In a judgment handed down on 2 November 2018 Mrs Justice O'Farrell has once again granted the contracting authority's application to lift the automatic suspension in circumstances in which damages would not be an adequate remedy for either party. We have previously reported the case of DHL Supply Chain v Secretary of State for Health and Social Care in which Mrs Justice O'Farrell reached the same conclusion, for broadly similar reasons.
The case of Bombardier Transportation UK Limited and Others v London Underground Limited  EWHC 2926 (TCC) concerns a procurement conducted by London Underground Limited ("LUL") under the Utilities Contracts Regulations 2006 ("UCR") in respect of the Deep Tube Upgrade Programme comprising contracts for the manufacture and supply of 94 new trains and equipment for the Piccadilly Line, with options in respect of other underground lines. The contracts have a duration of 40 years and a value of up to £2.5 billion.
The negotiated procedure under the UCR was used. Bombardier and Hitachi (acting together as a joint venture), Alstom, and Siemens all submitted tenders. Siemens was selected by LUL as the winning bidder. Proceedings were brought by all the other bidders. The effect of those proceedings was to trigger the automatic suspension under the UCR. LUL applied to lift the suspension. All three claimants applied for an expedited trial.
On an application to lift the automatic suspension the court applies the familiar "American Cyanamid" test, which the judge in this case formulated in the following way:
- Is there a serious issue to be tried?
- If so, would damages be an adequate remedy for the claimants if the suspension were lifted and they succeeded at trial?
- If not, would damages be an adequate remedy for LUL if the suspension remained in place and it succeeded at trial?
- Where there is doubt as to the adequacy of damages for any or all of the parties, which course of action is likely to carry the least risk of injustice if it transpires that it was wrong? In other words, where does the balance of convenience lie?
Adequacy of damages
As is now common, LUL conceded for the purposes of the application that there was a serious issue to be tried. On the question of adequacy of damages, the claimants argued that the effect of the Supreme Court judgment in the EnergySolutions case (see our commentary here) was that the claimants could be left without a remedy if the suspension were lifted but at trial LUL were found to have acted unlawfully albeit not in a "sufficiently serious" manner as to give rise to damages (so-called Francovich damages). The parties agreed that the court is not in a position to determine in an application to lift whether the alleged breaches are sufficiently serious to give rise to damages. The court held that:
"damages subject to the Francovich conditions are effective remedies for breaches of the regulations. Therefore, to the extent that the claimants can be compensated by damages for breaches of the [regulations] (absent the impact of EnergySolutions), it is just, in all the circumstances, for the claimants to be confined to such damages as satisfy the Francovich conditions."
In any event the judge found that damages would not be an adequate remedy for the claimants. The procurement was distinctively prestigious as a result of its size, location and value. Depriving the claimant of such a prestigious contract as a result of a flawed procedure would damage its reputation and would deprive it of the opportunity to rely on the innovative contract as evidence of its capabilities. The resulting losses would be very difficult to quantify, which is an established basis on which to find that damages would not be an adequate remedy.
The judge also found, however, that damages would not be an adequate remedy for LUL because a 12 month delay to mobilisation would result in the loss of public benefits such as comfort and accessibility and wide economic benefits such as housing and employment, that would be very difficult to quantify.
Balance of convenience
Having found that damages would not be an adequate remedy for either party, the court had to consider whether the "balance of convenience" favoured lifting or maintaining the suspension. The starting point is to consider how long the suspension might have to remain in force. The claimants argued that a trial could take place in spring/summer 2019. The court rejected that suggestion and found that a trial could not take place before November 2019 without causing unjustified disruption to other cases in the list. In respect of a four-week four-party trial which was still in its very early stages, this must be right. The claimants' application for an expedited trial was dismissed.
LUL argued that when considering the balance of convenience the court should take into account further delay that would be necessary in the event that LUL was required to re-run the procurement. The judge dismissed this argument as "wrong in principle". A requirement to re-run the procurement would be the result of the court finding that the procurement had been conducted unlawfully, which would mean that the suspension should have been maintained. It would undermine the purpose of the balance of convenience test if a contracting authority could argue that a suspension should be lifted in order to avoid delay that would result from a finding that it had acted unlawfully.
The court concluded that further delay in signing the new contract would be likely to cause more disruption to tube services and that there was a strong public interest (in the form of improved journey times, comfort, capacity, and access) in introducing the new trains and decommissioning the old stock as quickly as possible. For these reasons the suspension was lifted.
The court roundly rejected an application by LUL that parts of the hearing should be held in private. Where (as will be the case in most procurement disputes) the evidence contains commercially sensitive information belonging to one or more bidders, the judge can be taken to those parts of the written evidence without anything sensitive having to be read out in court. Any application for a hearing to be heard in private should be raised in advance of the hearing and proposed arrangements should be set out in skeleton arguments.
Lessons for contracting authorities and bidders
- Authorities can no longer expect to win an application to lift the automatic suspension on the mere basis that the Court will find that damages are an adequate remedy for the claimants. The trend in recent cases (see our reports including on the DHL and Lancashire cases) is to recognise that, particularly where the contract is of a prestigious nature, or will have a particular knock-on impact on the claimants' work force, that damages are not an adequate remedy. Contracting authorities will need to look carefully at whether or not they can bolster their arguments on the third limb of American Cyanamid – whether they can win on the balance of convenience.
- The court will expect a contracting authority to concede for the purposes of an application to lift that there is a serious issue to be tried unless there is very good reason not to do so.
- The possibility that breaches are not sufficiently serious so as to give rise to damages is not a reason to maintain the automatic suspension.
- The possibility of delay caused by having to re-run a procurement is not a reason to lift the automatic suspension.
- Any application for a hearing to be held in private must be raised with all the parties in advance, not on the date of the hearing, and practical arrangements for the hearing should be proposed in skeleton arguments.
- Finally, it should be remembered that an authority who succeeds in its application to lift will still have a claim in damages against it, along with also paying the successful contractor for the delivery of the contract.