Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2012] CSOH NUMBER 10
CA1/12	OPINION OF LORD HODGE in the cause CLINICAL SOLUTIONS INTERNATIONAL LIMITED Pursuer; against (1) NHS 24 and (2) CAPGEMINI UK plc Defender: ­­­­­­­­­­­­­­­­­________________

Pursuer: Lindsay QC; Anderson Strathern LLP

First Defender: R Dunlop QC; MacGregor; McGrigors LLP

Second Defender: Ms O'Neill, Solicitor Advocate; Brodies LLP

16 January 2012

[1] This is an application by NHS 24 under Regulation 47(10) of The Public Contracts (Scotland) Regulations 2006 (SSI 2006/1) ("the 2006 Regulations") for an interim order to bring to an end the prohibition from entering into a contract for the provision of software and other services for NHS 24's telephone and online medical advice services.

[2] Clinical Solutions International Limited ("CSL") has provided services of that nature for several years under a contract which ends on 1 April 2012. The contract provides for CSL to give further services in a transition period of up to twelve months after that date to allow the transfer of the services to another contractor.

[3] NHS 24 placed a contract notice in the Official Journal of the European Communities on 16 July 2010 inviting tenders or requests to participate for the award of a new contract for ten years. The proposed contract was divided into two parts. Lot 1 was essentially a software contract and Lot 2 was for the provision of telephonic and other hardware. The procedure for placing the contract was competitive dialogue. The bidders who were selected to submit final tenders for the Lot 1 contract were CSL, British Telecommunications plc ("BT") and Capgemini UK plc ("Capgemini").

[4] On 18 July 2011 NHS 24 issued an "Invitation to Submit Final Tenders" ("ITSFT") to which it attached a draft agreement which was to form the basis for the discussions of the Lot 1 contract. The bidders were instructed to provide "a full legal mark up" of the draft agreement in Schedule 2, which included a transition plan specifying when the bidder would be able to assume responsibility for the provision of the required services. The new contract was to come into effect on the date of its execution, which the ITSFT proposed would be 26 January 2012, and thereafter the parties would operate the transition plan to achieve the transfer of responsibility.

[5] CSL was not successful in its bid for the Lot 1 contract. NHS 24 avers that CSL came third in rank in its assessment after Capgemini and BT. CSL is aggrieved that NHS 24 did not disclose that there could be a lengthy transition period before the new contractor assumed responsibility for providing the Lot 1 services. It asserts that NHS 24 is in breach of the principles of equal treatment, non-discrimination and transparency under article 2 of Council Directive 2004/18/EC. In particular it asserts that NHS 24 is in breach of Regulation 4(3) of the 2006 Regulations which provides:

"A contracting authority shall -

(a)   treat economic operators equally and without discrimination; and

(b)  act in a transparent and proportionate manner."

As it is not suggested that the 2006 Regulations failed to implement the Directive, CSL's case is based on an alleged breach of that Regulation.

The law in relation to an interim order under Regulation 47(10)

[6] Regulation 47A(2) provides:

"In any interim proceedings under this Part the Court may decide not to grant an interim order where the negative consequences of such an order are likely to outweigh the benefits, having regard to the following considerations -

(a)   that decisions taken by a contracting authority shall be reviewed effectively and, in particular, as rapidly as possible;

(b)  the probable consequences of an interim order for all interests likely to be harmed; and

(c)   the public interest.

[7] Counsel agreed that the law on the exercise of the court's discretion under Regulation 47(10) was correctly summarised by Lord Glennie in his recent decision in Elekta Limited v Common Services Agency 2011 SLT 815. He stated in paragraph [26] of his opinion:

"It seems to me that what requires to be considered is the strength of the parties' cases, the balance of convenience having regard (but not overwhelming regard) to the question of whether the damages might be an adequate remedy, and the public interest."

[8] The requirement in Regulation 47A(2)(a) that decisions should be subject to effective and prompt review justifies the moratorium under Regulation 47(10). But in deciding whether that period should extend until the legal challenge is determined, the court must have regard to the strength of the challenge. The court in addressing consideration (b) of Regulation 47A(2) is to have regard to the interests of (i) potential tenderers, including CSL, (ii) Capgemini as the successful bidder, (iii) NHS 24 as the provider of the services and (iv) the users of the services. The adequacy of damages as a remedy is in my opinion a factor to be addressed when considering CSL's interests in this context. Consideration (c) in the Regulation is a broad factor which overlaps with the other considerations. It takes account of, among others, the requirement for effective review, the need for certainty in the procurement exercise, and the avoidance of delay when a challenge does not have a reasonable prospect of success. The public interest in the continuity of the provision of the medical services is an important consideration, especially if a challenge were to threaten that provision. The court has to consider the time that is likely to be needed to determine the challenge and whether arrangements are likely be put in place for the continued provision of services in the interim. The court also takes into account the risk that the moratorium might materially delay the provision of improved services.

NHS 24's motion

[9] In support of his motion that the interim order should be made Mr Dunlop QC submitted that (i) CSL did not have a prima facie case or, if it did, it was a very weak case and (ii) in any event the public interest and the balance of convenience favoured the ending of the prohibition. In relation to submission (i) he advanced three arguments. First, he submitted that the action was excluded by CSL's failure to send a valid pre-action letter as required by Regulation 47(6)(a). Secondly, he submitted that the action was barred because CSL had not commenced it within the time limit laid down in Regulations 47(6)(b) and 47(7)(b), namely:

"within three months from the date when grounds for the bringing of the proceedings first arose".

Thirdly, he submitted that NHS 24 had done nothing to give rise to the impression that a bidder had to start the provision of services on 1 April 2012, when CSL's contract expired. An analysis of the procurement documentation made it clear that it was for each bidder to state when it could commence provision of services. The speed with which a bidder could do so was a factor which was weighed in the assessment of the bids. CSL had made an assumption which was not justified. The ITSFT (at para 1.3.1) invited bidders seek clarification from NHS 24 of matters which might have a bearing on their final tender. CSL did not do so.

[10] In relation to the balance of convenience and the public interest, Mr Dunlop referred me to affidavits from Mr Robert Stewart, the director of Finance and Technology at NHS 24 and Mr Andrew Jaminson, a Vice-President of Capgemini's Application Services Division. Mr Stewart explained that NHS 24 had expected to execute the Lot 1 and Lot 2 contracts shortly after its board meeting on 26 January 2012. He stated that both Capgemini and the Lot 2 preferred bidder had extensive work to perform in the transition period to 31 March 2013. As a result, a delay in signing the agreements would postpone the implementation of the new Lot 1 services beyond 31 March 2013 and thus jeopardise the delivery of the telephonic clinical triage and assessment services after that date. Mr Jaminson explained that Capgemini could not prepare to provide the services until NHS 24 placed the contract with it. He set out the steps which Capgemini had to take before it could commence provision of the Lot 1 services, including the management of specialist subcontractors and the training of NHS staff and presented a similar view about the time needed to introduce the new services.

[11] Mr Dunlop submitted that if the transition were to extend beyond 31 March 2013, NHS 24 would have no contractual right to require CSL to provide transitional services and CSL would have it "over a commercial barrel." The new contracts would provide the public with better services supported by new technology. The public interest favoured the implementation of the new contracts as soon as practicable. If, contrary to his primary submission, CSL had a good basis for its challenge, damages calculated on the basis of a lost opportunity would provide a sufficient remedy. He invited me to follow the approach of Akenhead J in Exel Europe Limited v University Hospitals Coventry and Warwickshire NHS Trust [2011] BLR 167, at paras 45-48.

Discussion

(i) Whether CSL has a prima facie case

[12] I deal first with Mr Dunlop's submissions that the pre-action letter was invalid because of its content and the timing of its delivery. I am not persuaded that CSL's letter was deficient in its content. Regulation 47(6) provides that:

"Proceedings under this Part shall not be brought unless -

(a)   the economic operator bringing the proceedings has informed the contracting authority ... of -

(i)                 the breach or apprehended breach of the duty owed to it in accordance with paragraph (1) or (2); and

(ii)               its intention to bring proceedings under this Part in respect of that breach or apprehended breach; and

(b)  the proceedings are brought in accordance with paragraph (7)."

CSL's solicitors, Anderson Strathern LLP, wrote on 15 December 2011 to Mr Stewart at NHS 24's office at Caledonia House, Cardonald Park, Glasgow. The letter intimated that CSL intended to bring proceedings under the 2006 Regulations and stated that its complaint was that NHS 24 had failed to inform CSL that a services commencement date of April 2013 would be considered acceptable. By that failure NHS 24 had materially disadvantaged CSL as it would have submitted a materially different bid if it had known.

[13] While the letter did not refer to regulation 4(3), I am satisfied that its content was sufficient to inform NHS 24 of a complaint of lack of transparency. I agree with Mr Lindsay QC that this case falls to be distinguished from Gillen v Inverclyde Council 2010 SLT 513 in which Lord Woolman construed the contractor's letter as a request for information. In my view Anderson Strathern's letter made it clear that a claim was being made under the 2006 Regulations and NHS 24 could readily infer from the nature of the complaint that the breach alleged was a lack of transparency: Regulation 4(3)(b). In that regard I consider that the letter is materially different from the letter which the Court of Appeal considered in Luck v London Borough of Tower Hamlets [2003] 2 CMLR 12

[14] What is more difficult for CSL and what materially weakens its prima facie case is the fact that the letter was not served on NHS 24 until 5.13 pm on 15 December 2011, which was after office hours, and the summons was served 7.20 pm on the NHS Central Legal Office on the same evening. I was informed that the delay in sending the pre-action letter resulted from late instructions from CSL. It was not disputed that the purpose of the Regulation 47(6) notice was to give the contracting authority an opportunity to remedy the default and to indicate the seriousness of the complainant: Luck (above) at para 42. I recognise that the Regulation does not lay down any period of notice and, in my view, it does not envisage disputes as to whether the period of notice was sufficient in a particular case to allow a contracting authority to take any remedial action. But in this case the issue is starker. Where service is affected after office hours on a contracting authority and a summons follows within a short period of time on the same day, it seems to me to be readily arguable that the economic operator has failed to give any notice which complies with Regulation 47(6).

[15] Mr Dunlop's second submission, on time bar, was that if CSL were correct that there was a lack of transparency in the documentation, that documentation was complete by July 2011 and the ground of action arose at the latest on 29 August 2011, when NHS 24 notified it that it was not the preferred bidder. He referred to Sita UK Limited v Greater Manchester Waste Disposal Authority [2011] 2 CMLR 32 and Mears Limited v Leeds City Council [2011] BLR 155. Mr Lindsay submitted that it was only when CSL received a letter dated 15 September 2011 from NHS 24 that it became aware that services under the new contract could start long after 1 April 2012. In that letter NHS 24 stated that it sought to "extend" the existing contract with CSL beyond its scheduled expiry date and that it expected to require a twelve-month extension to the PRM licence and might extend that requirement by a further three to six months. Until then, CSL had understood that the transitional period which was envisaged would end on or shortly after 1 April 2012.

[16] The opposing submissions raise sharply the question of how much must the economic operator know or be deemed to know of the existence of the cause of action before time begins to run against it under Regulation 47(7)(b). In Uniplex UK Limited v NHS Business Services Authority [2010] 2 CMLR 47 at para [50], which Elias LJ quoted in Sita UK, the Court of Justice of the European Communities ("ECJ") referred to the relevant period as running

"from the date on which the claimant knew, or ought to have known, of the infringement of the public procurement rules."

Actual knowledge of an infringement would clearly suffice; constructive knowledge is more problematic. In Sita UK the majority (Elias LJ and Rimmer LJ) approved the test which Mann J adopted at first instance, namely:

"the standard ought to be a knowledge of the facts which apparently clearly indicate, though they need not absolutely prove, an infringement."

Arden LJ questioned that test and quoted the ECJ in Uniplex at para [31] in which it stated that time only started to run once the unsuccessful tenderer could:

"come to an informed view as to whether there has been an infringement of the applicable provisions and as to the appropriateness of bringing proceedings."

She counselled adherence to the language of the ECJ and did not put forward any test of her own.

[17] I do not think that it is appropriate in a motion for an interim order under Regulation 47(10) and without more detailed submissions to attempt to formulate any comprehensive test or to express a concluded view on what divided the Court of Appeal in Sita UK. Nor do I need to in this case. The essence of CSL's claim is a lack of clarity in the procurement documentation which it alleges caused it to have an understanding of NHS 24's requirements which turned out to be erroneous. I do not think that intimation on 29 August 2011 of the award of preferred bidder status to Capgemini gave CSL information from which it could have inferred an infringement of the public procurement rules through a lack of transparency.

[18] Accordingly, on the information before me I am not persuaded that Mr Dunlop has demonstrated that the claim is time-barred or that a defence of time bar is likely to succeed.

[19] Turning to the merits of the claim, I consider that CSL has at best only a weak prima facie case. I have reached this view for four reasons.

[20] First, I consider that there is a strong case that CSL has not complied with Regulation 47(6). See paragraph [14] above.

[21] Secondly, there was nothing in the procurement documentation which stated or directly supported the inference that the new contractor had to commence the provision of the services under the Lot 1 contract on or shortly after 1 April 2012. On the contrary, the draft agreement which accompanied the ITSFT envisaged that the bidders would set out their transition plan which would identify a "Services Commencement Date" and there was no stipulation that it had to be on or shortly after 1 April 2012.

[22] Thirdly, CSL knew from its current agreement with NHS 24 that the latter had the right to require it to continue to provide its contractual services for payment for a transitional period of up to twelve months from 1 April 2012. NHS 24 and CSL had corresponded between June and August 2010 about the possibility that NHS 24 would require services in a transitional period. By letter dated 24 June 2010 NHS 24 requested CSL to give an initial proposal concerning, among other things, the scope and duration of the transitional support and the terms of an extension of the PRM licence. In its response dated 14 July 2010 CSL agreed to provide a transitional service starting three months before the contract expiry date (1 April 2012) and finishing no later than 12 months after that date (31 March 2013). In a letter dated 12 August 2010 CSL stated that it was prepared to agree a short-term extension of the PRM licence "with a minimum period of 3 months and a maximum period of 12 months".

[23] Fourthly, as I have stated, the ITSFT in paragraph 1.3.1 invited tenderers to seek clarification: paragraph [9] above. If there were ambiguity in the documentation CSL could have asked for clarification. It did not do so.

(ii) The balance of convenience and the public interest

[24] I am satisfied that the balance of convenience and the public interest favour the granting of the interim order. I consider that it is not appropriate to delay the procurement process for an important public health service when CSL has advanced at best a weak prima facie case in favour of the remedy of setting aside NHS 24's decision to give Capgemini preferred bidder status. While CSL would prefer to pursue this remedy and thereby re-open the competition rather than claim damages, I consider that the latter remedy is adequate for the reasons set out in Exel Europe Ltd at para 47 and also because there is no suggestion of any deliberate departure by NHS 24 from the requirements of the 2006 Regulations. I bear in mind that it might take at least one year to determine the legal challenge, particularly if one or other party reclaimed a decision at first instance. The delay would cause uncertainty to NHS 24 and Capgemini and inconvenience to BT as the preferred bidder for the Lot 2 contract, and it would postpone the delivery of the improved services to the general public.

[25] In assessing the balance of convenience, I do not attach weight to the consideration that CSL might impose harsh commercial terms on NHS 24 for the provision of transitional services beyond 31 March 2013. If there were evidence that CSL had attempted to do so, that would be a significant consideration in favour of ending the Regulation 47(10) prohibition and NHS 24 could promptly seek a court order to that effect.

Other matters

[26] Mr Lindsay pleaded as a fallback a case of discrimination between bidders on the hypothesis that NHS 24 had initially intended the new contractor to commence services on or about 1 April 2012 but had later allowed Capgemini a prolonged transition period. I do not have to consider this case (a) as it was not foreshadowed in the Regulation 47(6) letter and (b) as Mr Dunlop confirmed that that had not occurred but that NHS 24 had allowed all the bidders to specify the period of transition which they required.

[27] Mr Lindsay also sought to argue that the procurement process was deficient because no allowance had been made in the assessment of the bids for the cost of the provision of CSL's services during the transition period which each bidder specified. This, he submitted, artificially reduced the costs of accepting Capgemini's tender and discriminated against CSL, which as the current contractor could achieve a much earlier service commencement date. Again, I do not have to consider this argument. The Regulation 47(6) letter made no mention of a discrimination case. Nor was it pleaded in the summons. Further, the addition of transitional costs into the assessment would have discriminated in favour of CSL. Mr Dunlop assured me that the evaluation criterion for service requirements in the ITSFT included a score for the speed at which a bidder could reach the service commencement date. It is therefore not clear that there is a substantive point here, even if it were proper to have regard to it.

Conclusion

[28] I therefore grant an interim order under Regulation 47(10) of the 2006 Regulations bringing to an end the prohibition on NHS 24 from entering into a contract pursuant to its tender procedure.