The effect of the 2015 amendments was to require the court to proceed on the hypothetical basis that an interlocutory injunction had been applied for and, in the event that the court considered that no such injunction would have been granted, to consider then whether the suspension created by the standstill provisions should be lifted.
A number of decisions in the High Court, such as BAM, Powerteam and Beckman, had established that the court must apply the Campus Oil test appropriate for interlocutory injunction applications.
This meant that the onus rested on the disappointed tenderer to show that:
- There was a fair issue to be tried,
- Damages would not be an adequate remedy, and if not, then
- The balance of convenience was in favour of granting the injunction.
In challenges of this kind, it is usually more likely than not that there will be a fair issue to be tried.
Regarding adequacy of damages, the effect of the previous case law was that damages would readily be available in a public-procurement case in the same way as they would be in a standard action for breach of contract, and that the normal principles applicable to damages – namely causation, foreseeability and quantification – would apply.
For example, in BAM, damages had been found to be an adequate remedy, notwithstanding the fact that the plaintiff had contended that it would suffer serious reputational damage. However, a recent decision of Hogan J from the Court of Appeal has taken a different approach.
Lost in translation
In Word Perfect, the plaintiff was the supplier of specialist translation services to a range of State bodies.
The plaintiff brought proceedings challenging the award by the Minister for Public Expenditure of a contract for the supply of translation services to the State’s immigration services and the Legal Aid Board to another company, known as Translation.ie.
The appeal arose out of an application to the High Court by the minister, lifting the automatic suspension and allowing the contract to be awarded, pending the outcome of the challenge. Noonan J granted the order sought.
During the course of the hearing in the High Court, an argument was made that the reference to damages in the 2010 regulations referred, not to damages that might generally be available in a breach of contract claim, but rather Francovich damages.
It will be recalled that damages that are available for a breach of EU law are highly conditional and limited. Such damages are only available when:
- The rule of EU law infringed must be intended to confer rights on individuals,
- The breach of that rule must be sufficiently serious, and
- There must be a direct causal link between the breach and the loss or damage sustained by the individuals.
If this argument were to be accepted, the effect in public procurement cases would be that damages might not be available and, accordingly, not an adequate remedy.
This would mean that it would be less likely that an application on behalf of a contracting authority to lift an automatic suspension would be less likely to be successful.
However, Noonan J in the High Court did not accept that the Campus Oil principles were required to be modified by European jurisprudence or to be inconsistent with that jurisprudence, and noted that the court in in both BAM and Powerteam had discounted similar arguments.
He was of the view that damages would be an adequate remedy for Word Perfect, notwithstanding arguments on behalf of the plaintiff regarding the likely reputational damage that Word Perfect would suffer if the contract award were to stand, through the loss of specialist interpreters for rare languages, and that this loss might even prove terminal to its business.
Noonan J, accordingly, granted the minister’s application to lift the automatic suspension, which would have had the effect of permitting the minister to conclude the contract with Translation.ie.
The Court of Appeal took a different view regarding which regime governs the question of adequacy of damages.
The decision was preceded, by only a few days, by an ex temporedecision of the High Court in Homecare in an interlocutory application, where it was held that the Campus Oil principles apply to the lifting of an automatic suspension.
It is noteworthy that the disappointed tenderer in that case had claimed in its substantive proceedings, which have since settled, that the specific provision of the Remedies Regulations, insofar as it enjoined the application of the Campus Oil test, was invalid on various constitutional and EU grounds.
Hogan J, for the Court of Appeal in Word Perfect, recalled in the first instance that the entire field of public procurement is largely governed by EU law and that the Remedies Directive provided for a scheme of standstill provision – the setting aside of awards of contracts and damages.
However, the EU had not specified what type of damages it had in mind; and whether the measure of damages was to be determined by national or EU law.
Hogan J observed that a recent case of the CJEU had determined that member states are required by EU law to provide remedies by reference to the Francovich criteria, but that it was open to member states to provide a more ‘claimant-friendly’ remedy.
The question then arose as to whether Ireland had provided for this in its implementing legislation.
While the 2010 regulations did not give any guidance in terms of the availability of damages in public procurement cases, Hogan J regarded it as relevant that they were not transposed by means of legislation by the Oireachtas, but rather by way of ministerial order made under section 3 of the European Communities Act 1972.
Hogan J drew upon established constitutional principles in deciding that the reference to damages in the 2010 regulations must be understood as being a reference to Francovich damages only, as this is all that EU law required.
He surmised that if the legislature wanted to provide for an award of damages over and above Francovich damages, then this would have had to be effected by legislation and not ministerial order, as article 15.2.1 requires that a change beyond that necessitated by EU law can only be effected by legislation.
The British Supreme Court had recently come to a similar conclusion.
The consequence of Hogan J’s conclusion was to remove the case from the standard application for an injunction as far as the question of adequacy of damages was concerned.
He noted that the highly limited and conditional nature of Francovich damages had recently been illustrated by an Irish Supreme Court decision, and that it is necessary to show, not simply that there had been an objective breach of breach of EU law but, rather, that such breach was either “grave or manifest” or “inexcusable”.
Hogan J recognised that the task for a court in an interlocutory application, such as the one before it, was to ensure the least possible injustice, pending the outcome of the substantive action.
Hogan J concluded that damages were not an adequate remedy for Word Perfect and, as an arguable case had been made out, the remaining question was where the balance of convenience lay.
Hogan J, in weighing up the competing factors of the public interest in ensuring the State had available to it the best possible translation service versus the real risk of reputational, and possibly terminal, damage to Word Perfect, found them to be finely balanced.
Whether EU or national law were to be applied, the right to an effective remedy was fundamental, and Hogan J concluded that Word Perfect would enjoy no real remedy if the automatic suspension were lifted, and so allowed the appeal.
It was acknowledged that the fact that damages had not been found to be an adequate remedy as an important and, perhaps, even a decisive factor, in this decision.
Practitioners acting for both contracting authorities and disappointed tenderers would do well to heed the decision of the Court of Appeal in Word Perfect, as it may well result in the reversal of the prior trend that had emerged in the Irish courts of lifting automatic suspensions.
Under the Francovich criteria, damages are less likely to be an adequate remedy for a tenderer challenging the legality of a procurement process.
The decision should be further welcomed as adding to the growing body of Irish jurisprudence in this area.