SITA fails to persuade Court of Appeal to revive procurement claim

The Court of Appeal has rejected a bid by waste giant SITA UK to revive its claim over the procurement by the Greater Manchester Waste Disposal Authority of a £4bn, 25-year PFI contract.

SITA UK issued proceedings against the Authority on 27 August 2009, claiming that there had been various infringements of procurement laws.

This followed the award of the contract to Viridor Laing on 9 April 2009 on the basis that it was the most economically advantageous tender. The contract was for the creation of a network of recycling facilities over the next five years.

SITA UK argued that as a result of further negotiations between the Authority and Viridor Laing after the latter’s selection as preferred bidder, there had been a fundamental change in the nature of Viridor Laing’s bid.

SITA UK claimed that the GMWDA should therefore have reopened negotiations with it to comply with the principles of transparency and equality.

In its pleadings, the company submitted that it had lost the change of obtaining the contract and that had a proper re-evaluation taken place, it would have been awarded the contract.

However, in March 2010 Mr Justice Mann upheld an application by the Authority that SITA had brought the case outside the relevant limitation period. The High Court judge also declined to exercise any discretion to extend the time period.

SITA UK appealed Mr Justice Mann’s ruling. In Sita UK Ltd. V Greater Manchester Waste Disposal Authority [2011] EWCA Civ 156, the Court of Appeal threw out SITA UK’s attempt to resurrect the claim.

Counsel for the appellant had argued that Mr Justice Mann had not given effect to EU law in a legitimate way when he had sought to apply the Uniplex ruling by disapplying the promptness requirement and exercising the discretion to secure that time would run from the date of actual or constructive knowledge.

Michael Bowsher QC suggested that the judge’s approach contravened the principle of certainty, adding that the court should have disapplied the whole regulation and applied the different limitation period that is applicable to claims for breach of statutory duty.

Lord Justice Elias said: “I do not accept that argument. The judge’s analysis was in my view wholly in line with EU law principles: it applies the three-month period adopted in the national rules and fixes the point from which time runs as the date of actual or constructive knowledge.

“It does not contravene the principle of certainty because there is a duty, and not merely a discretion, to apply that principle in all cases. Furthermore, this approach preserves the principle of rapidity which is a central feature of the Directive and would be seriously undermined if the appellant’s argument were correct.”

The judge also rejected SITA UK’s submissions that it did not have enough knowledge to pursue its claim until 3 July 2009, and that even if it did know enough, it should be permitted to take action with respect to the breaches it said it had discovered then.

Lord Justice Elias said: “I have no doubt that SITA’s primary case fails, essentially for the reasons given by the judge. Sita was aware that the price of the contract had increased very significantly, that the capital costs had also risen; that the number of employees had risen, and that in all these respects its own tender came in lower than VL’s.

“It also knew, because the letter of 9 May 2008 made it abundantly clear, that the facility being developed at Runcorn with Ineos Chlor involved a significant change in its original primary proposal for dealing with refuse derived fuel, resulting in a far greater capital expenditure than had been envisaged in its original proposal.”

The judge said he had “no doubt” that SITA was aware that it had a prospective claim, and it was right to say that on the material it had there was a clear indication that GMWDA was in breach of its procurement obligations.

Lord Justice Elias added that the further matters that SITA said had come to its attention later constituted “further evidence of the same breach which could be deployed in making good the claim, but in my judgement these were merely particulars of an existing claim which reinforced the view that a cause of action existed”. They were not necessary building blocks in establishing that cause of action, he added.

Lord Justice Elias said time did not start afresh where what is being relied upon to start time running again is a further breach of the same duty, whether it in fact occurred before or after the breaches already known.

He said: “The position may be different if a number of distinct duties can be spelt out of the procurement obligations; it may be said that time runs separately with respect to each duty. But Mr Bowsher properly did not contend that these further breaches could be said to relate to a different duty. They all went to the failure to reopen the bidding process.”

The judge added: “As I have said, in my judgement the matters being relied on as constituting the fresh breaches are simply further particulars of the infringement which could already be pursued. They do not constitute separate causes of action in their own right.”

Cllr Neil Swannick, chairman of GMWDA, said the ruling was good news for the Authority. “GMWDA carried out the procurement of its 25-year recycling and waste management contract fairly and according to procurement law, and we are very satisfied with our decision in 2009 to award the contract to the Viridor Laing consortium,” he said. “We had a duty to robustly defend both the initial proceedings and the subsequent appeal in order to protect the public purse and recover the costs incurred.”

GMWDA is the largest of six English waste disposal authorities that were created under the Local Government Act 1985, providing waste disposal services for more than one million households.