BY Development Ltd & Ors v Covent Garden Market Authority

Introduction

By an application originally made before Ramsey J at the CMC on 12^th July 2012, the claimants seek an order permitting them to adduce expert evidence in relation to both planning and finance issues at the trial of this action, currently fixed for January 2013. The application raises an important issue as to the extent, if at all, to which expert evidence can be admissible or relevant in a procurement dispute under the Public Contracts Regulations 2006 (as amended).

Nature of Dispute

The defendant is a statutory corporation which owns a large site next to Vauxhall Cross in South London where, for almost 40 years, the New Covent Garden Market has operated. The defendant wishes to redevelop the site. It began a tender process in March 2010. The procedure utilised was known as the competitive dialogue procedure which, following pre-qualification, involves three stages: stage 1, being initial dialogue and submission of outline solutions; stage 2, being the detailed dialogue; and stage 3, being the submission of final tenders.

The claimants reached stage 3 of the process. However, on 27 March 2012, the defendant issued a notice under Regulation 32, notifying the claimants that their tender had not been successful and that the defendant intended to award the development contract to a rival bidder, VSM.

In these proceedings, the claimants seek to challenge that decision. They contend that the defendant’s evaluation of the respective bids contained a number of manifest errors, particularly in relation to planning matters. In the alternative, they contend that the decision was unfair and/or arose as a result of the unequal treatment of their bid. Until these claims have been resolved, this large London development cannot proceed.

The Claimant’s Application

At the CMC in July, the claimants applied for permission to rely on expert evidence in the fields of both planning and finance (another area of the evaluation in respect of which the claimants say that the defendant made manifest errors and/or acted unfairly). Although Ramsey J expressed a general doubt as to whether such evidence was admissible in a case of this sort, he reached no concluded view. Instead, he required the claimants to identify those issues on which they said expert evidence was required. He allowed the defendant time in which to respond and fixed a hearing for 6 September 2012 for the matter to be argued out if the parties were unable to agree.

On 15 August 2012, the claimants identified their proposed questions for the experts. The planning questions were as follows:

“(1)

Whether the claimant’s tender was not compliant with planning policies, emerging policies and/or published planning guidance and, if so, in which respects (pleaded in particular at paragraph 90 and 91 (b), (c) and (d) of the CPoC, paragraph 97(1) and 99(1) of the AD, paragraph 60 of R).

(2)

Whether the Claimant’s tender provided a comprehensive and substantiated planning scheme (pleaded in particular at paragraph 91(1)(a) of the CPoC and paragraph 97(2) of the Defence and paragraph 60 of R).

(3)

Whether the Claimant’s planning strategy involved a much higher planning risk than VSM’s and/or whether VSM had adopted a lower risk planning strategy (pleaded in particular at paragraph 83(1) and 91(1)(b) of the CPoC, paragraphs 98(1), 99(2), 103(2), 103(4) and 111(1) of the AD, and paragraphs 61-63, 64, 77, 81 of R).

(4)

Whether VSM’s bid included significant planning risks and/or weaknesses (pleaded in particular at paragraphs 84(2)(f)(v) and 91(1)(b) of the CPoC, paragraph 99(2) of the AD, and paragraphs 64 of the R), and if so which risks and/or weaknesses.

(5)

Whether the Claimant’s assumptions relating to tariff and/or CIL payments were inconsistent with the Claimant’s planning strategy statements and/or the draft CIL policy position and/or too low and/or a much greater underestimate than those of VSM (pleaded in particular at paragraph 83(3) of the CPoC and 112(7)(c) of the AD).

(6)

Whether a full planning application for a 175m tower on the Northern site was necessary and/or whether LB Wandsworth was unlikely to accept an outline planning application (paragraph 97(3) of the AD and paragraph 60(3) of R).

(7)

Whether a planning application based on the Claimant’s scheme in its tender would have been rejected and/or whether the Claimant’s scheme presented at tender posed a much greater risk of not obtaining planning permission than the scheme presented during dialogue (if different) (pleaded in particular at paragraph 28, 126 of the AD and paragraph 95(d) of R).”

In addition, the proposed questions for the financial experts were as follows:

“(1)

What were the financial risks in both bids, in particular in relation to IRR proposals, credit ratings of guarantors, and issues relating to debt/the placing of equity at risk.

(2)

Was VSM’s finance solution more risky than that of the Claimant, in particular in relation to IRR proposals, credit ratings of guarantors, and issues relating to debt/the placing of equity at risk.

(3)

What is the difference between credit ratings of AA, Aa3 and A+? Are credit ratings of A+ and Aa3 materially weaker than a credit rating of AA.”

The defendant responded on 23 August 2012 setting out why, in its view, expert evidence was neither admissible nor relevant. The matter was then debated before me at the hearing on 6 September 2012 at which, amongst other things, reference was made to a number of authorities. I indicated at the close of that hearing that I would reserve my decision and provide my reasons in writing. Accordingly, I propose to set out some general principles of law before looking at the procurement cases in particular, and then go on to give my answer to the question raised by the application.

General Principles of Law

Under the 2006 Regulations as amended, the principal way in which an unsuccessful bidder, such as the claimants, can challenge the proposed award of a contract to another bidder is to show that the public body’s evaluation of the rival bids either involved a manifest error or was in some way unfair or arose out of unequal treatment. Accordingly, in deciding such claims, the court’s function is a limited one. It is reviewing the decision solely to see whether or not there was a manifest error and/or whether the process was in some way unfair. The court is not undertaking a comprehensive review of the tender evaluation process; neither is it substituting its own view as to the merits or otherwise of the rival bids for that already reached by the public body.

In Upjohn Limited v Licensing Authority Established Under Medicines Act 1968 and Others [1999] 1 WLR 927, the CJEC stressed this limited function at paragraph 34:

“According to the court’s case law, where a Community authority is called on, in the performance of its duties, to make complex assessments, it enjoys a wide measure of discretion, the exercise of which is subject to a limited judicial review in the course of which Community judicature may not substitute its assessment of the facts for the assessment made by the authority concerned. Thus, in such cases, the Community judicature must restrict itself to examining the accuracy of the findings of fact and law made by the authority concerned and to verifying, in particular, that the action taken by that authority is not vitiated by a manifest error or a misuse of powers and that it did not clearly exceed the bounds of its discretion.”

At paragraph 37 they went on:

“…Community Law [does] not require the Member States to establish a procedure for judicial review of national decisions revoking authorisations to market proprietary medicinal products, empowering the competent national courts and tribunals to substitute their assessments of the facts and, in particular of the scientific evidence relied on in support of the revocation decision, for the assessment made by the national authorities competent to revoke such authorisations.”

The test of ‘manifest error’ applied in the European cases, which is that required by the 2006 Regulations, is very similar to, if not the same as, the Wednesbury test of irrationality in domestic judicial review proceedings: see Upjohn and paragraph 74 of the judgment of Hidden J in R v The Licensing Authority (Ex Parte Novartis), a judgment dated 30 March 2000.

In domestic judicial review proceedings, it is very rare for expert evidence to be either relevant or admissible. The reasons for that were fully set out by Collins J in R (on the application of Lynch) v General Dental Council [2003] EWHC 2987 (Admin). He concluded that, in most JR cases, expert evidence will not be admissible, particularly where the public body making the decision under review is itself composed of experts or has been advised by an expert assessor. He said of such cases at paragraph 25:

“ it will be virtually impossible to justify the submission of expert evidence which goes beyond explanation of technical terms since it will almost inevitably involve an attempt to challenge the factual conclusions and judgment of an expert.”

Collins J did, however, draw a distinction between a report from an expert “which seeks to explain what is involved in a particular process and how complicated that process is”, and a report which goes on to opine that it was irrational for the public body to have reached the conclusion it did. As to the latter, he thought that such a report would involve an illegitimate usurpation of the court’s function. However, as to the former, he accepted that, in a truly technical field, expert evidence might be admissible to explain the technical terms and concepts. Even then, he said that “cases where this can be permitted will be very rare and what I have said should not be regarded as opening the door to the admissibility of experts’ reports in all cases such as this which involve judicial review of an expert tribunal or body.”

The conclusions of Collins J in Lynch were similar to those reached by Hidden J in R v The Licensing Authority (Ex Parte Novartis). In the latter case, again concerned with the licensing of drugs, the judge emphasised “the difficulties in the judicial review process in seeking to have the evidence of one expert witness preferred to that of another by the reviewing court in a contrary manner to the decision arrived at by the body under review”. He accepted the defendant’s submission in that case that, in an application for judicial review, it was inappropriate to invite the court to engage in a debate between experts on matters of scientific opinion (paragraph 49 of the judgment). He said that the court should respect the judgment of the decision-maker “unless it had no rational basis”.

The Public Procurement Cases

The correct approach to the test of “manifest error” in public procurement cases is set out at paragraph 35-38 of the decision of Morgan J in Lion Apparel Systems Limited v Firebuy Limited [2007] EWHC 2179 (Ch), where he said:

“35.

The court must carry out its review with the appropriate degree of scrutiny to ensure that the above principles for public procurement have been complied with, that the facts relied upon by the Authority are correct and that there is no manifest error of assessment or misuse of power.

36.

If the Authority has not complied with its obligations as to equality, transparency or objectivity, then there is no scope for the Authority to have a “margin of appreciation” as to the extent to which it will, or will not, comply with its obligations.

37.

In relation to matters of judgment, or assessment, the Authority does have a margin of appreciation so that the court should only disturb the Authority’s decision where it has committed a “manifest error”

38.

When referring to “manifest” error, the word “manifest” does not require an exaggerated description of obviousness. A case of “manifest error” is a case where an error has clearly been made.”

That approach has been endorsed and followed in a number of subsequent procurement cases including, most recently, the decision of Ramsey J in Mears Limited v Leeds City Council [2011] EuLR 464.

In Letting International Limited v London Borough of Newham [2008] LGR 908, Silber J was dealing with allegations of manifest errors in the defendant Council’s tender evaluation process. Having set out the relevant principles from the judgment in Lion Apparel, the judge went on to consider each of the alleged errors in the evaluation. However, he emphasised that, in so doing, he was not carrying out a re-marking exercise, in order to substitute his own view for that of the local authority, “but to ascertain if there is a manifest error, which is not established merely because on mature reflection a different mark might have been awarded.”

On the facts of that case, Silber J found that there had been a manifest error in relation to the authority’s marking on size and that, in addition, there was “probably” another manifest error relating to disability discrimination. But the first error was admitted by the defendant’s principal witness of fact, and the second was not capable of rational explanation by the same witness. No other manifest errors were found. In addition, the judge decided that the manifest errors were not causative because, even making allowances for them, the claimant’s tender would still have been unsuccessful. The exercise undertaken by the judge was a straightforward factual investigation: Silber J had regard to no expert evidence in reaching these conclusions. Indeed, procurement disputes of this type have not generally involved expert evidence.

Notwithstanding that general position, Ms Hannaford was able to identify three procurement cases where, on the face of it, expert or opinion evidence was admitted. However, on analysis, it seems to me that there were particular reasons why, in each case, that was so. Thus:

In summary, I consider that the authorities demonstrate that, where the issues are concerned with manifest error or unfairness, expert evidence will not generally be admissible or relevant in judicial review or procurement cases. That is in part because the court is carrying out a limited review of the decision reached by the relevant public body and is not substituting its own view for that previously reached; in part because the public body is likely either to be made up of experts or will have taken expert advice itself in reaching the decision; and in part because such evidence may usurp the court’s function.

All of that said, however, I believe that it goes too far to say that expert evidence can never be admissible in public procurement cases concerned with manifest error. In some cases, it may be required by way of technical explanatory evidence (Lynch). In addition, there may be other cases where, unusually, such evidence is both relevant and necessary to allow the court to reach a conclusion on manifest error. That may be particularly so where the particular issue is specific and discrete, such as a debate about one of the criteria used in the evaluation (Henry Bros) or complex issues of causation (Harmon). Thus, I do not accept the submission, trailed at one point in Mr Giffin’s skeleton argument, that, if expert evidence is required to support an allegation of manifest error, that would of itself indicate that the error could not be manifest. In my view, that would always depend on the facts of the particular case.

Having concluded that expert evidence is not generally admissible in a case of this type, but that there may be unusual circumstances which justify the use of experts, I turn to the particular facts of this case. Is this a claim where the technical background is so complex that explanatory expert evidence is required, and/or is this an unusual case where expert evidence on some or all aspects of the tender evaluation process is required in order to allow the court to reach a proper view on the issues of manifest error or unfairness?

Technical Explanation

Ms Hannaford submitted, albeit as part of her fall-back argument, that the expert evidence which she wanted to adduce was admissible because the planning and financial issues raised in these proceedings were complex, such that expert evidence was necessary to explain the technical background. For a number of reasons, I reject that submission here.

First, it does not seem to me that the questions which have been postulated by the claimant (see paragraph 6 above) touch in any way at all upon background or explanatory technical issues. On the contrary, I consider that they all go to elements of the evaluation itself. In those circumstances, the need for such evidence to explain background technical matters is not made out. Indeed it is not even clear whether there are any substantive disputes between the parties as to the technical background to the evaluation.

Secondly, I am mindful of the warning of Collins J in Lynch. The need for explanatory expert evidence should be carefully assessed. It is only where there is a complex technical field where explanation is required in order for the court to reach a conclusion that such evidence should be permitted. I have seen nothing in this case which leads me to conclude that such complexities arise here. On the contrary, this claim seems to me to require a relatively straightforward consideration of planning and financial matters: in essence, in undertaking the evaluation, the defendant had to decide the extent to which the respective bids represented a planning risk (i.e. that planning permission would not be granted) and would deliver proper value. The court has to review that process in the limited manner outlined above. As things stand, that does not seem to me to be a technically complex task. I agree with Mr Giffin that, on the face of it, the exercise is no different to a review of a planning decision in the Administrative Court, which does not involve or require competing expert evidence.

Thirdly, in my experience, if there is a genuine need for explanatory expert evidence, that will usually emerge much closer to the trial, following the exchange of witness statements. In such cases, where the parties agree that there are very specific areas of debate which may require explanatory evidence, they are usually able to agree on a joint expert to deal with those specific matters, whose evidence is adduced in writing and in respect of which there is no cross-examination. Thus, even if I am wrong, and a need for some sort of technical explanation emerges closer to trial, that could be the subject of the process which I have outlined. It is certainly not necessary to order each party to adduce their own expert evidence at this stage in order to provide technical explanation about planning and finance.

I have dealt with Ms Hannaford’s fall-back argument first for this reason. It seemed to me from the outset that, on any view, the questions that were set out in the letter of 15 August 2012 were not questions designed to elicit general technical explanations, but were questions which went to the heart of the dispute between the parties, namely the tender and evaluation process itself. Thus the real issue raised by this application is whether, despite the general rule outlined above, this is an unusual case where, in all the circumstances, the court should admit opinion evidence as to the way the tender process unfolded and the merits or otherwise of the defendant’s evaluation of the respective bids.

Manifest Error/Unfairness

I should express my view at the outset that, in disputes under the 2006 Regulations, a claimant, who is almost invariably the party whose bid has been unsuccessful, can often be at something of a disadvantage in mounting a challenge to the decision. That claimant has had no involvement in the detailed evaluation, so does not know precisely why its bid was unsuccessful. In the first instance, it is entirely dependent on the information which it is given by the defendant. Even once the proceedings have commenced, and further information has been provided (usually with a greater or lesser degree of reluctance) the claimant often remains unclear as to precisely what happened during the evaluation exercise. Against that background, I can see that the possibility of being able to rely on a detailed expert’s report, dealing with all aspects of the evaluation, and out of which a case as to manifest error or unfairness might emerge, would be at least superficially attractive to a claimant.

However, for the reasons abstracted from the authorities, and summarised in paragraph 20 above, I consider that such an approach is wrong. Given the limited nature of the court’s review function, such expert evidence will not generally be admissible unless there are particular reasons why, on the facts of the case in question, the costs, time and effort required to present such opinion evidence could be justified.

In my view, this is not an unusual case. On the contrary, the exercise for the court at the proposed trial in January is very similar to that undertaken by Silber J in Letting International: a factual investigation of each of the specific matters said to constitute manifest error or unfair and unequal treatment. Expert evidence would neither be admissible in nor relevant to such a limited exercise.

In my view, a consideration of the particular questions raised in the letter of 15 August only confirms that conclusion. The questions appear designed to permit nothing less than a complete re-run of the evaluation process, with the experts commenting on each element of the tenders and their evaluation, and seeking to substitute their views for those held, and the decisions taken, at the time. The questions ignore the limited review task for the court at trial, and erroneously assume that a complete replay of the whole evaluation process will be allowed.

One particular example of this mischief will suffice. Proposed question 6 for the planning experts is whether or not the London Borough of Wandsworth would have accepted an outline application for planning permission for a 175m tower. In my view, the opinion evidence of a planning expert, reached some time after the event, as to what a third party local authority might have done had it received a hypothetical planning application, is not going to be of any meaningful assistance to the judge in deciding whether or not there was a manifest error in the assessment of planning risk.

As noted above, expert evidence may be more likely to be admissible in these cases if it goes to a specific issue. But here, the proposed evidence does not go to discrete matters, such as the particular criteria used in the evaluation process (Henry Brothers) or questions of causation (Harmon). Instead, as I have already said, the questions purport to deal with the entire evaluation process.

In addition, there is a clear inference from these questions that the experts are being invited to say, not only that it is their view that, for example, the claimants bid did not represent an unreasonable planning risk (and/or that VSM’s bid did represent such a risk), but that also, in reaching the contrary conclusions, they are of the opinion that the defendant was manifestly wrong. That evidence would usurp the function of the court. It is the type of evidence which, for that reason, Collins J in Lynch concluded was inadmissible.

I should also say that, in connection with the unfairness/unequal treatment aspect of the claim, I am inclined to agree with Mr Giffin that it is difficult to envisage any case where expert evidence on such issues could be admissible. That does not seem to me to be a proper matter for expert evidence. Ms Hannaford was not able to point to anything, either in the cases or on the facts of this case, which suggested the contrary.

In essence, I conclude that the proposed questions raised by the claimants do not demonstrate that this is an unusual case where the general rule, that such expert evidence is inadmissible in a dispute of this sort, should not apply. On the contrary, even if this is a big project, and therefore an important claim, I am firmly of the view that the limited factual investigation to be undertaken by the court, of the kind carried out in Letting International, would not be assisted by such expert evidence.

Accordingly, for these reasons, I have concluded that expert evidence addressing the questions formulated in the letter of 15 August 2012 is neither admissible nor relevant. I therefore refuse the claimants application. I am however grateful to both Ms Hannaford and Mr Giffin for the clarity with which the topic was debated. I invite the parties to agree the appropriate order for costs.