LEGAL AID - UNIFIED CONTRACT FOR THE PROVISION OF PUBLICLY FUNDED CIVIL LEGAL AID WORK - LAWFULNESS OF CONTRACT

Lord Phillips of Worth Matravers CJ, Wall and Lawrence Collins LJJ

29 November 2007

John Howell QC, Jarvan Herberg and Mark Vinall (instructed by Bircham Dyson Bell) for the claimants.

Robert Jay QC, Paul Darling QC, Rhodri Williams and Sarah Hannaford (instructed by the Legal Services Commission and the treasury solicitor) for the defendant and the lord chancellor and secretary of state for justice as interested party.

The new unified contract for the provision of publicly funded civil legal aid work did not con­form to the principle of transparency, pursuant to regs 4(3) and 9 of the Public Contracts Regula­tions 2006, (SI 2006/5) (the Regulations).

Two sets of proceedings before the court con­cerned the new unified contract, introduced on 1 April 2007, for the provision of publicly funded civil legal aid work. In the first action, the Law Society brought a claim seeking judicial review of the decision of the Legal Services Commission (LSC) to seek offers from firms of solicitors and not-for- profit organisations on the basis of the new unified contract. It contended that the contract, in particular cl 13, did not comply with the requirements of rr 4 and 9 of the Regulations, or with the principle of transparency under EC law, and in particular Council Directive (EC) 2004/18 (which the Regulations sought to implement) because of the scope of the right it gave the LSC unilaterally to amend the contract. Regulation 4(3) provided that a contracting au­thority was required to treat “economic operators” equally and in a non-discriminatory way, and to act transparently; the requirements mirrored those in Art 2 of the directive which the Regulations were intended to implement. Regulation 9(2) pro­vided that where a contracting authority wished to lay down technical specifications which had to be met, it had to specify those specifications in the contract documents. Clause 13.2 in the con­tract empowered the LSC to amend the contract as it considered necessary to comply with or take account of UK legislation, directly effective EU legislation or the decisions of the UK or European Courts. Clause 13.12 provided that when the LSC was entitled to amend the contractual documents it could make amendments that affected all, or fewer suppliers. The only limitation was the obligation to consult, which had no minimum period.

Some 95% of firms signed the contract, but the claimant in the second case (DM) objected. It brought proceedings seeking damages for breach of the LSC’s obligations under the regulations. The court ordered that the liability aspect of the claim be heard with the Society’s application for judicial review. The judge made a declaration that the rights of the Commission to amend in cl 13.1 were incompatible with regs 9(2), 9(4) and 9(7) of the regulations in so far as they were applicable to technical specifications, as defined in s 9(1). He refused, however, to make a similar declaration in relation to reg 4(3). The Society appealed against that refusal, and the defendants cross-appealed against the former declaration. DM obtained judg­ment to like effect and also appealed against the ruling on reg 4(3).

LORD PHILIPS OF WORTH MATRAVERS:

A critical feature of the judgment below was the distinction between reg 4(3) and reg 9. On appeal, however, neither side supported the judge’s view that there was a decisive difference between the two provisions. The Directive and the Regulations were concerned with the award of contracts by public authorities. Their objective was to open up public procurement to competition. To that end the award of contracts had to comply with the principles of equal treatment, non-discrimination and transparency. Technical specifications had to set out clearly the require­ments of the authority so that tenderers would be aware of what they would be required to do under the contract for which they were tendering.

Transparency was not achieved by the limita­tions on the express powers of amendment which the judge perceived. The first point on which he had relied was that any exercise of the power of amendment by the LSC would have to comply with principles governing the exercise of discre­tionary powers by public authorities, including propriety of purposes and the consideration only of relevant factors.

It was true that the LSC could not make arbi­trary or improper amendments. That would fol­low not only from general principles of public law, but also from the Regulations and no doubt also from an implied term to that effect in the Uni­fied Contract or from the express term (cl 2.2) that the LSC would act as a “responsible public body”. But that would not achieve the transparency of the contractual terms.

There were no effective limitations, nor would the parameters of change be known to the profes­sion. The power of amendment was so wide that it amounted to a power to rewrite the contract.

The LSC’s right to amend the terms of the unified contract did not cease to be objectionable simply because firms who were not content with the amended terms had a right to terminate their contracts.

Necessary changes

His lordship accepted that changes might become necessary or desirable during the life of a contract; and that a contracting authority might need to reserve a power to amend terms. It was not neces­sary to decide what level of detail (substantive or procedural) the principle of transparency would require, or when amendments created a “new contract” which would engage the public procure­ment process. The reason was that this case was an extreme case where the contracting authority had reserved to itself a virtually unlimited power of amendment, subject only to some limited pro­cedural conditions. Indeed, the power to amend was better characterised as a power to rewrite the contract.

The judge’s characterisation in the context of reg 9(7) of one of those provisions was equally true in relation to reg 4(3).

Consequently, his lordship agreed with the judge that the unified contract did not conform to the principle of transparency, but that result flowed not only from reg 9 but also from reg 4(3). In the result, therefore, the appeal by the Society and DM would be allowed, and the appeal by the LSC and the secretary of state would be dismissed.

R (on the application of the Law Society) v Legal Services Commission Dexter Montague & Partners (a firm) v Legal Services Commission [2007] EWCA Civ 1264, [2007] All ER (D) 469 (Nov) Court of Appeal, Civil Division