Applications to lift the automatic suspension are a unique feature of procurement litigation. Patrick Arben and Susannah Fink look at the operation of the automatic suspension on contract making and applications to lift the same. They talk through the process of making and defending such applications, and examine the latest trends in the Court's approach to determining such applications.
Transcript
Patrick Arben: So it looks like everyone has managed to join today's webinar. Hello, my name is Patrick Arben, I am a partner here at Gowling leading our contentious public sector practice and I am joined by Susannah Fink who is a director in the team.
Welcome to the second in our series of ThinkHouse public sector webinars. Today's session has a litigation focus. We wanted to look at the subject of the automatic suspension and applications to lift. The reason for that is twofold. Firstly, because the question of what to do in the face of the automatic suspension is a common issue for contracting authorities but needs to be addressed early on in proceedings so it has a wide application of relevance really for anyone contracting on behalf of behalf of the public sector or with the public sector and second because we think we are seeing something of a change in the approach of both practitioners and the courts in how applications to lift the automatic suspension are being dealt with and we wanted to share that with you.
Just some housekeeping, we are very happy for you to raise any questions that come to mind during the course of the presentation this morning. If I could ask that you use the Q&A function and we will try and answer any questions if we have time at the end.
So just to summarise, moving on to our agenda, what we are going to run through today, we are going to look at and set the scene and give you the context around a procurement challenge and the impact of the automatic suspension on contract making and then we are really going to focus on the strategy and tactics around the imposition and maintenance of the automatic suspension from both the perspective of the contracting authority and the challenger and we are going to look at strategy and tactics around lifting the automatic suspension as well and then we will look at the legal tests and the evolving approach of the courts to these sorts of applications and try and do some crystal ball gazing and discern some trends.
So let us set the scene by reminding you of the regulatory regime, if we just move on to the next slide, and the key aspect of the, certainly the public contract regulations is regulation 951 so where a losing bidder thinks that they may have grounds for a challenge because the proper process in a procurement has not been followed in some way and decides to issue proceedings the immediate consequence of those proceedings being started is set out there in on the slide in regulation 951 and it is very important to point out that there are corresponding provisions in both the concession contract regulations and the utility rates so everything we are going to cover today has an equal application across the regulatory landscape.
So the effect of issuing proceedings and making the contracting authority aware of those proceedings is to effectively place a moratorium on contract on the contracting authority enter into a contract with the winning bidder and Susannah is going to explain what that means in practical terms now.
Susannah Fink: Thank you Patrick. So in procedural challenges time limits are vital. So it is important to be aware of them at all stages.
There are two distinct time limits which should be at the forefront of your mind. These are the standstill period which is usually no longer than ten days and then separately there is the limitation period which is 30 days from the date the challenger had knowledge of, or ought to have had knowledge of, the grounds of their claim. This 30 day period relates both to claims made under the public contract regulations and also to claims for judicial review of the decision reached. Both of these time periods are going to drive the tactics that are employed by both parties.
So what is the significance of starting proceedings before the expiry of the standstill period? Well if you are the challenger then you are going to want to ensure that the issuing of your proceedings invokes the automatic suspension upon contract making as that will inevitably give you significant leverage in any dispute. If you start proceedings after the standstill period has expired you might find that the contracting authority has already entered into the contract with the winning bidder and then it would be too late to trigger the automatic suspension. Your claim would instead be confined to one in damages or you may have an ineffectiveness claim.
If you do manage to issue your claim form before the standstill period has expired, it will suffice as notification under regulation 95 for you to email a copy of the claim form to the contracting authority and this will then have the effect of invoking the suspension upon contract making, although I should just warn that this method may not suffice as former service of the claim form.
The tactical impact of the automatic suspension is invariably disruptive and it does have the potential to be catastrophic. Once it has been imposed, it is not straightforward to bring it to an end and the suspension will then stay in place until such time as either an interim order has been made by the court to bring it to an end or alternatively proceedings are finally disposed of.
In many situations the challenger may ask for the standstill period to be extended when its claim is considered. The contracting authority may or may not agree to this. If it considers that the issues raised by the challenger are of some concern and require investigation then it may agree to extend the standstill period. If on the other hand, it seems like the challenge does not have much merit and the losing bidder is just upset at having lost and is merely fishing for information without having any real grounds for complaint then the authority may want to press on to award and therefore decline to extend the standstill period. It will then be up to the challenger to make the decision as to whether it is serious about its claim and if so, if it does want to obtain the benefit of the automatic suspension. If it does then it should issue the claim form before the standstill period has expired.
So, I am just going to move on now. Once the automatic suspension has been imposed then the contracting authority will need to make decisions within a very compressed timeframe. It will need to consider whether or not it wants to defend the claim that has been issued against it which may well depend upon whether or not it thinks there might be some merit in the claim. If there are real concerns that the complaints made might be valid then one possible option might be to decide to re run the procurement in whole or in part. If however the decision is that it does want to fight the claim then it is likely that it will want to take steps in order to bring the automatic suspension to an end. If so, then the authority's next move would be to make an application under regulation 96 for an order that the court lift the automatic suspension upon contract making.
Alternatively, the court can make an order to restore or modify the suspension in some way or it can suspend the procedure leading to contract award.
Now I am going to come on to how such an application can be made in practice but I firstly want to examine some of the factors that an authority would want to take into account when deciding whether or not to make the application. Now the obvious first consideration is urgency and if it is absolutely crucial that the contract with a new bidder is entered into as soon as possible and time is a really critical factor in all this then there is really no option than to proceed to make the application to lift and to do that just as quickly as you can.
The cost of issuing the application to lift does need to be taken into account though. These are very heavyweight applications and it is not unusual for the cost of the authority to amount to at least £100,000 or more than that and that is including the cost of Counsel. If the value of the procurement is quite low then and therefore the value of the claim that is being brought by the challenger is quite low then the costs of making an application to lift could be prohibitively high and in that case you may want to consider taking a different path and seriously look at the option of trying to reach a settlement and ideally you would do that before proceedings are even issued and you have to incur the cost of preparing a defence.
Reputation can be a key factor. There is inevitably some publicity that comes with an application to lift as the judgement will be a matter of public record. Depending upon the allegations made by the challenger, some authorities may be very conscious of not courting any additional potentially bad publicity which could negatively affect their reputation. Alternatively, an authority may feel that in fact the very best way to protect its reputation is to make an application to lift and to be seen to be trying to restore the status quo, particularly if there are issues such as continuity of the healthcare services at stake. There may be some commercial considerations at play if, for example, the authority have an existing and continuing relationship with the challenger, in relation to various other contracts besides the one that is subject to the procurement. This could impact the way in which the proceedings are defended and indeed whether it is even worth going on the offensive with an application to lift, if perhaps amicable resolution could otherwise be sought.
Contingency planning can be an issue as well. If, for example, there is an existing service that is likely to expire when the contract comes to an end and in the absence of being able to enter into a new contract with the winning bidder, alternative suppliers will be needed to be found in order to ensure continuity of service. This goes hand in hand with the urgency factor that I mentioned earlier and it might be the reason why there is no choice but to make the application to lift.
Other factors that may play a part in the decision whether or not to make an application are public policy considerations, there might be issues of national security or perhaps a key healthcare contract or a strategic infrastructure project and in such circumstances there might be other important stakeholders higher up the chain of command who are actually the ones calling the shots and will make the major decisions.
Moving on now to resources, it is possible that the authority may have assembled a team of consultants or specialists or employees who are earmarked to work on the procurement and assist in the transition from the incumbent supplier to the new provider. In such circumstances, it could be vital that this process of transition commence sooner rather than later and the impact of further delays to the lifting of the automatic suspension could be that these teams of consultants or specialists have to be disbanded or reallocated to other projects, all of which could cause great costs if they then have to scale up again later.
The final factor which may play into the decision is the extent to which the authority wants to seize the initiative as regards how the proceedings will progress. Not all claimants have a primary goal of looking to derail the ultimate procurement outcome. So if you have an incumbent supplier who is the losing bidder, they may in fact just be seeking to delay the process of entering into the new award with the hope of securing an extension to their old contract. Alternatively, they could be making a fairly speculative claim and they might be content with just a certain amount of damages which represents their loss of chance of entering into the contract. If the authority does decide to issue an application to lift, then it would involve the claimant in a substantial amount of expense in defending it and that tends to focus minds quite carefully on what the claimant is actually seeking to achieve and then this might, with any luck, ultimately improve the prospects of the claim either being abandoned or a settlement reached on a satisfactory basis on both sides.
So we are going to look now at some of the practicalities of making an application to lift. Firstly, it is advisable before issuing any application to write to the claimant's lawyers asking if their client would in fact consent to the lifting of the suspension. As I just mentioned, in some cases the challengers have not embarked on proceedings with the intention of going all the way and causing the maximum amount of disruption possible. They may in fact actually be getting cold feet about the whole process, in which case reaching out like this to see if they would have any interest and agree to lift the suspension or in trying to negotiate a settlement might be more of an attractive prospect, before both parties start incurring significant amount of costs.
In the cases that I have been involved in, I have to say that sending such letters has unfortunately not elicited the desired response and more often than not you receive a lengthy treaty on to exactly why the automatic suspension should remain in place but it is definitely still always worth a go and the sensible course of action to follow.
It is vital that applications to lift should be made promptly. Often the primary reason that the authority is giving for why the suspension needs to be lifted is due to the urgency of needing to enter into the new contract and, as you can imagine, if there has been a lengthy delay of say several months before the application is issued, then it tends not to go down very well with the courts when you are at the same time arguing that the situation is urgent. Having said that, it will take some time to collate the necessary evidence that you need for the supporting witness statement and to ensure that it is as compelling as possible. In reality, it is quite often the case that these applications are being prepared at the same time as the authority has to prepare its defence but ideally you would serve your defence first. This is so that the parties are clear on what the arguments are on both sides and therefore what the scope of the proceedings is before you start issuing any applications to lift and certainly by the time of the hearing of the application, the court would expect both sides to have served their statements of case so that the Judge can obtain an overview of the dispute as a whole, which then serves as a backdrop for the application. As Patrick will come on to, so that the court can be satisfied that there is indeed a serious issue to be trialled.
So how do you make these applications? Well there is an application notice to be filed and a court fee to be paid which is accompanied by a supporting witness statement and a draft of the order that you are seeking to obtain. These witness statements usually have exhibits and they tend to be quite lengthy so the authority is going to have to think about who is the most appropriate person to give that witness statement. It is usually someone who is very senior and someone obviously involved in a procurement and who has knowledge of the matters that need to be covered which Patrick again will go on to discuss.
The court will then fix the hearing date and it is usually possible to secure a hearing relatively quickly, probably within about a month or two depending on the time of year, and it is also possible to request that the technology and construction court hear the application as a matter of urgency.
You do need to bear in mind though that the hearing needs to be fixed far enough in advance so that there is sufficient time for the claimant to prepare and serve their evidence in response and they may need around two weeks for this and then also that there is sufficient time for the authority to then serve any further reply evidence although it is common for there to be only a few days available in which to complete this.
There will also need to be time to prepare the application bundle before it is lodged in court in advance of the hearing. This is never a simple task for the lawyers acting for the authority since the content will need to be agreed with the lawyers acting for the claimant and they will likely need both a confidential bundle and a public bundle meaning there is a substantial amount of highlighting and redacting the confidential information to be undertaken and that is going to involve a lot of liaison between the two sides and their lawyers and also any interested party who may be involved as well. The hearing is usually listed for a full day in front of a technology and construction court judge and there is usually quite a lot to get through in that one day.
I should just mention that these applications are very time and resource intensive, both for the authority and for the challenger. Both parties need to ensure that they have the relevant people available to deal with the information that needs to be included in the witness statements and in the case of the authority they also need to have someone available to be dealing with the preparation of the defence that is probably going to be going on at the same time. It can often be problematic if this falls over Christmas or during August so thought does need to be given in advance to this issue. Generally it just a very busy time and people might need to be available to be reviewing documents over the weekends and at night and your lawyers also need a large enough team to deal with all the work.
I will just hand back to Patrick.
Patrick: Okay so let us have a look at the approach of the court. So when deciding whether or not to bring the suspension to an end, the court applies what is the well-worn test devised by the Court of Appeal in the American Cyanamid v Ethicon case. There is a slight quirk here because actually the claimant who is the respondent to the application actually bears the responsibility for satisfying the American Cyanamid conditions in order to maintain the suspension because actually it is the notional applicant for the suspension which in effect is an injunction imposed by the operation of regulation 95.
So let us just go through the test in a little more detail. The first question Susannah rightly pointed out is that the court has to look at whether there is a serious issue to be tried and if there is then it goes on to consider first whether damages could be an adequate remedy for the claimant if the suspension were lifted and they succeeded at trial so putting that question another way, is it just effectively in all the circumstances that the claimant should be compliant to its remedy in damages. If the court considers that damages would not be an adequate remedy for the claimant, it would then go on to consider whether damages would be an adequate remedy for the defendant and contracting authority if the suspension remained in place and then finally the court considers that damages would be unlikely to be adequate remedy for either party then, and only then, it goes on to consider the balance of convenience which is effectively an exercise in determining which party is least prejudiced if it does not get its own way and it is these issues that invariably inform the background of any application to lift hearing and I will be running through these in a little bit more detail over the course of the next few slides.
So moving on, the first part of the Cyanamid test is whether or not there is a serious issue to be tried and in the context of procurement cases it is usually not that difficult for the claimant to establish this. The court just needs to be satisfied that the claim is not frivolous or vexatious although a serious issue I think it does mean more than just a fair arguable case. The key point is though that and this really drives the parties behaviour when it comes to the first part of the test is that it is a pretty low bar to overcome. In an ordinary procurement case, there may be points on both sides and it will often be unproductive for the parties to spend a good deal of time, remember as Susannah said, usually you are only getting one day to argue the application to lift and spend a good part of that time arguing the merits or otherwise of the underlying claim. If there is likely to be a serious issue to be tried and you are the contracting authority, why spend time arguing the point because beyond establishing that there is a serious issue at stake the court really will not be concerned with the merits of the parties respective cases at the application to lift hearing.
There is a 2017 case called Sysmex v Imperial College where the Court made it clear that it is not appropriate to have a mini-trial in a complex procurement dispute at the application to lift stage unless really the court can form a view without conducting any form of retrial that the contracting authority is virtually bound to succeed the case is likely to be one that is classified as having serious issue.
So accordingly where it is accepted that there is a serious issue to be tried then as I say in very exceptional circumstances both sides generally resist the temptation to argue the merits in any detail. However, the parties invariably want to demonstrate to the court that their position is a strong one which is why if you are a contracting authority generally you want to have served your defence in advance of the application to lift the hearing.
It is also important I think to note that in recent years it has become common for defendant contracting authorities to make this limited concession of there being a serious issue to be tried at the outset of any application to lift hearing in order to allow time to focus on the other issues. When really the other three issues of the American Cyanamid test and really where the meat of any application lies.
But having said this, I think it is important to consider at the outset if you think the claim is genuinely spurious then you may nevertheless want to argue serious issue and it is a point that you should certainly consider when you are preparing the application.
So just moving on, assuming you have a serious issue to be tried, the second part of the test is whether or not damages would be an adequate remedy for the claimant challenger. This is obviously fact sensitive and is determined on a case by case basis but it is possible to discern some if you like guiding principles here based on case law and you will see I have set out some of these in this slide.
The first one to cover is what you might call the existential threat type situation. Where there is a threat to the survival of the claimant's business if the suspension were lifted. The classic example of this is the 2015 case of Bristol Missing Link v Bristol City Council which concerned a contract for domestic violence and abuse support services in Bristol. The challenger here was the incumbent supplier. It was a non-profit making organisation and as such it had not included any amount of profit in its tender and only in a minimal amount for overheads. As damages in a case of this kind are usually based on an unsuccessful tender as there is a loss of a chance to make a profit, it meant that if the suspension were lifted, the claimant would not have had a claim for anything except nominal damages and as such the courts concluded that damages would not have been an adequate remedy in this case. Furthermore, lifting the suspension would have had other catastrophic consequences for the charity and the contract in question amounted to something like a third of its turnover of what is an integral part of the services it provided elsewhere, all of which were connected. So they had lost this contract effectively behind one of its remaining contracts too.
So that is a fairly cut and dry type situation but there are other more nuanced situations that the courts will consider. The second is really the argument that there is a frankly it is impossible to calculate damages, the practical argument here. A good example of this is the Central Surrey case for this type of scenario and that this concerned a contract for the provision of adult community health and social care services and the claimant here argued that damages would be based upon the loss of a chance generating a profit as is the usual case. But this was a case where the claimant argued that it had been wrongly excluded from the procurement bidding in a consortium rather than bidding alone and the judge accepted in this case that it would have been very difficult for the claimant to quantify its loss in circumstances where Central Surrey had never submitted an actual costed bid on its own behalf as opposed to as part of a consortium and their overheads and notional profits for distribution on other projects in the community was looked at globally as a business rather than on a contract basis. In those circumstances, the court was persuaded that the loss of the contract would have a knock on effect in terms of their contribution to other projects and it would have made their ability to work within the community generally not much more difficult and again in that situation the court found that damages would not have been an adequate remedy.
The third argument that you see around the second limb of the test is that there has been some kind of loss of competitive or commercial harm is going to be caused to the claimant if the suspension is lifted and the contract awarded to someone else. This is often I think probably after an incumbent challenger type argument and the Alstom case cited in the slide is one of many examples of this type of argument. In this case, Alstom claimed that the loss of the contract at stake in proceedings would have had a huge impact on its centre of expertise in traction technology and the damages would not compensate it for the loss of this competitive edge it would suffer if it were to lose the contract and it would be essentially barred from re-entry into the UK traction system market. Now Alstom's argument failed and was described as barely credible but the loss of a unique workforce, for example, TUPE over to a new provider, could in principle support a finding of damages would be an adequate remedy for a claimant. However, in Alstom the Judge found that the expertise held by in actual fact only a few employees could have been recorded. There was also access to expertise elsewhere within the Alstom group which is a very large group of companies including another European Centre of Excellence for traction technology.
So there was no reasonable basis for doubting that Alstom would be able to continue to tender the contracts as and when they arose. As such, Alstom had not shown that there was any significant risk that you would lose this competitive edge if this incumbent contract with London Underground were lost. Contract that with the arguments around reputational harm and loss of a prestigious contract. So one often sees reputational harm argued as a reason why damages would not suffice. The courts have recognised not hugely often but historically they have recognised that there is a particular category of very high profile and prestigious contracts where its loss could not be adequately compensated in damages.
The value of the contract is not everything however and we are seeing a slight sea change here in the courts. So the recent decision in Drago which is on the slide, there the court found that whilst the safety equipment contract for the fire service was not of itself high value it was nevertheless highly prestigious in the sense that the case was being or the procurement was being monitored by other fire brigades and whoever won that contract was likely to set the benchmark for safety equipment across the market and as such it was unlikely that damages could be readily quantified given its wider impact of losing the procurement.
So moving on, if the court were to decide that damages would not be an adequate remedy for the claimant it will then go on to the consider whether damages would be an adequate remedy for the defendant contracting authority. Now there are often many good reasons why damages would not be an adequate remedy for a contracting authority if it is prevented from entering into a contract with its preferred bidder if the suspension were maintained for the duration of the case which potentially could be you have something like a 12 to 18 month period. Some of the key factors that we often see coming up time and again are listed in this slide.
The first and most obvious is a delay in achieving whatever commercial objectives that may be partially quantifiable for example if there is a delay in realising efficiency savings but there may be other benefits which are far harder to quantify. For example, in a healthcare contract benefits to patients if the procurement provision for healthcare service is delayed.
Another common reason commonly cited is the risk of a hiatus in service provision. So if a contract cannot be awarded that could be a very serious issue, what might be a business critical public services that a contracting authority might actually have a duty to provide so if an incumbent service provider's contract is going to expire whilst the suspension is maintained then that cliff edge effect is going to be a compelling reason why damages would not be an adequate remedy.
There may also be for example national security or public interest concerns that would arise if there was a lengthy delay in entering into the contract. For example, if a major national infrastructure project, an HS2 type project, was going to be held up by a procurement challenge related to some critical contract within the supply train that could then be another good reason why damages would simply be an inadequate remedy because of the wider ramifications to the project. It is also worth noting that if a challenge simply lacks the resources to meet a damages award for example if it is a special purpose vehicle company set up solely for the purpose of performing the contract that is under challenge and lacks the assets to pay a damages award. That is also going to be a material factor in this part of the test.
I think the main point to take away is that traditionally we all thought that adequacy of damages was going to be a very difficult hurdle for a claimant to overcome and traditionally it was but cases like Drago and also the very recent Vodafone decision in which we were involved where the Judge found that Vodafone was an incumbent provider to the Foreign Office of Communication Services would not be adequately compensated in damages for the loss of a prestigious contract to provide communications to the UK's embassies across the world suggests, certainly to me at least, that the adequacy of damages is not going to be a determining factor going forward which means the balance of convenience test is going to assume I think greater significance in applications to lift and Susannah is going to look at that now.
Susannah: So, in situations where it is unclear if damages would be an adequate remedy for either party, then the courts will proceed to consider the balance of convenience. This test requires the court to consider all the circumstances of the case in order to determine which course of action is likely to carry the least risk of injustice to either party in the event that it subsequently established to be wrong or in other words, the courts will consider which outcome would produce the least harm.
There is a recognition on the part of the courts that these applications can cause imperfect outcomes. Determining where the balance of convenience lies is always going to be very fact specific but there are some common factors which the courts are entitled to and invariably do take into account.
Firstly, it is going to be important to consider when any trial can actually be fitted into the court's listings. The parties should make enquiries in this regard taking into account how many days or weeks the trial is estimated to last. This is going to be relevant to how long the suspension might have to be kept in force. The time taken by any potential appeal against the decision at trial should also be borne in mind. This is going to be relevant to how long the suspension might have to be kept in force.
In the recent 2008 case of Bombardier Transportation v Hitachi Rail before the trial could not be accommodated for another whole year after the hearing of the application to lift and it was held that a delay to enter into a contract of this length of time would ultimately result in years of delay to some planned London Underground improvement works. This was therefore a weighty factor which tips the balance of convenience in favour of lifting the automatic suspension.
Also the court is going to consider the impact of any delay in hearing the case. There might be implications such as the expiry of a tender validity period, the loss of skilled personnel, disruption to supply chains, any abortive costs of replacement items, there might be risks to the entire business case for the project, there could be knock on effects on other projects which are not the subject of the procurement, there could be disruption to planning and transition processes and also delays to the anticipated benefits of the new contract which are usually such things as cost savings or more efficient methodologies of providing services.
Another factor that the courts will invariably have regard to is the public interest. In the Bombardier case that I just mentioned before, there was a strong public interest in favour of introducing new underground trains as soon as possible, as to improve journey times, capacity and access and there was also a public interest in decommissioning the old stock which if not undertaken would cause increasing amounts of disruption.
The public interest will also take into account whether some form of service continuity can be maintained. When you are delaying with a healthcare contract for example, there might be real concerns about how to maintain the service that you are under a statutory duty to provide over the delay period and also because obviously that need to avoid causing serious harm to the general public. It may not be so easy to secure services from an alternative supplier or to try to negotiate a contract extension from the incumbent provider if they are actually the challenger.
Finally, the court should also consider the interests of the winning bidder as well as the interest of the claimant. Claimants do tend to argue that as well as it being in their interest, there is also a public interest in procurement processes being in compliance with the law, although this should not have the effect of trumping other factors.
So I think in general assessing where the balance of convenience lies is usually a very finely calibrated decision that has to be made by the court and it will involve the complex weighing of many arguments. If the factors relevant to the balance of convenience do not point in favour of one side or the other, then the courts have held that the prudent course in such a situation will usually be to preserve the status quo or rather to preserve the status quo as it was prior to the automatic suspension and then they will accordingly lift the suspension and allow the contract to be entered into.
So I am now going to examine the tactical considerations that should be going through the claimant's mind when served with an application to lift. A common tactic employed by claimants is to see to negate at least some of the harm that can be caused by the automatic suspension. So where challenges are the incumbent suppliers then they might offer to continue to supply services on the same terms that they are currently supplying them. Thereby neutralising any agreement made by the contracting authority that they risk paying higher prices as a result of the suspension being maintained. Similar tactics on the part of a challenging incumbent are to offer to agree to a short extension to the existing contract so as to maintain continuity of service over the period of the suspension. They might do this when they had previously not offered any extension at all or perhaps only a very lengthy extension which the authority might find it difficult to accept. This sort of tactic has a double benefit to the claimant of both being able to present itself to the court as acting very reasonably and also reducing any prejudice that the authority might otherwise assert that it was suffering.
A further consideration is whether the claimant should seek to provide the court with an attractive compromise to the rather stark choice of whether it should continue to maintain or agree to lift the automatic suspension. There is a few ways in which it could seek to do this.
Firstly, the court has the power under regulation 961b to modify the terms of the automatic suspension as opposed to bring it to a complete end. In the Vodafone case which Patrick just mentioned earlier, the court decided to modify the automatic suspension by permitting the Foreign Office to enter into a conditional contract prior to the trial which would not become binding until such time as there is a decision in its favour at trial.
Interestingly, Vodafone had not even sought such an order but the Judge in question saw it as an opportunity to try and reach a compromise solution that would be satisfactory to both parties. He thought it might also be of assistance to the winning bidder so as to enable to it to enter into mirror conditional contracts with supplier up stream in the supply chain. This is in the context of the winning bidder having provided evidence that a continuation of the suspension would cause it to have to review its contractual arrangements with its supplier and pay higher prices which it would then have to pass on to the authority. It may be that going forward we will see some more examples of courts ordering modifications of terms of the automatic suspension.
Another powerful option the claimants should consider is making a cross application for either an expedited trial or an expedited trial of the preliminary issue once the suspension is maintained. So what is the logic behind this? Well it only really works if the court can fit in a hearing of the trial of the length required within a relatively short period of time from the hearing of the application to lift, say about two or three months. If the claimant an show that there would be no prejudice caused by maintaining the automatic suspension for just that further short period of time, those few months, after which time it could be lifted then this actually does offer a very attractive compromised solution. Again, this was the position in the recent Vodafone case.
Vodafone made a cross application that there should be an expedited trial of a preliminary issue, the trial of which would only last four days and as such it could be heard in three months' time. The Judge concluded in that case that given that he was not persuaded by the urgency of the security concern claimed by the authority that a trial of the preliminary issue in another three months would an automatic stay be maintained until the outcome of such trial was actually the fairest outcome to the parties and would cause the least irredeemable prejudice.
A similar decision was reached in the recent Drago case that was held in August. There the court considered that a significant factor was the opportunity to hold an expedited trial in ten weeks' time against an estimated lead in time between contract award and operational commencement of around nine to 12 months a short ten week delay to resolve the procurement challenge would not have any significant impact on the progress of the protective equipment improvements that were the subject of a procurement in that case. The least risk of injustice is therefore to maintain a suspension pending the expedited trial.
So in what circumstances will the court order a trial of a preliminary issue? It is always going to be a decision made on the specific facts of the case but the relevant factors are in fact fairly well established. First and foremost can the issue itself be clearly and precisely defined? And the types of issues which may lend themselves to be heard as preliminary issues as neat points around the interpretation of the regulations or maybe points around which is most appropriate regulatory regime. If it cannot be succinctly defined, perhaps because it depends upon the impact of various detailed and complex findings of fact then it is unlikely to be suitable as a preliminary issue.
Secondly a relevant factor is whether the issue would dispose of the case or an aspect of it. So if you have a discreet knock out point that has the potential to decisively conclude the claim or an aspect of it then that will be suitable as a preliminary issue. Essentially, there must be a good chance that it will render a substantial portion of the statements of case as moot. Likewise, if the trial will otherwise be lengthy whereas those preliminary issues hearing would be comparatively swift then that would be a point in his favour.
A third relevant factor is if it is an issue of law to what extent could it be decided on the agreed facts. So if you have a lot of facts in dispute which would take a lot of time and effort to try and agree then the courts would not be persuaded that it is appropriate to be heard as a preliminary issue and it is always going to be especially important to establish the premise of an issue of law in fact sensitive cases so as to avoid the risk of one or more of the parties asserting opposing facts so as to seek to circumvent the outcome of the preliminary issue hearing.
A fourth factor is when there is a risk of the issue increasing costs or delaying a trial so if the issues identified by the parties would require a substantial disclosure or several lengthy witness statements and cross examination of a number of witnesses then the court is likely to order that a preliminary issue trial would not be idea in that scenario because that would be likely to significantly increase costs and also the inconvenience of the parties as opposed to creating any costs saving. You could also have a situation where a finding in favour of one or more of the parties at the preliminary issue stage would involve having to revisit various of the same issues at stage two, thereby causing a duplication of evidence and further delay to the stage two trial. Due to the fact that the judge hearing stage two may then take a different view of evidence from the judge who heard the stage one trial, there would then be concerns that it could lead to inconsistent timings and fact and ultimately unfair outcomes.
The final factor is whether determination of the issue could illicit a swift settlement. So you can see in such a scenario that it would be quite an attractive proposition for a judge if you felt that a decision on a preliminary issue would be more likely to unlock the dispute and result in a satisfactory resolution for both sides which would then obviously also be in the interests of justice. I think in general the courts do know here that they have to tread very carefully when ordering preliminary issue trials as there are plenty of cautionary tales about where such trials have imposed unworkable solutions on the parties and generally have gone horribly wrong. Scoring challenges in particular with their need for lengthy witness statements and cross-examination of those witnesses as to their credibility are absolutely not appropriate to be heard as preliminary issues.
So if you have a preliminary issue trial or indeed any trial that is going to be considered as an acceptable alternative to lifting the automatic suspension then a claimant will have to persuade the court that it should make an order for it to be expedited. Otherwise a hearing may not be held for at least 12 to 18 months according to the normal court timetable of proceedings. So what are the factors that the court will take into account when determining whether or not it should order expedition. Again these will always be very fact specific but the 2008 case of WL Gore & Associates v Geox is authority for the applicable principles which will normally be taken into account.
Firstly, can good reasons for expedition be demonstrated. Essentially the court has to be persuaded that there is a good reason for this particular case to jump the queue and expedition is usually connected here to the test for the balance of convenience and if it is presented as an alternative to lifting the suspension then it may well be accepted as meritorious.
Secondly, it has to be considered whether expedition would interfere with the good administration of justice and if a claimant can argue that it would save the costs of the proceedings overall and it would promote compliance with procurement law then a court may well be in favour of it. The court does need to however bear in mind the needs of other litigants who might also be currently waiting for their cases to be heard.
A third factor is whether expedition would cause prejudice to the other party. So the court must weigh the risks of delay to the claimants against the prejudice that might be caused to the contracting authority if there is going to be a very restricted trial timetable. The contracting authority will no doubt assert that even an expedited trial will lead to further delays in what is an already situation so the battle grounds usually tend to be over whether the court is persuaded by the reasons given for urgency and the arguments that even a further relatively short delay until the expedited trial would still not be in the public interest and therefore against the balance of convenience.
The final point to be considered is whether there are any other special factors. This can include the impact upon the winning bidder of ordering expedition rather than an immediate lifting of the suspension. Again this will obviously be fact specific but it may be possible to point to certain issues such as a need to reconsider the pricing of the bid or some issues arising out of the bidder having assembled a consortium of bidders or there may be difficulties with transition. I will hand you back to Patrick for the conclusions.
Patrick: Thanks Susannah. So just drawing some of the threads together. I think it is fair to say that historically it has been unusual for the courts not to find in favour of a contracting authority where it applies to have an automatic suspension lifted and it is probably even more unusual where you can demonstrate a significant public interest is involved in being able to get on and enter into the contract.
But we think the courts are becoming more willing to accept that damages might not be an adequate remedy for claimants even when they are large profit making entities and we are sort of seeing a trend where that is accepted on really quite thin evidence actually. So there is a greater willingness to accept that commercial harm can come in many forms. That does have an impact on the likelihood of contracting authorities being able to lift and if you compound that with what we saw in the decision in Drago and in Vodafone that suggests that the courts are increasingly attracted to these compromising alternatives to the sort of binary choice of either lifting the suspension or holding it in place for what might be a 12 or 18 month period. But I think this may be a signal of the court's intended approach going forward in terms of public procurement policy post Brexit. And interestingly it is not a million miles away from the proposals outlined in the recent Green Paper, I think it is from December last year, transforming public procurement. And that Green Paper, I mean it is not law, but it certainly advocates that challenges should be routinely dealt with on an expedited basis whilst a suspension remains in place. And if you do have the time it is worth reading Chapter 7 of that Green Paper which comes up with all sorts of ideas and that is concerned with procurement challenges.
I think regardless of whether or not the Green Paper becomes law it is clear I think that parties seeking to maintain or indeed challenge an automatic suspension are going to have to routinely consider the option of expedition either of a preliminary issue or indeed the whole case as an alternative to lifting the suspension and they are going to need to consider it early on in any dispute as we think that is probably the direction of travel
Now we have got a bit of time, I am conscious that everyone has got a day job to do, we have got a bit of time for questions. I am just going to see if we have any. We have not, we have stunned you into silence so that is probably all that I can say unless anyone does have any questions. I hope this session was helpful and I hope that you can join us tomorrow at 10:00 am for our third session in this series, Procurement in Practice. Thanks very much everyone.
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