REMEDIES IN PROCUREMENT LAW

Transcription

1 BANGOR UNIVERSITY PROCUREMENT WEEK March 2012 REMEDIES IN PROCUREMENT LAW Nigel Giffin QC 11KBW 1

2 Remedies under the Public Contracts Regulations 2006 This section of the paper will consider: First, remedies at the interim stage Secondly, remedies at trial Remedies at the interim stage The commencement of proceedings automatically suspends the procurement process. It is then up to the contracting authority to apply, if it sees fit, for an order lifting that suspension. The importance of the suspension, of course, is that once the contract has been concluded, then (leaving aside cases where a declaration of ineffectiveness may be available) the only remedy if the claim succeeds at trial will be one of damages it will not then be possible to have the contract set aside. See further below as to how far it is in fact always tactically advisable for contracting authorities to apply to life the suspension, or for claimants to resist the lifting of the suspension. In dealing with applications to life the automatic suspension, courts in both England Northern Ireland have applied precisely the same approach as they applied to applications for interim injunctions in procurement cases before the new remedies regime was introduced. That is to say, the new regime shifts the onus of making the application from the claimant to the defendant (and so makes it much easier for claimants to get proceedings under way and to freeze the position on an urgent basis), but it has not affected what the outcome of such an application ought to be. The position is as follows: The approach applied in procurement cases is the conventional American Cyanamid approach to the grant of interim relief generally. Therefore, the claimant must first show that the claim raises a serious issue to be tried. If it does, the court next asks whether an award of damages at or following trial would be an adequate remedy for the claimant or (if the claimant is offering a cross-undertaking in damages) the defendant. In particular, if damages would be 2

3 an adequate remedy for the claimant, interim relief should be refused, i.e. the automatic suspension should be lifted. If damages would not be an adequate remedy, then the court must decide where the balance of convenience lies, taking account of all relevant circumstances including The strength or otherwise of the claim. Whether the claimant is offering a cross-undertaking in damages, and its strength. The interests of third parties. The wider public interest, on the one hand in having a contract quickly concluded, and on the other hand in the proper observance of procurement law. See for example the discussion in Exel Europe, Indigo Services (UK) Ltd v Colchester Institute Corporation [2010] EWHC 3237 (QB) and Halo Trust v Secretary of State for International Development [2011] BLR 229. For the most part, contested applications in England have resulted in the interim suspension being lifted, whereas the majority of such applications in Northern Ireland have resulted in the suspension being continued, although there has been no difference in the test which the courts in the two jurisdictions say that they are applying. But it is important to note that in many of these cases an important driver of the court s decision, whether in terms of its explicit reasoning or in terms of its underlying attitude to the claim, or both, is its perception of the substantive merits. Where the claim appears strong, a judge may well wish to allow the claimant an opportunity to make its case at trial before any contract is irrevocably concluded, especially if the trial can be brought on for hearing with reasonable speed. Conversely, there will be a reluctance to allow the process to be held up by a weak claim which barely crosses the threshold of raising a serious issue to be tried. A significant number of the English decisions have been in cases in which the underlying challenge has appeared to be relatively weak. Nor should one ignore the hidden cases those in which the defendant authority may well not have applied to lift the suspension precisely because the grounds of challenge appear reasonably strong (as well as cases where the defendant makes no such application because there is no great urgency about entry into the contract). 3

4 It is suggested that the courts have been right to conclude that the new remedies regime and the amended Remedies Directive which it implements create no presumption in favour of interim relief, and in particular should not be seen as establishing any reason to grant interim relief in a case which appears weak upon its merits, or in which the likely harm done by continuing suspension in a case that ultimately fails appears to outweigh significantly the likely harm done by refusing to continue suspension. The Remedies Directive does not make suspension pending trial mandatory, and there is no reason why a balancing exercise of this nature should not take place. There are, however, two facets of the domestic jurisprudence which may be questionable. First, is it really consistent with EU law that, applying American Cyanamid, interim relief falls to be refused whenever damages would be an adequate remedy for the claimant at trial? This reflects a general doctrine in domestic law that injunctive relief is an exceptional measure that should only be brought into play where a party cannot be expected to make do with the primary remedy of damages. Whatever the merits or otherwise of the underlying doctrine, it is questionable whether an approach developed in private law litigation should be introduced into claims under the Regulations, which are really a form of public law litigation bearing clear similarities to judicial review. In judicial review proceedings, of course, there is normally no damages remedy, and the primary remedy is the setting aside of the offending decision. It is also debateable whether such an approach really meets the general effectiveness requirements of EU law, and of the Remedies Directive in particular. After all, the decision in Alcatel, which lay behind the introduction of the statutory standstill period, was to the effect that bidders must have the opportunity to challenge an award decision before it was implemented, precisely so that they would not be limited to seeking a remedy in damages. There was no suggestion that this opportunity only had to be accorded in cases in which damages would not be an adequate remedy. The problem is compounded by the apparent willingness of some judges to find that damages are an adequate remedy even in cases in which assessment of the value of the lost chance (see further below) will admittedly be a difficult exercise. In some cases, where the nature of the alleged breach is such that it is hard to know what would otherwise have happened, the courts have accepted that this may render a damages remedy inadequate: see e.g. Letting International Ltd v Newham LBC and Morrison Facilities Services Ltd v Norwich CC, both concerned with an alleged failure properly to disclose selection criteria and weightings in advance. But in other cases a different attitude appears to have prevailed. 4

5 In short, it is suggested that, whilst the adequacy of an available damages remedy should be one factor to be considered when assessing the overall balance of convenience, it should not be elevated to any greater extent than that, and further that the courts should take a more realistic approach to when damages will be an adequate remedy, in particular by holding unequivocally that damages will not be adequate when the nature of the claim is such that it will be very difficult for the claimant to demonstrate the value of the lost chance of having been awarded the contract. Note, however, that the CJEU s own jurisprudence in challenges to the procurement decisions of the EU institutions has been generally conservative in relation to the grant of interim relief. See e.g. T-299/10R Babcock Noell GmbH, and cf. C-568/08 Combinatie Spijker Infrabouw. The second questionable aspect of the domestic jurisprudence is the reluctance of the courts in some cases to accept that an interim solution to the performance of the service in question would be lawful. The typical case is one in which the original service contract, and any extension of that contract permitted by its terms, will have expired by the time that the procurement challenge to the award of the successor contract can be tried, yet it is essential that there should not be a break in service provision. It is submitted that, where continuity of service is indeed essential, it cannot be unlawful for the authority to continue to obtain the service under contract where it is prevented by judicial decision from entering into the intended replacement contract. It may be that in such a situation a further extension of the existing contract for the minimum period necessary ought not to be characterised as a change amounting to a new contract on C-454/06 Pressetext [2008] ECR I-4401 principles; or alternatively that the authority should be permitted to employ the negotiated procedure without notice on urgency grounds. Remedies at trial To date, relatively few procurement claims have actually reached trial and succeeded. More have been abandoned or settled at an early stage, or after a contested hearing about interim relief. This important topic has therefore been less considered than it might have been. A particularly important recent case is Mears Ltd v Leeds CC (no 2) [2011] EWHC 2694 (TCC), where the claim succeeded (in part) at trial on the basis that there had been a failure to give proper disclosure of scoring guidance and weightings. Ramsey J held that even at trial the decision as to appropriate remedy was a discretionary one, and there was no presumption in favour of a set-aside remedy as opposed to an award of damages. Although regard should be paid to the need for the law to be observed, the 5

6 public interest in the authority proceeding with the award of the contract had to be balanced against the private interests of the claimant, and the remedy should be proportionate to the seriousness of the breach. The claimant in Mears was restricted to a remedy in damages, even though it was anticipated that those damages would be difficult to assess (it is understood that the case is still proceeding towards a final assessment of damages, and it will be interesting to see how the court approaches that in a situation where it is intrinsically difficult to know how all bidders might have adjusted their tenders if more extensive disclosure of criteria had occurred such assessment proceedings are also pending in the Northern Ireland cases of Henry Bros (Magherafelt) Ltd v Department of Education for Northern Ireland and McLaughlin & Harvey Ltd v Department of Finance & Personnel). The Mears approach to remedy is probably consistent with the (somewhat confused) discussion in C-91/08 Wall. The decision of McCloskey J in a Northern Ireland case, Resource (NI) Ltd v Northern Ireland Courts and Tribunals Service, is also significant. The winning bidder had been given credit for a particular aspect of its proposal: it was held that this should not have occurred because that proposal was not compliant with the specification. The marking was so close that a lower mark under the heading in question would have left the (second-placed) plaintiff as the winning bidder in first place. But the judge refused to grant a declaration that the contract should have been awarded to the plaintiff, holding that such a remedy would be rare, and that it was not possible on the facts to be confident that, but for the error, the contract would have been awarded to the plaintiff. Resource is also important for what the court held should happen next. The court did not accept the plaintiff s argument that all that was required or permissible was the remarking of the particular head under which the error had occurred. Rather, McCloskey J said that the contract award decision was an indivisible whole, so that if set aside at all, it should be set aside in its entirety, with all bids therefore falling to be completely remarked. The judge also expressed the view that the offending element of the tender could not be marked in isolation, and that a fresh panel should in any case be free to re-evaluate the bids in the light of any relevant supervening developments. To date, there are not very many cases in which the courts have actually had to undertake the assessment of damages, although there is a general consensus that they fall to be assessed on a loss of a chance basis, i.e. the application of the percentage chance that the claimant would have been awarded the contract under a lawfully conducted procedure to the net profit which it would have made if it had indeed been awarded the contract. 6

7 An early consideration of such issues took place in Harmon CFEM Facades (UK) Ltd v Corporate Officer of the House of Commons (67) Con LR 1, [2001] CP Rep 20, for the purposes of determining an interim award of damages after the claim succeeded on multiple grounds at trial. The facts of the case were complex, and it is not clear that there is much general guidance to be derived from the decision. In Lancashire CC v Environmental Waste Controls Ltd [2011] LGR 350 the first instance judge found that irrelevant concerns about the claimant s financial standing and its price had been taken into account in the decision to award the contract to another bidder. He held that the claimant was entitled to damages assessed on the basis of 50% of the lost profits under the contract, on the footing that the claimant and the successful bidder had been the only two serious contenders, and that it was not possible to say which of them would otherwise have won. The Court of Appeal overturned the decision on liability, so its comments on the trial judge s approach to damages were obiter. However, Pill LJ expressed doubts about the broad-brush manner in which the 50% figure for the lost chance had been derived. He indicated that he would have expected more detailed exploration of how the marks actually awarded had been affected by the irrelevant considerations, and also of the evidence as to whether the award process might in fact have been abandoned. The implication seems to be that the claimant might have failed to adduce evidence sufficient to discharge the onus of establishing such a substantial lost chance. Pill LJ also indicated that the judge had been right to base the award of damages upon the profit that would have been made during the 3 year minimum term of the contract, rather than the possible extension of that term to a total 5 years. This conclusion, which will have a substantial potential impact upon the quantum of damages in many cases, appears to be based upon the assumption that the right approach here is to assume (as is normal in breach of contract cases) that the authority would have rendered the least performance that it could, rather than to assess the chances that the contract would in fact have been extended (which would be more normal in the law of tort, and would also be the approach in some breach of contract claims). The correctness of this assumption is debateable. Returning to the issue of interim remedies, this discussion should give some pause for thought about how advisable it may be for the parties to take the conventional stance that defendants seek to have the interim suspension lifted, and claimants seek to have it continued. If suspension is lifted and the challenged award decision is implemented, then the authority exposes itself to a significant risk unless it is confident that the claimant will in fact then discontinue the proceedings (by way of an acceptable settlement or otherwise) or that it will in fact then succeed at trial. If the case continues to trial and the claimant succeeds, the authority may in effect find itself paying for the contract twice once through the contract payments to the successful bidder, and again by way of an award 7

8 of damages to the claimant bidder. If the potential claim for damages is a substantial one, that may represent a very unappealing prospect. Such a substantial claim may be a realistic outcome if either: The claimant can demonstrate a high percentage chance that a lawful process would have led to it being awarded the contract. That is most likely to be the case where, for example, the claimant was a very close runner-up to the successful bidder, and it has some complaint about the marking of the bids which, if well-founded, would have caused it to take the lead. Alternatively, the case might be one in which the nature of the challenge is that the successful bidder ought to have been disqualified for some reason (where that would have left the claimant as the winner), or that the claimant has itself been unlawfully disqualified (e.g.an abnormally low tender case) and would otherwise have won the competition; or The claimant may only be able to demonstrate a relatively modest chance that it would have won the contract under a lawful process (because the outcome of such a process is to a greater or lesser extent speculative), but the value of the contract is so high that even a modest percentage lost chance will lead to a large award of damages. In such cases, the authority may well find it more attractive to seek an expedited trial and to leave the award decision unimplemented unless and until it is known to be lawful. Conversely, whilst most claimants would ultimately prefer to win a contract than to have an award of damages, success at trial will rarely lead directly to it simply being declared the winner of the process. More likely, there will have to be a process of remarking of bids, or an opportunity to resubmit tenders, depending upon the nature of the challenge that has succeeded. The claimant cannot know where that will lead, and may sometimes suspect that, if it has litigated successfully against the authority, any future remarking of its proposal will take place with a jaundiced eye. It is also always possible that the authority will, given the passage of time, simply decide to abandon the existing procurement without awarding a contract at all. In those circumstances, the possibility of being awarded damages of (say) 50% of the profit that would have been made under a contract, without actually having to perform that contract, is by no means necessarily unattractive. This also raises the question of whether, even if the contract has not been concluded, the claimant may choose to limit its claim to one for damages rather than a set-aside remedy and, if it does, whether the court might nonetheless refuse to make an award of damages as a matter of discretion. 8

9 It may be predicted that, whereas a disproportionate amount of attention has recently been afforded to interim remedies, there will be a greater focus in the future upon remedies at trial, and in particular upon damages remedies. Along with automatic interim suspension, the declaration of ineffectiveness was the feature of the new remedies regime which originally attracted the greatest attention. As matters stand, there is no case in which a declaration of ineffectiveness has been granted, and so there is little further to report. In Alstom Transport v Eurostar International Ltd (no 3) [2012] EuLR 162, the judge rejected various arguments of a somewhat technical nature for saying that grounds for the ineffectiveness remedy existed. In particular, the lack of contract notice ground could not be invoked if a notice existed that was capable of being related to the procedure and the contract in question, even if it did not properly cover the contract as awarded. It remains the case, however, that in cases in which a declaration of ineffectiveness would cause practical problems (for example, where there will be significant capital expenditure at the outset of the contract, or where there will be significant transfers of staff or assets, as opposed to a straightforward pay as you go service), and where there is a real possibility that one of the grounds for such a declaration may exist (in practice, where the contract will not be advertised e.g. because it is thought not to be a public contract as defined, or to fall within a specific exception, or to be a permissible variation to an existing contract, or to be a valid call-off under a framework agreement) authorities and their contractual counterparties need to think about potential riskmitigation measures. These may include: Publication of a so-called voluntary ex ante transparency (VEAT) notice, and then waiting for the requisite period before entering the contract. If the VEAT notice is valid (which requires inter alia that the authority genuinely believes that it is entitled to award the contract without prior advertisement), no declaration of ineffectiveness will then be possible although a subsequent claim for damages is still possible. But authorities have generally been reluctant to publish VEAT notices, reasoning that in many cases the disadvantage of advertising their doubts to the Commission and to third parties may outweigh the advantage of doing so. The agreement of discharge terms which will govern the unravelling of the relationship if a declaration of ineffectiveness is ultimately made. The parties are free to agree such terms provided that they do not amount to the back-door enforcement of the ineffective contract. To the extent that they do not, the court is empowered to impose a solution. The agreement of at least the most important consequences, in terms of restitution of assets, payment for work 9

10 already done etc, therefore has significant advantages. Bear in mind, however, that the discharge terms which one bidder rather than another may be willing to agree may arguably go to the question of which is the most economically advantageous tender, so that the agreement of such terms should arguably form part of the procurement process, rather than being left to the stage after the winning bidder has been selected. 10

11 Judicial review of procurement decisions Why should a claimant wish to seek judicial review of a procurement decision, rather than bringing a claim under the Regulations? There are three basic categories of case to consider. First, the decision may be one to which the Regulations do not apply. Secondly, the claim might be brought by an economic operator seeking to achieve some result not available under the Regulations. Thirdly, the claim might be brought by a person who is not an economic operator but who alleges a breach of the Regulations. First category: non-regulations cases The award of a contract will not be subject to the Regulations if it does not fall within the statutory definition of a public contract, or if its value is below the relevant threshold, or if it falls within one of the statutory exceptions (e.g. concession contracts, and contracts for the acquisition of an interest in land). In some such cases, the award of the contract will nonetheless be subject to general principles of EU law where it falls within the scope of the Treaty on the Functioning of the European Union. If those principles are breached, then the resulting claim will still in some cases fall to be brought under Part 9 of the Regulations, because of the reference in r.47a to compliance with any enforceable Community obligation as well as to compliance with the Regulations. Note, however, that this does not apply to obligations in respect of sub-threshold contracts, or contracts within the various specific r.8 exclusions. So if general Treaty principles are applicable and breached in such cases, there must be some remedy otherwise than under the Regulations, and it is not obvious what it might be, other than a claim for judicial review. In any case, the TFEU will only be engaged if the contract is of potential cross-border interest. It is also questionable how far there is any scope for general Treaty principles to apply where the contract in question is expressly exempted from the Directive. In any event, there will be a certain residual category of contracts which are wholly outside the scope of EU law. May a claim for judicial review nonetheless be made in respect of the procurement of such a contract, relying upon an assertion that the authority has acted in breach of 11

12 normal public law principles acting rationally, having regard to relevant and not irrelevant considerations, acting in a way which is procedurally fair, and so on? That depends upon whether the decision in question is one governed by public law. It is hard to reconcile all the authorities in which this issue has been considered. However, the courts have more often than not been reluctant to hold that decisions about the award of commercial contracts are subject to public law simply because it is a public authority which proposes to enter into the contract in question, regardless of whether it is doing so pursuant to statutory powers. This is illustrated by the decision in R (Menai Collect Ltd) v Department for Constitutional Affairs [2006] EWHC 727 (Admin). This general proposition is subject to certain exceptions. For example: Judicial review will normally be available to remedy a breach of specific statutory requirements: see Mass Energy. Judicial review may be available if the claimant can make good allegations of a certain kind. For example, it seems that it would lie where a public authority was acting in bad faith: see Mercury. There may be some contracts whose nature is such that their award is regarded as having a sufficient public element to make judicial review available. This appears to be the case in relation to contracts to provide legal services on a publicly funded basis: see e.g. Donn & Co, R (Law Society) v Legal Services Commission. See also the use of judicial review to challenge a quasiprocurement process in which organisations were invited to tender competitively for the award of grant funding, in Watters [2009] NIQB 71. There may also be cases in which the process of awarding the contract has a sufficient statutory underpinning to render it subject to public law and so to judicial review. An important but not very widely recognised example is that of local authority contracts which are subject to the provisions of the Local Government Act A number of older cases held that the requirement to give reasons for the relevant decisions indicated that judicial review was available in respect of them, even on grounds outside the specific statutory prohibition on taking account of non-commercial considerations. This line of authority was more recently reaffirmed in R (A) v B Council [2007] LGR 813. Second category: claims by economic operators It might be thought that either an economic operator had a good claim under the Regulations or it did not, and that there was no need for it to formulate a judicial review challenge instead, and further that any such challenge would fall to be dismissed on the ground that an alternative remedy existed. 12

13 This was indeed very much the approach taken by the Court of Appeal in R (Cookson & Clegg Ltd) v Ministry of Defence [2006] EuLR Proceedings were brought simultaneously under the Regulations and by judicial review, at a time when the Alcatel decision had not yet been given express effect in English law, and it was unclear whether there could be a set-aside remedy under the Regulations where the contract had been concluded without any previous opportunity for an application for injunctive relief to be made to the court. The claimant thought it was possible that in such a case it might be able to set aside the contract in judicial review proceedings even if that was not possible under the Regulations. But the court refused permission to apply for judicial review on the basis that, if EU law required such an outcome, it would be achieved under the Regulations, and therefore there was nothing that judicial review could legitimately achieve that the alternative remedy could not. More recently, however, in the extensive litigation arising from the award of contracts to provide legal services by the Legal Services Commission, many of the challenges have been brought by way of judicial review. This seems in large measure to have been prompted by the fact that the first challenges were brought by the Law Society, which was not an economic operator, and so necessarily proceeded otherwise than under the Regulations (see further below): individual firms of solicitors then followed the same judicial review procedure in making their own challenges, even though they clearly were economic operators with a right of challenge under the Regulations. The position was then considered by the Court of Appeal in R (Hossack) v Legal Services Commission [2011] EWCA Civ 788. The court granted permission on a renewed application, in effect on the basis that it was permissible for an economic operator to seek judicial review in cases where there were gaps in the remedies which the Regulations could provide, which was said arguably to be the position in the case in question. Strictly speaking, neither Cookson & Clegg nor Hossack is an authoritative decision, both being judgments given on permission applications, and the approaches taken in the two cases are not altogether easy to reconcile. Nor do the particular gaps in the Regulations that were suggested in Hossack seem very plausible ones. It is suggested that there may indeed be some scope for judicial review on a Hossack basis, but that it will properly fall to be limited to rare cases. One example might be a case in which a claimant holds off from issuing proceedings within the standstill period on the basis of an assurance from the authority that it will not conclude the contract without giving prior notice, but the authority then in fact enters the contract without giving such notice. On the face of the Regulations, it is no longer possible to have the contract set aside (although one can imagine that there would be at least an argument that the authority s assurance should be treated as an extension of the statutory standstill period, so opening the way to a declaration of ineffectiveness) if that is so, then it is entirely plausible that judicial review should step in. 13

14 Beyond the situations of perceived deficiencies in the remedy under the Regulations, there may also be cases in which the economic operator (and indeed this could also apply in the case of a third party claim) wishes to complain about the decision in question, but on grounds other than a breach of procurement law. One example of this would be the second round of Law Society v Legal Services Commission litigation, where the complaint was not about the conduct of the procurement process as such, but the Wednesbury challenge that the design of the process was irrational or had failed to have regard to relevant considerations, because it led to unintended and detrimental consequences in terms of the number of existing providers who would no longer be able to provide a service, and the resulting gaps in the service provision available to the public. Another example might be challenges, of a kind currently very much in vogue in judicial review generally, where it is alleged that the authority has failed to discharge its public sector equality duty, i.e. the duty under the Equality Act 2010 to have due regard to the need to avoid unlawful discrimination and promote equality of opportunity in relation to a number of specified protected characteristics (including race, gender age etc). The relationship between the equality duty and the tendering process was considered in R (Greenwich Community Law Centre) v Greenwich LBC [2011] EWHC 3463 (Admin), where it was held that the point at which the equality duty fell to be discharged was when the procurement (including the setting of criteria) was designed, not at the point at which the specified criteria fell to be applied to the tenders submitted. Third category: claims by third parties The Regulations provide that the obligation to comply with their provisions is a duty owed to economic operators, and that an economic operator who suffers or risks suffering loss or damage as a result of a breach of that duty has a right of action in the High Court. An economic operator is defined as a person who sought, or seeks, or who would have wished to be the person to whom a public contract is awarded, and who is a national of and established in a relevant state (the EU and EEA states). Clearly, therefore, a person who wishes to complain about a breach of the Regulations, but is not an economic operator, cannot bring a claim under Part 9 of the Regulations. Can such a person instead bring proceedings for judicial review? 14

15 This depends upon the answer to two questions. The first is whether the right of action created by the Regulations is, upon their true construction, an exclusive remedy for their breach. The second is whether the claimant has standing to complain of the breach. The Remedies Directive itself does not provide an answer to these questions. By article 1(3), it requires member states as a minimum to confer the specified rights of review upon economic operators, but leaves it open to them to confer such rights more widely (see also recital 17 to the amending Directive). The first question was not squarely addressed by the courts until relatively recently. It potentially arose in R v Brent LBC ex p.o Malley (1998) 30 HLR 328, where entry into a contract for the redevelopment of a housing estate was challenged by a resident of the estate on the ground (amongst others) that it was a public works contract that had not been properly procured. It was held that the development agreement was not in fact a works contract, so the claimant s ability to advance such a challenge was not an issue that had to be decided. Schiemann LJ at first instance indicated, briefly and obiter (and the Court of Appeal, even more briefly, appears also to have sympathised with thids approach), that he saw some merit in the defendant s submission on the point. This was that: (i) (ii) The possibility of a third party claim for judicial review was indeed not excluded by the statutory cause of action under the Regulations; However, because the Regulations provided that damages was the only remedy in respect of a concluded contract, the mere fact that a contract had been entered into in breach of the Regulations did not mean that it fell to be treated as void in proceedings for judicial review, unless there was some additional public law defect in the decision-making process. This analysis would leave open the possibility that the ability to mount an effective judicial review challenge would depend on whether that was done (and interim relief if necessary obtained) before the contract was concluded. More direct guidance came with the first instance decision of Beatson J in R (Law Society) v Legal Services Commission [2007] EWHC 1848 (Admin). The judge held at [112] that a breach of the Regulations was a matter of which complaint could in principle be made by way of judicial review. He said that the general principle was that judicial review was available in respect of a breach of a statutory requirement unless it was excluded by clear and explicit language, and there was no such exclusion to be found in the Regulations. The issue arose again in R (Chandler) v Secretary of State for Children, Schools and Families [2010] LGR 1. Mrs Chandler was a parent in Camden who objected to the 15

16 proposal to establish a new academy school in the borough, sponsored by University College London. There would be an agreement between UCL and the Secretary of State, under which funding would be provided in return for certain commitments on the part of UCL. Mrs Chandler argued that this agreement amounted to a public services contract which ought to have been procured by open competition. The Court of Appeal rejected that argument, but then went on to consider (albeit strictly obiter) whether, if there had been a breach of the Regulations, that was something of which Mrs Chandler was entitled to complain by way of judicial review. The court said that: (i) (ii) A breach of the Regulations did amount to something which was unlawful as a matter of public law. Indeed, it was said that the breach of such a statutory obligation was a paradigm case in which judicial review was in principle available; However, a claimant would need to have standing to complain of that breach which, on the facts, Mrs Chandler did not see further below. The issue has most recently arisen in R (Unison) v Wiltshire NHS PCT and others [2012], a claim for judicial review in which permission was refused a few weeks ago by Eady J, on grounds of delay (not relevant here) and lack of standing (see further below). His decision is currently subject to an application for permission to appeal to the Court of Appeal. The background is that the defendant PCTs proposed to outsource certain services, and to do so by way of calling off a contract under a framework agreement. The proposed contractor had put forward a plan which would involve making a significant number of redundancies in order to achieve financial savings. The claimant was the trade union representing numbers of the staff currently providing the services in-house. It contended that the proposed use of the framework was impermissible, for a number of reasons including that the terms of the proposed call-off contract differed substantially from those laid down in the framework agreement as originally procured. The defendants argued that the statements made in Chandler were incorrect, and that the statutory remedy for an economic operator under the Regulations was indeed an exclusive remedy for their breach. Eady J rejected this contention, at least for the purposes of the permission stage. He held that a breach of the Regulations did sound in public law, or at any rate that it was arguable that it did so, which sufficed for permission purposes. So judicial review for a breach of the Regulations is available in principle, and a noneconomic operator who makes such a claim cannot of course be faced with an argument based upon alternative remedy (because for such a person the remedy by way of a claim under the Regulations does not exist). However, as noted above, there remains the issue of whether the claimant has standing to complain of the breach. 16

17 All judicial review claimants must establish that they have a sufficient interest in the matter to which the claim relates: see s 31(3) of the Senior Courts Act The general trend in judicial review over the last 30 years has been for an increasingly liberal approach to be taken to standing. It has also been said that at the permission stage claims should fail for want of sufficient interest only in clear cases (the mere busybody approach), and that questions of what interest the claimant has in the matter should normally otherwise be left over to the substantive hearing, to be taken into account as part of the court s exercise of discretion in determining what if any remedy to grant in relation to any breach of the law that has actually been established: see e.g. R v Somerset CC ex p. Dixon [1998] EnvLR 111. Returning to the particular context of third party complaints about breach of the Regulations, what the Court of Appeal said in Chandler was that a claim for judicial review could be brought by a non-economic operator who has sufficient interest in compliance with the public procurement regime in the sense that he is affected in some identifiable way. Such an interest might exist if the claimant could show that performance of the competitive tendering procedure... might have led to a different outcome that would have had a direct impact on him. The Court of Appeal also said that it could envisage cases where the gravity of a departure from public law obligations may justify the grant of a public law remedy in any event. In the Unison case, the claimant sought to establish its standing in three basic ways. First, it said that the identity of the person performing the services would determine the identity of its members employer, that there could be no more direct effect than that, and that it was perfectly possible that a properly conducted procurement would have led either to an in-house bid succeeding, or to the contract being awarded to some other, more congenial external provider. Secondly, it said that, if there had been a proper procurement, the union would (under the relevant NHS procedures) have had an opportunity to become involved in discussions about the contract specifications and award criteria. Thirdly, it said that the case fell into the category of sufficiently grave breach contemplated in Chandler. Eady J rejected these arguments. He held that Unison had failed to establish that its members were affected in an identifiable way by a decision to outsource without a separate procurement process. That appears to have been primarily because it was a matter of speculation what the outcome of such a process would have been. It seems that the judge would have required some specific evidence indicating that following the Regulations could have been expected to lead to a different outcome, whereas the 17

18 evidence in this case (according to the judge) did not identify other candidates who could have been expected to bid, or what terms they might have offered. It remains to be seen whether Eady J s decision will stand. It seems to reflect a view that the only persons apart from economic operators who should be able to complain of a breach of the Regulations are those who might be described as quasi-economic operators for example, potential sub-contractors of the economic operator who bids for the contract, or bodies such as the Law Society which are representative of economic operator interests or perhaps would-be contractors not established in a relevant state. That would involve a narrower approach to the concept of sufficient interest than applies in judicial review proceedings generally. Is that what the Court of Appeal in Chandler had in mind? Is it a justified half-way house between the two other possible approaches either to say that an economic operator s right of action under the Regulations in the exclusive remedy for their breach, or to say that a breach of the Regulations may be challenged by anyone with a sufficient interest on normal judicial review principles? It is worth noting that the implications, of holding that a breach of the Regulations in entering into a contract is a public law wrong, potentially go beyond the issue of whether there may be a judicial review challenge to such a decision. The normal position is that a public law issue may be raised as a defence in private law proceedings, even though it could have been, but has not been, raised by way of a claim for judicial review. In principle, if a contract has been entered into by a public authority in breach of its public law obligations, the ineffectiveness of the contract may be asserted in proceedings which seek to enforce the contract: see for example Credit Suisse v Allerdale BC [1997] QB 306. Does it then follow that, in a claim brought upon a contract, whether by the authority against the contractor or the other way around, it could successfully be asserted that the contract was unenforceable because entered into in breach of the Regulations and therefore, according to Chandler, in breach of public law? Such a result seems instinctively unattractive. It may well be that the courts would seek to avoid it by developing the suggestion made in O Malley, above, namely that the scheme of the Regulations indicates that a contract concluded in breach of them is not to be treated as void in public law. If so, then it means that even where a judicial review challenge is available, it will need to be brought before the relevant contract is concluded. Alternatively, it is possible that the courts might seek to treat the raising of such a defence as an abuse of process, bearing in mind that the parties to the contract should have been in a position to know at the time whether it was being properly procured, and that at least one of them (the authority), if not both, will be responsible for any defect in the process: cf. Ford Camber [2007] EWCA Civ

19 19

20 Implied contracts in procurement cases The idea that there might be an implied contract, governing the conduct of the tendering process, between would-be client and would-be contractor is one that originated in Blackpool & Fylde Aero Club [1990] 1 WLR 1195 so before the regime of the Regulations and Directive, or their predecessors, was in place for contracts of the relevant kind. This was a case in which the plaintiff s tender had been timeously submitted but, through oversight, had not been considered at all. The court held that there had been an implied contractual obligation to consider tenders that were properly submitted. The case can be seen as a striking example of the law being shaped so as to remedy an obvious injustice, and the resulting contract was distinctly limited in nature. In Harmon CFEM Facades v House of Commons (1999) 67 ConLR 1 the court considered the relationship between the Regulations and an implied contract. Certain remarks of the judge appeared to imply that, in all Regulations cases, an implied contract could be expected to exist as well although the case is difficult and factually complex, and it is not clear that this is in fact what was intended. Thereafter, however, judges in a number of cases in Northern Ireland treated the remarks in Harmon as establishing a general proposition that there was an implied contract when a public authority went out to tender: see e.g. Natural World Products Ltd v Arc21; J&A Developments; Scott v Belfast Education and Library Board. In most or all of these cases, however, the question of whether such an implied contract existed does not appear to have been fully argued. What practical difference might it make if an implied contract existed? It is hard to imagine that any implied contract would contain terms more extensive or onerous than the obligations imposed upon a contracting authority by the Regulations and Directive. In reality there would seem to be three potential practical implications: (i) In those cases not subject to EU law (in particular, sub-threshold and excluded contracts in relation to which there is no potential cross-border interest), implied contract represents an alternative to the judicial review remedy as a means of introducing some form of legal control over the way in which the authority deals with the award process. 20

21 (ii) (iii) The normal limitation period for claims in contract is, of course, 6 years. Could a claim in contract be a means of sidestepping the normal, stringent 30 day time limit under the Regulations? If a call for tenders is indeed apt to create an implied contract between the client and the bidder who submits a tender, then it is hard to see why that should only be the case where the client is a public authority. It represents a potential means, and probably the only such means, by which a tenderer for a contract with a private undertaking might complain of the way in which the tendering process has been conducted (although it is unclear to what extent formal tendering procedures currently play much part in the way in which private sector undertakings establish their supply chains). Indeed, the judge in SES Contracting Ltd v UK Coal plc [2007] EWHC 161 (QB) said in terms that he could see no reason why the Blackpool & Fylde approach should not apply equally to private sector tendering processes. Full argument about the existence of an implied contract did take place in Deane Public Works Ltd v Northern Ireland Water [2009] NICh 8. The conclusion reached by Morgan LCJ was that such a contract did fall to be implied in the case of a sub-threshold works contract that was of potential cross-border interest. It is debateable whether this is a convincing basis for distinguishing cases in which an implied contract exists from those in which it does not. When the English courts have been invited to consider arguments based upon implied contract in procurement cases, they have been distinctly more sceptical than their opposite numbers in Northern Ireland. In the first instance decision in J Varney & Sons Waste Management Ltd v Hertfordshire CC [2010] LGR 801, the idea that an implied contract might exist was strongly rejected, on the basis that where the process was governed by a statutory procedure in the form of the Regulations, there was no basis for implying a contract on top of that. In JBW Group Ltd v Ministry of Justice [2012] EWCA Civ 8, a case in which the contract in question was held to be a services concession and so outwith the Regulations and Directive (with no element of cross-border interest alleged), the Court of Appeal agreed that there was generally no basis for implying a contract in a case to which the Regulations applied, and that in other cases the only limited form of contract which might be implied was a limited one requiring the client to consider tenders in good faith. The Court of Session decision in Re Sidey Ltd [2011] CSOH 194 is to similar effect, but goes a little further in its formulation of the relevant contractual obligation, accepting the existence of an implied obligation to consider bids fairly and equally in a non- Regulations case. 21

22 What JBW does leave open is the possibility that the tender documents may be construed as entailing an express offer by the authority, accepted by the submission of tenders, to follow a particular procedure, regardless of whether the Regulations would otherwise strictly oblige it to do so. This may be particularly significant, for example, in cases involving Part B services contracts where the authority nonetheless states that it will, for example, be following the restricted procedure albeit that the entire distinction between different categories of service will be rendered of much less importance if and when the currently proposed draft Directive is implemented. Most recently, in Easycoach, McCloskey J had to consider what legal regime was in play at a stage between the award decision and the actual conclusion of the contract (the issue being whether the authority had properly investigated issues as to the truth of the successful bidder s representations in its tender about its past experience, those issues having arisen following the award decision). He held that this so-called due diligence phase was indeed governed by the Regulations and Directive. However, he went on to say that, had he been wrong about that, he would have held that the authority s actions during this phase were subject to an implied contractual obligation of fairness. Even in cases in which a contract might otherwise fall to be implied, there seems to be no reason why sufficiently clear wording of the tender documents should not serve to exclude any such implication by clear and express words. 22