North Irish Court of Appeal dismisses appeals against setting aside framework agreements

Wednesday October 12th, 2011

Daradjeet Jagpal is a solicitor at Harper Macleod LLP

The Northern Irish Court of Appeal has dismissed two appeals against High Court rulings setting aside framework agreements which had been entered into by the Northern Irish Government.

(1) McLaughlin & Harvey Limited v Department of Finance & Personnel

The Northern Irish Department of Finance & Personnel (“DFP”) appealed to the Court of Appeal against a judgement of the Northern Irish High Court in which the High Court found that DFP had breached the procurement rules through its failure to disclose 39 award sub-criteria and their weightings.

The Court of Appeal looked at decisions of the European Court of Justice (“ECJ”) where the ECJ had decided that undisclosed weightings could be applied to award sub-criteria where the application of weightings would not:

  • change the contract award criteria
  • have affected the preparation of tender responses
  • discriminate against any of the tenderers

The Court of Appeal found that there was no evidence that the weightings attached to the sub-criteria would alter the contract award criteria or give rise to discrimination against any of the tenderers. However, had the weightings been known to tenderers at the time of tender preparation, this may have affected the preparation of tenders.

For the reasons set out in the Henry Brothers decision, the Court of Appeal decided that the High Court was correct to set aside the framework agreement after it had been entered into, as the procurement rules did not prevent this.

(2) Henry Brothers (Magherafelt) Limited v Department of Education for Northern Ireland

The Department of Education for Northern Ireland (“DoE”) appealed to the Court of Appeal against a judgement of the Northern Irish High Court which set aside a framework agreement that the DoE had entered into on the basis that the DoE had adopted an erroneous approach to considering fees when determining which of the tender responses was the most economically advantageous (DoE should have considered actual fee figures rather than percentages). DoE also claimed that the unsuccessful tenderers’ claims had been brought out of time, and that the High Court could not set aside the framework agreement in terms of the procurement rules.

The Court of Appeal noted that the DoE had used fee percentages on the basis that fee figures would be broadly identical between contractors, and that percentages would provide a clearer indication of the most economically advantageous tender. The Court of Appeal found that the DoE had erred in this regard in that it had selected an unreliable indicator on which it had based its award decision.

With regard to time periods for bringing a claim, the Court of Appeal noted the following points from recent case law:

  • a claim only arises where there has been an alleged breach of the procurement rules
  • the breach can consist of any infringement of the procurement rules which gives rise to risk of loss or damage
  • the time period for bringing a claim runs from the date on which the unsuccessful tenderer has sufficient knowledge of a serious breach of the procurement rules to justify proceedings.

The Court of Appeal noted that the DoE’s error in applying fee percentages occurred after receipt of tenders on 7 August 2007. Given that claims must be brought within three months of the breach date, the deadline was 7 November 2007. Here, the unsuccessful tenderers had brought their claim late (12 November 2007). However, due to ongoing correspondence between the DoE and the unsuccessful tenderers, the deadline had been extended and the unsuccessful tenderers were not therefore time-barred from bringing a claim.

With regard to setting aside the framework agreement, the Court of Appeal highlighted that, if a framework agreement was to be considered as a contract under the procurement rules, the only available remedy (once the agreement had been entered into) would be damages. However, if it is not a contract, then the framework agreement may be set aside. The Court of Appeal looked at various provisions within the procurement rules which demonstrated that there is a distinction to be drawn between the award of a contract and entry into a framework agreement. On that basis, the Court of Appeal concluded that a framework agreement was not a contract, and the High Court was entitled to set it aside.

While these decisions are interesting and demonstrate the tough stance that courts are increasingly taking, particularly in Northern Ireland, against contracting authorities which breach procurement rules, it should be noted that they both relate to procurement processes that were commenced before the new remedies rules came into force (20 December 2009). The EU Remedies Directive amended the procurement rules to include a definition of “contract”, which covers framework agreements. As a result of this, these cases may have been decidedly different (so far as the setting aside of the agreements is concerned) had the procurement processes commenced after the new rules came into force.

Daradjeet Jagpal is a solicitor at Harper Macleod LLP and can be contacted on daradjeet.jagpal@harpermacleod.co.uk

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