Powerteam Electrical Services Limited t/a Omexom v Electricity Supply Board [2016] IEHC 87, judgment of Costello J of 12 February 2016

Summary

In Powerteam Electrical Services Limited ("Powerteam") v Electricity Supply Board ("ESB") the High Court granted an application for the lifting of an automatic suspension order. The Court applied the established Campus Oil principles holding that while damages would not be an adequate remedy for the applicant, the balance of convenience clearly favoured the lifting of the suspension.

Background

Powerteam was an unsuccessful applicant in a tender competition for a multi-operator framework for overhead line works (the "Framework Agreement") and initiated proceedings against ESB pursuant to Regulation 8(1)(b) of the European Communities (Award of Contracts by Utility Undertakings) (Review Procedures) Regulations 2010 (the “2010 Regulations”) (as amended by the European Communities (Award of Contracts by Utility Undertakings) (Review Procedures) (Amendment) Regulations 2015) (together the "Remedies Regulations”).  The application to lift the automatic suspension was brought by ESB pursuant to Regulation 8(2) of the Remedies Regulations.

Applicable Test

The Court held that the applicable test was that set out in Regulation 8A(2) of the Remedies Regulations. Regulation 8A(2) provides that the court must consider whether it would be appropriate to grant an injunction restraining the contracting entity from entering into the contract. The correct approach was to consider the application as if the applicant (i.e. Powerteam, the respondent in the substantive proceedings) was making a notional application for an injunction to restrain the awarding of the contract in question. It is only if the court concludes that it would refuse the hypothetical application for an interlocutory injunction that the onus of proof shifts to the respondent as the moving party pursuant to Regulation 8A(2)(b) of the Remedies Regulations.

Applicable Principles

In deciding whether to grant an injunction under Regulation 8A(2), Costello J. applied the principles in Campus Oil Ltd. v. Minister for Industry and Energy (No. 2) [1983] I.R. 88 ("the Campus Oil Principles"). The Campus Oil Principles require the Court to consider:-

(1) Is there a fair or bona fide issue to be tried?

(2) If so, the court should consider the adequacy of damages initially from the view of the applicant and, if damages would not adequately compensate the applicant, then from the perspective of the respondent;

(3) If damages would not adequately compensate either party, the court then ought to consider the balance of convenience;

(4) Finally if all matters are equally balanced the court may seek to preserve the status quo.

The Court rejected Powerteam's argument that the applicable principles were those as set out in Regulation 9(4) of the Remedies Regulations. Regulation 9(4) provides that when considering whether to make an interim or interlocutory order, the Court may take into account the probable consequences of interim measures for all interests likely to be harmed, as well as the public interest, and may decide not to make such an order when its negative consequences could exceed its benefits. 

Applying the Campus Oil Principles

ESB conceded that the applicant raised a fair question to be tried in the proceedings. In relation to the adequacy of damages, the Court found for the applicant that damages would not be an adequate remedy.

Powerteam made a number of arguments on this point. In particular, the Court took into account evidence provided by Powerteam that it would not be able to maintain its workforce in Ireland in the intervening period and would therefore be forced to cease its operations in Ireland. This evidence was not contested by ESB. Costello J. held that, prima facie, if a business will probably cease to trade if an injunction is withheld, damages are not an adequate remedy.

The applicant also argued that it would suffer a loss of reputation and market position if it was not on the Framework Agreement and therefore damages would not be an adequate remedy. This argument was rejected by the Court. Costello J. was not satisfied that the contract at issue was of such an "exceptional and prestigious character" as to warrant the conclusion that the loss of the contract would cause such significant reputational damage as to be incapable of compensation.

Balance of convenience

Although Powerteam provided an undertaking as to damages, the Court considered that damages would not be an adequate remedy for ESB and it was therefore necessary to consider the balance of convenience. Considering the five arguments put forward by ESB, Costello J. found that balance of convenience lay in favour of lifting the suspension. The Court accepted that the absence of a framework agreement created a very serious issue for ESB in relation to the security of supply and the safety of supply of electricity throughout the State. This was sufficient to determine that the balance of convenience was in favour of lifting the suspension.

Costello J. also held that the Court was entitled to have regard to the effect of the suspension on other parties, including the successful tenderers. The Court noted that this was a public utility which provided essential services to the entire State; it was critical that there be security of supply and safety of supply.  The Court held that any question over either of these issues weighed "very heavily indeed" in the balance of convenience.

Decision

The Court granted the application to lift the suspension in the exercise of the jurisdiction conferred under Regulation 8A(2)(a) and on the basis of the Campus Oil principles. Costello J. held that if the Court was wrong on this issue and that the application should have been decided in light of the provisions of Regulation 9(4), the result would be the same. The applicant proposed conditions to be attached to the order lifting the suspension however the Court declined to attach any conditions to the order.

Comment

This is the second judgment since the introduction of the amended Remedies Regulations in which an application has successfully been made to lift an automatic suspension. The High Court's decision provides further clarity for litigants in procurement cases in relation to the test to be applied and guidance on the factors relevant to an assessment. It is clear that any litigant seeking to maintain the automatic suspension will face a difficult task in convincing the courts that the suspension should not be lifted.

For further information, contact Anna-Marie Curran or any member of the EU, Competition & Procurement Group at A&L Goodbody.

Date Published: 25 January 2017