This important judgment enables DCC to enter into the new Contract without delay, thereby realising significant benefits and service improvements to better meet the needs of vulnerable service users in the Devon community, as well as realising significant cost savings.

The need for "cogent" or "compelling" evidence

One of the key issues considered in the Judgment is whether damages would be an adequate remedy for the Claimant if the suspension was lifted and DCC entered into contract with the successful bidder.

The Court expressed the view that losing public contracts was "very much a part of life" and emphasised the need for Claimants to provide "cogent" or "compelling" evidence to support claims that significant harm will be suffered that cannot be compensated in damages if the suspension is lifted and a contract is lost as a result: " Where the claimant makes significant claims about its future prospects and ability to win contracts, as a result of losing one particular contract, the Court will be cautious in accepting such claims without detailed evidence, such as management accounts, detailed financial information, details of other contracts that Millbrook has in place and other potential bids that it might apply for in future".

In this case, the Claimant, who was the incumbent service provider, submitted a witness statement making a number of assertions that lifting the suspension would result in reputational harm, a significant loss of market share, an exodus of employees and a loss of ability to compete effectively for future opportunities. However, the statement was not backed up with any supporting evidence to demonstrate the impact losing the contract would have on the Claimant's business and no such concerns were noted by the auditors in the Claimant's annual accounts.

As a result of the lack of evidence to support the Claimant's assertions, the Court concluded that the Claimant would not suffer any losses that could not be compensated by way of an award of damages. In the event that the suspension was lifted and the Claimant was successful at trial, damages could easily be quantified (despite the Claimant's contention to the contrary) and would be an adequate remedy.

Sufficiently serious breach

One interesting aspect of this application is the fact that the Claimant stated in open correspondence that it would consent to the suspension being lifted if the Defendant provided a concession that it would accept that each alleged breach of duty, if upheld at trial, would be sufficiently serious to justify an award of damages. DCC refused to give the concession and the effect of this refusal became the subject of detailed argument as to what impact this had on the adequacy of damages for the Claimant.

The Claimant argued that in this case, the application of the "sufficiently serious" test (also known as the Francovich criteria) could realistically result in the Claimant being left without any remedy at all if the suspension was lifted and any breach upheld at trial was found not to be sufficiently serious to justify an award of damages. In such circumstances, the Claimant argued, damages would not be an adequate remedy.

The Judge held that although this argument was superficially attractive, it did not work for several reasons. In essence, the Judge considered that the issue of whether damages are an adequate remedy should not be influenced by considerations of whether breaches that may or may not be upheld at trial may or may not be sufficiently serious to justify an award of damages. On an application to lift the suspension, the Court has to consider whether damages would be an adequate remedy if awarded. If so, then the suspension should likely be lifted. The fact that, at trial, the Claimant may only establish a breach that is not sufficiently serious to justify an award of damages should not alter that conclusion. This is particularly the case given that Judges at interim hearings will not be in a position to make any meaningful assessment as to the likelihood of the Claimant being left without a remedy at trial (i.e. because it has established that a breach occurred but the breach is not sufficiently serious to justify an award of damages). 

Adequacy of damages for the Defendant

The Judge accepted DCC's evidence that the new contract would bring significant benefits to vulnerable service users within Devon and that a delay to their implementation could not be adequately compensated by an award of damages. The Judge also accepted that because cost savings resulting from the new contract had already been baked into the Council's budget for the following financial year, maintaining the suspension would result in a delay to those cost savings that would result in cuts having to be made from other parts of the Council's budget. The impact this would have on the population of Devon could not be adequately compensated in damages. Further, the loss of the local authority’s agency to decide how best to provide public services which would occur if the suspension was maintained could not be measured in financial terms or compensated in damages.

Comment

The key take-away from this judgment should be the need to provide clear and cogent evidence in support of arguments both in favour and against lifting the suspension. Without such evidence, arguments are likely to be given little weight by the Court.

The judgment also shows that it is not necessary to concede that breaches established at trial will necessarily be sufficiently serious to sound in damages in order to secure an order lifting the suspension. Whilst this is an interesting point of use to contracting authorities, it may be of no relevance to applications to lift the suspension made under the Procurement Act. As that Act is an entirely domestic piece of legislation, there is a good argument that the Francovich criteria will not apply, and that any breach of duty that is found to have caused loss will result in damages, irrespective of whether it would have been considered "sufficiently serious" using the Francovich tests.

Ed Williams, Victoria Pace and Nico Tilche of DAC Beachcroft instructed Joseph Barrett KC of 11KBW for the Defendant.

A copy of the Judgment can be found here.

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