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 costs and 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

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

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 of certiorari, mandamus and prohibition 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 2

Judicial Review Act (T&T) No. 60 of 2000. Administrative Justice Act 1980 and Judicial Review (Applications) Rules 1983. 3 Total Justice (1985) by L. Friedman

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 the procuring 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 law principles. 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.

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 of R 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.

[1987] 1 All ER 564

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 reasoning of 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). liability company a corporation sole The company was a limited and its sole shareholder was the State pursuant to the Minister of Finance

whose property is held in trust by the Minister of Finance as (Incorporation) Act Chap. 69:03.

CVA No. 95 of 2005 (T&T)

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 office a building to accommodate the Ministrys head (the and certain centralized programme units

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 by UDECOTT 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.

The Court of Appeal held

that in Trinidad and Tobago an

government procurement cases were to be considered

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 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 or statutory underpinning or nexus. There being none in this case, no public law remedy was

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

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, State) performing a public function on behalf of the 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

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, activity within the public portfolio some substantial control, potential, over those activities it brings any and retains

whether actual or then it must in

constitutional 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, instant one, the individual thus negating the underlying constitutional concept; and in a case like the

negating the fundamental rights of by the device of creating legal

entities to which is committed power to offend

10

against those rights individual

without any redress by the

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 Council8 made 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 Lordships affording take them the any view redress. that in Their 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
8

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

12

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 or bad 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 grant
9

supra

13

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 or involved some as to which way statutorily underpinned there is no universal test. (3) The test to be applied subject-matter of the is to look at the which it is

other sufficient public law element

decision

suggested should be subject to judicial review and by looking at that subject-matter then come to a decision appropriate. as to whether judicial review is 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.
10

For example in R v Legal Aid Board, ex

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 one indivisible whole, and its consequences as 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

15

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 motivated by political considerations the contract powers in question. was unlawful which was because it

was made for a purpose not contemplated by the state conferring 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 Appeal doubted 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. minority opinions expressly rejected Both majority and 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 and indicated that procurement should in general be subject to

12 13

[1988] 1 All ER 138 [1988] C.O.D. 466 14 [1990] 1 W.L.R. 55. Determined on other grounds by the House of Lords [1990] 1 W.L.R. 1453 15 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 contractor. equality and the of between access promotion to the council and the For example, public concerns such as government and markets, of

integrity in the conduct of government business, maintenance 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)

17

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 The Court decision was taken by the Commission to embark upon a new procedure with only one of the previous tenderers. 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 was per incuriam. Since NH v UDECOTT , two recent authorities have considered the 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) of procurement decisions
17

National Assembly for Wales which are irrational and unfair.

(2006)20 both considered the question of immunity from review However, emphasis was placed on the restrictive rather than the
Times, October 12th 2000 (QBD) Note 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.
18
19 20

[2006] EWHC 724 (Admin) (QBD (Admin)) [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. developing In fact, in recognition that public bodies ought to to provide remedies to disgruntled bidders in operate fairly in respect of bidders, the private law has been circumstances where previously none existed. Developments in

contract law acknowledge a Contract A, as it was termed in the Canadian authority of Ron 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 that more 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. Perhaps Oliver in her book Common Values and the PublicPrivate 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. 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 In her critique of R v Lord

Chancellors Department ex parte Hibbit & Saunders supra

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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. Information, 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 the contractual nature of the exercise of its power. This is so, especially where (as in this case) what
21 22

Jamadar J had this to and Distance

say in Star Telecommunications Company Ltd v Ministry of Communications, Training

PPLR 1993, 4, CS 104-109 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 To my mind, the there was to justify there would have context of procedural fairness. some statutory underpinning,

fact that if in these circumstances been a sufficient public law element concluding

judicial review proceedings, operates in favour of that there is a sufficient public law I see no good or powers element in this case to bring it within the scope of judicial review proceedings. the principle that all sufficient reason why (ex p. Hibbet apart) given discretionary exercised by public bodies are to be exercised in the public interest public law principles, case, in accordance with normal and on the facts of this the the

including the source of the power,

nature of the function being exercised, subject matter of the claim, stage of the matter are complaints which and the the

the pre-contractual procedural of this subject

challenge, this court should hold that there is no sufficient public law element post modern era, to make these In this proceedings amenable to judicial review.

when the principles of

transparency, openness and accountability

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are the increasing norm and democratic society, reason power why to the

for the conduct of there is no good of central an of the or common law enjoy review whether of

public affairs and the maintenance of a free exercise should judicial basis

governments prerogative contract from is on impropriety, the exemption procedural challenge irrationality, otherwise.

illegality,

abuse or excess of power or

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.