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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> Student Transport Scheme Ltd -v- The Minister for Education and Skills & Anor [2012] IEHC 425 (23 October 2012)
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Cite as: [2012] IEHC 425
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Judgment Title: Student Transport Scheme Ltd -v- The Minister for Education and Skills & Anor Neutral Citation: [2012] IEHC 425 High Court Record Number: 2011 1043 JR & 2011 249 COM Date of Delivery: 23/10/2012 Court: High Court Composition of Court: Judgment by: McGovern J. Status of Judgment: Approved |
Neutral Citation 2012 [IEHC] 425 THE HIGH COURT [2011 No. 1043 J.R.]
[2011 No. 249 COM] BETWEEN STUDENT TRANSPORT SCHEME LIMITED APPLICANT AND
THE MINISTER FOR EDUCATION AND SKILLS RESPONDENT AND
(BY ORDER OF THE COURT) BUS ÉIREANN NOTICE PARTY JUDGMENT of Mr. Justice Brian J. McGovern delivered on 23rd day of October, 2012 1. These proceedings concern the School Transport Scheme (the "Scheme"), an administrative scheme by which the respondent provides school transport to over 100,000 school children every day, including children with special needs. The Scheme in its present form was created in 1967, and has been administered by the notice party since that time. 2. The applicant company was formed in June 2011, and commenced these proceedings some four months later. The applicant contends that a contract exists between the respondent and the notice party and that this contract ought to have been put out to tender. The applicant complains that because it was not in fact put out to tender it has thereby suffered loss. The issue of damages (should they arise) has been deferred by the agreement of the parties and by virtue of a direction by Kelly J. in the course of case management. 3. The proceedings are brought by way of judicial review application and have been admitted to the Commercial Court. 4. At the commencement of the hearing, counsel for the applicant informed the court that the reliefs being pursued at the hearing are to be found in paragraphs 7, 11, 12 and 13 of the notice of motion. Paragraphs 11, 12 and 13 deal with the issue of damages and other ancillary relief and costs. Paragraph 7 is the substantive point which arises at this hearing. In paragraph 7, the applicant seeks "a declaration that the Contract to which the Services relate is ineffective, pursuant to the Remedies Regulations". These are the European Communities (Public Authorities' Contracts) (Review Procedures) Regulations 2010 (S.I. No. 130 of 2010) (hereafter the "Remedies Regulations"). 5. Counsel for the applicant accepted that he has to satisfy the court of the existence of the contract contended for. If there is such a contract, then the issue of eligibility and the issue of delay have to be considered. However, both of these assume the existence of a contract. 6. The award of public service contracts is regulated by Council Directive 2004/18/EC of the European Parliament and of the Council of 31st of March, 2004, on the coordination procedures for the award of public works contracts, public supply contracts and public service contracts, O.J. L 134/114 30.4.2004 (hereafter "the Public Contracts Directive") and the European Communities (Award of Public Authorities' Contracts) Regulations 2006 (S.I. No. 329 of2006). In addition, the Treaty of the Functioning of the European Union O.J. C 83/47 30.3.2010 (T.F.E.U.) and the principles established by the Court of Justice of the European Union (E.C.J.) apply to the procurement of services whether or not they fall within the scope of the Public Contracts Directive. The review of public service contracts is regulated by Directive 2007/66/EC of the European Parliament of the Council of 11th December, 2007, amending Council Directives 89/665/EEC and 92/13/EEC with regard to improving the effectiveness of review procedures concerning the award of public contracts, O.J. L 335/31 20.12.2007 (hereafter "the Remedies Directive") and the Remedies Regulations (S.I. No. 130 of2010). 7. The Remedies Directive provides under Article 1(3):
8. In 1966, the Government introduced free post-primary education in Ireland. The evidence establishes that on 10th February, 1967, the respondent informed Córas Iompair Éireann (C.I.E.) that it had "decided to give the total administration of this scheme to CIE'. The scheme in question was the School Transportation Scheme. C.I.E. was to administer the Scheme as agents of the respondent. In 1973, Ireland entered the European Economic Community. In January 1975, the accounting arrangements between the respondent and C.I.E. for the operation of the Scheme were put in place. 9. On 22nd June, 2006, the earliest legislation relied on by the respondent came into force, namely, the Public Contracts Directive. The applicant contends that on 1st September, 2011, a contract commenced between the respondent and the notice party in respect of the 2011/2012 school year. This is denied by the respondent and the notice party who maintain that preparation for the 2011/2012 school year commenced in March, 2011. In order to determine whether or not a contract existed between the respondent and the notice party, it is necessary to look at the nature of the Scheme. 10. The Scheme supports the State's obligation to provide for free primary education and access to education. Its purpose is to facilitate equality of access to primary and post-primary education for those children who, because of where they reside, might otherwise have difficulty in attending school regularly. 11. The notice party act as agents of the respondent and tender 85% of school transport services. It recovers its costs through accounting arrangements with the respondent. The operation of the Scheme involves a significant logistical operation serving approximately 111,000 pupils and their families each school day, including some 8,000 pupils with special needs. The Scheme serves approximately 3,000 schools on some 6,000 school transport routes. 12. Following the introduction of free post-primary education in Ireland in 1966, the respondent appointed C.I.E. to administer the Scheme in 1967. This appointment was made because the respondent does not have the resources or expertise to administer such a scheme. By letter dated 10th February, 1967, the respondent entrusted the administration of the Scheme to C.I.E. which accepted the appointment by letter dated 13th February, 1967. In a further letter of 28th May, 1969, the respondent set out the administrative and financial arrangements of the Scheme. Among other things, the said letter provided that:
2. All school transport services will be provided in accordance with the rules for eligibility of pupils and the regulations as to the minimum number of pupils necessary before a service can be established or maintained. " 13. The Scheme is administered in accordance with the general directions and policy of the respondent and in accordance with the eligibility criteria laid down by the respondent which derive from the imperative of equal access to education. The operation of the Scheme is divided between scheduled services and special services. Scheduled road passenger services carry approximately 4,700 pupils daily and are ordinary timetabled Bus Éireann, Dublin Bus and private sector licensed operators. Iarnród Éireann timetabled services are also used. Special school services are operated specifically for the purpose of conveying pupils to and from school and these special services carry approximately 106,300 pupils daily and account for 95% of the service provided. The Scheme is managed centrally at the notice party's headquarters in Dublin by a team of seven dedicated employees. At local level, it is administered through eleven regional offices of the notice party. 14. The Scheme is a highly complex and comprehensive one which requires the notice party to carry out, inter alia, the following functions:
(b) planning the provision of new services, including route itineraries and scheduling; (c) continuous monitoring of contractor operations; (d) procurement of private operators and payment of contractor accounts; (e) assessment of pupil eligibility; (f) collection and accounting for pupil contributions; (g) issuing of tickets/passes to pupils; (h) planning and deploying the fleet of the notice party vehicles; (i) day-to-day supervision and monitoring of service, performance and standards; (j) all administrative support necessary for the operation of the scheme and its accountability as a State service; (k) garda vetting of all drivers involved in school transport duties in conjunction with the Garda Síochana Central Vetting Unit; and (I) ensuring, before engaging contractors, that every contractor, driver and vehicle procured meets all relevant standards and legislative requirements. 16. The Scheme operates on a cost recovery basis. Accounting arrangements have been in place since 1968 and these were updated in 1975 and have not been amended since. The respondent reimburses the notice party for a range of costs which are directly incurred by the notice party in the operation and administration of the Scheme. In addition. the respondent pays an agreed 13% charge to cover all other direct and indirect costs for the work carried out on the Scheme by the notice party. Requirement to Establish Pecuniary Interest 18. Undoubtedly, funding passes from the respondent to the notice party but this does not determine whether the Scheme is for pecuniary interest, or indeed whether it establishes the existence of a public contract. In Commission v. Ireland (Case C- 532/03) [2007] ECR I-11353, the Commission alleged that Ireland had failed to fulfil its obligations under the Treaty by reason of the fact that Dublin City Council was permitted to provide emergency ambulance services without any tender procedure having been undertaken by the Eastern Regional Health Authority. The E.C.J. held that the Commission had failed to prove its case against Ireland and stated at para. 37, "... the merefact that, as between two public bodies, funding arrangements exist in respect of such services does not imply that the provision of the services concerned constitutes an award of a public contract which would need to be assessed in the light of the fundamental rules of the Treaty." 19. The Scheme is operated by the notice party on a cost recovery basis. It is of some significance that in each year since 2008, the 13% charge to cover all other direct and indirect costs attributable to the Scheme has been reduced at the instigation of the respondent, having regard to the financial difficulties currently facing the State. This indicates that there is no pecuniary interest in the administration of the Scheme such as to satisfy the requirements of Article 1(2)(a) of the Directive. 20. The court has to consider whether or not a contract exists between the respondent and the notice party. On this issue, there is some helpful case law from the E.C.J. In Asemfo v. Tragsa (Case C-295/05) (2007] E.C.R. I-02999 ("Asemfo"), the E.C.J. considered whether four municipalities had violated the public procurement rules in ordering the performance of certain services from Tragsa, a publicly owned company, without complying with tendering procedures. Under its rules of establishment, Tragsa was a "technical service" of the public administration and it was held at para.51 that the relationship between Tragsa and the public authorities that instructed it was "not contractual, but in every respect. internal, dependent and subordinate. At para. 54, the court stated:
21. In this case, the basis of the operation of the Scheme is entirely administrative:
(ii) the administration of the Scheme was entrusted to C.I.E. by letter dated 10th February, 1967, and, in turn, transferred to the notice party; (iii) C.I.E. and, in turn, the notice party, had no choice as to whether or not they would administer the Scheme.
23. The respondent and notice party argue that in this case, none of the normal features of a commercial relationship exist. For example, there are no mechanisms governing variation of the terms of the alleged contract. On the contrary, the notice party's functions can be varied at will by the Department. Examples were given in the affidavits before the court to show that on a number of occasions, the notice party had to grudgingly accept new terms imposed on it by the respondent regarding the operation of the Scheme. The respondent was able to amend the funding arrangements without having to engage in any consultation or negotiation with the notice party. 24. I am satisfied that the evidence establishes that the arrangements between the respondent and notice party do not contain any terms that might normally be associated with a commercial contract. 25. Each year since 2008, the 13% charge to cover all other direct costs and indirect costs attributable to the Scheme has been reduced on the direction of the respondent in the light of the financial difficulties facing the State during that period. The charge for functions performed by the notice party are laid down under budgetary decisions made by the Oireachtas and not the notice party. 26. The following facts, which have been established, are indicia of a relationship between the respondent and the notice party which is not contractual:-
"... I wish to inform you that I have decided to give the total administration of this scheme to CIE." In a reply, C.J.E. accepted the task assigned to it and referred to the respondent's letter "informing [CIE] of your decision to entrust to us responsibility for the total administration of your new scheme for free transport/or children attending post-primary schools". • C.I.E./the notice party is required to administer the Scheme as agents of the respondent and is obliged to operate the Scheme in accordance with its general directions and policy. All school transport services are to be operated in accordance with the rules for eligibility of pupils and the regulations as to the minimum number of pupils necessary before a service can be established or maintained. • The notice party performs its functions because it has been instructed to do so. • The respondent - not the notice party - controls and directs the policy of school transport through eligibility criteria which are laid down by the Government. • The Scheme is operated on a cost recovery basis. • The respondent has increased the charges for children using the Scheme, thereby making it harder to meet eligibility requirements and reducing demand for school transport. • Funding to the Scheme has been cut by the respondent, and while the notice party was entitled to make representations, it could not bind the respondent in any way to the status quo ante. 28. The applicant does not offer any cogent evidence to support a case that parties have renegotiated the essential terms of the Scheme. Even if the arrangement between the respondent and the third party was a public contract, there has not been any change which would constitute a new contract thereby overcoming the principle of non-retroactivity. Even if the applicant succeeds in demonstrating that there has been a material amendment to the administration of the Scheme such as to constitute the award of a "contract", the Scheme would be exempt as it involves cooperation between the respondent and the notice party by application of the principles set out in Teckal Sri v. Comune di Viano and Azienda Gas-Acqua Consorziale (AGAC) di Reggio Emilia (Case C-107/98) [1999] E.C.R. I-08121 ("Teckal"). In that case, the E.C.J., at para. 49-50, stated:
29. Before setting out my final conclusions on the existence of a contract, I should deal with the other points raised by the parties in the case for the sake of completeness in case this matter proceeds further. Is the Applicant's Claim Time-Barred?
(a) where the contracting authority published a contract award notice in accordance with Regulations 41 and 45 of the Public Authorities' Contracts Regulations, and, in the case of a contract awarded without prior publication of a contract notice in the Official Journal, on condition that the contract award notice sets out the justification of the contracting authority’s decision not to publish a contract notice; (b) where the contracting authority notified each tenderer or candidate concerned of the outcome of his or her tender or application, and that notice contained a summary of the relevant reasons that complied with Regulation 6(2); (c) the cases of a contract based on a framework agreement, and of a specific contract based on a dynamic purchasing system, where the contracting authority has given notice in accordance with Regulation 6(2). "
Eligibility
33. In this case, the applicant has given very little evidence as to its capacity to carry out the Scheme and has cited reasons of "commercial sensitivity" for failing to provide more information. The court cannot ignore the fact that the applicant is a shelf company which was only founded a short time before the initiation of the proceedings. 34. In the circumstances, I hold that the applicant has not established that it has met the test for eligibility to be found in Regulation 4 of the Remedies Regulations. Conclusions |