HT-2022-000043 - [2025] EWHC 540 (TCC)

In July 2021, the Claimants participated in a call-off competition under the DPS Agreement and were the successful second highest ranked bidder. There were three successful bidders. The parties entered into a call-off contract dated 6 September 2021 pursuant to which the Claimants agreed to supply Tests to the Defendant on receipt of committed orders, based on allocated volumes divided between the top three ranked bidders in accordance with a procedure set out in the call-off competition Invitation to Tender.

The Second Claimant engaged MP Biomedicals Germany GmbH (“MP Bio”), a company registered and operating in Germany, as its sub-contractor and the Legal Manufacturer of the Tests. At the same time, MP Bio engaged Xiamen Boson Biotech Co (“Boson”), a company registered and operating in China, as its sub-contractor and the Physical Manufacturer of the Tests.

On 30 September 2021, the Defendant placed a committed order for 68.4 million Tests from the Claimants (“the Committed Order”). The Tests were manufactured by Boson at its manufacturing facility in China (“the Boson Facility”) between 11 October 2021 and 7 November 2021.

On 7 October 2021, the Defendant informed the Claimants that he had commissioned a standard Amfori Business Social Compliance Initiative (“BSCI”) audit of the Boson Facility by a company called QIMA Limited (“QIMA”). BSCI audits assess working conditions in supply chains and thereby assist the Defendant to satisfy his legal obligations as to those working conditions. The subsequent audit report dated 26 October 2021 (“the QIMA Audit Report”) awarded Boson an overall rating of “D”, which the Defendant informed the Claimants amounted to a “failure”. A follow-up report in the form of a Corrective Action Plan Acknowledgement Report (“CAPAR”) was put in place pursuant to the QIMA Audit Report designed to identify and help implement areas of improvement at the Boson Facility. This is part of the BSCI process. The Claimants immediately objected to the findings in the QIMA Audit Report.

Within a short time of receipt of the QIMA Audit Report, the parties began to discuss (on an open basis) ways in which the issues identified in that audit could be addressed. An email of 1 November 2021 from Scott Haughton of the Claimants to Isabel Fernandez of the Defendant refers to the potential for a “follow-up” or “re-audit”. On 5 November 2021, Mr Sebastian Parsons (“Mr Parsons”) of the Claimants emailed Ms Sarah Collins (“Ms Collins”) of the Defendant suggesting that the solution was to “proceed as soon as possible with an interim audit to consider and report on the progress made against the CAPA plan” by Boson. He observed that such an audit would give the Defendant confidence that the areas of concern identified in the QIMA Audit Report had been, or were being, addressed. With a view to facilitating the conduct of this interim audit, and at the request of the Defendant, the Claimants withdrew their objections to the findings of the QIMA Audit Report and confirmed that they were continuing to work with Boson on a corrective action plan (as is confirmed in a letter from Lewis Silkin dated 13 December 2021 to which I shall return below).

Also, on 4 and/or 5 November 2021, the Defendant instructed QIMA to carry out a further inspection of the Boson Facility, albeit there is a dispute over the reasons why, in the event, this audit did not proceed.

The Claimants commissioned another BSCI audit provider, V-Trust, to carry out a further audit and to produce a report (“the V-Trust Audit Report”) designed to verify the status of corrective actions taken by Boson, specifically with reference to the information that had been provided to QIMA in October 2021 and the improvements that had been made by Boson since the QIMA Audit Report. The V-Trust Audit Report (which recorded “significant progress since the previous audit”) was sent to the Defendant under cover of an email of 8 November 2021 in which Mr Parsons indicated that he hoped that this would provide the confidence needed in relation to conditions at the Boson Facility to enable the Tests to be deployed with immediate effect.

The Defendant did not accept the findings in the V-Trust Audit Report. Instead, by notice of 12 November 2021 (“the Rejection Notice”), the Defendant rejected the Tests already delivered and the further Tests to be delivered pursuant to the Committed Order. The Defendant relied upon “breaches of labour law, health and safety and worker payment obligations” at the Boson Facility, identified in the QIMA Audit Report, together with Boson’s failure to identify such breaches in the Standard Selection Questionnaire for the call-off competition.

The Claimants dispute that the findings in the QIMA Audit Report amount to breaches of Chinese labour law and/or that the QIMA audit gave rise to grounds lawfully to reject the Tests. They assert that there is no such thing as a “fail” within the context of an Amfori BSCI audit. Amongst other things they rely on a human resources licence authorising longer working hours issued by the Jimei District Human Resources and Social Security Bureau in China on 12 April 2021 (“the Jimei Licence”) which the QIMA auditor failed to take into account, together with various other relevant documents that they say were available but were not reviewed by the QIMA auditor at the time of the QIMA audit.

Notwithstanding the Rejection Notice and the Defendant’s refusal to accept the findings of the V-Trust Audit Report, the parties continued to explore the potential to resolve the issues between them by way of, amongst other things, a further audit.

There is evidence (exhibited by the Claimants and not challenged by the Defendant) that on around 4 and 15 November 2021, the Defendant created “reactive lines” – potential responses to external enquiries – anticipating the implementation of a further audit and planning the public statements that would be made to the media in the event of either a “pass” or a “fail”, in respect of the audit. The Defendant’s documents recording these “reactive lines” specifically identify Ms Elena Snook (“Ms Snook”) as having “clearance”. They evidence the requirement imposed by the Defendant on all Test suppliers and manufacturers to pass BSCI audits in order “to fulfil contractual obligations” together with the Defendant’s internal recognition that, following an “independent audit” it would be necessary to have responses ready to address external enquiries – in other words there would be a need to make the audit public and to deal publicly with the results of the audit. An internal Note of 15 November 2021 entitled “Monday Exco 15^th Nov” expressly anticipates the “next audit” which will “follow BSCI guidelines”.

On 26 November 2021, the World Health Organisation identified Omicron as a variant of concern.

In an open letter from the Claimants’ then solicitors, Lewis Silkin LLP (“Lewis Silkin”) to the Government Legal Department (“GLD”) dated 13 December 2021, Lewis Silkin dealt at some length with the open discussions between the parties as to the need for a further audit to be conducted, including the scope of that audit.

An internal email from Ms Snook to Ms Collins dated 15 December 2021 evidences the Defendant’s thinking at that time that a new audit could be done to cover manufacturing at the Boson Facility during October and November 2021 which, if satisfactory, would enable the release of, and payment for, the Tests already supplied by the Claimants. By 24 December 2021, another internal email shows a more detailed discussion of the potential issues around conducting a further audit, together with the acknowledgement that “we need to also explore the routes to complete any audit as urgently as possible”.

At around the same time (and in an attempt to assist the Defendant to use the rejected Tests), the Claimants commissioned a full follow up Amfori BSCI audit to be undertaken by an independent company called TUV Rhineland (“TUV”). TUV undertook the further audit at the Boson Facility in January 2022 and provided an (open) audit report to the Claimants on 20 January 2022 (“the TUV Audit Report”), which gave the Boson Facility an overall rating of “C”. Once again, the Defendant apparently refused to accept the findings of this audit.

By this time, the parties had already begun to discuss the potential for mediation of their dispute, a process first raised in a letter from Lewis Silkin to GLD on 2 December 2021.

A mediation duly took place on 19 January 2022, followed by a further without prejudice meeting on 25 January 2022. It is common ground that, at this meeting, and in light of the Defendant’s refusal to accept the outcome of either the V-Trust Audit Report or the TUV Audit Report, the parties discussed the arrangements for a further audit to be conducted as one of eight proposed headline proposals for settlement. By now, and without going into the detail of the without prejudice discussions, the parties were discussing the potential supply by the Claimants of replacement Tests manufactured by Boson which would be able to detect the Omicron variant.

There then followed a series of emails between the parties, all marked “Without Prejudice”, in which they discussed the scope and purpose of the proposed audit and the date on which it should take place. For the sake of ease when it comes to the publication of this Judgment, I have included discussion of these emails in Appendix A. I shall require submissions from the parties in due course as to whether Appendix A, together with any other references to these emails made in the body of the Judgment, should be redacted from the public version so as to preserve the parties’ Without Prejudice privilege.

At an internal meeting of the Defendant on 23 February 2022, attended by Ms Snook, the minutes record that Ms Snook explained that:

“Sante have now raised a procurement challenge claim against UKHSA around why they did not receive any volumes out of DPS2. A response is currently being formulated. A visit to Xiamen Boson has also been confirmed with lntertek for Monday 28/02 and Tuesday 01/03. The objective is to 1) verify additional information Sante claims was not reviewed during the previous audit and 2) conduct a new BSCI equivalent audit for the period October 21- Jan 22”.

There was no reference in these minutes to the new audit being conducted on a Without Prejudice basis. As anticipated in the minutes, Intertek undertook the audit at the Boson Facility on Monday 28 February and Tuesday 1 March 2022. This audit was conducted on the instructions of, and funded by, the Defendant.

On 1 March 2022, Mr Henri Phan, a consultant employed by the Second Claimant, emailed Mr Parsons to confirm that the audit had been completed and that the auditor had provided a CAPAR to Boson. Mr Phan attached a copy of the CAP report (which includes a summary of the findings made during the audit) observing that the results looked similar to the previous TUV Audit Report.

On 4 March 2022, the Defendant received a copy of the full audit report prepared by Intertek (“the Intertek Audit Report”).

Thereafter, in a further series of “Without Prejudice” emails, also set out in Appendix A, the Claimants chased the Defendant for disclosure of the Intertek Audit Report.

By a letter from GLD to Lewis Silkin dated 31 March 2022, marked “CONFIDENTIAL AND WITHOUT PREJUDICE”, GLD noted that Mr Parsons had been requesting a copy of the Intertek Audit Report and said this:

“For the avoidance of doubt the audit was procured as part of the confidential and without prejudice process and any documents disclosed in that process, including the Intertek audit report, are covered by without prejudice privilege. Please confirm this is agreed and that your client understands the parameters of any disclosure and their responsibilities in regard to any disclosure made to them. To be clear, your client cannot use or refer to the Intertek audit report in open correspondence unless and until this [is] agreed between the parties”.

I understand this to have been the first time that anyone had expressly referred to the Intertek Audit Report itself being covered by without prejudice privilege (as opposed to including reference to its commissioning within Without Prejudice correspondence).

Lewis Silkin responded “Without Prejudice” on 1 April 2022 in the following terms:

“Although the commissioning of a document review and further quasi-BSCI audit by your client was discussed as part of ongoing WP discussions between the parties, the precise scope of the review and audit were not agreed but ultimately decided by your client and neither we nor our client have seen the instructions provided to Intertek or, of course the report or any drafts thereof. Our client cannot therefore accept that the without prejudice negotiations are or were [for] the sole purpose of the review and audit and that the documents created in connection with Intertek’s instruction and the review and audit (including the report) are covered by without prejudice privilege”.

Nevertheless, Lewis Silkin indicated that, for the purposes of ongoing settlement discussions, the Claimants were prepared to receive the Intertek Audit Report on a without prejudice basis, albeit that their right to challenge the assertion of without prejudice privilege was reserved. There then followed further correspondence between the parties discussing the status of the Intertek Audit Report. In summary (and although the reasoning on both sides has subsequently developed and changed), it was GLD’s position at this time that because the Intertek Audit Report was commissioned as part of without prejudice negotiations, it ”necessarily follows” that it falls within the confines of those discussions and “is itself a document that benefits from without prejudice privilege” such that it is inadmissible in any proceedings. It was Lewis Silkin’s position that they were not able to determine whether any exception to the WP Rule might apply to the Intertek Audit Report without seeing it.

Finally, upon confirmation from Lewis Silkin that the Claimants would not distribute the Intertek Audit Report to any other party, or use that report on an open basis without the Defendant’s prior written consent, the Intertek Audit Report was provided to the Claimants under cover of a letter from GLD (again marked “CONFIDENTIAL AND WITHOUT PREJUDICE”) dated 25 April 2022.