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Can third party organisations bring a challenge relating to a development when they are not bidders or potential bidders?

Can third party organisations bring a challenge relating to a development when they are not bidders or potential bidders?
Wednesday 5th April 2017

In the recent case of Wylde v Waverley Borough Council 2017 EWHC 466, the claimants sought judicial review of a decision by the local authority to vary a development agreement.  The circumstances were on the face of it, apparently similar to those in the decision of R (on the application of Gottlieb) v Winchester City Council 2015 EWCH 231 (Admin) and yet the outcome was entirely different.

In the Waverley case, there were 5 claimants, who comprised of 2 councillors from the town council and 3 members of local civic societies. The local authority had entered into a conditional development agreement after a competitive process, which did not follow the procurement rules for a works concession contract. The local authority wanted to vary the development agreement due to the financial crisis in 2008. The local authority issued a voluntary ex ante transparency (VEAT) notice advertising its intention to vary the contract. There were no responses to the VEAT from any potential bidders and this was considered to be a significant factor by the court.

The claimants were not economic operators and had not bid for the original development. The court had to consider whether they had sufficient standing to bring a claim for judicial review. The judge applied the rationale from an earlier case and stated that the claimants could only make a claim for judicial review if they had “sufficient interest in the matter to which the application relates”. In order to show sufficiency of interest, as the claimants were not economic operators and had not bid for the contract, they had to show that if the varied contract for the development had been competitively tendered, it might have led to a different outcome that would have had a direct impact on the claimant.

The judge noted that the variation reflected a change in the ultimate value the land should achieve once developed and the revised value had been confirmed by the authority’s professional valuers as satisfying the authority’s best consideration duty under the Local Government Act 1972 as it reflected best value for the authority at the time. The judge therefore concluded that the claimants would have difficulty in showing that a further tendering exercise for the varied contract would have resulted in a different outcome, partly due to the lack of response to the VEAT notice. The judge also held that the variation did not have a direct impact on the claimants as they did not have the status of economic operators under the procurement regime and the outcome of the development would not have been changed by the variation. On this basis, the claimants did not have legal standing to bring a judicial review claim.

In reaching its decision, the judge considered earlier cases including Winchester (referred to above), in which a local councillor brought a claim against the local authority following various variations made in 2014 to a development agreement which it was claimed resulted in a contract which was materially different in character such as to demonstrate the intention of the parties to renegotiate the essential terms of the contract to make the scheme financially viable for the developer. The High Court applied the Pressetext test to see if the variations were materially different in character from the original contract and found that the variations to the development terms altered the economic balance in favour of the developer and, had those terms been available at the time of the competitive process, other economic operators would have bid for the opportunity.

Whilst on the face of it, the facts of each of these cases appear similar, there are significant differences between them. In the case of Winchester, the council had not tendered the original opportunity for the development or the proposed variation and the variations did materially alter the nature of the development agreement. The judge noted that the failure to tender the original opportunity was a breach of the procurement rules but not one that could be remedied at the time of the claim. Also, the council did not argue the issue of whether the claimant had standing to bring the claim and the judge accepted that as a resident, a council tax payer and a city councillor, the claimant had a legitimate interest in ensuring public funds were spent wisely and secured the most appropriate development for the city through open competition.

In Waverley, the original development had been competitively tendered and it was considered that the variations to it would not have resulted in a different outcome for the claimant. Waverley highlights the use of a VEAT notice as an important tool in ensuring any challenges are brought quickly before the authority and the developer enter into binding obligations. However, the decision appears to make it more difficult to bring a challenge against a procurement by way of judicial review as it requires the claimant to show a link between the decision and how it affects them.