Killaree Lighting Services Ltd v Mayo County Council

• Jurisdiction: Ireland
• Judge: Ms. Justice Hyland
• Judgment Date: 23 January 2025
• Neutral Citation: [2025] IECA 7
• Court: Court of Appeal (Ireland)
• Docket Number: Record No.: 2024/122

Review of the Award of Public Contract

In the Matter of a Public Procurement Review Application Pursuant to Order 84A of the RSC

In the Matter of a Review Under the European Communities (Public Authorities' Contracts) (Review Procedures) Regulations 2010 As Amended

Between

Killaree Lighting Services Limited

Appellant

and

Mayo County Council

Respondent

and

Electric Skyline Limited

Notice Party

[2025] IECA 7

Faherty J.

Allen J.

Hyland J.

Record No.: 2024/122

THE COURT OF APPEAL

Challenge to decision by Mayo council - judicial error - case remitted

Facts: Killaree Lighting Services ('Killaree') challenged the decision by Mayo Council to exclude their tender in an award process for a public lighting contract on the basis that it was exceptionally low. The High Court concluded that the Council did not err in this decision. Killaree appealled this juidgment on fifteen grounds including; (i) the trial judge erred in law by failing to consider and/or give appropriate weight to the legal finding that the Council's letter did not constituted a standstill letter within the meaning of the Remedies Regulations and erred in law and ino fact by not giving appropriate weight to the legal consequences; (ii) the Council had concluded the contract prior to the commencement of the standstill period.. This was in breach of the Regulations; (iii) the trial judge erred in concluding Killaree breached Article 5(1) breach and therefore it was not subject to the clear scheme of remedies in the Remedies Regulations; (iv) the trial judge erred in law in concluding that Killaree had not been deprived of a remedy by the failure to provide a standstill period; (v) the trial judge erred in his use of discretion; (vi) the trial judge erred in concluding that the issue of a civil penalty could not be determined without further pleadings.

Mayo Council sought to uphold the trial judge's decision and argues the trial judge was not making a pleadings point in isolation, but rather explaining that the exercise required to impose a fine in accordance in Regulation 13(1) could not be carried out without further information. The Judge held that in the circumstances, Killaree cannot be precluded from seeking a civil penatly. The Court held that Killaree was successful in certain grounds of its appeal, and therefore the Order of the High Court will be varied. The matter will be remitted to the High Court solelt on othe question of a civil penalty where directions will be given including on pleadings, evidence and submissions.

Case remitterd

UNAPPROVED

NO REDACTION NEEDED

JUDGMENT of Ms. Justice Hyland delivered on 23 ^rd day of January 2025

Summary of Findings

1 This judgment concerns a challenge to a decision by the respondent, Mayo County Council (the “ Council”), to exclude the tender of the appellant, Killaree Lighting Services Ltd. (“ Killaree”) in an award process for a public lighting contract on the basis that the tender submitted was abnormally low. The contract had been concluded with another tenderer in circumstances where it was later found by the High Court – and not appealed – that the Council had breached its obligation to send a standstill letter to Killaree.

2 The High Court's conclusion that the Council did not err in its decision to exclude Killaree's tender is upheld. Killaree argued that the Council had impermissibly identified provisions of the request for tender (“ RFT”) in its correspondence with Killaree. But a contracting authority is quite entitled to refer to extracts from the RFT that are potentially relevant, including the rules on fixed inclusive value and balanced tenders, as well as those on abnormally low tenders.

3 Next, Killaree argued the Council was obliged to accept its explanation for the abnormally low tender i.e. that it had performed other contracts satisfactorily based on the same pricing approach. Article 69 of the Procurement Directive specifies that contracting authorities shall require economic operators to explain the price or cost where tenders appear to be abnormally low. The contracting authority must assess whether a tender is reliable and will not impair the proper performance of the contract ( Tax-Fin-Lex v Ministrstvo, C-367/19, EU:C:2020:685) and/or is genuine ( Veridos, C-669/20, EU:C:2022:684). To do that, it must understand why the prices that appear at first glance to be abnormally low are justified. The Council was entitled to conclude that the apparent completion of other contracts by Killaree using a similar pricing approach did not satisfactorily account for the low level of price/costs in the instant tender.

4 Nor can Killaree succeed on its argument that there was no entitlement to treat the tender as abnormally low because the tender total – a fortiori, a notional tender total as opposed to the constituent parts – was not abnormally low, and the Council were precluded from looking beyond the tender total to the constituent parts of the tender. First, the weight of case law is against that proposition, particularly European Dynamics Luxembourg SA v European Union Agency for Railways, T-392/15, EU:T:2017:462 and Commission v Sopra C-101/22P, EU:C:2023:396. Second, the wording of Article 69(1) TFEU draws a distinction between abnormally low costs and abnormally low price, suggesting that a contracting authority may look at either price or costs, or both. Third, a purposive interpretation of Article 69 undermines Killaree's argument. The objective of assessing whether a tender is abnormally low is to ensure that the tender is genuine, reliable and will not impair the proper performance of the contract. To restrict a contracting authority from looking behind the tender total, despite its concerns about the constituent parts, would significantly limit the scope of the inquiry. Some tender totals will be so low they will inevitably alert the contracting authority to a potentially abnormally low tender. But tenders requiring hundreds or thousands of items to be priced, such as the present tender, may contain abnormally low pricing in some areas but not in others. Killaree's construction of Article 69 would effectively prevent a contracting authority from conducting the necessary assessment of such tenders.

5 Finally, Killaree asserts that there was a failure to follow proper process by the Council because it launched an inquiry into whether its tender was abnormally low without comparing it with other tenders, despite indicating it would take such a course in the clarification document issued by the Council. Properly interpreted, the clarification document does not commit the Council to such a course. The RFT is the primary document: the clarification document is subsidiary to the RFT and must be read in the light of it. There is no conflict or ambiguity between the clarification and the RFT. The RFT does not limit the contracting authority to launching an inquiry only into those tenders that are abnormally low compared with other tenders.

6 Killaree also alleged a failure to give adequate reasons explaining the decision to exclude it from the tender process. Having regard to Directive 2014/24 of the European Parliament and the Council of 26 February 2014 on public procurement (the “ Procurement Directive”) and Directive 2007/66/EC of the European Parliament and of the Council of 11 December 2007 (the “ Remedies Directive”), as well as relevant case law, it is clear that the contracting authority must give the tenderer an opportunity to justify its price and/or cost, must engage with the justification given by the tenderer, and the tenderer must be able to understand why the contracting authority regards the tender as abnormally low following the exchange between them. When considering if those requirements have been met, the entire context must be considered, including the RFT. Where Killaree sought to justify its tender, inter alia, not by arguing that the prices represented the real cost, but on the basis that they were included in other prices or that the items were unnecessary, that justification breached the express provisions of the RFT. In the circumstances, Killaree must be taken to know why the justification offered by it was unacceptable. The Council was accordingly entitled to provide reasons in a summary format.

7 In respect of the consequences of the Council's admitted failure to send the standstill letter required under Regulation 5(1) of the European Communities (Public Authorities' Contracts) (Review Procedures) Regulations 2010 ( S.I. No.130 of 2010) (the “ Remedies Regulations”), Killaree argues that the trial judge erred in refusing to make a declaration of ineffectiveness (either mandatory or discretionary) or impose a civil penalty on the Council. A mandatory declaration of ineffectiveness of a contract is an unusually intrusive remedy and affects the rights of parties other than the contracting authority and the disappointed tenderer, notably the successful tenderer. Regulation 11(2) provides for a mandatory declaration of ineffectiveness in cases of Regulation 5(1) infringement where (a) the infringement has deprived the tenderer of the possibility of pursuing pre-contractual remedies and (b) is combined with an infringement with the Regulations that has affected the chances of the tenderer to obtain the contract.

8 Contrary to the conclusions of the trial judge, I have concluded Killaree was deprived of the chance to seek pre-contractual remedies because of the failure to send a standstill letter. The letter Killaree received indicated it was being excluded, but did not make it clear that the Council had decided the identity of the successful tender and the clock had started ticking for the purposes of the standstill period. By the time Killaree issued the proceedings, the contract had been signed. The Council's failure to send a standstill letter deprived Killaree of the chance to...