The recent case of Teleperformance Contact Ltd (TCL) v Secretary of State for the Home Department [2023] EWHC 2481 provides important guidance for private sector suppliers operating via corporate groups who bid for public sector contracts. The case is also of importance to contracting authorities, as the judgment clarifies the position in respect of whether losses suffered by group companies can be considered in assessing whether damages are an adequate remedy for a claimant in procurement claims.
Background
The procurement was for the delivery of visa and citizenship application services. The contract value was estimated at £1.2 billion. The procurement was split into five lots: Lot 1 (£316 million), Lot 2 (£303 million), Lot 3 (£147 million), Lot 4 (£271 million) and Lot 5 (£163 million). TCL was the incumbent provider for the services and bid for all five lots. TCL was awarded Lot 5 but was unsuccessful in respect of the other four lots. TCL brought a challenge in respect of the award decisions for Lots 1, 2 and 3.
Issue
The subject of the hearing was to determine whether the automatic suspension should be lifted. TCL argued that the automatic suspension should not be lifted, and that injunctive relief should be granted because damages would be an inadequate remedy for TCL. In assessing whether the automatic suspension should be lifted, the judge applied the American Cyanamid principles. The principles are as follows:
- "Is there a serious issue to be tried?
- If so, would damages be an adequate remedy for the claimant if the suspension were lifted and they succeeded at trial and is it just in all the circumstances that the claimant should be confined to a remedy of damages?
- If not, would damages be an adequate remedy for the defendant if the suspension remained in place and it succeeded at trial?
- Where there is doubt as to the adequacy of damages for either of the parties, which course of action is likely to carry the least risk of injustice if it transpires that it was wrong; that is, where does the balance of convenience lie?"
The court accepted that there was a serious issue to be tried. Therefore the key issue for the court to consider was whether damages would be an adequate remedy for TCL. The court highlighted that in applying the American Cyanamid principles, the object of the injunctive remedy should be considered. The object is to:
"Protect the plaintiff against injury caused by violation of his right for which he could not be adequately compensated in damages" but this protection "must be weighed against the corresponding need for the defendant to be protected against injury resulting from his having been prevented from exercising his own legal rights".
The court is required to balance these two factors to determine where the balance of convenience lies.
TCL argued that damages would be an inadequate remedy because irremediable losses had been suffered by TCL and the wider visa and consular services business in the Teleperformance group. TCL claimed that those irremediable losses suffered by the group consisted of: closure of visa and application centres, reduction in the group's presence and cessation of operation, reduction in the group's prospects of securing future business in upcoming procurements, redundancies of over 750 employees, reduction in the group's revenue and loss of reputation. TCL argued that the whole group company should be taken into account when assessing the adequacy of damages. The court had to determine whether the wider group's losses should be considered and whether the allegations of potential loss were made out by the evidence presented.
The court considered a variety of common law judgments, and in particular, the case of Circle Nottingham Limited v NHS Rushcliffe Clinical Commissioning Group which rejected the argument that losses suffered by the wider group company should be considered where the unsuccessful tenderer was an SPV. This case rejected the argument on the basis that if an organisation chooses to conduct its operations through an SPV "it cannot really complain if that carries disadvantages as well as advantages". The case also considered the fact that the wider group was not a party to the proceedings and that, if they were, then there may be scope to consider the wider group.
Further, the court considered the recent case of IGT Game Technology PLC v The Gambling Commission which acknowledged that companies setting up an SPE/SPV for the purposes of submitting a tender "may have separate standing to challenge the result of the procurement (because it might otherwise prevent those who have actually suffered the loss from making a claim)". However, the judge in this case declined to come to a conclusion on the issue as it was beyond the scope of the proceedings. In the current case, the judge's interpretation on this point was that it makes it less likely that the wider group should be taken into account. This is because there is the possibility for the wider group to bring a claim in their own right by bringing joined proceedings. If this were the case then the wider group would form part of the claimant so their losses would be taken into account.
Principles
The court decided that the wider group should not be taken into account in this instance and that damages would be an adequate remedy for TCL so the automatic suspension was lifted. This decision was made on the basis that no other Teleperformance entity was a party to the claim, so the losses were sustained by a third party with no right of action. Further, it was TCL's choice to conduct its operations through a network of SPVs and so, TCL must deal with both the advantages and disadvantages which come with that choice. The court suggests that this may be different in the case where the tender requires an SPV to be set up for the purposes of the contract being procured as the bidder has no freedom to structure the wider group in this instance.
The court also concluded, in any event, that TCL did not adequately substantiate their claims of losses suffered by the wider group as the evidence provided was "imprecise and vague". The judge advised that such claims should be substantiated with evidence, such as internal analyses and assessments or papers evidencing the claims.
The judge provided further guidance on the application of the American Cyanamid principles concluding that the following principles should apply when assessing the adequacy of damages in procurement claims:
- The jurisdiction to grant injunctive relief is subject to a broad discretion which permits the Court to grant it where it is just and convenient to do so
- In most cases, the injury or prospective injury to consider, is whether the right is or continues to be violated and if the injury is suffered by the party who is entitled to claim for the violation of the right
- Given the broad discretion, however, there may exceptionally be circumstances in which injury to third parties caused by the violation of rights may be considered relevant, particularly where there is a nexus between such injury and intangible reputational losses suffered by the claiming party, for which damages would be inadequate
- When considering whether it is just in all the circumstances to confine the claiming party to its remedy in damages, the court may look to the objective expectations created within the relevant relationship between the parties (whether by a contract, or by the regulatory regime giving rise to the obligations and available remedies, or otherwise).
If you have any queries about this case or if our expert procurement lawyers can be of assistance to you, please do not hesitate to get in touch.
