BL-2022-002117 - [2025] EWHC 2794 (Ch)

In October 2007, Peter Marples jointly founded a new business with Diane McEvoy-Robinson and incorporated it as the Company in December 2009. By 2011, the Company had developed into a large private training provider. The SFA awarded the Company its first direct contract in October 2012 in the sum of £300,000. From 2013, the Company developed its contract substantially and applied for quarterly growth to its funding contract through the SFA’s funding process. On 27 June 2014, the SFA awarded the Company a 3-year funding agreement (from 1 August 2014 to 31 July 2017) (the “Funding Agreement”). The Funding Agreement represented a substantial increase in the Company’s funding. By the end of the academic year 2014-2015, the Company’s contract spend had risen to £15 million.

Under the Funding Agreement, the Company was obliged to deliver the “Services” defined in clauses 1.11 and 4.1 as “the delivery of the Learning Programmes as set out in Appendix 1, the Summary of Programme Funding, and at Appendix 2”. Clause 5.1 to 5.8 placed limits on the Company’s ability to subcontract the provision of those Services, and clause 5.9 prohibited the Company from assigning any rights, duties or obligations under the Funding Agreement without the SFA’s consent.

Clause 5.10 of the Funding Agreement provided:

“THE CONTRACTOR must notify THE SFA if there is a change in its name and/or ownership. THE SFA reserves the right to terminate the Contract if it considers in its absolute discretion that the change in ownership would prejudice THE CONTRACTOR’S ability to deliver the Services.”

That was a standard provision in the SFA’s contracts for the provision of apprenticeship services. Clause 5.10 was in addition to other rights of termination conferred by the Funding Agreement on the parties, including the right of both parties to terminate it on 3 months’ notice without the need to give a reason. Any person purchasing a provider of such services took the risk that the contract (which might be that company’s main or only source of revenue) might be terminated if the purchase took place. Accordingly, it was common for the SFA to be given notice in advance of a proposed change of ownership, together with a request for an assurance that the right of termination in clause 5.10 would not be exercised if that change of ownership occurred.

It is common ground on the pleadings that the giving of notice and the requesting of such an assurance was sometimes described at the time, as a request for “approval” of the change of control and that such requests for “approval for change of control” had become commonplace. There appears not to have been an officially approved or published policy by which the SFA handled such requests. The provider would send a letter to the SFA notifying it of the proposed change of control and providing relevant documents. An SFA panel would carry out due diligence to ensure the new owners were financially fit to hold a contract with the SFA.

In addition to provisions regarding change of control, clause 4.1 of the Funding Agreement further explained that the detailed requirements in respect of each Learning Programme which the Company was to deliver were set out in the Funding Rules for 2015 to 2016 as amended from time to time by the SFA and that those Funding Rules formed part of the terms and conditions of the Funding Agreement. Funding Rule 64 stated:

“We [the SFA] will review whether the education and training you provide represents good value for money. If we consider that the funding we have provided is significantly more than the cost of the education and training, we may, after consulting you, reduce the amount of funding we pay you.”

Mr Marples accepted without hesitation in cross-examination that the effect of this provision was that the profit margins being achieved by PTPs were a legitimate consideration for the SFA; and that a person who questioned the level of profit being made by such a provider was having regard to a consideration which lies in the contract itself.