Barnet defeats Court of Appeal challenge to outsourcing programme

The judicial review challenge to Barnet Council’s controversial One Barnet outsourcing programme was brought out of time, the Court of Appeal has ruled.

The appellant claimant, local resident Maria Nash, had raised various grounds in her challenge to the local authority’s decision on 13 December 2012 to award Capita a £320m+ contract for a ‘New Support and Customer Service Organisation’ (NSCSO) and an intended decision on 31 January 2013 to award a contract to the company for development and regulatory services (DRS).

However, the High Court ruled in April this year that the claim had been brought out of time.

The Court of Appeal has now – in Nash, R (on the application of) v Barnet London Borough Council [2013] EWCA Civ 1004 – upheld Mr Justice Underhill’s ruling.

According to Lord Justice Davis, who gave the court's judgment, the key question was whether the claim form was filed “not later than three months after the grounds to make the claim first arose…”, by reference to CPR Rule 54.5(1)(b).

Counsel for the claimant argued that Mr Justice Underhill had got it wrong in selecting the relevant decision as being those made on 29 November 2010 (for the DRS project) and 2 March 2011 or 29 June 2011 (for the NSCSO project).

Nigel Giffin QC submitted that nothing had been decided at those times. Instead the ‘real’ decisions were that taken on 6 December 2012 (resolving to enter into a contract) and the prospective decision on 31 January 2013.

However, Lord Justice Davis said: “I cannot agree with this, any more than the judge could.”

He added: “The question to be asked….is, in my view, not in the abstract when the decision was finally or irrevocably made….but when a decision was taken in respect of which the statutory duty to consult first arose: because it is the alleged failure to consult which is the essence of these proceedings.”

Lord Justice Davis said this had to be assessed by reference to section 3 of the Local Government Act 1999, which was framed “in notably broad terms”.

The judge said: “The duty is to ‘make arrangements’ to secure continuous improvement in ‘the way’ in which a relevant authority’s functions are exercised: s.3(1). The obligation to consult, under s. 3(2) then arises for the purposes of deciding ‘how’ to fulfil that duty.

“That being so it seems to me an impossibly narrow application of the section to link it to the decision of 6 December 2012.”

The judge said the section was not designed to require consultation about the terms of particular contracts which an authority may be minded to make – “indeed considerations of commercial confidentiality would in any event often make that an impossibility”.

He added: “Moreover it seems at first sight most surprising to align the duty to consult with the date of resolving to enter into a particular contract. Rather one might expect – given the width of s.3 – that the duty should be geared to consultation at a much earlier stage, well before the stage at which consideration is given as to whether the relevant officer is to be authorised to sign a particular contract.”

Lord Justice Davis said: “Those considerations justify the judge's finding…. that the duty to consult is concerned with ‘questions of policy and approach’, not specific operational matters. That indeed accords with the wide language, and underlying purpose, of s.3 of the 1999 Act.”

The judge said this was reflected by the facts of the case – Mrs Nash’s complaint was not in truth about the alleged failure to consult her and others in the borough about entering into a contract with Capita or about the terms of any such contract.

“Rather the complaint is about the alleged failure to consult her, and others in the borough, about the whole proposal to outsource in principle.”

Lord Justice Davis agreed with Barnet’s counsel, Dinah Rose QC, that there was “a clear lack of connection” between consultation on the policy of outsourcing – the essential ground of complaint – and the decisions sought to be challenged on the face of the claim form.

Counsel for the claimant also submitted an alternative ground of appeal by reference to the House of Lords decision in R (Burkett) v Hammersmith & Fulham London Borough Council [2002] 1 WLR 1593, [2002] UKHL 23.

The judge said the essence of this argument was that even if Mrs Nash could have raised her challenge as to want of consultation at an earlier stage, there was no obligation on her, under the rules, to do; and that Burkett permitted such a claimant to raise the legal challenge at the time of the final decision to do the act.

Lord Justice Davis concluded that the Burkett decision, which was binding on the Court of Appeal, was “plainly distinguishable from the present case”.

The judge said: “Here, the council was not provisionally resolving to enter any outsourcing contract at all, let alone a provisional contract relating to the DRS project or to the NSCSO project.

“What, as the context and the terms of the relevant decisions in November 2010 and March 2011 show, the council was doing was actually deciding to enter into a procurement process by way of competitive dialogue. That process then, and in accordance with the 2006 Regulations, proceeded in stages.”

Lord Justice Davis continued: “Thus, in contrast with the initial resolution in Burkett, work here was lawfully and foreseeably done and money was expended precisely because of such decisions. The decisions thus had and were intended to have legal effect: not, of course, in terms of sanctioning a binding contract but in terms of authorising and causing the initiation of the procurement process, with attendant inevitable heavy expenditure and significant use of time and resources.”

The judge said that without such decisions, those things could not and would not have been done. “Those decisions are thus, indeed, in my view properly to be regarded as substantive or, if you like, ‘final’ (using Mr Giffin's word) for that purpose. They are not to be regarded as contingent or provisional, even though there was no guarantee at all that any outsourcing contract or contracts might ultimately result.”

Lord Justice Davis said there was nothing in terms of fairness or certainty such as to justify the claimant not issuing proceedings until after the decision of 6 December 2012. “The prior decisions had been made at public meetings, had been published and (as found by the judge) were widely known.”

He added: In truth, considerations of fairness and certainty in this respect all weigh strongly in favour of the Council. It is inconceivable that the Council (or the potential tenderers) would have gone down the very costly and time-consuming process of procurement and competitive dialogue had it been envisaged that a challenge on the grounds of lack of consultation on the whole strategy of outsourcing might at the very end of the day be made. That is quite different from the inherent and understood risk that the procurement process might not ultimately result in any concluded procurement contract.”

Lord Justice Davis concluded: “My opinion is that these proceeding were properly assessed as out of time and accordingly that this application should be refused.”

Cllr Richard Cornelius, Leader of Barnet, said: “We can all now get on with making the huge savings in our back office costs which we need to do if we are to continue protecting our frontline services. Nobody has stepped forward to propose either cuts in services or increased taxes as an alternative to this programme.

“This contract with Capita will save the Barnet taxpayer £126m over the next decade. We have to be clear that we are in line for a decade of austerity and we have to look at all opportunities to drive down costs while supporting our services.”

Helen Randall, Head of Public Sector Commercial at Trowers & Hamlins, which acted for Barnet in this case, said: "This landmark case gives confidence to all councils considering partnerships, joint ventures and outsourcings to save money and improve services including regulatory, customer and back office functions.  We are working with a number of government and contractor clients on new service delivery models to address the current economic and demographic challenges who will be relieved they can now progress their procurements."