Penny Wise And Pound Foolish ...

The famous historian Thomas Macaulay apparently noted that Frederick William I of Prussia a man not short of a bob or two was known to have saved 5 or 6 reichsthalers (coins) a year by feeding his family unwholesome cabbages even though the poor diet sickened his children and the resultant medical care cost him very much more than he saved. The false economy of such an approach is obvious but its lure remains and very often becomes an issue in litigation.

It is no secret that legal proceedings can be expensive. A big loser in the previous government's austerity project was the Ministry of Justice whose budget has faced a huge reduction. This has meant that alternative means of funding had to be found leading to a very significant increase in court fees. In March 2015 the cost of issuing a claim where damages were expected to be in excess of £200,000 rose to £10,000.

In a public procurement context it is very easy to see how damages for the failure to win a substantial public contract could be in excess of £200,000. Unlike most litigants however a Claimant in a public procurement case only has a maximum of 30 days (and perhaps as little as 10 where a standstill period is not extended) in which to decide whether to bring a claim and that frequently means that Claimants are immediately faced with the prospect of paying out a substantial and irrecoverable court fee without having any real idea of the strength of their case.

It is hardly surprising therefore that some Claimants choose to issue proceedings seeking only a 'declaration' that the process was in breach of the Regulations. *Until recently that cost just £480. Once issued however it is not uncommon for the claim to be amended to seek damages once more is known about the merits.

Like Frederick William's cabbages such an approach is undoubtedly superficially attractive (at least from a cost if not a dietary point of view) but there are significant risks.

Firstly if you issue a claim for a declaration only and a Contracting Authority succeeds in lifting the automatic suspension then there is effectively no further remedy as the claim has not been issued for damages.  Result: the claim fails and you pay the Authority's costs and your own.

Secondly the courts have taken a very strict line with Claimants deliberately issuing at a low fee and then seeking to amend to claim damages once those proceedings are up and running. That has been held to amount to an abuse of process and could lead to the court  striking out the claim. Result: the claim fails and you pay the Authority's costs and your own.

Thirdly and most significantly in a procurement context claims are only regarded as 'brought' within a limitation period where the Claim Form is delivered along with the 'appropriate fee'. Where the incorrect fee is paid then a claim will not be considered to have been brought in time for the purposes of limitation. Where the limitation period is very short as it is in procurement cases that would mean that a court would consider that any claim for damages has not been brought in time where only the fee for a declaration is paid on issue. Result: the claim fails and you pay the Authority's costs.

This case law has not yet been tested in a procurement context but is likely to be followed.  At the very least it is likely to tie the claim up in expensive satellite litigation.

A far better approach would be to pay a realistic fee for damages (the fee for claims up to £199,999 is 5% of the claim value) based on a reasonable and justified assessment of the facts at the time of issue and then present a cogent case to the court if amendment is subsequently needed. Result: the prospect of success an award of damages and the Authority has to pay your costs as well as its own. Much better than cabbages!

*From Monday 25 July 2016 the cost of seeking a declaration has increased to £528.

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