High Court lifts automatic suspension in Home Office procurement challenge

In Teleperformance Contract Ltd v Secretary of State for the Home Department and another [2023] EWHC 2481 (TCC), the High Court granted an application to lift the automatic suspension on entering into four contracts.

The Court considered the usual test pursuant to American Cyanamid v Ethicon [1975] AC 396 and determined that damages were an adequate remedy for the Claimant if it succeeded at trial. The contract award was therefore permitted to proceed and the automatic suspension lifted. Central to the judgment was whether losses suffered by group companies (not just the bidder) could be considered when assessing whether an entity could be adequately compensated by damages at trial.

We consider the impact of the decision below.

Facts

The claim concerned a procurement conducted by the Secretary of State for the Home Department ("Home Office") for five contracts facilitating the provision of visa and citizenship services (the "Procurement"). The Procurement was to cover five geographical "Lots" resulting in the procurement of five contracts. The total value of the Procurement was c. £1.2 billion. Teleperformance Contract Limited ("TCL") was the incumbent provider of the services to the Home Office.

On 15 June 2023, TCL was informed that it had been awarded one of the contracts; however, VF Worldwide Holdings Ltd ("VFW") was the successful bidder in respect of the remaining four contracts ("the VFW Contracts").

TCL commenced proceedings against the Home Office on 15 July 2023. As TCL had issued a claim within the limitation period and the Home Office had not yet entered into the VFW Contracts, pursuant to regulation 95(1) of the Public Contracts Regulations 2015 ("PCR"), there was an automatic suspension prohibiting the Home Office from entering into the VFW Contracts unless and until the automatic suspension was lifted and / or the matter was determined at trial.

The Home Office subsequently applied to lift the automatic suspension on entering into the VFW Contracts.  On 10 August 2023, by the Order of Mr Justice Eyre, VFW was joined to the proceedings as an Interested Party. 

Legal issues

The impact of the suspension pursuant to the PCR has, in essence, the same practical effect as subjecting the contracting authority to injunctive relief. 

As such, the relevant legal test for the Court to determine whether the suspension be discharged is the usual test set out in American Cyanamid. Those principles are as follows:-

• whether there is a serious issue to be tried;
• whether damages would be an adequate alternative remedy (if the Claimant was successful at trial); and
• whether the balance of convenience favours the contracting authority entering into the contract.

There was no dispute that there was a serious issue to be tried, passing the first limb of the test. As is often the case, the Court's focus was whether damages would be an adequate remedy for TCL if it was to succeed at trial. If so, the Court would likely lift the suspension.

TCL's case as to why damages would not be an adequate remedy was based on losses which would allegedly be suffered by it and its wider group. TCL submitted wide-ranging evidence regarding the alleged significant prejudice to the ability of its group companies to compete in other opportunities in the global market of visa and immigration services.   The question for the Court was therefore whether losses within group companies were relevant to overcoming whether damages were an adequate remedy.  The Court found that TCL's evidence did not substantiate its position, in particular, the Court commented that:-

1. Some of the evidence was irrelevant (i.e. did not show how TCL / the group suffered loss);
2. Other evidence was contradictory, seeking to draw a line between various entities when considering lost revenue, whilst also asking the Court to consider the impact on the group as a whole;
3. The evidence was vague, numbers were overstated and TCL failed to provide internal analyses / papers to support its assertions; and
4. The evidence did not adequately substantiate the claims of far-reaching harm and prejudice to the wider corporate group, as TCL suggested.

The Court therefore found that it was not appropriate to consider losses suffered by group companies as relevant to the question of adequacy of damages, noting in particular:-

1. No other group company was party to the litigation (nor did they have a cause of action, having not been a bidder in the Procurement);
2. The Court was not asked to consider whether group companies have standing to challenge a procurement, but rather whether group losses are relevant in a claim brought by a subsidiary;
3. The relevant loss is the loss of profits to be sustained by the losing bidder, i.e. TCL, which will generally be capable of assessment via damages;
4. There was insufficient nexus between TCL's alleged losses and any group company losses; and
5. The Home Office owed no duty under the PCR to any other group company, irrespective of any losses they may have sustained.

Notably, the Court commented that even if it was necessary to consider the wider losses when considering the adequacy of damages, in this instance the evidence submitted did not adequately substantiate the claims of far-reaching harm and prejudice to the group companies.  The Court therefore ordered that the automatic stay be lifted, allowing the VFW Contracts to be entered into.

Comment

The judgment follows the principles in American Cyanamid and will be of interest to public authorities in providing further clarity of the test to lift the automatic suspensions and is another example of the difficulties in clearing the hurdle of whether damages are an adequate remedy.

However, this case is particularly noteworthy as it demonstrates the Court taking a firm approach to losses allegedly suffered group companies and the hurdles to be overcome.  The judgment is also important to demonstrate the importance of substantiating claims with clear, accurate and analysed evidence.