In the recent TCC judgment in Alstom Transport UK Ltd v London Underground Ltd (LUL), Mr Justice Stuart-Smith allowed LUL’s application to set-aside an automatic suspension to its award of a contract for the provision of AC traction motors for Central Line trains. He held that damages would be an adequate remedy should Alstom succeed at trial, it was not unjust to confine it to such remedy, and the balance of convenience required a contract with the winning bidder, Bombardier Transportation (UK) Ltd, to be concluded sooner rather than later. The judge stressed the importance of putting forward credible, detailed evidence to support arguments in favour of the stay; Alstom’s failure to provide plausible evidence, consistent with previous public statements, proved fatal.
Following an ITT in December 2015, LUL’s Evaluation Board in July 2016 shortlisted 3 bidders including Alstom and Bombardier, having openly recognised that Bombardier had not met its Stage 3 scoring thresholds. It recommended that Bombardier proceed to the final stage “in order to maintain tender competition”. In March 2017, LUL made a contract award to Bombardier. Alstom immediately challenged this, issuing proceedings in May 2017, triggering the automatic suspension on LUL entering into the contract. Central to the outcome will be the interpretation of provisions in the ITT allowing LUL a degree of discretion as to the conduct of the tender process. This will be determined at trial. The Judge made no decision on that and it is possible, indeed Alstom argued very probable, that Alstom will succeed at trial.
Adequacy of damages / balance of convenience Stuart-Smith J rejected the authorities cited by Alstom’s counsel, each of which related to complexities not present on the current facts. He held that, if successful at trial, there should be no difficulty formulating a claim for loss of profits given the evidence available from various sources including Alstom’s rates of profit on past contracts, its own projections for the LUL contract, and expert and lay evidence available about the outcome had Alstom been awarded the contract; the wasted tender costs had already been incurred.
Crucially, Alstom argued that losing the LUL contract “will have a huge impact on its centre of expertise in traction technology” and an irreparable “loss of competitive edge”. It argued that its traction centre in Preston was highly likely to close early and a new facility in Widnes, opening June 2017, would be severely impacted with knock-on effects for regeneration in the local area. Stuart-Smith J was highly critical of the supporting evidence which was “surprisingly lacking in detail”, “partial”, “inherently implausible” and “barely credible” – contrary to its submitted evidence, Alstom’s accounts and public statements confirmed that Widnes was a substantial long-term investment in specialist resource; there was no evidence that any part of the LUL contract would have been performed there, and only 12 out of 180 Preston staff were envisaged to be allocated to it; it was unable to explain what work the Preston site was doing given Alstom had undertaken no traction work since 2014; he also held that a market-leading company would not credibly sacrifice specialist resource and exclude itself from future profitable core business work. Closing a specialist centre having lost the LUL contract was, in the judge’s view, “a serious case of cutting off the nose to spite the face”. In any event, if it won the case, Alstom would receive substantial damages to plug any funding gap left by losing the LUL contract. In terms of “competitive edge”, the relevant expertise would remain within Alstom itself even if employees left or were dismissed; Alstom was part of a wider global market-leading group and would not be precluded from tendering for similar contracts in the future; the failure to win the LUL contract would not determine the outcome of future tenders. In all above respects, Alstom failed to provide credible evidence to the contrary. Further, it was “hopelessly vague” of Alstom to assert that the Widnes area would be adversely impacted when there was no evidence any of the contract work was ever to be carried out there.
There was no public interest in maintaining the suspension. Whilst LUL may end up paying public money twice, namely the contract price to Bombardier and damages to Alstom, that possibility is an integral part of the Regulations and not in itself reason for maintaining the stay. There was no suggestion of “even a whiff of corruption” about the tender process, which would have tended towards maintaining the stay. Nor did the existence of delays by LUL to the procurement process justify an “insignificant” further delay by maintaining the stay – there was good evidence from LUL that the Central Line systems are unreliable and the motors need to be replaced sooner rather than later, and Alstom had provided no evidence that the litigation could be determined in a timescale avoiding “significant and material delay” to implementing that work.
The judge acknowledged that aspects of the case would be “grist to Alstom’s mill at trial”, but the strength of Alstom’s case was not disproportionate to that of LUL. He concluded that damages would adequately compensate Alstom if it won the case, and the balance of convenience lay in allowing the contract to be concluded.
Whilst reflecting settled law, the decision provides a useful reminder of the factors a court will consider on an application to lift an automatic suspension (and on the granting/maintenance of injunctive relief generally), the burden a claimant will face in resisting an authority’s attempts to lift such a stay, and critically, the importance of providing credible and plausible evidence to support arguments that damages would not be an adequate remedy – and making sure such evidence is consistent with previous public statements.
(See also previous e-alert in respect of Alstom’s specific disclosure application heard on 26 May 2017).
Bill Gilliam 0113 209 2442