Mansfield District Council v Secretary of State for Communities and Local Government [2014] EWHC 2167

On 2 July 2014, the English High Court held that Mansfield District Council (MDC) had breached EU law in the award of two sub-threshold procurement contracts by failing to advertise them publicly. This ruling is a reminder to contracting authorities of the importance of abiding by the general principles of equal treatment, non-discrimination, transparency and proportionality contained in the Treaty on the Functioning of the European Union (TFEU) when awarding contracts which fall below the financial thresholds in the EU public procurement rules.

Summary:

A district council lost a judicial review challenge over the Communities Secretary’s decision to claw back almost £160,000 in payments made from the European Regional Development Fund.

The amounts of £138,317.74 and £20,262.52 related to two contracts awarded by Mansfield District Council to A&S Enterprises in connection with a town centre improvement plan.

The decision was justified on the basis that:

The claimant had breached EU law in the award of the two contracts by failing to advertise publicly the proposed contracts;

The council was, accordingly, also in breach of contract with the Department for Communities and Local Government; and

The amount of the claw back (25% of the total sums made available by way of grant) was appropriate.

In Mansfield District Council v Secretary of State for Communities and Local Government [2014] EWHC 2167 (Admin) Mansfield refuted the Communities Secretary’s case and his entitlement to act in the manner indicated.

Mr Justice Foskett rejected the claim.

“Given that there was no open advertising of the proposed contracts in the way contemplated by the local guidance [issued by the East Midlands Development Agency], I do not think it is argued that there was no breach of the Deeds of Grant. At all events, I so find,” he said. “Unless there has been a waiver of that requirement (which has not, in my view, been established), the right to claw back monies advanced arises. On that basis, it is probably immaterial as to whether, on a strict analysis, there has been a breach of EU law also save that it would, on all standard principles, not be possible to ‘waive’ a requirement imposed by EU law.”

The judge went on to find nevertheless that if the ERDF National Procurement Requirements reflected EU law, then, in his judgment, a breach would be established because there was no evidence that the claimant council as grant recipient took any steps to decide whether the proposed contracts “might potentially be of interest to suppliers located in other member states”.

“Because the contracts were relatively small in the overall scale of things (and were to be executed ‘in a remote part of North Nottinghamshire’, according to the claimant), it is possible to see why such a conclusion might have been reached, but the guidance given requires a conscious process to have been adopted conscientiously at the material time with an appropriate audit trail.”

Mr Justice Foskett added that the failure to consider whether there was any realistic prospect of cross-border interest (with the need for appropriate advertising if it existed) did itself represent a breach of the EU procurement requirements and that an ex post facto justification was not sufficient to remedy that omission.

The judge also said there were no grounds upon which the court could interfere with the amount of the claw back.

Mr Justice Foskett concluded: “It is unfortunate that the claw back should have become necessary since this is not a situation in which there was ever any intention on the part of the claimant to evade its responsibilities under the procurement processes and there is no doubt that there was a good and open working relationship between the claimant’s team and the team from EMDA [the East Midlands Development Agency], as it then was. “However, the EU requirements are demanding and the onus is on the grant recipient to get its own processes right. The help given by the defendant is, of course, always important, but the ultimate responsibility for complying with the procurement obligations lies on the grant recipient.”