Court of Appeal rules on limitation periods in…

On 28 June 2024, the Court of Appeal handed down judgment in Lancashire County Council v Brookhouse Group Limited [2024] EWCA Civ 717. The case provides important clarification about the limitation periods which apply to claims seeking a declaration of ineffectiveness against public contracts under the PCRs. Coulson LJ’s leading judgment makes it clear that where no competitive tendering exercise has been carried out, unless the Council has issued a contract award notice explaining why it thought no exercise was necessary, a 6 month limitation period applies. A shorter 30 day limitation period cannot be triggered merely by writing to the individual economic operator giving reasons why no competition was required.

Although the PCRs will be repealed in October 2024 when the Procurement Act 2023 comes into force, this case will remain important for legacy procurements initiated under the old regime.

The underlying claim sought a declaration of ineffectiveness seeking to declare void a development agreement entered into in 2022 in relation to Council owned land at a regional investment site in Cuerden in Lancashire. It was common ground that no separate contact award notice had been issued in relation to that contract and no competitive tendering exercise had been conducted in relation to it. The claim was filed 4 months after the contract was entered into.

The Council advanced a limitation defence to the effect that the claim should have been filed within 30 days of the date the Claimant had been informed of the reasons why the Council considered no tendering process was necessary. The Council had informed the Claimant in pre-action correspondence that it considered no procedure was necessary on the basis that it had entered into an earlier agreement in 2012 which it claimed entitled the Council to appoint the developer in question. The Claimant sought to strike out that limitation defence, and the Council filed a cross-application to strike out the claim in its entirety.

The short question of law was whether, in circumstances in which no competitive tendering exercise under the PCRs had been carried out for a particular contract, could a contracting authority rely upon Regulation 93(5) of the Public Contract Regulations 2015 (“the PCRs”) by providing reasons to any economic operator as to why the authority considered no competitive award procedure has been carried out. In circumstances in which “a summary of relevant reasons” for the purposes of Regulation 93(5) has been provided, the limitation period for a declaration of ineffectiveness is shortened to 30 days from the “standard” 6 month period.

The Court of Appeal rejected appeal and upheld the decision of the High Court, for four key reasons. First, the fact that Regulation 93 already provided a route to reduce the limitation period, via the issue of a Contract Award Notice. Second, there was a sound policy reason for Brookhouse’s construction, because otherwise an authority could take a “tactical” decision to focus on one operator and deliberately choose not to alert other economic operators of the contract award, as occurred here. This decision was described as a “flagrant” breach of the PCRs. Third, the words “would have been entitled to receive” as set out in Regulation 55 did not envisage the provision of reasons to a hypothetical economic operator who had never been involved in a competition. Finally, Regulation 55 pre-supposed that there had been at least been a call for competition.

The Court of Appeal did not accept that the situation was analogous to the only previous authority which considered the issue of notices and limitation periods, Alstom Transport v Eurostar International [2011] EWHC) 1828 (Ch). In that case there had been a call for competition and reasons given as to why the claimant had been unsuccessful.

The Judgment can be found here.

Tim Buley KC and James Neill acted for the successful applicant, instructed by DLA Piper LLP (Martyn Scott and Marie Fegan).