Reclaiming Motion By Salt International Ltd (formerly Nationwide Gritting Services Ltd) Against The Scottish Ministers
| Jurisdiction | Scotland |
| Judge | Lord Justice Clerk,Lady Paton,Lord Menzies |
| Neutral Citation | [2015] CSIH 85 |
| Court | Court of Session |
| Published date | 01 December 2015 |
| Year | 2015 |
| Date | 01 December 2015 |
| Docket Number | CA93/12 |
SECOND DIVISION, INNER HOUSE, COURT OF SESSION
[2015] CSIH 85
CA93/12
Lord Justice Clerk
Lady Paton
Lord Menzies
OPINION OF THE COURT
delivered by LORD CARLOWAY, the LORD JUSTICE CLERK
in the reclaiming motion by
SALT INTERNATIONAL LTD (formerly NATIONWIDE GRITTING SERVICES LTD)
Pursuers and Reclaimers;
against
THE SCOTTISH MINISTERS
Defenders and Respondents:
Act: O’Neill QC; Heggie Alexander
Alt: Clark QC, O’Neill, Solicitor Advocate; Scottish Government Legal Directorate
1 December 2015
Introduction
[1] This reclaiming motion (appeal) concerns an alleged breach by the defenders of the Public Contracts (Scotland) Regulations 2006 when purchasing de-icing salt over the severe weather winters (winters 1 and 2) of 2009/10 and 2010/11. At the material time, the defenders did not consider that the Regulations applied to the transactions. They did not attempt to comply with them. In the action, they concede their applicability, but rely on extreme urgency to justify derogation from the tender procedures otherwise required. The pursuers seek declarators that contracts awarded to six different companies breached the 2006 Regulations in a variety of different ways. They conclude for damages in respect of an alleged consequential loss of profits.
[2] The Lord Ordinary disposed of two preliminary issues in favour of the pursuers, viz. a plea of time-bar raised by the defenders ([2013] CSOH 119) and the allowance of an amendment by the pursuers to the claim for damages ([2014] CSOH 41). Upon the amended pleadings, and following the deletion of part of the damages claim relative to alleged loss of haulage profits, damages were restricted to just over £3m. Neither decision is now subject to challenge; the ground of appeal in relation to time-bar not having been insisted upon at the conclusion of the hearing.
[3] In terms of an Opinion dated 17 October 2014, the commercial judge expressed his intention to find in favour of the defenders. Whilst the extreme urgency in winter 2 was, to an extent, self-created by the defenders, the judge held that the pursuers would not in any event have been successful tenderers. By interlocutor dated 28 October 2014, the judge assoilzied the defenders. He found the pursuers liable for 90% of the expenses. The pursuers reclaim on the basis that the judge erred in his decisions on the merits and damages. They did not insist in their ground of appeal based on the “EU common law” case. The defenders cross-appeal the finding of “self-created” urgency in winter 2. The liability for expenses is challenged, but the judge was not asked to provide written reasons for that decerniture.
Background
[4] The defenders are responsible, in terms of the Roads (Scotland) Act 1984, for the trunk road network. They carry out that responsibility through their agency, namely Transport Scotland. The agency enters into winter maintenance contracts with certain private Operating Companies (OCs) in respect of each of four regions. The contracts require the OCs to deliver a level of service designed to deal with the winter conditions normally associated with the region and to provide such resources as are required to deal effectively with all winter conditions that can be expected to arise. It is for the OCs to provide the resources, including depots, materials, labour and plant, needed to fulfil the contractual obligations. It is thus the OCs that normally procure and provide the de-icing salt. Similar arrangements are put in place by local authorities, who are responsible for the non-trunk road network. Some of the local work may be performed by direct labour organisations.
[5] The winter maintenance contracts will generally have been awarded following upon a tendering process compliant with the 2006 Regulations. They will have been operating for periods of some years. In normal course, there would be no need for the defenders to become involved in the purchase of de-icing salt. That would be for the OCs to organise as part of the contracts or for the local authorities as part of whatever arrangements they had entered into. Because of this, it was the defenders’ view that they did not have to comply with the Regulations. They could use the OCs as a vehicle for any purchases. Whilst, against the backdrop of the operating winter maintenance contracts, that view may be understandable, what happened in fact was different. Because of the exceptional conditions, the defenders set about purchasing de-icing salt themselves in order to deal with what was perceived by them to be an emergency situation, threatening not only the road network but the health and safety of the public. That spirited action, it is accepted, engaged the Regulations. It ultimately prompted the current litigation.
The Regulations
[6] The 2006 Regulations implement the Directive 2004/18/EC (the “Public Sector Directive”) of the European Parliament and Council on the co-ordination of procedures for the award of public supply and services contracts. They specify the procedures to be followed. These require the contracting authority to use the open or restricted procedures prescribed, unless use of the negotiated procedure is permissible. The former procedures involve, in essence, a public tendering process whereas the latter allows the contracting authority to select the particular “economic operator” with which to negotiate. A contracting authority is permitted to use the negotiated procedure, without the prior publication of a contract notice seeking tenders, when the time limits in the prescribed procedures cannot be met:
“(but only if it is strictly necessary) for reasons of extreme urgency brought about by events unforeseeable by, and not attributable to, the contracting authority” (reg 14(1)(a)(iv)).
The time limits for tenders are, in broad terms, respectively at least 52 (reg 15(3) the open procedure, open to all economic operators) or 37 (reg 16(3) the restricted procedure, limited to selected economic operators) days from the publication of the notice, although these periods can be reduced in certain defined circumstances, notably when an electronic form of notice is employed. There is an accelerated restricted procedure involving a minimum 15 day (reducible to 10 day) period for the receipt of tenders (reg 16(6)). The procedures applicable to the evaluation of tenders involve considerations primarily of price, but they also include an assessment of the operator’s economic and financial standing, as well as its technical ability.
[7] The 2006 Regulations specify the remedies for breaches. They implement the Council Directive 89/665/EEC (the Remedies Directive), which requires member states to ensure that remedies are effective. Regulation 47 provides that the obligation on the contracting authority to comply with the Regulations “(1) … is a duty owed to an economic operator”. It provides that a breach of duty is actionable:
“(5) … by any economic operator which, in consequence of the breach, suffers, or risks suffering, loss or damage …”.
Regulation 47A then states that:
“(7) … the Court does not have power to order any remedy other than an award of damages in respect of a breach of the duty … if the contract in relation to which the breach occurred has been entered into …”.
The Commercial judge’s reasoning
[8] In a commendably short and lucid Opinion, the commercial judge made certain critical findings. He rejected the contention that, because the defenders had not relied on it at the time, they could not invoke the extreme urgency provision in regulation 14(1)(a)(iv) (supra). It was for the court to determine the applicability of the regulation in all the circumstances. The judge then addressed each element of the criterion in the regulation which allows the use of the negotiated procedure.
[9] In relation to winter 1, the commercial judge held that, when the defenders had purchased the de-icing salt, the situation had been one of extreme urgency. If, as was about to be the case, the stocks had become exhausted, the roads would have become unsafe and might be rendered impassable. That would cause a risk to public safety. It would have a profound impact on the economy. By January 2010, stocks of de-icing salt were dangerously low across the country. The First Minister had intervened personally to secure a supply from INEOS Enterprises Ltd, a private company with a stock of, in effect, table salt. The situation had been brought about by events, namely unexpected climate conditions. These had been unforeseeable. The long-range weather forecasts had not predicted the early arrival of winter or that it would be exceptionally cold and long lasting. In previous years, the salt bought by the OCs had sufficed.
[10] The lack of salt had not been attributable to the defenders. Once winter had begun, any supplies obtained through the open or restricted procedures would have arrived too late. The defenders’ officials gave evidence that even the accelerated restricted procedure would have taken three months. The use of the negotiated procedure had been strictly necessary because the purchase of the salt had been required to protect public safety and to ensure that the economy did not fail. The commercial judge had been aware that there had been a report in July 2009, which had recommended that highway authorities in England should hold a salt reserve and establish a framework agreement in order to widen sources of supply. A commercial company had also circulated a warning about insufficient salt supplies.
[11] The commercial judge reached the opposite conclusion in relation to winter 2. Although the situation had also been one of extreme urgency caused by unforeseen events, those events had been brought about by the defenders. By this time, the defenders had been aware that the salt supply arrangements were fragile. They ought to have acted sooner and arranged matters in such a way as to be able to hold a tender...
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