Healthcare at Home Limited v The Common Services Agency

The Clapham omnibus has many passengers. The most venerable is the reasonable man, who was born during the reign of Victoria but remains in vigorous health. Amongst the other passengers are the right-thinking member of society, familiar from the law of defamation, the officious bystander, the reasonable parent, the reasonable landlord, and the fair-minded and informed observer, all of whom have had season tickets for many years.

The horse-drawn bus between Knightsbridge and Clapham, which Lord Bowen is thought to have had in mind, was real enough. But its most famous passenger, and the others I have mentioned, are legal fictions. They belong to an intellectual tradition of defining a legal standard by reference to a hypothetical person, which stretches back to the creation by Roman jurists of the figure of the bonus paterfamilias. As Lord Radcliffe observed in Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696, 728:

It follows from the nature of the reasonable man, as a means of describing a standard applied by the court, that it would misconceived for a party to seek to lead evidence from actual passengers on the Clapham omnibus as to how they would have acted in a given situation or what they would have foreseen, in order to establish how the reasonable man would have acted or what he would have foreseen. Even if the party offered to prove that his witnesses were reasonable men, the evidence would be beside the point. The behaviour of the reasonable man is not established by the evidence of witnesses, but by the application of a legal standard by the court. The court may require to be informed by evidence of circumstances which bear on its application of the standard of the reasonable man in any particular case; but it is then for the court to determine the outcome, in those circumstances, of applying that impersonal standard.

In recent times, some additional passengers from the European Union have boarded the Clapham omnibus. This appeal is concerned with one of them: the reasonably well-informed and normally diligent tenderer.

The RWIND tenderer, as he has been referred to in these proceedings, was born in Luxembourg. He owes his existence to the EU directives concerned with public procurement. For present purposes, the most significant directive is Directive 2004/18/EC of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts (OJ L 134, 30 April 2004, p 114). The background to the Directive, as explained in the second recital to the preamble, is that the award of contracts by public authorities in the member states is subject to the principles of freedom of movement of goods, freedom of establishment and freedom to provide services, and to other principles derived from those, such as the principles of equal treatment, non-discrimination, mutual recognition, proportionality and transparency. In particular, as explained in the forty-sixth recital:

These general principles are reflected in the requirements laid down in Directive 2004/18. In particular, article 2 requires that “contracting authorities shall treat economic operators equally and non-discriminatorily and shall act in a transparent way”. Article 41 entitles unsuccessful candidates to be informed of the reasons for the rejection of their applications. Article 53 sets out requirements governing the disclosure of the criteria for the award of public contracts.

It was in order to articulate the standard of clarity required in this context by the principle of transparency that the European Court of Justice invoked the RWIND tenderer. In the case of SIAC Construction Ltd v County Council of the County of Mayo (Case C-19/00) [2001] ECR I-7725, where there was a disagreement between the parties as to the interpretation of tender documents, the court stated:

In that passage, the court explained what the legal principle of transparency meant in the context of invitations to tender for public contracts: the award criteria must be formulated in such a way as to allow all RWIND tenderers to interpret them in the same way. That requirement set a legal standard: the question was not whether it had been proved that all actual or potential tenderers had in fact interpreted the criteria in the same way, but whether the court considered that the criteria were sufficiently clear to permit of uniform interpretation by all RWIND tenderers.

The objective nature of the standard to be applied also appears from the opinion of Advocate General Jacobs in the same case:

That the standard is objective also appears from the opinion of Advocate General Sharpston in Lämmerzahl GmbH v Freie Hansestadt Bremen (Case C-241/06) [2008] 1 CMLR 462. The case concerned another directive which is relevant to the present appeal, namely Directive 89/665/EEC of 21 December 1989 on the coordination of the laws, regulations and administrative provisions relating to the application of review procedures to the award of public supply and public works contracts (OJ L 395, 30 December 1989, p 33). Article 1 of the Directive requires member states to take the measures necessary to ensure that:

The issue in the case was whether a national time limit for the bringing of proceedings was compatible with Directive 89/665. The time limit started to run if the alleged irregularity was identifiable on the basis of the tender notice. The Advocate General posed the question as to what was the degree or nature of knowledge of an irregularity which might be attributed to a tenderer without breaching the effectiveness principle underlying Directive 89/665. She observed:

As the Advocate General noted in that passage, the yardstick of the RWIND tenderer is an objective standard applied by the court. An objective standard of that kind is essential in order to ensure equality of treatment, as the court explained in SIAC. In addition, as the Advocate General explained, such a standard is consistent with legal certainty: something which would be undermined by a standard which depended on evidence of the actual or subjective ability of particular tenderers to interpret award criteria in a uniform manner. Furthermore, to require proof of the subjective understanding of tenderers would be inconsistent with the need for review to be carried out as rapidly as possible, as required by article 1 of Directive 89/665. The latter requirement has also been emphasised by the Court of Justice: see for example Universale-Bau AG v Entsorgungsbetriebe Simmering GmbH (Case C-470/99) [2002] ECR I-11617, para 74.

Judgments of the Court of Justice subsequent to SIAC are consistent with this approach. An example is the case of EVN AG v Austria (Case C-448/01) [2003] ECR I-14527, which concerned the award of a contract for the supply of electricity. The invitation to tender required tenderers to state the amount of electricity which could be supplied from renewable sources. It was contended by an unsuccessful tenderer that that requirement lacked the transparency required by the predecessor directive to Directive 2004/18, because there was a failure to specify the period of time in respect of which the amount that could be supplied was to be stated. The Court of Justice said:

The rationale of the standard of the RWIND tenderer is thus to determine whether the invitation to tender is sufficiently clear to enable tenderers to interpret it in the same way, so ensuring equality of treatment. The application of the standard involves the making of a factual assessment by the national court, taking account of all the circumstances of the particular case.

The standard of the RWIND tenderer has been applied by the Court of Justice and the General Court in a number of cases in which those courts have themselves had to determine whether tender documents complied with the standard. An example is the case of Commission of the European Communities v Netherlands (Case C-368/10) [2012] 3 CMLR 234, which concerned the compatibility with Directive 2004/18 of a tender specification for drinks machines which contained generally expressed requirements relating to sustainability. The court stated:

In that case, as in other direct actions where the RWIND tenderer test has been applied (such as Evropaïki Dynamiki – Proigmena SystimataTilepikoinonion Pliroforikis kai Tilematikis AE v Commission of the EuropeanCommunities) (Case T-59/05) (unreported) 10 September 2008 and Evropaïki Dynamiki – Proigmena Systimata Tilepikoinonion Pliroforikis kaiTilematikis AE v European Maritime Safety Agency (EMSA) (Case T-70/05) [2010] ECR II-313), the court arrived at its conclusion on the basis of its consideration of the relevant documents, without requiring evidence as to the interpretation placed on the documents by actual or potential tenderers.

As I have explained, article 41 of Directive 2004/18 imposes on contracting authorities a duty to inform any unsuccessful candidate, on request, of the reasons for the rejection of his application. Guidance as to the effect of that duty can be found in the judgment of the Court of First Instance in Strabag Benelux NV v Council of the European Union (Case T-183/00) [2003] ECR II-138, paras 54-58, where the court stated (para 54) that the obligation imposed by an analogous provision was fulfilled if tenderers were informed of the relative characteristics and advantages of the successful tenderer and the name of the successful tenderer. The court continued (para 55):

The present case concerns a tendering process carried out by the respondent in 2010 in respect of the provision of medical services to health authorities in Scotland. The appellant was the existing supplier of the services in question, but was unsuccessful in a tender competition for a replacement contract. It challenged that decision on the ground that the respondent had breached certain of its duties under the Public Contracts (Scotland) Regulations 2006 (SSI 2006/1), which implemented Directives 89/665 and 2004/18. In particular, it complained that the criteria in the invitation to tender were insufficiently clear, and that the reasons given to it for the rejection of its tender were unclear and lacking in detail.

Following an eight day proof, at which the appellant adduced evidence from a number of witnesses to the effect that they had not understood the criteria in the same way as the successful tenderer, the appellant’s case was rejected by the Lord Ordinary, Lord Hodge: [2012] CSOH 75. In relation to the clarity of the criteria, he expressed the opinion that it was unrealistic to require a contracting authority to frame its invitation to tender in such detail that two reasonable people could not reach different views on its interpretation. He noted that there were practical limits to the extent to which a contracting authority could spell out every aspect of what its criteria might entail, and stated that it was implicit in the RWIND tenderer test that the court should ask what would have been reasonably foreseeable by a RWIND tenderer as being encompassed by the stated criteria. Applying that objective approach to the invitation to tender, in the light of evidence as to the relevant context, he concluded that the criteria met the required standard of clarity. In relation to the reasons given, he applied the approach which I have described in paragraph 17 in the light of the evidence, and concluded that the reasons which had been given were adequate: the appellant could have been left in no real doubt as to why it had been unsuccessful, and as to the relative characteristics and advantages of the successful tenderer. The appellant was able to assert its rights before the courts.

An appeal to the Inner House was refused, for reasons set out in an opinion delivered by the Lord Justice Clerk, Lord Carloway: [2013] CSIH 22; 2013 SC 411. In his opinion, the Lord Justice Clerk recalled what the Court of Justice had said about the requirement of transparency in SIAC, namely that the test was whether the invitation to tender had formulated the criteria “in such a way as to allow all reasonably well-informed and normally diligent tenderers to interpret them in the same way” (para 52). He observed (para 57):

In the appeal to the Inner House, counsel for the appellant founded on evidence which had been led before the Lord Ordinary as to witnesses’ understanding of the invitation to tender. Counsel sought to rely on the evidence in order to establish how a RWIND tenderer would have understood the criteria in question. The Lord Justice Clerk considered however that the attempt to establish by evidence how the RWIND tenderer would have understood the criteria was misguided (para 60).

The Lord Justice Clerk also observed that it was of considerable importance that decisions of the courts on the validity of a tendering process were taken with all due expedition, so that the parties could know, without delay, whether or not the contract was going to proceed. Unless there was a strong reason to suppose that it would cause injustice, such decisions ought to be capable of being taken in the absence of detailed oral testimony. If it were otherwise, a swift decision would be almost impossible.

In relation to the adequacy of the reasons given, the Inner House followed the same approach as the Lord Ordinary and arrived at the same conclusion.

In its appeal to this court, the appellant challenges the conclusions reached by the courts below both in relation to the clarity of the tender criteria and in relation to the adequacy of the reasons given for the rejection of its tender.

In relation to the tender criteria, the appellant submits that the Inner House erred in treating the RWIND tenderer as a hypothetical construct, and in applying the RWIND tenderer standard not according to the evidence of witnesses as to what an actual tenderer did or thought, but according to the court’s assessment of what a hypothetical RWIND tenderer would have done or thought. The evidence of witnesses from an actual tenderer as to their understanding of the tender criteria, far from being irrelevant, established what RWIND tenderers actually understood, unless it were shown that the witnesses were not reasonably well-informed or normally diligent. The courts below had, it was submitted, confused the RWIND tenderer test with the interpretation of a contract: an objective test was appropriate in the latter context, but not in the former.

For the reasons I have explained at paragraphs 2-3 and 7-12, these submissions are in my view ill-founded. I agree with the way in which this issue was dealt with by the Lord Justice Clerk:

As the Lord Justice Clerk made clear, evidence may be relevant to the question of how a document would be understood by the RWIND tenderer. The court has to be able to put itself into the position of the RWIND tenderer, and evidence may be necessary for that purpose: for example, so as to understand any technical terms, and the context in which the document has to be construed. But the question cannot be determined by evidence, as it depends on the application of a legal test, rather than being a purely empirical enquiry. Although, as counsel for the appellants emphasised, the question is not one of contractual interpretation – the issue is not what the invitation to tender meant, but whether its meaning would be clear to any RWIND tenderer – it is equally suitable for objective determination.

I also agree with the Lord Justice Clerk that it is unnecessary, and potentially confusing, to introduce the concept of reasonable foreseeability in the present context. The Lord Ordinary’s reference to reasonable foreseeability did not however lead him into error: in substance, he and the Inner House applied the same objective test by considering what a RWIND tenderer would have understood as being encompassed or entailed by the terms of the invitation to tender.

Counsel for the appellant also submitted that the Lord Ordinary and the Inner House had erred in concluding that a number of specific aspects of the invitation to tender complied with the requisite standards of transparency. In each case, the argument was essentially that the court had erred in holding that the meaning of the relevant criterion would have been sufficiently clear to a hypothetical RWIND tenderer, in the light of evidence that it had not been clear to witnesses whose understanding was said to be representative of that of a RWIND tenderer. Once it is accepted, however, that the courts below applied the correct legal test, this court will not readily interfere with the conclusion which they reached in the light of their evaluation of the evidence (cf Biogen Inc v Medeva plc [1997] RPC 1, 45; In re B (A Child) (Care Proceedings: Threshold Criteria)[2013] UKSC 33; [2013] 1 WLR 1911). There is no suggestion that circumstances entitling this court to interfere might exist in the present case, if the principal submission, that the courts below erred in law in their treatment of the evidence in question, were rejected. In these circumstances, it is unnecessary to repeat the analysis carried out by the Inner House.

It was also submitted that the courts below had erred in concluding that the reasons given to the appellants for the rejection of their tender were adequate. As I have explained, however, the courts below applied the approach laid down by the Court of Justice. It is not the function of this court to review their findings, in the absence of any error of law in their approach to the evidence or some other recognised ground for interfering with their assessment.

For these reasons, I would dismiss the appeal.