HT-2024-000023 - [2025] EWHC 63 (TCC)

OPC submits that there would be immediate and severe disruption to its finances if the current interim contract, terminable on 3 months’ notice, were terminated following a lifting of the suspension.

In his statement, Mr Beverley describes OPC as operating a lean and relatively low margin business. For example, to year ending 30 September 2023, on a turnover of £28.9 million, the operating profit is £714,511. The confidential figures shown in his statement evidence that the Corby UCC contract was by some margin OPC’s most profitable UCC contract. EBITDA on the Corby UCC contract was [REDACTED]; for the next most profitable contract the figure was [REDACTED]. He states that most of the profits from profitable contracts were invested back into the business to support the delivery of services and support a number of unprofitable contracts. In effect, he says, the Corby UCC contract has cross-subsidised other loss making NHS contracts for 5 years. The loss of the Corby UCC contract will require immediate cost cutting and the termination of unprofitable contracts. The loss of the Corby contract will result in a negative EBITDA [REDACTED] in year ending September 2025 [REDACTED].

Mr Beverley’s evidence is that a core finance team would need to be retained with the result that central cuts would fall disproportionately on the Workforce Management Team, the Operational Team and the Business Development and Growth Team. To break even, he argues that central team costs would need to be cut by a very high percentage [REDACTED]. The knock-on effects would include the termination of unprofitable contracts resulting in loss of service; the need for local contract managers to take on work that is currently supported centrally; and a detrimental effect on the ability to bid for new work.

The ICB to an extent does not dispute that OPC may have to undertake cost cutting. On the contrary, it is submitted that the claimant’s high costs under its contracts can and should be reduced. OPC relies on agency staff for 20% for primary care staffing and 52% for urgent care staffing. That, Ms Coyne submits, could be reduced by attracting more full time staff, even at increased salaries, and working with local commissioning boards to improve recruitment. As other contracts have also recently terminated, there is a likelihood that overhead costs in the centralised staff team could be reduced.

As to Mr Beverley’s evidence as to the impact on the centralised staff, the ICB accepts that they may be affected but argues that there is very little evidence as to how and why. It is submitted that the reality is that, if staff reductions are required to address the financial dependence of other contracts on the Corby UCC contract, that is a matter of the financial management of OPC and not the unsuccessful bid. That does not seem to me to be an issue that can be determined on this application and there is at least some evidence that the lifting of the suspension would be causative of these changes and their knock-on effects.

It also, Ms Coyne submits, does not follow that unprofitable contracts that have been supported by the profits from the Corby contract will fail. The claimant, it is submitted, can negotiate with commissioning authorities disclosing that their contracts are financially unsustainable and agreeing new terms. This is something the ICB and DHU have experience of doing.

Mr Beverley regards the prospect of renegotiation as unrealistic. He points firstly to the fact that the examples given by Ms Stansfield are of Outpatients contracts which are not comparable and that insufficient detail is given for the examples to be meaningful. More importantly, he gives evidence of two instances in which OPC has sought to negotiate contracts on more favourable terms without success. On this application, it would not be right to make any assumption that OPC could improve its financial position in this way.

More particularly, Ms Coyne submits that there is no realistic prospect of disruption or destruction of the OPC’s business because it has or can be inferred to have other sources of funding which will support it until trial, after which, if it is successful, it will be compensated in damages for loss of profit.

The ICB points out that, in itstender in theprocurement, the claimant gave an unqualified commitment that it could access “In addition to the cash balance of [REDACTED] One Medicare LLP owns investments to the value of [REDACTED] which are realisable should the need arise.” The sums are redacted for reasons of commercial confidentiality but are significant and material. The evidence of Mr Beverley is that this latter figure represents a debtor balance. The ICB submits that that is not credible or consistent with the meaning of “investments” but, in any event, it was identified as a sum that OPC could realise if the need arose.

Loans in very substantial sums[REDACTED] were made by OPC to One Medical Property Holdings Ltd. (“OMPH”) which are not repayable until dates from February to December 2026. Mr Beverley’s evidence is that these loans have been used to fund the purchase and development of medical centres. OPC has no right to call in the loans. To realise the loans would require OMPH to seek to sell one completed development and two medical centres bought because they had development potential. His evidence is that they were long term investments and that their sale now would generate a very limited capital gain which could be contributed to OPC. OMPH has a development portfolio which is currently consuming rather than generating cash. There is a possibility of selling one site in London on which development has not started. That would realise funds for both OMPH and the shareholders but Mr Beverley says:

“OMPH and OPC would both be reluctant to agree to early repayment of these loans because a loss will be realised which is likely to be avoided if time is available to fully examine each of the alternatives ….”

Mr Beverley further identified two developments on sites where bank funding is in place. Shareholder capital together with OMPH funds is required for these developments which might not be able to progress if the loan is called in early.

In summary, Mr Beverley says that “some capital could potentially be raised by realising three of the loans made by OPC to OMPH. OPC would not be repaid in full. … Commercially, the damage to OMPH’s ability to progress developments and generate profit will be significant, which undermines OMPH’s ability to repay the balance of the loans provided to OPC in 2026 and means that it is likely that OMPH will not agree to early repayment.”

Even if the investment funds or loans are not available to OPC, the ICB submits that it is highly likely that shareholders would inject funding to enable OPC to continue in existence.

The evidence of Mr Beverley is that the claimant is owned by One Medical Property Holdings (OMPH as referred to above) and One Medical Group (“OMG”). Mr Beverley and Mrs Beverley-Stevenson (his daughter) are shareholders of OMPH. They, Jennifer Beverley, the Michael Beverley 2014 Discretionary Trust and Sir Vernon Ellis are shareholders in OMG.

It appears, therefore, that the group is highly interconnected in terms of personnel and shareholding and operates to the benefit of the group. That can be seen from the OMPH loans and the manner in which OPC’s profits have been deployed to generate business and income in OMPH. The shareholders have benefitted from OPC’s profits both in terms of dividends (albeit Mr Beverley’s evidence is in small percentages since 2018) and the loans to OMPH where there is common shareholding. As Ms Coyne put it, it is reasonable to expect this funding to be reciprocated in circumstances where the claimant requires temporary assistance by way of capital injection.

OPC’s evidence is not that the shareholders cannot or will not support the claimant but Mr Beverley says that it would not be commercially rational for the shareholders to do so when the future of the OPC business is uncertain. In his first statement, Mr Beverley said that the shareholders would need to be confident that there is a profitable future for OPC which is primarily focused on NHS primary care contracts. The shareholders will need to consider OPC projections for 2024 and 2025 and the impact of cost saving measures, and their decision would depend on the prospects of OPC returning to profitability. In his second statement, Mr Beverley went further and suggested that if the suspension were lifted, serious consideration would be given to winding down the healthcare business with OPC becoming a shell company because “its ability to operate as a healthcare business would be fatally undermined through cost cutting and the inability to win new work”. These are very much self-fulfilling prophecies. The issue is whether the shareholders would support OPC so that it was not in that position. Shareholders’ funds are intended to be made available to OMPH for its developments which are themselves in part funded by a loan from OPC which the shareholders know will be repaid over the course of 2026. In those circumstances, despite the protests of OPC, in my view, there is every reason to consider it rational for the shareholders to support OPC.