Ministers handed England’s biggest academy trust £1 million to fight a legal challenge from a tech firm “with a history of litigiousness” in a bid to protect the wider academy sector, documents obtained by Schools Week reveal.
However United Learning Trust (ULT) went on to lose the High Court case against Bromcom over a £2 million contract to provide its schools with a cloud-based management information system (MIS).
Correspondence obtained by Schools Week shows the 89-school trust wanted to settle the case before trial. This would have been “cheaper than even a completely successful defence,” internal documents showed.
The settlement had to be ratified by the government as it would be classed as a “novel or contentious” payment under academy rules.
But the request was “declined due to the potential repercussions to the wider academy sector – the claimant has a history of litigiousness and ESFA [the education and skills funding agency] believed that it was important for a large trust to resist this claim,” documents stated.
Bromcom is also suing Academies Enterprise Trust, another large trust, and took high court action against both Cambridgeshire and Leicestershire councils around ten years ago.
Part of the United Learning deal included the ESFA underwriting up to £1 million of legal costs should the trust lose the case.
Trust took £1m financial hit
The new information came to light after Schools Week obtained the business case for the funding, written by ULT chief executive Sir Jon Coles last year and submitted to the Treasury, which approved the deal.
However ULT’s total costs for the case – including for a failed appeal and settlement paid to Bromcom – were around £2 million, which meant the trust has also taken a hit of around £1 million.
A spokesperson for the trust said “those are funds that would otherwise have been invested in children’s education.”
Ali Guryel, Bromcom managing director, said the “litigious” comment was “unfair and defamatory”. He said the firm only had two legal cases in five years, despite hundreds of procurements.
“Bromcom only pursues claims very reluctantly and when it believes them to have merit,” he added, saying the judge’s ruling shows its concerns were “well-founded”.
The trust previously said its procurement, which awarded the contract to Arbor, was done in “good faith” and with “full professional advice.”
But the high court judge found a “failure to treat the bidders equally” and “manifest error” because the trust did not take a particular step to “neutralise” the “inherent advantage” of Arbor, which already provided the service to some schools.
The trust was also adjudged to have “acted unlawfully” in its scoring by not providing enough information to Bromcom about why it received particular scores.
No rule breaches in ‘bad faith’
However the judge said no rule breaches were “deliberate” or in “bad faith.”
But Guryel said by awarding the contract to Arbor, ULT overpaid by nearly £250,000 across five years, which if extrapolated nationally would have cost the sector “tens of millions of pounds more”.
The dispute comes amid “seismic” change in the sector. In 2012, 84 per cent of English state schools were using the School Information Management System (SIMS), run by Capita until recent years.
But cloud-based alternatives, emerging as academies took control of their own budgets, has eroded that dominance. SIMS’ market share is now just 50 per cent, analysis by the Bring More Data blog shows.
The ULT business case document also sheds more light on how the spat ended up in court.
Coles wrote lawyers advised the trust to share documents with Bromcom after the contract decision to “placate groundless suspicions that they had been treated in an unfair/untransparent way” and in the “spirit of transparency”.
But it added: “Regrettably, the information we provided was used not for the purposes we had hoped, but instead to construct a challenge to the procurement.”
DfE had no ‘view on strength of the case’
However Guryel said this was “nonsense” as contracting authorities “need to comply to transparency, fair and equal treatment” in procurements to “protect public money”.
Emails between ULT bosses and the ESFA, also obtained through FOI, showed the government did not have its “own view on the strength of the case.”
Instead, it had simply considered the trust’s “legal advice which our lawyers thought made sense, was credible.”
As part of the £1 million indemnity, government asked for a “lessons learnt” review to share with other trusts.
The Department for Education said its lawyers do not “advise academy trusts on what they should do”, but its “default approach” is “not to settle” except in “exceptional circumstances.”.
They added the £1 million payment helped “limit” the financial impact on pupils.
Company accounts show Bromcom’s turnover rose by 60 per cent from £9.8 million in 2021 to £15.9 million in 2022, with a net profit of £1.5 million.