Healthcare at Home Ltd v The Common Services Agency [2014] UKSC 49

Healthcare at Home lost a public tender competition and challenged the process as insufficiently transparent under EU procurement rules. The Supreme Court held that the 'reasonably well-informed and normally diligent tenderer' is a legal fiction assessed objectively by the court, not by witness evidence.

Facts

The Common Services Agency conducted a tendering process in 2010 for the provision of medical services to Scottish health authorities. Healthcare at Home Ltd, the existing supplier, submitted a tender but was unsuccessful. It challenged the decision under the Public Contracts (Scotland) Regulations 2006, which implement Directives 89/665/EEC and 2004/18/EC. The appellant argued that the criteria in the invitation to tender were insufficiently clear, and that the reasons given for the rejection of its tender were inadequate.

At an eight-day proof before Lord Hodge (Lord Ordinary), the appellant led evidence from several witnesses to establish that they had not understood the tender criteria in the same way as the successful tenderer. The Lord Ordinary rejected the challenge, and the Inner House refused the appeal, holding that the ‘reasonably well-informed and normally diligent’ (RWIND) tenderer standard was objective and not to be established by witness testimony.

Issues

The principal issues before the Supreme Court were:

• Whether the RWIND tenderer standard, derived from EU procurement law, is a hypothetical objective standard applied by the court, or whether it may be established by evidence from actual tenderers as to their understanding of tender criteria.
• Whether the tender criteria in question satisfied the requirement of transparency under Directive 2004/18/EC.
• Whether the reasons given for rejection of the appellant’s tender complied with article 41 of Directive 2004/18/EC.

Arguments

Appellant

Healthcare at Home submitted that the Inner House erred in treating the RWIND tenderer as a purely hypothetical construct. It argued that evidence from witnesses at an actual tenderer as to their understanding of the criteria established what RWIND tenderers actually understood, unless it was shown that those witnesses were not themselves reasonably well-informed or normally diligent. The appellant contended that the courts below had wrongly conflated the RWIND tenderer test with the objective interpretation of a contract.

Respondent

The Common Services Agency supported the reasoning of the courts below: the RWIND tenderer is a legal fiction whose response is determined by the court applying an objective standard, informed where necessary by evidence about context and technical matters, but not by witness testimony about what particular tenderers thought.

Judgment

Lord Reed (with whom Lord Mance, Lord Kerr, Lord Sumption and Lord Hughes agreed) dismissed the appeal.

The nature of the RWIND tenderer

Lord Reed opened with the observation that legal fictions such as the reasonable man on the Clapham omnibus, the officious bystander and the fair-minded and informed observer are devices used by courts to articulate objective legal standards. Citing Lord Radcliffe in Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696, 728, he emphasised:

The spokesman of the fair and reasonable man, who represents after all no more than the anthropomorphic conception of justice, is and must be the court itself.

The RWIND tenderer was described as a comparatively recent addition to this tradition, deriving from EU procurement law. Lord Reed traced the origin of the concept to SIAC Construction Ltd v County Council of the County of Mayo (Case C-19/00), where the Court of Justice held that award criteria must be formulated so as to allow all reasonably well-informed and normally diligent tenderers to interpret them in the same way. The standard is objective: the question is not whether particular tenderers in fact interpreted the criteria uniformly, but whether the court considers the criteria sufficiently clear to permit such uniform interpretation.

Lord Reed drew support from Advocate General Sharpston’s opinion in Lämmerzahl GmbH v Freie Hansestadt Bremen (Case C-241/06), which emphasised the appropriateness of an objective, or deemed, standard rather than a requirement of actual, subjective knowledge. This was consistent with the need for legal certainty, equality of treatment, and the rapidity of review required by article 1 of Directive 89/665. He noted that in cases such as EVN AG v Austria and Commission v Netherlands, the Court of Justice and General Court had themselves determined compliance by reference to the documents, without evidence of the interpretations of actual tenderers.

Application to the present case

Lord Reed endorsed the approach of the Lord Justice Clerk (Lord Carloway), quoting his statement that:

The court’s decision will involve it placing itself in the position of the reasonably informed tenderer, looking at the matter objectively, rather than, as occurred here to a degree, hearing evidence of what such a hypothetical person might think … evidence as to what the tenderers themselves thought the criteria required is, essentially, irrelevant.

Lord Reed accepted that evidence may be relevant to inform the court about technical terms or the context in which the document must be construed, but the ultimate question is not empirical: it depends on the application of a legal test. Although this is not an exercise in contractual interpretation, it is equally susceptible to objective determination.

On the concept of reasonable foreseeability employed by the Lord Ordinary, Lord Reed agreed with the Lord Justice Clerk that it was unnecessary and potentially confusing to introduce it in this context, but this had not led the Lord Ordinary into error.

Specific criteria and the reasons given

Once it was accepted that the courts below had applied the correct legal test, the Supreme Court would not readily interfere with their evaluation of the specific tender criteria. In relation to the adequacy of reasons under article 41 of Directive 2004/18/EC, the courts below had applied the correct approach as set out in Strabag Benelux NV v Council and had concluded that the appellant was left in no real doubt as to why it had been unsuccessful, and as to the relative characteristics and advantages of the successful tenderer.

Implications

The judgment confirms that the RWIND tenderer is a hypothetical, objective standard applied by the court, in the same intellectual tradition as other legal fictions used to articulate legal standards. The decision has several practical implications for public procurement litigation:

• Parties challenging public procurement decisions on grounds of lack of transparency cannot establish that criteria are insufficiently clear simply by leading evidence from witnesses that they, or their organisations, did not understand the criteria in the same way as the successful tenderer.
• Evidence remains admissible to inform the court about technical terminology, industry context or other background matters necessary to enable the court to place itself in the position of the RWIND tenderer, but not as to the subjective interpretations of actual tenderers.
• The decision supports the objective of rapid resolution of procurement disputes required by Directive 89/665, since disputes over transparency should not routinely require lengthy oral testimony.
• The approach to the adequacy of reasons under article 41 of Directive 2004/18/EC follows the settled EU case-law: the contracting authority need not provide a copy of the evaluation report or a detailed comparative analysis, but must give reasoning sufficient to disclose the relative characteristics and advantages of the successful tender so as to enable rights to be defended and supervisory jurisdiction to be exercised.

More broadly, the case is significant for its clear articulation of the objective character of legal standards defined by reference to hypothetical persons. Lord Reed’s judgment situates the RWIND tenderer within a long tradition of such fictions, and reinforces that it is for the court, informed by relevant background, to determine what such a person would understand. The decision will be of particular importance to public authorities designing tender processes and to unsuccessful bidders considering challenges, guiding the type of evidence which is properly to be adduced in procurement litigation.

Verdict: Appeal dismissed. The Supreme Court held that the ‘reasonably well-informed and normally diligent tenderer’ standard is an objective legal test applied by the court, not established by witness evidence from actual tenderers, and that the courts below had correctly applied that test and the correct approach to the adequacy of reasons.

Source: Healthcare at Home Ltd v The Common Services Agency [2014] UKSC 49