CA362/08

SHERIFFDOM OF GLASGOW AND STRATHKELVIN AT GLASGOW

JUDGEMENT
of Sheriff N.A.Ross
in the cause
FARRANS (CONSTRUCTION) LIMITED
PURSUER
against
GLASGOW CITY COUNCIL
DEFENDER

Act: Buchanan, advocate
Alt: A.Clark QC, Ross, advocate

Glasgow, 12 February 2013: The Sheriff, having resumed consideration of the cause, finds in fact as follows:-

1            The pursuer is a company incorporated under the Companies Acts and having a place of business at Oakbank, Midcalder, Livingston. The defender is Glasgow City Council. The defender is charged with responsibility under the Flood Prevention (S) Act 1961 for flood prevention works within the Glasgow area. Following extensive flooding in 1984 from the White Cart Water the defender commissioned studies to alleviate future flooding. The defender selected a scheme known as the White Cart Water Flood Prevention Scheme 2004 (the "works"). In 2007, following statutory approval of the scheme the defender issued an invitation to prospective tenderers to pre-qualify to carry out the works.

2            The pursuer timeously completed and submitted a pre-qualification questionnaire (the "PQQ") under cover of a letter dated 22 June 2007. The pursuer timeously tendered to carry out the works prior to the closing date of 4 April 2008. Accurate copies of the PQQ and tender are lodged at 5/426 of process. The PQQ and tender contained information relating to the pursuer which were certified by the pursuer to be accurate to the best of their knowledge.

3            On 17 October 2008, following the assessment of competing tenders, the defender wrote to the pursuer informing them that they had been unsuccessful in their tender. The defender appointed Volker Stevin Limited as the contractor for the works. The pursuer thereupon commenced a process of challenge to that decision, resulting in the current litigation. The challenge was taken upon an alleged breach of the Public Contracts (Scotland) Regulations 2006 (the "2006 Regulations") and associated European directives. The detailed averments of fact relating to the existence and nature of any breach by the defender of the 2006 Regulations and the nature and extent of any claim available to the pursuer remain to be established in evidence and are not the subject of the present judgement, which is concerned solely with resolving the defender's challenge to the pursuer's title and interest to sue under the 2006 Regulations.

4            The pursuer is a dormant company within the meaning of section 1169 of the Companies Act 2006 and does not trade. It has no business, assets, employees or other resources. Notwithstanding this, it has sought and received professional status as a member of the Civil Engineering Contractors Association and is accredited as a specialist contractor. This dormant status was unknown to the defender until May 2012, when it was first disclosed at the hearing of a proof before answer on the principal questions of liability. It was at no time prior to then disclosed or communicated by the pursuer or any other party to the defender. The pursuer's operational holding company is Northstone (Northern Ireland) Limited ("Northstone") and its ultimate holding company is Cement Roadstone Holdings Limited.

5            Northstone is a limited company and is the parent company of the pursuer. It has considerable financial resources. It operates in several different areas of business. It operates part of its business, namely construction and related activities, under the trading name "Farrans" or "Farrans Construction". Recent examples of the financial resources of the construction division of Northstone are accurately set out in management accounts 5/10/422 to 424 of process. Although these accounts bear the pursuer's name, they are in fact accounts relating to one area of Northstone's business, namely its construction business. Northstone would have ample resources to carry out the works.

6            The internal group relationship between Northstone and the pursuer is regulated by a Business Transfer and Agency Agreement dated 23 December 1998 (the "BTA Agreement"), an accurate copy of which is lodged as 5/22/463 of process. The terms thereof provide, amongst other matters, for the pursuer to cease trading on its own account, the transfer of the pursuer's whole business and assets to Northstone, and thereafter the pursuer to act only as agent of Northstone and not on its own behalf. Reference is made to the terms of the BTA Agreement. During the pursuer's dealings with the defender, the defender was at no stage aware, or fairly informed, of this arrangement. The defender justifiably believed at all material times, including after the commencement of the hearing of evidence in this case, that the pursuer was proposing to act as principal in carrying out the works. Such belief was justified on the basis of the information given by the pursuer in the PQQ and tender documentation.

7            The pursuer proposed, unknown to the defender, to utilise the assets and resources of Northstone in order to carry out the works. The pursuer had no resources, staff, plant, equipment or any other necessary assets to carry out the work. The defender was unaware of this. The pursuer had no contractual or other means of enforcing the performance of the works by Northstone or any other party.

8            The PQQ and tender documentation was in the name of the pursuer alone. It contained information which purported to relate to the pursuer and not to any other party. That information was false, because it misrepresented that the pursuer had employees, assets and other resources. That information properly related to Northstone, not the pursuer. In completing the PQQ and tender documentation, the pursuer's directors did not intend to deceive or misrepresent the position, but nonetheless failed to have regard to the legal relationship of the pursuer and Northstone, and the practical, legal and accounting status of the pursuer. As a result, the PQQ and tender documentation materially misrepresented that the pursuer had employees, assets and other resources sufficient to properly carry out the works.

9            As a result of those misrepresentations, the defender was misled into viewing the pursuer as an operating company with sufficient assets, employees and resources potentially to carry out the works. In reality, the pursuer was in no such position. It had no employees, assets or other resources. It was not capable either of carrying out the works, or enforcing the carrying out of the works by either its group companies or third parties. The defender's said understanding was induced by the content of the pursuer's completed tender documentation. Had the defender understood the true position, the defender would have allocated fewer marks to the pursuer's tender which would have materially decreased its prospects of being awarded the tender.

10         The pursuer nominally carried out work for the defender on a previous projects, namely the Pointhouse Quay and East End Regeneration projects. The said projects were tendered for, awarded, started and completed without the pursuer ever revealing that it purported to act as an agent of Northstone, or that the works were in fact carried out using Northstone resources and at the direction of Northstone. During those projects, the only relationship between the pursuer and Northstone of which the defender had knowledge was of parent company and holding company, with the parent company providing guarantees of performance. The defender was at all times unaware that the pursuer purported to act as agent of Northstone. There was no reasonable basis, prior to the commencement of the present tender process, upon which they ought to have been aware of such a relationship.

11         Had the pursuer been awarded the contract for the works, any payments by the defender would have been made to Northstone, not the pursuer. They would have been remitted to a Northstone-owned account which bore the pursuer's name. Receipts for payment would have been issued by Northstone, using the name of the pursuer. VAT would have been collected and paid through Northstone. All payments would have been accounted for through the accounts of Northstone. The pursuer would have remained commercially inactive throughout. It would have remained as a dormant company within the meaning of the Companies Acts. The pursuer did not incur any preliminary costs, such as consultants' fees. All preliminary costs were incurred by Northstone. Any costs nominally incurred by the pursuer fell to be paid by Northstone. The pursuer would have made no profit and no loss. It had no financial interest in the project.

12         The directors of the pursuer, and of Northstone, failed to have regard to the legal relationship between the pursuer, the defender and Northstone. They did not properly consider the significance of the legal structure under which they proposed that the works would be performed. The directors of the pursuer and of Northstone variously regarded the pursuer as a brand name, as an agent, or as a part or division of Northstone itself. The documentation held it out as a principal in its own right. They did not appreciate the contradictory and inconsistent nature of these positions. They did not at any time convey these to the defender. As a result, the PQQ and tender documentation failed accurately to reflect the factual status of the pursuer. It failed fairly to explain that Northstone had any proposed role in the tender, or whose resources would be utilised in completing the works. The defender were at no time informed of the appointment of the pursuer as agent of Northstone, and did not consent to such an arrangement.

13         Due to the pursuer's said failure to recognise the legal significance of the pursuer's status, they would not have considered it necessary, had the pursuer been awarded the contract, to reveal to the defender the nature of the relationship between the pursuer and Northstone. The contract works would have been performed under the same legal structure as was used in the Pointhouse Quay and East End Regenerations projects. Accordingly, the pursuer would have played no more than a nominal role. The pursuer would not have concluded any binding sub-contract with Northstone or any other group company. It would have relied on the voluntary assistance of Northstone in providing management, plant, employees, expertise and all other resources. The pursuer would have played no material role in the carrying out of the works.

14         Accordingly the defender would have been unaware of the true relationship between the pursuer and Northstone. The said relationship was of material contractual and financial significance. The defender would have sought parent company guarantees from Northstone, but would have been unaware of any other involvement of Northstone. They would have been unaware that, in fact, Northstone were carrying out the works, not the pursuer, and that there was no contractual means of enforcing performance by Northstone. There was a failure by the pursuer to provide transparency as to whom the defender was truly contracting with, who would carry out the work, and to whom the defender should look for any legal or financial remedy.

Finds in fact and law as follows:

1            The relationship between the pursuer and Northstone was regulated by the BTA Agreement and in terms thereof the pursuer operated as agent of Northstone. Neither brought either the BTA Agreement or the nature of their relationship to the attention of the defender and the defender was unaware of that. In submitting the tender and PQQ, the pursuer did not purport to act as agent for Northstone. The information given in those documents, properly understood, was that it was operating, and would operate, as principal in carrying out the works, and the defender properly so understood. The pursuer considered itself an agent for Northstone, but failed to act in that capacity in its dealings with the defender. This would not have changed had they been awarded the tender.

2            The pursuer proposed to utilise the resources of Northstone and carry out no work itself. It did not propose to enter any formal sub-contract with Northstone or any other company, and would therefore have undertaken to complete the works without any contractual means of enforcing performance by Northstone or any other party.

3            The pursuer has no title or interest to sue. The pursuer has no relevant claim for lost revenue or loss of profit. Had the tender been awarded to the pursuer, it would have made no profit and incurred no loss. Any profit would have been paid to Northstone, not the pursuer. Any expenses nominally incurred by pursuer were incurred by Northstone, and would have been paid or indemnified by Northstone.

4            The pursuer has no title or interest to sue. The pursuer does not qualify as an economic operator within the meaning of the 2006 Regulations. It did not offer on the market work or works. It has suffered no loss or damage capable of being recovered from the defender. It is not entitled to make any claim on behalf of any third party.

THEREFORE sustains the first plea-in-law for the defender and dismisses the action; fixes a hearing on expenses to take place on a date to be afterwards fixed.

 

NOTE:

1.    This is an action for declarator and damages under the Public Contracts (Scotland) Regulations 2006 (the "2006 Regulations") in respect of an alleged wrongful failure by the defender to award to the pursuer a contract to carry out certain public works comprising Urban Flood Defences element of the White Cart Water Flood Prevention Scheme, Glasgow (the "White Cart Water scheme"). The pursuer is a disappointed contractor and seeks damages of £2.125million, in respect of its claim that, had their tender been properly assessed under the requirements of the 2006 Regulations, their contract ought properly to have been awarded to them.

Prologue

2.    The action went to proof before answer in 2012 on all issues, but was adjourned during the evidence of the second witness for the pursuer because of an unexpected issue about title to sue. The pursuer's proof had commenced with the pursuer's business development manager, James Wasson, giving evidence about the business and experience of the pursuer. His evidence lasted six days and covered, in particular, detailed evidence about the basis upon which the pursuer estimated prices and prepared tenders for jobs in general, and for the White Cart Water scheme in particular. He commented in detail on the pursuer's pre-qualifying questionnaire ("PQQ") and the subsequent tender which was submitted. No distinction was drawn in question or answer between the pursuer and any other company, and he described himself as the business development manager or estimator for the "company". The matter was not explored further with him. The pursuer's second witness was Eamonn Sweeney, whose curriculum vitae describes him as "Executive head of Farrans and Northstone Board Director". He described "Farrans" as the construction arm of Northstone (Northern Ireland) Limited. He said that the pursuer was a dormant company, but now "formed a division" of Northstone (Northern Ireland) Limited ("Northstone"). He was on the board of Northstone, but was managing director of the pursuer. He went on to describe the various divisions of "Farrans", but it was plain he could not be referring to the pursuer, which has no divisions, and indeed no business or employees. Cross-examination commenced with a focus on the identity of the pursuer. Mr Sweeney confirmed that the pursuer was a dormant company, that it did not trade, that "Farrans Construction" is a trading name for Northstone, and that the pursuer made no profit. He stated that "Farrans Construction" was an accepted trading name for Northstone.

3.    After an overnight break, counsel agreed that the identity of the pursuer might raise a fundamental question about title to sue for damages for loss, and the proof was adjourned. After sundry procedure, it was agreed that the proof before answer on quantum and liability should be adjourned, and a short, interposed proof before answer should be heard on the discrete issue of title and interest to sue. The present proceedings are the result.

Evidence on title to sue

4.    At the interposed proof before answer the pursuer led evidence from Andrew Donan, Alvar Kenwell and Alan McGowan. The defender led evidence from David Russell.

5.    Andrew Donan is the financial director of Northstone. He was formerly an accountant of "Farrans Construction", which he described as a division of Northstone, which is the "trading legal entity", with "Farrans Construction" as a "trading division". He confirmed the pursuer is a dormant company. It acts as an agent for Northstone, with all accounting transactions recorded through Northstone. The pursuer has been dormant since 1999 or 2000 following an internal divisional restructuring, when the trade and assets of the pursuer were transferred to Northstone.

6.    He spoke to a Business Transfer and Agency Agreement (5/22/463 of process) dated 23 December 1998 (the "BAT Agreement"), to which 18 separate companies were party, and all transferring their business to Northstone (under a former name). All financial transactions were henceforth recorded as those of Northstone.

7.    He spoke to an example of a transaction (5/8/47). The invoice is headed with the pursuer's title, and addressed to the client, but Mr Donan described this as being raised by Northstone "against the operating division of Farrans". The VAT would be collected from HMRC under a Northstone VAT return. There would be no separate VAT invoice for the pursuer. The payee bank account is in the name of the pursuer, although the account belonged to Northstone. The invoice debt was an asset of Northstone. A payment to the bank account (bearing the pursuer's name) would be recorded as a transaction in the books of Northstone.

8.    Management accounts were drawn up for the Northstone group. An example from 2007 is lodged as 5/10/422. These were from Northstone accounts system, which would also produce annual dormant company accounts for the pursuer. Because the pursuer is dormant, all transactions are reported through Northstone. Any receipts would not be shown in the pursuer's accounts, as they belong to Northstone. Mr Donan's view was that a dormant company could handle large sums, but as long as they were acting as agents they could recorded as dormant. For HMRC purposes, VAT invoices could be raised on behalf of the pursuer because the pursuer was acting as agent for Northstone. In accountancy terms, a contract of the pursuer would give rise to an asset, which would be accounted for through Northstone's accounts. He agreed that, in accountancy terms, the pursuer had no role to play. All invoices are generated by Northstone, the sums paid to a Northstone account, the receipt generated by Northstone under a Northstone VAT number. The pursuer is not involved at all. The client would get an invoice under the pursuer's name, and make payment to an account bearing the pursuer's name, and may not know of Northstone's involvement.

9.    Management accounts would show the transactions in the pursuer's name. These accounts are not released to third parties.

10. Mr Donan was referred to an entry in the pursuer's PQQ (5/12/426) at page 347, at which the defender asked to see "the company's full annual accounts". In reply, the pursuer had noted:-

"Please find attached:- Farrans (Construction) Limited Accounts for 2004, 2005 and 2006. With effect from 1^st January 1999, the business of Farrans (Construction) Limited was transferred to Farrans, Limited [sic]. From the same date Farrans (Construction) Limited was appointed Farrans Limited's agent for the purpose of carrying on that business. On the 1^st April 2005 Farrans Limited had a change in name to Northstone NI Limited....We intend to continue to take new contracts in the name of Farrans (Construction) Limited as agent for Northstone NI Limited. The accounts that we are submitting are therefore those of Farrans Limited or as we are now known Northstone NI Limited."

11. Enclosed were accounts for Northstone (notwithstanding the first sentence). These show (page 15 of those accounts at 5/12/462 page 201) that the pursuer is a dormant subsidiary. The accounts were for the group, and it was not possible to identify the individual transactions of the pursuer.

12. Mr Donan stated that there would be no scope for an accountant to misunderstand the status of the pursuer. It is a dormant company, whose transactions were indistinguishable within the Northstone accounts. The accounts of the ultimate holding company, CRH were included as a judgement call, so the ultimate assets behind Northstone could be seen.

13. On carrying out the work, Northstone assets would be available to the pursuer. The insurance brokers' letter confirmed the pursuer was a dormant agent (5/12/426 volume 2, page 3). The pursuer has no employees or assets. Despite that, it is a member of the Civil Engineering Contractors Association (Scotland) (ditto, page 19), and is accredited as a specialist contractor (ditto page 22).

14. Contracts were taken in the "name" of Farrans as it is a recognised trading brand, which has a value on the market. It is a brand. He could not say if the customers recognised the brand as "Farrans" or "Farrans (Construction) Limited". They were invited by the defender to tender (5/22/464) following their PQQ. They were lead contractors on other projects, which were taken in that name. The profits of the pursuer would not be visible, except to those persons receiving the pursuer's management accounts.

15. In cross-examination, Mr Donan agreed that, after 1999, it would be false to maintain that the pursuer had employees or assets, paid VAT or tax, or paid suppliers or sub-contractors. It made no profit, as all profit was made by Northstone. He was taken to the PQQ (5/12/426, Vol 2) and agreed that the claims about environmental policy (page 23) could not relate to the pursuer, that the training policy (Vol 2, page 141) was not operated by the pursuer, and similarly the employees (p142) were not the pursuer's. Mr Kenwell's letter of 22 June 2007 (p229) sent the PQQ information in the pursuer's name, and declared it "accurate to the best of our knowledge" (p230). The PQQ information started on page 231, which identified the "business" as the pursuer, with no trading name. The tax information was for Northstone. The information at paragraph A9(b), however, related to the pursuer, as there had been a £100,000 fine imposed on the pursuer for a fatality on the M1 project. He accepted that, if in fact it was Northstone tendering, albeit via the pursuer, then incidents relating to Northstone should be included. He was aware of a 2006 fatality under Northstone's contracts, but this had not been included. He claimed no expertise in tendering, as his input was just the financial input. He was taken through the rest of the PQQ, and agreed that questions relating to assets and employees were actually information relating to Northstone, not the pursuer.

16. He agreed that, from an accounting perspective, the pursuer did not do anything. He agreed that the value of any brand was not shown in the Northstone accounts. He maintained that the pursuer acted as agent.

17. Overall, I accepted the evidence of Mr Donan as credible and reliable. It was, however, instructive to see how an accountancy perspective such as his might differ from the legal perspective, on matters such as agency, dormancy and, ultimately, title to sue. In my view, his evidence explained the pursuer's position but did little to resolve the legal status of the pursuer and its operations.

18. The pursuer next led Alvar Kenwell, who is a director of the pursuer and their civil engineer. He was a director since 2008, and described himself as employed by the pursuer since 1 September 1987.

19. He spoke to the tender document 5/12/287 of process. It was prepared by the estimator, but he had signed off on it. He described the pursuer as a building division, carrying out civil engineering projects. There were seven directors including a managing director. He spoke to management accounts 5/10/422 of process. Historically, the pursuer took contracts in the name of Farrans. He spoke to examples of the pursuer's contracts at 5/10/465 to 471, which had been large scale contracts in Scotland. He was asked to reconcile this with the accountant's view of the pursuer as a dormant company. He described the pursuer as an agent on behalf of Northstone. He'd been employed by the pursuer for 25 years. The pursuer "carries out all the work and has the reputation". He signed everything in the Farrans name. They take their reputation very seriously, and clients did not know Northstone but they did know the Farrans name.

20. In his view, the pursuer provides all the insurances, and orders and invoices were under their name, albeit sent from head office. If the tender had been awarded, the pursuer would have carried out the work. It had employees and plant to do so. They had relevant professional body membership (5/12/426/Vol 2/ pages 19 to 26). They had received prestigious awards (5/12/426/Vol 3/389).

21. In cross-examination, he maintained that he worked for the pursuer. The first he'd heard of dormant status had been through this court case. They tell clients that the pursuer carries out the work but as agent of Northstone. He assumed he'd signed the PQQ documentation. He confirmed the details (5/12/426/Vol 2/230, 231, 242, 245, 247, 248, 75, 89, 94) were all accurate for the pursuer. If Northstone had a fatality in 2006, it would not be relevant to mention this in this document. Personally, his salary was paid by Northstone, but he regarded himself as employed by the pursuer.

22. It was suggested to him that, if Northstone was really the party submitting the tender, then Northstone's safety record would be relevant. He agreed with that. Had it been, they'd also have mentioned Northstone's contracts, but because in his view it was the pursuer's tender, that information had not been included.

23. He confirmed that the tender would be a binding contract "between us" (ibid, page 287 - the Form of Tender). That document is addressed to the defender, and states: "We offer to Provide the Works in accordance with the Contract Data..." and is signed by Mr Kenwell on behalf of the pursuer on 4 April 2008. He confirmed that the pursuer sought to pre-qualify, and subsequently to tender. He confirmed that on all the other sample works completed by the pursuer (5/22/465 to 470) there was no mention of Northstone. He agreed that the whole point was to show the pursuer was a substantial company, and could carry out the works.

24. In re-examination he explained what he meant by agency. He would explain to clients. It would mean the pursuer carried out the construction works, but would do so on behalf of Northstone. Some clients would ask for parent company guarantees from Northstone. The works would be carried out using the pursuer's resources and employees. He insisted he was an employee of the pursuer. He accepted he focused on the practicalities rather than the legal niceties. He filled in the documents in relation to what he considered to be the pursuer's assets, to show what they could deliver.

25. In my view, Mr Kenwell's evidence was credible and reliable, and clearly showed a fundamental, and in my view fatal, failure by the pursuer's directors (and indeed by the directors of Northstone) to give adequate thought to their legal position. I return to this below.

26. The pursuer next led Alan McGowan, the principal engineer of Halcrow Group. They were involved in the issue of procurement for the White Cart Water scheme. He spoke to the development of the procurement documentation. The purpose of the PQQ document was to assess the suitability of applicants. There were two strands - the technical ability, as shown by experience of other construction projects, and the financial/legal/accounting side. The latter were really for the defender to decide upon.

27. He spoke to the important considerations for award of the tender, such as the types and locations of works completed in the past. Halcrow's remit was to assist only as regards technical capabilities. A methodology of marking responses was developed. Production 5/23/472 was the methodology for this project. He spoke to the detail of how various aspects were allocated marks. There was no verification process at this stage, and it was necessary to assume the information submitted was correct. No contact was made with previous clients.

28. In cross-examination, he was taken to the pursuer's PQQ submission (5/12/426/Vol 2/229). Page 230 contained a declaration that there was no false information. He'd scored section B10, including the technical skills. Both the defender and Halcrow scored the last two sections. He recalled the information relating to employees and training, and had regard to the attachments to the PQQ in assessing these. It was claimed they owned the premises in Mid-Calder. There was no doubt it was information relating to the pursuers which was being presented and marked. He did not know of, and had never heard of, Northstone, and they were not brought to his attention during the marking process. If they'd known the pursuer had no assets or employees they'd have reverted to the defender for instructions. They'd want to know who was actually doing the work, what their status may be, and they'd be concerned they had incorrect information. It would be the same if they were told the other projects had been carried out by Northstone, not the pursuer. The accident figures (page 247) were very relevant to the construction industry.

29. If the pursuer were acting as an agent, he'd expect disclosure of the Northstone accident history. This applied to other questions as well. The response should then be based on Northstone, not the pursuer. If he'd known the pursuer was acting as an agent, he'd raise this as a concern, as he did not understand how the mechanics would operate. He'd never come across this before. He'd understood the pursuer to be a substantial company in its own right.

30. In my view, Mr McGowan's evidence was credible and reliable, and of central importance in showing that an independent consultant had no inkling of the proposed structure of the tender, other than that the pursuer was the principal and actual contractor. It is strong evidence that the defender did not know of this, and were not fairly informed. They had no reason to be on their enquiry, and accordingly that means that the inconclusive general statement in the accounts is all the less likely to be picked up as being of central importance.

31. The defender led David Russell, who is an employee of the defender who oversaw the administrative side of the contract. The evaluation process was done during the PQQ process. His role in the tender process was getting the documentation together, ensuring compliance with the procurement regulations, and appointment. He was not responsible for evaluation. The pursuer qualified from the PQQ stage.

32. He spoke to the PQQ material (5/12/Vol 2/229 et seq). The declaration of non-falsehood was important, to know exactly who they were dealing with. There could be no selective use of information. Page 242 had various "showstopper" questions, relating to default on other contracts. The number and training of the employees was important. He confirmed from the answers that he had formed the impression that the pursuer had a significant resource, and they assumed the employees were employed directly. There was nothing to create a suspicion otherwise. The documents showed property was owned, and that there was a training programme. He did not evaluate the financial information, as that was for the accounts department, but he was in no doubt that the pursuer would be carrying out the work. The instruction to the accounts department was to ascertain whether the accounts were robust.

33. There was no mention of Northstone. The defender assumed there may be sub-contracting of some of the works. If they had known that some of the information was untrue, they'd refer the matter to the legal department for information as to whether they were obliged to continue to evaluate the material. They'd want to remove a candidate who had misrepresented the position.

34. If they had known that the pursuer was acting as agent, it would have affected the evaluation process. They would need a clear declaration as to what information pertained to whom. They'd expect the showstopper questions to be answered for Northstone, not just the pursuer. In relation to a fatal accident (page 247) they'd expect to see Northstone fatalities. That information would be irrelevant for the pursuer, if the pursuer were not delivering the contract. Had they known of a fatality in 2006 it would have affected the score, downwards. The defender took such information very seriously. If it appeared that the pursuer were trying to hide information, they'd recommend to the management that steps be taken to remove the tenderer.

35. Had they known that the pursuer was acting as an agent for Northstone, and had no assets, it would have affected the score. The defender would have awarded no marks for those elements of contract where the pursuer had no assets or employees. He had no knowledge of the entry in the accounts section mentioning Northstone, as he had not seen this because it had gone to the accounts section. Had the pursuer been intending to alert the defender to this agency status, he would have expected a declaration in Part A of the PQQ documents. It was open to add a supplementary box, which was not uncommon. He had not been involved in any of the other projects mentioned.

36. The advertisement for procuring works (5/3) was described as "execution". If it had been intended to appoint others to carry out the works, he would have stated "management" or possibly "design and build". He was not aware that the pursuer was a dormant company.

37. In cross examination it was suggested that the defender must have noted that the insurances showed that the pursuer was a dormant company. Mr Russell's position was that the check was only for the existence of insurance, not the fine details, and that they would not have picked this up as reference to group companies is not uncommon. The place to discuss legal capacity was at the beginning of the document, not under the insurance provisions. Overall, the defender did not have a reason to investigate these documents in detail, or check out the holding company Cement Roadstone Holdings (page 238). They would be of relevance to parent company guarantees. Northstone were shown to be the operational holding company, but the defender was dealing with the pursuer, so this information was not directly relevant. The fact that the pursuer was part of a group was not integral to the bid. The information about agency (5/12/Vol 1/347) had been passed across to the accounts department and he had not seen it. This information should have been volunteered at section A1 of the PQQ documentation. He had no dubiety as to the status of the pursuer, at the time. He did now.

38. In my view, Mr Russell's evidence is credible and reliable, and shows that in fact the identity and resources of the pursuer were of central importance to the bid. As for Mr McGowan, Mr Russell had no idea about the pursuer's intentions about structure of the group. I accept that the defender were entitled to reach the understanding that the pursuer was tendering as principal.

Findings on the evidence

39. Although the defender's submissions focus on the issue of title to sue under the 2006 Regulations, the pursuer's submissions refer extensively to the capacity of the pursuer. It is therefore necessary that I deal with these.

40. Following evidence, the pursuer submits that it was acting as agent on behalf of a disclosed principal (Northstone). In my view, from the evidence, three significant points emerge, as follows:

That the pursuer's tender documentation did not effectively convey that it was acting as agent for Northstone

41. In my view, whatever was in the mind of the pursuer, the defender was at no stage fairly informed, or effectively alerted, that the pursuer was trading in anything other than a personal capacity. I can accept, based on the terms of the Business Transfer and Agency Agreement (5/22/463) dated 23 December 1998 (the "BTA Agreement") that Messrs Donan and Kenwell (and indeed James Wasson and Eamonn Sweeney who gave evidence in the adjourned principal proof), all understood in some general sense that the pursuer acted as an agent of Northstone. In my view they are all entirely sincere in that view, and the said Agreement gives them an apparently sound base for holding that view.

42. The problem is that agency, as simply a domestic or group company relationship, is not effective in contracts with third parties. In order for third parties to be fixed with the legal consequences of the pursuer acting only as agent, the third parties require to be effectively informed about that relationship, and to consent to it. In the absence of such information, a third party such as the defender is entitled to regard the "agent" as trading as a principal in its own right. It is for the "agent" to properly disclose otherwise, and show that the third party's consent was given, or should properly be inferred.

43. I have already discussed Mr Kenwell's evidence. In my view, his evidence was representative of every director of the pursuer and of Northstone. As I have indicated, the pursuer did not ever effectively apply its own mind to its own status. It is not difficult to conclude that it did not see the importance of bringing that status to the attention of the defender. I have no doubt that, firstly, the pursuer did not do so and, secondly, there was no reason for the defender to be on enquiry or to work out for itself, what the pursuer's intentions actually were.

44. In considering this, the starting point is the BTA Agreement. It shows that the pursuer regarded itself as a permanent agent of Northstone which would not trade in its own right. This, however, is an internal group document and there was no suggestion that the defender previously knew of its contents or existence. For this arrangement to be relevant to the present tender process it is necessary to show that the defender knew or ought to have known that the pursuer was not, or at least was not necessarily, acting as principal.

45. The knowledge of the defender requires to be approached in a number of steps.

46. First, what was the pre-existing knowledge of the defender about the pursuer's status? The clear answer is that the defender had no basis to know or even suspect that the pursuer was acting in a representative capacity. The parties had completed at least two historic projects. Neither had been understood, or stated, to involve the pursuer acting as agent, and both had nominally been carried out personally by the pursuer. The defender did not know of the BAT Agreement. There was, accordingly, no historic reason for the defender to know or suspect these factors, and indeed every reason to think the opposite.

47. There is no evidence, and no reason to suppose, that the defender did in fact know of the suggestion of agency, or indeed of the involvement of Northstone at all, save as perhaps a group company from whom guarantees might at one stage be sought. The defender was entitled to approach this tender in the expectation that the pursuer was acting in a personal capacity. David Russell, whose role was to ensure the honesty and compliance of the tender documents, expected that any variation to this would be flagged up in the Part A of the PQQ documents, and in my view that position was wholly justified. His evidence was that it is not uncommon for supplementary information, such as business names or other businesses, to be added to that information. In my view, the defender is entitled to rely on the pursuer's answers within that section as definitive. That is its whole point, as both parties ought to have understood. Accordingly, the starting point for the defender is that the pursuer is acting as principal.

48. Next, what was the defender entitled responsibly to understand from the pursuer's answers to the PQQ documents? In my view, the defender was entitled to require that any unusual status would be fairly and unambiguously stated. The obvious, and in my view only proper, place to disclose this was in the "Company Information" section (5/12/426/Vol 2/page 231). The pursuer did not do that. That section contains clear requests for information about the tenderer, its officers and its holding company, and the pursuer has certified that information as accurate (5/12/426/Vol 2/page 230). The pursuer's PQQ actually represents that the pursuer is the tenderer, that it has no different trading name and that it has considerable assets, resources employees and trading history. There is no attempt to show that the pursuer is acting in an representative capacity. It is entirely unambiguous that the pursuer is acting in a personal capacity. Where Northstone is mentioned, it is as a holding company, not its principal.

49. To attempt to prove that the defender knew of the agency status, the pursuer primarily relies on the statement which appears in the pursuer's pre-qualifying questionnaire and tender documentation (5/12/426) at page 347, at which the defender asked to see "the company's full annual accounts". In reply, the pursuer states:-

"Please find attached:- Farrans (Construction) Limited Accounts for 2004, 2005 and 2006. With effect from 1^st January 1999, the business of Farrans (Construction) Limited was transferred to Farrans, Limited [sic]. From the same date Farrans (Construction) Limited was appointed Farrans Limited's agent for the purpose of carrying on that business. On the 1^st April 2005 Farrans Limited had a change in name to Northstone NI Limited....We intend to continue to take new contracts in the name of Farrans (Construction) Limited as agent for Northstone NI Limited. The accounts that we are submitting are therefore those of Farrans Limited or as we are now known Northstone NI Limited."

50. This statement (which I shall refer to as the "Agency Statement") if it is intended to impart knowledge of the pursuer/Northstone relationship, is in the wrong place, and very poorly expressed.

51. The Agency Statement was not included in the company information section. It was instead placed in the "Annual accounts" section of the PQQ documentation. If the defender truly intended to change the fundamental status of the pursuer, placing the Agency Statement there was inexplicable, except by possibly a failure to understand its importance.

52. The next question is, notwithstanding the Agency Statement was placed in the "Accounts" section, can the defender be fairly fixed with knowledge of its existence and import? In my view, clearly not. The evidence of Mr Russell was that this section was passed over to the accountants and was never brought to his attention, and this was not challenged. In my view, in light of the sheer volume of PQQ material it ought to have been entirely expected that the detailed contents be divided up and allocated amongst suitable departments for analysis. Not surprisingly the accountancy evidence would go to the accountants, not the lawyers. The defender's administrator, Mr Russell, never became aware of the statement. Neither the industry, nor even the defender's team, were aware of the pursuer's tendering practices, and I accept Mr McGowan's evidence as good evidence of that.

53. The Agency Statement went to the defender's accountants. Should then, the accountants be said to have received fair notice on behalf of the defender? In my view, plainly not. In my view it is wholly unfair to fix them with the responsibility for following this up.

54. Accountants and lawyers do not peruse documentation with the same questions in mind. For example, Mr Donan's evidence shows clearly that the role and perspective of the accountants would be entirely different to that of the legal administrator. Agency is a legal status, not an accountancy one (at least in this context). I accept Mr Donan's evidence, to the effect that that there would be no scope for an accountant to misunderstand that the pursuer was a dormant company, but that does not affect the defender's knowledge of legal status. An accountant would not be tasked with analysing legal structures (for example, Mr Donan's analysis of the pursuer as a "trading division" with Northstone as the "trading legal entity", while also being a "brand" could only be an accounting one; legally, it is opaque, if not incoherent), and would not necessarily realise the import of what was stated, particularly on the vague form of the Agency Statement. The placing of the Agency Statement in the accounts section appears to indicate that the pursuer viewed accountancy status and legal status as the same thing. Given my view of the directors' limited grasp of these issues, that is entirely possible, in my view.

55. However, a company might be historically a dormant company but thereupon commence operations again. A company's status as dormant says nothing about its legal status as an agent or otherwise. An accountant is looking for financial status within a group, whereas a lawyer is looking for legal status of individual companies. I cannot see that an accountant could be faulted for assuming that matters of legal status were being dealt with elsewhere, by the lawyers, standing that the PQQ actively sought such information. Looked at another way, the defender would be entitled to regard the specific information in the "company details" section as superseding the rather vague formula of the statement. In my view, the placing of essentially legal information in the wrong place within a section which asks for accountancy information is clear evidence that the pursuer had not clearly thought out its own status, and did not identify it as an important issue of which the defender must be made aware.

56. Accordingly, in my view, there was no effective information given to the defender to the effect that the pursuer was acting as an agent for any other party.

57. Further, even if I were wrong on this, and the defender knew or ought to have known about the Agency Statement, what would the pursuer learn from reading it? It is necessary to examine the wording of the Agency Statement at 5/12/426/Vol 1/347. It is held out as the principal source of potential information that the pursuer is not the principal contractor. In my view the wording is entirely inadequate for that purpose. Without repeating the whole wording, I note that (i) the first paragraph is historic, and appears to relate only to the business which existed at 1999; (ii) the second paragraph refers to "our construction business" - which can only fairly refer to the pursuer, which is the author and tenderer - and gives every impression the pursuer is the contractor; (iii) the third paragraph refers to an "intention" to take new contracts as agent for Northstone - but it does not create any such relationship, and does not remove the impression that the pursuer is the contractor. There is nothing to say the pursuer will not perform any of the works at all. There is nothing to say that this is any more than an intra-group taxation, or other, arrangement. There is nothing to say that a significant amount of the PQQ information given does not relate to the pursuer, and is, in that context, false. The enclosing of accounts for Northstone might be explained as relevant solely to a parent company guarantee, and there is a large difference in scale between a parent company providing a financial safety-net by guarantee, and a principal which will in fact operate the entire contract. The enclosing of Northstone accounts says nothing about dormancy or the performance of the works. In my view, the Agency Statement was insufficient in its terms, and in the wrong location, to bring any such question to the minds of the defender.

58. Accordingly, even if the pursuer intended throughout to act as an agent for Northstone, my view is that the evidence clearly shows that it failed to do so, or to fairly and effectively draw this to the defender's attention, and that the defender at no time either knew of this purported arrangement or had the opportunity to consent or otherwise to transacting with the pursuer in such a limited capacity. The present proof would never have been necessary had the defender understood, prior to the original proof starting, that the pursuer was not operating in a personal capacity. Nor can it be said that the defender ought fairly to have either known of the arrangement or at least put on enquiry. In my view the evidence shows that not only did the pursuer fail to alert the defender as to its capacity, but it failed even form a coherent view as to its own status in a future relationship with the defender.

59. The pursuer also relies on the content of various insurance documents. These refer, in schedules to those documents, to a group structure in which the pursuer is described as dormant. In my view, this information is even more remote, and does not at any point explain why agency is involved. The insurance documents were perused only to show that the pursuer could get insurance. The insurance documents were not being scrutinised as part of detective work into the pursuer's status. It is verging on disingenuous, in my view, to claim that either of these sources represent fair notice to the defender

60. Lest there be any suggestion that this confused position would have been clarified prior to signature, no such evidence was led and I have no reason to believe it. This is for two reasons: first, the pursuer had already operated the Pointhouse Quay and East End Regeneration projects with the pursuer (and led evidence of several other large projects with other clients) under what seems to be the same arrangement and without the defender ever knowing. There is no reason to think this would have changed. Second, the pursuer's directors simply did not see the problem, and therefore there is no reason to think they would have been prompted to take action to disclose what is, ultimately, highly relevant information.

The pursuer at no stage adequately or accurately considered its own status

61. The second point is that, when completing the documentation (and indeed in raising the subsequent litigation), the pursuer did not effectively apply its corporate mind to the capacity in which it was holding itself out. In submitting the PQQ and tender documentation, the pursuer did not adequately consider the nature of its relationship with the defender (as opposed to Northstone), the capacity in which it was submitting the documentation, or its own legal status. The effect of this, and the preceding, point, is that whatever was in the mind of the pursuer (and, for tender purposes, that "mind" appears to have been that of James Wasson and Alvar Kenwell, with the knowledge and consent of the other directors of the pursuer and of the Northstone directors) about its own legal capacity and status, the defender was entitled responsibly to hold the view, on the basis of the PQQ and tender documentation, that the pursuer was tendering in a personal capacity.

62. The principal source of evidence as to the legal "mind" of the pursuer was that of Alvar Kenwell. In my view, Mr Kenwell's evidence was credible and reliable, but fatally exposed a failure by the pursuer's directors (and indeed by the directors of Northstone) to give adequate thought to their legal position.

63. At the outset, I would make clear that I have no reason to doubt that the Northstone construction division, in some guise or other, is a competent and honest provider of construction services, and has a string of satisfied customers. The witnesses are practical men who doubtless are highly skilled at their chosen professions. The pursuer's legal status in the present tender (and apparently, in every other tender) is, however, hopelessly underthought. For example, Mr Kenwell sincerely believed himself to be employed by the pursuer, although his payslip came from Northstone. He believed that the pursuer was submitting the PQQ and tender in their own name, and would carry out the works. These are impossible conclusions when dealing with a dormant company. They are impossible conclusions when acting as an agent. He knew that Northstone's resources lay behind the bid, but nonetheless it was not relevant in his view to refer to Northstone's performance or safety record. He appeared to see no inconsistency between "Farrans Construction" being a company in its own right, or being a brand name only, or being a "division" of Northstone (whatever legal entity that suggests), or being an agent for Northstone. In these circumstances, I was entirely able to understand that the pursuer would not see the central importance, or indeed requirement, to bring any agency status to the attention of the defender, as its directors barely understood the significance themselves. I have no difficulty in accepting that it was not properly done. I don't intend to single out Mr Kenwell. It is perfectly plain that not one individual at any level in Northstone, or the pursuer, applied their minds or took legal advice as to their status in this tender process, whether it be dormancy, agent, principal, "division", brand name, or anything else. In my view, the pursuer did not adequately exercise its corporate mind in setting up this relationship with the defender, or even in considering its own status within the group.

64. I was, at the end of the evidence, entirely unable to understand the structure of the proposed tender. The witnesses were unable to explain it. In my view, that is because it was impossible to explain. Although the pursuer purports to be acting as agent, it nonetheless offered to perform the works by reference to its own personality and (apparent) resources. The pursuer held itself out as carrying out the works, and therefore cannot be the agent.

65. Nonetheless, the pursuer purports to be acting as agent. As an agent, it would be offering to carry out the works on behalf of a principal. An agent does not, however, procure that its principal will carry out works. The whole point of the contract is that the tenderer would be contractually obliged either to perform the works personally or see that they are carried out, for example using sub-contractors. There is an inherent inconsistency which cannot be resolved.

66. Even if it were resolved, the pursuer has firmly pinned its colours to the agency mast. It was not, it states, acting as principal. Assuming that to be true, it is difficult to see how the pursuer could sustain any loss, as an agent is fully accountable to a principal, and entitled to indemnity from that principal. On that analysis, this could only be Northstone's contract, and Northstone's profit or loss.

67. Further, Mr Kenwell described the pursuer as being part of Northstone, or a division of Northstone. Leaving aside what this precisely means, the pursuer cannot be both part of Northstone and its agent. That is another inconsistency which apparently cannot be resolved.

68. Further, the pursuer held itself out in the PQQ and tender documentation as acting as principal. It now maintains that it did not intend to do so, did not in fact do so, and was acting at all times as an agent for Northstone. It maintains (but I cannot accept - see the foregoing) that it informed the defender of this arrangement. Accordingly, there is a tension between the capacity in which it was acting in relation to Northstone (as agent) and the capacity in which it held itself out to the defender (as principal).

69. Further, in raising the present action, the pursuer does not purport to act as agent of Northstone. It sues in a personal capacity. There is an inherent contradiction between the capacity in which it sues and the capacity in which (it says) it would have entered the contract. That capacity is not readily resoluble.

70. Further, Mr Kenwell's (and Mr Wasson's and Mr Sweeney's) evidence was to the effect that the pursuer's name was a trading name for Northstone. There is an inconsistency between the existence of the pursuer as an entity, and the use by Northstone of what is simply a trading title of "Farrans Construction" or even "Farrans Construction Limited". It is unclear whether Northstone actually meant to use the pursuer's intellectual property, or the pursuer as a subsidiary, to complete the deal.

71. Further (and this is discussed further later), even if the present proceedings were raised as agent of Northstone, it is not clear how the pursuer would bring themselves within the definitions of the 2006 Regulations as economic operator. No common law case is advanced to recover any loss of Northstone.

72. The foregoing inconsistencies and tensions present a legal picture which is incoherent and which I have found impossible to resolve. This situation is eloquent, in my view, that the pursuer tendered, and acted, without accurate analysis of who was tendering or in what capacity. Further, even if I am wrong and the pursuer did form some coherent intention, they failed to explain or represent that they acted as agent of the Northstone. In a question with the defender, no agency agreement exists.

73. The result is that the pursuer can only be regarded as principal. The pursuer refutes that analysis. The only way Northstone can be regarded is as a holding company of the pursuer, a potential parent company guarantor, but not as principal. On that basis, the pursuer cannot establish any coherent link with Northstone which would entitle it, short of assignation of any claim, to sue at common law on Northstone's behalf. It cannot present any relevant claim, based on agency, for damages for losses which it would never have incurred.

74. The pursuer places emphasis on preliminary costs incurred (such as consultants' fees), as if it were a gateway to title to sue. I do not agree. In my view this is no more than a device to attempt to establish title. If, as they insist, they were operating as agent, then they have a remedy for those wasted costs against their principal, Northstone. They have no right (short of an express clause in a contract with the defender - Woodar Investment Development v Wimpey Construction [1980] 1WLR 277 - which was not on offer) to pursue the defender for any such wasted costs. The existence of wasted costs does not open the gateway for recovery of a completely different type of claim, based on a different contracting status, namely under the 2006 Regulations, for works which it was not physically capable of carrying out, or forcing a third party to carry out.

75. It follows from the foregoing that another point arises. In the authorities, it is of central relevance (discussed below) that the tendering party was able to "call upon" the resources of group companies or other contractors. Here, there is every reason to find that there would have been no capacity to "call upon" Northstone. There was never any suggestion of sub-contracting to Northstone, not least because the directors considered the pursuer to be its agent (in an arrangement unknown to, and probably unavailable to, the defender) or, alternatively, part of Northstone. They had operated this arrangement in previous contracts. Accordingly, Northstone's involvement was entirely voluntary. While one might suppose Northstone would be a willing participant, it is doubtful if the defender would have taken such a generous view without binding contracts. One is left to speculate, had the contract works gone disastrously wrong, and had the parent company guarantees been for any reason unenforceable, what remedy the defender would have had under what was supposedly a bilateral contract with mutual obligations.

The pursuer's tender documentation was misleading

76. The pursuer certified that the tender information was correct (5/12/428/Vol 2/page 230. It is, as a result of the foregoing, clear that it was not correct. It referred only to the pursuer as the contractor, but contained information about officers, employees, assets and other resources which can only have been those of Northstone. It failed to disclose health and safety information, such as a fatality on a previous project, because of confusion about identity of tenderer. As I have accepted, this misinformation was not intentionally misleading, and I can accept that the directors gave what they considered to be correct information, but it was not. This issue is not one which is central to the restricted question of title to sue, so I will not comment further, except to notice the concern with which this was viewed by Messrs McGowan and Russell in evidence, and the steps they would have taken to seek information, legal protection and even legal advice as to whether the tender could be dropped as a result.

77. The net effect, in my view, is a complete lack of transparency for one side in this relationship. That lack of transparency was unnecessary, and was induced by the wholly ambiguous and uninformative content of the PQQ and tender documentation. Had "Northstone trading as Farrans Construction" tendered for the works, no such problem would have arisen - I note that the company information part of the PQQ expressly invites consideration of a trading name.

Title to sue

78. Against the foregoing factual background, I turn to consider the restricted issue for this proof before answer, namely whether the pursuer has title to sue. I agree with the defender's submission that title to sue can be found only in the 2006 Regulations. No claim is available to the pursuer at common law, and none is made. Even if it had been, the inchoate nature of any claim would be fatal, for the reasons discussed above, and there would be no title and interest to sue at common law. In my view, the pursuer also fails to bring itself under the 2006 Regulations, and as a result has no title and interest to sue.

79. Regulation 47(1) of the 2006 Regulations provides that the obligation on a contracting authority, such as the defender, is a duty owed to an "economic operator". Regulation 47(6) provides that a breach of the Regulations is actionable "by any economic operator which, in consequence [of the breach], suffers, or risks suffering, loss or damage...".

80. The pursuer qualifies as an economic operator if it is "a contractor, a supplier or a services provider" (Regulation 4(1)). The term "contractor" is the only term relevant for present purposes, and is defined (Regulation 2) as:-

81. "a person who offers on the market work or works and -
(a) who sought, or seeks, or would have wished, to be the person to whom a public works contract is awarded; and
(b) who is a national of a relevant State and established in a relevant State" ( - not in issue in the present case)

82. Work and works are further defined terms. I notice that the terms "public works contract", which appears in the definition of contractor, is defined as:
"a contract, in writing, for consideration...(a) for the carrying out of a work or works for a contracting authority, or (b) under which a contracting authority engages a person to procure by any means the carrying out for the contracting authority of a work corresponding to specified requirements."
It is a feature of this latter definition that the contractor must be engaged either to carry out works itself, or to procure the carrying out of works by another. I will return to this.

83. For the pursuer to have title to sue, it must bring itself under those regulations, in this case as a contractor. For that purpose, the pursuer must offer on the market works, and must be the person who wished to have the contract awarded to them. The state residence criterion is satisfied. Having satisfied this definition, they must have suffered loss and damage in order for Regulation 47(6) to operate (although this last question is not one for the present proof).

Dormant company

84. At the outset, it is necessary to be clear on the status of a dormant company. In terms of section 1169 of the Companies Act 2006, a company is dormant during any period in which it has no significant accounting transaction, which in turn includes (section 386) records of money received and expended by the company on a day to day basis, and all assets and liabilities of the company. In my view, however, dormancy is primarily an accounting status, rather than a legal disability, and its main effect is to permit limited accounts and returns to be made to the Registrar of Companies. The ability to offer works on the market is therefore not defeated simply by reason that the pursuer is a dormant company. Dormancy does not denote any lack of legal capacity. There is therefore no reason that the pursuer could not slough off this capacity and return to the market. The pursuer's claim is not defeated by mere reason of their dormant status. On the evidence, however, there is no suggestion that the pursuer would in fact have commenced any sort of activity, or that its dormant status was intended by the pursuer, or Northstone, to change during the course of the tendered works. Neither side seeks to assert that the pursuer would have been active, economically or otherwise, in a manner which would remove it from this status, and there is no evidence to this effect. It is established, in my view, that the pursuer was, and would have remained, a dormant company, even if the defender had decided to award the works tender to the pursuer. It was never, in any real sense, going to be the contractor, or economic operator, or any more than a "brand name" for Northstone.

85. The defender sets out various heads for consideration, and I broadly agree with these and will reflect them in what follows. The pursuer's submissions took a slightly broader approach, and set out seven propositions upon which its position rested. I will refer to these seven propositions individually as they become relevant to the headings below.

86. In my view, in considering title to sue, the following considerations arise:

Does the pursuer offer on the market work or works?

87. The obvious point is that, shorn of its representative capacity, the pursuer offers nothing at all. It has no resources of any sort, and is unable to carry on any type of works. It is unable, without compromising its status, to carry out any significant transaction, such as sub-contracting or invoicing.

88. Had the tender been awarded to the pursuer, there was never any suggestion that the pursuer would offer any works on the market. The works were only ever to be provided by Northstone. The pursuer's directors clearly regarded the pursuer as, in effect, a brand name and nothing else. The pursuer was not at any time regarded as having its own legal existence. It was merely a "division" of Northstone, whose business and assets were provided under the brand name of Farrans. While that arrangement may make business sense it is, legally-speaking, incoherent.

89. The pursuer's first and second propositions are relevant here.

90. The first proposition is that where an economic operator does not itself intend to execute works, it cannot be precluded from participation in public works contract procedures. The pursuer asserts that it is not a bar to an award of a tender that the tenderer does not proposes to use its own resources (Case C-176/98 Holst Italia), and indeed even if it does not even propose to carry out the works itself (C-389/92 Ballast Nedam Groep NV v Belgium [1994] CMLR 836). These propositions are not contradicted by the defender and I accept them as accurate. Notably, it is a requirement of the latter case, when ascertaining that group assets and not merely company assets are available for fulfilment, that the tenderer can actually call upon the resources of those group companies. In my view "calling upon" is something more than just "requesting", or even "confidently expecting", and involves at requirement for certainty or compulsion.

91. I agree that a tenderer may elect to have contract works carried out on its behalf by other parties. The authorities and the defender accept that sub-contracting is sometimes appropriate and necessary. However, none of the authorities deals with, or considers, a situation where a tender is submitted by a party which is economically inert, or acting only as agent. A sub-contracting situation is entirely different in character from a representative situation. In the former, the tenderer has a right, and a power, to compel sub-contractors to perform, and can impose sanctions upon or terminate the contract of a defaulting sub-contractor. There are no means I can identify by which the present pursuer could compel the parent company to perform the works. An agent cannot compel the principal to perform. An agent would not require to do so, as it is not personally liable for performance. In the present circumstances, although the evidence shows that a separate parent company guarantee would likely be sought, that is a separate contract. Such practical considerations cannot be prayed in aid in analysing the legal effect of the present contract.

92. The pursuer's second proposition is that under EC Procurement law, the effectiveness principle allows recovery of losses whether or not normally recoverable under national law. I agree with that proposition, but it relates to a later stage of the argument, namely what type or extent of loss is recoverable, not the identity of who is entitled to recover it. In any event this proposition is not challenged in the present case, because the defender does not rely on idiosyncrasies of Scottish or UK law. Rather, the pursuer is described as not bringing itself under either the 2006 Regulations or the Directive 2004/18/EC from which it derives. The proposition is not relevant, for either of these reasons.

93. I am unable to see how, in any real sense, the pursuer could be regarded as offering to carry out works. The pursuer has been at pains to prove that any offer was made on behalf of Northstone, as principal. I have found that not to be proved. Even if the agency analysis was stateable, there is no evidence that the pursuer would ever be able to procure any performance by Northstone, which would be acting only as it saw fit to act, and no further. In its own capacity, the pursuer was not a business unit and did not intend to be. The pursuer falls at this first question.

Was the pursuer a person who would have wished the contract to be awarded to them?

94. In my view, the fact that the pursuer argues for an agency relationship shows that the pursuer never wished the contract to be awarded to them, except in a representative capacity. I have found that they did not effectively inform the defender that they wished such a status. That does not detract, however, from their own, innermost, intention (at least as they portray it now - I am not convinced that any more than the shallowest legal analysis went into the tender documentation). In my view, the 2006 Regulations are not aimed at procedural issues, such as title to sue, so much as substantive rights and duties. In my view, the wording of Regulation 47(6) is aimed, as Harmon CFEM Facades (UK) Ltd v The Corporate Officer of the House of Commons 1999 WL 1457322 (discussed further below) points out, at the commercial reality of the transaction, not just the procedural or technical trappings. In my view, the present claim is defeated by the idiosyncrasies of the present tender documentation which failed to present a coherent legal tender or, as a result, to found a coherent legal claim.

95. In short, the pursuer has argued forcefully that they intended to be bound only as agent, not as principal. They cannot now argue that they intended the contract to be awarded to them in any beneficial sense. They could not carry out, or even administer, such a contract.

Did the pursuer wish to be awarded a public works contract?

96. If I am wrong in finding that the pursuer did not "offer on the market work or works", it is necessary to consider the second part of the definition. It was suggested that the pursuer may qualify as a contractor, and hence economic operator, as it wished to be awarded a public works contract (see definition of "contractor", part (a)). In my view, the claim would fall at that stage also.

97. "Public works contract" which appears in the definition of contractor, is defined as:
"a contract, in writing, for consideration...(a) for the carrying out of a work or works for a contracting authority, or (b) under which a contracting authority engages a person to procure by any means the carrying out for the contracting authority of a work corresponding to specified requirements".
I have already found that the pursuer did not offer to carry out work or works. In my view, it did not offer to "procure" such works either. There are two reasons for this. First, the evidence of David Russell was that the defender did not intend to grant a procurement contract - it was performance of construction works. Second, in the pursuer's mindset as agent for Northstone, it did not intend to procure such works in any real sense. "Procurement" is not simply passing a contract on to another. It is the enforcement of that contract. It is the guarantee to the other contracting party that it will see the works are carried out. Procurement involves the ability to enforce, and impose sanctions, and to instruct work by an alternative contractor in the event of default. None of those features were part of the pursuer's intended or actual arrangement with Northstone. The pursuer could enforce nothing at all. In my view, the formula "could call upon" (see Ballast Nedam Group NV v Belgium [1994] 2 CMLR 836) is more than on a grace-and-favour basis. It is one thing for a group holding company, which owns the subsidiary companies, to "call upon" its subsidiaries to carry out works - it can enforce such performance. It is quite another for an assetless group company to "call upon" the rest of the group to perform, without binding sub-contracts. There is nothing it can do to enforce such performance.

98. As an aside, what would happen if the dormant subsidiary incurred large liabilities under the construction contract and the group then simply refused to get involved? There would be no remedy at all for the pursuer (and it is no answer to say that, practically, there would be group company guarantees - these may not be watertight, and in any event a collateral contract cannot be prayed in aid in analysis of the basic legal relationship).

99. In my view, the pursuer could not even procure that the contract works be carried out.

Has the pursuer suffered loss or damage?

100.     Even if I am mistaken in the foregoing, and the pursuer qualifies as an economic operator with a claim under Regulation 47 for damages, in my view there is no relevant claim for loss or damage. Strictly speaking, this head goes a step further than merely title to sue, and might be considered as interest rather than title. It is in any event a question of relevancy. Because the defender's preliminary plea is directed to title and interest, I can deal with this question here. There are two possible losses to pursue, being (a) the pursuer's own losses and (b) Northstone's losses.

(a) The pursuer's own losses

101.     Regulation 47(6) states:

"A breach of the duty owed in accordance with paragraph (1) or (2) shall be actionable by any economic operator which, in consequence, suffers, or risks suffering, loss or damage..."

102.     The focus of this regulation is not merely the availability of a claim, but the suffering of a loss. In my view, "suffering" means a direct loss to the economic operator, not that the economic operator may have a derivative claim available on behalf of another party. In a real sense, Northstone may have "suffered" or "risked suffering" a loss. The pursuer did not. The only loss which the pursuer can present as an actual personal loss is the wasted expense of consultants' fees. In my view, that is not a loss caused by breach of paragraphs (1) or (2), or by breach of the 2006 Regulations generally. The pursuer only ever incurred expense as an agent of Northstone, and would expect to be reimbursed by Northstone. There would be no right of recourse against the defender under those circumstances. Even if the pursuer claimed to be the "economic operator" offering to carry out the works (a logistical impossibility, and legally unsound for the reasons discussed above), it would never have "suffered loss", because it would never have made any profit. Such profit would be Northstone's property, and would be paid to a Northstone-owned bank account (albeit in the name of the pursuer; an irrelevance) and would feature in the Northstone company and group accounts (and not in the pursuer's accounts). The pursuer would have nothing to do with the receipt of funds, or any benefit under the contract, at any stage.

103.     The pursuer's third and fourth propositions are relevant at this stage, and I discuss these as follows:

104.     The pursuer's third proposition is that where an agent benefits from rights acquired nominally but beneficially for its principal, and also undertakes obligations nominally but truly on behalf of its principal, a breach of the rights and obligations has as a consequence loss or damage caused to the agent, or at least gives rise to a risk of the agent suffering such loss or damage. As an example of personal loss, the pursuer points to consultancy fees incurred as part of the costs of tender.

105.     This propositions hinges on the pursuer's agency analysis being accepted. For the reasons set out above, I do not accept that the pursuer held itself out as agent for the pursuer. The proposition is therefore not of assistance.

106.     Further, even if I had found the relationship of agent/principal to be established, or even stateable, this proposition would not work. It is based on personal liabilities (such as initial consultants' fees) incurred by the agent being repaid by the principal, using funds which the principal generates from the project. It proposes that liability to repay agent's costs becomes a loss to the principal if the means of recovery (namely award of the contract) is wrongfully prevented. In my view this analysis is misconceived. If a party elects to incur liability for preliminary costs, with the realistic anticipation of future indemnity by another, it is nonetheless its own liability. It may be recoverable in a question with the other party, such as an agent/principal, but not in a question with a third party. For such a payment to be recoverable from a third party, it would require to be a loss recoverable under that third party contract. Here, if the pursuer were pursuing the tender in its own name, and was wrongfully thwarted, then any loss might be said to arise to the pursuer. That is not the case here. If the pursuer is an agent for a principal, the loss is that of the principal, and the pursuer has a right to look to the principal for reimbursement (unless, of course, the agent has a contractual right to sue the third party, which was not on offer here). The loss cannot be said to be directly recoverable from the defender. Accordingly, the only "breach" which would be relevant would be a failure of the principal to reimburse. The agent is not a party to the principal contract, and accordingly cannot found on a breach thereof, and therefore cannot be said to suffer loss as a consequence of such a breach. Only the principal could recover from the defender.

107.     The pursuer's fourth proposition is that an agent suffers potential loss where, having submitted tender documentation, the non-award causes it to lose reputation in the market place, or it causes inconvenience, or where costs are wasted, or where there is a loss of opportunity to secure a contract, or where the principal may suffer loss of profits. In my view, this argument is not correct ( - as a preliminary, and for procedural reasons, I exclude any argument based on loss of reputation, because this was denied probation. Prior to proof the pursuer sought to amend its pleadings to refer to loss of reputation in the market place, and this amendment was refused as coming too late. At proof, the defender took timeous objection to all questions tending to relate to loss of reputation, and any such evidence was ruled inadmissible. This alleged head of loss has therefore been excluded from the present proof). As for the other identified heads of loss, the "principal's" loss of profits cannot be described as a loss to the pursuer. Tendering costs are equally the responsibility of the principal, to whom is the pursuer's sole recourse, as I have discussed above. "Inconvenience" is very hard to analyse, but if it means costs of tendering, these are the responsibility of the principal. I reject this proposition.

108.     For these reasons, even if the pursuer qualified as an "economic operator", it is not possible to say, on the facts of this case, that breach of the 2006 Regulations would cause the pursuer to suffer loss for which the defender would be liable.

109.     In my view, the pursuer has no title or interest to sue by reference to any personal loss likely to be suffered.

(b) group company losses

110.     The pursuer then claims that has title to pursue losses of a third party, namely Northstone. I have already rejected this, on the basis that "suffering" loss does not include a derivative claim for another party. However, I require to address the pursuer's submissions in this regard.

111.     The pursuer's fifth proposition is that an economic operator need not claim its own direct loss, in order for title to sue to arise. The pursuer is asserting, in effect, that hypothetical loss is enough to give it title. That proposition, as far as it goes, may be correct in some circumstances, but it founders here on a much more fundamental issue, namely that the losses actually claimed cannot relevantly be said to be the pursuer's losses. Standing the unique factual circumstances of this case, the losses could only be those of the alleged principal.

112.     In advancing this proposition, the pursuer places emphasis on the case, mentioned above, of Harmon CFEM Facades (UK) Ltd v The Corporate Officer of the House of Commons 1999 WL 1457322. That judgement of the Technology and Construction Court of the Queen's Bench Division, was based on a previous EC Directive (latterly 89/665, rather than 2004/18/EC), and on different regulations, but is broadly in point. Most of the lengthy judgement is taken up with consideration of liability and causation. However, the issue of identity of plaintiff was relied upon in a submission that it could not recover group losses. HHJ Humphrey Lloyd found in fact that [paragraph 61] the defendant: "knew that [the plaintiff] was a member of the Harmon Group; (2) that it was a small company set up to establish business for the Harmon Group in the United Kingdom...(3) that in order to submit the tender and to carry out the contract [the plaintiff] would have to call on the resources, personnel and expertise of other companies within the Harmon Group and would thus sub-contract much to such companies [emphasis mine]; (5) that accordingly [the plaintiff] was primarily a vehicle for the Group..."

113.     In considering whether that plaintiff could recover group losses, the judge stated [paragraph 147]:
"...the [defendant] was interested in the Harmon group with its worldwide expertise...[150] Ballast Nedam shows that it is permissible to look beyond the immediate company to test its worth for the purposes of registration and pre-qualification. In my judgement it would be artificial to require a contract only to be let to the person who had been pre-qualified if in pre-qualifying account had been taken of the group or other resources available to it..."
and later [310]:
"[the plaintiff] however submitted that if it was contractually liable to another company within the Harmon Group [emphasis mine] either in respect of tender costs or in respect of payment of gross margin or profit, under ordinary principles of law, Harmon was entitled to recover in respect of those matters...[327] In my judgement [the defendant] knew that the Harmon tender was being prepared for it by others in the Harmon Group and that Harmon could not have itself tendered without that assistance...[328]...in my judgement to deny [the plaintiff] the opportunity of recovering such tender costs would be to recognise the proverbial "black hole" which it was the intention of the House of Lords in [case of Martin] to avoid, by the application of the principle in Dunlop v Lambert which itself calls for an effective remedy."

114.     In my view, Harmon does not assist the pursuer in the present case, and falls to be distinguished on the facts. The mischief which Harmon was addressing is not the same as the mischief here. In Harmon, the defendant client plainly was well aware of the nature of the relationship between the plaintiff and its group companies, that the group would in fact be carrying out the work, and that to limit losses to those of the plaintiff only was an artificial device which risked creating an unrecoverable but very real loss to the group companies. It was entirely foreseeable by the defendant, which was fully informed. By contrast, in the present case, the defender has been kept entirely in the dark about the nature of the pursuer's business, and has been kept so by the pursuer's own responses to the tender documentation. The existence, never mind the nature, of any losses to group companies are not foreseeable, for that reason. Moreover, the dicta suggest that an element of enforceability is required - the reference by HHJ Humphrey Lloyd (above) "...and would thus sub-contract much to such [group] companies..." and "...if it was contractually liable to another company within the Harmon Group..." denotes a formal contractual framework, which must involve a right to enforce performance. The case of Ballast Nedam, to which he refers, states as Case-5/97 (quoted in Harmon at paragraph 149) is founded on the same element of enforceability:
"It follows from all the foregoing considerations that a holding company which does not itself carry out works may not be precluded for participating in procedures for the award of public works contracts...if it shows that it actually has available to it the resources of its subsidiaries necessary to carry out the contract..."
That dictum clearly infers, in my view, that enforcement of delegated works, either by formal sub-contract, or by control of the subsidiary group companies, is a necessary constituent of the principle. That is far from being the case here. As I have already observed, one wonders what comfort (from this contract, not including any collateral contract) the defender would have from this contract that any breach would be remedied or compensated.

115.     In these circumstances, the pursuer has failed to demonstrate a relevant claim for the group company losses, and has failed to demonstrate title to sue for even hypothetical losses.

Subsidiary issues

116.     The pursuer makes two further propositions:

117.     The sixth proposition is that where there is a prima facie case on the issue of breach of procurement rules, the economic operator is entitled to be heard. In my view, this proposition goes a step too far - this proof is about whether the pursuer can qualify as an economic operator in the first place. There can be no prima facie case of breach until that is established. It is also not established that the defender has committed any breach, standing the apparently confused and misleading information contained in the tender documentation.

118.     The seventh proposition is that, if there is doubt about the status of "economic operator", the correct course is for a reference to the European Court, under chapter 38 of the Sheriff Court Ordinary Cause Rules. That may be true, but as discussed above I have not been able to identify such doubt. In any event, domestic remedies should always be exhausted before a reference is made.

119.     None, then, of these propositions are ones which can I accept in isolation, and none diverts from what is the central question, as the seventh proposition foreshadows - whether the pursuer is an economic operator which qualifies for damages under the 2006 Regulations.

120.     For the foregoing reasons, the pursuer cannot bring itself under the definition of economic operator, and cannot demonstrate any risk of loss. It therefore has no relevant claim under the 2006 Regulations. It has no title or interest to sue, as it is not an economic operator, and would not suffer any loss.

121.     It follows that the action must be dismissed. I will arrange for the matter to be put out for discussion of expenses. If parties are able to agree matters, they should contact the court and the matter can be dealt administratively without appearance.