HT-2024-000378 - [2025] EWHC 354 (TCC)

DHL has not discharged the burden of establishing to a reasonable degree of confidence that a failure to impose interim relief will lead to financial losses that would be significant and irrecoverable as damages. In these circumstances, it is not necessary (were DHL to be the only party) to go on to consider the adequacy of damages for SCCL. Given the position of Unipart, I nevertheless go on to do so.

Unipart has, just, discharged that burden although the degree of confidence is at the lower end of the spectrum. I note, however, that in light of my finding above, the primary basis I should consider where the balance of convenience lies between Unipart and SCCL must be on the basis that DHL has failed to establish that damages are inadequate and that Unipart is effectively the only party able to argue that interim relief is open (at least as a matter of principle) to it.

Mr New gives evidence in support of SCCL’s position which, as summarised by Ms Sloane KC, falls into two broad categories of loss should the suspension not be lifted: the loss of benefits of the New Contract v the Existing Contract; and the integral part the New Contract plays in part of a broader and urgently needed modernisation programme (known as ‘Project Tokyo’). The attack on this evidence focusses principally on Mr New’s evidence about Project Tokyo: in summary, the Claimants argue that the urgency is exaggerated; no funding is secured and the prospects of funding are remote not just in the current financial year but more generally given the widely known public sector funding constraints; documents supporting the ‘highly confidential’ project are scant; and Project Tokyo formed no part of the services specification for the tender, such that it would represent a fundamental change to the specification which cannot be introduced through the change process pursuant to Regulation 72 and/or the contract provisions themselves.

At paragraphs 69 to 76 of his first statement, Mr New states that the NHS Supply Chain currently faces a risk of systemic failure. SCCL provides a critical service to the NHS and if it were to be disrupted, it would quickly have a major and catastrophic effect on the NHS’s ability to provide care. The Court has been referred to the National Audit Office report, which concluded that the NHS Supply Chain was not yet fulfilling its potential. In Mr New’s evidence to the Public Accounts Committee, he stressed the limitations of aged/legacy technology, as did the Boardman Review of Government Procurement in the COVID pandemic.

Mr New then explains that SCCL’s infrastructure is based on a system called RESUS, which is around 30 years old. At paragraph 74, Mr New states that there were 35 P1 (highest priority) alerts in the period of 11 months to the end of November 2024. Mr New explained the effect of one such alert on 1 November 2024, which resulted in 17,000 lines not being picked, and consequent delays which affected the shipping of those products to hospitals. The SCCL Board Minutes for the November 2024 meeting stated:

“…it was noted that the Committee had considered the principal risk register in its most recent meeting and that 6 of the 11 principal risks were outside of the stated risk appetite for those risks. It was noted that the fragility of the existing IT system meant that the risk relating to IT stability had crystallised and was now creating wider issues for the Company meaning that it was suffering contagion between risks and the Committee felt that this position was intolerable….”

Although Mr Pyne’s responsive evidence suggested that the number or severity of P1 alerts had been overstated, the document he has relied upon to substantiate this point appears not to be comprehensive. For example, it does not contain the P1 alert on 1 November 2024, which Mr Pyne accepts occurred (he appends the Major Incident Alert itself which substantiates the P1 event). It also does not appear to include the ‘6 separate and unrelated incidents over 4 months, each resulting in widespread disruption for a large number of orders for at least one day’ as reported in the Board Minute of 15 November 2024 under the heading ‘Severe (P1) IT/Data failures….’ These failures obviously happened but are not in the schedule relied upon by Mr Pyne. The discrepancy is not explained by different time periods as (to be fair, somewhat tentatively) suggested by Ms Hannaford KC. The schedule relied upon by Mr Pyne is not therefore a reliable basis upon which to undermine Mr New’s evidence about the increasing severity of the problem SCCL, and the NHS, is facing.

Mr New’s responsive evidence explains, in my view credibly, how Mr Pyne has misunderstood the integral nature of RESUS and the IT architectural challenge facing SCCL. Mr New explains that Project Tokyo is seeking to address this by replacing the entire architecture with a modern Software As A Service solution. Importantly, it is not suggested that it will be the new logistics supplier who will implement this. Mr New’s point is that the new provider must work with SCCL to devise what is feasible and fit for the future, and it makes no sense to do that with the provider who will not be in place for the following duration of the New Contract. It is on this basis that delay to the letting of the New Contract impacts the progression of the IT modernisation project, even though the logistics supplier is not carrying out that project itself.

To demonstrate the interface, Mr New provides a document (which is part of the Confidentiality Ring) showing the timelines for critical paths to be started and completed over the course of Project Tokyo. As Ms Hannaford KC rightly says (and as Mr New’s evidence itself accepts) there is more than one critical path through the duration of the project which runs from 2025 to 2029. However, it is clear that one such path runs through the letting of the new logistics supplier and the completion of the transition. Without needing to understand the complexities, it seems to me entirely plausible that interaction with the new logistics supplier and the strategic plan that that supplier has to produce and the IT modernisation programme is essential, and that delay to one will either cause delay to the other, or, if the latter proceeds without the relevant input, problems down the line. I accept that the ‘Key Milestone’ document is, notwithstanding Ms Hannaford KC’s scepticism, taken from the existing Business Case. According to the document, letting the logistics provider contract is a key milestone in the planned modernisation programme. It might be more surprising if it were not. It also seems to me that Mr New’s evidence that IT modernisation is now critical is effectively a statement of public record. I do not regard the fact that the failure to have been able to progress this sooner – whether through funding difficulties or otherwise – detracts from that urgency or means that further delay is tolerable for the NHS or the public who may be impacted.

I therefore do not consider that either the importance of Project Tokyo or the importance of the establishment of the long-term logistics provider to progressing that infrastructure modernisation programme has been exaggerated by Mr New.

I then consider the point that the New Contract does not presently include Project Tokyo and that its introduction would not be possible in any event because of Regulation 72 of the PCR. If this were correct, DHL and Unipart argue that it cannot, therefore, be relevant to the question of the importance of not delaying Contract Award.

The Claimants rely upon the summary of Project Tokyo set out at paragraph 79 of Mr New’s First Witness Statement. Having explained that ‘the only option is to build a new network, deploy new ERP technology and at the same time transform the service proposition and then transition demand between the old network and new network before changing the use or closing the legacy warehouses’, Mr New then identifies the broad process as follows:

Both parties rely upon the Service Description provided at ISIT and the later version at ISFT; the Claimants say that this plan is entirely outwith the specification for which they have bid at each stage and would be a substantial change excluded by Regulation 72; and the Defendant to contend that there are sufficient indicators and flexibility in the New Contract identified in the specification that the expected involvement in the implementation of Project Tokyo sits within it.

It is common ground that at least some parts of the new supplier’s involvement in Project Tokyo will be managed through change procedures. It is not necessary, or possible, to do an exhaustive analysis of the specification(s) and the extent they may or may not permit potential changes about which there is at best very limited and general information. In the context of this application, it is therefore not feasible or appropriate for me to make any determination as to whether any such change request, in the absence of seeing what it is in detail, could give rise to legitimate complaints either as to changes between ISIT and IFST (insofar as Unipart is concerned) and/or valid Regulation 72 challenges. Nothing I say in the following paragraphs predetermines any such questions that may arise.

By way of example, however, in relation to the emphasis placed by Mr Coppel KC on the reference by Mr New to the development of new warehouses, Ms Sloane KC relies upon paragraph 3.21, which appeared in both versions. This states:

“3.21.1

The Supplier will be managing the network and associated infrastructure on behalf of the Authority. As Customer activity changes throughout the lifetime of the Operating Model, the Supplier must undertake ongoing reviews of the suitability and capability of that infrastructure to support the changes.

3.21.2

The Supplier is required to advise and work with the Authority in order to ensure that the network continues to meet the needs of the Operating Model. This may lead to decisions to change the existing network infrastructure which may include additional warehouses. There is a possibility that some network expansion activity will be underway at the commencement of the Contract.

3.21.3

The Authority may task the Supplier with either leading or participating in this work. The Variation Procedure, as defined within the Contract, will underpin and support these decisions and subsequent actions”.

The new logistics suppliers’ involvement in those elements of broad outline process explained by Mr New would, at least in principle, fall within what is very broadly envisaged in these paragraphs. Whether or not they do, in due course, will depend on what precisely is required. However, it is not possible for me to say that the Claimants are obviously correct that the logistic suppliers’ interaction with Project Tokyo falls outside that which they may legitimately be required to carry out (with or without a variation) with regard to the supporting of the development of new warehousing capacity.

Similarly, in respect of IT Infrastructure, paragraph 8.5.7 of the ISIT Specification identifies, amongst other things, RESUS as a legacy application. Paragraph 8.5.8 states:

“The Supplier ADSM function will be responsible for the development of the technical roadmap that supports modernization/replacement of all legacy Logistics and transport applications and services. With changes being agreed through the Change Control process.”

Similar wording is included in paragraph 8.18.9 of the updated draft (which also contains more details). This is, on its face, consistent with the sort of interaction with the IT modernisation programme which lies at the heart of SCCL’s plans. Whether or to what extent is ultimately required of the logistics supplier gives rise to Regulation 72 challenges is a different matter and not one I can determine on this application.

I also reject the suggestion, at least from DHL, that it came as a surprise to them that SCCL considered that the new logistics supplier would be required to be involved in transformational change at SCCL. Of course, the internal name of ‘Project Tokyo’ may have been new to DHL, as may have been some of the objectives of the broader modernisation programme with which the logistics supplier would have to interact. But that the Contract would be ‘transformational’ was not news. First, in Mr Peacock’s initial Witness Statement, he did not suggest that anything Mr New had set out about Project Tokyo was new to him. Far from suggesting that the connection between Project Tokyo and the role required of the new logistics supplier was wholly incompatible with the contract he thought DHL had bid for (the thrust of the argument now run), Mr Peacock specifically relied upon that transformational growth as the basis for contending that the Contract was a unique contract in the healthcare sector such that its loss could not be adequately compensated for in damages. Mr Coppel KC tried to suggest that Mr Peacock was simply explaining Mr New’s evidence about the New Contract’s transformational qualities, but this is plainly not what Mr Peacock is doing at [41] and [42] of his First Witness Statement. He is plainly agreeing that, in his view, the project is in part transformational and then relying upon that fact. The suggestion that this transformational quality is only what SCCL ‘apparently envisages’ only appears in his Second Statement, and lacks credibility when viewed against the content of his First Statement.

Finally, it is right that Project Tokyo does not presently have funding and Mr New is clear about the steps for approval that lie ahead. There is no evidential basis for the claim that the prospects of it receiving funding are ‘remote’ merely because of general financial constraints, given the significance of the project to national infrastructure and the indication Mr New refers to that, whilst not guaranteed, funding may be available in the remainder of the current year and in the next. What is clear is that such prospect as exists for approval is will be put at significant risk if not extinguished in circumstances where SCCL is not able to demonstrate that a critical dependency for the success of the project, the Contract Award with the new logistics supplier, is in place.

I am entirely satisfied on the evidence before me that there is a very credible risk (to put it at its lowest) that delaying the letting of the New Contract will cause real delays to SCCL’s broader modernisation programme, the progress of which is obviously very important to the NHS and of extremely high public interest. The loss to SCCL in being able to progress these plans for any significant duration would plainly not be compensatable adequately in damages.

The first question to be considered is how long the delay is likely to be (DWF LLP v Secretary of State for Business Innovation and Skills [2014] EWCA Civ 900.

In this context, it is necessary to consider first DHL’s contention (supported by Unipart) that there should be a preliminary issue “as to whether the Defendant breached its duties under reg. 24 and/or 41 of the Public Contracts Regulations 2015 by failing to identify that Chris Holmes, a recently-employed senior executive of the Defendant, was advising GXO on the preparation of its tender and to take action to ensure equal treatment of tenderers and that competition was not thereby distorted (see §17 of the Amended Particulars of Claim and §§9-10 of the Amended Defence)”.

DHL seeks the listing of this preliminary issue with a time estimate of 2 days (or, as Mr Coppel KC said in oral submissions, no more than 4 days).

The claim regarding Chris Holmes relies upon regs. 24 and 41 PCR:

DHL says that GXO correctly declared Mr Holmes' involvement according to the rules of the procurement. However, since SCCL “originally misfiled” GXO’s declaration, DHL contends that there has already been a prima facie breach.

Whilst the cause and impact of the ‘misfiling’ would no doubt play some role, this characterisation of the dispute seriously underestimates the nature of the ‘preliminary issue’. The heart of the dispute relates to what steps SCCL took to remove Mr Holmes from the procurement process once he resigned and their adequacy, in light of the involvement and knowledge Mr Holmes had already acquired and the role he went on to perform for GXO. What DHL propose is essentially staging the liability trial, taking one allegation of breach first. It is not a ‘preliminary issue’ in the traditional sense, and would require the potential for further pleadings, extensive disclosure and factual evidence.

As to pleadings, Ms Sloane KC is correct that various allegations or at least possible allegations which go further than the pleaded case are made in Mr Coppel KC’s skeleton and in the witness evidence of Mr Peacock. SCCL are entitled to know with some precision (as is Mr Holmes) what the precise ambit of the allegation is. At present, it is not clear and the ambit of the pleaded case would need to be clarified.

As became clear when the issue was explored with Mr Coppel KC, disclosure would be wide ranging. DHL would, understandably, be seeking disclosure of all the documents which showed Mr Holmes’ involvement in the development of the procurement process up to the point he announced his resignation. They would also require documents relating to what Mr Holmes was in fact doing between that date and the date he ended his employment with SCCL, so as to interrogate the assertion of fact that Mr Holmes had nothing to do with the ongoing procurement process whilst working at SCCL. I have no doubt that that documentation may include any interaction Mr Holmes had during that time with prospective tenderers, including specifically GXO, and any representations Mr Holmes made about the value he could bring during his recruitment process. That may go beyond GXO, as it appears that DHL themselves at one point sought to engage Mr Holmes, which SCCL wish to explore (even if DHL do not) as it goes potentially to a question of limitation. Mr Coppel KC suggested that this would not be all of Mr Holmes’ documents during this time, but did not formulate any basis upon which disclosure could rationally be limited. On its face, documents demonstrating what Mr Holmes was doing A: are relevant in demonstrating that at the time he was not doing B: SCCL may wish to disclose all such material in order to prove the negative. After Mr Holmes started with GXO, documents evidencing what he was doing are potentially relevant if DHL intends to investigate (as suggested at 13(2) of the skeleton) whether Mr Holmes had contact with his former colleagues during the procurement, and in any event to consider what causative effect any potential conflict may have had.

Added to this is the suggestion that one of Mr Holmes’ former team is the evaluator about whom specific complaint is made by Unipart. It seems to me that if Mr Holmes’ conduct is to be investigated, that should be in the context of all or any allegations which may concern him, directly or indirectly. This interaction would widen disclosure and the scope of any preliminary issue.

The issue could not be determinative of litigation without causation being considered. It is difficult to see how causation could properly be investigated in a vacuum from all the alleged breaches, and it certainly would be a most inefficient way of doing so.

The amount of factual evidence and exploration would therefore be significant. This is obviously an extremely serious allegation both for GXO, SCCL and of course for Mr Holmes personally. The suggestion that it could be carried out in a few days with limited disclosure and limited evidence in the near term is wholly implausible. It is difficult to think of the sort of issue that is further away from the situation considered by Kerr J in Vodafone Ltd v SS for Justice [2021] EWHC 2793 (TCC), (2021) 200 Con LR 82, which related to a straightforward, largely document based evaluation criteria analysis, with limited scope for disputed factual evidence.

I therefore dismiss the application for a preliminary issue as advanced by DHL.

In relation to the possibility of expediting the whole of the trial generally, as the exploration of just one of the issues has illustrated, preparation for trial will involve considerable work. As indicated at the outset, virtually every type of complaint is made and the trial will involve the claims by three bidders, and the central involvement of a member of staff from the successful bidder, together with the Defendant. It seems highly unlikely that even with an expedited timetable, this matter would be ready for trial in less than 12 months, but assuming the hearing is (at best) 16 days and (perhaps pessimistically) 24 days, the TCC is not likely to be able to accommodate such a trial until Autumn 2026. With judgment (and ignoring any appeal), a delay to Contract Award if SCCL is successful is likely to be in the order of 2 years.

The Claimants identify between them a number of factors which, they say, weigh heavily in the balance of convenience in their favour. The first is problems that the procurement process has encountered so far, both in terms of the ‘mistakes’ that have been made and the general length of time/delays. In circumstances where I cannot and should not form a view on the merits of the parties’ positions substantively, it is difficult to see where the point about the ‘mistakes’ goes. At least in the circumstances of this case, the fact that certain admissions have been made make it no more or less likely that the allegations which are disputed will be made out. There has been some delay in the process so far, and it is a factor which weighs to some degree in the Claimants’ favour, but it is far from an overwhelming or determinative point.

The next is the risk that the Defendant will have to ‘pay twice’. It could be said that the odds of SCCL having to pay, if not twice, at least more than once have increased in circumstances where there are complaints from all three complaining bidders. Moreover, liability has been admitted in respect of a breach in the Wincanton claim, although liability for damages has not. The related point is the understandable and strong public interest in SCCL complying with its legal obligations in respect of public procurement. However, these points, as stated by Joanna Smith J in Kellogg Brown & Root v Mayor’s Office for Policing and Crime at [2021] EWHC 3321; 200 Con LR 116, have already been answered by the judgments of Stuart-Smith J in Openview, Kent, and Alstom. As he made clear, important though these factors are, they should not be a reason for maintaining the automatic suspension if it is otherwise inappropriate to do so.

In circumstances where DHL have not established that it would be unjust, in all the circumstances, that it be confined to a remedy of damages, the balance of convenience question does not in reality arise; and if it did, in the circumstances where damages are likely to be inadequate for SCCL, the balance of convenience falls firmly in SCCL’s favour.

In these circumstances, when considering Unipart as the only party able to demonstrate that it would at least arguably be unjust for it to be confined to a remedy in damages, the balance of convenience question must be considered in the context of its own decision not to challenge the procurement process when excluded. In line with CSC, this delay counts heavily against Unipart, and the balance falls determinatively again in favour of SCCL.

For the sake of completeness, I consider the position had DHL established, contrary to my finding above, that damages were inadequate. Had this been the case, I would nevertheless have concluded that the risk of creating the least injustice lies with allowing the suspension to be lifted. The public interest in the circumstances of this case in light of the importance of the contract for national infrastructure and the potential implications for considerable delay plainly outweigh the potential injustice to DHL and Unipart (even putting to one side Unipart’s own failure to challenge the progression of the procurement when it was excluded).

In the circumstance, the application to lift the suspension succeeds.