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Traffic Signs and Equipment Ltd & Anor, Re Judicial Review [2012] NICA 18 (12 June 2012)

    Neutral Citation No [2012] NICA 18 Ref: GIR8518
    Judgment: approved by the Court for handing down Delivered: 12/06/12
    (subject to editorial corrections)*    


    Traffic Signs and Equipment Ltd and David Connolly's Application (Leave Stage) [2012] NICA 18
    Before: Morgan LCJ, Girvan LJ and Coghlin LJ

    GIRVAN LJ (delivering the judgment of the court)


    [1] In 2010 the Department of Regional Development ("the respondent") awarded Traffic Signs and Equipment Limited ("TS") two out of twenty one advertised contracts for the supply and delivery of permanent and temporary traffic signs and sign posts. TS instituted proceedings in the Queen's Bench division on the commercial side against the respondent claiming that the procurement process leading to the award of the twenty one contracts had in several respects breached the Public Contracts Regulations 2006 ("the Regulations").

    [2] Weatherup J as the trial judge in those proceedings upheld one aspect of TS's challenge to the procurement process. The court set aside the decision to award three of the contracts which the court found TS would have been awarded in addition to the two which it had been awarded if different award criteria had properly applied in the competition.

    [3] The respondents subsequently entered into fifteen of the remaining eighteen contracts. TS and David Connolly ("the second applicant"), a director and shareholder in TS, sought leave to apply for judicial review of the respondent's decision to enter into those fifteen contracts. Weatherup J refused leave to apply for a judicial review.

    [4] The applicants renew their application for leave to apply for judicial review of the decision to let the fifteen contracts and further or in the alternative appeal against the decision to refuse leave to apply for judicial review.

    [5] Mr Aiken appeared with Mr O'Donoghue QC on behalf of the applicants. Mr Hanna QC and Mr McMillen QC appeared for the respondent. The court is indebted to counsel for their full and detailed written and oral submissions.

    Factual Background

    [6] In April 2010 instructions were made available to select contractors for twenty one contracts for the supply and delivery of permanent and temporary road traffic signs and signposts. The twenty one contracts were described as schedules. The tenderers were entitled to bid for one or more or all of the schedules. The evaluation criteria specified that price was to have a weighting of 60% and quality of service a weighting of 40%. The outcome of the competition was a decision dated 21 July 2010 made by the respondent to award two contracts to TS, one contract to a firm described as Hursts and eighteen contracts to a firm described as PWS.

    [7] TS challenged that outcome on the ground that it had been made in breach of the Regulations on a number of grounds. In his judgment in the civil proceedings given on 4 February 2011 Weatherup J categorised the grounds into three headings.

    (a) Complaints of discrimination and bias relating to the valuation panel.

    (b) Complaints relating to the price/quality split.

    (c) Remaining complaints of alleged manifest error.

    The court rejected the challenge on all the grounds save on the ground relating to the price/quality split. It found that the respondent acted unlawfully in determining the price/quality split at the ratio of 60% to 40%. In previous competitions percentages lower than 40% had been allocated to quality. TS submitted that a split previously used of 80:20 would have been more appropriate. The specific breach identified was described at paragraph [66] of the judgment:-

    "Given the history of the Traffic Signs contracts . . . the final adoption of a 40% measure of quality requires explanation and justification . . . the adoption of the 40% quality measure does not accord with the obligations of objectivity and transparency."

    It was noted at paragraph [67] that a choice of 40% may have been justified but that the respondents had failed to undertake a proper analysis to determine where the balance should lie.

    [8] At paragraphs [74] to [77] of his judgment Weatherup J discussed the question of remedies. Regulation 47I provides that where the court is satisfied that a decision is in breach of a duty under the Regulations the court may set aside the decision or action concerned, it may order the contracting authority to amend any document or it may award damages to an economic operator who has suffered loss or damage. The judge in the exercise of his powers under regulation 47I of the Regulations ordered the setting aside of the respondent's decisions to award three specific contracts identified as contracts that TS would have won (in addition to the two that they did win) if the price/quality apportionment had been 80:20 rather than 60:40. The court did not set aside decisions of the respondent in respect of the other eighteen contracts. A stay in respect of the carrying into effect of the Department's decision to let contracts arose by virtue of the Regulations and continued until the expiry of the appeal period following the judgment. TS did not bring an appeal and the statutory stay thus ceased. Three of the eighteen remaining contracts would have been awarded to Hursts had the 80:20 ratio been applied. These were not set aside because Hursts had not issued proceedings to enforce the respondent's duties under the Regulations and TS had suffered no loss as a consequence of breach of the Regulations affecting the three contracts.

    [9] On 24 March 2011 solicitors on behalf of the second named applicant wrote a letter to the respondent requesting a decision in relation to the remaining eighteen contracts indicating that if the respondent had let the contracts the second named applicant might embark on litigation to review that decision. The respondent's solicitors replied to indicate that fifteen of the eighteen contracts were let by letters dated 21 March 2011. Three contracts had been set aside and the three contracts that would have been awarded to Hursts in the 80:20 price/quality ratio were not let. Those six contracts became the subject of a fresh procurement competition.

    Application for leave to apply for judicial review

    [10] On 20 June 2011 the applicants sought leave to apply for judicial review of the respondent's decision to let the remaining fifteen contracts. The grounds relied on in the Order 53 statement alleged that:-

    1. The fifteen let contracts were tainted by the same unlawfulness as the decisions that were set aside.

    2. The award of the fifteen contracts arose from a process adjudged to be unlawful and thus ultra vires.

    3. The letting of the fifteen contracts was in breach of EU law, in particular the Public Sector Directive and the principles of objectivity and transparency.

    4. The decision to let the fifteen contracts arose from a process to be adjudged to be unlawful and was Wednesbury unreasonable.

    5. The decision to let the fifteen contacts breached the legitimate expectation of the applicants that the award of Traffic Sign contracts would only take place after a lawful tender process.

    The judgment in the lower court

    [11] Weatherup J in his judgment given on 14 September 2011 proceeded on the basis that, following the approach outlined in paragraph [77] of the judgment in R (Chandler) v. Secretary of State for Children, Schools and Families [2009] EWCA Civ 1011, a non-economic operator such as Mr Connolly may have standing to apply for a judicial review even if that applicant is not the exceptional type of claimant with whom the court was concerned in R (The Law Society) v. Legal Services Commission [2007] EWHC 1848. The non-economic operator might bring judicial review to prevent non-compliance with the Regulations where he is not himself an economic operator who could pursue remedies under Regulation 47. The primary remedy was that which is available under Regulation 47.

    [12] The judge distinguished the facts of Chandler. In that case there had not been any proceedings under Regulation 47 whereas in the subject case there had already been a review by the court as to whether there had been an unlawful act. He was of the view that if there is a statutory scheme to regulate activity and statutory remedies are provided judicial review should not displace the statutory scheme. He considered the applicant was in effect making a collateral challenge to the judgment in the civil proceedings in which a breach of the Regulations had been found. While Mr Connolly was a non-economic operator he was, as a 50% shareholder and director, for practical purposes TS. The relief that was sought was that which was not achieved under the Regulations. The application was in essence a form of impermissible satellite litigation. Weatherup J refused the applicant's leave to apply for judicial review.

    The parties' respective submissions

    [13] Mr Aiken contended that the single procurement process intended to award twenty one contracts was conducted unlawfully and in breach of the Regulations. The award of the fifteen contracts was ultra vires the respondent. Under the Regulations the judge had a discretion as to the remedy to be granted. It would have been arguably difficult to challenge on appeal the exercise of judicial discretion in the civil proceedings on the remedy granted. The unlawfulness of the act of letting the contracts was a new event arising after the conclusion of the civil proceedings. By exercising its discretion and giving a particular remedy the court could not confer lawfulness on a process found to be unlawful. The judge in the civil proceedings had not declared it lawful to award the eighteen contracts which were not set aside. Counsel contended that the interplay between public procurement challenges under the Regulations and judicial review is a matter of public importance and should be amenable to a judicial review.

    [14] Counsel relied on the case of Chandler as authority that a non-economic operator such as the second named applicant could obtain relief if he could demonstrate sufficient interest in compliance with the public procurement regime in the sense that he was affected in some identifiable way. It was further contended that an economic operator should have similar access to judicial review so as not to be in a less favourable position. Even if this were not the case the second named applicant had a sufficient interest separate from that of TS.

    [15] Mr Hanna QC in resisting the application for leave stressed the special nature of claims arising out of breaches of public procurement legal requirements. Such claims have the nature of claims for a species of statutory tort. The Regulations give rise to a special statutory regime and statutory remedies. Where a contract is let in breach of any public procurement requirement the contract cannot be described as the outcome of an ultra vires act devoid of legal effect. In this case in the civil proceedings the court had fashioned a remedy to do justice between the parties. TS had not challenged that remedy on appeal as it could have done. The judge's conclusion was that if the apportionment of price to quality had been 80:20 rather than 60:40 there would have been no breach of the requirements of public procurement law. In that event the outcome of fifteen of the twenty one contracts would not have been different. The remaining three contracts would not have been awarded to TS but to another party who had not brought a challenge under the regulations. It was for that reason that the judge declined to set aside the decision of the Department to award the remaining eighteen contracts. Even if they had been awarded TS would not have suffered any loss or damage as a consequence of the breach as found by the judge.

    [16] Counsel pointed out that by virtue of Regulation 47G the continuation of the proceedings at first instance prevented the respondent from entering into any of the contracts because the proceedings effected a stay on entering into a binding contract. This stay remained effective until the expiry of the appeal period after the judge's decision. There had been no appeal and the stay thus ceased. On 21 March 2011 the Department entered into 15 of the contract with the successful tenderer in each case. The six contracts in respect of which the outcome would have been different on the 80:20 split were not let and became the subject of fresh procurement proceedings. However, it was important to bear in mind that the decision to award the contracts that were let was in effect made on 21 July 2010. It was that decision which was the subject of the stay. The contracts in question have now fully operated since 21 March 2011. Such private contracts could not be the subject of quashing in public law proceedings. The claim for judicial review was in any event out of time.

    [17] Mr Hanna contended that the second named applicant could not demonstrate a separate right to bring judicial review proceedings in respect of the procurement decisions he was impugning. His financial and economic interests were parasitic on those of TS in the sense that if any alleged breach of the Regulations had a financial or economic impact on the second named applicant it was because he was a shareholder of TS. He has no other legal interest in the proceedings. On the evidence it is clear that TS had suffered no loss (a point not resisted by Mr Aiken) and the second named applicant had no financial interest to protect, quite apart from the argument that his claim is wholly dependent on the viability of TS's claim.


    [18] In the civil proceedings before Weatherup J TS asserted breaches by the respondent of the duty under Article 47A of the Regulations owed by the respondent to TS as an economic operator to comply with the provisions of the Regulations. Regulation 47C provides that a breach of the duty owed in accordance with Regulation 47A is actionable by an economic operator which in consequence suffers or risks suffering loss or damage. Article 47C(2) provides that such proceedings for that purpose "must be started in the High Court and Regulations 47D to P apply to those proceedings." Those Regulations thus include Regulation 47I.

    [19] Regulation 47I covers situations where the court is satisfied that there was a breach of the Regulations and the relevant contract or contracts have not been entered into. TS's case fell within the provisions of Regulation 47 I(2) and (3) which provide:-

    "(2) In those circumstances, the court may do one or more of the following:-
    (a) order the setting aside of the decision or action concerned;
    (b) order the contracting authority to amend any document;
    (c) award damages to an economic operator which has suffered loss or damage as a consequence of the breach.

    (3) This regulation does not prejudice any other powers of the court."

    It is thus clear that the court has a wide power to mould the appropriate remedies to the circumstances of the case. Its task is to impose a remedy to which the economic operator should be entitled in consequence of the loss or damage that he has suffered or is suffering.

    [20] Weatherup J was satisfied that in consequence of the breach which he found TS had suffered or risked suffering loss or damage in respect of the three contracts which TS would otherwise have won had the price/quality split been 80:20 rather 60:40. These were contracts 17, 18 and 20 in the disputed list of contracts. TS did not challenge that remedial order on appeal.

    [21] English and Northern Ireland law in common with many other legal systems including Roman law recognise the importance of ensuring finality of litigation (rei publicae interest ut sit finis litium), of protecting parties from multiple claims in relation to the same dispute (nemo debt bis vexari) and of avoiding conflicting decisions between courts. While the term res judicata is loosely used in this context there are different doctrines in play. Under the doctrine of res judicata estoppel are included cause of action and issue estoppel. In addition there is a doctrine of former recovery or merger in judgment. Thirdly, there is what is sometimes called "the extended doctrine of res judicata" and sometimes "implied issue estoppel" based on the court's jurisdiction to control its own process.

    [22] As the court pointed out in Ulster Bank v. Fisher [1999] NI 68 at 75:-

    "The doctrine of former recovery or merger in judgment is based on the principle that any person in whose favour a judicial tribunal of competent jurisdiction has pronounced a final judgment, civil or criminal, is precluded from afterwards recovering before any tribunal a second judgment against the same party on the same cause of action or a second conviction for the same offence. A plea of this nature (former recovery in civil actions and autrefois acquit in criminal) differs from res judicata estoppel in two ways. Firstly, the latter prevents contradiction, the former reassertion. Secondly, in the case of estoppel the proposition of law or finding of fact declared by or necessarily involved in the res judicata cannot be controverted. In the case of former recovery what is not allowed is a second action for relief previously granted or refused. In the case of former recovery the theory expounded in Coke's time was that any cause of action which results in a judgment is merged in the judgment and disappears as an independent entity, the judgment being of a higher nature than the cause of action (transit in rem judicatam)."

    [23] In the case of res judicata estoppel the classic statement of the principle of cause of action estoppel is stated by Diplock J in Thoday v. Thoday [1964] P181 at 197 in which he stated that cause of action estoppel is an estoppel which "prevents a party to an action from asserting or denying as against the other party the existence of a particular cause of action the non existence or existence of which has been determined by a court of competent jurisdiction in previous litigation between the same parties."

    [24] The classic statement of the principle of issue estoppel is by Coleridge J in R v. Hartington Middle Quarter Inhabitants [1855] 4 E and B 780 at 794:-

    "The judgment concludes not merely as to the point actually decided but as to a matter which it was necessary to decide and which was actually decided as the ground work of the decision itself though not then directly the point at issue and is conclusive evidence not merely of the facts directly decided but those facts which are necessary steps in the decision in the sense that they are so cardinal to it that without them it cannot stand."

    [25] The extended doctrine of res judicata emerges from the authorities such as Henderson v. Henderson [1843] 3 Hare 100 at 114 to 115:-

    "The plea of res judicata applies, except in special cases, not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment but to every point which properly belonged to the subject of the litigation and which the parties, exercising reasonable diligence might have brought forward at the time."

    The High Court of Australia in Port of Melbourne Authority v. Anshun Property Limited [1981] 147 CLR 589 at 603 stated:-

    "There will be no estoppel unless it appears that the matter relied upon in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would have been unreasonable to rely on a matter if having regard to the nature of the claim and its subject matter it would be expected that the party would raise the issue and thereby enable the relevant issue to be determined in the one proceedings."

    [26] TS's attempt to litigate in the proposed judicial review proceedings issues which were or should have been before Weatherup J in the civil proceedings falls foul of both the narrower and wider principles of res judicata and of the doctrine of former recovery. Mr Aiken asserted that TS would have had difficulty calling into question the exercise of the judge's discretion as to remedies in the civil proceedings under Regulation 47I and accordingly there was no point appealing the decision. This argument, in reality, asserts that an economic operator who pursues a claim under the Regulations and obtains relief which he considers is too narrow is entitled to start fresh proceedings to seek relief to which the first court has held that he is not entitled. This is a clear example of an impermissible attempt to make a collateral attack on a binding and final decision not challenged on appeal. It was open to TS to seek to persuade the Court of Appeal that Weatherup J erred in restricting the remedy available to TS. Mr Aiken's contention that the Department acted ultra vires and that the entire procurement process should have been set aside was an issue he was fully entitled and able to assert before the Court of Appeal on appeal from Weatherup J's conclusion that the relief should be fashioned as it was. It was a matter so relevant to the subject matter of the civil proceedings that it would have been unreasonable not to rely on it and TS should have been expected to have raised that issue in those proceedings.

    [27] Mr Aiken sought to rely on what was said in Chandler at paragraph 77. Arden LJ at paragraph 77 said:-

    "The failure to comply with regulations is an unlawful act whether or not there is no economic operator who wishes to bring proceedings under regulation 47, and thus a paradigm situation in which a public body should be subject to review by the court. We incline to the view that an individual who has a sufficient interest in compliance with the public procurement regime in the sense that he is affected in some identifiable way but is not himself an economic operator who could pursue remedies under regulation 47 can bring judicial review proceedings to prevent non compliance with the regulations or the obligations derived from the Treaty especially before any infringement takes places . . . He may have such an interest if he can show that performance of the competitive tendering procedure in the Directive or of the obligations under the Treaty might have led to a different outcome that would have had a direct impact on him. We can also envisage cases where the gravity of a departure from public law obligations may justify the grant of a public law remedy in any event."

    [28] Arden LJ's comment was obiter and expressed in tentative terms ("we incline to the view"). The applicant in that case failed on quite separate grounds. The passage in the judgment focused on the locus standi of a non-economic operator. It fully recognises that an economic operator "could pursue remedies under Article 47)." Counsel argued that it should logically follow that if a non-economic operator may pursue the judicial review route an economic operator can be in no worse position. It is unnecessary for this court in a leave application to determine whether there are any circumstances in which an economic operator who has a cause of action under Regulation 47 would be entitled to pursue his claim by way of separate judicial review proceedings although we can see considerable force in Mr Hanna's argument that an economic operator's cause of action is for a form of statutory tort and that an economic operator's claim is one to be pursued by the High Court process envisaged by Regulation 47C(2). TS's application founders on the ground that it is an impermissible collateral attack on an earlier binding judgment.

    [29] Mr Aiken sought to rely on the relevant passage in Chandler as the basis for the argument that the second applicant in his personal capacity was entitled as an interested party to challenge the impugned procurement process. Arden LJ made clear that if a non-economic operator is to have a proper basis for a judicial review challenge he must be affected in some identifiable way. He may be able to show such an interest if he can show that performance of the tendering procedure might have led to a different outcome that would have had a direct impact on him. It has been suggested that Arden LJ's comments that a breach of the Regulations amounts to an illegality in public law are far reaching and that they appear to turn on its head the conventional wisdom that public procurement decisions lack the necessary public element to be amenable to public law (see, for example, James Neill in "Procurement Challenges and the Scope of Judicial Review" 2011 JR 61".) This being a leave application we shall assume that Chandler correctly states the position while recognising that a fuller consideration of the issues may lead to a qualification of that approach. Applying the Chandler approach we agree with Weatherup J's conclusion that while the second named applicant was not someone who could have brought proceedings under the Regulations and could in theory be entitled to bring a judicial review application, nevertheless, he was the effective promoter and director of TS which had litigated the relevant issues in the civil action. The second named applicant, while he may be interested in the outcome of the procurement process, is not a person on whom there has been a direct impact arising from the respondent's decision to let the contracts. He cannot demonstrate any identifiable effect on him arising from that decision. On that basis he has not demonstrated a viable argument that he would be entitled to judicial review relief.

    [30] In the result we affirm the judge's refusal to grant leave and dismiss the appeal.

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