Petition By Kenman Holdings Limited Against Comhairle Nan Eilean Siar
| Jurisdiction | Scotland |
| Judge | Lady Paton,Lord McGhie,Lord Menzies |
| Judgment Date | 03 February 2017 |
| Neutral Citation | [2017] CSIH 10 |
| Court | Court of Session |
| Date | 03 February 2017 |
| Published date | 03 February 2017 |
| Docket Number | P552/15 |
EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
[2017] CSIH 10
P552/15
Lady Paton
Lord Menzies
Lord McGhie
OPINION OF THE COURT
delivered by LORD MENZIES
in the Petition
by
KENMAN HOLDINGS LIMITED
Petitioner and Reclaimer
against
COMHAIRLE NAN EILEAN SIAR
Respondent
Petitioner and Reclaimer: Dunlop QC, P Sellar; Maclay Murray & Spens LLP
Respondent: Crawford QC, E Campbell; Harper MacLeod LLP
3 February 2017
Introduction
[1] The petitioner is a company which owns and operates hotels on the Isle of Lewis. The respondent is Comhairle Nan Eilean Siar (“the Council”), which owns Lews Castle, a redundant Category A listed building in Stornoway that the Council wishes to develop as a heritage and hospitality tourist destination. The council envisages that the works will be carried out in four phases. These proceedings are concerned with the third and fourth phases, being upper floor works and hospitality and accommodation fit‑out, to be undertaken by a private sector partner who would subsequently be granted a concession by the Council to operate various tourism‑related businesses within the premises. A public procurement exercise conducted by the Council in 2012 led to the signing, on 24 July 2014, of a development agreement between the Council and two companies who are interested parties in these proceedings.
[2] In this application for Judicial Review the petitioner originally sought various orders including (i) declarator that the Council’s decisions to enter into the development agreement and a related technical services agreement with these companies were taken in breach of EU public procurement law and legal principles, and in breach of natural justice; (ii) reduction of those decisions; and (iii) damages. Answers were lodged on behalf of the Council, Highlands and Islands Enterprise (“HIE”), and these companies, denying that any breach of EU law and principles or of natural justice had occurred. The Council contended inter alia that the application for Judicial Review was incompetent, and, in any event, that it should be refused on the grounds of mora, taciturnity and acquiescence on the part of the petitioner.
[3] These two preliminary issues were considered by the Lord Ordinary at a first hearing diet, following which by interlocutor dated 16 December 2015 he sustained the Council’s second plea in law and refused the prayer of the Petition. The Council’s second plea in law was that “the petitioner being barred by mora, taciturnity and acquiescence the prayers of the Petition should be refused.”
[4] It is against that interlocutor that the petitioner now reclaims. The Lord Ordinary found in favour of the petitioner on the question of competency. The respondent has not reclaimed against his determination on this point. The sole issue before this court is therefore the question of mora, taciturnity and acquiescence.
[5] In the course of proceedings in the Inner House, the petitioners and reclaimers were allowed to amend their pleadings by restricting the remedies which they seek. They now seek the following remedies:
(a) declarator that the decisions to award the contract and the related contract to the Company were in breach of requirements of European Union law relating to public procurement and natural justice;
(b) declarator that the award of the related contract constitutes unlawful state aid in breach of Articles 107 and 108(3) of the Treaty on the Functioning of the European Union;
(c) expenses against any party appearing to oppose the Petition;
(d) damages estimated to be £23,340,538;
(e) such further order, decree or orders as may seem to the court to be just and reasonable in all the circumstances of the case.
Perhaps for this reason, the companies and HIE who appeared as interested parties before the Lord Ordinary were not represented at the summar roll hearing before this court. In addition to detailed Notes of Argument, we heard submissions on behalf of the petitioner and reclaimer and the respondent. We do not propose to set out in detail the terms of the respective notes of argument, which we have taken into account. Before summarising the submissions for the parties, it may be helpful to set out the exchanges and correspondence between the parties, which featured in the discussion before us.
Chronological Sequence of Events
[6] 1/4/14 Mr Kenneth McKenzie, chief executive of the petitioner, wrote to Councillor Angus Campbell, leader of the Council, referring to a meeting of 6 March regarding the Lews Castle development, and offering to present his ideas to progress the project. He indicated that he was confident that the Board would find his proposal would deliver a higher level of economic benefit than what was currently proposed, as well as being much less controversial.
8/4/14 Mr Campbell responded to the above, indicating that both procurement exercises conducted by it complied with all legal requirements. The second of the procurement exercises which had identified Natural Assets (one of the interested parties) as the preferred bidder had not yet been concluded but negotiations were at an advanced stage. In the event that the Council was satisfied as to certain factors, he would anticipate an appointment being made, and he was advised that to stop the current process without good reason might give rise to a legal challenge from Natural Assets. He indicated that it would not be appropriate to discuss Mr McKenzie’s proposal for Lews Castle at a time of advanced contractual negotiation.
17/4/14 Mr McKenzie prepared a written aide memoire for a meeting with Mr Campbell, noting his concerns and proposals.
5/5/14 Mr McKenzie sent an email to Mr Malcolm Burr at the Council seeking information about contact between the Council and Natural Retreats/Natural Assets prior to 5 November 2012.
29/5/14 The FOI team of the Council emailed Mr McKenzie giving a response to the above, which indicated three meetings in July and August 2012.
10/6/14 The petitioner’s solicitors (“MMS”) emailed the respondent making formal FOI requests for detailed information about meetings between the Council and the above companies and any other parties before the tender process, the evaluation of tender submissions from the above companies, and meetings held on or around 20 July 2012.
18/6/14 MMS sent a letter by email to Mr Campbell of the respondent, which asserted breaches of the procurement rules. The letter contained the following passages:
“there is at the very least an appearance that Natural Assets has received an unfair advantage with respect to the Tender following the meetings and the call. In so far as the meetings and the call are an example of pre‑tender engagement, they have not taken place in a transparent, objective and non‑discriminatory way. Rather, the process appears to have been largely opaque and has fallen far short of basic EU law requirements. …
The Council appears to be in breach of its duty under the Regulations which requires it to consider all tender submissions in accordance with principles of equal treatment and transparency and its obligation to follow proper and transparent procedures. That is a duty owed to our client …
In light of the above issues, our client would request that the current tender process be withdrawn and substituted by a new, compliant process. Our client would be happy to meet with the Council to discuss his concerns in more detail.”
26/6/14 Mr Campbell of the respondent replied to the letter from MMS of 18/6/14. This letter rejected the claims made in the letter of 18/6/14; it included the statement “I am confident that the Comhairle has met its legal obligations in relation to this procurement process”, and concluded with the words “I do not accept that the procurement process is defective”.
30/6/14 MMS made further formal FOI requests of the Council, which focused on the areas of alleged breaches of the Procurement Rules set out in the email of 18/6/14.
20/8/14 A notice was published in the EU journal that the contract had been awarded to Natural Assets.
11/9/14 MMS wrote by email to Mr Campbell of the respondent, (and to the Scottish Government and Audit Scotland) complaining that the pre‑tender communications with Natural Assets resulted in their receiving an unfair advantage to the detriment of other potential bidders. The letter contained the following assertions:
“Due to the fact that the Comhairle engaged in both pre‑ and post‑tender discussions with Natural Assets, and disregarded the principles of equal treatment and transparency, it was not entitled to award the contract to Natural Assets. In that context, we note that our Freedom of Information request from 30 June 2014 addressed to the Comhairle to gather information in that respect was responded to well after the statutory date by which a response should have been given. A response to our Freedom of Information request was due on 31 July 2014. We received the response on Tuesday 7 August 2014 at 4.51pm. The formal decision to award the contract was taken on Wednesday 8 August 2014. The failure to comply with the Freedom of Information legislation and the coincidence between the timing of the response eventually received and the formal decision to award the contract will be brought to the attention of the European Commission. The problems with the procurement process described above also mean that Natural Assets has received a selective advantage through state resources which distorts competition.”
15/9/14 Mr Campbell of the respondent replied to the letter from MMS dated 11/9/14. He did not accept that the award of the contract breached procurement, EU funding and/or state aid rules. He went on to state:
“Your client has had time to challenge the procurement process and has not done so. I do not consider there was anything in the information provided pursuant to the Freedom of Information request which would have changed your client’s position. In any event the Comhairle...
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...only made out where all three elements of mora, taciturnity and acquiescence are present (Kenman Holdings Ltd v Comhairle Nan Eilean Sar 2017 SC 339 paragraphs 39 to 40). Mora connotes an unreasonable period of delay. Taciturnity is a failure of the petitioner to speak out in assertion of i......