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England and Wales High Court (Technology and Construction Court) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> Ocean Outdoor UK Ltd v Hammersmith And Fulham [2018] EWHC 2508 (TCC) (28 September 2018) URL: http://www.bailii.org/ew/cases/EWHC/TCC/2018/2508.html Cite as: [2018] EWHC 2508 (TCC) |
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CO/3864/2017 |
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (QBD)
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
OCEAN OUTDOOR UK LIMITED |
Claimant |
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- and - |
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THE LONDON BOROUGH OF HAMMERSMITH AND FULHAM |
Defendant |
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- and – |
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OUTDOOR PLUS LIMITED (in CO/3864/2017 only) |
Interested Party |
____________________
James Goudie QC and Joanne Clement (instructed by Sharpe Pritchard LLP) for the Defendant
Hearing dates: 9th May 2018, 10th May 2018, 14th May 2018, 16th May 2018
____________________
Crown Copyright ©
Mrs Justice O'Farrell :
Factual background
"The Parties shall act in good faith in relation to each other in order to maximise Gross Turnover. The Tenant shall use all reasonable endeavours to market and promote the Tower so as to maximise the Gross Turnover. Save where such marketing or promotion reflects usual advertising or marketing practice the Tower shall not be marketed, promoted or let at a discount in order to market, promote or otherwise sell space at other advertising sites operated by the Tenant."
"Please take this as formal notice that we only approve disclosure of contract details (currently 3 locations known as West Cross Route, P10 and Two Towers West) to contract managers at LBH&F that are known to us.
The details are commercially sensitive and require a high level of control with regards as to who has access to them.
For the avoidance of doubt we do not authorise disclosure of the agreements without our prior written approval."
"The Council's advertising hoarding sites sit in their own property portfolio – the Advertising Hoardings Portfolio. The Council wishes to expand this portfolio by securing new sites in the borough. To help it achieve this, the Council wishes to appoint a contractor specialising in – and with expertise in – advertising and media transactions to fully explore the opportunity to identify additional sites, negotiating with the Council's Planning Department to obtain planning permission for such sites and when obtained, to market the site. In addition, the Contractor will carry out re-lettings and rent review and lease renewals of existing hoarding sites in the portfolio."
i) a percentage of the increase in rent achieved in respect of rent reviews up to 9.8% for increases over £50,001;
ii) a percentage of the initial annual rent in respect of lease renewals of 9.8% for rental income over £250,001;
iii) a fee based on the first year's rental due in respect of new lettings of existing sites that became vacant of 9.8% for rental income over £250,001;
iv) a scale fee based on the first year's rental due in respect of the marketing of new sites up to 14.8% for rental income over £250,001.
The fee that Wildstone would earn for a lease renewal would be the same as the fee earned for a new letting of an existing site.
"If you do put forward a new figure then I would like to run the numbers past our Councillors and external consultants before we speak".
"I am leading on all advertising for H&F in terms of strategy and commercials including sign off or approach to members on any deals.
Nigel you will work with me in order to achieve a significant and rapid increase in our advertising revenue but you continue to report to Maureen for line management and other purposes.
We will use Wildstone as our agents to advise and negotiate within the scope of the existing contract. The only exception is where Wildstone have a clear conflict of interest (eg with TfL). In these circumstances we will only use them if the conflict can be managed to our satisfaction.
We will discuss Wildstone's advice and performance and, where decisions are required, I will take your advice before I make a decision or recommendations are made to members.
Neither Izhar or anyone else is to negotiate with any party regardless of the reasons unless I agree particular[ly] in respect of Ocean or JCD…"
"We'd suggest that you meet internally within H&F and agree a position which you, or whoever has the authority to do so, can negotiate an agreement with us in a face-to-face meeting…
The current deal gives 85% of all profits to H&F and of course the risk profile therefore reflects that great years are awarded above original expectations and normal years that follow will reflect a reduction. Moving towards fixed rent is removing all H&F exposure to risk and therefore will naturally require a shift in expectations. We are therefore at a loss to understand what you believe is fair and equitable for us in accepting all future risk on these assets. You will be well aware of the changing landscape with competitive locations developed around the Towers over the last 3 years. This only serves to increase the risk that we would be adopting.
Finally, I note you mention external consultants.
We deal with external consultants across all areas of the business, which includes operating the two largest borough councils outside of London, namely Birmingham and Manchester city councils. In all cases we have some base criteria under which we operate and that is for any external consultant to be privy to commercially sensitive information they need to be, in our opinion, neutral. Being involved in the industry as a Media Owner, overtly aligned to any one Media Owner or within its operations display the activities of a Media Owner by selling outdoor advertising would mean the consultant was not neutral. In most scenarios this is almost never the case however H&F need to be conscious of this.
It is ironic that a consultant closely associated with creating competition for the Towers could be deemed worthy as an adviser. We are surprised no one has made an official complaint regarding the independence of certain consultants. As per our letter dated 23 October 2013 we do not authorise disclosure of any of our contractual related negotiations to any third party."
"We will be approaching the wider market place with opportunities that will include the re-development of the Two Towers West, with the potential for full motion, over the coming months. It is likely that we will be using our agents, Wildstone, to do this with our close involvement.
I very much hope that you will be one of the parties who is interested in this and other opportunities.
Thanks for the offer of a meeting. However, at this point, while we are still working on a review of our existing estate and new development sites, I think it would be a little premature. When we are in a position to engage with the market then Wildstone and I will be in touch."
"… As regards any tender process you decide to implement I can reassure you that Ocean would fully participate in any OJ EU/Public Procurement law compliant tender process. As part of this process we'd expect, as indeed would any tender respondent, that any advisers you worked with would be independent and without a conflict of interest. We look forward to any tender in due course…"
"…the letter from them from October 2013, I assume they cannot require us to restrict who we share the contract details with unless it is set out in the original contract?"
"Had a mtg with commercial director at H&F this morning.
He has a mtg with Tim Bleakley in next few wks.
I gave suitable perspective to this and offered to provide him with a crib sheet.
Let's chat through.
Good thing is that H&F have no intention of doing an off market deal with Ocean."
"
- The site is one of the best in the UK…
- Current income is profit share only which is not the industry norm.
- Ocean sell a large number of sites often as a pack and sales revenue will be shared equally between a number of sites rather than allocated proportionately based on the strength of each location. This means the Towers will be directly subsidising lower quality locations elsewhere at the cost of revenue share payable to the Council.
- It is understood income has dropped off on the site and forecast for this year is c£800k. Ocean's accounts show year-on-year growth and this is still one of their best sites so this income fall off could be challenged. It would be interesting to see the annual sum payable to the Council over term relative to the performance of other comparable locations.
- It is a key site for Ocean but would also be a key site for many other media owners.
- The Council have exposure to full market volatility by having a rev share only deal. A min. guarantee with profit share top-up allows greater budgeting certainty and less exposure to volatility for the Council.
- A full redesign and relaunch of the site would rejuvenate its position in the market and deliver maximum income potential…
- This would not preclude Ocean from keeping the site and they will be in the strongest position as they know the sales performance better than any other.
In summary in every scenario it is imperative that the Council test the market on this site rather than agreeing an off market deal. Ocean can still regain the site but it will ensure the Council can have confidence that income is being maximised…"
"The need to drive a really fantastic deal on this site is a key H&F imperative and I am sure we will be able to [do] that together, following the approach you have set out."
"1. Immediate payment of £1.8m, comprising an early payment of £600,000 for the second half of 2016 and £1,200,000 advance payment for 2017 profit share if full motion is permitted.
2. Immediate payment of £1.5m, comprising an early payment of £500,000 for the second half of 2016 and £1,000,000 advance payment for 2017 profit share. No change to current planning status.
3. Introduction of a quarterly minimum guarantee providing a floor to your income thereafter and improved cash flow timings.
4. The economics remain as 85% share in your favour so there is no cap on income. The depreciation deduction on the profit share has ceased so there is a further uplift provided attached.
5. £500,000 of media value per year to use across Ocean locations in London or nationwide...
The offers above, subject to board approval, are for an extension of 4.5 years on the Towers with a performance break in your favour after 2.5 years…"
The attached schedule showed the profit share based on projected revenues for static and full motion displays. The projected profits, assuming a static display, were forecast to produce an income for the Council of £1.4 million in 2016, rising to £1.8 million in 2021. The minimum guaranteed income for the Council, assuming a static display, was £500,000 in 2016, £1 million in 2017 and £850,000 for each of years 2018 to 2021.
"We've had an interesting proposal from Ocean which I will be considering with Cllr Coleman tomorrow prior to the meeting. Notwithstanding the sensitivities of Ocean / Wildstone I'd like to bring copies to the meeting for us all to discuss. I will raise it as part of your item 3. But no need to identify on the agenda."
Mr Hainge:
"Are you coming over this afternoon by any chance? I have received a proposal and it would be good to discuss it. If not today then soon?"
Mr Chandler:
"Yes I am over this afternoon. 4 til 5 I think.
Can catch up after if that suits?"
Mr Hainge:
"I've got a conference call and then a quick conversation at 5pm but if you can hang around until 5.30pm we can chat then? I will give you a copy of the proposal for you to peruse at the earlier meeting."
Mr Chandler:
"Great. 5.30pm suits.
Let me know where you want to meet. Our earlier meeting is at Meeting Room 1, 6th Floor, LBHF but I can meet off site if preferred."
Mr Hainge:
"Thanks – will do.
See you at 4pm."
"2.4 The existing agreement with Ocean Outdoor is due to expire in June 2017. The contract provides a revenue share based payment structure to the Council and it has been shown that the performance of the site, based on the amount paid to the Council, has been dropping off on an annual basis over recent years.
…
5.2 It is assumed that the Council's objectives are as follows:
// Maximise rent
// Prioritise guaranteed rent over profit share
// Promote the longevity of income
// Safeguard the Council's operational obligations.
5.4 The options to the Council are as follows:
// Renew with Ocean based on existing design
// Retender with existing design
// Renew with Ocean based on new design
// Retender based on new design.
…"
i) Chiswick Towers – rent of £1.3m pa plus profit share, 10 year term;
ii) Piccadilly Underpass – rent of £2.67m per annum (guaranteed plus index linked reviews), 10 year term;
iii) The One, Piccadilly Circus – rent of £2.65m per annum plus net revenue share, 3 year term.
"7.1 Ocean have sought to agree an off-market renewal of their agreement and have proposed an increase in the minimum guarantee and forecast an improvement in gross sales income to facilitate an increase in profit share payable.
7.2 The total forecast rent payable under the proposed renewal terms from Ocean is £1.6m pa rising to £2.06m pa with 50% payable as a minimum guarantee and the remainder payable in the form of a 85:15 profit share split in the Council's favour. This assumes full motion consent. The forecasts with static images (as existing) is approximately 10% below this. The figures above are inclusive of the profit share.
7.3 This reflects a substantial improvement on revenue share forecast for this year which is understood to be c £800k. It has not been made clear from the information provided how Ocean proposed to increase sales on the site such that the profit share can increase by this amount.
…
8.5 On the basis of the above comparables, and making concessions in consideration of the nuances of each, it is estimated that the Two Towers, if tendered in today's market with full motion consent, would attract a rent in the region £2-2.65m per annum on a fixed rent plus profit share basis.
…
9.1 It should be noted that Ocean were invited to bid through a competitive process for all of the above-mentioned comparables and were unable to make offers at the same level as the successful bidders. This perhaps reflects the fact that each of the sites provided a unique factor that delivered a strategic advantage to the successful party and they were therefore able to pay a greater sum than their rivals. This is likely to also be the case for the Two Towers and a number of media owners are expected to show a very strong appetite for the advertising rights.
9.2 Without tendering the site the council cannot be certain what another party may be able to pay, however, based on other more recent tenders there are media owners that are currently able to pay bigger rents than Ocean elsewhere. On this basis it is recommended that the site is tendered and if Ocean are successful then the Council can be reassured that they have undergone an appropriate procurement process to reveal the current best value. However if an off-market renewal is done then the true market value will be unknown and the Council may be left vulnerable to challenge.
…
9.5 The tender should be structured such that parties are required to bid with an emphasis on fixed rents not profit shares in order to provide the council with greater certainty of future income and less exposure to market fluctuations. Retaining a small profit share element would allow the council to benefit from any super-profit achieved."
i) a document entitled: "The Towers, London – Invitation to Tender: Outdoor Advertising Rights" ("the ITT");
ii) the Tender Bid Form;
iii) the Heads of Terms;
iv) a planning application letter, stating that an application would be made for planning consent to display full motion images on the Two Towers; and
v) a marketing brochure.
The ITT stated that Wildstone had been appointed by the Council to market the Two Towers.
"Our client will award the advertising rights subject to completion of appropriate Leases for a term[s] of 3/5/10 years for each tower. The successful bidder will be required to complete the Leases within a time period to be specified following the tender award. The Leases shall be in our client's standard form including rent reviews. The Heads of Terms are attached to this tender."
"for the display of advertising content in accordance with the planning consent and the Landlord's advertising content policy which may [change] from time to time."
"The London Borough of Hammersmith and Fulham will award the exclusive rights at the Towers, London, subject to completion of a Lease for a term of 3/5/10 years (subject to the rent being index-linked annually to the Retail Price Index (RPI) plus 1% from the base date being the Lease Commencement Date. The Rent to be the higher of the passing Rent or the index-linked event…
Premium offered for the award of the advertising leases [figure]. The premium rent (optional) is payable on completion of the leases."
i) £500,000 per annum over a 3-year lease;
ii) an escalating rent, starting at £725,000 per annum and rising to £825,000 per annum over a 5-year lease;
iii) £600,000 per annum over a 10-year lease.
Further, Ocean offered to pay a premium for the award of the advertising leases, namely, upfront payment of the first 18 months' rent.
"As you are aware the Council, via its consultants Wildstone, has remarketed the site. A decision on the preferred bidder has yet to be made."
"The Council wanted to maximise its income but look at its risk profile as income flows have significantly dropped away. Soft market testing was undertaken by our consultant to test if a letting based on a rent basis (rather than pure profit rent) was favourable in the market. This provided a positive response…
The highest bid received was from Outdoor Plus.
Outdoor Plus have an excellent track record in the digital advertising sector…
The Council will receive a minimum of £1.7 million per annum from 1st July 2017 (assuming lease completes) with staged annual increase plus a market review in year 5.
The increase in annual rental income compared to the outturn for 2016/2017 is over £1.0 million uplift…
It is proposed that the council proceeds with granting Outdoor Plus a 10-year lease and to ensure the Director of Property and Building Management, as proper officer within the Scheme of Delegation, approves the final property documentation before legal completion…"
"Our client is prepared to say that the successful bidder's proposal for the annual rent for both leases was the highest bid and was substantially in excess of the bid put forward by your client. The council has achieved best value by selecting the highest bidder for the sites and has carried out full due diligence on this bidder."
Proceedings
The Concessions Directive and the CCR 2016
"The absence of clear rules at Union level governing the award of concession contracts gives rise to legal uncertainty and to obstacles to the free provision of services and causes distortions in the functioning of the internal market. As a result, economic operators, in particular small and medium-sized enterprises (SMEs), are being deprived of their rights within the internal market and miss out on important business opportunities, while public authorities may not find the best use of public money so that Union citizens benefit from quality services at best prices. An adequate, balanced and flexible legal framework for the award of concessions would ensure effective and non-discriminatory access to the market to all Union economic operators and legal certainty, favouring public investments in infrastructure and strategic services to the citizen. Such a legal framework would also afford greater legal certainty to economic operators and could be a basis for and means of further opening up international public procurement markets and boosting world trade. Particular importance should be given to improving the access opportunities of SMEs throughout the Union concession markets."
"For concessions equal to or above a certain value, it is appropriate to provide for a minimum coordination of national procedures for the award of such contracts based on the principles of the TFEU so as to guarantee the opening-up of concessions to competition and adequate legal certainty. Those coordinating provisions should not go beyond what is necessary in order to achieve the aforementioned objectives and to ensure a certain degree of flexibility. Member States should be allowed to complete and develop further those provisions if they find it appropriate, in particular to better ensure compliance with the principles set out above."
"Concessions are contracts for pecuniary interest by means of which one or more contracting authorities or contracting entities entrusts the execution of works, or the provision and the management of services, to one or more economic operators. The object of such contracts is the procurement of works or services by means of a concession, the consideration of which consists in the right to exploit the works or services or in that right together with payment. Such contracts may, but do not necessarily involve a transfer of ownership to contracting authorities or contracting entities, but contracting authorities or contracting entities always obtain the benefits of the works or services in question."
"In addition, certain Member State acts such as authorisations or licences, whereby the Member State or a public authority thereof establishes the conditions for the exercise of an economic activity, including a condition to carry out a given operation, granted, normally, on request of the economic operator and not the initiative of the contracting authority or the contracting entity and where the economic operator remains free to withdraw from the provision of works or services should not qualify as concessions. … In contrast to those Member State acts, concession contracts provide for mutually binding obligations where the execution of the works or services are subject to specific requirements defined by the contracting authority or the contracting entity, which are legally enforceable."
"In addition, certain agreements having as their object the right of an economic operator to exploit certain public domains or resources under private or public law, such as land or any public property, in particular in the maritime, inland ports or airports sector, whereby the State or contracting authority or contracting entity establishes only general conditions for their use without procuring specific works or services, should not qualify as concessions within the meaning of this Directive. This is normally the case with public domain or land lease contracts which generally contain terms concerning entry into possession by the tenant, the use to which the property is to be put, the obligations of the landlord and tenant regarding the maintenances of the property, the durations of the lease and the giving up of possession to the landlord, the rent and the incidental charges to be paid by the tenant."
"(1) In these Regulations, "concession contract" means a works concession contract or a services concession contract within the meaning of this regulation.
…
(3) A "service concession contract" means a contract –
(a) for pecuniary interest concluded in writing by means of which one or more contracting authorities or utilities entrust the provision and the management of services (other than the execution of works) to one or more economic operators, the consideration of which consists either solely in the right to exploit the services that are the subject of the contract or in that right together with payment; and
(b) that meets the requirements of paragraph (4).
(4) The requirements are –
(a) the award of the contract shall involve the transfer to the concessionaire of an operating risk in exploiting the works or services encompassing demand or supply risk or both; and
(b) the part of the risk transferred to the concessionaire shall involve real exposure to the vagaries of the market, such that any potential estimated loss incurred by the concessionaire shall not be merely nominal or negligible.
(5) For the purposes of paragraph (4)(a), the concessionaire shall be deemed to assume operating risk where, under normal operating conditions, it is not guaranteed to recoup the investments made or the costs incurred in operating the works or the services which are the subject-matter of the concession contract."
"(1) These Regulations establish rules on the procedures for procurement by contracting authorities and utilities by means of a concession contract –
(a) the value of which is estimated to be not less than the threshold mentioned in regulation 9; and
(b) which is not excluded from the scope of these Regulations by any other provision of this Part.
(2) These Regulations apply to the award of works concession contracts or services concession contracts to economic operators by –
(a) contracting authorities …"
It is not in dispute that the value of the leases exceeds the threshold value referred to in regulation 9.
"(1) Contracting authorities … shall treat economic operators equally and without discrimination and shall act in a transparent and proportionate manner.
(2) The design of the concession contract award procedure, including the estimate of the value, shall not be made with the intention of excluding it from the scope of these Regulations or of unduly favouring or disadvantaging certain economic operators or certain works, supplies or services.
(3) During the concession contract award procedure, contracting authorities … shall not provide information in a discriminatory manner which may give some candidates or tenderers an advantage over others.
(4) Contracting authorities … shall aim to ensure the transparency of the concession contract award procedure and of the performance of the contract, while complying with regulation 28."
"(11) These Regulations do not apply to services concession contracts for –
(a) the acquisition or rental, by whatever financial means, of land, existing buildings or other immovable property or which concern interests in or rights over any of them …"
"A contracting authority shall not disclose information which has been forwarded to it by an economic operator and designated by that economic operator as confidential, including, but not limited to, technical or trade secrets and the confidential aspects of tenders."
"(1) Contracting authorities … shall take appropriate measures … to effectively prevent, identify and remedy conflicts of interest arising in the conduct of concession contract award procedures, so as to avoid any distortion of competition and to ensure the transparency of the award procedure and the equal treatment of all candidates and tenderers.
(2) The measures adopted in relation to conflicts of interest shall not go beyond what is strictly necessary to prevent a potential conflict of interest or eliminate a conflict of interest that has been identified.
(3) For the purpose of this regulation, the concept of conflicts of interest shall at least cover any situation where relevant staff members have directly or indirectly, a financial, economic or other personal interest which might be perceived to compromise their impartiality and independence in the context of the concession award procedure.
(4) In paragraph (3), "relevant staff members" means staff members of the contracting authority … who are involved in the conduct of the concession contract award procedure or may influence the outcome of that procedure."
"… a contracting authority or utility shall send to each … tenderer a notice communicating its decision to award the concession contract.
Content of notices
(2) Where it is to be sent to a tenderer, the notice referred to in paragraph (1) shall include—
(a) the criteria for the award of the concession contract;
(b) the reasons for the decision, including the characteristics and relative advantages of the successful tender, the score (if any) obtained by—
(i) the tenderer which is to receive the notice, and
(ii) the tenderer to be awarded the concession contract …;
(c) the name of the tenderer to be awarded the concession contract; and
(d) a precise statement of either—
(i) when, in accordance with regulation 48, the standstill period is expected to end and, if relevant, how the timing of its ending might be affected by any and, if so what, contingencies, or
(ii) the date before which the contracting authority … will not, in conformity with regulation 48, enter into the concession contract…"
The issues
i) Do the CCR 2016 apply to the tender procedure for the New Leases?
ii) Was the award of the New Leases governed by the general principles of EU Law?
iii) Was the Council in breach of the CCR 2016 or any general EU obligations in respect of the tender procedure adopted for the New Leases?
iv) If the Council was in breach of its obligations, to what remedies, if any, is Ocean entitled?
v) Should Ocean be given permission to seek judicial review of the decisions to enter into the leasing arrangements with Outdoor Plus and/or to execute the New Leases?
vi) If permission is granted, were the decisions (a) to enter into the New Leases and/or (b) to execute the New Leases unlawful?
vii) If either or both of the decisions were unlawful, what, if any remedy should be granted?
Does the CCR 2016 apply to the tender procedure for the New Leases?
i) the contracting authority entrusts the provision and management of services to the economic operator;
ii) there is a mutually binding obligation for the provision of the services;
iii) the consideration for the concession is the right to exploit the services (with or without additional payment);
iv) the contracting authority transfers to the economic operator an operating risk in exploiting the services;
v) the contract does not fall within one of the excluded contracts in regulation 10.
I address each of these requirements below.
(i) Services concession
"for pecuniary interest concluded in writing by means of which one or more contracting authorities or utilities entrust the provision and the management of services (other than the execution of works) to one or more economic operators …"
"… contracting authorities or contracting entities always obtain the benefits of the works or services in question."
"A services concession is characterised in particular by the fact that the public authority entrusts the exercise of a service activity, a service the provision of which would as a rule fall to that public authority, to the concessionaire, thus requiring that concessionaire to provide a specific service."
"Under Community law, the service that is the subject of a service concession must also be in the general interest, so that a public authority is institutionally responsible for providing it. The fact that a third party provides the service means that the concessionaire replaces the authority granting the concession in respect of its obligations to ensure that the service is provided for the community."
[52] In my view, it is possible from a full examination of the measure, bearing in mind the meaning that the Court has so far attributed to it, to deduce the fundamental principle that for a given activity to fall within the ambit of the law on public works contracts there must be a strong and direct link between the public authority and the work or works to be executed. That link normally follows from the fact that the work or works are executed on the public authority's initiative.
"[53] Contrary to the view taken by the referring court, non-material and indirect benefit alone is not sufficient. Nor is the mere fact that the activity to be assessed is, generally, in the public interest sufficient. It should be noted that, in cases where a permit for the activity has to be issued by a public authority (which is normally the case with all building activities), the activity must obviously be in the public interest in order to obtain a permit, since the public interest is the reference parameter on which the public authorities grant permission. Unless the scope of the Directive is extended indefinitely, the general existence of a public interest which justifies permission to pursue the activity cannot therefore constitute the decisive criterion for determining which cases are to fall within it. In particular, it must be borne in mind that a building permit, that is to say, the typical expression of the authorities' powers in the objective area of town planning, is usually confined to removing restrictions on a private initiative, not a public initiative."
In paragraph [58] of the judgment, the CJEU confirmed that the concept of public works required that the purpose of the works should be an immediate economic benefit to the contracting authority.
(ii) Legally enforceable obligation
"In my view, however, it is clear that… the obligation to carry out the work and/or works constitutes an essential element in order for there to be a public works contract or a public works concession.
This follows, first and foremost, from the provisions of [the Public Contracts Directive] itself which… define public works contracts as contracts for pecuniary interest. The concept is therefore based on the idea of an exchange of services between the contracting authority which pays a price (or, alternatively, grants a right of use) and the contractor, who is required to execute a work or works. Thus, public contracts are clearly mutually binding. It would obviously be inconsistent with the characteristic to accept that, after being awarded a contract, a contractor could, without any repercussions, simply decide unilaterally not to carry out the specified work. Otherwise, it would mean that contactors were entitled to exercise discretion with regard to the requirements and needs of the contracting authority."
The judgment of the CJEU confirmed this requirement at [59]-[63]:
"… the concept of "public works contracts", within the meaning of [the Public Works Directive] requires that the contractor assume a direct or indirect obligation to carry out the works which are the subject of the contract and that that obligation be legally enforceable in accordance with the procedural rules laid down by national law."
"[100] The principles underlying the propositions helpfully set out in the OCG Guidance were emphasised the recent judgment of the Court of Justice of the European Union (Third Chamber) in Helmut Müller GmbH v Bundesanstalt für Immobilienaufgaben [2010] 3 CMLR 18. At paragraph 63 …
The reference there to "direct or indirect obligation to carry out the works" does not detract from the firm requirement that there must be a legally enforceable obligation on the contractor, the reference to "indirect obligation" simply reflecting the flexibility with which the obligation may be met, (e.g. through sub-contractors.
[101] The rationale for the proposition that a legal obligation to carry out works specified by the contracting authority is a required element for there to be a public works contract is admirably set out in the Opinion of Advocate General Mengozzi in Helmut Müller, as follows (at paragraphs AG76-77) …
Hence, to fulfil the purpose of the Directive, a required element is a commitment by the contractor, legally enforceable by the contracting authority, to perform relevant works. It is insufficient if, legally, the contractor has a choice and is entitled not to perform the works."
"[63] For an instrument to be regarded as a services concession, it must therefore be established that the provision of services is subject to specified requirements laid down by the public authority concerned and that the economic operator is not at liberty to withdraw from the provision of such services.
[64] These considerations are borne out by recital 14 of Directive 2014/24, according to which certain member States act such as authorisations or licences, in particular where the economic operator remains free to withdraw from the provision of such services, should not qualify as concessions. Unlike those acts, concession contracts provide for mutually binding obligations whereby the execution of the works or services is subject to specific requirements defined by the contracting authority."
"The Tenant shall use all reasonable endeavours to market and promote the Tower so as to maximise the income received. Save where such marketing or promotion reflects usual advertising or marketing practice the Tower shall not be marketed, promoted or let at a discount in order to market, promote or otherwise sell space at other advertising sites operated by the Tenant."
That clause imposes on Outdoor Plus a legally enforceable obligation to use all reasonable endeavours to market and promote the site but only for the purpose of producing revenue. It does not require Outdoor Plus to procure or carry out any particular scope, volume or value of advertising. There are no specific requirements defined by the Council that must be satisfied by Outdoor Plus. Outdoor Plus does not have to deliver any advertising.
(iii) Right to exploit the services
"… the consideration of which consists either solely in the right to exploit the services that are the subject of the contract or in that right together with payment …"
(iv) Operating risk
"(a) the award of the contract shall involve the transfer to the concessionaire of an operating risk in exploiting the works or services encompassing demand or supply risk or both; and
(b) the part of the risk transferred to the concessionaire shall involve real exposure to the vagaries of the market, such that any potential estimated loss incurred by the concessionaire shall not be merely nominal or negligible."
(v) Land transaction exemption
General principles of EU Law
"Within the framework of the provisions set out below, restrictions on freedom to provide services within the Union shall be prohibited in respect of nationals of Member States who are established in a Member State other than that of the person for whom the services are intended …"
"[41] In reality, this is not a case in which [the developers] are providing services of the type envisaged by article 56FEU. This is no more than an agreement to agree the terms of a long lease of the site…
[44] In those circumstances, as a matter of construction, I conclude that the proposed agreement was not a contract for the provision of services as defined in the TFEU, and it fell outside article 56FEU…
[47] … [any services] would be for [the developers'] own benefit, in order that they maximise their interest in the land. Again, they would not be caught by article 56FEU.
[48] … Pursuant to the proposed agreement, [the developers] are not being granted a concession. They are not being put in the shoes of the council, obliged to provide services to the public but entitled to charge for such services… [They] are not being granted a concession to provide public services at all…
[56] … what matters for the purposes of article 56FEU is not the particular nature of the development opportunity, but whether there is a restriction placed by the public authority on the services to be provided to that authority.
[57] The proposed agreement does not contain any restriction being place by the council on the provision of services…
[74] [The developers] are a UK company. The council is a UK authority. Quidnet are a UK company. The land in question is in the UK. There is no evidence that any undertaking in any other member state is interested in the development of the site, in Hounslow town centre. In those circumstances, I conclude that this is an internal matter …"
"That obligation of transparency which is imposed on the contracting authority consists in ensuring, for the benefit of any potential tenderer, a degree of advertising sufficient to enable the services market to be opened up to competition and the impartiality of procurement procedures to be reviewed."
"[54] … Stadtwerke Brixen AG argues that Articles 43 EC to 55 EC do not apply to a situation such as that in the main proceedings, because it is a situation purely internal to a single Member State, given the Parking Brixen, Stadtwerke Brixen AG and the Gemeinde Brixen all have their seats in Italy.
That argument cannot be accepted. It is possible that, in the main proceedings, undertakings established in Member States other than the Italian Republic might have been interested in providing the services concerned … In the absence of advertising and the opening to competition of the award of a public service concession such as that at issue in the main proceedings, there is discrimination, at least potentially, against undertakings of the other Member States which are prevented from making use of the freedom to provide services and of the freedom of establishment provided for by the Treaty …"
"[62] Having regard to the foregoing considerations, the conclusion must be that a mixed contract of which the main object is the acquisition by any undertaking of 49% of the capital of a public undertaking and the ancillary object, indivisibly linked with that main object, is the supply of services and the performance of works does not, as a whole, fall within the scope of the directives on public contracts.
[63] That conclusion does not preclude the fact that such a contract must observe the basic rules and general principles of the Treaty, in particular those on the freedom of establishment and the free movement of capital…"
"It is settled case-law that the Treaty provisions relating to the freedom to provide services do not apply to situations where all the relevant facts are confined within a single Member State …"
"[20] As regards the objective criteria which may indicate certain cross-border interest, the Court has previously held that such criteria may be, in particular, the fact that the contract in question is for a significant amount, in conjunction with the place where the work is to be carried out or the technical characteristics of the contract and the specific characteristics of the products concerned. In that context, it is also possible to take account of the existence of complaints brought by operators situated in other Member States, provided that it is determined that those complaints are real and not fictitious…
[22] … a conclusion that there is certain cross-border interest cannot be inferred hypothetically from certain factors which, considered in the abstract, could constitute evidence to that effect, but must be the positive outcome of a specific assessment of the circumstances of the contract at issue. More particularly, the referring court may not merely submit to the Court of Justice evidence showing that certain cross-border interest cannot be ruled out but must, on the contrary provide information capable of proving that it exists."
"There is much to be said for the approach taken by Coulson J [in Quidnet] of requiring evidence that someone beside the original bidders would have bid for the contract, because the EU procurement rules are designed to protect against real, not hypothetical distortion of competition. However, I do not need to decide the point because even if one approaches the question on the basis that a hypothetical bidder has been shut out of the bidding process by the absence of reference to the subject-matter of the proposed amendment, it seems to me that in principle that must necessarily be a realistic hypothetical bidder – i.e. the evidence must demonstrate that there would be someone else who would have been ready, willing and able to bid and who would have wished to have done so if the opportunity had been made clear, but who did not do so because it was not."
Breach
Remedies if breach
"(1) Paragraph (2) applies if –
(a) the Court is satisfied that a decision or action taken by a contracting authority or utility was in breach of the duty owed in accordance with regulation 50 or 51; and
(b) the concession contract has already been entered into.
(2) In those circumstances, the Court –
(a) must, if it is satisfied that any of the grounds for ineffectiveness applies, make a declaration of ineffectiveness in respect of the concession contract unless regulation 61 requires the court not to do so;
(b) must, where required by regulation 63, impose penalties in accordance with that regulation;
(c) may award damages to an economic operator which has suffered loss or damage as a consequence of the breach, regardless of whether the Court also acts as described in sub-paragraphs (a) and (b);
(d) must not order any other remedies.
(3) Paragraph (2)(d) does not prejudice any power of the Court under regulation 62(3) or 63(12)."
"(2) … where the concession contract has been awarded without prior publication of a concession notice in the Official Journal in any case in which these Regulations required the prior publication of a concession notice.
…
(5) (a) the concession contract has been entered into in breach of any requirement imposed by –
(i) regulation 48, or
(ii) regulation 56, or
(iii) regulation 57(1)(b);
(b) there has also been a breach of the duty owed to the economic operator in accordance with regulation 50 or 51 in respect of obligations other than those imposed by regulation 48 and this Chapter;
(c) the breach mentioned in sub-paragraph (a) has deprived the economic operator of the possibility of starting proceedings in respect of the breach mentioned in sub-paragraph (b), or pursuing them to a proper conclusion, before the concession contract was entered into; and
(d) the breach mentioned in sub-paragraph (b) has affected the chances of the economic operator obtaining the concession contract."
"Where a declaration of ineffectiveness is made, the concession contract is to be considered to be prospectively, but not retrospectively, ineffective as from the time when the declaration is made and, accordingly, those obligations under the concession contract which at that time have yet to be performed are not to be performed."
Judicial Review claim
Delay
Breach of confidentiality
"On 2 June 2017, the Claimant's Chief Executive Officer, Mr Timothy Bleakley, met with Mr Jonathan Lewis, the Chief Executive Officer of Outdoor Plus at a lunch in the context of an industry trade body meeting as they were both members. Mr Lewis informed Mr Bleakley that Outdoor Plus had submitted a tender in the Procurement. He indicated that Outdoor Plus's tender would not be anywhere near the same level as what he referred to as 'Ocean's benchmark offer' that had been shared with him by the Defendant's new commercial director and Wildstone. The Claimant inferred from that statement that the Defendant had shared with Outdoor Plus and presumably therefore with other tenderers the details of the Claimant's offer."
"Over the lunch, the subject of the Hammersmith and Fulham tender came up, and Jonathan stated that they were bidding and that they would be doing so 'sensibly, but nowhere near the levels of the Ocean benchmark offer that the Defendant's new commercial director and Wildstone had shared with him'."
"[Mr Hainge] informed me that the Council had received a private offer in respect of the Towers to extend the current lease. He did not specifically mention that the offer had been made by Ocean, but I was aware that they were the current lessees. Michael said that he thought that the right thing to do was for the Council to go out to tender in the marketplace again and that was what they were intending to do. He said that if they went out to tender again, they would be looking for a fixed rent and not a profit share. He said that any interested parties would need to bid north of £2m if they were going to be successful. Michael provided me with no detail of the offer that had apparently been made to the Council and he did not show me any documents. He did not explain how he got to the £2m figure and did not say that it was based on the offer he had received, although that suggestion was implicit."
"Q. It didn't take much for you to put two and two together and work out that a private offer must have been from Ocean, did it?
A. It seemed most likely.
Q. When he said that any interested parties would need to bid north of £2 million, what you concluded was that an offer that would be or would beat the offer that he had received from Ocean, didn't you?
A. No, I don't think that was my conclusion. I think my conclusion was that was a possibility or he could have just been talking bidders up
…
It was implied by him, but it wasn't received that way by me. My view was he was implying that but it could just as easily be him talking it up, so I didn't necessarily believe that that bid was the case."
"Q. You talked about an Ocean offer, didn't you?
A. No, I didn't talk about an Ocean offer. I said that we had been given an indication of what was necessary to win the site and therefore we didn't expect to win the site.
…
Q. It's not unlikely that you would have used words to the effect of "your offer" or "an offer", "Ocean's offer"?
A. As I said, I don't believe I did but I certainly would have said that we had been given an indication of what it would take to win the site and we therefore didn't expect to win it. "
"I did not share any details of Ocean's offer with any individuals outside the Council nor did I discuss their offer with any third parties, other than with Jonathan Chandler and Damian Cox of Wildstone. I certainly did not reveal any details of Ocean's May 2016 offer to Jonathan Lewis of Outdoor Plus as is being alleged by Ocean … I did not discuss any details of Ocean's May 2016 offer with any other media operators either."
"I informed the media operators that the Council was not going to just extend Ocean's leases again and stated that we would be going back out to the market. I 'talked up' the site; I explained that the council was looking at getting a rental income of around £2m to £2.5m if full motion consent was granted and said that we were confident of achieving that kind of figure… I do not recall specifically mentioning to any of the individuals I met at these meetings that an offer had been received from Ocean. I certainly did not provide them with any details of Ocean's May 2016 offer and I did not state that there was a 'benchmark figure' that they would need to beat. In particular, I did not discuss Ocean's offer with Jonathan Lewis of Outdoor Plus ..."
"I had a separate meeting with Jonathan Chandler to discuss the Ocean offer. Damian Cox was also present at this meeting and we met up in the garden of a local pub. I had not met Damian Cox before and he came along at Jonathan Chandler's suggestion. I assume that Jonathan had suggested this as an opportunity for Mr Cox, the principal of the business, to meet me and to demonstrate Wildstone's commitment to the Council, particularly as this was going to be the first big piece of work they were going to undertake on our behalf. Although the e-mail from Ocean had been marked private and confidential, I wanted to take Wildstone's expert view on it as the council's appointed consultants. My own view was that it was not a particularly good offer and it was not something that the Council wanted to accept. I was not, however, an expert in this area and I wanted to ensure that there was nothing in the offer that I was missing nor that there were other factors that I should also be taking into account when considering if this was an offer which the council should accept. I therefore wanted to discuss it with our expert advisers."
"… Whether I believed Michael Hainge or didn't, it didn't inform our bid. We bid below the level at which he thought he told us would win the site and regardless there were going to be other bidders in the process. So even if it had been Ocean and even had I have known, that wouldn't have told me what the likes of JC Decaux were going to bid, so I still had no choice but to put in a bid that I was happy to win the site at."
Conflict of interest / apparent bias
"Mr Cox was my predecessor as the CEO of the claimant. Mr Cox left the Claimant's employment in acrimonious circumstances in January 2010. He left following allegations of financial irregularities which has meant the parties have irreconcilable differences. The Claimant informed the Defendant at a quarterly review meeting in 2015 that there was a conflict in respect of Mr Cox and that he should not be used in relation to the Two Towers contract as he also had knowledge of the Claimant's position on that contract, having been involved in its negotiation. At the time the Defendant seems to accept this but subsequently there was a change in personnel at the Defendant and Mr Cox was involved in the tendering process. Mr Cox also appeared to be targeting opportunities with Authorities where the Claimant had an existing relationship."
"Q. … But the fact is that although there was some communication about unhappiness about Wildstone and Mr Cox, the council were never really told any solid basis for that.
A. I mean, I disagree. We put in writing that we felt there was a conflict of interest. We warned the council we thought there was a conflict of interest. We told the council there was a conflict of interest, and to quote yourself: ducks, quacks, it was a conflict-of-interest…
Q. … The council is never given any hard information as to why there is anything wrong with Mr Cox.
A. That is not true … We do not need to go into detail. The fact we have raised it as a problem should be enough."
"Mr Damian Cox, the then Chief Executive of Ocean was involved in the lease negotiations with the Council and signed the original leases on behalf of Ocean. Mr Cox left Ocean shortly after the leases were completed. I have no knowledge of the circumstances which led to him leaving Ocean. I had understood that Mr Cox had set up Ocean in the first place and was under the impression that he had sold his interest in the company and had left to set up a new venture. Until the commencement of this dispute with Ocean, I had no idea that Mr Cox had apparently left Ocean in acrimonious circumstances."
"… having ascertained the relevant circumstances, the court should ask itself whether, having regard to those circumstances, there was a real danger of bias on the part of the relevant member of the tribunal in question, in the sense that he might unfairly regard (or have unfairly regarded) with favour, or disfavour, the case of a party to the issue under consideration by him …"
Actual bias – application to amend
"(a) The crib sheet provided by Mr Chandler to Mr Hainge by way of email dated 29 April 2016 contained untrue statements in relation to Ocean and its business operations which Mr Chandler knew to be untrue, alternatively for which he had no reasonable basis for any belief in their truth. The claimant relies in that regard in particular on the claim that "Ocean sell a large number of sites often as a pack… The towers will be directly subsidising lower quality locations elsewhere at the cost of revenue share payable to the Council". The unchallenged evidence of Mr Stephen Joseph at trial was that this statement was untrue and did not reflect the claimant's business model. Mr Chandler not only made that untrue statement but also suggested it should form the basis to challenge the claimant over the forecast income from the Two Towers.
(b) The report "Two Towers Hammersmith flyover: appraisal of advertising rental value and future strategy" prepared by Wildstone and provided to the Defendant on 18 July 2016 (the Appraisal Report) contained a false, misleading and detrimental statement concerning the Claimant at section 9.1 (under the heading recommendations), namely that "It should be noted that the claimant was invited to bid through a competitive process for all of the above-mentioned comparables and were unable to make offers at the same level as the successful bidders."…
(c) The fair-minded objective reader could and would only interpret the statement above contained at section 9.1 of Wildstone's report as meaning that the Claimant had participated in the competition for all three sites discussed at section 7 and had not been able to match the amounts offered by the successful bidders and for that reason had not been awarded the relevant contracts. However the unchallenged evidence of Mr Stephen Joseph was that the Claimant had not bid for two of those sites. In one case, the Claimant had not even been aware of the relevant opportunity.
(d) … on the basis of the evidence provided by Mr Chandler at trial, that statement was included by Wildstone in the Appraisal Report in the knowledge that it was untrue. Alternatively, Wildstone was reckless as to the truth of the statements it made, despite it being obvious that it would have a materially adverse impact on the Claimant and its reputation and would render any subsequent tender process unfair and unequal.
(e) Thereafter, the Defendant acted upon the advice contained in the crib sheet and the Appraisal Report. The Defendant conducted a subsequent tender process for the Two Leases which was infected by a wholly erroneous understanding of the Claimant's business model and position in the market, in particular in respect of its participation in recent competitions, and by a perception that the Claimant would be unlikely to meet the level offered by other tenderers and/or that such alleged inability to meet the level offered by other tenderers reflected adversely the Claimant's financial standing. That erroneous understanding was a direct consequence of Wildstone's biased approach in both the crib sheet and the Appraisal Report."
i) The claim is long out of time. Ocean's claim of actual bias is based on (a) the crib sheet provided by Mr Chandler to Mr Hainge on 29 April 2016; and (b) the appraisal report prepared by Wildstone and provided to the Council on 18 July 2016. These documents were produced almost 2 years ago. At the very latest Ocean should have sought permission to amend the claim when these documents were disclosed on 15 February 2018.
ii) Ocean's case on actual bias depends on these two documents from early 2016. The real complaint is that Ocean was not given the direct awards they sought in the early summer of 2016. The outcome of Ocean not being given a direct award is that the Council held a tender process and opened up the grant of the new leases to fair competition. Ocean was able to, and did, participate in that tender process.
iii) Ocean alleges that the evidence relied on demonstrates that the Council (through its agent, Wildstone) was actually biased against Ocean in the procurement. However, the tender process did not begin until 24 April 2017. There is no evidence to suggest that the Council, or its agent, was actually biased against Ocean in the conduct of that tender exercise and/or in taking the decisions subject to challenge in this claim.
Conclusion
i) the part 7 claim is dismissed;
ii) permission to amend the statement of grounds is refused;
iii) permission to proceed with the judicial review is refused;
iv) the judicial review is dismissed.