Reversal of fortune

December 15, 2010

In the first case of its kind, Colchester Institute Corporation successfully applied for the lifting of an automatic suspension of entry into a contract. Helen Prandy explains what was involved.

Ever since December 2009 when the Public Contracts (Amendments) Regulations came into force implementing the Remedies Directive, all those involved in public procurement have been asking what is a “reverse injunction” and how will the English courts deal with one.

The intrigue lies in the operation of Regulation 47G and Regulation 47H.

Regulation 47G provides that where proceedings are started in respect of a contracting authority’s decision to award a contract and the contract has not been entered into (in other words the parties are still in the standstill period between contract award and contract signing) then the starting of proceedings by the disappointed bidder requires the contracting authority to refrain from entering into the contract.

It really is that simple. All the bidder has to do is issue a claim form. There is no requirement even for detailed Particulars of Claim. The simple, administrative act of paying money at the High Court and issuing the claim would be sufficient. Previously, a disappointed bidder had to apply for an injunction complete with claim form, witness statements and reasonable grounds of success as well as, often a major obstacle, a cross undertaking to the court to pay any damages arising from harm that the contracting authority may suffer as a result of the injunction. This deterred many unsuccessful bidders so the intention of Regulation 47J was to make a challenge much easier effectively by automatically granting an injunction and placing the burden on the contracting authority to apply to discharge it. A “reverse injunction”.

That application is permitted by Regulation 47H which allows a variety of further applications to be made to the court including an application by a contracting authority to bring to an end the suspension imposed by Regulation 47G(1). Regulation 47H goes on to say that in deciding whether to make an order to lift the suspension the court should consider the same issues as it would have had to consider under the previous regime where an injunction was being applied for.

Despite fears that Regulation 47G might lead to an explosion of claims in fact it has taken nearly a year for the first cases to come to court and therefore for practitioners to get a better understanding of how the courts will consider the application of Regulation 47H.

In Indigo Services UK Limited v Colchester Institute Corporation (QBD-26) judgment on the first case of a contracting authority applying to lift the automatic suspension was handed down on 1 December 2010 and it is believed that another case was heard on the same point in the Technology & Construction Court a matter of days later.

In Indigo, the Defendant contracting authority was re-tendering a cleaning contract which was due to expire on 31 December 2010. Due to TUPE and the need to ensure a smooth handover between contractors at least a month’s ‘mobilisation period’ was required before the new contract could begin and if there was no cleaning provision the Institute would not be able to re-open in January 2011 after its Christmas break.

Indigo were the incumbent bidder. However, they failed to win the newly tendered contract and issued proceedings, before the contract was signed with the successful bidder. Under Regulation 47G the contract could not be signed and the Institute found itself in a situation where one contract was due to run out but no new contract could be entered into.

At the hearing on 26 November 2010 before D Donaldson QC sitting as a Deputy High Court Judge it was submitted on behalf of Indigo that the continued suspension was essential because if the Institute were allowed to sign the contract with the successful bidder Indigo would lose its primary remedy: the suspension on signing the contract. Allied to this argument was a submission that what the contracting authority should, and could easily do was extend the existing contract with Indigo whilst it re-ran the procurement.

It was further argued that damages would not be an adequate remedy and that Indigo’s losses were not easily quantifiable and that the balance of convenience lay with Indigo because the contract could be extended.

Philip Moser of Monckton Chambers submitted on behalf of the Institute that damages were clearly an adequate remedy and that the balance of convenience favoured the Institute which could not, legally, extend the contract with Indigo and which faced the prospect of indefinite closure should it be unable to secure adequate cleaning provision from 3 January 2011. In particular it was submitted that if the court accepted the solution of extending an existing contract to allow a procurement to be re-run this would simply amount to an “incumbent’s charter” whereby a disappointed incumbent bidder could subvert the purpose of the Regulations by contract extensions which are, in any event, of dubious legality under European law.

The court was content to treat the application as though it was an application for an injunction and applied the well known test established by American Cyanamid in deciding whether the stay should be lifted.

It is perhaps not surprising that the decision turned on where the judge considered the balance of convenience lay and that despite a conclusion that damages may not be an adequate remedy for Indigo the “prejudicial impact on [the Institute] and the wider public of continuing the standstill far outweighs any prejudice which may be caused to Indigo by lifting it and relegating it to a claim in damages”. This was notwithstanding a submission by Indigo’s counsel that the Regulations now provided a ‘nudge’ or ‘steer’ in favour of an injunction.

The judge also rejected the submission that pressetext C-454/06 supported Indigo’s position that the contract could be extended without a competitive tendering process and considered that an extension of the contract into a new period of necessity “encompasses” services not previously covered by the contract, when the extension is not foreseen in the contract. In the present case, the contract had already been extended for a further period before the disputed procurement took place.

So what do we now know about reverse injunctions?

Not very much more than we knew already. Generally it is the balance of convenience which will determine what order the court is minded to make. However, it is unlikely to be the last time that a bidder argues that they would be deprived of a remedy if the stay were lifted and that the Regulations give a ‘steer’ towards upholding the stay. If a weight of cases starts to go against such a submission then has Regulation 47G added anything at all to an unsuccessful bidder’s armoury?

Helen Prandy is an Associate at Mills & Reeve LLP, which advised the Institute in this case. She can be contacted on 01223 222344 or by email at This email address is being protected from spambots. You need JavaScript enabled to view it..