Since 2009 a peculiar remedy has been lurking in the Public Contracts Regulations. It is a remedy that is rarely litigated and therefore remains somewhat shrouded in mystery. It is the remedy of ‘ineffectiveness’ - namely the ability of the court to put an end there and then to a publicly procured contract that has been awarded in certain circumstances in breach of the Regulations. Alongside the declaration of ineffectiveness (and in addition to any award of damages) the court must impose a mandatory civil penalty on a contracting authority found to be in breach. That penalty must be “effective, proportionate and dissuasive".
When we advise clients on the risks of ineffectiveness we are commonly asked what level of civil penalty is considered to be ‘effective, proportionate and dissuasive’.
In Faraday Developments Ltd v West Berkshire Council [2018] EWHC 2532 the court in England & Wales considered this question for the first time and imposed a nominal penalty of just £1. However, the facts of Faraday were very particular and it was widely considered that the civil penalty imposed should not be considered a precedent in other cases.
However, in a judgment handed down on 29 July 2022 the court has given a much clearer picture of what the appropriate level of civil penalty might be. In Consultant Connect Limited v (1) NHS Bath and North East Somerset, Swindon and Wiltshire Integrated Care Board (2) NHS Gloucestershire Integrated Care Board and (3) NHS Bristol, North Somerset and South Gloucestershire Integrated Care Board [2022] EWHC 2037 (TCC) penalties of £10,000, £8,000 and £4000 were imposed on the Defendants. The highest penalty followed conduct which the judge considered to be the worst breach of the requirements of the Regulations particularly regarding fairness and transparency. The lowest penalty was imposed for less serious conduct but for willing participation in a procurement exercise which the Authority “should have known…was unlawful”.
It is also worth noting in the context of the penalties imposed that an argument that they would deplete already scarce public funds was not accepted.
So we know have some kind of scale by which “effective, proportionate and dissuasive” can now be judged. What I suspect is now taxing the lawyers for the Defendants is how exactly, to whom and over what timescale the penalties should be paid.