Mandatory suspension - the first judgment is out!

Further to our earlier blog post, Mills & Reeve have advised the successful party, Colchester Institute, in what we believe to be the first reported case under the Public Contracts (Amendments) Regulations.

In Indigo Services UK Limited v Colchester Institute Corporation [2010] EWHC 3237 (QB) judgment on the contracting authority applying to lift the automatic suspension was handed down on 1 December 2010.

In Indigo the Defendant contracting authority was re-tendering a cleaning contract which was due to expire on 31 December 2010. Due to the need to re-employ staff and to ensure a smooth handover between contractors at least a month's 'mobilisation period' was required before the new contract could begin and if there was no cleaning provision the Institute would not be able to re-open in January 2011 after its Christmas break.

Indigo were the incumbent bidder. However they failed to win the newly tendered contract and issued proceedings before the contract was signed with the successful bidder. The contract could not now be signed and the Institute found itself in a situation where one contract was due to run out no new contract could be entered into and it could not open to students staff and members of the general public without that provision in place.

At the hearing on 26 November 2010 before D Donaldson QC sitting as a Deputy High Court Judge it was submitted on behalf of Indigo that the continued suspension was essential because if the Institute were allowed to sign the contract with the successful bidder Indigo would lose its primary remedy: the suspension on signing the contract. Allied to this argument was a submission that what the contracting authority should and could easily do was extend the existing contract with Indigo whilst it re-ran the procurement. Such an extension need only last a couple of months thereby ensuring that the Institute could re-open after Christmas.

It was further argued that damages would not be an adequate remedy as Indigo's losses were not easily quantifiable and that the balance of convenience (a key if somewhat nebulous factor in deciding whether an injunction should be granted) lay with Indigo because the contract could be extended.

The Institute argued that damages were clearly an adequate remedy for Indigo that it could not extend the contract with Indigo without being in breach of EU law and that the potential harm of an indefinite closure whilst the matter was considered by the court was irreparable. It argued that if the court accepted the solution of simply extending an existing contract to allow a procurement to be re-run this would amount to an incumbent's charter whereby a disappointed incumbent bidder could subvert the purpose of the public procurement regime by contract extensions which only an incumbent contractor could benefit from.

The court was content to treat the application as though it was an application for an injunction and applied the legal tests established by American Cyanamid in deciding whether the stay should be lifted.

The decision turned on where the judge considered the balance of convenience lay. Despite a conclusion that there was a serious issue to be tried and that damages may not be an adequate remedy for Indigo he considered that the prejudice that might be suffered by the closure of the Institute with its impact on a wide section of the public far outweighed any possible harm to Indigo.
This judgment has been keenly awaited by all those involved in procuring public services as it had been difficult to predict whether the courts might try to develop a new legal framework in order to consider a new remedy or simply apply tried and trusted principles that have applied to injunctions for many years.

Although only the first case Indigo demonstrates a reluctance by the court to depart from those well established principles despite the fact that in doing so disappointed bidders are arguably deprived of the effective new remedy they thought they were getting. Such an outcome whilst reassuring to public bodies may not be what the legislators in Brussels intended and could ultimately put the English interpretation of the Directive in conflict with the interpretation favoured in Europe.

A copy of the judgment is available from Monckton Chambers. Philip Moser represented Colchester Institute at the hearing. For further details please contact Helen Prandy of our procurement disputes team.

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