Openview Security Solutions Ltd v The London Borough of Merton Council

The Defendant Local Authority (“Merton”) applies under Regulation 47H of the Public Contracts Regulations 2006 (as amended) to set aside the automatic suspension that has been in place since the issue of proceedings on 21 July 2015. Merton’s application was issued on 19 August 2015. Evidence was filed on both sides, consisting of witness statements from Mr Tom Davies, Merton’s Parking and Infrastructure Manager, and Mr Mark Ingleson, OpenView’s Managing Director.

The hearing of the application was on 18 September 2015. On 21 September 2015 the parties were informed that Merton’s application was successful and that reasons for my decision would follow later. This judgment sets out my reasons.

The dispute arises out of a procurement competition run by Merton for the provision of an integrated CCTV and automatic number plate recognition systems in the Borough of Merton, together with ongoing maintenance. The primary function of the system is to police and enforce road traffic infringements such as driving in bus lanes, stopping in junction boxes and so on. Merton says that one of its aims is to improve traffic flows, improve road safety and reduce pollution. Merton has an existing CCTV system but it is out of date, unreliable, and unable to capture as many infringements as the new system should. The new system will therefore lead to an increase in revenue for the Council, which it is very keen to have and which it has incorporated into its budget projections. When the results of the procurement were announced, Merton declared its intention to enter into a contract with OpenView’s competitor (“Tyco”). OpenView came second in the assessment of tenders. Although not formally conceded by Merton on this application, all available information suggests that if Tyco had been disqualified for submitting a non-compliant tender or had been marked in the way that OpenView contends should have happened, OpenView would have got the contract.

It is common ground that the principles to be applied are those established by American Cyanamid Co v Ethicon Ltd [1975] AC 396, which have been subject to observation, adaptation and application in public procurement cases by the lower courts on a regular basis. It will, however, be necessary to look at the applicable principles and the factual background in rather more detail below, in order to explain the parties’ submissions and place them in context.

The essential chronology is as follows:

As originally enacted, the Regulations did not provide for automatic suspension of the contracting process where an aggrieved party brought a claim that there had been a breach of the duty owed to him by a contracting authority. It was therefore up to the aggrieved party to apply for an injunction if it wished to interrupt the contracting process. The Public Contract (Amendment) Regulations 2009 introduced the notion of automatic suspension by Regulation 47G (which I set out below). Where the automatic suspension is in place, it is for the contracting authority to apply to the Court to set aside the automatic suspension, if it wishes to do so.

The regulations that are most directly relevant to this application are regulations 47A, 47C, 47E, 47G and 47H, which provide as follows:

“Duty owed to economic operators

47A.–(1) This regulation applies to the obligation on–

(a)

a contracting authority to comply with–

(i)

the provisions of these regulations, …;

…

(2)

That obligation is a duty owed to an economic operator.

…

Enforcement of duties through the Court

47C.–(1) A breach of the duty owed in accordance with regulation 47A … is actionable by any economic operator which, in consequence, suffers, or risks suffering, loss or damage.

(2)

Proceedings for that purpose must be started in the High Court, ….

…

Contract -making suspended by challenge to award decision

47G.–(1) Where–

(a)

proceedings are started in respect of a contracting authority´s decision to award the contract; and

(b)

the contract has not been entered into,

the starting of the proceedings requires the contracting authority to refrain from entering into the contract.

(2)

The requirement continues until any of the following occurs–

(a)

the Court brings the requirement to an end by interim order under regulation 47H(1)(a);

(b)

the proceedings at first instance are determined, discontinued or otherwise disposed of and no order has been made continuing the requirement (for example in connection with an appeal or the possibility of an appeal).

…

Interim orders

47H.–(1) In proceedings, the Court may, where relevant, make an interim order–

(a)

bringing to an end the requirement imposed by regulation 47G(1);

(b)

restoring or modifying that requirement;

(c)

suspending the procedure leading to–

(i)

the award of the contract; or

(ii)

the determination of the design contest,

in relation to which the breach of the duty owed in accordance with regulation 47A … is alleged;

(d)

suspending the implementation of any decision or action taken by the contracting authority in the course of following such a procedure.

(2)

When deciding whether to make an order under paragraph (1)(a)–

(a)

the Court must consider whether, if 47G(1) were not applicable, it would be appropriate to make an interim order requiring the contracting authority to refrain from entering into the contract; and

(b)

only if the Court considers that it would not be appropriate to make such an interim order may it make an order under paragraph (1)(a).

(3)

If the Court considers that it would not be appropriate to make an interim order of the kind mentioned in paragraph (2)(a) in the absence of undertakings or conditions, it may require or impose such undertakings or conditions in relation to the requirement in regulation 47G(1).

(4)

… .

(5)

This regulation does not prejudice any other powers of the Court.”

These are not, however, the only relevant regulations for present purposes. The Regulations go on to prescribe in considerable detail what the Court must, may or may not do in certain circumstances, of which the following is a brief paraphrase:

This framework of regulations provides both the basis of the Court’s jurisdiction on this application and the context in which it is to be exercised. I bear in mind at all times the test imposed by regulation 47H(2): the Court may onlymake an order bringing the automatic suspension to an end if it would notbe appropriate to make an interim order requiring the contracting party to refrain from entering into the contract if regulation 47(G)(1) were not applicable. That opens the way to the application of American Cyanamid principles on the hypothetical basis that no automatic suspension is in place.

Although extraordinarily well known and well-worn, it is worth starting with the key passage of American Cyanamid itself. At 408B-409C Lord Diplock said:

“As to that, the governing principle is that the court should first consider whether if the plaintiff were to succeed at the trial in establishing his right to a permanent injunction he would be adequately compensated by an award of damages for the loss he would have sustained as a result of the defendant's continuing to do what was sought to be enjoined between the time of the application and the time of the trial. If damages in the measure recoverable at common law would be adequate remedy and the defendant would be in a financial position to pay them, no interlocutory injunction should normally be granted, however strong the plaintiff's claim appeared to be at that stage. If, on the other hand, damages would not provide an adequate remedy for the plaintiff in the event of his succeeding at the trial, the court should then consider whether, on the contrary hypothesis that the defendant were to succeed at the trial in establishing his right to do that which was sought to be enjoined, he would be adequately compensated under the plaintiff's under-taking as to damages for the loss he would have sustained by being prevented from doing so between the time of the application and the time of the trial. If damages in the measure recoverable under such an undertaking would be an adequate remedy and the plaintiff would be in a financial position to pay them, there would be no reason upon this ground to refuse an interlocutory injunction.

It is where there is doubt as to the adequacy of the respective remedies in damages available to either party or to both, that the question of balance of convenience arises. It would be unwise to attempt even to list all the various matters which may need to be taken into consideration in deciding where the balance lies, let alone to suggest the relative weight to be attached to them. These will vary from case to case.

Where other factors appear to be evenly balanced it is a counsel of prudence to take such measures as are calculated to preserve the status quo. If the defendant is enjoined temporarily from doing something that he has not done before, the only effect of the interlocutory injunction in the event of his succeeding at the trial is to postpone the date at which he is able to embark upon a course of action which he has not previously found it necessary to undertake ; whereas to interrupt him in the conduct of an established enterprise would cause much greater inconvenience to him since he would have to start again to establish it in the event of his succeeding at the trial.

Save in the simplest cases, the decision to grant or to refuse an interlocutory injunction will cause to whichever party is unsuccessful on the application some disadvantages which his ultimate success at the trial may show he ought to have been spared and the disadvantages may be such that the recovery of damages to which he would then be entitled either in the action or under the plaintiff's undertaking would not be sufficient to compensate him fully for all of them. The extent to which the disadvantages to each party would be incapable of being compensated in damages in the event of his succeeding at the trial is always a significant factor in assessing where the balance of convenience lies; and if the extent of the uncompensatable disadvantage to each party would not differ widely, it may not be improper to take into account in tipping the balance the relative strength of each party's case as revealed by the affidavit evidence adduced on the hearing of the application.
This, however, should be done only where it is apparent upon the facts disclosed by evidence as to which there is no credible dispute that the strength of one party's case is disproportionate to that of the other party. The court is not justified in embarking upon anything resembling a trial of the action upon conflicting affidavits in order to evaluate the strength of either party's case.”

These principles have been summarised many times: see, for example, Fellowes & Sons v Fisher [1976] 1 QB 122, 137 per Browne LJ and National Commercial Bank Jamaica Limited v Olint Corporation Limited [2009] 1 WLR 1405 PC per Lord Hoffman at [16]-[19]. At the risk of repeating what others have said frequently and better in the past, the following points should not be forgotten:

The facts of American Cyanamid itself are informative for the present application. American Cyanamid owned a patent covering sterile absorbable surgical sutures. Ethicon manufactured in the United States and were about to launch in the British market a suture which American Cyanamid claimed infringed their patent. In deciding to issue a temporary injunction prohibiting Ethicon from launching in the British market, the judge at first instance took into account that Ethicon’s sutures were not yet on the market, so they had no business that would be brought to a stop by the injunction, no factories would be closed and no work-people thrown out of work. American Cyanamid on the other hand was in the course of establishing a growing market in surgical sutures. If Ethicon were also entitled to establish themselves in that market in the period until trial (which was thought to be about two or three years off or longer after an appeal) American Cyanamid, though ultimately successful in proving infringement, would have lost its chance of continuing to increase its market share. A second feature taken into account by the Judge at first instance was that once doctors and patients had got used to Ethicon’s product in the years before trial, it might well be commercially impracticable for American Cyanamid to deprive the public of it by a permanent injunction.

Both these factors were expressly regarded by the House of Lords as properly brought into account by the judge at first instance: see 409F-410C. It may be noted that almost precisely opposite arguments could have been put forward by Ethicon: if ultimately successful in proving that they were not infringing the patent, they would have lost their opportunity in the intervening period to establish market share; and by the time of trial American Cyanamid’s products might be so firmly entrenched in the market’s perception and use that it would be effectively impossible for Ethicon to penetrate it. One difference which still told in American Cyanamid’s favour was that there was an established status quo, which included American Cyanamid’s existing market presence and penetration.

There are features of the present case which are likely to be common in public procurement disputes and which were not present in American Cyanamid. First, American Cyanamid was a private dispute between two commercial parties. The reason why the present application is brought under the regulations is because of the wider public interest in public procurement, which caused the regulations to be enacted into English law. In principle, the public interest should be a feature to be taken into account when dealing with applications for interim suspensions under the regulations. Second, and for similar reasons, the regulations provide a context for the application that was lacking in American Cyanamid. In particular, by enacting the regulations, Parliament has adjusted the remedies that are available in the event that a breach is subsequently established. Not only is there the quasi-private remedy that would be available in damages to OpenView, but the Court has the power to set aside Merton’s decision to award the contract to Tyco and to order Merton to amend any document. If Merton had already entered into a contract, the draconian powers of making a declaration of ineffectiveness and imposing a financial penalty could come into play. These are consequences that go well beyond those available either in Tort or on an application for Judicial Review. Third, this is not a bi-partite dispute since the commercial interests of Merton’s chosen contractor are affected to an equal and opposite extent to the effect on those of OpenView. Tyco is not a party to this application, but that does not mean that its interests are irrelevant. This multi-partite context is itself a reason why the Court should be slow to interrupt the status quo by maintaining the suspension of the contracting process.

Drawing these strands together, when considering an application for removal of the automatic suspension the Court must take into account the fact that these are not merely private law disputes and that there is an ever-present element of public interest in the outcome of public procurements. That said, there is no reason why (and no binding authority to suggest that) the American Cyanamid principles themselves are changed by the public interest element. The real question, which I turn to below, is how the public interest element should be taken into account when applying American Cyanamid principles.

The influence of the public interest has been considered in a number of previous decisions. In Alstom Transport v Eurostar International Limited & Siemens PLC [2010] EWHC 2747 Vos J accepted that the public interest could be taken into account in determining the balance of convenience when an interim injunction was sought under the original 2006 Regulations: see [80]. Alstom wanted an injunction to prevent Eurostar contracting with Siemens for the supply of trains. The contract value was said to be €600-700 million. Vos J initially took into account the public interest in Eurostar not having to pay twice (once to Siemens and once as damages to Alstom) but regarded it as more relevant to the balance of convenience than to the question of adequacy of damages for Alstom: see [130]. At [138(iv)] he held that the public interest in that case militated against the granting of interim relief on the grounds that (i) delay for Eurostar would be costly and would affect its competitive position, (ii) the travelling public would be affected by having new trains delayed, and probably by the additional costs of the delay, (iii) the public interest would be served by the introduction of timely and effective competition for tunnel train services. While acknowledging the risk that Eurostar might have to pay twice, that possibility seemed unlikely and was therefore not sufficient to outweigh the other factors. Vos J gave his decision on 29 October 2010 and contemplated that the full trial, even if expedited, would not be concluded before Easter 2011 so that the minimum delay (assuming swift production of the judgment and the absence of any appeal) would be about 6 months. I respectfully find his approach to the influence of the public interest and the examples he cited to be helpful and informative for the present case, although the facts of the two cases are obviously very different. In particular, I agree with Vos J that the question of public interest logically falls to be considered if and when the Court gives separate consideration to the balance of convenience; and there will frequently be a public interest in contracting authorities being able to go ahead with their plans promptly.

Two months later Akenhead J gave judgment in Exel Europe Limited v University Hospitals Coventry and Warwickshire NHS Trust [2010] EWHC 3332 (TCC). Having referred to the decision in Alstom he said:

“I have already indicated that the public interest is something which in appropriate cases, such as this, needs to be weighed by the court in the balance of convenience exercise. That public interest includes the desirability of ensuring fair and transparent procurement processes by contracting authorities as well as other areas of public interest. In my judgment, one important area of the public interest is the efficient and economic running of the National Health Service. In these times of economic difficulties and constraints, there is massive pressure on the different arms and parts of the NHS to make savings. One main area is and must be the procurement of medical goods, drugs equipment and services. It is not for the Court however to determine how the different parts of the NJS must achieve efficient and cost saving procurement.”

Akenhead J held that the Defendant had clearly established an urgency for the procurement exercise in question to go ahead; and he took that into account as a factor militating against the maintenance of the automatic suspension. He did so in the context of a decision handed down on 21 December 2010 and an expectation that judgment after a full trial would not be produced before May or June 2011. As he put it at [48] “If Exel fails ultimately at trial, 8-9 months of time or more would have been wasted. If it succeeds, [there] would have to be a new tender process which could well take another 6-8 months up to award of contract. Thus, well over a year of delay will have occurred.”

In Covanta Energy Ltd v Merseyside Waste Disposal Authority [2013]EWHC 2922 (TCC) Coulson J reviewed previous authorities and provided his own summary of the principles to be applied. In the course of his review he referred to Evans Marshall & Co v Bertola SA (No 1) [1973] 1 WLR 349, where the Court had noted at 379 that “the standard question “Are damages an adequate remedy?” might perhaps, in the light of more recent authorities, be re-written as: “Is it just, in all the circumstances, that a claimant should be confined to his remedy in damages?”” In the present application both parties endorsed this as a useful formulation. It was reflected in Coulson J’s summary of principles at [48]:

“Accordingly, I would summarise the relevant principles concerning the adequacy of damages as follows: ”

(a)

If damages are an adequate remedy, that will normally be sufficient to defeat an application for an interim injunction, but that will not always be so (American Cyanamid, Fellowes, National Bank);

(b)

In more recent times, the simple concept of the adequacy of damages has been modified at least to an extent, so that the court must assess whether it is just, in all the circumstances, that the claimant be confined to his remedy of damages (as in Evans Marshall and the passage from Chitty);

(c)

If damages are difficult to assess, or if they involve a speculative ascertainment of the value of a loss of a chance, then that may not be sufficient to prevent an interim injunction (Araci);

(d)

In procurement cases, the availability of a remedy of review before the contract was entered into, is not relevant to the issue as to the adequacy of damages, although it is relevant to the balance of convenience (Morrisons).

(e)

There are a number of procurement cases in which the difficulty of assessing damages based on the loss of a chance and the speculative or 'discounted' nature of the ascertainment, has been a factor which the court has taken into account in concluding that damages would not be an adequate remedy (Letting International, Morrisons, Alstom, Indigo Services, and Metropolitan Resources). There are also cases where, on the facts, damages have been held to be an adequate remedy and the injunction therefore refused (European Dynamics, Exel).

Coulson J repeated this summary in Bristol Missing Link Limited v Bristol Council [2015] EWHC 876 (TCC) at [49]. He also stated at [48]:

“In my view, there are four elements of the balance of convenience that need to be considered on an application of this kind. They are:

(a)

The adequacy of damages;

(b)

The importance of the remedy of review;

(c)

The advantages and disadvantages to the parties if the suspension is not lifted; and

(d)

The advantages and disadvantages to the parties if the suspension is lifted.”

He then continued by considering each of these topics in turn.

In BMLL Coulson J concluded that damages would not be an adequate remedy for BMLL and that if the suspension was lifted it would be the effective end of BMLL’s entire claim. His reasons for so concluding were that (i) BMLL was a non profit organisation so that an award of damages (which would conventionally be calculated by reference to loss of profits) would lead to nominal recovery, (ii) the contract would constitute 1/3 of BMLL’s turnover, without which BMLL would suffer catastrophic harm that would have a significant effect on its existing ability to provide (other) services for vulnerable women in Bristol who relied upon BMLL to be able to continue providing those services, and (iii) lifting the suspension would have a significant effect upon BMLL’s reputation because of the consequential inability of BMLL to continue doing its existing core work in their only market.

Under the heading “The Importance of the Remedy of Review” Coulson J referred to the decisions of Arnold J in Morrison Facilities Services Ltd v Norwich City Council [2010] EWHC 487, Vos J in Alstom and Ramsey J in NATS (Services) Ltd v Gatwick Airport [2014] EWHC 3133 (TCC) each of which had referred to the importance of the remedy of review as an element of the relief that an aggrieved tenderer may want instead of (or in addition to) the remedy of damages. He also cited the observation of Leggatt J in R (On the application of Edenred (UK Group) Ltd v Her Majesty’s Treasury and Others [2014] EWHC 3555 (QB) where the Judge said:

“Looking at the matter overall, I accept the defendants’ contention that there is a public interest in the avoidance of delay and that there will be a detriment to that interest if it is necessary to wait a further six weeks before the TFC scheme can be launched. I do not, however, consider that detriment to be sufficient to outweigh the strong public interest in compliance with the law and the benefits that implementing the scheme in a lawful way may be expected to bring. That is particularly so given the arrangements that have been made for an expedited trial and the fact that, as I have assumed for the purpose of this judgment, a decision on the question of legality can be expected within a relatively short time.”

The context for Leggatt J’s observation was that in March 2013 the Government had announced plans to replace the existing system of Employer Supported Childcare (“ESC”) with a new scheme known as Tax Free Childcare (“TFC”). ESC operated by giving tax relief to employers who provided childcare for their employees either directly or through vouchers which could be used to purchase childcare. The voucher scheme was administered by private commercial operators, one of which was Edenred. A governmental decision had been made that the TFC scheme would be administered by National Savings and Investments, all of whose operations were contracted out to a private company other than Edenred. Edenred brought proceedings claiming that the decision to switch from ESC and to implement TFC scheme in this way was unlawful. It was therefore far from the normal run of public procurement disputes and raised important issues going to the legality of an important plank of national government policy. Seen in this context I agree with the observation made by Leggatt J.

Coulson J’s approach to the importance of the Remedy of Review is shown by his application of the principles he had just summarised to the facts of the case he was considering. He said at [65]:

“In my view, the public interest in ensuring compliance with the law is particularly significant in the present case because … if the submission is lifted, that is effectively the end of BMLL’s claim. Thus, if BMLL are right and this procurement process was not properly operated, they will have been deprived for all time of a significant legal right.” [After considering the short timetable that could lead to an expedited trial he continued] “Accordingly, the fact that the remedy of review can be dealt with relatively promptly by the TCC is another factor in the balance of convenience weighing against lifting the suspension.”

I respectfully question whether it is right in principle to elevate “the importance of the remedy of review” into a separate step or consideration before weighing the advantages and disadvantages to the parties of either lifting or not lifting the suspension. It is also unclear precisely what is meant to be included in this step. As applied in BMLL, it is consistent with the factor that always has to be taken into account when considering whether or on what terms to impose interim injunctive relief, namely the duration of the interim relief and what its effects will be during that time. That is conventional in a case where it has been concluded that damages would not be an adequate remedy; but normal application of American Cyanamid principles does not suggest that it can as a matter of course be a substitute reason for imposing interim relief in a case where damages would be an adequate remedy. On the contrary, if damages will be an adequate remedy the period to trial should generally not be an influential factor, though special cases might arise such as if the Court were persuaded that one party was using the period to trial as an instrument of financial oppression or the delay to trial might put the continued existence of a party (for whom damages would in theory be an adequate remedy) at risk.

Proper application of the reasoning of the House of Lords in American Cyanamid also suggests that the Court should be cautious about looking to the nature of the remedy available at trial as a reason in support of maintaining an interim suspension. That is because of the uncertainties facing the Court at this stage. The first prerequisite to the application of American Cyanamid principles is no more demanding than that there is a serious issue to be tried. In some cases, of which the present is one, the party resisting the interim injunction may consent to the application proceeding on the assumption that this pre-requisite is satisfied while maintaining that, if put to the test, the Court would conclude that it was not. It will only be in rare cases that the potential outcome of the ultimate hearing can be predicted with any confidence, and American Cyanamid itself is clear about the caution to be exercised when attempting to assess the relative strength of the parties’ cases at this stage. First, it features in the House of Lords’ statement of principle if there are uncompensatable disadvantages to each party and the extent of their uncompensatable disadvantages would not differ widely. Second, it is worth repeating that:

“This, however, should be done only where it is apparent upon the facts disclosed by evidence as to which there is no credible dispute that the strength of one party's case is disproportionate to that of the other party. The court is not justified in embarking upon anything resembling a trial of the action upon conflicting affidavits in order to evaluate the strength of either party's case.”

The second reason why the Court should be slow to look to the final trial as a solution is that the Regulations have established a procedure which does not in any way suggest that suspending the contracting authority’s right to contract should be regarded as the norm or general approach to be adopted. The Regulations have established the proper balance between private and public interests by defining and circumscribing the remedies that will be available at trial and endorsing the application of AmericanCyanamid principles in the meantime. If proper application of American Cyanamid principles leads to the conclusion that damages would be an adequate remedy for the aggrieved tenderer, I see no justification in binding authority or in the framework created by the regulations for treating the prospect of a prompt final decision as being of itself a justification for maintaining the automatic suspension. To my mind there is a real danger that the Court may arrogate unwarranted powers of interference in matters of local or national politics if it treats the nature of the remedy that might be available in certain circumstances at a final trial as a justification for imposing (or maintaining) highly disruptive interim suspension of a contracting authority’s intended contracting processes. The suggestion that compliance with the law and the benefits of implementing the public procurement scheme are compromised by setting aside the automatic suspension where proper application of American Cyanamid does not justify its continuation seems to me to be very questionable. I therefore respectfully suggest that Leggatt J’s observation in Edenred should not be adopted as a statement of general principle providing a free-standing reason for maintaining automatic suspensions in all cases.

There are now a number of examples of public procurement challenges where the Courts have concluded that damages would not be an adequate remedy for the aggrieved contractor. Counsel were unable to identify (and I have not found) any statements of general principle about what uncompensatable disadvantages should or should not be regarded as rendering damages an inadequate remedy. However, the Claimant suggested that three categories of case may be identified, namely:

This categorisation is neither satisfactory or justified. First, in principle, there need be no pre-ordained limit upon when and in what circumstances damages may be regarded as an inadequate remedy: the categories of inadequacy need not be closed. Second, difficulty of assessment does not of itself demonstrate that the damages once assessed will be inadequate. Third, I am not convinced that a framework contract gives rise to particular difficulties. Normal principles suggest (for good reason) that damages should be awarded on the basis of the contracting authority’s minimum or least onerous obligation. Fourth, the Claimants’ third suggested sub-category is self-contradictory: if it would be unjust to leave a party to his remedy in damages, the damages are by definition an inadequate remedy.

The Court has not been deterred by difficulty of assessment as such. But it has recognised that the more variables are fed into a “loss of chance” calculation, the more likely it becomes that the compensation recovered by the aggrieved party will not match the outcome after the features that were uncertain in prospect have resolved themselves and determined what in fact happens. One example illustrates the problem: if the procurement is limited to two tenderers there may be circumstances in which, even at the interim suspension stage, the Court can be confident that if the impugned successful tenderer had not been awarded the contract, the aggrieved one would have been. However, the more tenderers there are, the less certain this may be – leading to a discounting of the aggrieved tenderer’s chance when calculating damages. This was, I think, what Arnold J was referring to in Morrison Facilities Services Limited v Norwich City Council [2010] EWHC 487 (Ch) at [30] when he said:

“Counsel for Morrison submitted that damages would not be an adequate remedy for three reasons. The first and most important one is that, in a case where one of the key complaints is that of undisclosed criteria, it is very difficult indeed for the Court at trial to assess damages because assessment of what chance has been lost by the claimant in those circumstances is virtually impossible. In such a case, the Court is faced with the question of considering the scenario that would have arisen if there had been proper disclosure of all the criteria in advance. In those circumstances, it is very likely that all bids submitted in response to the ITT would be different. How then, he asks, can the Court decide what chance of success in obtaining the tender the claimant has lost?”

Arnold J relied upon the decision of the Court of Appeal in Lettings International Limited v London Borough of Newham [2007] EWCA Civ 1522 where the submission was that damages would be an inadequate remedy because quantification of the loss “will have to take [into] account not only that the claim will be for the loss of a chance of being successful in a fairly operated tender process (which will have to take account of how other bidders would have acted under those circumstances), but also the consequential loss of the chance of being called on by the council to provide services pursuant to the framework contract.” ([32] - emphasis added). The response of the Court of Appeal at [36] was that “A loss of opportunity to take part in a fair tendering process on equal terms with other bidders may be difficult to evaluate in monetary terms but cannot be said to be [of] no commercial value at all.”

Counsel in the present case were not in a position to address the question whether the lost chance in a case of unpublished criteria is properly to be assessed on the basis that the contract assessment would have been on the basis of the published criteria or on the basis of the published and the unpublished criteria. In the absence of full submissions on the point, my tentative conclusion is that there may be two different categories of case: the first could be where the criteria to be applied were fully pre-determined but inadequately publicised (as in Emm G Lanakis AE v Dimos Alexandroupoulis (C-542/06)); the second could be where the intended criteria are properly advertised but the contracting party deliberately or otherwise relies on additional unpublished criteria when it comes to assess the bids. While flagging that question for possible future resolution, I accept for present purposes that there may be circumstances where the number of uncertainties or variables that have to be brought into the calculation of the aggrieved tenderer’s lost chance may persuade the Court that damages would not be an adequate remedy. However, the mere fact that the damages will be for loss of a chance and will be assessed as such is not of itself evidence that the damages are an inadequate remedy. The reverse is likely to be true in many or most cases because the principles that have been developed have been designed to reflect the true commercial value of the chance that has been lost.

The Courts have on occasions referred to “loss of reputation” as a possible basis for holding that damages are not an adequate remedy. In principle, the underlying assumption appears to be that a “loss of reputation” may be a real commercial disadvantage but one that is not capable of being included in any assessment of damages. This would be most likely to apply because of the application of principles of remoteness. For example, it might not in general be open to an aggrieved tenderer to recover damages for the chance of securing other contracts on the back of the contract at issue because the law would regard those losses as legally too remote. The outcome might in principle be different if both the tenderer and the contracting authority knew and intended that participation in the contract at issue was a necessary and sufficient qualification for participating in another contract as well. It is not self-evident that the exclusion of a particular head of damages on grounds of remoteness automatically renders damages an inadequate remedy, not least because the principles of remoteness are intended to be a principled response to the assertion of losses that are too speculative to justify recovery under a just and adequate system of law.

OpenView relies upon Alstom and upon DWF LLP v The Secretary of State for Business Innovation and Skills [2014] EWCA Civ 900 on this point:

Loss of reputation also featured in NATS (Services) Ltd v Gatwick Airport Ltd [2014] EWHC 3133 (TCC), which concerned the tender for the provision of air traffic control services at Gatwick Airport. Ramsey J was satisfied that the it would be very difficult to estimate damages if NATS was successful. He also dealt with the question of reputational damage at [84-85]:

“84.

I am also persuaded on the evidence in this case that the contract for air navigation services at Gatwick Airport would have a particular impact on the reputation of NATS in the global marketplace. Gatwick is the world’s largest single runway airport with a very large number of annual movements. It is seen in the marketplace as a being of major importance in the increasingly competitive market for air navigation services.

85.

I am persuaded that, …, the loss of the contract to provide air traffic control at Gatwick airport will significantly impair NATS’s ability to secure international air traffic control contracts and other related contracts. Whilst Mr Herga correctly points out that NATS remains the supplier to 14 UK airports, including Heathrow, and has worldwide operations throughout the world, I have no doubt that the particular nature and challenges of air navigation service at Gatwick airport is an important factor in NATS’s attempts to win worldwide contracts. I have therefore no doubt that the loss of this contract in the procurement would have a substantial effect on the good will and trade reputations of NATS which it would be impossible to properly calculate in terms of damages.”

These passages, and others like them, do not identify any test or touchstone to be applied when asking the question whether “loss of reputation” renders damages an inadequate remedy. Two questions arise. The first is whether “loss of reputation” is an abstract notion or one that requires to be closely linked to the concept of compensatory damages. The second is whether what matters is “loss of reputation” in general or whether the reputation needs to be lost in the eyes of any particular constituency. The questions are to some extent interrelated.

I am not persuaded that loss of reputation as such affects the question of adequacy of damages as a remedy. If damages were otherwise an adequate remedy, I see no reason why the “reputation” of a tendering party as such should affect the giving or withholding of interim relief. With commercial parties, what ultimately matters is whether the loss of the contract in question will reduce their profitability in a way that is not recognised by the normal principles on which damages are awarded. This in turn suggests that what is generally of concern is whether the aggrieved tenderer will lose out on other contracts which it might have obtained if it had added lustre to its reputation by getting the contract at issue. In other words, the real subject of the “loss of reputation” argument is financial losses which the law of damages does not normally recognise. This must surely be the end point of the “specific and uncompensatable benefits” that Alstom would have hoped to achieve if it got the Eurostar contract; equally, DWF must surely have hoped that its reputation as the legal adviser to the Insolvency Service would help it to get other profitable work in the future; and in NATS, what persuaded Ramsey J was the evidence that “the loss of the contract to provide air traffic control at Gatwick airport will significantly impair NATS’s ability to secure international air traffic control contracts and other related contracts.” With not-for-profit organisations, such as BMLL, the emphasis is different but the underlying concerns are for the financial effects of losing the contract: thus with BMLL the catastrophic harm to the organisation which was put at the forefront of Coulson J’s reasoning flowed from the potential loss of one third of BMLL’s turnover and the destruction or dislocation of its ability to provide an integrated service to existing needy users of their services. Their whole organisation was therefore at risk of becoming unviable.

This points to the answer to the second question: the constituency of interest is future prospective contracting authorities (or other contracting parties) who might be influenced to give work to a party which has the contract at issue rather than to a party which has not. The answers to the two questions explain in many cases why the “loss of reputation” does not normally sound in damages in the first place: the loss is speculative and legally too remote. They also provide good reason for restraint on the part of a Court which is urged to adopt “loss of reputation” as a reason for holding that the damages that would be awarded are not adequate compensation.

What then are the criteria to be applied before a court accepts that “loss of reputation” is a good reason for holding that damages which would otherwise be adequate are an inadequate remedy for American Cyanamid purposes? In the absence of prior authority directly in point (none having been cited by the parties) but with an eye to the approach adopted by the Court in Alstom, DWF and NATS I suggest the following:

These are general criteria, which need to be reviewed and considered in the light of the facts of each case. I readily accept that there is more to be said on the subject and that principles such as those I have suggested are not to be applied by rote.

The ITT specified that Merton wanted to purchase new Automatic Number Plate Recognition (APNR) cameras to form a complete Digital Image Capture and Processing System (DICPS) to monitor and enforce road traffic behaviour in the Borough. It was a vital feature that “all equipment installed in this contract, as well as transmission type/methodology and configuration will meet the requirements of the Department for Transport’s document “Civil Traffic Enforcement Certification of Approved Devices” (known as the COAD).” It was also specified that the new Traffic Enforcement system was to link “to the MetPol ANPR intelligence gathering system so the new Merton ANPR system will need to be BOFII and NAAS compliant together with meeting the standard of ONVIF version 1.02 including profile S. The equipment must also be Elexon Code Certified for the provision of power supplies.”

It is the central factual thrust of OpenView’s challenge that Tyco’s system uses technology that is not ONVIF compliant, does not have Elexon Code certification, does not meet the requirements of COAD, is not BOFII or NAAS compliant and fails to comply with the technical requirements of the specification in various other respects: Amended Particulars of Claim [14]. OpenView alleges as breaches of the duties owed to it under the Regulations that:

The Court was taken to the technical requirements of the ITT with which it is said that Tyco’s tender fundamentally failed to comply. Other aspects of the case are addressed in the evidence but do not need to be set out in detail here.

For the purposes of its application to set aside the automatic suspension Merton asserts that there is no serious question to be tried but relies upon the subsequent limbs of American Cyanamid. Merton was invited to concede that, if Tyco were to have been eliminated, OpenView would have got the contract. Merton did not formally make that concession, but OpenView came second and there has been no suggestion from Merton that anyone else was equally well or better placed to succeed if Tyco had not been successful.

In opposing the application, OpenView’s main submissions were directed primarily to the adequacy of damages, loss of reputation, and the public interest.

OpenView submits that damages would be an inadequate remedy because they would fall to be assessed on the basis of a loss of a chance. It submits that assessment would be difficult because it includes as part of its case the allegation that unpublished criteria were relied upon by Merton in assessing the bids. The specific criticism is that Merton has stated that Tyco’s presentations “demonstrated a better understanding of our requirements with regard to achieving value for money on a fully comprehensive maintenance option and of the need for covert operations in sensitive areas”, which is alleged to be the application of a non-published criterion. Despite the doubts I expressed earlier in this judgment about the proper exercise to be undertaken, I assume for present purposes that this allegation could in theory open the way to a hypothetical re-run of the tender process on the basis of the allegedly undisclosed criteria. Even so, I do not accept that this raises a real prospect that the calculation of damages will be technically difficult or will lead to damages that are an inadequate remedy, for a number of reasons:

The OJEU notice stated that the estimated contract value of the provision of the ANPR, recording and GUIs (Graphical User Interfaces) was between £1 - 2 million. The ITT stated that the budget available for the project was £400,000 for control room upgrade equipment works and £1,300,000 for the DICPS, ANPR, Storage Facility and interface into the PCN back office system. There was in addition a maintenance contract for an initial period of 3 years, with an extension option of a further 2 years, the estimated value of which was stated in the OJEU notice and the ITT to be between £50,000-150,000 per annum. In its submissions, OpenView submitted that this band of estimated values made the maintenance contract equivalent to a framework contract where the amount of work would be dependent upon the contracting authority calling of work at its discretion. On that basis it submitted that the value of the maintenance contract would be unacceptably difficult to calculate when assessing damages.

I reject that submission. The scope of the maintenance contract was set out at pages 51-57 of the Tender Specification. That set out with some precision the obligations that the contractor was required to undertake in order to maintain all of the equipment which formed part of the Merton Council CCTV and DICPS enforcement systems including all existing and new equipment. Response levels were identified and PPM visits and other meetings with Merton were stipulated. Page 58 of the Tender Specification said that specified maintenance prices needed to be valid for 6 months from the Tender Submission Deadline. None of this information supports the suggestion that assessing damages would be unacceptably difficult. The mere fact that the ITT contract value was estimated in the ITT to be between £50,000-150,000 provides little or no information about the actual value as estimated by the tendering contractors or the actual contract value when awarded. When tendering, OpenView will have made assumptions about its potential profit levels in relation to the maintenance contract and tendered a price just as it will have done in tendering for the capital installation contract. And, although the amount of maintenance that the system might require might differ from what had been anticipated, it was not subject to the discretion or whim of the contracting authority as would have been the case with a typical framework contract. The Court is well used to assessing damages attributable to the loss of contracts in such circumstances. Finally, if the Court felt that there was insufficient certainty at the time of the main trial to enable it to do justice under this head, it would be open to the Court to adjourn the quantification of this head of damages until greater certainty could be achieved. This would not be unfair to OpenView in circumstances where the revenue from the maintenance contract would have come in over three years in any event. All that would be lost by delaying computation would be any benefit arising from accelerated receipt.

I am therefore not persuaded that damages would be unduly difficult to assess in this case or that the difficulties in assessment render damages an inadequate remedy. It is not suggested that the loss of the Merton contract would have a catastrophic effect similar to that asserted in the BMLL case: nor could that sensibly be suggested given that OpenView’s turnover in the year to July 2014 was just over £26 million with an operating profit in the region of £1.5 million.

I turn therefore to the question of loss of reputation. The parties put in conflicting evidence about the prestige to be attached to the Merton contract because of its size and novelty when compared with others. The Merton contract is for the provision of a system based on 41 cameras with the prospect of 7 more, making 48 in total. As just outlined, the contract value for the capital installation is between £1 – 2 million with between £50,000-150,000 per annum for 3 years for maintenance. It was not asserted in submissions that OpenView has the option to renew for the further 2 years; Merton asserts that the option is open to it alone.

OpenView asserts that the Merton contract is uniquely prestigious; Merton says it is one amongst many. Other contracts to which the parties referred were:

OpenView asserts that it operates in a competitive and fast moving market where technological advances are being made all of the time. That does not appear to be controversial and I accept the assertion for present purposes. It is clear from the content of the Waltham Forest Framework and from the directors’ Business Review in its accounts to July 2014 that OpenView’s business covers a range of different types of security systems.

In its written submissions, OpenView identified three features of the present contract which it says go to the issue of loss of reputation and adequacy of damages. It submits that:

I accept that the contract has an element of prestige about it. However, this can be greatly overstated. In terms of size, the sums being considered are not spectacularly different from those involved in the others to which I have been referred and, in absolute terms, they are dwarfed by the contracts in Alstom (€600-€700 million) DWF (£32-50 million) and NATS (not apparently stated but clearly very substantial). Even accepting OpenView’s case that this is a cutting edge contract that incorporates technology that has not been used before in this way, this is a fast moving and highly competitive market where technological advances are likely to be a constant feature as contracting authorities seek improvement and competitors seek transient advantage: it does not follow that having achieved a contract with what is now cutting edge technology will give lasting or substantial advantage to the successful contractor. There is no evidence that OpenView has proprietary or patented rights that require or merit protection. There is no evidence to suggest that its competitors will not soon be competent to tender on the basis of the same technological requirements, if they are not already. All that the Court knows is that there were other tenderers for the Merton Contract and OpenView has only alleged that Tyco’s system was technologically deficient. This could be because the other tenderers are not an immediate threat to OpenView’s position and so have not been addressed in detail; but the fact remains that OpenView’s evidence, even taken at face value, does not demonstrate that the technology it intended to use for the Merton contract is not available to others. In summary, neither the size nor the nature of the contract suggest that the reputational advantage of being known to be the successful contractor will be substantial or give rise to a reasonable expectation of future additional profitability.

Similarly I am not persuaded by OpenView’s submission that it will lose reputation if it does not get the Merton contract. If the submission is well founded, the loss is likely to be transient because it is plain that other contracts in the field in which Tyco and OpenView are competitors, including other traffic management and enforcement contracts, are likely to be relatively common occurrences. To suggest that the failure to obtain this contract will prevent future contracting authorities from including OpenView on their list of admitted tenders is to enter the realms of unsubstantiated speculation: it must be the case that all or most of the admitted tenderers for the Merton contract must have failed to obtain contracts in the past.

I accept that OpenView may lose an opportunity to refine some of its technology or technological knowledge in the field if it does not get the Merton contract. Assuming (without deciding) that this loss of a working laboratory would not sound in damages, the refusal of damages would (in my view) be a reasonable reflection of the speculative and unquantifiable nature of such losses leading to the conclusion that they are too remote to justify compensating in damages.

Finally, it seems to me to be worth placing in the balance that if (as OpenView confidently asserts will be the case) Tyco fails to deliver because of the technological inadequacy of its equipment, that seems likely to become known in the small and highly specialised market in which both Tyco and OpenView operate If that happens it will be Tyco and not OpenView that suffers the lasting loss of reputation.

For these reasons, I am left with no confidence that the loss of the Merton contract would cause financial losses for OpenView that would be significant and irrecoverable as damages. The information placed before me does not support the idea that OpenView’s reputation in the eyes of future contracting authorities will lead to the loss of future contracts, turnover or profit.

For these reasons, I am satisfied that damages would be an adequate remedy for OpenView.

Merton submits that damages would not be an adequate remedy for it because delay in entering into the contract with Tyco would have negative health and safety repercussions for the local population and would require Merton to cope with a deteriorating CCTV system.

If the automatic suspension is lifted there will be some delay. Assuming an expedited trial, a decision on OpenView’s claim cannot reasonably be expected before the end of November or early December 2015. If the trial judge’s decision were to be appealed, there could be no reasonable expectation of resolution until well into 2016. If OpenView’s claim fails, the minimum delay attributable to its claim would be about 4 ½ months from the issue of proceedings and about 2 ½ months from the date of this hearing: an appeal would make the delay longer by an indeterminate period. If OpenView’s claim succeeds, Merton may have to undertake a further tender process, but that will be attributable to Merton’s proved mismanagement of the first tender process.

The witness evidence for Merton and Merton’s submissions for the hearing made much of “the negative health and safety repercussions for the local population”. It is said that congestion will continue, traffic infringements will not be reduced, bus journeys will take longer, air quality in London will be adversely affected because traffic flows will not be improved, there may be accidents at junctions that are not subject to the improved CCTV surveillance, and (a matter that is said to be of particular concern) safety in the vicinity of schools will not be improved. These are said to render damages an inadequate remedy.

Before dealing with these points individually, it is worth remembering what is at issue here. Merton has an existing CCTV system which it uses to monitor and enforce traffic infringements. It wishes to improve that system. Neither the existing nor the proposed system actually polices or directs traffic at the places where surveillance is carried out: it merely records infringements and forms the basis for the imposition of penalties. Improved traffic flows at junctions and along bus lanes will be the consequence of increased awareness on the part of drivers of monitoring and potential penalties. It is this increased awareness that is intended to lead to improved traffic flows, improved air quality and associated safety improvements.

I accept that implementing an improved system is in the public interest: that is what Merton has decided as a matter of policy and I am not in a position to review the assumptions on which that policy is based. Even if it were permissible to second-guess, my instinct would be that traffic monitoring systems are, in general terms, “a good thing” in terms of the public interest and benefit. I also accept that the delayed implementation of these benefits would not sound in damages if OpenView were to be unsuccessful in its claim.

I have formed the clear view that Merton’s reliance on these features in support of its submission that damages would not be an adequate remedy is exaggerated, for a number of related reasons.

While accepting that the new system is intended to confer public benefits over and above that of increasing the revenues available to Merton, the objective evidence that I have set out above leads me to the conclusion that Merton’s evidence about the importance of these anticipated benefits in the relevant period is overstated and that there is no material that justifies a conclusion that damages would be an inadequate remedy for Merton.

For reasons identical to those I have outlined when considering the question of adequacy of damages for Merton, I have concluded that Merton’s reliance upon the delay to the implementation of public benefits as a factor to be brought into account when considering the balance of convenience overall is also overstated. I am left with three general propositions. The first is that it is undesirable that a project which is intended to make things better for the residents of Merton and which has been decided upon by those elected and appointed pursuant to due political process should be delayed. The second is that it is in the public interest for Merton to achieve the increased revenue flow for which it has budgeted sooner rather than later. The third is that it is undesirable that Merton should go ahead with Tyco if the procurement process has led to a breach of Merton’s duty to OpenView. Given the uncertainty of the outcome, I do not consider that any of these propositions can exercise a dominant influence in the present application. OpenView tried to persuade me that it is bound to win its contention that Tyco’s bid is non-compliant. Conversely, Merton is bringing forward a strike-out application. I am not satisfied that this is a case where it can be said that “there is no credible dispute that the strength of one party’s case is disproportionate to that of the other party” without conducting what amounts to a mini-trial, which I will not do.

Finally, I am not persuaded that the availability of the remedy of review brings the balance of convenience down in OpenView’s favour. If the suspension were to be maintained and OpenView were to succeed, the remedy it would achieve in addition to its claim for damages would be that Merton’s decision to award the contract to Tyco would be set aside. The Court does not have the additional power to hand the contract to OpenView and Merton may decide to retender or take some other course which does not guarantee that OpenView would ultimately be its contractor of choice. The most that OpenView can obtain from the remedy of review is therefore the existence of another chance. That may be given some weight when considering the balance of convenience but, in my judgment, it is not sufficient to justify the maintenance of the automatic suspension.

Standing back, I take into account the fact that OpenView has an established place in the market but has not committed resources to carrying out the work on the Merton contract. It is therefore not being deprived of existing market presence but of the chance of increasing it in the future. That disadvantage is relative, transient and minor when compared with the consequences to either party on the facts of American Cyanamid itself.

OpenView has not shown that damages will be an inadequate remedy. In those circumstances the starting point for the application of American Cyanamid principles is that no interlocutory injunction should normally be granted, even though I am equally satisfied that damages would be an adequate remedy for Merton if OpenView ultimately fails in its challenge. I accept that this starting point is not necessarily determinative, but no other factor has been identified by OpenView that would justify departing from the normal outcome. If and to the extent that the public benefit is to be brought into account as a separate factor to be applied in a separate and discrete balancing of convenience, I do not consider that the matters that have been identified by the parties tilt the balance one way or the other.

Accordingly, whether American Cyanamid principles are applied in the conventional way or as discussed in the authorities to which I have referred, the answer is the same. If I adopt the formulation endorsed by both sides in the present case, namely “Is it just, in all the circumstances, that OpenView should be confined to its remedy in damages?”, my answer is that it is.