Lettings International Ltd v London Borough of Newham [2007] EWCA Civ 1522

Case No A2/2007/2841

[2007] EWCA Civ 1522

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM QUEEN’S BENCH DIVISION

(MR JUSTICE ROYCE)

(LOWER COURT No. HQ07X04065)

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date Friday, 21 st December 2007

Before

LORD JUSTICE MOORE-BICK

LORD JUSTICE WARD

Between

LETTINGS INTERNATIONAL LIMITEDAppellant

LONDON BOROUGH OF NEWHAMRespondent

(DAR Transcript of

WordWave International Limited

A Merrill Communications Company

190 Fleet Street, London EC4A 2AG

Tel No: 020 7404 1400 Fax No: 020 7831 8838

Official Shorthand Writers to the Court)

Mr N Giffin QC (instructed by Messrs Bowling & Co) appeared for Appellant.

Mr P Woolfe (instructed by London Borough of Newham) appeared for Respondent.

Judgment

[1]On 27 November 2007 Openshaw J granted an interim injunction on the application of the claimant Lettings International Limited (“the contractor”) against the London Borough of Newham (“the council”) restraining it from entering into any contract or framework agreement pursuant to its tender procedure for the procurement, management and maintenance of private sector leased accommodation. On 13 December Royce J discharged that injunction on the application of the council, but continued it pending this application for permission to appeal. This is, therefore, the contractor’s application for permission to appeal against the order of Royce J, which Sir Henry Brooke directed should be made orally with the appeal to follow if permission were granted.

[2]The claim arises out of the operation by the council of a tender process for the procurement, maintenance and management of housing leased from the private sector. The contractor is a property management company which carries on the business of procuring, updating, maintaining and managing properties leased to local authorities in order to enable them to meet their statutory housing obligations. It currently manages a number of properties for the council and wishes to continue doing so. The value of its current business with the council is very substantial. For the year 2006/2007 it was worth approximately £22 million.

[3]On 15 March 2007 the council advertised, by means of a formal contract notice, its intention to enter into two framework contracts, one for the procurement, management and maintenance of private sector leased properties; the other simply for the management and maintenance of private sector leased properties. Each was divided into separate lots, for which separate bids were invited. The contracts are described as framework contracts because they are intended to do no more than establish the terms on which the council will procure such services of the kinds described in the contract, as it may need during the lifetime of the contract, which will run for three years. Whether the council will in fact require such services, and if so to what extent, is at present unknown.

[4]In section IV.2.1 headed “Award Criteria” the contract notice identified the criteria by reference to which the contracts would be awarded as follows:

“The most economically advantageous tender in terms of the criteria stated in the specifications, in the Invitation to Tender or to negotiate or in the descriptive document.”

[5]The contractor expressed an interest in tendering for the contract and duly received a form of Invitation to Tender. It submitted its tender on 7 September 2007. The closing date for the submission of tenders was 10 September. The tenders were marked later in September and a report was prepared for a meeting of the council’s housing department on 18 October. On 8 November the contractor was informed that its tender had not been successful. It immediately asked for an explanation, as it was entitled to. Correspondence then followed between the contractor and council, in which the contractor sought, and eventually obtained, information which, it contends, shows that the council had failed to act in a fair and transparent manner in handling the tender process and had failed to comply with the requirements of the Public Contracts Regulations 2006. These regulations, which govern the procedures for awarding public contracts of all kinds, provide, so far as is material to this case, as follows (Regulation 30):

“30 (1) . . . . . . . . . . (2) A contracting authority shall use criteria linked to the subject matter of the contract to determine that an offer is the most economically advantageous including quality, price, technical merit, aesthetic and functional characteristics, environmental characteristics, running costs, cost effectiveness, after sales service, technical assistance, delivery date and delivery period or period of completion. (3) Where a contracting authority intends to award a public contract on the basis of the offer which is the most economically advantageous it shall state the weighting which it gives to each of the criteria chosen in the contract notice or in the contract documents…”

[6]Section 8 of the Invitation to Tender, which was headed “Tender Response Requirements,” provided as follows:

“8.0.1 Tenderers are required to provide the following specific responses as part of tender:- A. Schedule A – Method Statements Method statements should be provided for the following areas of the contract For Part 1 submissions only, the following • Procurement of accommodation, specifically in respect of the acquisition pathway For Part 1 and Part 2 submissions the following • Customer Care, particularly with regard to receiving and inducting new tenants and obtaining feedback on service improvements • Responding to Service Users with emphasis on responding to out of normal hours emergencies, carrying out repairs and behavioural management and the way in which it relates to the Council’s policies • Resource Allocation detailing the numbers and ratios of staff allocated to property management and the administration of financial matters i.e. invoicing to ensure clarity, thereby reducing the need for protracted enquiries • Management and Monitoring outlining arrangements for responding to the Council’s enquiries, the collection of statistics and the flexibility of the format for information retrieval systems The above explanations against each of the method statements required is for guidance only. Submissions should look to go beyond this in ensuring a full explanation is given as to how the performance specification is to be fully met. Please also comment upon the Performance Management standards contained in the specification.”

Method statements should be provided for the following areas of the contract For Part 1 submissions only, the following

For Part 1 and Part 2 submissions the following

[7]Section 9 of the document headed “Tender Evaluation Criteria” set out the criteria by reference to which tenders would be evaluated. It provided as follows:

“9.0.1 The Contract will be awarded on the basis of the most economically advantageous tender; 9.0.2 Evaluation of the tenders will be based on the detailed written response within the Method Statements, pricing and site visits. The evaluation criteria is:- [and then there follows a table which identified three criteria by reference to which tenders would be marked, compliance with specification carrying 50% of the score; price carrying 40% of the score, and premises carrying 10% of the score]. 9.0.5 All relevant submitted evidence and visits will be assessed/ merit rated against predetermined criteria.”

[8]Correspondence between the council and the contractor after the tenders had been marked disclosed that the assessment of compliance with the specification, which carried a 50% weighting, had been conducted by reference to the five aspects on which method statements had been required, to each of which there had been assigned a specific proportion of the mark allocated to that criterion as a whole. The proportions varied between 5% for procurement of accommodation to 17% for customer care. It appears likely that these weightings had been established after the tender document had been published, but before any tenders had been received. The contractor submitted that, in effect, the overall criterion of compliance with specification, had been broken down into five sub-criteria, each carrying its own proportion of the marks, but without that degree of transparency which is called for by the regulations. It has also become apparent from a letter written by the council to the contractor on 6 December 2007 and from evidence subsequently filed by the council in support of its application to discharge the injunction, that when marking each of the sub-criteria a system was adopted by those evaluating the tenders under which full compliance with the specification was awarded less than the full number of marks available – the highest marks being reserved for tenders which exceeded the specification. The contractor complained that that also involved a failure to administer the process fairly and transparently in breach of regulation 30, because bidders were entitled to assume that the specification represented the mark at which they had to aim and that full compliance with the specification would therefore be awarded full marks.

[9]These were the principal grounds on which the contractor maintained that the council was in breach of the duties imposed upon it by the regulations. It also contended, however, that the council was in breach of contractual duties similar to those imposed by the regulations. On 27 November the contractor issued proceedings against the council in the High Court alleging a breach of the regulations and immediately made an application without notice to Openshaw J for an order preventing the council from entering into any contracts with the successful bidders pending the trial of the action.

[10]At this point it is necessary to refer to some of the other provisions of the regulations. Regulation 47 deals with the enforcement of obligations. By virtue of paragraph 1, the obligations imposed by regulation 30 give rise to a legally enforceable duty to what is known as an “economic operator”, which includes a person in the position of the contractor in this case. Under regulation 47(6) a breach of that duty is actionable by any economic operator which in consequence suffers or risks suffering loss or damage. Provided that matters have not progressed to the point at which a contract has been entered into pursuant to the tender procedure, the court has power under regulation 47(8)(a) to make an interim order suspending the process and following a trial it may order that a decision or action of the contracting authority should be set aside, if it is satisfied that it was taken in breach of a duty imposed by the regulations: see regulation 47(8)(b). However, once a contract has been entered into as the culmination of the procedure in respect of which the alleged breach of the regulations was committed, the only remedy available is an award of damages: see regulation 47(9).

[11]The claim form in the present case was issued on 27 November but particulars of claim have yet to be served. The only document which might tell one what the contractor is seeking by way of a remedy, therefore, is the claim form itself, but unfortunately it does not identify the relief being sought. However, we were told by Mr Giffin QC, who appeared for the contractor, that his client will be seeking an order setting aside the existing decision.

[12]The principles generally applicable when considering whether to grant relief by way of interim injunction were established in the case of American Cyanamid Co v Ethicon Ltd

[1975] AC 396

. They were applied in a case involving a claim under these regulations in Lion Apparel Systems Ltd v Firebuy Ltd

[2007] EWHC 2179

Chand also by the judge in the present case. In my view, the considerations governing an application for interim relief under regulation 47(8)(a) are so similar to those which arise on the ordinary application for an interim injunction that it is appropriate to apply the same principles, and indeed that was not in dispute before us. It is common ground, therefore, that the court must ask itself the following questions:(i) Is there a serious issue to be tried? If so,

(ii) Would damages be an adequate remedy for any interference with either party’s rights which may later be found to have occurred?

(iii) Does the balance of convenience favour maintaining the status quo?

[13]The contractor’s claim is now based on two grounds, other less weighty grounds having been effectively discarded for the purposes of this appeal. The first is that in breach of regulation 30(3) and of the principles enunciated by the European Court of Justice in Universale-Bau AG and Others v Entsorgungsbetriebe Simmering GmbH [2002] ECR 1-11617 and ATI EAC SRL and Viaggi Di Maio SNC v ACTV Venezia SPA [2005] ECR 1-10109 the criteria published by the council in the Invitation to Tender did not reveal the whole of the position in relation to the assessment of tenders because it failed to disclose that the overall criterion of compliance with specification would be assessed by reference to sub-criteria which were not identified and to which explicit weightings had therefore not been given. Royce J held that the contractor’s case on this ground was arguable, but not strong. He did not consider that it raised a serious issue to be tried.

[14]The contractor’s second argument is that, in breach of the same regulation, the marking of the tenders was unfair because maximum marks were available in relation to some, if not all, of the sub-criteria, only for exceeding the requirements of the specification, whereas it is implicit in the concept of transparent tendering that full compliance with the specification should lead to an award of full marks unless the tender documents state otherwise. Royce J held that this ground did not raise an arguable case at all.

[15]As to the balance of convenience, the contractor says that it will suffer irreparable harm if the injunction is discharged because it is very difficult to assess damages in this case, partly because a framework contract of this kind only gives the successful bidder a chance of obtaining work. If the injunction is maintained, however, it will, if successful, have an opportunity to take part in a new tender procedure and may be successful in obtaining a contract. The contractor says that, as far as the council is concerned, if the injunction is maintained up to trial and its own claim fails, the council may not need to conduct a new tender procedure at all but, if it does, any additional costs it incurs as a result – whether by way of higher fees in the intervening period or as a result of the new procedure, as well as the costs of conducting the second tender exercise – can be quantified without too much difficulty and since it is able to pay them, damages will provide an adequate remedy.

[16]The judge decided, in the exercise of his discretion, that the balance of convenience came down in favour of discharging the injunction because the damages that the contractor might be expected to recover if successful were likely to be very modest, whereas the council would be prejudiced if it were prevented from entering into contracts with the successful bidders before 6 January 2008 when their current tenders will expire. It is not clear whether in reaching that conclusion the judge fully appreciated that the contractor is not primarily seeking to recover damages but is seeking to have the result of the tender process set aside altogether.

[17]I turn first to the question whether there is a serious issue to be tried. Mr Giffin for the contractor put forward the submissions which had previously been made to the judge and which I have summarised. In support of them he relied principally on the decisions of the European Court of Justice in Universale-Bau and the ATI EAC case. Ms Holmes for the council submitted that the judge was right to hold that there is no serious issue to be tried in this case and, in the skeleton argument which she inherited from counsel previously instructed in the matter, she reminded us that the decision whether to continue or discharge the order involved an exercise of discretion by the judge with which this court should not lightly interfere.

[18]I quite accept that this court should be slow to interfere with the exercise by a judge of his discretion, but it seems to me that even if the overall decision whether to continue or discharge the order was one which rested in the discretion of the judge, one very important factor to be taken into account in the exercise of that discretion is whether there is or is not a serious issue to be tried and that is essentially a question of mixed fact and law.

[19]It is convenient to dispose first of an argument which, although it appears in the council’s skeleton argument, was not strongly pressed in oral argument, namely, that the contractor cannot show that there is a serious issue to be tried because it cannot show that it has suffered loss, or a risk of loss, as a result of the council’s alleged breach of the regulations. The argument is based on regulation 47(6) which provides:

“A breach of the duty owed in accordance with paragraph (1) or (2) is actionable by any economic operator which, in consequence, suffers or risks suffering loss or damage…”

[20]The argument is that in order to be entitled to pursue a claim of any kind a bidder, in this case the contractor, has to show that were it not for the alleged breaches of the regulations his tender would have been successful. I find it difficult to accept that submission. The purpose of regulation 47(6) is to render a breach of the regulations actionable at the suit of an economic operator who has suffered or risks suffering loss or damage as a result. In other words, it is concerned with providing a cause of action, not with establishing a precondition to the commencement of proceedings. If a tenderer seeks a remedy in damages it will, of course, be necessary for it to prove its loss at trial, but I doubt whether in every case it need go so far as to show that it would have been successful in obtaining the contract. If the breach of duty has compromised the transparency and fairness of the process as a whole, the claimant will have lost the opportunity of taking part in a properly constituted and properly operated tender process, and it is at least arguable that the loss of a significant chance of obtaining the contract is enough to found a claim. That is really what the contractor is saying in this case. In my view, therefore, regulation 47(6) does not provide a complete answer to the contractor’s claim in the present case.

[21]Miss Holmes’ next point is that, provided that the council identified criteria of the kind envisaged by regulation 30(2), by reference to which tenders were to be assessed, and the weighting attached to each of them, as it did, it was not obliged to provide precise details of how it would go about assessing compliance with each of those criteria. The method statements required as part of the tender are not, she submitted, to be equated with criteria; they were simply the means by which tenderers were expected to describe the ways in which they proposed to meet the requirements of the specification. She submitted that a distinction is to be drawn between the criteria themselves and the machinery used to apply them and, in support of that argument, she relied principally on the decisions in De Vilbiss Medequip Ltd v NHS Purchasing and Supply Agency

[2005] EWHC 1757

and the ATI EAC case, to which I have referred.

[22]In Universale-Bau the European Court of Justice was concerned with a procedure for selecting candidates who would be invited to tender for certain civil engineering works. The case was not, therefore, directly concerned with a tender of the kind now under consideration, but it is clear that the court was seeking to lay down principles of general application to public authority tenders of all kinds. In that case the contracting authority had not published in the tender documents or elsewhere the method that would be used for scoring tenders, but had deposited it with a public notary to ensure equality of treatment amongst the tenderers. The question for the court was whether that conformed to the relevant regulations and to general principles of community law. The court held that it did not, and in giving its judgment it emphasised the importance of transparency as well as equality in procedures of this kind generally. It said this:

“97. Similarly, for all types of procedure, where the award of the contract is made to the made to the most economically advantageous tender, Article 30(2) of Directive 93/37, which applies both to the open procedure and the restricted and negotiating procedures, imposes on the contracting authority the obligation to state in the contract documents or in the contract notice all the criteria it intends to apply to the award, where possible in descending order of their importance. Also according to that article, where the contracting authority has set out a ranking in their order of importance of the criteria for the award which it intends to use, it may not confine itself to a mere reference thereto in the contract documents or in the contract notice, but must, in addition, inform the tenderers of the ranking which it has used. 98. . . . . . the requirement thus imposed on the contracting authorities is intended precisely to inform all potential tenderers, before the preparation of their tenders, of the award criteria to be satisfied by these tenders and the relevant importance of those criteria, thus ensuring the observance of the principles of equal treatment of tenderers and of transparency (see, Commission v Belgium [1996] ECR I-2043, paragraphs 88 and 89). 99. It is therefore clear that the interpretation according to which, where, in the context of a restricted procedure, the contracting authority has laid down prior to the publication of the contract notice the rules for the weighting of the selection criteria it intends to use, it is obliged to bring them to the prior knowledge of the candidates . . . . . .”

[23]Miss Holmes referred to the fact that in paragraph 86 of its judgment in that case the court rephrased the question referred to it as “whether the directive (that is the equivalent to the regulations in this case) is to be interpreted as meaning that, where in the context of a restricted procedure the contracting authorities have laid down in advance the rules as to the weighting of the criteria for selecting candidates who will be invited to tender, it is obliged to state them in the contract notice or the tender documents.” She submitted that the judgment should be understood as dealing only with that narrow question, but in my view it is strongly arguable that the court was laying down principles that would apply to the present case. I do not understand those principles to have been diluted by the subsequent decision in the ATI EAC case, to which I will come in a moment. The point of publishing criteria and their weighting is to enable bidders to know the relevant importance which the contracting authority attaches to different aspects of the contract as a whole and to formulate their bids in that knowledge. If the published criteria are broadly defined, the adoption of sub-criteria is capable of frustrating their objective, as the European Court of Justice recognised in the ATI EAC case. Whether they do have that effect will depend on the circumstances of the case.

[24]The ATI EAC case bears some similarities to the present appeal. In that case contractors were invited to tender for the provision of public transport services. The tender documents identified four criteria: cost per kilometre of primary service, which was allocated sixty points; cost per kilometre of additional service, which was allocated ten points; organisational procedures and support structures, which were allocated twenty-five points in the contractual authority’s absolute discretion; and possession of a certificate of conformity, to which five points were allocated. The tender documents called for a description of facilities under five heads comparable to the method statements required in this case. After the period for submitting tenders had expired, but before the envelopes were opened, the authority decided to allocate the twenty-five points available at its discretion to the five different heads of facilities in different proportions, ranging from eight points to depots and parking areas down to two points for the number of employees engaged in organising drivers’ shifts. The question for the court was whether it was lawful to supplement the criteria published in the tender documents with additional criteria of that kind. The court said this:

“21 Next, it must be observed that the award criteria defined by a contracting authority must be linked to the subject-matter of the contract, may not confer an unrestricted freedom of choice on the authority, must be expressly mentioned in the contract documents or the tender notice, and must comply with the fundamental principles of equal treatment, non-discrimination and transparency (see Concordia Bus, cited above, paragraph 64). 22 In the present case, it must be observed, in particular, that the duty to observe the principle of equal treatment lies at the very heart of the public procurement directives (see Concordia Bus Finland, paragraph 81) and that tenderers must be in a position of equality both when they formulate their tenders and when those tenders are being assessed (see Case C-19/00 SIAC Construction [2001] ECR I-7725, paragraph 34). 23 It must also be observed that, in accordance with Article 36 of Directive 92/50 and Article 34 of Directive 93/38, all such criteria must be expressly mentioned in the contract documents or the tender notice, where possible in descending order of importance, so that operators are in a position to be aware of their existence and scope (see Concordia Bus Finland, paragraph 62). 24 Similarly, in order to ensure respect for the principles of equal treatment and transparency, it is important that potential tenderers are aware of all the features to be taken into account by the contracting authority in identifying the economically most advantageous offer, and, if possible, their relative importance, when they prepare their tenders (see, to that effect, Case C-87/94 Commission v Belgium [1996] ECR I-2043, paragraph 88, and Case C-470/99 Universale-Bau and Others [2002] ECR I-11617, paragraph 98). 25 Finally, it is for the national court to assess, in the light of these rules and principles, whether, in the case in the main proceedings, the jury infringed Community law by applying a weighting to the various subheadings of the third criterion for the award of the contract. 26 In that regard, it must be determined first whether, in the light of all the relevant facts of the case in the main proceedings, the decision applying such weighting altered the criteria for the award of the contract set out in the contract documents or the contract notice. 27 If it did the decision would be contrary to Community law. 28 Second, it must be determined whether the decision contains elements which, if they had been known at the time the tenders were prepared, could have affected that preparation. 29 If it did the decision would be contrary to Community law. 30 Third, it must be determined whether the jury adopted the decision to apply weighting on the basis of matters likely to give rise to discrimination against one of the tenderers. 31 If it did the decision would be contrary to Community law 32 Accordingly, the answer to the questions referred must be that Article 36 of Directive 92/50 and Article 34 of Directive 93/38 must be interpreted as meaning that Community law does not preclude a jury from attaching specific weight to the subheadings of an award criterion which are defined in advance, by dividing among those headings the points awarded for that criterion by the contracting authority when the contract documents or the contract notice were prepared, provided that that decision: – does not alter the criteria for the award of the contract set out in the contract documents or the contract notice; – does not contain elements which, if they had been known at the time the tenders were prepared, could have affected that preparation; – was not adopted on the basis of matters likely to give rise to discrimination against one of the tenderers.”

[25]Mr Giffin submitted that the decision reinforces the conclusion that sub-criteria of the kind that were adopted in the present case are not to be treated as different from the primary criteria, at least if they are of a kind that could have affected the preparation of a tender. Miss Holmes, on the other hand, submitted that the decision supports the conclusion that criteria of this kind can be adopted to assist in assessing compliance with the primary criteria published in the tender documents. In further support of that submission, she relied on the decision in De Vilbiss Medequip Limited v NHS Purchasing and Supply Agency. I do not intend to examine that case in any detail because, in the light of the two decisions of the European Court of Justice to which I have referred, I am firmly of the view that the council’s failure to publish the criteria, by reference to which compliance with the specifications would be assessed, raises a serious issue about the lawfulness of the tender procedure, which is sufficient for present purposes. It is arguable that the five method statements were not simply used as a guide for the assessment of compliance with specification but, were treated as additional formal criteria of which the bidders were unaware.

[26]The judge thought this raised an arguable point, but he did not think it was strong enough to give rise to a serious issue. I find that a little confusing, but I assume that he meant that he did not think that the prospects of success were sufficient to justify interim relief regardless of other factors. With all due respect, however, I think he was wrong about that.

[27]The second point concerns the manner in which the tenders were marked, in particular, the failure to award full marks in cases where the tender fully met the specification. It is apparent from the correspondence and from the evidence filed on behalf of the council that, when marking bids the council did not adopt a scale of 0 to 5 – where 0 represents complete failure to comply with the requirements and 5 represents full compliance – but appears to have awarded only 3 marks for full compliance and to have reserved an award of 4 and 5 marks for tenders which exceeded the published requirements, presumably by different margins. It can be argued, therefore, that the published specification was not really the specification against which tenders were actually going to be marked.

[28]Mr Giffin accepted that a contracting authority is entitled to adopt a marking scheme of that kind if it makes clear in the tender documents that that is its intention. He submitted, however, that in the present case it did not do so. Miss Holmes submitted that the council, as the contracting authority, has a margin of discretion in marking tenders and that its decision can be challenged only where there is a manifest error. She also submitted that paragraph 8.0.1 of the Invitation to Tender did contain an invitation for bidders to go beyond the basic requirement of the specification.

[29]In my view the latter submission is difficult to sustain. The opening part of paragraph 8.0.1 of the Invitation to Tender described what was required in each of the five method statements and was followed by the passage to which I have already referred which invited tenderers to go beyond the minimum requirement in ensuring that they gave a full explanation of how the performance specification was to be fully met. In my view it is certainly arguable that the purpose of that paragraph was merely to encourage tenderers to give as full an explanation as possible of how they proposed to meet the specification. It is doubtful whether it is sufficient to make them aware that the highest marks would be reserved for tenders that exceeded the specification.

[30]As to Miss Holmes’ first point, I accept that the contracting authority must be allowed a significant degree of latitude or judgment when it comes to evaluating individual aspects of a tender, but the complaint in this case is not about the council’s judgment as to where on a recognised scale any particular bid should be placed, but about the scale that was being adopted. I think the judge was wrong, therefore, to hold that there was no arguable case in relation to this complaint. It is certainly arguable that, for the council to adopt as part of its process for assessing the tenders a marking scale of that kind offends against the requirements of transparency and fairness. In my view there is a serious issue to be tried in relation to this point as well.

[31]In those circumstances I find it unnecessary, as the judge did, to consider whether the contractor also has a claim in contract which would raise a serious issue for trial.

[32]In my view that is sufficient to grant permission to appeal. Moreover, since the judge approached the exercise of his discretion on what I consider to have been the false basis that the contractor’s case was so weak that it did not raise a serious issue, this court is in my view entitled to exercise its own discretion in the matter.

[33]I turn first, then, to consider the adequacy of a remedy in damages. Mr Giffin’s principal submission was that if the contractor is confined to a remedy in damages, as it will be if the present order is discharged, the quantification of its loss would prove very problematical. That is because it will have to take account not only that the claim will for the loss of a chance of being successful in a fairly operated tender process (which will have to take account of how other bidders would have acted under those circumstances), but also the consequential loss of the chance of being called on by the council to provide services pursuant to the framework contract. At the moment no-one knows if or when or in what quantity such services may be required, or which contactor will be in a position to provide the particular sizes and types of property that are needed. He submitted that damages are therefore a wholly inadequate remedy for his client.

[34]Miss Holmes submitted that the contractor has failed to put forward any evidence that it has suffered a loss of any kind. Not only is there no evidence that it would have been successful if no breach of the regulations had occurred, but, even if it had been successful, there was no guarantee that it would receive any work. That was particularly so in view of the fact that the call-off procedures contemplated that the council would first approach the contractor which had made the lowest tender for the particular type of property required and the contractor’s prices were not the lowest in any case.

[35]To some extent I have already dealt with Miss Holmes’ points, which in my view tend, if anything, to reinforce the contractor’s argument that, since loss is likely to be so difficult to assess, damages are not an adequate remedy as far as it is concerned. However, they also overlook the fact that the tender procedure is not yet complete and no contract has yet been awarded. The contractor is not limiting its claim to damages; what it really seeks is an order setting aside the council’s decision altogether, thus forcing it to reopen the process and provide it with a fresh opportunity to be successful.

[36]A loss of an opportunity to take part in a fair tendering process on equal terms with other bidders may be difficult to evaluate in monetary terms but cannot be said to be on no commercial value at all. As far as the council is concerned, there is evidence that it currently has more temporary accommodation available to it than it needs to meet its statutory obligations. Indeed, it had been returning some to the market. This is one reason why it is uncertain whether any contracts will be placed under the framework agreements once they had been entered into. The evidence filed by the council comes from Mr Frank MacCool, the scrutiny and project manager in its housing and public protection service. He does not suggest that the continuation of the present order will seriously affect the council’s ability to discharge its statutory functions, but he does point out that if contracts are not formally entered into before 6 January 2008 the tenders will expire. Whether the successful bidders are in fact likely to withdraw may, however, be debateable. At the moment there is no evidence either way, and in my view therefore one should not assume that they will not.

[37]A number of consequences might then follow. Assuming that the bidders who have currently been successful were to withdraw, the council, although eventually successful in beating off the contractor’s challenge, would have to put the contract out for tender again. That would involve a certain amount of expense, although, presumably having succeeded in defeating the challenge to the previous tender process, it could simply reproduce the former documentation with necessary minor amendments. Nonetheless, the new tenders would still have to be evaluated, which is a time-consuming and no doubt expensive process. It is also quite possible that the prices obtained following a fresh tender might be less advantageous than those already obtained, in which case the council would suffer a loss by reason of the increased cost of any services ultimately required. These losses are difficult to quantify at the moment, but should be more readily quantifiable at a later date. For example, it should be possible to calculate without too much difficulty the cost of carrying out a fresh tender, although it is fair to say that it may remain difficult to calculate the additional costs of the services themselves if the extent to which they would actually be required remains uncertain.

[38]It is not suggested that the contractor is not, and will not remain, able to meet any judgment for damages which the council may obtain if it is successful at trial. In addition, one should not overlook the fact that the continuing uncertainty surrounding the status of this tender may prevent the council from making changes to its policies and plans for the service it is providing. That is something to which Mr MacCool specifically refers in his first witness statement. However, he says so little about those changes or the impact of this dispute upon them, that it is impossible to conclude with any confidence that continuing the order is likely to have a significant impact on the council’s operations.

[39]The council was moved to put these services out to tender as a result of criticisms of its existing arrangements made following an independent investigation. It is understandable, therefore, that it should wish to complete the process as soon as possible. If its procedures are eventually vindicated, it will not be open to criticism in respect of the delay caused by these proceedings, and there is no suggestion that the existing arrangements will not continue to function adequately in the meantime. Mr Giffin says that enquiries have revealed that if an order were made for the trial to be expedited it could be heard in the course of next term. If so, that means that the delay in obtaining a final resolution of these difficulties need not be delayed too long. In the end, I have come to the conclusion that damages may not be a wholly adequate remedy for either party, but that they will prove far less of an adequate remedy for the contractor than for the council. In those circumstances I have come to the conclusion that the balance of convenience lies in favour in maintaining the order. I would, therefore, allow the appeal and restore the order of Openshaw J.

[40]I agree; and it is only out of deference to the judge with whom we are disagreeing that I add a few words of my own. On the first point -- namely, whether the council had [inaudible] the weighting to be given to each of the criteria chosen in the contract notice, section 9 of the Invitation to Tender, dealing with “tender evaluation criteria,” set out three broad criteria by reference to which the tenders were to be evaluated, the main one of which was “compliance with specification” which in turn identified the five aspects which were to be the subject of method statements as required by section 8 of the Invitation to Tender. The question then is whether these five matters are themselves criteria or merely the “machinery,” as Miss Holmes described them, to be used in the evaluation of the compliance with the specification criteria. In my view, support for the argument that they were and are criteria is gained from section 9.0.5 which provides:

“All relevant submitted evidence and visits will be assessed/ merit rated against predetermined criteria.”

[41]What seems to have been treated by the council as “predetermined criteria” was the breakdown of the criteria and compliance with specification into an assessment of the five method statements, each of which was given a different percentage mark, not (as might otherwise have been expected) equal marks. It seems to me, therefore, that there is a serious issue to try as to whether or not this breakdown should have been disclosed to those submitting their tenders. On the second point, it seems to be arguable that the expectation to be gained from the Invitation to Tender was that full marks would be given for meeting the five targets set in section 8. To add, as section 8.0.1 does, that “Submissions should look to go beyond this in ensuring a full explanation is given as to how the performance specification is to be fully met” is, arguably, too Delphic a statement if it was intended to inform the tenderer that three marks would be given for meeting the standard, and one or two more for going beyond it. Arguably, no more is required than an explanation of how the tenderer proposes the performance of the specification should be “fully met”. If fully met, marks would be given accordingly. In my judgment these conflicting arguments give rise to another serious issue to be tried. I have nothing to add to what my Lord has said on the adequacies of damages and the balance of convenience, so I too would allow the appeal and restore the injunction granted by Openshaw J that, no doubt, to be until further order, but I would invite council to address us on any further directions that need to be given, for example, expedited hearings and so forth.

Order

Application granted

Cited in 13 later judgments

and 4 more of the most senior