Risk Management Partners Ltd v Brent London Borough Council (No 1)

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLord Justice Pill,Lord Justice Moore-Bick,Lord Justice Hughes
Judgment Date09 June 2009
Neutral Citation[2009] EWCA Civ 490
Docket NumberCase Nos: C1/2008/1254, C1/2008/1251,
Date09 June 2009

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM QUEEN'S BENCH DIVISION

ADMINISTRATIVE COURT

Stanley Burnton LJ

Before: Lord Justice Pill

Lord Justice Moore-Bick and

Lord Justice Hughes

Case Nos: C1/2008/1254, C1/2008/1251,

C1/2008/1091, C1/2008/1082

Between
Brent London Borough Council
Appellants
and
Risk Management Partners Limited
Respondents
and
London Authorities Mutual Limited & Harrow London Borough Council
Interested Parties

Mr Nigel Giffin QC and Miss Deok-Joo Rhee (instructed by London Borough of Brent) for the Appellants

Mr John Howell QC, Mr Javan Herberg and Mr James Segan (instructed by Sedgwick, Detert, Moran & Arnold) for the Respondents

Mr Roger Henderson QC and Mr Rhodri Williams (instructed by Weightmans) for the Interested Parties

Hearing dates: 16th, 17th, 18th and 19th March 2009

Lord Justice Pill

Lord Justice Pill:

1

These are appeals against decisions of Stanley Burnton LJ who heard the cases as a High Court Judge but had been appointed to the Court of Appeal when he delivered judgment. Judgments were delivered on 22 April 2008 and 16 May 2008. In the first judgment ( [2008] EWHC 692 (Admin)), Stanley Burnton LJ declared that Brent London Borough Council (“the appellants”) had no power to become a member or participating member of London Authorities Mutual Limited (“LAML”) or to make payments or to enter into commitments to make payments to LAML. These were proceedings by way of judicial review.

2

In the second judgment, ( [2008] EWHC 1094 (Admin)) Stanley Burnton LJ gave judgment for Risk Management Partners Limited (“the respondents”) in their claim for damages against the appellants for breach of the Public Contracts Regulations 2006 (“the 2006 Regulations”) in awarding contracts of insurance to LAML, a mutual insurance company of which the appellants were a member. Issues of causation and quantum were reserved. Stanley Burnton LJ granted the appellants permission to appeal in both cases.

3

The respondents are a commercial provider of insurance which seeks business from local authorities. They would wish to obtain business which might otherwise go to LAML. LAML was established by a number of London Borough Councils, including the appellants and Harrow London Borough Council (“Harrow”) which joined the proceedings as an interested party. LAML and Harrow have joined cause with the appellants in these appeals. They seek to establish that London local authorities did have power to become members of LAML. They challenge the finding of Stanley Burnton LJ, in his second judgment, that the appellants were in breach of the 2006 Regulations in awarding contracts of insurance to LAML in respect of the financial year 2007/8, outside the tender process in which the respondents participated.

4

Mr Nigel Giffin QC appears for the appellants and Mr Roger Henderson QC for the interested parties. Mr John Howell QC appears for the respondents. By way of introduction, I can say that the issues were succinctly stated by Mr Giffin: first whether the appellants had power to enter into contracts of insurance with LAML and whether those powers were exercised (the vires issue) and, secondly, whether the appellants should have followed the competitive procedure specified in the 2006 Regulations before entering into contracts with LAML (the procurement issue).

5

For the appellants and interested parties, Mr Giffin made the main submissions on the first issue and Mr Henderson on the second. In their main submissions, they dealt with all issues between the parties, including those raised in a respondent's notice. It was also submitted by the appellants that the respondents were not entitled to relief in either case because of their delay in bringing the proceedings. There was a counterclaim for a declaration.

6

London local authorities were plainly concerned about the amount they pay to commercial insurers by way of insurance premiums and the services they receive from those insurers. Following extensive studies conducted on behalf of a group of London authorities, it was considered that participation in a guaranteed indemnity mutual insurance company could produce average savings in premiums of 15% to 20%. Moreover, it was considered that the financial incentive for members of the mutual to share best practice would result in improved risk management to which commercial insurers gave relatively little attention. For many years many local authorities obtained their insurance from a company known as Municipal Mutual Insurance Limited but it has not been suggested in this court that any useful comparison can be made between the function of that company and of LAML.

7

To achieve participation in LAML, the appellants subscribed on 18 January 2007 to the Memorandum and Articles of Association (and thereby became a member), made a paid capital contribution of £160,500 to LAML on 16 March 2007, executed on 27 March 2007 an undertaking to pay sums on demand to LAML up to a total of £609,500 (the guaranteed capital contribution) and became a Participating Member. Following an invoice on 30 March 2007, the appellants paid premiums of £520,328.14 for the year 2007/08 in respect of terrorism, liability, property and contents insurance.

Local Government Act 2000

8

On behalf of the appellants, it was submitted that participation in LAML was within their powers both under section 2 of the Local Government Act 2000 (“the 2000 Act”) and under section 111 of the Local Government Act 1972 (“the 1972 Act”). Sections 2, 3 and 4 of the 2000 Act provide, in so far as is material:

“2 Promotion of well-being

(1) Every local authority are to have power to do anything which they consider is likely to achieve any one or more of the following objects—

(a) the promotion or improvement of the economic well-being of their area,

(b) the promotion or improvement of the social well-being of their area, and

(c) the promotion or improvement of the environmental well-being of their area.

(2) The power under subsection (1) may be exercised in relation to or for the benefit of—

(a) the whole or any part of a local authority's area, or

(b) all or any persons resident or present in a local authority's area.

(3) In determining whether or how to exercise the power under subsection (1), a local authority must have regard to their strategy under section 4.

(4) The power under subsection (1) includes power for a local authority to—

(a) incur expenditure,

(b) give financial assistance to any person,

(c) enter into arrangements or agreements with any person,

(d) co-operate with, or facilitate or co-ordinate the activities of, any person,

(e) exercise on behalf of any person any functions of that person, and

(f) provide staff, goods, services or accommodation to any person.

(5) The power under subsection (1) includes power for a local authority to do anything in relation to, or for the benefit of, any person or area situated outside their area if they consider that it is likely to achieve any one or more of the objects in that subsection.

(6) Nothing in subsection ( 4) or (5) affects the generality of the power under subsection (1).

3 Limits on power to promote well-being

(1) The power under section 2(1) does not enable a local authority to do anything which they are unable to do by virtue of any prohibition, restriction or limitation on their powers which is contained in any enactment (whenever passed or made).

(2) The power under section 2(1) does not enable a local authority to raise money (whether by precepts, borrowing or otherwise).

(3) The Secretary of State may by order make provision preventing local authorities from doing, by virtue of section 2(1), anything which is specified, or is of a description specified, in the order.

(5) Before exercising the power under section 2(1), a local authority must have regard to any guidance for the time being issued by the Secretary of State about the exercise of that power.

4 Strategies for promoting well-being

(1) Every local authority must prepare a strategy (referred to in this section as a sustainable community strategy) [current wording] for promoting or improving the economic, social and environmental well-being of their area and contributing to the achievement of sustainable development in the United Kingdom.

(2) A local authority may from time to time modify their community strategy.”

9

Mr Giffin submitted that the well-being power conferred by section 2 was a step change in the approach to the powers of local authorities. He relied in support of that general submission on the content and reasoning in the explanatory notes which accompanied the statute and the guidance under section 3(5) which followed it and it is appropriate to quote from those documents at some length. The power was limited, Mr Giffin submitted, only by the restrictions and potential restrictions in section 3. Having referred in general terms to statutes which expressly authorised action by local authorities, the explanatory notes referred to the limited general powers in section 137 of the Local Government Act 1972. The notes continued:

“8. This formulation has, on occasion, led the courts to take a restrictive view of the activities that can be pursued using section 137. In some cases, the courts have inferred from the absence of specific powers in other legislation that certain activities are prohibited and that an authority cannot, therefore, rely on its section 137 powers to overcome that prohibition. This has created uncertainty amongst local...

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