Quarterly Case Law Update (Article 80)

Introduction

This Article considers three recent Decisions from the English Courts. The issues within these cases centre around:

1. An Application for Payment 8 Years after Completion;
2. Procurement Protocols; and
3. Invalid Service of a Part 36 Offer.

An Application for Payment 8 Years after Completion

The case LJR Interiors Limited v Cooper Construction Limited [2023] EWHC 3339 (TCC) considers limitation periods and the enforcement of an Adjudicator’s Decision.

In this case, LRJ Interiors Ltd (“the Claimant”) had, in 2014, entered into a written contract with Cooper Construction Ltd (“the Defendant”), to which the Claimant agreed to carry out dry lining, plastering and screed works.

On 31 July 2022, almost eight years after it had completed works under the Contract, the Claimant submitted its Application for Payment Nr. 4, in the sum of £3,256.58 Ex. VAT. The Defendant did not respond to this Application for Payment Nr. 4 and failed to issue either a Payment Notice or a Pay Less Notice.

The Claimant referred the matter to Adjudication, whereby the Adjudicator awarded the Claimant the sum it had claimed in Application for Payment Nr. 4.

The Defendant failed to pay the Adjudication award, resulting in the Claimant (LJR) commencing Part 7 enforcement proceedings and applying for a summary judgment. The Defendant subsequently commenced its own Part 8 proceedings on the grounds that the Adjudicator had been wrong to dismiss its limitation defence issued in its Response.

The Defendant’s Response during the Adjudication explained:

“Also, it was issued outside the Limitation Period of six years, in accordance with Section 5 of the Limitation Act 1980 as the Limitation Period commenced upon the issue of the Referring Party’s Application Nr. 3, that the Referring Party issued on 31 October 2014”.

The Court held that the Adjudicator was “clearly wrong in ignoring the limitation defence” put forward by the Defendant (the Responding Party (Cooper Construction) in the Adjudication). It was considered that this defence, by its very nature, brought clear-cut closure to the financial implications of the Contract and prevented the Claimant from being entitled to any further sums. The Adjudicator’s Decision was, therefore, void and unenforceable.

Conclusion

This case shows the importance of taking prompt action against another party to ensure any claim is made within the relevant limitation period. It is also a gentle reminder that a party should not simply ignore any claim it may receive. In this particular case, the Application for Payment was submitted nearly eight years after the work had finished. However, had the Application been submitted two years earlier, the Adjudicator’s Decision would likely have been enforced, and the Defendant would have been required to pay the sums claimed in the Application for Payment.  

 

Procurement Protocols

In the case Bromcom Computers Plc v United Learning Trust [2022] EWHC 3262 (TCC), a dispute arose concerning alleged breaches of the Public Contracts Regulations 2015 (“the Regulations”).

United Learning Trust (“the Defendant”) conducted a “competitive dialogue procedure”, as part of the procurement process, to award a five-year contract. Two companies were shortlisted for the final stage of the procurement process, one of which was Bromcom Computers Plc (“the Claimant”). The Defendant eventually awarded the contract to Arbor Education Partners Limited (“Arbor”), a company that already provided similar services to the Defendant under a separate contract.

The Claimant argued that the Defendant was in breach of several aspects of the Regulations during the procurement process. It contended that, had those breaches not occurred, it would have been awarded the contract not Arbor.

The Court held that there had been several breaches of the Regulations, which came under four main headings:

1. Scoring;
2. Dropbox Submission;
3. Discount on Existing Contracts;
4. Manifest Error.

Scoring

The Invitation to Tender identified that the scoring was to be whole scores from 0 to 5. However, the Defendant aggregated the tender scores and calculated the average for each quality criterion, which produced scores containing decimals rather than whole numbers. It was considered that the Defendant failed to adhere to its duty of transparency and to identify its reasons for the scores awarded, which was contrary to the Regulations.

Dropbox Submission

The Defendant had used Dropbox as the mechanism for the tender submissions. The Claimant argued that this did not comply with the Regulations. The Court found in favour of the Claimant, clarifying that any electronic means of submission must allow the precise date and time of the submission to be determined. It was considered that Drobox enabled the winning bidder to alter its bid even after the submission deadline, a breach of the principle of transparency and equal treatment.

Discount on Existing Contracts

The Claimant alleged that Arbor sought to leverage its incumbency by including in its tender price a rebate on its existing contracts with the Defendant. The Court agreed that such a rebate was contrary to procurement law, as it rewarded Arbor for offering something that did not relate to the contract in question, in breach of rules on the award criteria that contracting authorities may apply.

Manifest Error

The Claimant reviewed the evaluation records and alleged several instances of “manifest error”. The Court considered that a miscalculation of the Arbor’s mobilisation costs had occurred, unduly inflating its score. There had been a misunderstanding by the evaluators as to what the invitation to tender required in each bidder’s response to the “Meet Local Needs” aspect of the tender, causing inaccuracy in the awarded scores. There was also a misinterpretation of the Claimant’s response to a question, whereby the evaluator had incorrectly concluded that the Claimant could not meet the Defendant’s requirements. The Court, however, confirmed the Claimant was “plainly offering what the tender required”.

The Court held that the Claimant had succeeded on liability and causation in respect of the breaches of procurement law, advising that the next stage will be to assess the quantum involved with the case.

Conclusion

The case highlights the importance of following the applicable procurement protocols. If processes are set out in the invitation to tender, ensure they are carried out. Transparency when evaluating bids can reduce the prospect of accusations of favouritism. The criteria for awarding a contract must be related to the contract being awarded, not to any other contract. When evaluating submitted bids, in instances whereby the information in the submission is unclear, it is important to seek clarity rather than make an assumption.

 

Invalid Service of a Part 36 Offer

The case Coldunell Ltd v Hotel Management International [2002] EWHC 3084 (TCC) considers the validity of service of a Part 36 Offer.

Hotel Management International (“the Defendant”) expressed that a Part 36 Offer by Coldunell Ltd (“the Claimant”) was served incorrectly which invalidated the Offer.

The parties had been involved in earlier proceedings, to which the Claimant was ordered to pay a proportion of the Defendant’s costs. The Claimant submitted a Part 36 Offer, which accounted for the Defendant’s costs it had been ordered to pay, and took into account counterclaims from the Claimant.

The Defendant claimed:

1. The Claimant’s Offers were outside the scope of Part 36 because they did not comply with Civil Procedure Rules (“CPR”) Part 36.2(3). The reasoning for this was; that they were stated to take into account the Claimant’s liability for costs pursuant to the Costs Order.
2. The Claimant’s Offers did not comply with the requirements of CPR 36.5(d) because:
   • The incorporated a matter (the Claimant’s costs liability pursuant to the Costs Order) that was neither part of the claim nor an issue arising in the claim or a counterclaim; and
   • They did not sufficiently clearly define the claim they were settling.
3. The Claimant’s Offers were not adequately served, and without valid service, there was no valid Part 36 Offer.
4. Even if the Part 36 Offer was considered valid, it would be unjust to give the Claimant the benefit of the provisions of CPR Part 36.17 on the grounds that:
   • The Claimant unreasonably refused a second mediation of a second claim when a second mediation had a reasonable, realistic prospect of success;
   • The Claimant’s claim was overstated, and some 40% of the value of the claim was abandoned shortly before trial; and
   • There was late disclosure by the Claimant of a report dating back to 2015.

In relation to the validity of the service of the Part 36 Offer, the Courts held:

“The key purpose of service of a Part 36 Offer is that the date from which time starts to run for acceptance of the offer, and the assessment of its consequences, should be fixed as well as the obvious need for the offer to have been brought to the offeree’s attention. On the facts of the present case, there is no question that the Claimant’s 02 July 2019 Offer was communicated to the Defendant… To that falls to be added that there is no question of the Defendant being prejudiced by the fact that the Claimant’s 02 July 2019 Offer was sent by email rather than by post… to invalidate the Claimant’s 02 July 2019  Offer on the basis of defective service would be a ’triumph of form over substance”.

The Courts noted that it was mindful that there was reason to believe that the Defendant was aware, at the time, that the Offer had not been properly served and was keeping that facts “up its sleeve”. The Judge contended that if the Defendant believed the Offer was defective:

“it ought, in the spirit of cooperation which would enable Parties to settle their disputes and taking into account that the purpose of Part 36 is to promote settlement, to have raised that with the Claimant at the time rather than merely not admitting the validity of the offer as a Part 36 Offer”.

In relation to the Claimant’s refusal of a second mediation, the Court found that it did not consider that it was unreasonable for the Claimant to have declined a second mediation. It was considered that the Claimant’s Part 36 Offers to settle its claim at substantially less than it appeared to be worth at the time showed its intention to agree on the matter and that it was difficult to see what more could have been achieved through a second mediation, that could not be achieved through the Claimant’s Offers.

Conclusion

This case highlights the importance of correct service of Part 36 Offers and also that invalid service does not automatically constitute an invalid Offer. In this case, the Courts considered that the Defendant had full knowledge of the intended Offer and conducted itself in a manner that showed it had considered the Offer whilst aware that it had been served invalidly.

The case further highlights that a party may not be criticised for not entering into a secondary mediation. The Part 36 Offers put forward by the Claimant clearly demonstrated its intention to settle the matter outside of the Courts, and a second mediation would not necessarily be anything further.

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