Lettings International Ltd v Newham [2008] EWHC 1009 (QB)

[2008] EWHC 1009 (QB)

IN THE HIGH COURT OF JUSTICE QUEEN’S BENCH DIVISION Case No. HQ07X04065

Venue Royal Courts of Justice

Date Friday, 18 th April 2008

Before

MR. JUSTICE McCOMBE

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B E T W E E N:

Between

LETTINGS INTERNATIONAL LTD.Claimant

LONDON BOROUGH OF NEWHAMDefendant

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MR. J. COPPELL (instructed by Bowling & Co.) appeared for Claimant.

MR. R. ANDERSON QC and MS. E. HOLMES (instructed by Legal Services, London Borough of Newham) appeared for Defendant.

MS. D. ARTESI (instructed by Sternberg Reed) appeared for 1 st Interveners.

MR. D. GATTY (instructed by YVA Solicitors) appeared for 2 nd Interveners.

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J U D G M E N T

MR. JUSTICE McCOMBE:

[1]In this action the claimant, Lettings International Limited, alleges that the defendant, the London Borough of Newham, acted in breach of the Public Contracts Regulations 2006 and in breach of contract in conducting a tender process for contracts for the procurement, management and maintenance of private sector leased accommodation, to be made available to the defendants for the discharge of its functions broadly under the Housing Acts.

[2]The gist of the allegation is that the Council acted unfairly and without the requisite transparency in failing to disclose contract award criteria; made a number of errors when marking the tenders, and, in doing so, did not treat the claimant’s tender fairly and objectively. Those heads of complaint are amplified in the particulars of claim in the action, in para.15 in the following broad headings: “1. Failure to specify contract award criteria. 2. Failure to apply contract award criteria. 3. Failure to mark tenders fairly, reasonably and objectively”.

[3]The claimant has the benefit of an injunction preventing the defendant from entering into contracts consequent upon the tendering process pending trial of the claim. The trial is scheduled for later this month, having been so ordered on a speedy trial basis. The application for the injunction went so far as the Court of Appeal late last year, when the claimant’s claim, as I am informed, did not include the claim under head 3 that I have already mentioned.

[4]The application before the court is made by the claimant for specific disclosure of successful tenders submitted to the defendant by four other contractors in the relevant field, Atlantic Lodge Limited; Fine Fair Consultancy Limited, Theori Investments Limited and Omega Lettings Limited.

[5]Before me the claimant has been represented by Mr. Coppell of counsel and the defendant by Mr. Anderson QC and Ms. Holmes. The successful tenderers (whom I will call “the interveners”) applied to the court to make representations on the application, and they have been represented by Ms. Artesi and Mr. Gatty. Mr. Coppell, for the claimant, did not oppose my hearing argument from the interveners but put a marker down as to his potential opposition to any order for costs that might be made in their favour. As a result, I have heard helpful submissions from all interested parties.

[6]The claimant’s application only arises upon the third head of its claim, that is the allegation of unfair marking. Mr. Coppell submits that his client’s tender was marked erroneously, unfairly and in a discriminatory manner when compared with the markings given to the interveners. He argues that without sight of the interveners’ tenders it is impossible fairly to determine that issue. Further he says it is impossible to understand the significance of certain other documents already disclosed without sight of the disputed papers, to which reference is already made in those documents. He argues that the allegations made and the defences deployed by the defendant clearly indicate the relevance of the successful tender documents.

[7]The material paragraphs of the particulars of claim is para.19(1) to (6) of the particulars, which read as follows: “In breach of Regulations 34(3) of the EU Law principles of transparency and equal treatment, the defendant failed to mark the claimant’s tender fairly, reasonably and objectively. Pending disclosure and independent analysis of the respective tenders, the claimant relies upon the following facts and matters:(1) The claimant has successfully provided services to the defendant for some years which are the same as the services comprised in the contracts, yet it received relatively low marks for aspects of its business with which the defendant has been consistently satisfied in practice.

(2) The claimant received only 2 out of 5 marks for ‘size’ under ‘Procurement of accommodation’ which meant that its tender was ‘unsatisfactory’ in this respect, despite offering a firm commitment to procure accommodation of the size required by the defendant.

(3) The claimant received lower marks than each of the successful tenderers for ‘ease of upkeep’ and ‘matching our needs’ and ‘a procurement of accommodation’ has received no satisfactory explanation for the defendant’s approach.

(4) The claimant received only 2 out of 5 marks for ‘appropriate escalation routes for complaints’. In its letter dated 6th December 2007 the defendant explained that this was because ‘nothing was shown in your client’s bid as to escalation through the company of contractual or other issues’. In fact the defendants had overlooked that the claimants had provided a complaints procedure with a three stage escalation route ending with managing director review. It was marked down for similar reasons under ‘complaint handling’.

(5) Under ‘resource allegation’ the defendant failed to give any weight to the investment made by the claimant in retaining in-house teams of plumbers and heating engineers.

(6) The claimant received relatively low marks under ‘management and monitoring’ despite having ISO 9001 accreditation and providing the defendant with extensive evidence of that”.

[8]As to those paragraphs, it is pleaded in para.19 of the defence as follows: “The defendant denies paragraph 19 of the particulars of claim, except where specifically stated below. The claimant’s tender, as with all other tenders it received, was marked fairly, reasonably and objectively. The claimant notes the matters set out in paragraphs 19(1) to (9) of the particulars of claim. None of the matters contained therein evidence any failure on the part of the defendant to mark the claimant’s tender fairly, reasonably and objectively. Further, and without limiting the generality of the foregoing:(1) The defendant disputes the relevance of paragraph 19(1) of the particulars of claim. The claimant has provided services to the defendant since 2001 pursuant to contracts which were the subject of the independent report referred to in paragraph 3 above. No account was taken in the marking process of any previous track record of the claimant or any other tenderer.

(2) The defendant admits paragraph 19(2) but says the assessment of the claimant’s tender in this respect, as in every other, was fair, reasonable and non-discriminatory. The defendant would have expected, for example, the claimant’s bid to include a commitment to providers to maximise the room size requirements in negotiating with the landlords.

(3) As to paragraph 19(3) the defendant admits that the claimant received lower marks than each of the successful tenderers for ‘ease of upkeep’ and ‘matching our needs’. The claimant however provides no basis on which a court could conclude that this was a result of the defendant’s alleged failure to apply the regulations or general EU legal principles. Without prejudice to any other matters which the defendant will raise at trial, the defendant would have, for example, expected to see a commitment to preferring risk free properties.

(4) The defendant admits the first and second sentences of paragraph 19(4). The defendant denies, however, it overlooked the complaints procedures put forward by the claimant. The claimant’s tender was marked down in this respect because the complaints procedure referred to appeared to be designed to deal with complaints from clients and, in any event, its escalation was limited in that all complaints were ultimately decided upon in-house. Further, the claimant’s submission made no mention of how the mechanics would be managed of the relationship with the defendant.

(5) The claimant admits paragraph 19(5) of the particulars of claim, and says that this is because the matters referred to therein were matters considered at the selection stage. None of the matters considered at the selection stage were considered again at the tender evaluation stage of the process.

(6) In relation to paragraph 19(6) the defendant admits that the claimant received relatively low marks under ‘management and monitoring’ in that the claimants had ISO 9001 accreditation. As it was a requirement of the pre-qualifying stage to have quality accreditation, however, no particular account was taken of this at the tender evaluation stage. Paragraph 19(6) is otherwise denied”.

[9]Mr. Coppell argues that it is clear from those paragraphs that the defendant’s contention that all tenders were marked fairly can only be verified by sight of the successful tender documents. He submits that reference to certain specific matters which were absent from the claimant’s tender, as mentioned in the defence, requires the court to see what was said in the other tenders about those matters. His argument is that the whole thrust of the defendant’s case is that all the tenders were treated by reference to the same consistent criteria and that that assertion cannot be judged without reference to the documents now sought. Mr. Coppell acknowledges the confidentiality of the documents in question, but submits that suitable safeguards can be put in place adequately to protect that confidentiality. In correspondence prior to the issue of this application the claimant and the defendant had reached a broad agreement that the documents should be disclosed to legal advisers only, but with suitable ancillary orders and undertakings to protect confidentiality.

[10]Mr. Anderson, for the defendant, supported by counsel for the interveners, resists disclosure. He argues that the documents, if relevant at all, are only marginally so and that the confidentiality of the tender documents should override that marginal relevance in the balancing exercise to be carried out by the court.

[11]There is no dispute as to the substantive test that will have to be applied by the court on these issues at trial. I was referred to the decision of Mr. Justice Morgan in Lion Apparel Systems v Firebuy Ltd

[2007] EWHC 2179

Ch., where the learned judge says this at paras.35-38: “35. The court must carry out its review with the appropriate degree of scrutiny to ensure that the above principles for public procurement have been complied with, that the facts relied upon by the Authority are correct and that there is no manifest error of assessment or misuse of power.36. If the Authority has not complied with its obligations as to equality, transparency or objectivity, then there is no scope for the Authority to have a ‘margin of appreciation’ as to the extent to which it will, or will not, comply with its obligations.

37. In relation to matters of judgment, or assessment, the Authority does have a margin of appreciation so that the court should only disturb the Authority’s decision where it has committed a ‘manifest error’.

38. When referring to ‘manifest’ error, the word ‘manifest’ does not require any exaggerated description of obviousness. A case of ‘manifest error’ is a case where an error has clearly been made”.

[12]Mr. Anderson submits that the crucial factor is to determine the correctness of the defendant’s treatment of the claimant’s tender, and for that purpose the treatment of the other tenders is in fact irrelevant. Mr. Anderson was also at pains to stress the importance of confidentiality in the procurement field. He submits that the exposure of confidential material in these documents could serve to distort fair treatment not only in relation to the present tender process, either originally or as resumed if that is the result of the trial, but also in relation to other tender processes in similar fields in other areas of the country. He referred me to the decision of the European Court of Justice in Varec SA v Belgium State [2008] EUECJ C-450/06. In that case a challenge to a tender process was pending before the Conseil d’État in Belgium. Files of relevant documents were submitted to the Conseil for the purpose of that review. The files included the successful tender documents which the unsuccessful tenderer then sought to see. Confidentiality objections were raised. The case was decided under earlier EU legislation, but it is accepted that the relevant principles now are the same. I must quote certain passages from that judgment and I make no apology for the length of the quotations because the case is of importance. First paras.34-37, the court said this:

“34. The principal objective of the Community rules in that field is the opening-up of public procurement to undistorted competition in all the Member States (see, to that effect, Case C’26/03 Stadt Halle and RPL Lochau [2005] ECR I’1, paragraph 44). 35. In order to attain that objective, it is important that the contracting authorities do not release information relating to contract award procedures which could be used to distort competition, whether in an ongoing procurement procedure or in subsequent procedures. 36. Furthermore, both by their nature and according to the scheme of Community legislation in that field, contract award procedures are founded on a relationship of trust between the contracting authorities and participating economic operators. Those operators must be able to communicate any relevant information to the contracting authorities in the procurement process, without fear that the authorities will communicate to third parties items of information whose disclosure could be damaging to them. 37. Accordingly, Article 15(2) of Directive 93/36 provides that the contracting authorities are obliged to respect fully the confidential nature of any information furnished by the suppliers”

. Missing a paragraph and going to 39-40:

“39. Admittedly, those provisions relate to the conduct of the contracting authorities. It must nevertheless be acknowledged that their effectiveness would be severely undermined if, in an appeal against a decision taken by a contracting authority in relation to a contract award procedure, all of the information concerning that award procedure had to be made unreservedly available to the appellant, or even to others such as the interveners. 40. In such circumstances, the mere lodging of an appeal would give access to information which could be used to distort competition or to prejudice the legitimate interests of economic operators who participated in the contract award procedure concerned. Such an opportunity could even encourage economic operators to bring an appeal solely for the purpose of gaining access to their competitors’ business secrets”

. I move to para.43:

“It follows that, in a review procedure in relation to the award of public contracts, the body responsible for that review procedure must be able to decide that the information in the file relating to such an award should not be communicated to the parties or their lawyers, if that is necessary in order to ensure the protection of fair competition or of the legitimate interests of the economic operators that is required by Community law”

. Reference is then made to the other question in issue, namely the achievement of a fair trial of the issues before the appeal body, and reference is made to

Article 6 of the European Convention on Human Rights

. The court continues at para.47 as follows:

“The adversarial principle means, as a rule, that the parties have a right to a process of inspecting and commenting on the evidence and observations submitted to the court. However, in some cases it may be necessary for certain information to be withheld from the parties in order to preserve the fundamental rights of a third party or to safeguard an important public interest (see Rowe and Davis v The United Kingdom [GC] no 28901/95, ?61, ECHR 2000’II and V v Finland no 40412/98, ?75, ECHR 2007’…)”

. Then at para.50-53 the court continues:

“50. Finally, the maintenance of fair competition in the context of contract award procedures is an important public interest, the protection of which is acknowledged in the case-law cited in paragraph 47 of this judgment. 51. It follows that, in the context of a review of a decision taken by a contracting authority in relation to a contract award procedure, the adversarial principle does not mean that the parties are entitled to unlimited and absolute access to all of the information relating to the award procedure concerned which has been filed with the body responsible for the review. On the contrary, that right of access must be balanced against the right of other economic operators to the protection of their confidential information and their business secrets. 52. The principle of the protection of confidential information and of business secrets must be observed in such a way as to reconcile it with the requirements of effective legal protection and the rights of defence of the parties to the dispute (see, by analogy, Case C-438/04 Mobistar [2006] ECR I’6675, paragraph 40) and, in the case of judicial review or a review by another body which is a court or tribunal within the meaning of Article 234 EC, in such a way as to ensure that the proceedings as a whole accord with the right to a fair trial”

. There then follows a passage which Mr. Coppell stressed at paragraph 53:

“53. To that end, the body responsible for the review must necessarily be able to have at its disposal the information required in order to decide in full knowledge of the facts, including confidential information and business secrets”

. Finally, the conclusion of the court was as follows, at para.55: “Accordingly, the answer to the question referred must be that Article 1(1) of Directive 89/665, read in conjunction with Article 15(2) of Directive 93/36, must be interpreted as meaning that the body responsible for the reviews provided for in Article 1(1) must ensure that confidentiality and business secrecy are safeguarded in respect of information contained in files communicated to that body by the parties to an action, particularly by the contracting authority, although it may apprise itself of such information and take it into consideration. It is for that body to decide to what extent and by what process it is appropriate to safeguard the confidentiality and secrecy of that information, having regard to the requirements of effective legal protection and the rights of defence of the parties to the dispute and, in the case of judicial review or a review by another body which is a court or tribunal within the meaning of Article 234 EC, so as to ensure that the proceedings as a whole accord with the right to a fair trial”.

[13]It is important to note two things. First, there is an important public interest in the maintenance of confidentiality in this area. Second, the body responsible for adjudicating upon challenges, to quote again Mr. Coppell’s passage, “must necessarily be able to have at its disposal the information required in order to decide in full knowledge of the facts”. Paragraph 55 of the judgment makes it clear that there remains a fair balance to be struck between the obligation of confidentiality and the requirements of effective legal protection and the rights of defence of the parties to a dispute so that the proceedings as a whole accord with the right to a fair trial. The process requires a balance. The tribunal or court deciding a fairness challenge must have before it proper materials on which to do so.

[14]A rather similar issue arose in a judicial review case, helpfully referred to me by Ms. Artesi. The case is Abbey Mine Ltd v The Coal Authority

[2008] EWCA Civ. 353

. There the claimant challenged the fairness of decisions of The Coal Authority, a statutory body, to issue a coal mining licence to a competitor of the claimant. One of the principal grounds of challenge to the fairness of the process was on the basis that the authority had failed to disclose to the claimant the successful application. The judge and the Court of Appeal rejected that ground of challenge. At para.26 of the judgments, Lord Justice Laws referred to the well-known passage in the speech of Lord Bridge of Harwich in Lloyd v McMahon

[1987] AC 625

at 702, where Lord Bridge said this:

“’The so-called rules of natural justice are not engraved in tablets of stone. To use the phrase which better expresses the underlying concept, what the requirements of fairness demand when any body, domestic, administrative or judicial, has to make a decision which will affect the rights of individuals depends on the character of the decision-making body, the kind of decision it has to make and the statutory or other framework in which it operates.’ Accordingly, what fairness demands varies according to the context”

. One has to bear in mind that statement in particular in looking at the various cases, and the various challenges to decisions of different bodies that are charged with questions such as the type that are in issue here. A little later in the case, at para.32,

Lord Justice Laws continues as follows:

“Mr Griffiths submits that it is a basic imperative of the need of fairness that a party who will be affected by a public decision is entitled to know the case against him. He relies (specifically in the context of Ground of Appeal 2, to which I shall come shortly) on such well known authority as Ex p Fayed [1998] 1 WLR 763 and Hadmor Productions v Hamilton [1983] 1 AC 191, 233. Now, the signal feature of the present appeal is that it concerns rival applications for a licence to undertake a commercial venture. In such an instance there is, I think, a distinction to be drawn for the purposes of Mr Griffiths’ submission between a right to know the details of the rival’s case, and a right to know the decision-maker’s concerns about one’s own case. The decision-making body, the Authority, is concerned to arrive at a result in the public interest in conformity with the obligations laid on it by the 1994 Act. In the execution of that process no applicant is shown the details of any other applicant’s bid. In that sense they are treated equally; all the competitors are in the same boat. It would be obviously unfair if one applicant saw his opponent’s bid, but the opponent did not see his. But if every applicant (there may sometimes, no doubt, by more than two) saw every other’s bid, and was entitled to comment and challenge and criticise, the resulting prolongation and complexity of the decision-making process can scarcely be exaggerated”

. At para.34

Lord Justice Laws concludes:

“There is no question of sacrificing fairness to administrative convenience. The duty of fairness always takes its place in a practical setting. Where the setting involves statutory functions imposed in the public interest, the court must be alert to see that they are fulfilled and not frustrated. Here, as I have said, all competitors are in the same boat. In my judgment, in a competition case like this (in addition to the elementary imperative of impartiality in the decision-maker) fairness imposes two broad requirements: (1) that an applicant be told the substance of the decision-maker’s concerns about his own case, and (2) that each applicant be treated like every other: there should, to use the hackneyed phrase, be a level playing-field. The first of these requirements applies the distinction I drew earlier: the applicant is entitled to be told of the decision-maker’s concerns about his own case, but not the details of his rival’s case”

. Lord Justices Rix and Dyson agreed with Laws LJ.

[15]Of course one has to note, as Mr. Coppell points out, that the decision there under challenge was a review of the decision of the authority itself. Of necessity, the authority had all the documents, including the confidential material, and it was not necessary for its processes for one bidder to see the bids of the other. In contrast, in this case, without the documents it may be that the court, as decision-maker, would not have the material that it needs (see again para.53 of the Varec case).

[16]In my judgment, it is clear, for the reasons advanced by Mr. Coppell, that the defence does indeed put in issue various aspects of the relative marks achieved in the tenders because of the relative attributes of the rival bids. To that extent the documents appear to me to be strictly relevant to the issues in the action and would be subject to disclosure on ordinary principles. Disclosure, even in ordinary civil litigation, is to be tempered by proper recognition of confidentiality (see Civil Procedure 2008 Volume I, para.31.3.7 at p.768).

[17]I recognise the valid concerns of the interveners in this case, but, in my view, in the first instance, the court must be put in a position to judge the materiality of these documents for the fair trial of these proceedings. The papers before me are sparse compared to what will inevitably be a wider documentary base at trial. I have had a snapshot of the issues in the case with no sight of the background evidence at all. It is important that the trial judge should be equipped, if he or she finds it necessary as the trial proceeds, to have access to the disputed papers for the fair resolution of the issues put in play by the defendants and so that it is fully informed as EU law requires it to be. The principles of EU law recognise that the decision-maker in challenges of this type must have “full knowledge of the facts including confidential information and business secrets”.

[18]In my judgment, these objectives and suitable confidentiality can be achieved by disclosure in the first instance, with redaction so far as practical, to the claimant’s legal advisers (as had essentially been agreed before this application was issued). In the first instance, I consider that the lawyers should be able to assess the materiality of what they have been shown without reference to the lay clients. Equally, the lawyers can have no practical interest in the use of the confidential information beyond the confines of these proceedings. However, any application for disclosure beyond the lawyers will have to be made to the trial judge who, after such disclosure, will have a far better means than I have had of assessing where the balance is to be fairly struck and will have had a fuller basis in which to assess how important these documents are in the context of the decision that the court has to make. To that limited extent this application succeeds.

LATER:

[19]The application for permission to appeal made by Mr. Anderson, supported by Ms. Artesi and Mr. Gatty, is that there is a compelling reason for an appeal to be heard, namely the importance of obligations of disclosure in this type of litigation.

[20]Part of the compelling reason to assess, in my mind, is the context of the litigation as a whole. I recognise that there has been interesting argument before me, but we have a trial scheduled for a week on Monday. What I have done, although dealing with some interesting and not often cited material in this court, is to apply what seemed to me to be settled principle and to apply my discretion to those principles. For reasons adumbrated in the judgment, I consider that the case is, to some extent, fact specific (although I recognise that there are general points arising as well).

[21]In the circumstances, it seems to me to be the right course but if the Court of Appeal considers the matter to be of a compelling nature it should make that judgment. I consider I have exercised my discretion in the light of settled, although not much cited, principle and if that has been done on a wrong basis I think that Mr. Anderson and his supporters should excite the Court of Appeal’s interest in an appeal rather than mine. ____________________