REUTERS | Fabrizio Bensch

Specific disclosure in procurement cases: forcing an early victory

David Gollancz, barrister, Keating Chambers:

David Gollancz looks at the following notable judgments on disclosure applications in three procurement cases:

  • Roche Diagnostics Limited v The Mid-Yorkshire Hospitals NHS Trust [2013] EWHC 933 (TCC).
  • Pearson Driving Assessments Ltd. v Minister for the Cabinet Office and Secretary of State for Transport [2013] EWHC 2082 (TCC).
  • Covanta Energy Ltd. v Merseyside Waste Disposal Authority [2013] EWHC 2964 (TCC).

The judgments concerned applications for early specific disclosure in existing actions. In Roche, the claimant also sought pre-action disclosure.

 Standstill period and automatic suspension

Under Regulation 32A of the Public Contracts Regulations 2006 (SI 2006/5) (PCR 2006), as amended by the Public Contracts (Amendment) Regulations 2009 (SI 2009/2992), contracting authorities are obliged to observe a standstill period of ten days from when they notify bidders of their decision to award a contract and when they formally enter into a contract with the successful bidder.

The aim of the standstill period is to enable the contract award to be suspended where an aggrieved bidder (referred to in the PCR 2006 as an “economic operator”) alleges the award would be in breach of the procurement rules.

Once a claim is issued, the defendant contracting authority must apply to the court under Regulation 47H, PCR 2006 for the suspension to be lifted before it can proceed with the award. For more information, see Practice note, New remedies in public procurement law.

 Applying to lift the suspension

The Regulation 47H application is to be determined as though it were an application for an injunction by the claimant, following American Cyanamid principles (for example, see Legal update, High Court grants application to lift automatic suspension of contract award).

The claimant must establish that there is a serious issue to be tried; the court will consider:

  • Whether an award of damages would be an adequate remedy for the claimant if the suspension is terminated and the claimant ultimately succeeds at trial.
  • The “balance of convenience”: whether greater injustice, or irremediable harm, will accrue to the claimant or to the defendant if the decision at trial is contrary to the interim decision.

It may be questioned whether this approach is correct: it treats the matter as though it were a purely commercial dispute, and has no regard to the purpose of the procurement legislation as a single market measure; however it is well established in the cases.

In a Regulation 47H application (where the applicant for disclosure will in practice be the claimant and the respondent to the defendant’s application for termination of the automatic suspension), the claimant will generally argue that disclosure will be relevant to the question whether there is a serious issue to be tried, or to the balance of convenience (or both). The claimant will often believe that the documents it seeks will demonstrate that the breaches alleged did take place, so that obtaining disclosure will lead to early victory. It is also frequently the case that a claimant will lose interest in the litigation if the defendant’s Regulation 47H application to lift the suspension is successful. The claimant wants the procurement to be re-run because it believes that if that is done fairly, it will win. It does not want to persist in litigation once the contract has been concluded with the successful tenderer, where the best outcome is likely to be an award of damages for loss of a chance of winning the contract. These considerations mean that the claimant’s application for disclosure for the purposes of the Regulation 47H hearing can be a, if not the, pivotal moment in the case.

 Roche Diagnostics case

In Roche Diagnostics Limited v The Mid-Yorkshire Hospitals NHS Trust [2013] EWHC 933 (TCC), Coulson J acknowledged the “uniquely difficult” position of the claimant in a procurement claim. He set out what might be called a baseline position: that essential information should be disclosed in order to enable the claimant to take an informed view of the lawfulness of the contracting authority’s conduct. He then set out in 5 paragraphs these principles or requirements:

  • Subject to issues of proportionality and confidentiality, the claimant ought to be provided promptly with essential information and documentation so that the claimant can take an informed view of the fairness and legality of the process [Coulson J refers to the “evaluation process”, which was under challenge in Roche, but it is assumed that the same principle would apply to any aspect of the defendant’s conduct.]
  • The short time limits imposed on claimants by the PCR 2006, and the fact that the limitation period is triggered by the claimant’s actual or constructive knowledge of the alleged infringement, confirm the requirement set out in the bullet above.
  • The court should consider applications for early disclosure in light of the specific case, distinguishing between those cases where a prima facie case had been made out and those where the claimant appears to have little or no grounds for their challenge.
  • The request for disclosure must be “tightly drawn and properly focused”: it should be aimed at information or documents which demonstrate what actually happened and why the claimant lost. Other material, which might be caught by standard disclosure, is unlikely to be so fundamental that it should be subject to separate early disclosure.
  • Applications should be determined by balancing the claimant’s need to know what actually happened with the need to guard against a fishing exercise designed to shore up a weak claim, putting the defendant to unnecessary cost.

In the particular case, the judge noted the defendant’s position, that the dispute really concerned the proper construction of the invitation to tender, to which the documents sought were irrelevant. That might prove to be right, but the fact that the defendant had sought to justify its decision by disclosing documents, which then repeatedly proved to be flawed, undermined its position. Limited disclosure would enable the claimant to take a considered view of the contracting authority’s evaluation process. It would ensure that the parties assessed the merits on the basis of the same information, which would promote settlement and save costs. Accordingly, the judge ordered specific disclosure of the documents which in his view were directly relevant.

 Is there a serious issue to be tried?

The “serious issue” threshold is low (see for example Metropolitan Resources North West Ltd v Secretary of State for the Home Department [2011] EWHC 1186 (Ch)), and therefore, a claim which is not liable to be struck out will usually raise a serious issue. The case law, including American Cyanamid itself, emphasises that an injunction hearing is not to be treated as a mini-trial of the substantive merits. Accordingly, as occurred in Pearson Driving Assessments Ltd. v Minister for the Cabinet Office and Secretary of State for Transport [2013] EWHC 2082 (TCC) and Covanta Energy Ltd. v Merseyside Waste Disposal Authority [2013] EWHC 2964 (TCC), the court is likely to determine the question whether there is a serious issue on the basis of the facts set out in the pleadings and any uncontroversial evidence: it is unlikely to take into account any disputed issues of fact. Therefore, a court is likely to consider that disclosure is not reasonably necessary for the determination of the issue, or not sufficiently desirable to put the defendant to additional and premature expense.

 The balance of convenience

The question then is whether the strength of the claimant’s case goes to the balance of convenience and, if so, to what extent the court should consider evidence about matters in dispute in determining where the balance of convenience lies. In Pearson the claimant argued that it had not only raised a serious issue to be tried but that it could demonstrate a very strong case on the merits. If, despite that very strong case, the defendant was free to contract with the successful tenderer and thus permanently deprive the claimant of a fair chance of winning the contract, such that both the claimant’s commercial interest and the objective of the legislation were defeated, greater injustice would be done to the claimant than would result to the defendant if it had to wait until trial. Moreover, on the facts of the particular case, the damages payable would be very high if the defendant contracted with the successful tenderer and was then held to have breached its obligations. Therefore, the public interest was engaged in the Regulation 47H application. If a claimant was right and its case was very strong, that should affect the court’s judgment on the balance of convenience; accordingly, the court should order disclosure of documents which would assist the court in assessing the strength of the claimant’s case.

In Pearson, the court considered that more weight should be given to the fact that Regulation 47H offered the defendant the opportunity to obtain the termination of the automatic suspension at an early stage and, necessarily, before all the steps prescribed by the CPR, including disclosure, had been completed. It would defeat the purpose of the provision if specific disclosure had to be undertaken, and probably a new and more distant date fixed for the hearing of the defendant’s application.

Covanta amounted to a further application of the same approach: the court would be able to determine the Regulation 47H application without regard to controversial facts and accordingly need not order the disclosure of documents.

Practitioners who have the impression that the odds in a Regulation 47H application are against the claimant are unlikely to change their view much, if at all, on the basis of these cases. Unless and until courts take the view that, in procurement cases, the American Cyanamid tests are not wholly adequate, it is unlikely that disclosure will be ordered for the purposes of a Regulation 47H hearing. By contrast, Roche and ALSTOM Transport v Eurostar International Ltd [2010] EWHC B32 (Ch) (a claim of breach of the law relating to utilities procurement) give some comfort to a claimant, and potentially to defendants, that early or pre-action disclosure will assist in confirming or refuting the existence or substance of a cause of action, or clarifying the way in which a statement of case should be framed.

For more information on the issues dealt with in this post, see Article, Pre-action and early disclosure in public procurement cases.

Leave a Reply

Your email address will not be published. Required fields are marked *