The Court of Appeal (CoA) decision in Faraday Development Ltd v West Berkshire Council  EWCA Civ 2532 has significant implications for public bodies entering into land development agreements and relying upon Voluntary Ex Ante Transparency notices (VEAT).
Specifically, the decision provides important guidance on when contracts containing obligations to carry out works will comprise "public works contracts" subject to public procurement law. In this case, a development agreement contained options, post-execution, for a developer to draw down land and if the developer exercised an option, it was under legally-enforceable obligations to develop the land in accordance with the agreement.
This article explores the significance of the case, focusing on when a contract will likely comprise a "public works contract" and the use of VEAT notices to preclude procurement challenges.
West Berkshire District Council (WBDC) entered into a development agreement with St Modwen Developments Limited (SMDL) in relation to the regeneration of industrial land in Newbury. Faraday Development Limited (Faraday) was the unsuccessful bidder in the non-EU tender process and challenged WBDC's decision to award to SMDL.
In the first instance, the High Court rejected Faraday's challenge and concluded that the development agreement was not a "public works contract" requiring compliance with public procurement law because SMDL was under no enforceable obligation to carry out works when the development agreement was entered into (as this obligation only arose if SMDL exercised an option to draw down a parcel of land); and effectively, SMDL could "walk away" from the arrangement without being obliged to carry out works.
The CoA agreed that the development agreement was not a "public works contract" at the time it was entered into because it did not contain any immediate enforceable obligations to carry out works. However, a "public works contract" would come into existence in the future if SMDL proceeded to draw down land but WBDC would be unable to carry out the required procurement at this future point. This was held to be unlawful from both a public procurement and public law perspective, as WBDC was effectively agreeing to act unlawfully in the future.
The CoA held that there was no evidence that WBDC had acted in bad faith at any stage of the process in deliberately attempting to circumvent public procurement law; or that the agreement had an unlawful purpose. However, this did not affect the CoA's decision in the case.
The VEAT notice issued by WBDC was held to be misleading as it failed to:
The CoA made the first declaration of ineffectiveness (ie. rescinding the contract) in a public procurement case since the remedy was introduced in 2009.