Ireland: Allpay Limited v Northern Ireland

Last Updated: 16 October 2015
Article by William Curry and Pat Mc Govern

Introduction

The High Court of Northern Ireland applied the American Cyanamid test (serious issue to be tried; monetary damages inadequate; and balance of convenience) and granted an order lifting the automatic suspension thereby allowing NIHE to conclude the contract. If the challenger ultimately won (after full trial – at a later date) it could obtain a remedy in monetary damages. The Court had regard to the public interest in such public contracts being awarded without further delay if (as held to be the case here) monetary damages would compensate adequately a challenger which might succeed ultimately.

The Court considered that there was no reasonable suspicion that the bid of Paypoint, the first placed bidder, was abnormally low or that it might not be able to perform its obligations if it won the contract. The Court held that the bid was in any case "at market rates". It concluded that, even if it was wrong on those points, there was no general obligation on an awarding authority to investigate such a bid.

Facts

The defendant, Northern Ireland Housing Executive (NIHE), ran a procurement competition lots 1 and 3 of which were to provide a payment connection network and provision of a secure web payment service. This was in connection with processing payments to NIHE in connection with its public housing function.

NIHE advised the plaintiff Allpay of an intention to award lots 1 and 3 to Paypoint. Allpay issued proceedings challenging this. NIHE sought to set aside the "automatic suspension" under Regulation 47H(1)(a) of the Public Sector Regulations 2006 (as amended). The automatic suspension (operative automatically once Allpay had issued its proceedings) prevented the awarding authority (here NIHE) from concluding a contract with the winning bidder until the trial of the matter or until the High Court ordered otherwise at an earlier date. NIHE applied to the High Court to lift the automatic suspension at interlocutory stage pending full trial later.

At the heart of the matter was the fact that NIHE required tenderers to offer customers a "Maximum Transaction Value" (MTV) for all methods of payment (cash, credit cards, debit cards and others) no lower than £220. Allpay sought clarification as Paypoint, a rival bidder, had its own network (which Allpay proposed to use) and was only prepared to permit Allpay a MTV of £200 when using that network. Allpay complained but NIHE rejected the complaint. Allpay also complained that the bids were abnormally low and ought to have been excluded by NIHE.

Judgment

The High Court (Horner J) held that NIHE had made clear that it required the minimum MTV as stated. Moreover, Allpay was not obliged to use the Paypoint network and the defendant NIHE did not disqualify the plaintiff on that count but rather merely did not award any marks to Allpay for the Paypoint network. Allpay was held to have no ground for complaint.

The Court held that the tender documents for lot 1 could have been more clearly worded but that was not the test. The Court considered that the claim confused the difference between average and maximum. If the plaintiff had been in any doubt whether a tenderer had to offer a MTV greater than £220 that would have been dispelled by a clarification issued by NIHE. The Court considered that the stance taken by the plaintiff was opportunistic and the plaintiff knew exactly what NIHE had in mind, namely, that the required MTV applied to each cash payment and any other payment which any reasonably well informed and normally diligent ("RWIND") tenderer intended to include in its offer. Horner J held that there was no serious question to be tried on that issue.

American Cyanamid

The Court applied the American Cyanamid [1] test, deeming it appropriate in the circumstances and compatible with EU Law. It held that, in any case, damages would be an adequate remedy for Allpay including because nothing had been put forward which suggested to the contrary. The Court was capable of assessing damages if necessary. Moreover, this was not a case involving a claim for reputation damage which might be difficult to assess. The balance of convenience lay in favour of lifting the automatic suspension. There was a public interest in permitting the contract to be awarded rather than delayed further and it was not good administration to delay further a public contract such as this. It would also be unfair that Paypoint would have to subsidise the litigation by being required to provide its services to the defendant under the old contract which attracted lower payments.

Abnormally Low Bids

As to the question of abnormally low bids, the Court ruled that there was no serious issue to be tried because no suspicion had been aroused that the bids of Paypoint were abnormally low and that both bids in respect of lots 1 and 3 were in line with prices which Paypoint currently charged and thus were in line with "market rates". Furthermore, the Court concluded that there was no general obligation on NIHE to carry out an investigation into those bids. The relevant legislative provisions were designed to avoid contracting authorities rejecting low tenders where there was a good reason for the tender being low. The Court did not have to determine such an issue in this case. Accordingly, damages would be an adequate remedy for the plaintiff if it ultimately succeeded.

Result

The Court lifted the automatic suspension thus leaving the plaintiff to pursue a claim in monetary damages and NIHE free to award the contract.

Comment

The case is a classic application of the American Cyanamid principles on the question of lifting the "automatic suspension" at interlocutory stage. It also illustrates the importance which the Courts attach to the public interest in public contracts being awarded.

The Court affirmed its view that there was no general obligation on an awarding authority to investigate an allegedly abnormally low bid.

Footnote

[1] American Cyanamid Company v Ethicon Limited [1975] AC 396

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.

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