Abstract
This chapter presents public procurement damages claims in the UK, with a particular emphasis on jurisprudential developments. It covers the relevant causes of action, namely breach of statutory duty, implied contract and public misfeasance, and discusses the justiciability of claims. It further examines the quantification aspects of damages claims, notably the recoverable losses (bid costs, lost profits and the compensation for lost chances) and judges’ quantification methods.
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Notes
- 1.
The main work on UK public procurement is S Arrowsmith, The Law of Public and Utilities Procurement, 2nd edition (London, Sweet & Maxwell, 2005); the volume that includes remedies is forthcoming in 2015. Of relevance to practitioners: S Roe & D Harvey, ‘Public Procurement 2011’, in HJ Preiss (ed), Getting the Deal Through: Public Procurement 2010 (London, Sweet & Maxwell, 2011). On damages in the UK: D Pachnou, The Effectiveness of Bidder Remedies for Enforcing the EC Public Procurement Rules: A Case Study of the Public Works Sector in the United Kingdom and Greece (Dissertation, University of Nottingham, 2003); M Bowsher & P Moser, ‘Damages for breach of the EC public procurement rules in the United Kingdom’ (2006) Public Procurement Law Review, 195; F Banks & M Bowsher, ‘Damages Remedy in England & Wales and Northern Ireland’, in D Fairgrieve & F Lichère (eds), Public Procurement Law. Damages as an Effective Remedy (Oxford, Hart Publishing, 2011); S Arrowsmith, The Law of Public and Utilities Procurement, ibid, pp 1379–1385 ; M Trybus, ‘An Overview of the United Kingdom Public Procurement Review and Remedies System with an Emphasis on England and Wales’, in S Treumer & F Lichère (eds), Enforcement of the EU public procurement rules (København, DJØF Publishing, 2011), 227–228 ; C Bovis, EC public procurement: case law and regulation (Oxford, Oxford University Press, 2006), 594. To the author’s best knowledge there is a dearth of literature dealing specifically with the issue of the quantification and valuation of procurement damages. The findings in this chapter are therefore largely based on own research in the relevant case law databases.
- 2.
The reader is asked to excuse subsequent imprecisions on the matter.
- 3.
In Scotland, the Public Contracts and (Scotland) Regulations 2006 were consolidated and changed to accommodate the ECJ Uniplex ruling through the Public Contracts (Scotland) Regulations 2012 (SSI 2012 No 88) and the Utilities Contracts (Scotland) Regulations 2012 (SSI 2012 No 89).
- 4.
Public Contracts Regulations 2015 (SI 2015 No 102).
- 5.
Council Directive of 21 December 1989 on the coordination of the laws, regulations and administrative provisions to the application of review procedures to the award of public supply and public works contracts 89/665/EEC [1989] OJ L395, as amended by Directive 2007/66. The respective implementation measures for Directive 2007/66 were carried out through the Public Contracts (Amendment) Regulations (SI 2009 No 2992), and the Utilities Contracts (Amendment) Regulations (SI 2009 No 3100), followed by amendments undertaken through the Public Procurement (Miscellaneous Amendments) Regulations 2011, which contained minor modifications and brought the time limits for bringing proceedings in line with the CJEU ruling in Case C-406/08 Uniplex (UK)Ltd v NHS Business Services Authority [2010] ECR I-00817.
- 6.
See Utilities Contracts Regulations 2006 and amendments (SI 2006 No 6); and Utilities Contracts (Scotland) Regulations 2012 (SSI 2012 No 89).
- 7.
For an overview of the public law element variations with regards to procurement cases, see Arrowsmith, The Law of Public and Utilities Procurement, above n 1, pp 79–85.
- 8.
R. (on the application of Cookson & Clegg Ltd) v Ministry of Defence, in Bowsher & Moser, ‘Damages for breach of the EC public procurement rules in the UK’, above n 1, p 195.
- 9.
Arrowsmith, The Law of Public and Utilities Procurement, above n 1, p 1379.
- 10.
This implied contract was examined in Blackpool and Fylde Aero Club Ltd. v Blackpool B.C. [1990] All E.R. 237. It also came up again in Sidey Ltd v Clackmannanshire Council [2011] ScotCS CSOH 194.
- 11.
For Scotland, see the identical provision regulation 48(b)(iii) Public Contracts (Scotland) Regulations 2012.
- 12.
Public Contracts Regulation 2015, reg 97(2)(c).
- 13.
Public Contracts Regulation 2015, reg 98(2)(c).
- 14.
Public Contracts Regulation 2015, regulation 91(2). This is usually the Queen’s Bench Division, but sometimes its Technology and Construction Court element, wherein construction or engineering matters are dealt with. See Trybus, ‘An overview of the United Kingdom Public Procurement Review and Remedies System with an Emphasis on England and Wales’, above n 1, p 203.
- 15.
Or the Court of Session of the Sheriff Court for Scotland. On public contract litigation, see P Craig & M Trybus, ‘Angleterre et Pays de Galles/England and Wales’, in R Noguellou et al (eds), Droit comparé des contrats publics (Bruylant, 2010), p 357.
- 16.
Civil Procedure Rules 1998 (SI 1998 No. 3132).
- 17.
Harmon CFEM Facades (UK) Ltd v The Corporate Officer of the House of Commons [1999] EWHC Technology 199 (the ‘Harmon’ case). See also, S Arrowsmith, ‘EC Procurement Rules in the UK Courts: An Analysis of the Harmon case: Part 2’ (2000) Public Procurement Law Review 135.
- 18.
Public Contracts Regulation 2015, reg 89.
- 19.
Sidey Ltd, above n 10.
- 20.
Harmon CFEM Facades, above n 17, p 216.
- 21.
Blackpool and Fylde, above n 10, p 1202F–G.
- 22.
See Arrowsmith, The Law of Public and Utilities Procurement, above n 1, pp 107–113 and references in fn 22.
- 23.
Arrowsmith advances an interesting argument as to the unilateral or bilateral nature of the implied contract. If the contract were recognized as a bilateral relationship, certain duties could be incumbent not only on the contracting authority, but also on the tenderers. See ibid.
- 24.
See answers to Issue 7 in Harmon Facades, above n 17 and in particular paras 214–218.
- 25.
Citing Blackpool and Fylde, above n 10, p1202; Fairclough Building Ltd v Port Talbot Borough Council [1992] 62 BLR 86, p 28; Nolan LJ, p33; Harmon CFEM Facades, above n 17, paras 206, 214 and 216; Pratt Contractors Ltd v Transit New Zealand, paras 44, 47 and 49; J & A Developments Ltd v Edina Manufacturing Ltd, paras 4, 38 and 50. See also, Sidey Ltd, above n 10, para 11.
- 26.
“Economically advantageous’ is a term which is highly likely to be dependent upon the subjective stance of the party considering the question. I would find it difficult to see that parties in the position of the petitioners and respondents would agree on such a subjective term without further definition and qualification.’ See Sidey Ltd, above n 10, para 25.
- 27.
J Varney & Sons v Hertfordshire CC [2010] EWHC 1404 (QB), paras 233–235.
- 28.
JBW Group Ltd v Ministry of Justice [2012] EWCA Civ 8, para 59.
- 29.
Willmott Dixon Partnership Ltd V London Borough of Hammersmith and Defendant Fulham [2014] EWHC 3191 (TCC) (09 October 2014), paras 236 and further.
- 30.
Arrowsmith, The Law of Public and Utilities Procurement, above n 1, pp 1379–1380.
- 31.
Bowsher & Moser, ‘Damages for breach of the EC public procurement rules in the UK’, above n 1, p 195.
- 32.
Harmon Facades, above n 17, paras 241–256.
- 33.
Three Rivers District Council v Bank of England [1999] EU LR 211. The categories by which to assess knowledge are actual knowledge, willfully shutting one’s eyes to the obvious or willfully and recklessly failing to make inquires that an honest and reasonable man would make.
- 34.
Harmon Facades, above n 17, para 256.
- 35.
The incident also entailed a parliamentary investigation published in the Report of the Inquiry into Harmon v Corporate Officer of the House of Commons by Sir Thomas Legg and Mr Peter Bosworth. See www.parliament.uk/documents/foi/foi-2012-Sir-Thomas-Legg-report-March-2000-F12-349.pdf.
- 36.
Deceit is another possible cause of action, which was considered in Montpellier Estates Ltd v Leeds City Council [2013] WL 425703. Again, the burden of proof is so onerous that breaches of the regulations are probably easier to establish. A possible advantage might lie in the much longer time limits.
- 37.
Allied Maples Group v Simmons & Simmons [1995] 3 All ER 907, pp 914–916. In Allied Maples Group, Stuart Smith L.J. had distinguished three scenarios to establish the causal link. The first is the question of causation as a historical fact, or its dependence on future uncertain events. The causality of these two ought to be judged according to the balance of probabilities test. In a third category, involving the hypothetical actions of third parties, the plaintiff only needed to succeed in showing that he had a ‘substantial chance rather than a speculative one’.
- 38.
Harmon Facades, above n 17, para 266.
- 39.
Letting International Ltd v Newham LBC [2008] WL 2696950, para 141.
- 40.
Mears Ltd v Leeds City Council (No 2) [2011] EWHC 1031 (TCC), para 209.
- 41.
ibid, para 214.
- 42.
J Varney & Sons Waste Management Ltd v Hertfordshire CC [2010] WL 2131723.
- 43.
Edenred (UK Group) Ltd v Her Majesty’s Treasury & Ors [2015] EWHC 90 (QB). The court continued: ‘Edenred bidding for a single provider award by HMRC would not have stood a chance against an independently regulated private sector organization such as a clearing bank’ and ‘In the alternative scenario where Edenred would be bidding for the provision of support services to NS&I so as to enable NS&I to provide the accounts to HMRC, its chances of successfully outbidding Atos or another BPO are even more remote’. Ibid, para 159.
- 44.
ibid, p 142.
- 45.
American Cyanamid Co v Ethicon Ltd [1975] AC 396.
- 46.
Letting International, above n 39, para 36.
- 47.
Morrisons Facilities Services Ltd v Norwich City Council [2010] EWHC 487 (Ch).
- 48.
The regulation stated:
(7) Proceedings under this regulation must not be brought unless – (a) the economic operator bringing the proceedings has informed the contracting authority or concessionaire, as the case may be, of the breach or apprehended breach of the duty owed to it in accordance with paragraph (1) or (2) by that contracting authority or concessionaire and of its intention to bring proceedings under this regulation in respect of it; and (b) those proceedings are brought promptly and in any event within 3 months from the date when grounds for the bringing of the proceedings first arose unless the Court considers that there is good reason for extending the period within which proceedings may be brought.
- 49.
See para 48 of M Holleran Ltd v Severn Trent Water Ltd M Holleran Ltd v Severn Trent Water Ltd [2004] EWHC 2508 (Comm), referring to Luck v London Borough Tower Hamlets [2003] 2 CMLR 12.
- 50.
For the requirement to have brought a complaint, see Luck, ibid (discussing the information requirement which used to be 32(4) of the 1993 Regulations). The Court found that plaintiff had not complied with information duties in para 32: ‘In the present case the solicitors’ letters identified neither the regulation in question (‘this regulation’, ie reg 32 of the 1993 Regulations), nor ‘the breach or apprehended breach of the duty owed to him. Therefore, subject to the next issue, any claim under the Regulations is barred.’ The issue of whether the claimant has properly informed the authorities was also dealt with in eg, Keymed Ltd v Forest Healthcare NHS Trust [1998] EuLR 71, 90–91. The same rule in Utilities Regulation 32(4)(a) was considered in Holleran Ltd, above n 49.
- 51.
The Court applied the CJEU Joined Cases C-147/06 and C-148/06 SECAP and Santorso [2008] ECR I-3565 in Sidey Ltd, Re Judicial Review [2011] ScotCS CSOH 194, finding that there was no cross border interest.
- 52.
Sidey Ltd, above n 10, para 13.
- 53.
Sidey Ltd, above n 10, para 19: ‘It seems to me that such employees familiar both with the nature and scope of the contract in question and with the placing of contracts of this sort in general would be likely to be aware whether or not a contract had the potential to generate any cross border interest.’
- 54.
C-454/06 Pressetext Nachrichtenagentur GmbH v Republik Österreich (Bund), APA-OTS Originaltext-Service GmbH and APA Austria Presse Agentur registrierte Genossensschaft mit beschränkter Haftung [2008] ECLI:EU:C:2008:351.
- 55.
Pressetext Nachrichtenagentur GmbH, ibid, Opinion of the Advocate General, C-454/06, ECLI:EU:C:2008:167, especially paras 143 and 148. She pointed out that limited standing for applicants who had an interest in the relevant contract and who could show existing or imminent harm served to exclude applicants with no prospect of success but ‘the possibility of harm … must be presumed where it is not manifestly excluded’. See Electronic Data Systems Ltd v Transport Trading Ltd [2008] EWHC 2105 (QB), para 21.
- 56.
Public Contracts Regulations 2015, regulation 92(2).
- 57.
The reasons for exercising discretion are ‘the length of and reason for any delay; the extent to which the plaintiff is to blame for any delay; the extent to which the defendant may have induced or contributed to the delay; and whether the defendant has been or will be prejudiced by the delay or the grant of an extension’. See Keymed, above n 50, p 96B. It was also examined in Gillen & Anor v Inverclyde Council [2010] ScotCS CSOH 19. See also, Dekra Eireann Teoranta v Minister for the Environment and Local Government [2003] IESC 25 (‘In exercising its discretion in such applications the court retains its duty to protect the right of access to the courts. However, there are special weightings which must be given. Thus the requirement under European and Irish law that such applications be brought rapidly is important. So too is the nature of the contract under review. This public contract calls into play the special importance of time and thus the nature of the prejudice to the parties if they are delayed. The court may also consider any prejudice to the public, the common good.’)
- 58.
The 2006 Regulations provided that proceedings must be brought within 3 months, but open the possibility of either shortening or lengthening that time period – where there is good reason to do so, or on the other hand, restricting it in cases where a tenderer may not be evaluated to have acted ‘promptly’; enough, ie Regulation 2006 old Article 47(7)(b). Uniplex was applied in the Sita case, above n 10.
- 59.
An application for damages was time-barred in Sita. See Sita UK, ibid, para 30: ‘He [counsel of pursuer] says that as a matter of construction that includes not merely the infringement (of which the complainant now has to be aware) but also the fact that loss has been caused.’. The standard was held to be ‘knowledge of the facts which apparently clearly indicate, though they need not absolutely prove, an infringement.’
- 60.
See Montpellier Estates, above n 36. In an initial application to strike out parts of the claim, the Court had rejected the application holding that Harmon was the authority for the potential of an implied contract to arise.
- 61.
Croft House Care Ltd & Ors v Durham County Council [2010] EWHC 909 (TCC).
- 62.
Science Research Council v Nassé [1980] AC 1028.
- 63.
Croft House, above n 61, para 43.
- 64.
S Roe & D Harvey, ‘Public Procurement 2012’, in HJ Priess (ed), Public Procurement (London, Law Business Research, 2012).
- 65.
See eg, Sita UK, above n 58.
- 66.
See eg, Gillen & Anor, above n 57.
- 67.
See eg, Brent London Borough Council v Risk Management Partners Ltd [2009] EWCA 490. In lower instances the damages claim was upheld, but judgment was overturned by the Supreme Court, stating that the contracting authority would be allowed to benefit from the Teckal exemption.
- 68.
See Harmon Facades, above n 17, p 302.
- 69.
Arrowsmith interprets the rightful position to be one in which the procedure would have been lawfully conducted. See Arrowsmith, The Law of Public and Utilities Procurement, above n 1, p 1381. This is criticizable from a contractual point of view under fn 81, citing Bowsher, arguing that damages ought to be limited to bidding costs, as though the procedure had not occurred. This view is based on the argument that a contracting authority cannot be required (from a private law point of view) to award a contract at all.
- 70.
Harmon Facades, above n 17, p 259.
- 71.
ibid, answers to issue 19.
- 72.
ibid, answers to issue 26.
- 73.
Harmon CFEM Facades (UK) Ltd v. The Corporate Officer of the House of Commons [2000] EWHC Technology 84, para 18 [hereinafter ‘Harmon II’].
- 74.
Harmon Facades, above n 17, issue 11.
- 75.
ibid, issue 20.
- 76.
ibid, issue 21.
- 77.
Aquatron Marine (t/a Quatron Breathing Air Systems) v Stratchyde Fire Board [2007] ScotCS CSOH 185, para 93.
- 78.
ibid, para 103.
- 79.
Harmon Facades, above n 17, para 359.
- 80.
This issue is also discussed as a case study in the horizontal comparative part, see Chap. 10.
- 81.
Which was 6.75 %, which with the additional 2.5 % amounts to a 9.25 % rate of interest.
- 82.
Mears Ltd v Leeds City Council (No 2) [2011] EWHC 1031 (TCC); WL 5105153.
- 83.
These were issues 12, 15 and 21 respectively.
- 84.
See eg, Mears Ltd, above n 82 in which the judge, in the face of insufficiently clear criteria, concluded that the claimant had had a ‘real or significant as opposed to a fanciful chance that Mears would have been selected’ for the next stage of the tender. However, the amount of damages was not discussed.
- 85.
Harmon Facades, above n 17, para 308.
- 86.
ibid, issue 12 on the question of the gross margin.
- 87.
ibid, para 294.
- 88.
ibid, para 314.
- 89.
See Harmon II, above n 73.
- 90.
Provisional sums, variations, claims and currency. This sum excluded running costs, overheads and contingencies such as payments to OMC. See Harmon Facades, above n 17, para 296.
- 91.
Of this, the judge estimated Harmon to be able to recover one third (which was granted at 100 %, along with 25 % of the remainder of the balance), resulting in an interim payment of £1,846,466GBP.
- 92.
Aquatron Marine, above n 77, para 103.
- 93.
ibid.
- 94.
Bowsher and Moser, above n 1, p 195.
Bibliography
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Arrowsmith, S (2005) The Law of Public and Utilities Procurement, 2nd edition (London, Sweet & Maxwell)
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Pachnou, D (2003) The Effectiveness of Bidder Remedies for Enforcing the EC Public Procurement Rules: A Case Study of the Public Works Sector in the United Kingdom and Greece (Dissertation, University of Nottingham).
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Schebesta, H. (2016). Case Study: The United Kingdom. In: Damages in EU Public Procurement Law. Studies in European Economic Law and Regulation, vol 6. Springer, Cham. https://doi.org/10.1007/978-3-319-23612-4_6
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