On 28 September 2015, the High Court handed down a judgment granting an application by the the London Borough of Merton to lift the automatic suspension on its award of a contract for CCTV and traffic monitoring services (Openview Security Solutions Ltd v The London Borough of Merton Council). The award of the contract was suspended under Regulation 47G of the Public Contract Regulations 2006 when unsuccessful bidder, Openview, brought a challenge claiming that Merton had used undisclosed criteria to evaluate the contract. In a hearing on 18 September, the High Court was required to decide whether the suspension should be lifted and the contract entered into, or whether the suspension should remain in place until the claim had been heard at full trial.
As described in previous posts (for example, see here), it has been established that the appropriate test for the court to use in deciding this question is that set out in the American Cyanamid v Ethicon. This requires the court to consider: (1) if there is a serious issue to be tried; (2) if damages are an adequate remedy; and (3) where the balance of convenience lies.
Mr Justice Stuart-Smith’s judgment in this case is interesting in that it analyses recent case law relating to the application of the American Cyanamid test to the Regulation 47G automatic suspension and results in a finding which steers the test towards favouring the position of the contracting authority. In particular, Mr Justice Stuart-Smith appears to find fault with two recent cases, Edenred and Bristol Missing Link, where the court refused to lift the automatic suspension, finding the balance of convenience swung in favour of the claimant largely on the basis that the substantive issues were to be heard within a short timeframe, thus allowing for “remedy of review” to be dealt with promptly.
The judgment questions whether it was right in principle for the court in these two previous cases “to elevate the ‘importance of the remedy of review’ into a separate step or consideration before weighing the advantages and disadvantages to the parties of either lifting or not lifting the suspension”. Mr Justice Stuart-Smith found that if it were established that damages would be an adequate remedy, then it was unnecessary to look at the “balance of convenience” and weigh up the claimant’s desire to maintain the suspension until trial against the contracting authority’s need to award the contract and/or the public interest. If damages would be an adequate remedy then the prospect of a prompt final decision should not of itself be a justification for maintaining the automatic suspension.
The judgment also provides some interesting commentary on the factors which should be taken into account in deciding whether damages would be an adequate remedy for the claimant, including:
- In principle there should be no pre-ordained limit upon when and in what circumstances damages should be regarded as an inadequate remedy;
- The fact that it may be difficult to assess damages does not of itself mean that damages will ultimately be inadequate and a framework contract is unlikely to give rise to particular difficulties; and
- There are difficulties in calculating damages associated with a “loss of chance”, and the more variables that are fed into the calculation, the more likely it becomes that the compensation recovered by the aggrieved party will not be adequate.
Mr Justice Stuart-Smith also found that claims for loss of reputation are unlikely to be relevant when considering adequacy of damages for these purposes (unless a failure to maintain the suspension will lead to financial losses that would be significant and unrecoverable as damages).
The High Court concluded that the claimant had not shown that damages would be an inadequate remedy and found in favour of lifting the suspension. Following this judgment it is likely to be more difficult for unsuccessful bidders to use the automatic suspension process to prevent the award of the contract, albeit that Edenred and Bristol Missing Link had provided some degree of optimism in this regard. It will be interesting to see how the review of the EU remedies directive might impact on this in the coming months.