Newsflash: Automatic suspension maintained – first automatic suspension case post NDA

Lancashire Care NHS Foundation Trust & Blackpool Teaching Hospitals NHS Foundation Trust v Lancashire County Council [2018] EWHC 200 (TCC)

Hempsons acted on behalf of Lancashire Care NHS Foundation Trust and Blackpool Teaching Hospitals NHS Foundation Trust (the “Trusts”) in resisting an application made by Lancashire County Council (the “Council”) to lift the automatic suspension in a procurement challenge.

As a result of the claim issued by the Trusts at the end of last year, the Council were automatically suspended from signing the contract with Virgin Care Services Limited (“Virgin”). The Council made an application to lift the automatic suspension. The lifting application was heard on 25 January 2018, and the Court’s judgment has now been handed down.

The claim stems from the Council’s decision to seek to award a contract for Public Health and Nursing Services for children and young people (0 – 19) to Virgin. The process was run under the Light Touch Regime.

Hempsons successfully advised on resisting the application and the Court refused to grant the Council’s application to lift the automatic suspension.

This was the first case in which an application to lift the automatic suspension has been considered since the Supreme Court’s decision in NDA v Energy Solutions in 2017, where the Supreme Court held that for a claimant to receive damages, the claimant would need to demonstrate a “sufficiently serious” breach of procurement law.

The application to lift was considered in accordance with the familiar tests:

1. Was there a serious issue to be tried;
2. Were damages an adequate remedy for either party; and
3. Where did the balance of convenience lie?

We have set out below some of the key issues from the judgment:

• The NDA case states that in order for a claimant to be entitled to damages, the breach of procurement law must be “sufficiently serious”. In this case, Mr Justice Fraser was required to consider how (if at all) the requirement for the breach to be sufficiently serious should be taken into account when the court is faced with an application to lift the automatic suspension, where the adequacy of damages as a remedy is a consideration. On the facts, this issue was not explored in detail, and Mr Justice Fraser was of the view that this is an issue that will require further and more detailed consideration in the future. It was argued that the court could not come to a decision on the question of whether the alleged breaches made by the claimant were or could be classified as sufficiently serious at an early application hearing. Both parties agreed that the point should be taken into account when considering the question of adequacy of damages, as presenting an additional requirement which any claimant had to satisfy to recover damages at all.
• The Council sought to argue that any extension to the existing contract for the services would be illegal. Mr Justice Fraser did not consider this a good point. The judge stated “I cannot, for myself, see why continuing the existing current provision of the services by the Trusts for a short time pending a legal challenge to the procurement exercise, whilst the Council is under an automatic suspension imposed by the Regulations themselves, could be said to be a breach of the Regulations”.
• The Council had argued that because no procurement was conducted for the original contract, then there were doubts about the legality of the Council using the Trusts to continue to provide the services if the suspension is not lifted. Mr Justice Fraser stated “it would be odd (to say the least) that if the Council were in breach of its legal obligations in awarding the existing contracts to the Trusts, it could rely upon its own breach in this respect and be in a stronger position concerning its application that if it had not been in breach of the Regulations in the first place.”
• Mr Justice Fraser did consider the fact that the incumbent providers were public bodies was a factor to be taken into account when considering an application to lift. This fed into the question of whether damages would be an adequate remedy in this specific case.
• The court was able to accommodate an expedited trial. This was also a point, although not a determinative one, which went towards the decision to maintain the suspension.
• Mr Justice Fraser determined that damages would not be an adequate remedy for the Trusts, and in any event, the balance of convenience of maintaining the suspension was overwhelmingly in the Trusts’ favour.
• In terms of disclosure, the Council had initially refused to provide the Trusts with any disclosure in relation to the evaluation of Virgin’s bid. The Trusts made an application for specific disclosure in accordance with the TCC Guidance Note and case law. This was compromised just ahead of the application to lift. Mr Justice Fraser stated “…parties…should strive to save the collective public purse unnecessary expenditure on legal costs, and arguing at length about disclosure is one of the ways in which such wasted expenditure can readily be incurred”. He stated that in his judgment, disclosure “generally ought to be in such a case”. This would be in line with the TCC Guidance Note published last year.

Procurement cases are all fact specific, but this case highlights that public bodies can, and may need to, challenge other public bodies in procurement law disputes. Careful consideration should be given to the issues of early disclosure, and it is not always the case that the automatic suspension will be lifted.

Hempsons’ specialist, integrated procurement and litigation teams will utilise their significant experience to guide you through these issues if you need to challenge a procurement process, or to defend a challenge.

Link to the case is here: http://www.bailii.org/ew/cases