D&G Cars Ltd v Essex Police Authority

A long-term vehicle-recovery contract may contain an implied term requiring honesty and integrity where the contractor handles recovered property and potential evidence for a law-enforcement body. Attribution is not confined to the company’s directors: the contract’s purpose may require the conduct of managerial and supervisory employees to be attributed to the company.

A serious breach of that term, or of express disposal obligations, may be repudiatory even without proof of subjective dishonesty. In a restricted public procurement, a repudiatory breach involving honesty and integrity may constitute grave misconduct. Future provision of premises, staff or equipment may be acceptable if the tender documents permit it, but the contingent nature of the bid must be reflected fairly in the evaluation.

The claimant operated vehicle-recovery services for the defendant under a five-year contract. A vehicle recovered for crushing was retained, had its identity altered to resemble an older vehicle belonging to the claimant, was refurbished and branded as a recovery vehicle, and was used in the claimant’s fleet.

After the vehicle was discovered, the defendant suspended and then terminated the contract and removed the claimant from a restricted tender process for replacement contracts. The claimant alleged breach of contract, unequal treatment, bad faith and defects in the procurement process. Two actions were tried together: the contractual termination claim and the tender-process claim.

1. Contract claim. The claimant’s conduct amounted to a serious breach of both the express obligations governing disposal of recovered vehicles and the implied term requiring honesty and integrity. The term was implied because the contract was a long-term relational contract involving the custody, preservation and disposal of public property and possible criminal evidence.
2. The content of honesty and integrity was context-sensitive and extended beyond proven dishonesty. The relevant question was whether the claimant’s conduct compromised the trust, confidence, fair dealing and transparency required by this particular relationship.
3. Attribution was not limited to the directors. Applying Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500, attribution depended on the purpose of the contractual obligation. The acts and omissions of managerial and supervisory staff involved in directing or failing to prevent the vehicle’s alteration were capable of constituting a breach by the claimant.
4. The breach was repudiatory when assessed objectively from the perspective of a reasonable person in the defendant’s position, having regard to all the circumstances. The defendant was entitled to terminate the contract. The claimant’s allegations that the termination resulted from bad faith or a conspiracy were rejected.
5. Tender process. Under regulation 23(4)(e) of the Public Contracts Regulations 2006, a repudiatory breach of a contractual term concerning honesty and integrity may constitute grave misconduct. The defendant was entitled to treat the claimant as ineligible and remove it from the tender process.
6. The procurement principles required equal treatment, transparency and objective application of the published criteria. Clarification after submission was permissible, but a tender could not be materially transformed into a new tender. Future premises, staff and equipment could be relied upon where the documents did not require them to be currently available, although the evaluation had to reflect the resulting contingency. The evaluation tool was not sufficiently transparent or replicable, and BJG should have been disqualified unless it provided the required rolling road.
7. The claimant’s claims in both actions were dismissed. The defendant’s counterclaim in the contract action succeeded. Had the claimant remained in the process, it would have won lot 2 and had at least an even chance of winning lots 1 and 3.