Redwood Health Ltd, R (on the application of) v NHS Purchasing and Supply Agency

In a public procurement framework, substitution of a new contracting party may amount to a change to an essential term, unless the original contract provided for that substitution. A group reorganisation does not remove the procurement-law risk where the original contractor no longer assumes responsibility for the contractual obligations. A public authority may take the risk, cost and disruption of legal challenge into account when deciding whether to permit substitution. At the permission stage, the court may refuse relief where a quashing order would be unlikely to provide practical benefit. Legitimate expectation requires a clear and unequivocal representation which the authority lawfully could fulfil.

Redwood Health Limited sought permission to apply for judicial review of decisions by the NHS Purchasing and Supply Agency concerning two procurement framework agreements. Redwood had acquired the business of Montagu Nursing Agency Limited after Montagu entered administration. The defendant refused to novate an existing framework agreement and refused to allow Redwood to participate in, or prospectively take over, the tender process for a replacement agreement.

The claim alleged errors concerning EU procurement law, the short remaining duration of the existing agreement, irrationality, fairness and legitimate expectation. The application was heard orally after permission had initially been directed to be considered in that manner.

1. Existing agreement. The claimant’s reliance on paragraph 11.1 of the framework agreement was misplaced. That provision made the agreement personal to the supplier and permitted novation only with the defendant’s prior written consent. It did not fall within the qualification identified in Pressetext Nachtrichtenagentur GmbH v Republik Osterreich (Bund) C-454/06.
2. Pressetext indicated that substitution of a new contractual partner was ordinarily a change to an essential term, unless substitution had been provided for in the initial contract. Its treatment of a group reorganisation depended critically on the initial service provider continuing to assume responsibility for the contractual obligations. The administrators’ letter made clear that Montagu would not continue to assume that responsibility. The defendant was therefore entitled to regard novation as carrying a risk of challenge under EU procurement law.
3. Even if the defendant’s legal view were wrong, the risk of legal challenge was a material circumstance which it could take into account. The associated expense, delay and disruption were relevant, and the weight given to those matters was for the defendant unless the decision was irrational. The decision was not arguably irrational.
4. The court could consider at the permission stage whether relief was likely to be granted as a matter of discretion. By the time of any substantive hearing, judgment and further decision by the defendant, the existing agreement would have almost expired. A quashing order would have no, or minimal, practical utility. This provided a further reason to refuse permission.
5. New agreement and legitimate expectation. The procurement-law risk also applied to allowing Redwood to replace Montagu in the new tender process, whether actually or prospectively. The defendant was entitled to give weight to that risk because it could cause legal challenge, delay and disruption to the replacement framework.
6. The legitimate-expectation argument failed. Applying the principles stated in Rowland v Environment Agency [2003] (ChD) 581, there had been no clear and unequivocal representation. Neither the defendant’s silence nor its short period of continued dealings with the group created such a representation. The related fairness and reasonableness arguments added nothing and were not reasonably arguable.
7. Permission to apply for judicial review was refused and the applications were dismissed. Transfer to the ordinary Queen’s Bench civil list was not considered appropriate. No order for costs was sought.