Of Adequacy and Convenience: High Court lifts automatic suspension in community equipment procurement dispute

Medequip Assistive Technology Limited v (1) The Mayor and Burgesses of the Royal Borough of Kensington and Chelsea and (2) Nottingham Rehab Centre (trading as NRS Healthcare) [2022] EWHC 3293 (TCC)

In a judgment handed down on 21 December 2022 the High Court (Mr Justice Eyre) lifted the automatic suspension in a procurement dispute concerning the establishment of a framework for the provision of community equipment services, and declined to order expedition of the underlying damages claim. Bevan Brittan’s procurement litigation team acted for the successful contracting authority Defendant. The judgment does not contain any new law, but does include some interesting discussion on the application of elements of the well-known American Cyanamid test that applies to such applications.

The procurement

The Royal Borough of Kensington and Chelsea (“the Council”) ran a procurement on behalf of 21 London Boroughs (“the Consortium”) to establish a framework for the provision of community equipment services (e.g. mobility aids, specialist mattresses, moving and handling equipment etc.) to enable individuals to improve their quality of life and live independently in the community. The framework was to be the largest of its kind in the UK, and replaced a previous agreement under which Medequip Assistive Technology Limited (“Medequip” – the Claimant in the case) was the incumbent. The Contract Notice published in relation to the tender opportunity referenced a value of £360,000,000 for the framework term. Bids were submitted by two suppliers: Medequip and NRS Healthcare (“NRS” – the winning bidder who participated in the case as an Interested Party). 

Medequip’s challenge

Medequip brought what the judge described as a “wide-ranging attack on the procurement process and on its outcome” which covered the scoring of tenders, the adequacy of reasons for scores, and an allegation that the Council acted unlawfully in evaluating tenders on the basis of undisclosed criteria. The Council conceded (solely for the purposes of the application and as almost always happens in applications to lift) that there was a serious issue to be tried.

The application to lift: legal principles

On an application to lift the automatic suspension the court applies the well-known American Cyanamid test:

1. Is there a serious issue to be tried
2. Would damages be an adequate remedy for the Claimant if the suspension is lifted and it is ultimately successful at trial (this is sometimes expressed as “is it just in all the circumstances to confine the Claimant to a remedy of damages”) and
3. Does the balance of convenience favour lifting or maintaining the suspension.

In a line of recent cases[1] there has been some very interesting discussion (and divergence of judicial opinion) on whether the test should be applied “holistically” (in which the availability of an expedited trial should be taken into account when considering the adequacy of damages)[2] or conventionally, in which the three limbs of the test are applied sequentially, it being the end of the matter if the court concludes that damages would be adequate for the Claimant.[3]

Mr Justice Eyre applied the conventional approach, expressly endorsing that of Mrs Justice Joanna Smith in Kellogg Brown (see paragraph 52 of the judgment). The judge accepted, however, that the timing of the trial was still a relevant factor. He said (at paragraph 59) that applications to lift should be considered on the basis that there will be an expedited trial, and also said (at paragraph 53) that the duration of the suspension will be a factor of potentially significant weight when considering the risk of prejudice, making clear that this is a factor to be taken into account in assessing the balance of convenience, rather than the adequacy of damages.

Paragraphs 37 to 59 of the judgment contain a clear and concise summary of the “conventional” application of American Cyanamid, and will be helpful reading for practitioners wishing to understand how the court will usually approach these applications.

Adequacy of damages

In an interesting observation at paragraph 56 of the judgment the judge links the question of adequacy of damages and the balance of convenience when he says:

A claimant who narrowly establishes that damages will not provide it with an adequate remedy will necessarily be less well-placed to persuade the court that the balance of convenience favours maintenance of the suspension than one who has established that point convincingly.

Medequip argued that damages would not be adequate because loss of the contract would result in (1) reputational harm; (2) reductions in the size, standing, and scale of its business; (3) lost opportunities for innovation; (4) closure of its head office; and (5) loss of specialist staff. Following a careful analysis of the evidence submitted in support of these arguments the judge rejected them. He did, however, accept (with some reluctance) Medequip’s argument that the allegation that the Council had evaluated on the basis of undisclosed criteria would (if proved) be difficult to reflect in a damages award, thus arguably making damages inadequate in relation to that element of the claim.

The judge went on to consider whether damages would be adequate for the Council and reached the clear conclusion that they would not. Essentially the judge accepted that the improvements which the Consortium believed would be brought about by the framework could not be reflected in an award of damages. The judge noted that while there would inevitably be scope for debate as to the extent of improvements that a new contract would bring about, the Consortium itself was best placed to decide how services are to be delivered. Here, the Council had engaged in a process of consultation and reflection to shape the service specification, and the court was clear that an inability to deliver the services in that way would not be adequately compensated in an award of damages.

Balance of convenience

In light of those findings on the relative risk (for each party) that damages would not be an adequate remedy, the judge reached the clear conclusion that the balance of convenience lay in lifting the automatic suspension.

Comment

As noted above, this judgment applies established principles without creating any new law. The judge’s view that damages would be difficult to quantify (and therefore potentially not adequate) in relation to the alleged use of undisclosed criteria is unfortunately not explained in detail. This may be because the allegation was “far from at the forefront of the claim.” It is likely that such an argument will require a more detailed investigation and analysis in a future case.

The judge’s linking of the relative strengths of the parties’ arguments on adequacy of damages to the balance of convenience test is helpful. It suggests that in many cases the balance is likely to fall in favour of the party who can marshal the strongest case on damages not being an adequate remedy for it. 

[1]               (1) Vodafone Limited v Secretary of State for Foreign, Commonwealth and Development Affairs [2021] EWHC 2793 (Mr Justice Kerr), (2) Draeger Safety UK Limited v London Fire Commissioner [2021] EWHC 2221 (Mrs Justice O’Farrell), and (3) Kellogg Brown & Root Limited v Mayor’s Office for Policing and Crime [2021] EWHC3321 (Mrs Justice Joanna Smith DBE)

[2]               This “holistic” approach was exemplified by Mr Justice Kerr in the Vodafone case.

[3]               This more conventional approach was exemplified by Mrs Justice Joanna Smith in the Kellogg Brown case.