Claim for a declaration of ineffectiveness in relation to £multi-million redevelopment refused

30/07/19

On Friday 26 July 2019, Sir Robert Akenhead sitting in the Technology and Construction Court handed down an important judgment in the context of a preliminary issue trial relating to a claim for the specific procurement remedy of a declaration of ineffectiveness.  The Court held that the claim should be dismissed.

The claim arose in the context of a procurement exercise held by the Basingstoke and Deane Borough Council (the Defendant) for the redevelopment of the Basingstoke Leisure Park.  Following an open call for tender carried out on a negotiated basis, NewRiverLeisure Limited (NRL) entered into an exclusivity agreement which led to the signing of a development agreement between the 2 parties.  That agreement was entered into in March 2018.  The key objectives identified therein were amongst other to create a high-quality regional destination centre including a Designer Outlet Centre to be a market leader for the south of England.

Just before the end of the deadline for bringing proceedings, AEW Europe LLP and other related companies (the Claimants) issued a claim seeking inter alia relief by way of a declaration of ineffectiveness insofar as concerned the development agreement.  Had such relief been granted – described by the judge as “draconian” – it would have had the effect of bringing to an end that agreement, leading to the need either to start a new procurement exercise or scrap the whole project.  The Claimants owned and operated a shopping centre in the middle of Basingstoke and described themselves as competitors to NRL.  It was therefore in their clear commercial interest to try to stop the redevelopment.

The claim for declaration of ineffectiveness was predicated on the assertion that the scope and contents of the development agreement were so different from the that which had been envisaged in the original notice which started the procurement exercise, that a new notice should have been issued.  As one had not been, the Claimants alleged that a declaration of ineffectiveness should be ordered pursuant to the Public Contract Regulations, which confirmed that such a remedy should be granted when there had been no appropriate publication of the tender exercise.

The Court, basing itself on the 2011 decision of Mann J in Alstom v Eurostar International and in particular on the “mechanistic test” identified in that case, comprising a comparison between the original notice and the eventual procured agreement with the aim of determining whether the two were sufficiently related, found that in the present case there was a “sufficient and indeed close connection between the initial notice and the eventual development agreement.  Accordingly, it dismissed the claim for a declaration of ineffectiveness, with the effect that the development agreement remains operative.

The judgment is here.

The Claimants’ application for permission to appeal was refused on 3 September by Coulson LJ.