NP Aerospace Ltd v Ministry of Defence

On an application to lift the automatic suspension of a public procurement contract, the court applies the American Cyanamid approach. It asks whether there is a serious issue to be tried, whether damages would be an adequate remedy, and where the balance of convenience lies. Under the Defence and Security Public Contracts Regulations 2011, the court must consider all interests likely to be harmed, including the interests of the successful tenderer and the public interest in defence and security. A claimant’s loss of the contract, reputational concerns and related commercial effects may be adequately compensable in damages. Where continuation of the suspension would materially prejudice defence capability and the claimant has an adequate damages remedy, the suspension should be lifted.

NP Aerospace Ltd, trading as Morgan, challenged the Ministry of Defence’s decision to award a vehicle-conversion contract to Force Protection Europe Ltd. Morgan alleged that Force Protection’s tender was abnormally low and predatory, and that the procurement had involved breaches of the Defence and Security Public Contracts Regulations 2011.

The claim triggered the statutory suspension preventing the Ministry from entering into the contract. The Ministry applied under regulation 57 to bring that suspension to an end. The central issues were whether there was a serious issue to be tried, whether damages would adequately compensate Morgan if successful, and whether the balance of convenience, including defence and security interests, favoured lifting the suspension.

Application granted. The statutory suspension was brought to an end under regulation 57(1) of the Defence and Security Public Contracts Regulations 2011.

1. The court applied the three-stage approach in American Cyanamid Co v Ethicon [1975] AC 396: whether there was a serious question to be tried; whether damages were an adequate remedy; and, if necessary, where the balance of convenience lay. At this interlocutory stage the court should not resolve disputed evidence or difficult questions of law requiring a full trial.
2. There was a serious issue to be tried. The allegations concerning an abnormally low tender, predatory pricing, possible failures relating to price information and errors in evaluation could not properly be characterised as weak without full evidence and argument.
3. Damages were an adequate remedy. Loss of profit could be assessed with reasonable facility. The asserted risks concerning reputation, workforce, future opportunities, market position and intellectual property did not establish an irremediable prejudice. The approach to adequacy of damages was consistent with Araci v Fallon [2011] EWCA Civ 668.
4. Regulation 57(2) required the court to consider all interests likely to be harmed, together with the public interest and, specifically, defence and security interests. This included the successful tenderer’s interests, not merely those of the contracting authority and the claimant.
5. The evidence showed that continuing the suspension would seriously affect Army training and operational capability and would cause substantial further delay to an important defence project. Those considerations firmly outweighed Morgan’s interests, particularly because Morgan retained an adequate remedy in damages. The factual circumstances were materially different from those considered in Covanta Energy Ltd v Merseyside Waste Disposal Authority [2013] EWHC 2922 (TCC).