HT-2024-000271 - [2024] EWHC 3039 (TCC)

There are now a number of examples of public procurement challenges where the Courts have concluded that damages would not be an adequate remedy for the aggrieved contractor. Counsel were unable to identify (and I have not found) any statements of general principle about what uncompensatable disadvantages should or should not be regarded as rendering damages an inadequate remedy. However, the Claimant suggested that three categories of case may be identified, namely:

This categorisation is neither satisfactory or justified. First, in principle, there need be no pre-ordained limit upon when and in what circumstances damages may be regarded as an inadequate remedy: the categories of inadequacy need not be closed. Second, difficulty of assessment does not of itself demonstrate that the damages once assessed will be inadequate. Third, I am not convinced that a framework contract gives rise to particular difficulties. Normal principles suggest (for good reason) that damages should be awarded on the basis of the contracting authority's minimum or least onerous obligation. Fourth, the Claimants' third suggested sub-category is self-contradictory: if it would be unjust to leave a party to his remedy in damages, the damages are by definition an inadequate remedy.

The Court has not been deterred by difficulty of assessment as such. But it has recognised that the more variables are fed into a "loss of chance" calculation, the more likely it becomes that the compensation recovered by the aggrieved party will not match the outcome after the features that were uncertain in prospect have resolved themselves and determined what in fact happens. One example illustrates the problem: if the procurement is limited to two tenderers there may be circumstances in which, even at the interim suspension stage, the Court can be confident that if the impugned successful tenderer had not been awarded the contract, the aggrieved one would have been. However, the more tenderers there are, the less certain this may be – leading to a discounting of the aggrieved tenderer's chance when calculating damages. This was, I think, what Arnold J was referring to in Morrison Facilities Services Limited v Norwich City Council [2010] EWHC 487 (Ch) at paragraph 30 when he said:

“Counsel for Morrison submitted that damages would not be an adequate remedy for three reasons. The first and most important one is that, in a case where one of the key complaints is that of undisclosed criteria, it is very difficult indeed for the Court at trial to assess damages because assessment of what chance has been lost by the claimant in those circumstances is virtually impossible. In such a case, the Court is faced with the question of considering the scenario that would have arisen if there had been proper disclosure of all the criteria in advance. In those circumstances, it is very likely that all bids submitted in response to the ITT would be different. How then, he asks, can the Court decide what chance of success in obtaining the tender the claimant has lost?”

Arnold J relied upon the decision of the Court of Appeal in Lettings International Limited v London Borough of Newham [2007] EWCA Civ 1522 where the submission was that damages would be an inadequate remedy because quantification of the loss "will have to take [into] account not only that the claim will be 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." (paragraph 32 - emphasis added). The response of the Court of Appeal at paragraph 36 was that "A loss of 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 [of] no commercial value at all."

Counsel in the present case were not in a position to address the question whether the lost chance in a case of unpublished criteria is properly to be assessed on the basis that the contract assessment would have been on the basis of the published criteria or on the basis of the published and the unpublished criteria. In the absence of full submissions on the point, my tentative conclusion is that there may be two different categories of case: the first could be where the criteria to be applied were fully pre-determined but inadequately publicised (as in Emm G Lanakis AE v Dimos Alexandroupoulis (C-542/06)); the second could be where the intended criteria are properly advertised but the contracting party deliberately or otherwise relies on additional unpublished criteria when it comes to assess the bids. While flagging that question for possible future resolution, I accept for present purposes that there may be circumstances where the number of uncertainties or variables that have to be brought into the calculation of the aggrieved tenderer's lost chance may persuade the Court that damages would not be an adequate remedy. However, the mere fact that the damages will be for loss of a chance and will be assessed as such is not of itself evidence that the damages are an inadequate remedy. The reverse is likely to be true in many or most cases because the principles that have been developed have been designed to reflect the true commercial value of the chance that has been lost.

The fact that the assessment of damages after a trial will not be straightforward and that there will be difficulty in such an assessment does not necessarily mean that damages will not be an adequate remedy for a claimant. However, this is a matter of degree and “there may be circumstances where the number of uncertainties or variables that have to be brought into the calculation of the aggrieved tenderer’s lost chance may persuade the court that damages would not be an adequate remedy” (per Stuart-Smith J in Openview at paragraph 32) .…

What then are the criteria to be applied before a court accepts that "loss of reputation" is a good reason for holding that damages which would otherwise be adequate are an inadequate remedy for American Cyanamid purposes? In the absence of prior authority directly in point (none having been cited by the parties) but with an eye to the approach adopted by the Court in Alstom, DWF and NATS I suggest the following:

These are general criteria, which need to be reviewed and considered in the light of the facts of each case. I readily accept that there is more to be said on the subject and that principles such as those I have suggested are not to be applied by rote.

Damages would not be an adequate remedy for the Claimant, and it would not be just, in all the circumstances, for the Claimant to be confined to its remedy in damages (see the guidance at paragraph 42 above):

The Contracts represent a rare opportunity that could bring significant rewards. There are only so many 27,000 property contracts with one of the country’s leading housing associations, such as the Defendant. The ITT provided that the tender would be for a 5-year contract, with the option to extend for a further 2 years. Accordingly, the next time that the Claimant might have another opportunity to bid for the Contracts may not be until 2032. Had the Claimant been successful, the Contracts would have been worth approximately £4 million in profits to the Claimant over 7 years (see paragraphs 53 to 54 of McIntosh1 ….)

The Claimant’s failure to retain what is its second largest contract is likely to have an adverse effect on its reputation. The Claimant expects that some of its engineers will choose to resign rather than be TUPE transferred in the event that the automatic suspension is lifted (see paragraph 55 of McIntosh1 ….).

The principal loss claimed by the Claimant is for the loss of the opportunity to take part in a fair competition. Plainly, damages in the sum of £20,800.00 (the Claimant’s costs of preparing its bid), would not adequately compensate the Claimant for the loss of the opportunity to take part in a fair competition for important contracts, or for the damage to its reputation that will likely follow its loss of its second largest contract (see paragraph 53 of McIntosh1 ….).

The Claimant has not claimed loss of profits because, by virtue of there being no fair competition, it is not possible for it to say what percentage chance it may have had of winning the competition. In particular, four companies from the Sureserve Group were allowed to take part in the Procurement, all of which could have benefited from Ms Nicklin’s conflict of interest (see paragraph 13 of McIntosh1 ….).