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A cautionary note for successful bidders – the cost consequences of failing to act reasonably


A cautionary note for successful bidders – the cost consequences of failing to act reasonably

February 1, 2018 10:11 AM | Posted by Smith, Ruth | Print this page

What do you do when you’re a successful bidder and a challenging bidder seeks disclosure of confidential documents contained within your tender? Whilst instinct might be to vehemently oppose this, one successful bidder has recently had to pay the price (in costs) of doing so.

The facts

This was a procurement claim brought against Merseytravel by an unsuccessful bidder, Bombardier Transportation UK Limited (“Bombardier”) in the Technology and Construction Court (“TCC”). The successful bidder was Stadler Bussnang AG (“Stadler”) who was not a party to the proceedings.

Bombardier made an application relating to disclosure of what were termed “highly sensitive documents” (“HSD”). The HSD included elements of Stadler’s tender. The most important aspect of Bombardier’s application was that disclosure of the HSD should be to all persons within the confidentiality ring, not just the lawyers. This was because of the difficulties they were having in understanding Stadler’s tender.

The Defendant, Merseytravel, took a neutral position on the application but Stadler opposed it.
The TCC granted the majority of Bombardier’s application (save for a request to add an additional named person to the confidentiality ring). The question then arose as to the costs of the application and who should be responsible for these? The TCC noted that this was a potentially important point for procurement cases as it concerned the potential liability for costs of a non-party (in this case Stadler), who will often be the successful tenderer.

The law on liability of a non-party for costs

Although cost orders made against non-parties are to be regarded as “exceptional”, this means no more than outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense. The ultimate question in any such "exceptional" case is whether in all the circumstances it is just to make the order, which will inevitably be largely fact specific.
An important consideration will be whether the party against whom costs are to be awarded was in fact the ‘real party’ to the litigation (a critical factor being the nature and degree of their connection with the litigation).

The Courts have also repeatedly held that the trial judge has a wide margin of discretion when considering orders against non-parties.

Decision

Applying these principles, the TCC decided that Stadler should be responsible for Bombardier’s costs in relation to the successful aspects of its application (being the majority of the costs claimed). In deciding this, the TCC made the following points:

• Stadler should have agreed to the application and its objections were unreasonable. The Court rejected out of hand, Stadler’s allegation that Bombardier was using "a tactic routinely deployed by the claimant…to gain access to highly confidential and sensitive material". Stadler went on to allege that, in their view, Bombardier was seeking to deliberately misuse confidential information to "give [Bombardier] an entirely improper competitive advantage". The TCC said this was a serious allegation which was wholly unjustified on the evidence;

• Stadler were the ‘real party’ here. The opposition to the application came only from them, as it related to disclosure of elements of their tender. The Defendant, Merseytravel, was neutral on the issue;

• there was no need for Bombardier to demonstrate exceptional or unreasonable behaviour on behalf of Stadler (which Stadler had argued was necessary before an order against a non-party could be made);

• even if it had been necessary for Bombardier to demonstrate exceptional or unreasonable behaviour on the part of Stadler, the Court felt that they had done this. It would have been both sensible and proportionate for Stadler to agree to the application and it acted unreasonably by not doing so. Stadler also made an unwarranted and unreasonable allegation regarding Bombardier’s motives for seeking disclosure which the Court had rejected out of hand; and

• no formal application would have been necessary had Stadler consented to the application. Had they done so there would have been no need to trouble the Court.

Court’s concluding remarks – and a warning for successful bidders in procurement cases

Having concluded it should exercise its discretion in favour of Bombardier and make an order for costs against Stadler, the Court went on to state an important point of principle, and warning, for successful bidders in procurement cases where similar issues are at stake: It said: “such an order [for costs] will not always be justified against a non-party; it will always turn on the facts. But in procurement cases, successful tenderers will need to consider carefully the balance between, on the one hand, the undoubted confidentiality of their tender documents and, on the other, the need for a proper and fair disposition of the unsuccessful tenderer's challenge. In circumstances where confidentiality rings are common (as in this case), a non-party will need very good evidence before it suggests that the claimant is seeking the documentation for its own commercial advantage, rather than for the purposes of the litigation. Stadler had simply no evidence of that kind at all.”

Comment

The case is a valuable reminder to successful bidders that, even when emotions are high and the disclosure of confidential tender documents to a competitor are at issue, there is still a need to behave reasonably and proportionately; and to avoid making unsubstantiated, or spurious allegations about the motives of the claimant in seeking the documentation. Failure to do so could see a successful bidder (such as Stadler) facing an unexpected and potentially significant order for costs against it.

Case: Bombardier Transportation UK Limited v Merseytravel (No. 3: Costs) (Rev 1) [2018] EWHC 41 (TCC) (17 January 2018). The full judgment is available here.

Posted by Ruth Smith


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