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Thursday, April 1, 2010

A tale of two wrongs making nothing right

The England and Wales High Court has decided a case instructive on (at least) two counts. (Hattip to CMS Cameron McKenna Law-Now.)

This case (we'll call the Sita case) is summarized by CMS in the following extracts from its review of the case:
Sita had brought an action for damages against Greater Manchester Waste Disposal Authority (GMWDA) after unsuccessfully bidding for a PFI project to provide waste disposal facilities for Greater Manchester.

The final contracts between GMWDA and the winning tenderer VL were delayed due to changes in the specification as a result of the credit crunch. These changes to the project were negotiated with VL after it was selected preferred bidder.

GMWDA finally entered into a contract with VL on this basis on 8 April 2009 and issued a press release to that effect.

Sita was informed that its bid had been unsuccessful on 18 April 2008 [ten (10) days after the selection of VL].

Sita argued that the process was flawed since VL was offered the opportunity to amend its bid whilst Sita was given no such opportunity.

On 27 August 2009 Sita launched a claim for damages against GMWDA for breach of the procurement rules.

GMWDA sought to strike out Sita’s case on the basis that proceedings were commenced outside the [3 month] limitation period. GMWDA argued that Sita knew or ought to have known of the infringements by 8 April 2009 at the latest.
First, the impropriety of changing specifications after submittal of bids: This matter was not discussed. Indeed, it was not considered an issue on the facts presented. The changes were patently material enough that it was assumed that the changes would constitute an appealable infringement of the procurement process.

The more meaty subject in the Sita case was the timing of the protest appeal. This is based in the "should know" condition of the relevant European law, discussed in a prior post. The case there discussed was a leading case in UK procurement law, often referred to simply as the Uniplex case.

The Court in this Sita case, Mr. Justice Mann, pointed (¶ 129) to the essential holding of the Uniplex case:
Only once the unsuccessful tenderer or candidate has been informed of the essential reasons of his being unsuccessful in the award procedure may it generally be presumed that he knew or in any case ought to have known of the alleged breach of procurement law. Only from then on is it possible for him sensibly to prepare a possible application for review and to estimate its chances of success. Before receiving such reasons, on the other hand, the person concerned cannot as a rule effective exercise his right to a review.
This particular procurement in Sita was extended over many years, and there was a significant amount of long (and convoluted) communication between the protester and the government agency. The decision canvassed much of it, and indicated by doing so that the discourse could color what a protester might later learn, bearing on when the "should know" condition is triggered.

The Court said (¶ 131),
As I have already indicated, the best evidence of what Sita knew comes from the correspondence between April and July 2009. Miss Rose's strongest case is that, looking at that material, against the background of what had passed, it is plain that Sita knew of an infringement (within the meaning of the Regulation) by 8th April at the latest, or very shortly thereafter, and that more than 3 months passed before it issued its claim form.
In discussing how much a protester might know before it "should know" of an impropriety, the Court said ¶¶ 129-130),
The information required is the essential reasons indicating a prima facie case. One did not necessarily need detail for this purpose...

There are dangers in dealing with this question in the abstract, and prescribing something which purports to be a formulated standard for something like knowledge of the grounds of a claim. However, some sort of boundaries need to be set. It cannot sensibly be the case that a claimant has to have great detail of how any breach came about before he has knowledge for present purposes. Many claimants do not have full knowledge until after a trial, because additional facts emerge throughout a piece of litigation. Claimants start actions (and are expected to start actions, for limitation purposes) at a time when their knowledge is incomplete, and when detail is not known. I do not see why actions under the Regulations should be any different. Any attempt to require levels of detail would be likely to run counter to the principle that challenges should be indicated swiftly and mounted swiftly. The standard ought to be a knowledge of facts which apparently clearly indicate, though they need not absolutely prove, an infringement.
The ultimate holding of the Court was that, on all the facts of this case, the protester's claim was filed beyond the time limit allowed from when it should have known it had a prima facie claim.

Another noteworthy topic in this case is the notion of tolling the time period for bringing a claim. The discussion in this case indicates both a statutory and a case law basis for exercising a discretion to extend the time beyond the stated bar. The Court said (¶ 170),
Regulation 32(4)(b) as strictly construed, and as operated before Uniplex, provided for the court to exercise a discretion to extend the time bar if circumstances justified it. If the Regulation had directly imposed a 3 month time limit then there would be a discretion to extend it if the circumstances warranted it. I have held that the discretion should be used to give effect to a different 3 month time limit. That does not, in my view, deprive this court of the more extended discretion that seemed to exist anyway.
The Court concluded (¶ 184),
I therefore conclude that Sita's claim has been brought out of time and there is no good reason to exercise any discretion to extend it.
On the facts of this case, the Court declined to exercise the discretion to toll the time bar. In analyzing various factors whether it should exercise its discretion, the Court said,
Ms Wolfenden correctly points out the public interest in the integrity of public procurement procedures. It is one of the drivers underlying giving the disappointed tenderer a remedy in the first place. She also points out that this is a big contract, and that the claim is potentially big and serious. All those factors are true. They are, however, of little weight in favour of exercising the discretion. They are the reasons why the remedy is there in the first place. That remedy is subject to time bars. So the time bars in principle override even if a claim is prima facie good and big. (¶ 176.)
This is a reference to the fact that GMWDA did not make the full necessary disclosure of what had happened after VL acquired its preferred bidder status, and to the fact that what was disclosed is said to have elements of the misleading about it. This is a more troubling point, but in the end it is no reason for exercising the discretion to extend the time bar. This factor boils down to a complaint that Sita had been kept out of information necessary to start an action. If good, it would be true in relation to an action based on those facts, but the present action is not based just on those facts. It is based on later facts and the award of the contract, and by 8th April or shortly thereafter Sita knew it had a claim anyway based on later facts. The fact that it discovered late in the time period that there were yet further alleged breaches does not justify any delay in commencing proceedings based on the matters of which it was already aware and which went to the same breach. (¶ 177-178.)
GMWDA has not identified any degree of prejudice which will be suffered by it if this claim is allowed to proceed which it would not have suffered had proceedings been commenced in July. The absence of prejudice would be a potentially relevant factor if there were other factors which supported the exercise of the discretion, at least in the sense that the existence of prejudice would point the other way. But as a separate factor it is of little weight. A short time period for the commencement of proceedings has been imposed in the interests of good public administration and so that public procurement authorities can know as soon as possible whether or not one of its exercises is being challenged. The existence of such a claim, let alone its being established, is capable of causing significant disruption to the public finances and the deliberations of those who have to plan budgets and recovery. The short time bar period is intended to limit the effect of that. Time bars are potentially draconian in their effect in that they are mechanical and absolute, and are not based on ad hoc prejudice considerations. The fact that no additional prejudice is sustained a week, two weeks, or a month after the lapse of the period is not, of itself, a good ground for extending the period. (¶ 179.)

And, so, the wrongly conducted solicitation was allowed to stand because the protester was wrong to bring the protest outside the time allowed.

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