Procurement Challenges – Rulings on Claim Forms, Statements of Case and Suspension

Procurement Challenges – Rulings on Claim Forms, Statements of Case and Automatic Suspension

Introduction

Two recently decided cases illustrate sharply the early difficulties and pitfalls claimants face in pleading their cases when they challenge public contract award decisions:

they are often in the dark about the detail of the error on which their claim is based and they usually have little information about how the award decision was reached;
under CPR 17.4(1) and (2) a case can be amended after a relevant period of limitation has expired (and in procurement challenge cases that limit is only 30 days ) by adding or substituting a new claim only if the new claim arises out of the same facts in respect of which a remedy has already been claimed.

Often a claimant will be able to plead that a step in a procurement has been made in error by reference to a known fact but it will not be able to plead the details of how that error fits into an impacts on its claim until later on in the action – usually after disclosure. Sometimes disclosure might reveal a whole different cause of action to the one originally pleaded, as was the case in D&G Cars v Essex Police Authority ([2013] EWCA Civ 514) where after disclosure the claimant sought to amend and plead claims of bias, tender rigging and bad faith. However, permission was refused as by the time the application to amend was heard the limitation period in respect of what were held to be new claims had expired.

Travis Perkins Case

In the first recent case, Travis Perkins Trading Company Ltd v Caerphilly County Borough Council ([2014] EWHC 1498(TCC)), the Court had to consider whether there was compliance with the CPR 16.2 requirement that a claim form must contain a concise statement of the nature of the claim and specify the remedy sought. In all cases that question has to be considered in the context of whether the claim form corresponds to the claim subsequently pleaded in particulars of claim.

Of great importance here is that if the concise details do not cover the claim made later on in the particulars of claim, a defendant could apply to have the particulars of claim struck out because they do not correspond to the claim form – the claim form being the issued proceedings which stops the limitation period from running. In that event, a claimant would have to apply to amend the brief details in the claim form or bring a new claim in separate proceedings. In either event limitation issues may well apply.

The claim form in Travis Perkins advanced claims under the Public Contracts Regulations 2006 and EU general treaty principles, plus a claim for breach of the duty to treat tenderers equally.

In Travis Perkins, the claimant was successful in arguing that the brief details on the claim form did cover and substantially correspond to the particulars of claim which were subsequently served. The judge held that in construing or understanding what was intended by the words used in the claim form, the court can have regard to the “factual matrix” and that included the correspondence between the parties and the particulars of claim themselves.

Clearly, each case will be different when determining whether the claim form matches the particulars of claim. In Corelogic Ltd v Bristol City Council ([2013]EWHC 2088(TCC)), the judge held that the brief details on the claim form did not tally with the subsequently served particulars of claim, whether one considered the particulars themselves or construed their meaning in the light of the correspondence before the claim was issued. Also in Corelogic the application to extend time for commencing the new claims in the particulars of claim was refused, because there was no good reason for extending time under Regulation 47D(4). Corelogic was not referred to in Travis.

DWF Case

The second recent case is the Court of Appeal’s judgment in DWF LLP v Secretary of State for Business Innovation & Skills ([2014]EWCA Civ 900), acting on behalf of the Insolvency Service which provides useful guidance for practitioners when it comes to amending particulars of claim and also represents another case where the automatic contract making suspension was not ended.

Facts in DWF

DWF, a firm of Solicitors, tendered for contracts for insolvency service work in England and Wales and Scotland for the Insolvency Service (“IS”). DWF were informed in January 2014 that its tenders were unsuccessful and was provided, in the usual way, with its scores, and the winning tenderers’ scores. That information revealed that it scored 1% less than the winning tenderer immediately above it in the rankings, Shepherd and Wedderburn, a Scottish firm of solicitors. DWF sought more information and that revealed DWF had received higher scores on the quality side of its bid in Scotland than for England and Wales, even though DWF’s two insolvency partners handling the work were based in England. Also, the Scottish firm Shepherd and Wedderburn received higher marks for England and Wales than Scotland. It was this “Scottish anomaly” which the Claimants regarded as inexplicable and formed the basis of the claim commenced on 3rd February 2014, claiming a breach of the 2006 Regulations, the Directive underlying the Regulations and general EU principles. In particular the anomaly was said to:

represent a manifest error in its assessment/scoring of DWF’s tender and/or;
demonstrated that DWF had not been treated equally.

The Amendment in DWF

DWF served particulars of claim within the 30 day limitation period and was also pressing for early and specific disclosure. That disclosure, given on 17th March 2014, triggered the application to amend, which was made before 30 days had elapsed from the date of that disclosure. The disclosure revealed that DWF’s score had been moderated down because of a weakness in its team – over reliance on just two partners. That marking down: was allegedly done by reference to undisclosed criteria; without reference to published award criteria; led to a decision not appoint DWF and a manufactured reduced score was produced to reflect that decision. Those newly discovered matters prompted an amendment based on a lack of transparency.

At first instance the original claim was held to be based on inequality of treatment only. The judge accordingly held that the amendment was a new claim and, even though the application to amend was made before 30 days had expired from knowledge of these transparency matters, by the time the application was heard that time limit had expired. That ran into the established rule that amendments take effect from the date when the amendment is allowed, not when the application to amend is issued/ made. As such, the new claim based on a lack of transparency was held to be time barred.

The Court of Appeal unanimously overturned the judge’s decision and made the following findings:

The issue of whether the amendment was a new claim depended on applying general principles of construction to the original pleading– “…what a reasonable reader would think the author meant to convey” – having regard to the background facts which the reader would know. The key reader is the “… opposite party for the document is primarily aimed at him…”.
The parties knew DWF were pressing for an explanation of the “Scottish anomaly” and the original pleading repeatedly said that until DWF had that information it was working in the dark and the only hard fact it had was the anomaly itself.
The reader would take it that the real complaint was that something caused the error in the “Scottish anomaly” and that something was the breach of duty under the Regulations.
Moreover, DWF in its original particulars of claim specifically reserved the right to contend that when the reasons for the anomaly were disclosed they would be relied on as well. Even better for DWF, that reservation specifically covered the possibility of downward adjustments by reference to undisclosed matters so as to breach the principles of transparency and/or equal treatment.
Reading the Particulars in the way set out at 4. was confirmed by the Defence which positively rebutted the transparency complaint and responded to the reservation of rights by denying the (admitted) downward moderation point was attributable to undisclosed matters.
Even though it was held that the judge was wrong to conclude the amendment added a new cause of action for the above reasons and permission to amend was granted, the Court of Appeal also held that there was an overlap between equal treatment and transparency principles. So, the anomaly arose either because there was unequal treatment, or because there was lack of transparency or both – so transparency was held to flow from equal treatment which was pleaded in the original claim.

Applying to End the Contract Making Suspension in DWF

The High Court decided that as it had refused permission to amend there was no serious issue to be tried so there was no purpose in continuing with the contract making suspension. In the Court of Appeal though, having allowed the amendment, it considered afresh whether the contract making suspension should be ended. It refused to end the contract making suspension. In arriving at this decision the Court of Appeal readily applied the usual tests as to whether an interim injunction should be granted as set out in American Cyanamid v Ethicon (1975 AC 396). The following points were of relevance:

There was clearly a serious issue to be tried – the admitted marking down of DWF’s tender may ultimately prove to be justified but at the interim stage it was arguable either way as to whether this was undertaken in accordance with the disclosed criteria.
The issues were such that the trial could take place in August or September 2014 so any prejudice caused by the delay in entering into the contract with Shepherd and Wedderburn was restricted by a speedy trial. Also, on the facts here the prejudice caused by not ending the suspension was also restricted because the suspension did not affect other the decisions to award to the other successful tenderers.
Damages would not be an adequate remedy for DWF if it was successful at trial. This was because the Court would have to be involved in “… a host of speculative questions …” revolving around DWF’s loss of a chance of its tender winning were it not for the breaches of the duties owed to it. In addition, there would be damage to DWF’s insolvency department through the loss of an established team but also a loss of reputation. Those matters were held to be impossible to fairly quantify.
In contrast, the Insolvency Services damages would be much easier to quantify if it turned out that DWF lost at trial because, if by reason of the continuance of the suspension, IS paid higher prices than it would have done to Shepherd and Wedderburn then that difference would be quantifiable. Further, DWF had given a cross-undertaking in damages.
It was improbable that the IS would have difficulty in finding legal insolvency services during the short delay in holding the trial. Further, the IS had access to other frameworks, it could have small discreet awards for each case – being below the threshold for a full tendering process – it could use the Treasury Solicitor and Counsel etc.
It was argued that there would be damage to the successful bidders if the suspension was maintained but that was dismissed because only Shepherd and Wedderburn would be affected by the continuance of the suspension and it was not up to the IS to be concerned with their loss. It was for that firm to apply to intervene and to seek their own independent cross-undertaking in damages but they did not.

In reported cases where the suspension was not ended, the claims settled shortly after the application to end failed. Only time will show if that happens here.
Some Points to bear in mind

Both Travis and DWF suggest to the writer that the Court may well be more open minded about amendments in procurements challenges. Perhaps because of: (a) the very short limitation period and; (b) the Claimant’s lack of knowledge of decision making to which it is not party. However, the Court of Appeal did refuse to give permission to amend in D&G but that may have been because of its particular facts; (c) the duties owed to economic operators are based on fairness and openness so the different ways as how they can be characterised are technical rather than differences of substance, so expressing them in a different way by amendment may well not amount to huge change to the underlying claim.
When drafting claim forms, Claimants will understandably be anxious to stop the short limitation period running but care should still be taken to be as broad as possible in preparing the description of the claim. It is preferable to be too wide and amend something out rather than add it by amendment.
If an economic operator has deep pockets and if there is doubt, a separate claim could be issued within any new time limit running from the date of knowledge instead of applying to amend. The claims could be consolidated and run together. That would avoid the necessity of applying to amend and the argument that a claimant was trying to introduce a new but time barred claimed cause of action.
DWF continues to suggest that the greater the difficulty in quantifying damages in a loss of chance case, the greater the chance of the Court holding that damages are not an adequate remedy and the contract making suspension should not be ended.
A successful tenderer who is affected by a refusal to end the contract making suspension should be prepared to join in the application to end it and give evidence of prejudice. The Contracting Authority is not well placed to rely on that prejudice.
A Claimant who wants to maintain the contract making suspension should be prepared to offer very speedy trial directions.