Suspension of Contract

May 22nd, 2019 by James Goudie KC

Kenson Contractors v Haringey LBC (2019) EWHC 1230 (Admin) was an application made by the Claimant contractor, for an interim injunction against the Council to suspend its decision to award or execute a road-improvement contract to the Interested Party, Marlborough Highways Limited (“MHL”). Kenson came second in the procurement exercise for that contract and MHL came first. Because of the value of the contract (some £630,000 plus VAT) this procurement exercise was well below the threshold for the operation of the otherwise relevant parts of the Public Contracts Regulations 2015.  The underlying claim was brought by way of judicial review (“JR”) of the Council’s decision to award the contract to MHL rather than Kenson.

The question of whether permission should be granted for this claim was not before Waksman J. Indeed, the time for service of the acknowledgments of service from MHL and the Council had not yet expired.

Waksman J observed:-

“24. In many, but by no means all, cases where interim relief is sought in JR proceedings, the Court might decide that question at the same time as dealing with permission. If so, it is obvious that if permission is not granted, interim relief will not be either. If permission is granted, interim relief may still not be appropriate.

25. But often (and this case is a good example) the Court will be dealing with the question of interim relief alone. What might happen subsequently at the permission stage is not directly relevant. That is, not least, because by the time the Defendant (and any Interested Party) has served an AOS and the summary grounds of defence, the arguments and evidence may have moved on. It is not uncommon for interim relief to be granted only to be discharged at the permission stage when on a closer analysis, it appears that there is no arguable case to go forward.

26. So while the permission stage involves a consideration of the merits, I do not think it is particularly useful for the Court at an earlier stage to make predictions about whether permission will or will not be granted thereafter, so far as general merits are concerned. The assessment of merits in the injunction context should focus principally on the merits as the Court perceives them to be at the time. The corollary of this is that merely because a Court on an application for interim relief is satisfied that there is a serious issue to be tried (see below) that does not mean that when permission is later considered, it will or must be granted.”

Waksman J addressed “serious issue to be tried” and then “balance of convenience”. As to the latter, Waksman J observed:-

“35. … if damages in practice are generally unavailable in a JR claim on a free-standing basis (or at any rate would not be awarded in the instant case) the logical consequence is that they simply fall out of account altogether because the issue is irrelevant. The removal of the question does not create a presumption in favour of either side on the balance of convenience. It just means that the balance of convenience focuses on other things. …

37. In a case where the defendant may suffer a financial loss if the injunction was wrongly granted, the Court will, of course, then consider the provision of a cross-undertaking in damages by the claimant.”

“40. It is clear that where appropriate, the Court can take into account within the balance of convenience exercise the substantive merits: … In my judgment, this is not limited to cases where the only dispute is as to law, such that the view of the merits is likely to be decisive … Even if there is some element of factual or analytical dispute, the merits can in an appropriate case be taken into account. Precisely how they are taken into account will depend on the other balance of convenience factors, the nature of the JR claim and the response thereto, and whether the merits are particularly clear in one direction such that it can be said, for example, that the claimant has a plainly or clearly strong – or weak – case. Where the prospects of success are more nuanced, the exercise of looking at the merits is not likely to be productive or appropriate.

41. In my judgment, I also consider that where, as in this context, the adequacy of damages for the claimant is not a live issue, there is probably more justification for taking merits into account at the balance of convenience stage; …”

As regards justiciability, and whether the decision of the Council concerned with a contract, or the award of a contract, should be susceptible to a claim for JR, Waksman J said that the following considerations (at least) will be material in deciding whether the necessary public element is present:-

“(1) The nature and status of the particular public body concerned: this may be relevant because some such bodies may have an obviously greater public importance than others;

(2) The subject matter of the contract in question: this will include the status and nature of the other party or tenderers, along with the nature and scope of the works and the extent to which they might be described as “public-facing” and/or for the benefit of the public; also relevant is the source of funding; however, it must be borne in mind that as the contract put out to tender is being awarded by a public body, there will usually be some element of public funding and the contract will usually have some public connection;

(3) The source of the tender process used: that is to say, whether the particular process employed was specifically mandated to the defendant body, for example by statute or some other binding provision, as opposed to one essentially devised by that body; it will be relevant to know whether the body was purporting to comply with any statutory obligation in seeking tenders for this contract or whether it was simply empowered to do so;

(4) The nature of the challenge: this can take a variety of forms, including arguments that:

(a) there was a failure by the relevant body to comply with some aspect of the mandated process or some other statutory obligation relating to it;

(b) the particular policy or process adopted by it was itself unlawful in a public law sense;

(c) the actual decision in question involved fraud, corruption or bad faith on the part of the relevant body;

(d) in carrying out the process (in particular the scoring of rival bidders) the relevant body acted unfairly or irrationally.

Waksman J continued:-

“46. Something more needs to be said about the fourth factor, the nature of the challenge. Obviously, if the relevant body acted outside or in breach of its statutory obligation or power, that will generally be viewed as a more serious matter than acting irrationally in a particular case. Equally, a challenge to the lawfulness of the policy or process itself may be regarded as more substantial or fundamental than how it is applied in one case. Thus …, some grounds of challenge “score more highly” than others in this context. But there is a risk of confusing (a) the nature of the challenge in the context of justiciability with (b) whether the public law challenge can actually be made out. Thus, to say that if the relevant body does no more than exercise commercial judgment, there can be no public law claim may be saying no more than that in such a case, grounds of JR unlawfulness cannot be made out. It is akin to saying that there is no viable claim to set aside a decision of the Planning Inspector because the relevant decision was no more than an exercise of planning judgment.

47. In the justiciability context, the point is rather that if the challenge is only one of irrationality within the scoring process, that may well not be sufficient. …

48. … In the tendering process scoring context, I think that the question whether the challenge involves more than scrutinising the “nuts and bolts” of the process as it applies to the individual applicant, is an important one.”

“56. I consider that there is a strong argument that this case is not justiciable. There are obviously significant local public benefits to the contract works which have been identified by the Council and at least some of the funding is public. But on the other hand, this is in reality no more than a “nut and bolts” challenge to the scoring as it affects one commercial bidder in a contract of modest value. It is not suggested that the marking system is itself unlawful or that the Council has acted in breach of any statutory obligation.”

Waksman J found that the serious issue to be tried threshold was made out – just, but that the claim on any view was clearly a weak one.  He found that the balance of convenience plainly favoured the Council for various reasons. He refused interim relief.

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