Cheshire East Council

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Cambridge college loses judicial review challenge over Government refusal to grant European Regional Development Fund support

A Cambridge college has lost an action over whether it should have received a European Regional Development Fund (ERDF) grant towards a biomedical laboratories project, despite succeeding on one point in a judicial review.

In Trinity College (CSP) Ltd, R (on the application of) v Secretary of State for Housing, Communities and Local Government [2021] EWHC 1355 Mr Justice Andrew Baker ruled that although the Secretary of State for Housing, Communities and Local Government in part misdirected himself “there is, overall, no operative error in the defendant's decision to reject the claimant's grant application”.

Trinity College had argued that delays by the team assessing its grant application meant that when an irregularity arose it was judged under a more punitive procedure than would have applied before that.

The college applied for a grant from the European Regional Development Fund (ERDF), which was administered by the Communities Secretary’s growth delivery team.

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This was to refurbish and fit out a 9,000 square feet building at Cambridge Science Park as affordable laboratories for biomedical research.

The government’s regional growth delivery team regarded this as in principle a good candidate for ERDF support at some £1.75m, being half the estimate cost.

Unknown to the grant team, Trinity awarded the primary construction contract in January 2019 without advertising it as required by regulations.

This triggered a procurement review during which Trinity was warned that it would need to re-procure the work as ERDF projects could only include compliant costs, but it was unable or unwilling to do that.

Following this the grant team indicated the project was no longer eligible for funding

Trinity argued failure to advertise the contract had been only a technical breach of the national guidelines.

It would not accept it should lose all funding since the European Structural Investment Funds National Procurement Requirements, Version 5, published in February 2017, provided a penalty for failure to advertise of a 10% grant 'correction'. The college said it should have seen 10% withheld, not been judged ineligible.

But the grant team said that following an EU Commission Decision in May 2019 and/or Version 6 of the ESIF National Procurement Requirements published in August 2019 any ERDF grant for the project would be subject to a correction of 100%, not 10%.

Trinity argued that the case should be judged against the fifth rather than sixth version of the regulation but the MHCLG said that it was bound to refuse the application since it had established a procurement irregularity.

The college’s main ground in the judicial review - named as Ground A by the judge - was that the Regulations and NPR5/NPR6 properly construed, entitled the grant team to award Trinity the money subject to a 10% correction, and did not oblige it to reject the grant application.

It also argued that the Secretary of State misdirected himself as to the meaning of the words "financial correction procedure" in the European Commission’s decision and acted procedurally unlawfully in failing to fulfil his obligation to detect irregularities within a reasonable time, causing it claimant to be subjected to the more punitive correction regime of the 2019 Decision. Baker J said another ground was academic and a fourth unarguable.

Ruling on Ground A, he said: “It was an error of law for the defendant to direct himself…that the defendant could not lawfully grant ERDF support for a project to an applicant when aware, prior to grant, that the applicant had awarded a project contract without complying with what would be the procurement rules applicable to it as a grant recipient, even if the putative financial correction rate would not be 100%, e.g. only 10%.”

The judge said: “Ground A, then, succeeds in part, in the sense that to the extent the defendant directed himself that if prior to grant he finds that the applicant has awarded a contract in a way that, if it were a grant recipient, would involve an irregularity requiring a financial correction pursuant to the Regulation, then as a matter of law the grant application must be rejected, that was a misdirection.

“The true position in that circumstance was that the defendant could lawfully grant ERDF support, 'pre-corrected', although he would not be under a duty to do so, i.e. it would be a matter for decision by him whether to do so rather than a matter where he was bound in law to refuse.”

Baker J rejected Ground 1 and turned to Trinity’s other ground that “in breach of an administrative law (procedural) duty to complete the procurement review within a reasonable time, the defendant without justification delayed the detection of (what would be) an irregularity under the 2013 Decision, in consequence of which the claimant was subjected to the effect of the more punitive correction rates that had to be set following the 2019 Decision when that was not necessary or proportionate”.

The judge said the timing of the commission's intervention by the 2019 Decision “was thus unhappy for [Trinity]…but it was not through any actionable failure on the defendant's part that the procurement review was concluded in early June 2019”.

He concluded Trinity was “warned in writing that, as regards ERDF grant funding, it acted at its own risk if it awarded the project works prior to a final grant decision.

"It took that risk. Its claim that it should not pay as a price the failure to secure that funding, by way of judicial review of the decision to refuse it in the circumstances as they were then found to be, fails and is dismissed.”

Mark Smulian

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