Serco Ltd v Secretary of State for Defence

This is an application to strike-out, alternatively for summary judgment upon, certain passages in the Particulars of Claim and is an application brought the defendant in a procurement case. The defendant is the secretary of State for Defence (the "MoD"). The claimant is Serco Limited. It is the first hearing in a series of hearings over the next week and-a-half which are all quite close together. There is a contested hearing, or there was supposed to be a contested hearing, tomorrow in respect of disclosure. At the beginning of the week when I examined the list it seemed to me that the parties might well require a decision from me on the strike-out application today, as soon as possible, as it might impact upon tomorrow's hearing and the application by Serco for disclosure. It seems to me that the issues on this application are sufficiently clear that I can identify to the parties what the result is, and give reasons almost straightaway. I am therefore giving this judgment ex tempore.

The procurement in question is in relation to certain services to be provided by the winning bidder to the Ministry of Defence for fire prevention, protection and response services in relation to the majority of the defendant's own premises in the UK and abroad, and in support of UK forces on defence exercises and deployed on operations. The contract will not cover the provision of relevant services for aircraft while they are airborne, ships whilst they are at sea, or visiting US forces while they are stationed in the UK. The contract is a sizeable one. It is to have a life of 12 years and the value of the procurement is approximately £1.1 billion. The procurement exercise itself - I am told in the evidence, which for the defendant is from Mr Ahmad and for the claimant, Serco, is from Miss Moor - took four years. The evaluation process took about nine months and Serco was unsuccessful. The winning bidder was a company called Capita.

There are two bases upon which the MoD seek to strike out certain passages in the Particulars of Claim. The first is that the Particulars of Claim seeks to bring a claim not only in respect of the Defence and Security Public Contract Regulations 2011 ("the Defence Regulations"), but also the Public Contract Regulations 2015. Although the Public Contract

That averment, and others similar to it, cannot be entirely accurate for this reason. Both sets of Regulations cannot apply to the same procurement. Either one set applies, or the other. The contract notice was published in the OJEU on 17 October 2014. The Public Contract

Ms Hannaford had a variety of other points which she relied on in respect of the claim as purported to be brought under PCR 2015, but it is unnecessary to analyse what they are. This is because it seems to me that that primary point which I have just outlined is a fairly compelling one. Mr Barrett for Serco has frankly accepted today that the pleading refers to a version of the Regulations (PCR 2015) which were not in force in respect of this particular procurement, as of the date the contract notice was published. He submitted that if this was the case – and it clearly is - he would apply to amend. He has no amendment application before the court today.

I am going to strike out the part of the claim that relies on the Public Contracts Regulations 2015 for the obvious reason that they were not in force at the relevant date. They cannot therefore apply to this procurement. If Mr Barrett - and I am expressing myself neutrally - feels compelled to issue an application to amend, one of the grounds upon which it will be opposed, as has been made clear by Ms Hannaford, is not only the ground that the Defence Regulations apply to this procurement. This would be a rather obvious ground given the Defence Regulations are the regulations identified in the contract notice itself. There are also other grounds that she might have, including one that any claim under the 2006 Regulations would be rather considerably out of time. Given the tight timescales within which public procurement challenges needed to be brought, it might be though likely that an application to amend to include a claim under the PCR 2006 Regulations, when those regulations are no longer in force, have not been in force for a period of over four years, and given the procurement started in October 2014 given that it is now February 2019, might not stand the best chances of success. However, I am not going to pre-judge any amendment application that might be made, other than to observe for current purposes today that the claim in respect of the Public Contracts Regulations 2015 is indeed going to be struck out. It has no prospect of success whatsoever.

However, the second issue that arises is one which concerns the sufficiency of notice. Under the Defence Regulations in Regulation 52(3), particulars of breach are required to be identified in the pre-action correspondence. That has been described by Mr Barrett as the “sufficiency of notice” issue. It is, perhaps unsurprisingly, given my conclusion on the applicable regime so far as the Regulations is concerned, the issue that has taken up the majority of the argument today. On a strikeout application the test is set out at CPR

Under CPR Part 24.2:

The wording there is slightly different. It says "real prospect" rather than "no reasonable grounds".

In the recent Court of Appeal authority in Iiyami UK v Samsung [2018] EWCA Civ. 220 [39] the test on an application for summary judgment was considered by the Court of

Turning to the sufficiency of notice issue, I am just going to identify some of the documents.

With that letter went an annex which was described as:

That letter had the effect of starting the standstill period the following day. This letter is the notification of the contract award. As anyone in practice in procurement law will know, there are very strict time limits for doing certain things, in particular issuing proceedings.

With that document in the annex, which runs to about 37 pages, there are a number of explanations given for the score that was obtained by Serco, taking into account weighting, and the score obtained by the winning tenderer. These are done against each of a group of numbered items which have been referred to by the parties as "RoRs", each of which relate to a different part of the bid. In the first pre-action letter which was sent by the solicitors DWF acting for Serco, the MoD's chief commercial officer was told in rather detailed terms of the dissatisfaction Serco had with that outcome. This letter is dated 22 June 2018 and has been called the first pre-action letter. Paragraph 2 of that letter states:

There then appear against different headings certain points which Serco draw to the MoD's attention. (A) Apprehended breaches of the evaluation of Capita's bid. In respect of that, certain RoRs are identified by number. (B) Apprehended breaches in relation to Capita's bid. Certain RoRs are identified by number. (C) Apprehended breaches in relation to Serco's bid. Again, certain RoRs are identified by number. At (D) the standstill period is sought to be extended. It says at paragraph 41:

Under (F) “provision of information”, complaint is made between paragraphs 46 and 51 about the amount of information available to Serco. At paragraph 46 the letter says:

There is then a conclusion paragraph which says, at paragraph 55:

There was an answer on 4 July 2018 from the Government Legal Department on behalf of the MoD. That included copies of the AWARD records of the individual and consensus scores for Capita and Serco for the evaluation criteria which had been identified in the 22 June letter at each stage of the procurement process, but it did not include records for the other criteria so far as I can tell. AWARD is an evaluation database. The actual pre-action response, again from the Government Legal Department, came on 9 July 2018. In that, at paragraph 3, the Government Legal Department stated, on behalf of the MoD:

That letter then identifies, in particular at paragraphs 6 to 19, the general approach that was said in the letter to have been adopted by the MoD in the evaluation. Mr Barrett for Serco makes the point, not only in respect of this but in respect of various points arising out of today's proceedings, that the tender response was 9,000 pages long. It is therefore perhaps to be put in context that the annexure which run to 37 pages, the communication with the contract award notice, is perhaps not as fulsome necessarily as one would expect. It certainly enabled the unsuccessful bidder (Serco) to identify some RoRs in respect of which complaint was made, and some of those detailed points were responded to in the pre-action response letter that I have just identified. However, it is highly unlikely that there was enough detail in a 37 page document to identify all of the grounds with which Serco was dissatisfied in terms of evaluation of a 9,000 page tender response.

That led to a second pre-action letter. This one is dated 11 July 2018. Again, it is a fairly lengthy letter. I am not going to read a great deal of it out. It is not as long as the first preaction letter. In paragraph 3 it says,

There is then a heading. "MoD's change in approach to evaluation of SRDs following submission of final tenders." There are a lengthy number of paragraphs under that heading that go from (5) to (15). The final sentence of paragraph 5 makes it clear that -

The final sentence in paragraph 9 states:

At paragraph 16 onwards there are some examples given. They run for a couple of pages. At paragraph 26, under the heading "provision of information", further information is sought by Serco in respect of the evaluation of its tender. At paragraph 29 it is said:

The point is then made that: "This information should be primarily and readily available on the AWARD system.”

At paragraph31 is the paragraph which Ms Hannaford relies on, which says,

The conclusion is a demand for further information which includes copies of the full award records of all the evaluators, in respect of all the RoRs and records and information relating to the MoD's evaluation of cost.

I should say that letter received no meaningful response, but in accordance with the strict time limits in procurement cases, on 17 July 2018 proceedings were issued by Serco. Those proceedings, in the brief details of claim, sought to bring a claim both under the Public Contracts Regulations and the Defence and Security Public Contract Regulations. I have dealt with the first of those earlier in this judgment. They were followed by the Particulars of Claim. I am going to identify what effectively amounts to the crux of Ms Hannaford's submissions now before I turn to the pleading. Ms Hannaford's argument is that what is required to comply with the Regulations, and Regulation 52 in particular, is a clear statement of the alleged breach in the pre-action correspondence. I will come on to the authorities dealing with that in a moment. She maintains that because that requires identification in the letter, any numbered RoRs which are not separately identified in either of those two letters have not been sufficiently identified in advance, as required by the Regulation, and reference to them in the Particulars of Claim should be struck out. That will require consideration, firstly, of what those letters have to include to comply with the

I am just going to deal briefly with the pleading because it is relevant to the amount of information that was available to Serco at the time. In paragraph 23 of the Particulars of Claim, which has been settled both by Mr Barrett and Mr Sammour who appear before me today for Serco, at paragraph 23 this reads as follows.

That was pleaded to in the defence which was settled by leading counsel - not Miss Hannaford but Mr Moser QC - together with Mr Webster and Ms Opsecui, who appears before me today, and also Ms Katidja. The following is stated in paragraph 23 of the defence.

There are a number of cases, but not very many, which deal with the sufficiency of notice. This is because cases such as this under the Defence Regulations do not often come before the court, and although there used to be a similar approach across other regulations, there is only a handful of cases. They are summarised in the decision of Coulson J (as he then was) in Amaryllis Limited v HM Treasury sued as OGC Buying Solutions [ 2009] EWHC 962 (TCC). In that judgment, which was on a strike-out application in the same vein as this one but under the 2006 Public Contracts Regulations, Coulson J considered the authorities. The relevant regulation there was Regulation 47, but the fact that it is a different regulation does not, in my judgment, dilute the effect of this decision, which is very useful. At [31] to [37] Coulson J identified the relevant three authorities. The first is R v Portsmouth City Council Ex Parte (1) Bonaco Builders Limited. As the title suggests, that is a judicial review case. Again, that does not matter because the procurement challenges are brought by judicial review, and even today they are still brought sometimes both by judicial review in the Admin Court, and by Part 7 proceedings in the TCC. In that case Keene J (as he then was) considered the language of that Regulation 47 which referred to "the" (using the definitive article) breach of duty rather than "a" (the indefinite article) breach of duty, suggesting that the actual breach complained of must be identified as the notice. His judgment says, as follows:

That case went to the Court of Appeal and before it got to the Court of Appeal there was a European Court of Justice decision in a case known as "Wallonne Buses." Because of that decision, the Court of Appeal made certain findings not connected with the adequacy of notice under the Regulations and overturned the result at first instance. As Coulson J correctly identifies in [33], that was on an entirely different point.

The next case in the series is Keymed Limited v Forest Healthcare NHS Trust [1998] EuLR 71, although the reference copy in the authorities' bundle is a Westlaw reference. The complaint in the notice concerned the advertisement of the proposed contract. The part of the notice that was said to relate to the breach complained of read as follows:

Langley J had concluded that "that the letter adequately fulfilled the purpose and letter of the notice provision in the relevant Regulation."

The third case in the series is Luck T/a G Luck Aboricultural & Horticulture v LB TowerHamlets[2003] EWCA Civ. 52. As one might guess from the title, that also was a judicial review case. It went to the Court of Appeal first on the refusal of permission to allow judicial review. That appeal was allowed and then the judicial review itself took place, and the case went to the Court of Appeal again. However, the alleged notice was in remarkably brief terms, as Coulson J says at [35].

Mr Justice Coulson's summary of those authorities is one which I gratefully accept and adopt in [37]. He says:

I would repeat the clause in the middle of that final sentence "by reference to the Regulations", because in my judgment what Ms Hannaford seeks to do (although she portrays it as a notice requiring a clear statement of alleged breach) is effectively urging that the notice must include specific allegations of a failure to evaluate a particular RoR, which in my judgment is more correctly characterised as full particulars of a breach. That can be tested by looking at the facts in the Amaryllis case, in my view. In [18] it can be seen that the letter which was sent stated in its second paragraph:

It is plain, therefore, that the score of which complaint was made is identified in [23] where, in the middle of that paragraph, it says:

They then follow in that paragraph as (a) Previous Experience and Comparable contracts. (b) is Criteria and Weightings; (c) is Environmental Management; and (d) is Business Activities. When Coulson J comes, at [38] to [43], to consider whether or not there was sufficient notice in accordance with the Regulations in the letter which I have identified, he concluded there was. He said:

Thirdly he accepted the submission that " the adequacy of the notice has to be considered against the backdrop of the information made available to the claimant by the defendant."

Considering each of those three points in this case, based on the adequacy of the information provided in the 37 page annexe and the information identified in the two pre-action letters, I consider that that is sufficient to cover all numbered RoRs, and not just the numbered RoRs contained in the letter.

However, there is a subsidiary point which applied in Amaryllis, and in my judgment also applies here. The learned judge, at [42] said:

When one considers that the response from the Government Legal Department was to provide the AWARD documentation only in respect of the numbered RoRs, which were identified in the first letter, and which stated on their face that they were only part of the exercise in terms of what the complaint was, it is very difficult to see how there could be any legitimate criticism that other further numbered RoRs were not identified. In dealing with what I should say is a subsidiary or supplementary argument of Ms Hannaford, she places great store on the paragraph at the end of the second pre-action letter which identifies that Serco has identified other breaches which are not specifically identified within that letter by way of numbered RoRs. However, the introductory first two or three pages of that letter makes it clear that an attack is made upon the whole of the scoring criteria. The Regulations are particularly specified in both the second pre-action letter and the first preaction letter. On the facts of this case, I have come to the conclusion that at this stage of the proceedings it would be wrong to decide, applying the test as I must, that there are no reasonable grounds for allowing the claim to continue or that the claims under those RoRs which have been identified in the particulars, but are not identified in the first pre-action letter by number, have no real prospect of success. Accordingly, in all the circumstances that limb of Ms Hannaford's application fails, but as I said, her first limb in respect of the applicable regulatory regime succeeds.

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