CHC Ireland Designed Activity Company v Minister for Transport and Another

• Jurisdiction: Ireland
• Judge: Mr. Justice Twomey
• Judgment Date: 25 July 2023
• Neutral Citation: [2023] IEHC 457
• Court: High Court
• Docket Number: Record No. 2023/680JR

Between

CHC Ireland DAC

Applicant

and

The Minister for Transport

Respondent

and

Bristow Ireland Ltd.

Notice Party

[2023] IEHC 457

Record No. 2023/680JR

THE HIGH COURT

COMMERCIAL

Tender process – Automatic suspension – Balance of justice – Respondent seeking to lift an automatic suspension of the tender process – Whether the balance of justice favoured the lifting of the automatic suspension

Facts: The applicant, CHC Ireland DAC (CHC), was the incumbent provider of aviation services for the life-saving search and rescue work of the Irish Coast Guard under the terms of an existing contract, which was signed between CHC and the respondent, the Minister for Transport (the Minister), on 22nd July, 2010. The existing contract provided for an initial term of 10 years from 1st July, 2012 to 30th June, 2022, with three optional years of extension, allowing the contract to run until 30th June, 2025. The three option years were taken up by the Minister and therefore the existing contract was due to expire on 30th June, 2025. On 31st May, 2023 the Minister communicated to CHC its decision that he had selected the notice party, Bristow Ireland Ltd (Bristow), as the successful tenderer in the competition for the award of the contract pursuant to the Competitive Procedure with Negotiation as provided for in s. 29 of the European Union (Award of Public Authority Contracts) Regulations 2016 (S.I. No. 284 of 2016). On 14th June, 2023, CHC issued proceedings. As a result of Regulation 8(1) of the European Communities (Public Authorities’ Contracts) (Review Procedures) Regulations 2010 (S.I. No. 130 of 2010), the very fact that the proceedings had issued led to the automatic suspension of the tender process and so prevented the Minister signing the contract with Bristow. The proceedings were then admitted to the Commercial Court on 26th June, 2023, on the application of the Minister. One of the many grounds upon which CHC challenged the legality of the tender process and the award of the contract to Bristow was its claim that Bristow’s winning tender was based on an ‘abnormally low tender’. CHC also claimed that the Minister, in reaching his decision, was subject to ‘unlawful political influence’. The Minister’s preliminary application was to lift the automatic suspension.

Held by Twomey J that the balance of justice favoured the lifting of the automatic suspension in the case. Twomey J noted that both parties claimed that lives would be lost if the automatic suspension was lifted/continued. In such a situation, and where the Court could not determine which party was correct, Twomey J held that lifting the suspension preserved the status quo by permitting the Minister to sign the new contract with the winning tenderer, not being forced to sign an extension of the existing contract with the losing tenderer.

Twomey J, in view of the urgency of the case, delivered the judgment in court, so as to hear immediately from the parties regarding any orders which arose as a result of the terms of the judgment.

Application granted.

JUDGMENT OF Mr. Justice Twomey delivered on the 25 ^th day of July, 2023

INTRODUCTION

1 . The law applying to State bodies which put public contracts out to tender is the only area of law where a court injunction is effectively there ‘for the asking’. This is because the mere filing of proceedings by a losing tenderer, in which it challenges the tender for a public contract, triggers an automatic injunction (known as an “automatic suspension”). This automatic suspension prevents the State agency from signing the public contract with the winning tenderer. The injunction/automatic suspension is there ‘for the asking’ in the sense that it arises regardless of the merits of a losing tenderer's challenge to the tender and without any judicial oversight whatsoever – the only condition to be satisfied is that proceedings are filed within a specified time frame of the decision to award the tender.

2 . Not only is it an exceptionally powerful weapon in the hands of any individual or any business that has lost a tender, but it also arises irrespective of the importance or value of the public contract which is being injuncted, e.g the building of public housing, hospitals, schools, vital transport infrastructure or, as in this case, the delivery of the provision of life-saving search and rescue aviation services worth circa €800 million.

3 . Furthermore, where the losing tenderer is also the incumbent provider of services to a State agency, this means that the incumbent has, ‘for the asking’, a means of automatically preventing the signing of a contract with its competitor, while the incumbent remains in place. As the incumbent, it will then be in prime position to financially benefit from the automatic suspension of the tender process, i.e. with the prospect of having its contract continued by the State agency, after its intended expiry date, for the months/years that it takes for its legal challenge to the tender process to be resolved.

4 . The fact that this can give rise to ‘ unsatisfactory’ situations was noted in the English High Court case of Metropolitan Resources v. Secretary of State for the Home Department [2011] EWHC 1186 (Ch) at para. 25. There, Newey J. noted that it is ‘inherently unsatisfactory’ that a State agency ‘should, in effect, be compelled to conclude a contract’ with the incumbent provider of services, who might have lost the tender, simply by virtue of the incumbent provider issuing proceedings against it.

5 . Another way to look at this situation is that the fact that an ‘automatic suspension’ of a tender process is there ‘for the asking’ for losing tenderers, particularly for those who are the incumbent provider of services to a State agency, could in some cases act almost as an incentive to litigate for the losing incumbent.

6 . Where the public contract is one of high value, the incentive for the losing incumbent to litigate may be even greater. This is because the legal costs of losing the challenge to the public contract (if the ‘automatic suspension’ is found to be without merit) may be dwarfed by the financial benefits of any extension of the incumbent's contract beyond its expiry date for the time it takes to resolve the legal challenge and any appeals.

7 . It is perhaps not surprising therefore that, at a time of scarce court resources, a lot of court time is taken up with applications to lift ‘automatic suspensions’. This is because the State agency, if it wishes, which it usually does, to sign the contract for crucial State services with the winning tenderer, is forced to come to court, at considerable expense, to seek the lifting of the automatic suspension. This is such a case.

8 . However, it is important to note that it is not being suggested that the foregoing observations represent the motivation of the applicant and losing tenderer in this case (“ CHC”) to issue proceedings and thereby obtain an automatic suspension preventing the respondent (“ Minister”) from signing a contract (“ New Contract”) with the winning tenderer and third party (“ Bristow”) for the provision of life-saving search and rescue aviation services.

9 . Firstly, similar observations were made by this Court in Glenman Corporation Ltd. v. Galway City Council [2023] IEHC 336 (at para. 35) regarding the fact that the ‘automatic suspension’ constitutes a powerful weapon in the hands of a disappointed losing tenderer.

10 . Secondly, Mr. Robert Tatten (“ Mr Tatten”) on behalf of CHC swore that it did not take lightly its decision to issue the proceedings and thereby claim its automatic suspension (at para. 98 of his affidavit dated 29 ^th June, 2023).

11 . Thirdly, the foregoing observations are of a general nature regarding the legal landscape for State bodies seeking to provide critical services and infrastructure by means of public contracts. Such general observations can never be a determinative factor in these cases, as each case must be determined on its own facts. It is nonetheless important to bear these observations in mind. This is because O'Malley J. has pointed out in the Supreme Court case of Krikke v. Barranafaddock Sustainability Electricity Ltd [2020] IESC 42 at para. 90 that the legal principles which apply to the grant of injunctions (and thus to the continuation/lifting of automatic suspensions of a tender process) ‘ need to be applied in different ways in different cases’. Automatic suspension cases are different in many ways from other cases. Accordingly, where a court is applying the legal test for lifting the automatic suspension, it is relevant to bear this legal backdrop in mind. It is particularly relevant when this Court has to consider what will preserve the status quo pending the trial of the substantive case. Is the status quo preserved by (i) continuing the automatic suspension (which, it must be remembered, CHC got ‘for the asking’), which prevents the Minster signing the contract with the winning tenderer or is the status quo preserved by (ii) lifting the automatic suspension to allow the Minister to sign the contract after a prima facie valid tender process?

“Critically urgent” application

12 . Another important part of the background to this case is the fact that the Minister has claimed that it is ‘ critically urgent’ that a decision be given regarding the lifting of the automatic suspension as soon as possible as it relates to a contract for life-saving services with a value of €800 million over 10 years.

13 . The urgency of the case is illustrated by the fact that it was entered into the Commercial Court on the 26 ^th June, 2023 and the application to lift the suspension of a public procurement process was heard the following week on 4 ^th July, 2023. The hearing lasted a day and this Court was provided with several detailed affidavits and exhibits for its consideration along with case law...