This case appears to show a difference in the way applications to lift the automatic suspension may be approached, not only as between cases in which the claimant is or is not a not-for-profit, but also as between the Courts of Northern Ireland and those of England & Wales.

Written by: Natalie Harris, a Senior Associate in our Band 1 Ranked Procurement Team

Judgment Summary 

This judgment relates to the application by DAERA (the Contracting Authority) to lift the automatic suspension triggered by the procurement challenge filed by OFRA (the incumbent, not-for-profit, bidder) within the standstill period – i.e. prior to signature of the contract with the winning bidder.

Madam Justice Denise McBride, applying the American Cyanamid [1] principles, concluded that the stay should not be lifted, and OFRA was not required to give a cross-undertaking in damages. An expedited trial was ordered.  

The judgment provides a useful summary of the Northern Ireland High Court’s current approach to applications to lift an automatic suspension taking account of recent case law.  

The special position of not-for-profit organisations 

This judgment provides a useful insight into applications to lift the automatic suspension and the factors to be considered in applications where the unsuccessful tenderer challenging the outcome is a not-for-profit organisation.     

As in Bristol Missing Link  [2] and in Counted4  [3], this was a case in which the court placed considerable weight on the fact that the claimant was a not-for-profit organisation, and that the viability of the organisation was tied to the provision of a single government contract. The fact that OFRA relied on this contract for its continued existence, and that experienced personnel would be lost, formed a significant part of this judgment as to why the suspension should not be lifted.  

This stands in contrast to the decision in Camelot[4], where the Claimant was a commercial SPV established specifically to run the UK Lottery, for whom the loss of the contract would be terminal, and which would stand to lose all or substantially all its staff and assets if the suspension was lifted. In Camelot, the Court decided the suspension should be lifted. The Court not only considered that this factor was not decisive, but stated that it was a “normal incident” of failing to win the competition.

The fact that the Court so summarily dealt with the fact that no cross-undertaking in damages should be given is also a noteworthy feature of this decision. Regulation 96 PCR has the consequence that the court will generally require the claimant to give a cross undertaking as to damages in return for upholding the suspension; it is “generally regarded as the "price" of an interim injunction, granted at a time when the court is not in a position to adjudicate on the rights and wrongs of the underlying dispute."[5].

In Counted4 [6], the Court ordered a capped cross-undertaking offered by Counted4, on the basis that it was a not-for-profit organisation established for the purpose of providing services to the defendant, and where there was no evidence that losses would be suffered by the Defendant if the suspension was continued.

Central Surrey Health [7] was similarly a claim by a not-for-profit entity, where the Court ordered a limited cross-undertaking in damages, which related only to the interested party’s projected losses, which were easily ascertainable.   

Partenaire v Department of Finance and Personnel [8] represents a rare case of a commercial claimant giving only a limited cross undertaking in damages.  However, this case was described as a “high water mark” by Mrs Justice Cockerill in the West Coast Franchise Litigation.[9]  Her ladyship was not prepared to order a continued contract suspension without a ‘full’ undertaking being given by the claimant in that case.

Although a cross-undertaking in damages is not a necessary counterpart of granting the suspension of contract (see for example Inhealth [2022] [10]), it is very rare for the court to order a suspension without any cross-undertaking being ordered.  So the present case might therefore illustrate a divergence in the way in which an application to lift the automatic suspension was approached, not only as between cases in which the claimant is or is not a not-for-profit, but also as between the Northern Ireland Courts, and the Courts of England & Wales.

Background 

This judgment relates to a challenge to the procurement by the Northern Ireland Department of Agriculture, Environment and Rural Affairs (DAERA) for the provision of a local community development support and advice service for the Fermanagh and Omagh District Council area (the Procurement).   

The claimant, Omagh Forum for Rural Associations (OFRA), was the incumbent provider and had been the successful bidder in procurement for the replacement contract; but that procurement was abandoned following a challenge by an unsuccessful tenderer. This claim arose out of the re-run of that procurement in which OFRA was unsuccessful in its bid, and challenged the award. 

Detailed Facts 

OFRA is a registered not-for profit charity. In 2018, it was awarded a contract to provide local community development support and advice service for the Fermanagh and Omagh District Council area (the Services). It was extended 7 times; most recently to 31 January 2023. 

In July 2021, a procurement was advertised and in September OFRA was notified it was the successful tenderer. An unsuccessful tenderer challenged that procurement, which was then abandoned. The present case arose out of the re-run procurement. 

On  23 June 2022, DAERA published a contract notice re-advertising the Procurement as governed by the Public Contracts Regulations 2015 (PCR).  On 16 August 2022, DAERA notified OFRA that its tender was unsuccessful and that the contract would be awarded to Fermanagh Rural Community Network.

On  5 September 2022, OFRA issued proceedings, seeking a declaration that DAERA’s actions were unlawful and/or were in breach of contract. It also sought damages for loss and damage in the alternative. On  5 January 2023, following delays in submitting its statement of claim, OFRA sought to amend directions for an expedited hearing. 

DAERA argued that the stay on the successful party’s tender should be lifted as the Services were of “vital importance” and needed to be provided. It argued that the existing contract with OFRA could not be further extended due to the restrictions in Regulation 72 of the PCR.

OFRA argued that the loss of this contract “would be critical” as it would “inevitably lead to staff redundancies” and “make it unsustainable for [it] to continue as a charity”. Therefore, damages would not be an adequate remedy for OFRA.

Judgment  

In reaching its decision, the Court applied the traditional American Cyanamid test for injunctive relief, namely:

(a) was there a serious issue to be tried; 

(b) if so, whether damages would be an adequate remedy for the claimant if the suspension was lifted and it succeeded at trial;

(c) if not, whether damages would be an adequate remedy for the defendant if the suspension remained in place and its defence succeeded at trial; and

(d) if there was doubt to the adequacy of damages for either party, where the balance of convenience lies.

As is common for the vast majority of suspension lifting cases, DAERA conceded for the purposes of the hearing that there was a serious issue to be tried.  DAERA also conceded that damages would be an adequate remedy for it if the suspension remained in place. Essentially,“[T]he court is seeking to carry out its principal task of ensuring that it identifies which of the two options open to it, namely to lift the suspension or to allow it to remain in place, is likely to cause the least irremedial prejudice to one party or the other.”[11]

Adequacy of Damages for OFRA 

Drawing on existing jurisprudence, the Court considered four principles: (a) the burden of proof lies on OFRA; (b) “[OFRA] must produce solid, cogent evidence that damages are not adequate. Mere bald assertions are usually not sufficient”[12]; (c) the amount of damages that may be recoverable is immaterial; and (d) the party seeking the suspension must show a real prospect of loss attributable to the loss of the contract at issue [13]. 

The Court also considered whether the adequacy of damages test should be applied differently to not-for-profit entities. Having applied existing case law[14], the Court concluded “the fact a body is a not-for-profit entity may make it more likely that it cannot be adequately compensated in damages but the burden nonetheless remains on the not-for-profit organisation to prove by evidence why this is so”[15]. 

 The Court went on to consider whether damages were, in fact, an adequate remedy for OFRA. It took into account the witness evidence of OFRA that the loss of this contract would lead to loss of uniquely experienced staff, OFRA would be unable to carry out its charitable purposes and that the contract is “essential to the long term survival of the organisation and without this Contract [OFRA] would suffer catastrophic consequences which are not compensatable in damages.”[16] Therefore, the Court concluded that damages would not be an adequate remedy for OFRA.

Balance of convenience

Even though damages were not an adequate remedy for OFRA, it still had to persuade the Court that the balance of convenience lies in favour of continuing the suspension.  

The Court noted the factors applicable to assessing the balance of convenience:  The effect of the delay;  The public interest; The impact on other tenderers; The impact on the plaintiff of refusing the suspension; The strength of the plaintiff’s case; and The extent to which damages are available. 

The Court accepted that the status quo should be favoured “where the various interests involved do not weigh significantly more in favour of one side than the other”[17], which is an established principle under the American Cyanamid case. In procurement cases the status quo will generally mean allowing the contract to go ahead.[18]

Given DAERA’s submission that there has been delay the Court was satisfied that there could be an expedited trial to ensure no further delay. 

The Court did not accept that there would be “of necessity”[19] a cessation of the services after 31 January 2023 as OFRA was able and willing to continue providing the services. Any gap in continuity of services would be because of a decision made by DAERA. Furthermore, the impact of a gap would not be “as detrimental as those involving the provision of acute services”[20]. Further, even if the current contract was not extended, given the directions for an expedited hearing, the Court considered that the gap in services would be for a short duration.

The Court also took into consideration the interest of the successful tenderer, which should be awarded the contract it won.  

Considering all the above, the balance of convenience favoured the suspension remaining in place.

Cross-undertaking in damages 

The Court stated that: “Although the court has power to impose conditions, and, in particular, to require a party to give an undertaking in damages, in the present case I do not consider it is appropriate to place such a condition upon the plaintiff”[21]. No further reasons we given for this.

Case: Omagh Forum for Rural Associations v Department for Agriculture, Environment and Rural Affairs [2023] NIKB 14 (30 January 2023)  

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[1] American Cyanamid Co v Ethicon Ltd [1975] AC 396. 

[2] Bristol Missing Link Ltd v Bristol City Council [2015] EWHC 8766.

[3] Counted4 CIC v Sunderland CC [2015] EWHC 3898 (TCC).  

[4] Camelot UK Lotteries v The Gambling Commission [2022] EWHC 1664

[5] Scheltini v Silvestri  [2019] EWCA Civ 349, [8].( Lewison LJ).

[6] Counted4 CIC v Sunderland CC [2015] EWHC 3898 (TCC).

[7] Central Surrey Health Lid v NHS Surrey Downs CCG [2018] EWHC 3499 (TCC).

[8] [2007] NIQB 100.

[9] West Coast Trains Partnership & Others Claimant v Department for Transport, case HT-2019-000173, judgment unreported, 27th August 2019. 

[10] InHealth Intelligence Ltd v NHS England [2022] EWHC 2471 (TCC)  – A cross-undertaking was not ordered as the court held it has no vires to order one in circumstances where the defendant authority had already agreed a consent order for the continuation of the automatic suspension without seeking a corresponding cross-undertaking in damages from the claimant.  

[11] OFRA v DAERA, [24]

[12] OFRA v DAERA, [32].

[13] Open View Security Solutions v the London Borough of Merton Council [2015] EWHC 2694.

[14] Bristol Missing Link Ltd v Bristol City Council [2015] EWHC 8766; Kent Community Health NHS Foundation v NHS Swale Clinical Commissioning Group and other [2016] EWHC 1393.

[15] OFRA v DAERA, [41].

[16] OFRA v DAERA, [44].

[17] OFRA v DAERA, 50