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R (Midlands Co-Operative Society Ltd.) v. Birmingham City Council & Tesco Stores Ltd. [2012] Eu L.R. 640

DATE: 16 Mar 2012

The Co-Op challenged the decision by Birmingham City Council to sell certain strategic land interests in Stirchley to Tesco, as well as the in principle authorisation of compulsory purchase powers to facilitate the making of a compulsory purchase order to facilitate land assembly for Tesco’s proposal for retail-led regeneration of Stirchley. The Co-Op has an existing retail store in Stirchley as well as planning permission for a different scheme. The claim was brought on a number of grounds, including in particular that:

1. The transaction, viewed in conjunction with planning obligations that Tesco had entered into relating to the relocation of a community centre and bowling facility currently located at the site, was a “public works contract” engaging the public procurement rules in the Public Contracts Directive and the Public Contracts Regulations 2006; and

2. The Council had failed in its duty under s.123 of the Local Government Act 1972 to obtain best value for its interests.

Following a rolled-up hearing, Hickinbottom J granted the Co-Op permission to proceed but dismissed the substantive claim. In particular, he held:

1. Following the CJEU’s judgment in Case C-451/08 Helmut Müller, in order for a contract to fall within the scope of the Directive, there needed to be a binding legal obligation upon the contractor to carry out (or be responsible for the carrying out) of works. There was no such binding obligation in the present case. The s.106 agreement would only be triggered if Tesco chose to implement the development, and there was no obligation on Tesco to do so.

2. S. 123 imposed a duty to achieve a particular outcome, namely the best price reasonably obtainable, rather than a duty to conduct a particular process. An authority’s purported discharge of its duty under s.123 could only be challenged on ordinary public law grounds. In light of the expert valuation evidence filed on behalf of the Council, as well as the advice contained in a contemporaneous internal valuation report, there were no public law grounds for concluding that the Council had failed to comply with s.123 in the present case.

Other grounds based on alleged legitimate expectations, unfairness and having regard to immaterial considerations were also rejected.

The case is the first to consider the application of the Public Contracts Directive in the planning and development contexts since the landmark cases of Auroux v. Roanne and Helmut Müller.

David Holgate QC and Tim Morshead QC acted for the Co-Op, instructed by Marrons.

David Elvin QC and Charles Banner acted for Birmingham City Council.

Reuben Taylor acted for Tesco Stores Ltd (led by James Goudie QC), instructed by Ashurst LLP.