Trinity College (CSP) Ltd, R (on the application of) v Secretary of State for Housing, Communities and Local Government

A managing authority may grant ERDF support even where, before the grant decision, it discovers that the applicant has awarded a project contract in a way that would breach procurement rules applicable to a grant recipient. The authority may make a pre-corrected grant, applying the financial correction that would be required if the grant were made. The Regulation does not impose an absolute duty to refuse the application.

However, no irregularity or financial correction exists before a grant is made. The applicable correction regime is therefore determined when the grant decision is made. Where a later regime would require a 100% correction to a central contract, making the project unviable, refusal of the grant may be lawful. A misdirection on the legal test does not invalidate the decision where the later circumstances independently justify refusal.

The claimant sought judicial review of the defendant’s refusal to provide ERDF support for a biomedical research hub. Before the grant decision, the claimant had awarded the principal refurbishment contract without advertising the opportunity and without following a procurement process in line with the applicable national rules.

The defendant initially treated the procurement failure as requiring rejection of the application. Following the 2019 Decision, and the corresponding provisions of NPR6, the defendant concluded that the contract would attract a 100% correction and that the project was not viable without it. The central issues were whether the defendant had been legally obliged to refuse the grant, when any financial correction procedure was launched, and whether the procurement review had been completed within a reasonable time.

1. Claim dismissed. Ground A succeeded in part, but Grounds 1 and 3 failed; Ground 2 was academic and Ground 4 was unsustainable.
2. Article 122(2) of the Regulation (EU) No 1303/2013 did not require refusal merely because the authority had discovered, before grant, facts which would constitute a procurement breach if the grant were made. A breach of applicable law is not itself an irregularity. It becomes an irregularity only where it has, or would have, the effect of charging unjustified expenditure to the Union budget.
3. The financial-correction mechanism measures the extent of unjustified expenditure and permits a grant to be made with an appropriate correction built in. The Regulation does not distinguish, for this purpose, between a procurement breach occurring after grant and facts occurring before grant which become a breach upon the grant being awarded. The authority was not under a legal duty to grant support, but it was entitled to consider a pre-corrected grant.
4. No actual irregularity, financial correction or correction procedure could exist before grant. If the concept was applied by analogy, the procurement review was an examination leading to a provisional conclusion. The procedure was launched, at the earliest, by the letter of 11 June 2019, which post-dated 14 May 2019. Ground 1 therefore failed.
5. The applicable regime was consequently the 2019 Decision and NPR6. The principal refurbishment contract attracted a putative 100% correction. Since the contract was central to the project and its removal made the project unviable, the defendant was entitled and effectively bound to refuse the application as matters stood in June 2019.
6. The defendant had not acted unlawfully by failing to complete the review sooner. The available information did not conclusively establish non-compliance, and it was reasonable to investigate whether the procurement process was substantively equivalent to the prescribed advertising process. The misdirection identified under Ground A therefore caused no operative error in the final refusal.
7. The claimant had been warned that awarding project works before a final grant decision was at its own risk. The claim was dismissed.