Winchester Council loses legal challenge over contract alterations

Paul Snell is managing editor at Supply Management
24 February 2015

The High Court has ruled against a local authority's decision to make changes to a development agreement without running a fresh, competitive tender process.

The court approved an application for a judicial review from councillor Kim Gottlieb, who challenged Winchester City Council’s decision to authorise variations to a contract with a developer to redevelop an area of the city centre, known as Silver Hill.

The council said the court’s decision was disappointing, went against legal advice they had received, and they were considering whether to appeal against the ruling. Robert Humby has resigned as leader of the council, taking responsibility for the decision.

“The court decided the council was wrong to proceed with the variations to the scheme now approved without first testing the market. I have therefore asked officers to advise on whether it is possible to rectify that omission to allow us to comply with the court’s decision,” he said.

“I have also asked officers to advise on other options open to us, including whether we should abandon the existing approved scheme and begin again.”

According to Paul Henty, partner at law firm Charles Russell Speechlys, the case is another reminder of the critical importance for local authorities to consider the application of procurement rules before entering into new developments or authorising variations to existing ones.

In 2004, the local authority signed a development agreement with Thornfield Properties (Winchester), which was later acquired by Henderson Global Investors. This contract was competitively tendered, or advertised in the OJEU.

Then in 2013 the council approved changes to the agreement, which included the removal of requirements to provide social housing and certain civic amenities. Gottlieb, who is one of the leaders of the Winchester Deserves Better campaign opposing the scheme, challenged the move in court.

The judge, Mrs Justice Lang, applied the test established in previous case law whether the variations were “materially different in character from the original contract”. She ruled it was a major change to the deal, and other potential bidders would have bid for the contract, if the opportunity had arisen.

She allowed the judicial review application, even though Gottlieb was not a disgruntled bidder, saying he was allowed to bring the application because he had a legitimate interest as a resident, council tax payer and councillor, He sought “what the procurement process is intended to provide, namely an open competition to allow Winchester to select the development which best fulfils its needs”.

A full report on the case will appear in the March edition of Supply Management.

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