Lifting the automatic suspension

What's money got to do with it?


person photo

Emily Heard


In the recent High Court procurement challenge of Perinatal Institute v Healthcare Quality Improvement Partnership [2016] EWHC 2626 (TCC) the Court lifted the automatic suspension, holding that whilst there was a serious issue to be tried, damages would be adequate for the Claimant, and that further the balance of convenience favoured lifting the suspension.

The case is interesting as it continues the recent theme of cases looking at when it is just to confine a Claimant to a remedy in damages.  In our article in July earlier this year "Lifting the automatic suspension :  when will damages be adequate for non-profit organisations" we drew out the notable distinctions between the Court's approach in a recent quintet of procurement challenge cases set out below in chronological order:

Solent NHS Trust v Hampshire County Council [2015] EWHC 457

Bristol Missing Link Ltd v Bristol City Council [2015] EWHC 876

OpenView Security Solutions Ltd v The London Borough of Merton Council [2015] EWHC 2694

Counted4Community Interest Company v Sunderland City Council [2015] EWHC 3898

Kent Community Health NHS Foundation Trust v NHS Swale CCG and ors [2016] EWHC 1393

The score sheet for these cases had shown 2 for the Claimants (Bristol Missing Link and Counted4) and 3 for the Defendants.  In the most recent procurement challenge of the Perinatal Institute case, the Defendants draw ahead to 4-2.

What is the reason for the difficulty in maintaining the automatic suspension?

It is well-established that the Court will apply the tri-partite test laid down in American Cyanamid v Ethicon [1975] AC 396.   Overcoming the first limb of this test (namely that there is a serious issue to be tried) is usually relatively unproblematic for Claimants, as the Court does not scrutinise the merits of the claim in detail, and the Defendant may concede that there is indeed a serious issue to be tried, particularly where disclosure has yet to be given.

Where Claimants have more difficulty is in overcoming the second hurdle; namely whether or not damages are an adequate remedy.  The mere fact that a Claimant is a not for profit organisation is unlikely to be enough, on its own, to persuade the Court that damages are inadequate.  In Kent, even though the Claimant Trust was a not for profit organisation, the Court nevertheless held that damages would be adequate as the losses the Trust would incur were capable of assessment.  Continuing that vein, in the Perinatal Institute, the Court found that there was a financial loss that could be compensated in damages which was a contribution to overheads.

Why then, the distinction between the approach in Kent and Perinatal on the one hand (where damages are an adequate remedy for not for profit organisations), and the finding in Bristol Missing Link and Counted4 on the other hand that damages were inadequate remedies for not for profit organisations).

The passage from Bristol Missing Link upon which the not-for-profit Claimants have sought to rely is found at paragraph 55 of Coulson J's judgment where he says that:

"In my view, a non-profit making organisation, which has bid for a contract making no allowance for profit at all, and a minimal amount for overheads, is entitled to say that, in such circumstances, damages would not be an adequate remedy".

However, Bristol Missing Link (described as a paradigm case in Openview) concerned a Claimant for whom the loss of the contract would entail catastrophic consequences including disconnecting related services, and fundamentally undermining Bristol Missing Link's ability to deliver its remaining services.  It was in that context that the Court held it was not "just, in all the circumstances, that the Claimant be confined to his remedy of damages" (using Coulson J's formulation in Covanta Energy Ltd v Merseyside Waste Disposal Authority [2013] EWHC 2922).

In Counted4 Carr J held that damages were not the "gravamen" of the Claimant's position, and that the Claimant would lose its work force if it lost this contract.

In Perinatal Institute, the Court placed weight on the evidence of the Defendant that any delay from keeping the suspension in place would be against the public interest in allowing the procurement to proceed, since this was a procurement designed to reduce perinatal mortality.  Whilst the Court recognised the public interest in the proper application of the Public Contracts Regulations 2015, the Court concluded that both the adequacy of damages and the balance of convenience (the lines between which the Court said were blurred) fell in favour of lifting the suspension.   The importance the Claimant placed on a remedy other than damages (including the fact that the Claimant had grave concerns about the winning bid) did not mean that it was unjust to confine the Claimant to a remedy in damages

Related Insights

Authority Update 16/3/18

by Claire Booth

Brief details of recent Government policy and legal developments relevant to those involved in local government work

Authority Update 2/3/18

by Claire Booth

Brief details of recent policy and legal developments relevant to those involved in local government work

Waste Watch - February 2018

by Nadeem Arshad

Government and EU publications, legislation, cases and other developments in England and Wales relevant to those interested in...

Authority Update 16/2/18

by Claire Booth

Brief details of recent policy and legal developments relevant to those in the local government sector

The Haringey ruling and local authorities' duty to consult

by Judith Barnes

Commentary on governance issues

Stop Press: Lawfulness of using LLPs for local authority joint...

by Richard Hiscoke

The Peters v Haringey LBC judgment

Authority Update 2/2/18

by Claire Booth

Brief details of recent policy and legal developments relevant to those involved in local government work

Waste Watch - January 2018

by Nadeem Arshad

Policy and legal developments in England and Wales relevant to those interested in municipal waste management

Keep up to date With Bevan Brittan

What interests you?

About you?