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13 March 2018
The courts have ruled that a successful tenderer who raises unreasonable objections to an application to vary a confidentiality ring in a public procurement dispute may be liable for the claimant's costs of the application, even though not a party to that dispute.
An important point of principle in procurement cases concerning the potential liability of a non-party to costs has been recently considered by the court. The decision follows on from an earlier judgment (Bombardier Transportation UK Limited v Merseytravel  EWHC 726 (TCC)) where the claimant, Bombardier, successfully applied to vary the terms of a consent order to widen a confidentiality ring into which the non-party's tender documents had been disclosed.
The decision means that successful tenderers wanting to object to the use and adaptation of confidentiality rings in procurement challenges should consider very carefully the extent to which they ought to raise objections. Ill-founded objections run a material risk of being sanctioned in costs by the court.
Bombardier brought a number of claims against Merseytravel relating to the conduct of a procurement process leading to the award of a suite of contracts to supply new rolling stock valued at c £460m together with related works and services. The successful tenderer was Stadler Bussgang AG (Stadler).
The parties, together with Stadler, agreed the terms of a confidentiality ring into which a number of Stadler's documents were disclosed, together with documents relating to the evaluation of Bombardier's and Stadler's bids. In the usual way, the individuals permitted to review those documents all gave confidentiality undertakings. The terms of these arrangements were recorded in two consent orders.
Following a hearing in April 2017, Bombardier was granted permission to amend an earlier consent order in respect of the disclosure of what was termed Highly Sensitive Documentation. Merseytravel adopted a neutral stance on the application. Stadler opposed it. The hearing followed a series of exchanges between the parties in which Bombardier sought to proceed by way of consent to its proposed adaptations to the consent orders, to which Stadler was ultimately not prepared to agree.
Stadler's opposition to the application rested squarely on its allegation that Bombardier might be seeking to (deliberately) misuse confidential information to gain an improper competitive advantage in future tender competitions. It sought to characterise Bombardier's application as a "tactic" in a witness statement put before the court, although Stadler did not participate in the hearing or otherwise seek to make that point good – a point taken into account by the court when dismissing Stadler's allegation as unjustified and unsupported by any evidence.
On the issue of costs, the starting position was that Bombardier had been successful and was therefore entitled to its costs in principle. The court held that Merseytravel were not liable for those costs on the basis that they remained neutral to the application and were simply in attendance to protect Stadler's interests in their capacity as the contracting authority. By contrast, Stadler were found to be prima facie liable for Bombardier's costs on the basis that their objections to Bombardier's proposed amendments were unreasonable and were contrary to the terms of the consent order itself. Both Stadler and Bombardier were asked to provide written costs submissions so that the Judge could consider these further on paper. This judgment is the product of those submissions.
In exercising its discretion and making an order against Stadler following written costs submissions, the court considered the leading authorities on the liability of a non-party for costs and identified that the key issue in considering applications for non-party costs orders was whether the party against whom the order was sought was "the real party" to the application.
It is apparent that the court remained unhappy that Stadler had made a serious allegation that Bombardier was trying to gain an improper competitive advantage without providing any justification for this position in their evidence.
Stadler's primary position was that the court was required to conclude that it was responsible for exceptional or unreasonable behaviour before it could be made the subject of an adverse costs order. They also argued that their behaviour did not take up any court time and that Bombardier would have been required to make its application in any event.
The court disagreed. It found:
As a result, the court ordered that Stadler pay Bombardier's costs of the application, applying only a distinctly modest deduction to reflect that Bombardier had been unsuccessful on one aspect of its original application relating to the addition of a further individual to the confidentiality ring.
The factual scenario in this case will be familiar to successful tenderers and contracting authorities faced with procurement claims, where the successful tenderer's documents may end upbeing disclosed into a confidentiality ring.
Successful tenderers will need to carefully consider the balance between the confidentiality of their tender documents and the need for a proper and fair process to resolve the unsuccessful tenderer's challenge. Where an appropriately-structured confidentiality ring is in place, a party will need to have very good evidence in front of it before it suggests that the claimant is seeking the documentation for its own commercial advantage. Running tactical, not to say prejudicial, points against claimants in those circumstance may well backfire.
For further information on this topic please contact Richard Collins, Kathrine Eddon or Lucy Bremner at Womble Bond Dickinson (UK) LLP by telephone (+44 191 279 9000) or email (firstname.lastname@example.org, email@example.com or firstname.lastname@example.org). The Womble Bond Dickinson (UK) LLP website can be accessed at www.womblebonddickinson.com.
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