Peter Oldham KC and Joseph Barrett KC successful in £2.7 billion PFI Credits JR


Peter Oldham KC and Joseph Barrett KC of 11KBW acted successfully for Birmingham City Council (BCC) in its successful judicial review challenge to the decision of the Secretary of State for Transport (the SST) to terminate the PFI Credits allocated to BCC’s £2.7bn highways PFI.

Following termination of the contractual arrangements with the previous principal sub-contractor for the PFI, Amey, BCC was required to restructure the project and conduct a re-procurement. BCC provided extensive information to the SST, and the SST communicated ongoing support and approval at various gateways.  

However, the SST took a decision not to approve BCC’s Updated Outline Business Case submission, and to terminate BCC’s entitlement to on-going payments of the PFI Credits.

The basis for the SST’s decision was, in summary, that changes in Government accounting policies meant that the project would now need to be accounted for “on balance sheet” and this would require new capital account funding to be allocated to the SST in the current and/or next financial year, which was regarded as ‘unaffordable’.

BCC sought judicial review of the SST’s decision to terminate the PFI Credits contending, inter alia, that: (i) the decision was in breach of the written terms governing PFI credit payments (the PFI Guide)  that were issued by the SST when the PFI Credits were awarded (Grounds 1-3), and (ii) the decision was procedurally unfair, because the core reasons relied on by the SST to justify the decision had not been fairly or properly communicated to BCC, and BCC had accordingly never been provided with a procedurally fair opportunity to be heard in respect of them (Ground 4).

The High Court has upheld BCC’s claim for judicial review, quashing the SST’s decision terminating the PFI Credits.

The Court held, in summary:

(i) The PFI Guide was intended to inform local authorities being awarded PFI Credits of the Government’s policy in administering PFI Credits, and to be relied on by local authorities. However, the relevant provisions of the PFI Guide did not provide that PFI Credits would only be terminated in “exceptional circumstances”. Grounds 1-3 were therefore dismissed.

(ii) The core reasons relied on by the SST as justifying the decision to terminate the PFI Credits were not communicated to BCC before the decision was made, and BCC was not provided with a fair opportunity to make representations in respect of those reasons. The evidence indicated that there were a number of relevant matters that BCC might realistically have raised with the SST that could have informed his decision. In the circumstances, the SST was in breach of the duty of procedural fairness and/or a procedural legitimate expectation. Ground 4 was therefore successful.

The Court also dismissed limitation arguments and a submission by the SST that relief should be refused on the ground that any error of law made no difference.

A copy of the judgment can be found here.

The Judgment will be of interest to public and local government practitioners, and those whose practice relates to PFI projects, public sector finance and/or public-private transactions.

Peter Oldham KC and Joseph Barrett KC of 11KBW appeared successfully for BCC, instructed by Emma Dowden-Teale, Martyn Scott and Marie Fegan of DLA Piper.