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Word Perfect Translation Services Limited v The Minister for Public Expenditure and Reform [2021] IECA 305 (12 November 2021)


Monday, January 31, 2022

In a reversal of the decision of the High Court, the Court of Appeal provides a highly reasoned judgment favouring maintaining the automatic suspension in this case. As in most public procurement cases, this case is very fact specific with factors such as the availability of an early trial date and the impact of the suspension on those public bodies intending to avail of the procurement procedure carrying particular weight. However, it is the Court of Appeal’s detailed assessment on the availability of damages which is likely to attract most attention. It will be interesting to see if the decision impacts the appetite of contracting authorities to apply to lift the automatic suspension in future public procurement challenges.    

Background

In May 2021, the Office of Government Procurement (the “OGP”) commenced a tender process to establish a multi-supplier framework for the provision of Irish language translation services (the “Framework”).  The tender documents indicated that the Framework was to operate across three separate lots with up to a maximum of 15 tenderers being admitted to the Framework. Prior to the deadline for submitting tenders for this Framework, Word Perfect Translation Services Limited (“Word Perfect”) issued proceedings challenging the manner in which the OGP intended to establish and operate the Framework.

Grounds of Word Perfect’s challenge

i. Under lot 1 (the highest valued lot), the OGP indicated that contracts with a value of less than €100,000 would be allocated by way of a rotation system. Word Perfect challenged the use of this rotation system contending that it was inconsistent with the most economically advantageous tender (“MEAT”) criterion given that the entity ranked in first place may get less work than the entity ranked in 15th place over the lifetime of the Framework.

ii. The OGP included a minimum pricing requirement under all three lots and tenderers were not permitted to propose rates below these OGP minimum rates. Word Perfect maintained that this minimum pricing requirement is detrimental to competition and efficiency and pointed to the fact that the minimum rates imposed are in fact higher than the rates Word Perfect and other market providers charge and, as such, argued that the requirement amounted to an interference by the State in the market which could have the effect of distorting competition and even possibly compel entities to breach competition law.

iii. Finally, Word Perfect challenged the minimum turnover requirement of €40,000 that applied across all lots contending that that this turnover requirement is disproportionately low and risks the admission of tenderers who would not have the capability to perform the contracts resulting in a disadvantage to those tenderers who have such capability.

Effect of Word Perfect’s challenge

The issuing of proceedings by Word Perfect resulted in the application of an automatic suspension preventing the Minister for Public Expenditure and Reform (the “Minister”) from entering into the Framework until after the substantive hearing. The Minister subsequently brought its own application seeking to lift the automatic suspension and was successful in this application. The High Court’s decision to lift the automatic suspension was however, overturned by the Court of Appeal.

The timing of Word Perfect’s challenge is worth emphasising – the challenge was taken before any tenders were submitted and therefore did not relate to a decision to award a contract/framework agreement. As a consequence, the issue of damages (which was addressed in detail) was considered on a “loss of chance” basis.

The Applicable Test for Applications seeking to lift the automatic suspension

The Court of Appeal confirmed that in circumstances where a contracting authority applies to lift an automatic suspension, the onus of proof rests with the Applicant (Word Perfect) to demonstrate that it would be appropriate for the Court to grant an interlocutory injunction restraining the authority from entering into the relevant contract. Applying the findings of Merck[1], the Court of Appeal found that it was up to Word Perfect to persuade the Court that (i) there was a serious issue(s) or a fair question(s) to be tried and (ii) the balance of convenience lay in favour of the grant of an interlocutory injunction and as part of the consideration of this balance, that damages would not be an adequate remedy in the event that the suspension was lifted and Word Perfect was ultimately successful in its substantive case.

Both the High Court and Court of Appeal were satisfied that Word Perfect had raised fair issues to be tried and both cases ultimately turned on where the balance of convenience lay with a focus on the adequacy of damages.

Issues considered by the Court of Appeal

The Court of Appeal had to consider the following two points:-

  1. Whether the High Court had erred in concluding that damages would be an adequate remedy for Word Perfect or alternatively whether this conclusion would do a real injustice to Word Perfect; and
  2. Whether the findings of fact by the High Court were supported by the evidence and whether the High Court’s conclusions, in the particular circumstances of this case, would give rise to real injustice to Word Perfect.

Relevance of recent case law on the adequacy of damages

In a previous unrelated 2018 Word Perfect case[2], the Court of Appeal found that in the context of public procurement litigation, in order to obtain damages it was necessary to establish a “sufficiently serious breach of EU law” and as a consequence it was found that a claimant such as Word Perfect “would not find recovery of damages straightforward, even if, following a full hearing, a material breach of the procurement rules were actually to be established”. It was ultimately concluded in this 2018 case that damages could not be shown to be an adequate remedy.

It was observed by the Court of Appeal that in light of the above 2018 decision, a particularly high bar has been set for establishing damages as an adequate remedy and noted that there has been very few applications by contracting authorities to lift the automatic suspension since this 2018 decision. (Interestingly, this latest Word Perfect case involved the first application to lift the automatic suspension since the 2018 decision).

In order to overcome the difficulties associated with the adequacy of damages test, the OGP were willing to concede that, if Word Perfect were successful in any of their three complaints, the OGP would not raise an issue as to the seriousness of the breach thereby making the remedy of damages available to Word Perfect in the event that it succeeded in one or more of its claims. Interestingly similar type concessions were successfully made by a number of UK contracting authorities in recent hearings involving an application to lift the automatic suspension. However, both the High Court and Court of Appeal agreed that while the concession offered by the OGP resulted in the remedy of damages being available to Word Perfect, this did not necessarily mean that damages might be an adequate remedy. However, both courts arrived at different conclusions in terms of their respective considerations relating to the adequacy of damages in this case.

Decision of the Court of Appeal

While the High Court concluded that it should be possible for Word Perfect, if successful in its claims, to pursue a claim for damages, particularly in light of the concession provided by the OGP, the Court of Appeal found otherwise. The Court of Appeal found that the High Court judge did not attach sufficient weight to the complexity of calculating damages in a case such as this and in doing so, inadvertently raised the bar for demonstrating that damages would not be an adequate remedy.  Rather than damages being unavailable, it was a case that damages might be too difficult and complex to assess which would give rise to a real risk of injustice. In arriving at this conclusion, the Court of Appeal placed huge significance on the fact that this case did not involve an assessment of whether a tenderer would or might have ranked first rather than second if the breaches complained of had not occurred but rather focused on the rules and structure of the competition and as such required the Court to speculate how the competition would be re-run in its entirety without the elements complained of (relating to minimum prices and the rotation system), and to consider all of the many different variables involved in such an assessment. Given the complexity of this type of analysis and the existence of so many variables, the Court of Appeal found it would be “extremely difficult, if not actually possible, for a court to assess damages on a loss of chance basis or otherwise”.

In relation to the second issue considered by the Court of Appeal relating to whether the findings of the High Court supported the conclusion that the balance of convenience required the lifting of the automatic suspension so that the OGP Framework could be put in place, it was noted that in assessing the balance of convenience, the High Court judge considered a range of factors. One of the critical issues being the time frame for keeping the suspension in place. While during the High Court hearing there was great uncertainty as to when the full trial would proceed, the position became clearer during the Court of Appeal hearing, with a trial date of early January 2022 being confirmed. According to the Court of Appeal this was a very significant factor as it limited the time frame for keeping the suspension in place and brought some certainty to the issue.

Some of the other factors that helped persuade the High Court that the balance of convenience lay in lifting the suspension related to the volume of materials required to be translated as well as the number of public bodies impacted by the automatic suspension. However, the Court of Appeal was not convinced by the evidence relied upon by the High Court in this regard and considered the evidence (as set out in the final affidavit of the Applicant) to show that a relatively small number of public bodies did in fact use the existing 2016 framework (which the new 2021 framework was due to replace) and in the case of those who did, their contracts remained in existence at least into 2022 and in some cases up to 2025. The Court of Appeal found that the evidence did not support the claimed overriding urgency that the 2021 Framework should be put in place immediately and in advance of the trial and ultimately found that the balance of convenience lay in favour of keeping the suspension in place until the trial.

Conclusion

While the adequacy of damages is but one of the elements that must be assessed by a Court when considering an application to lift an automatic suspension, the issue will often be decisive as it was in this case. Significantly, neither party in the case was able to identify any Irish judgement in which damages were awarded for breach of procurement rules bar one[3] (which did not discuss the basis on which they were assessed). While this in and of itself will not sway a Court when determining the issue of adequacy of damages, it does point to the fundamental difficulty faced by unsuccessful tenderers when a remedy of damages is the only avenue available to them.  The case also however highlights the importance of each piece of evidence as well as the issue of timing when determining where the balance of convenience lies.

We now await the substantive hearing and whether Word Perfect’s challenge to the competition itself, specifically, the rotation system, minimum pricing requirements and the minimum turnover requirements will be successful. There are likely to be some very interesting arguments in this regard that might be of interest to contracting authorities.

[1] Merck Sharpe & Dohme v Clonmel Healthcare Limited [2019] IESC 65

[2] Word Perfect Translation Services Limited v The Minister for Public Expenditure and Reform (No.3) Judgement of Mr. Justice Gerard Hogan delivered on the 7th day of June 2018

[3] Clare Civil Engineering Limited v Mayo County Council [2001] 1EHC 135


Author

Kerri Crossen

PARTNER


Jean-Anne Young

SENIOR ASSOCIATE

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