Ocean Outdoor UK Ltd v The London Borough of Hammersmith and Fulham
| Judge | Mrs Justice O'Farrell |
| Judgment Date | 28 September 2018 |
| Neutral Citation | [2018] EWHC 2508 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Docket Number | Case No: HT-2017-000233 CO/3864/2017 |
| Date | 28 September 2018 |
and
[2018] EWHC 2508 (TCC)
Mrs Justice O'Farrell
Case No: HT-2017-000233 CO/3864/2017
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (QBD)
Royal Courts of Justice
Strand, London, WC2A 2LL
Philip Moser QC and Ewan West (instructed by DLA Piper UK LLP) for the Claimant
James Goudie QC and Joanne Clement (instructed by Sharpe Pritchard LLP) for the Defendant
Hearing dates: 9th May 2018, 10th May 2018, 14th May 2018, 16th May 2018
Approved Judgment
This is the combined trial of a Part 7 claim by the claimant (“Ocean”) and its application for judicial review, challenging the decision by the defendant (“the Council”), to enter into arrangements with Outdoor Plus Limited (“Outdoor Plus”) for the leasing of two plots of land and operation of two metal towers, with media screens and supportive software, one on each plot, in West London (“the Two Towers”) following a tender exercise.
In 2010 the Council granted to Ocean a lease in respect of each plot of land for the purpose of advertising from the Two Towers (“the Original Leases”). In April 2017 the Council invited bids for a new leasing arrangement. Outdoor Plus submitted the highest bid and was the successful tenderer. In June 2017 the Council granted new leases in respect of the land to Outdoor Plus (“the New Leases”).
Ocean's primary case is that the New Leases transaction is properly to be classified as a services concession to which the provisions of the Concession Contracts Regulations 2016 (“the CCR 2016”) apply. Further, there was sufficient potential cross-border interest in the procurement for general EU principles to apply, such as transparency, non-discrimination, equality, fairness and proportionality. The Council failed to comply with the CCR 2016 and was in breach of general EU principles arising from the Treaty on the Functioning of the European Union (“TFEU”) in its conduct of the tender exercise for the New Leases.
Ocean's alternative case is that the award of the New Leases is susceptible to judicial review in relation to the Council's decisions: (i) to enter into arrangements with Outdoor Plus for the leasing and operation of the Two Towers; and (ii) to execute the New Leases with Outdoor Plus; on the grounds of procedural unfairness and manifest error.
The Council's case is that the CCR 2016 do not apply to the tender exercise for the New Leases. The New Leases are not service concession contracts as defined in the CCR 2016; they are land transactions. The Council was obliged to obtain the best consideration reasonably obtainable in respect of any land disposal pursuant to section 123 of the Local Government Act 1972 but was not obliged to comply with the CCR 2016 because such land transactions are excluded from the regulations. Further, they are not governed by the general principles of EU law because they concern internal matters and there is no cross-border interest.
The Council's position is that Ocean should not be granted permission for judicial review because the challenge has been made too late, there are no reasonably arguable grounds and any alleged unlawful conduct is unlikely to have made any material difference to the outcome. The Council engaged independent consultants to carry out the tender exercise. The procedure was fair. The Council acted properly in accepting the highest bid.
During closing submissions, Ocean indicated that it wished to amend the statement of facts and grounds in its judicial review claim to allege actual bias on the part of the Council. The draft statement was produced on 18 May 2018. The application to amend is opposed by the Council, as set out in its further written submissions on 21 May 2018.
Factual background
Ocean is a company specialising in the provision of outdoor advertising and has pioneered the use of electronic media for this purpose.
The Council is the freehold owner of two plots of land to the north and south of the Hammersmith Flyover, at a major entry point to central London on the A4.
In about 2009 Ocean constructed the Two Towers to support digital advertising screens and their operating software, one on each plot of land.
On 11 February 2010 the Council granted to Ocean a lease in respect of each plot of land (“the Original Leases”). The permitted use under the Original Leases was the installation, maintenance and operation of the Two Towers for the display of electronic advertisements. Under each lease Ocean covenanted to pay a turnover fee, calculated as 85% of the gross profit derived from the sale of advertising. Gross profit was calculated as the aggregate of all advertising revenues subject to deductions for fees, commissions, costs and expenses.
The Original Leases each contained a good faith provision at clause 10.8:
“The Parties shall act in good faith in relation to each other in order to maximise Gross Turnover. The Tenant shall use all reasonable endeavours to market and promote the Tower so as to maximise the Gross Turnover. Save where such marketing or promotion reflects usual advertising or marketing practice the Tower shall not be marketed, promoted or let at a discount in order to market, promote or otherwise sell space at other advertising sites operated by the Tenant.”
The Original Leases were for a term of 6 years from 21 December 2009. On 20 December 2012 the parties executed supplemental leases under which the Council granted a further term, expiring on 20 June 2017, on the same terms as set out in the Original Leases.
By letter dated 23 October 2013, Ocean wrote to the Council in the following terms:
“Please take this as formal notice that we only approve disclosure of contract details (currently 3 locations known as West Cross Route, P10 and Two Towers West) to contract managers at LBH&F that are known to us.
The details are commercially sensitive and require a high level of control with regards as to who has access to them.
For the avoidance of doubt we do not authorise disclosure of the agreements without our prior written approval.”
On 14 March 2014, following an EU procurement exercise, the Council entered into a framework agreement with Wildstone Property Limited, now Wildstone Consulting Media Limited (“Wildstone”) for the provision of professional property services in respect of Lot 7, advertising hoardings, on a call-off basis. The objectives were stated as follows:
“The Council's advertising hoarding sites sit in their own property portfolio – the Advertising Hoardings Portfolio. The Council wishes to expand this portfolio by securing new sites in the borough. To help it achieve this, the Council wishes to appoint a contractor specialising in – and with expertise in – advertising and media transactions to fully explore the opportunity to identify additional sites, negotiating with the Council's Planning Department to obtain planning permission for such sites and when obtained, to market the site. In addition, the Contractor will carry out re-lettings and rent review and lease renewals of existing hoarding sites in the portfolio.”
Clause 19 of the framework agreement contained a confidentiality agreement, including an obligation on each party not to disclose the other party's confidential information without the owner's prior written consent.
The fee structure under the agreement provided for Wildstone to receive incentive-based remuneration, including:
i) a percentage of the increase in rent achieved in respect of rent reviews up to 9.8% for increases over £50,001;
ii) a percentage of the initial annual rent in respect of lease renewals of 9.8% for rental income over £250,001;
iii) a fee based on the first year's rental due in respect of new lettings of existing sites that became vacant of 9.8% for rental income over £250,001;
iv) a scale fee based on the first year's rental due in respect of the marketing of new sites up to 14.8% for rental income over £250,001.
The fee that Wildstone would earn for a lease renewal would be the same as the fee earned for a new letting of an existing site.
In 2015 Izharul Haq, a valuer employed by the Council, expressed concerns that the income from the Two Towers had dropped significantly. Between 2011 and 2014 the rental income was more than £1.3 million per annum but in 2015 it dropped to £844,030. Ocean explained that continued road closures and obstruction of the screens by trees had adversely affected advertising revenues.
In January 2016 Wildstone produced a paper, identifying advertising opportunities for the Council. Included was a potential redevelopment of the Two Towers sites. Wildstone stated that the estimated rental value of the sites in 2016–2017 was between £1 million and £1.4 million and asked for the Council to provide details of the existing agreement and any termination provisions.
On 6 February 2016 Stephen Joseph, Chief Operating Officer of Ocean, sent to the Council a proposal for discussion in respect of renewal of the leases. The proposal included a minimum guaranteed rental income of £620,000 in 2016, rising to £750,000 in 2020, for static visual displays. Higher guaranteed rental income figures were shown for moving displays, which were subject to Ocean obtaining planning permission.
That offer was considered to be too low by the Council and it was rejected. The Council decided to instruct Wildstone to act as its agent in respect of the negotiations.
On 4 March 2016 Mr Haq invited Ocean to put forward a revised offer and stated:
“If you do put forward a new figure then I would like to run the numbers past our Councillors and external consultants...
To continue reading
Request your trial
-
Faraday Development Ltd v West Berkshire Council
...to the principles applied in the European case law (see, for example, the recent judgment of O'Farrell J. in Ocean Outdoor UK Ltd. v London Borough of Hammersmith and Fulham Council [2018] EWHC 2508 (TCC)). In Midlands Co-operative Society both Tesco and a consortium led by the Co-op obtai......
-
Ocean Outdoor UK Ltd v The London Borough of Hammersmith & Fulham
...(CIVIL DIVISION) ON APPEAL FROM THE HIGH COURT OF JUSTICE TECHNOLOGY AND CONSTRUCTION COURT THE HONOURABLE MRS JUSTICE O'FARRELL DBE [2018] EWHC 2508 (TCC) Royal Courts of Justice Strand, London, WC2A 2LL Philip Moser QC and Ewan West (instructed by DLA Piper UK LLP) for the Appellant James......
-
Braceurself Ltd v NHS England
...only weigh towards a finding that this was a sufficiently serious breach.” 77 In Ocean Outdoor UK Ltd v Hammersmith and Fulham LBC [2018] EWHC 2508 (TCC), O'Farrell J had concluded that the breaches were not sufficiently serious, in part because there was no direct impact on public service......