judicial review of government procurement

8/3/2019 Judicial Review of Government Procurement

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CARIBBEAN PUBLIC PROCUREMENT (LAW AND PRACTICE)

CONFERENCE 2008

HYATT HOTEL AND CONFERENCE CENTRE

WEDNESDAY 19TH MARCH 2008

PAPER BY KARL T. HUDSON-PHILLIPS, Q.C.

ON

Judicial Review and Public Procurement in Trinidad and

Tobago

Is there a Public Law Remedy in the Tendering Process for

public projects?

The most vexing question facing an unsuccessful tenderer who

suspects impropriety on the part of a public procuring entity is

whether he should challenge the decision before the Courts. Any

would-be litigant must face head on the risk of high legal costsand the added disincentive of litigating against a procuring entity

with which he may wish to do business in the future. Even worse

is the fact that definitive judicial guidance appears elusive when

dealing with the jurisdiction of the courts to review public

tendering decisions.

Judicial Review is the principal method by which the courts have

exercised a supervisory jurisdiction over the manner in which

Public bodies make decisions. It is a specie of action unique to

the Public law. The Government through its various


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instrumentalities can enter into contracts with the private sector

and be subject to the jurisdiction of the private law as any other

private citizen albeit that by virtue of the public nature of the

body and its functions it may be held under the public law to

higher standards than a private citizen. The courts under the

public law through the mechanism of judicial review will look at

the manner in which decisions are made in order to ensure that

they were arrived at fairly, rationally, reasonably and in good

faith. The rationale for seeking to place on public bodies this

obligation of considerate decision making is to protect citizensfrom executive abuses.

Under the Judicial Review Act1, the grounds upon which an

applicant for judicial review is entitled to relief are set out in

section 5(3) ibid. A similar statutory formulation and basis for

judicial review exists in Barbados2. In Jamaica, although there is

no specific judicial review act, provision is made for the procedure

of judicial review by virtue of Part 56 of the Supreme Court Civil

Procedure Rules 2002.

Through the process of judicial review the litigant can obtain

orders ofcertiorari, mandamus andprohibition and judicial

review has developed as one of the most important mechanisms

for achieving public justice in common law jurisdictions and in

reducing the zone of immunity3 previously existing around a

great deal of governmental action.

1 Judicial Review Act (T&T) No. 60 of 2000.2 Administrative Justice Act 1980 and Judicial Review (Applications) Rules 1983.3 Total Justice (1985) by L. Friedman

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The reliefs of certiorari, mandamus and prohibition are unique to

the public law since private law remedies more usually take the

form of compensation in damages for provable loss. The flexible

nature of these public law reliefs is obviously more attractive to

the unsuccessful tenderer who may have enormous evidential

difficulties in a private law action to prove specific damage over

and above the cost of tendering unless he is able to prove

conclusively that he would have won the contract. The task of

proving this is increasingly more remote with the inclusion of

what are now standard clauses in the Tender Call that theprocuring entity is not bound to accept the lowest or any bid at

all. Further, even the calculation of damages on the basis of loss

of chance is arbitrary and at best a hopeful consideration since

there is no ready acceptance of this as a measure of damages

by the Courts in the region. The principal advantage therefore in

a claim for judicial review over a private common law action is the

nature of the relief which can be obtained for the former.

It should be noted, however, that it is not every decision of a

public body which is susceptible to judicial review. The Courts

have recognized that public bodies ought to be free to enter into

contracts and perform other private acts just as any other private

citizen and in such circumstances to be subject to private lawprinciples. In this regard the courts traditionally refuse to grant

judicial review of decisions where adequate private law remedies

exist or the particular activity giving rise to the questioned

decision is held to be a private law exercise.

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In determining whether to grant relief in a particular case, the

Courts historically have placed significant emphasis on the

source of the power of the decision maker. If the power to

make the decision emanated expressly from statute or the

prerogative, the Courts tended to hold that the decision was

amenable to judicial review. This preoccupation with the source

of the power test, however, has been substantially eroded and

greater focus is now placed on the nature of the power or function

being exercised.

This more recent approach is highlighted in the case ofR v Panel

on Takeovers and Mergers ex parte Datafin plc4. It was held

that, in determining whether the decisions of a particular body

were subject to judicial review, the Court was not confined to

considering the source of that bodys powers and duties but could

also look to their nature. Accordingly, although the Panel on

Takeovers and Mergers was a self regulating non public body,

because it was performing a public duty and exercising public law

functions, the Court had jurisdiction to entertain an application for

judicial review of that bodys decisions.

As the courts began to focus more on the nature of the power or

function being exercised, the emphasis was placed on searching

for a public element, flavour or character in the decision in order

to bring it within the purview of the public law.

4 [1987] 1 All ER 564

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It is against this background that, on the 17th March 2006 in NH

International (Caribbean) Ltd. v UDeCOTT5 the Court of

Appeal (Sharma, C.J., Warner and Kangaloo JJA.), upheld the

decision of Stollmeyer J. at first instance that the decision of

UDECOTT, a state-owned enterprise, to award a 140 million dollar

contract to the lowest tenderer was not amenable to judicial

review. This is considered an important judgment in the

Commonwealth Caribbean representing the latest statement on

the dichotomy between the source of the power and the

nature of the power or function being exercised. The reasoningof the Court of Appeal was not the same as that of the Court of

first instance although they both arrived at the same conclusion.

Both held that there was no public law remedy for the

unsuccessful tenderer, NH International.

The decision of both courts was in the teeth of the following

features in the case:-

The procuring entity UDECOTT was a wholly owned State

Owned Enterprise (SOE). The company was a limited

liability company and its sole shareholder was the State

whose property is held in trust by the Minister of Finance as

a corporation sole pursuant to the Minister of Finance

(Incorporation) Act Chap. 69:03.

5 CVA No. 95 of 2005 (T&T)

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The object and purpose of UDECOTT was to develop,

redevelop and rehabilitate the physical fabric of urban and

other designated areas of Trinidad and Tobago.

UDECOTT was retained by the Ministry of Health to design,

finance, construct, project manage, outfit and lease to the

Ministry a building to accommodate the Ministrys head

office and certain centralized programme units (the

project) on lands owned by the State.

The financing for the project was to be sourced by way of

mortgage of the state owned lands which would then be

repaid by way of lease payments made by the Ministry of

Health to UDECOTT after completion and handing over of

possession of the building to the Ministry.

NH International, the second lowest tenderer on the project, was

able to provide evidence to the Court that consultants hired byUDECOTT had recommended that the contract be awarded to NH

International. The consultants had pointed to the fact that even

though another tenderer was the lowest bidder there were

several discrepancies in that companys bid which would have

exposed UDECOTT to serious pricing risks and less than adequate

site management. UDECOTT however chose not to follow this

advice and proceeded to negotiate with the lowest tenderer. On

hearing of this, NH sought to obtain an order of certiorari

quashing the decision on the ground that it was unlawful,

irrational, unreasonable or an abuse/misuse of power.

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The Court of Appeal held that in Trinidad and Tobago

government procurement cases were to be considered an

exception to the general principles governing judicial review and

that, in such cases, the public law remedy was only available if

there was a sufficient public element or flavour in the decision

as a result of some policy or statutory underpinning or nexus.

There being none in this case, no public law remedy was

available.

This decision is difficult to reconcile with others. For example,

Seeballack Singh v The Agricultural Development Bank6

held that there was a sufficient public law element in a decision

relating to the wrongful dismissal of a CEO by a State Owned

Enterprise. On appeal the Court held that the Board of the State

Owned Enterprise was exercising a public law function when it

terminated the Claimants employment. It is not easy to see how

there could be a sufficient public element in a matter of wrongful

dismissal (which could have been subject to private law

employment contract principles) and yet not in the award of a

multimillion dollar contract for the benefit of a government

ministry providing health care services to the public, financed by

state funds and backed by state guarantee.

Instinctively something seems wrong with this decision. - not on

an assessment of the merits of the substantive claim brought by

NH International, but on the ostensible shutting of the procedural

door by the courts to unsuccessful tenderers seeking to review

6 HCA S430 of 2003

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decisions made by the government or its agents relating to the

expenditure of millions of tax payers dollars.

The question that arises is

If this is not a case with a sufficient public element or

flavour, (A public body, a project financed by the public

purse, performing a public function on behalf of the

State) then WHAT IS?? Why was the decision of

UDECOTT to award a 140 million dollar contract to

construct the Ministry of Health Headquarters on state

owned land, financed by a mortgage of state owned lands

not subject to the principles of public law under judicial

review?

Even more puzzling was the assertion by the judge at first

instance that UDECOTT was not a public body! This contention,

that a wholly owned state owned enterprise is not a public body

merely because it is incorporated under the Companys Act 1995,

appears to be patently inconsistent with earlier decisions of both

our local courts and the Privy Council.

In 1982, Deyalsingh J. in a compelling judgment in Surujrattan

Rambachan v TTT7 had this to say on whether TTT a wholly

owned state enterprise could be subject to public law principles:-

7 HCNo. 4789 of 1982

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To limit the constitutional issue raised in this

motion to the personality test can very well

offend against one of the underlying principles of

the Constitution .Power without responsibility is a

concept alien to our constitutional framework. To

the Government is given very wide powers.

Where in its wisdom therefore, it brings any

activity within the public portfolio and retains

some substantial control, whether actual or

potential, over those activities then it must inconstitutional law and in my view also in common

sense, retain the responsibility for the legitimate

performance of those activities. To hold otherwise

(and particularly in developing countries where

the traditional checks and balances to political

power are not yet fully developed or are ignored)

is to court constitutional disaster. This can easily

lead to a situation where an Executive can by

establishing various non-traditional governmental

entities, retain to itself the power but without the

responsibility, thus negating the underlying

constitutional concept; and in a case like the

instant one, negating the fundamental rights of

the individual by the device of creating legal

entities to which is committed power to offend

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against those rights without any redress by the

individual

The Court accordingly held that The Trinidad and Tobago

Television Company (TTT) was a public body for the purpose of

allocating time for political broadcasts and in so doing it was

indulging in state action. The fact that the plaintiff came by way

of constitutional motion and not judicial review does not weaken

the argument on the point.

This judgment seems prophetically to have applied to present

circumstances where, in this jurisdiction for example and that of

other developing countries, the Executive chooses to create

special purpose companies through which to conduct its major

procurement activities ostensibly with the goal of achieving

greater commercial expediency. (The purchase of an executive

jet aircraft to facilitate the movement of members of the

executive is presumably not state action because it is done

through a wholly owned state company.) In so doing, it is

important not to ignore the potential loss of public law

accountability which may result even though these entities are

undertaking the public function of pursuing the Governments

development goals. Despite the powerful reasoning in the

Rambachan judgment, one still sees arguments being made,

some gaining judicial support, that incorporated state owned

enterprises are not public bodies and therefore should not be

subject to public law principles and discipline. Another twist to

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the same question is the virus which seems to have crept into the

argument about who should be required to make declarations

under the integrity in public life legislation. Leaving aside the

question of entitlement to proceed with a claim for judicial review,

in 1994, the Privy Council8made it clear that in New Zealand:-

a state enterprise is a public body; its shares are

held by Ministers who are responsible to the

House of Representatives and accountable to the

electorate. The defendant carries on its business

in the interest of the public. Decisions made in

the public interest by the defendant, a corporate

body established by statute, may adversely affect

the rights and liabilities of private individuals

without affording them any redress. Their

Lordships take the view that in these

circumstances the decisions of the defendant are

amenable in principle to judicial review both under

the Act of 1972 as amended and under the

common law.

Stollmeyer J however appeared not to have considered these

decisions. In reliance on the Datafin principle, after dismissing

UDECOTT as a private body, he went on to hold that there was

nothing inherent in a construction contract to give it a public

flavour. He further held that there was no statutory underpinning

for the tender procedure by which UDECOTT went about

8Mercury Energy Limited v Electricity Corporation of New Zealand Limited (1994) 1 WLR 521

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considering the bid and accordingly the decision was not

susceptible to review. The Court of Appeal disagreed on this

point and found that UDECOTT was a public body and therefore

prima facie its decisions were amenable to judicial review.

However, the Court went on to consider whether in inviting

tenders for the award of the contract, UDECOTT was performing a

public as opposed to a private function. After reviewing the

relevant case law, the Court of Appeal held that judicial review of

the decisions of a public body will not be appropriate where

(1) The decision is commercial in nature, such as

the purchase of goods or services or in

consequence of a tendering process

(2) Where its decisions are not subject to duties

conferred by statute

(3) There is no allegation of fraud, corruption orbad faith

It should be noted that it is accepted that in cases of fraud,

corruption or bad faith the Courts will exercise its power to review

the decision and grant public law relief. This was in fact held by

the Privy Council in the Mercury Energy Case.9

Interestingly enough, the approach of the Court of Appeal in the

NH International case appears to be in line with the traditional

approach of the courts in other Commonwealth jurisdictions.

This demonstrated reluctance of common law courts to grant9 supra

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public law remedies in what is viewed as a private contract

matter between the procuring entity and the tenderer can be

seen in several cases. In R v Lord Chancellors Department

ex parte Hibbits & Saunders (a firm) and Another10 , Rose

LJ held that:-

(1) The Lord Chancellor is susceptible to Judicial

Review

(2)The susceptibility exists only in relation to

those of his decisions which are either in some

way statutorily underpinned or involved some

other sufficient public law element as to which

there is no universal test.

(3) The test to be applied is to look at the

subject-matter of the decision which it is

suggested should be subject to judicial reviewand by looking at that subject-matter then come

to a decision as to whether judicial review is

appropriate. Per Woolf L.J. in ex parte Noble

[1990] 1 CR 808

However, judicial equivocation on this issue is also apparent from

the authorities which recognize the public element in the

tendering function. For example in R v Legal Aid Board, ex

10 March 12, 1993, The Times Law Report

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parte Donn & Co (a firm),11 a case dealing with the award of a

contract by the Legal Aid Board to solicitors to represent generic

plaintiffs in a multi party action it was held that:

(1) the decision making process of a legal aid

committee in awarding a contract to solicitors for

the conduct of a multi-party action was justiciable

in public law. Treating the nature and purpose of

the selection process and its consequences as

one indivisible whole, the function exercised by

the committee, the purpose for which they were

empowered to act and the consequences of their

decision making process all clearly indicated that

it would be wrong to characterize the matter for

review as one of private law; and irrespective of

whether there was a remedy in private law, the

public dimensions of the matter were of a quality

which made it justiciable in public law

As recognition grows worldwide on the strategic importance of the

function of procurement in the attainment of a Governments

developmental objectives, more and more we see courts in other

commonwealth jurisdictions acknowledging the public element in

the tendering process and allowing such decisions to be

amenable to judicial review.

11 [1996] 3 All ER

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For example, in R v Lewisham London Borough Council, ex

parte Shell UK (1988)12 the Court held that a decision not to

deal with firms having South African connections which was

motivated by political considerations was unlawful because it

was made for a purpose not contemplated by the state conferring

the contract powers in question. Also in R v Enfield London

Borough Council, ex parte Unwin (1988)13 a decision by a

local authority to suspend a contractor from its approved lists was

held subject to the public law principles of natural justice. And in

Jones v Swansea City Council (1990)14

the Court of Appealdoubted the wisdom of the view that contract powers are prima

facie outside the scope of public law and held contracting to be a

public power for the purpose of the tort of misfeasance in public

office.

In Shell Canada Products Ltd v City of Vancouver (1994)15

on facts similar to the Lewisham case above, the Supreme Court

of Canada extensively considered the general question of the

review of procurement decision making. Both majority and

minority opinions expressly rejected the argument that

procurement powers were to be treated differently from other

governmental powers when it related to decisions taken for

improper purposes. The minority went even further andindicated that procurement should in general be subject to

12 [1988] 1 All ER 13813 [1988] C.O.D. 46614 [1990] 1 W.L.R. 55. Determined on other grounds by the House of Lords [1990] 1 W.L.R. 145315 Judgment February 12th 1994 See Comment by Arrowsmith PPLR 1994, 5, CS174-178

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judicial review just like any other government function.

McLachlin J. argued very persuasively that:-

The most important difference is the fact that

municipalities undertake their commercial and

contractual activities with the use of public

funds. Another consideration justifying different

treatment of public contracting is the fact that a

municipalitys exercise of its contracting power

may have consequences for other interests not

taken into account by the purely consensual

relationship between the council and the

contractor. For example, public concerns such as

equality of access to government markets,

integrity in the conduct of government business,

and the promotion and maintenance of

community values require that public procurement

be viewed as distinct from the purely private

realm of contract law.

A decision to remove a contractor from the tender list was

challenged on an application for judicial review on the basis that

the removal was a wrongful removal under general public law

principles. Jackson J16 stated that

as a matter of general principle, a decision by a

local authority to strike a contractor off an

16 R v Bristol City Council, ex p. D.L.Barrett (2000)

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approved list of tenderers does contain a public

law element

In R v National Lottery Commission Ex p. Camelot Group

Plc (2000)17 the tender procedure was terminated and a

decision was taken by the Commission to embark upon a new

procedure with only one of the previous tenderers. The Court

granted relief in an application for judicial review and concluded

that there had been a breach of the obligation of fairness, in the

sense of a requirement to give even handed treatment to persons

in a similar position18.

It is to be noted that none of these cases was referred to in the

Court of Appeal in NH v UDECOTT and if they were the decision

of the Court may well have been different. This is not to suggest

that the decision wasper incuriam.

Since NH v UDECOTT , two recent authorities have consideredthe amenability of procurement decisions to judicial review. R

(on the application of Menai Collect Ltd) v Department for

Constitutional Affairs (2006)19 and R (on the application of

Gamesa Energy UK Ltd) v National Assembly for Wales

(2006)20 both considered the question of immunity from review

of procurement decisions which are irrational and unfair.

However, emphasis was placed on the restrictive rather than the17 Times, October 12th 2000 (QBD)18Note that in this case, there was a significant statutory underpinning to the tender procedure and therefore cannot

be relied upon for justification of the public law jurisdiction of the courts.

19 [2006] EWHC 724 (Admin) (QBD (Admin))20 [2006] EWHC 2167 (Admin) (QBD (Admin))

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broader approach to the issue of amenability to judicial review

leaving the state of the law somewhat uncertain.

What is clear though is that, as concepts of transparency,

accountability and good governance in Government take firmer

hold, procurement decisions are coming under closer scrutiny by

the Courts. In fact, in recognition that public bodies ought to

operate fairly in respect of bidders, the private law has been

developing to provide remedies to disgruntled bidders in

circumstances where previously none existed. Developments in

contract law acknowledge a Contract A, as it was termed in the

Canadian authority ofRon Engineering, recognized in the UK as

the BlackPool contract and accepted by the Privy Council in

Pratt Contractors as a Process contract. This points squarely

to the closing of the obvious lacunae in the landscape of fair play

in the tendering process. Now, implied duties of fairness and

duties to comply with terms of the tender are being placed on

procuring entities. I understand thatmore will be presented on

this aspect in other sessions in these proceedings.

Paradoxically however, this progression of the private law may

very well operate to have the unintended effect of making public

law relief even less attainable. As much was suggested by the

Court of Appeal in the NH v UDECOTT case.

PerhapsOliverin her book Common Values and the Public-

Private Divide is correct when she states that the continued

divisive approach to accountability through either public or

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private law mechanisms is illogical and not serving us. What is

suggested is that greater emphasis be placed on the similarity

between the underlying goals and values of both systems and

that the law favour inclusive approaches to fashioning remedies

as distinct from artificial exclusive approaches.

Arrowsmith goes further. In her critique of R v Lord

Chancellors Departmentex parte Hibbit & Saunders supra

she stated:

..the better view is that in principle contract

powers are subject to public law principles of

judicial review in the same manner as all other

powers of government. To insist on the need for a

public law element for review in the way that the

English Courts have done is wholly anomalous; the

criteria which the courts have developed to

determine whether such a public law element is

available have very little relevance to the policy

matters which must be applied to determine when

review is available, and what is its precise scope.

Of course, this is not to say that the content of

substantive public law principles might not be

severely limited in the commercial context in

which the principles must operate; but this

problem must be approached by fine-tuning these

principles to apply in an appropriate manner on

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the facts of each case, rather than excluding

contract powers from review according to rather

arbitrary criteria which purport to define a public

law case.21

Is there a ray of hope?

Mention must be made of a judgment of Jamadar J. in 2000 which

was not cited in NH v UDECOTT supra. Jamadar J had this to

say in Star Telecommunications Company Ltd v Ministry of

Information, Communications, Training and Distance

Learning22:

With the greatest of respect to the Divisional

Court in ex p. Hibbet, I do not agree with the

restrictive approach apparently taken in that case.

I am of the view that in a developing democracy

such as Trinidad and Tobago, where the state,

acting by the central government through one of

its Ministries, chooses to exercise its prerogative

or common law power to contract and where the

nature of that function is clearly public (as it is in

this case), it cannot hide behind the veil of thecontractual nature of the exercise of its power.

This is so, especially where (as in this case) what

21 PPLR 1993, 4, CS 104-10922 HCA No. Cv1713 of 1999

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is being challenged, are alleged criteria laid down

in advance by the Ministry and the exercise of the

Ministers powers in relation to same in the

context of procedural fairness. To my mind, the

fact that if in these circumstances there was

some statutory underpinning, there would have

been a sufficient public law element to justify

judicial review proceedings, operates in favour of

concluding that there is a sufficient public law

element in this case to bring it within the scope of judicial review proceedings. I see no good or

sufficient reason why (ex p. Hibbet apart) given

the principle that all discretionary powers

exercised by public bodies are to be exercised in

the public interest in accordance with normal

public law principles, and on the facts of this

case, including the source of the power, the

nature of the function being exercised, the

subject matter of the claim, the pre-contractual

stage of the matter and the procedural

complaints which are the subject of this

challenge, this court should hold that there is no

sufficient public law element to make these

proceedings amenable to judicial review. In this

post modern era, when the principles of

transparency, openness and accountability

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are the increasing norm for the conduct of

public affairs and the maintenance of a free

and democratic society, there is no good

reason why the exercise of central

governments prerogative or common law

power to contract should enjoy an

exemption from judicial review of

procedural impropriety, whether the

challenge is on the basis of illegality,

irrationality, abuse or excess of power orotherwise.

Before I take my seat I wish to acknowledge publicly the

assistance given to me by Margaret Rose, Chief Executive Officer

of the Caribbean Procurement Institute in the preparation of this

paper. Her focus and grasp of the subject made my task

immeasurably easier and I wish to thank her publicly.

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judicial review of government procurement

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