England and Wales High Court (Technology and Construction Court) Decisions

Plaintiff

- and -

Defendant

Case No: 1996 ORB No 1151

Date of Judgment: 28 October 1999

1. In this action the plaintiff, Harmon, claimed (amongst other things) that the defendant had failed to observe the Public Works Contracts Regulations 1991 (PWR), and was also in breach of obligations under Articles, 6, 30, 5965 of the Treaty of Rome (as amended at Maastricht) and obligations stemming from certain European Directives concerning the procurement of public works (eg 71/305 and 89/665), and under an implied contract about the treatment of its tenders, and was also liable for misfeasance in public office in the course of the tender procedures which led to the award of the trade contract for fenestration for the New Parliamentary Building at Westminster. The preliminary issues for decision by the court included questions as to whether Harmon had been treated equally, openly and fairly, whether there had been discrimination of a "Buy British" nature in favour of the successful contractor and as to the damages or compensation recoverable, such as exemplary or aggravated damages. The issues were mainly answered in favour of Harmon for reasons which appear from the text of judgment. (The issues and court's answers are to be found at the end of the text of judgment and before the appendices to it.)

22. On 18 June 1992 the Principal Quantity Surveyor of the PWD issued a circular 12/92 which was given a wide circulation. It provided a brief summary of the effect of the PWR. Amongst things it recorded:

256. Furthermore, under the heading: "What Are the Criteria for Awarding the Contract?" the circular stated:

23. Even before advertisements were place in the Official Journal (OJ), companies had begun to hear of the project on the grapevine. Harmon had retained a company called Overseas Material Consultants Inc. (OMC) (which operated from an address in East Grinstead, West Sussex) to provide it with leads to new projects. In July 1993 OMC provided Harmon with some indication about the NPB and on 27 July 1993 Mr. Eric W. Laithwaite, a director of OMC, wrote to Harmon confirming that it had supplied it with such information (through Mr. Clatworthy, the UK Sales Manager of Harmon Contract (UK) Limited). According to the letter, Mr Laithwaite obtained the information from Mr Ron Kerr, the director in charge of the project at LML, who had put the value of the work at about -9 million. OMC sought a commission fee of 4% of the total value of Harmon's contract. Even on the basis of this value the fee would have amounted to -360,000. Mr Clatworthy (who was called) thought that OMC "had a relationship with Laings, perhaps it was deeper than others, and they could help us in obtaining an opportunity to tender and then maybe some influence beyond that. That is unknown." Harmon appear to have made some contract with OMC for what on the face of it appears to have been an extravagant amount merely for providing Harmon with material which would in any event be publicly available, unless, of course OMC's connections with LML were likely to lead Harmon in getting an advantage when it came to the selection of the contractor. On 15 November 1993, Mr. Clatworthy sent a memorandum copies of which were sent to Mr. Haider and Mr. Michno in which he apparently believed that Harmon was under some obligation to OMC although, as he pointed out in cross-examination, there was no obligation unless Harmon was awarded the contract. Mr Clatworthy pursued the lead given by OMC by getting in touch with Mr Kerr. He provided him on behalf of Harmon Contract (UK) Ltd with information about work done by the Harmon group throughout the world. Mr Kerr then visited France where he met Mr Boyle. By that time Mr Kerr had submitted proposals to the PSA and other members of the project team (including Mr Makepeace) about how the work on the NPB project was to be advertised in the OJ. Mr Kerr's notes on the requirement to advertised in the OJ included this view:

261. However his advice on the policy that should be adopted (but which was not apparently adopted) did not (or did not necessarily) come to the attention of those responsible at the time for specifying the various packages. For example, Mr Mumford did not see these proposals until relatively close to the trial. Moreover he had not seen many of the general documents before tenders were invited for the fenestration package including, remarkably, the text of the PWR. This is particularly surprising since Mr Mumford was responsible for the preparation of the tender and contract documentation on the basis of LML's standard documents.

24. LML's standard documents included one concerning the "Accountability of Audit Trails (Part II)", which had been prepared about July 1993 and contained a number of recommendations which had apparently been made by Mr Kerr. The document records that LML would take the lead in compiling the tender documents. It also stated:

265. The document also attached a "sampling" recommendation showing the level of detail and typical content of a recommendation document. This was the type of document used by LML for tenders for a project for the building of new Inland Revenue offices at Nottingham. Both Mr Mumford and Mr Morehen where also engaged on that project.

25. On 1 October 1993 Mr Makepeace wrote to the PSA enclosing the general guidelines which he thought necessary to lay down and which "should dictate the manner in which the trade packages are procured". In it he sought the views of the PSA as well as those of Mr Brand and Mr Terry Fleet of Berwin Leighton, the solicitors acting for the defendant. Before writing it Mr Makepeace had discussed it with Mr Webber and had got his authority for it to restate the policy of the PWD. Mr Makepeace said that he did not get any response from any of those to whom the letter was addressed. The document began:

26. When questioned about this document Mr Makepeace accepted that its readers included members of the project team (as the guidelines were plainly intended for them), but he somewhat strangely maintained that the last sentence was merely a statement of fact and not intent. He also accepted that it was devised to be used in case pressure was brought to bear, for example by Members of Parliament (with whom Mr Makepeace himself would have little contact) to maximise the use of British companies, even though paragraph 10 stated: "there should be no bias for or against overseas companies".

27. In a letter of 6 October 1993, Mr. Makepeace did make some comments on Mr. Kerr's letter of 29 September. Amongst them was :-

(It would appear that Mr. Makepeace was not at this stage aware of the text of the 1991 regulations, even though he said that he became aware of them in early 1992 and that they embodied EU law.)

28. As part of the process of finalising the design of the building a mock-up of a typical room and exterior elevations was commissioned and built and displayed on a site in Greenwich. The mock-up of the fenestration was provided by Harmon after a tender. Harmon's involvement on the mock-up has a certain significance. First, it enabled Harmon to gain experience of welding on aluminium bronze components for although it had certain problems at the outset they were overcome once it took advice from the French Welding Institute. Mr Blois-Brooke agreed that Harmon learned a lot and that it would have assisted it when it came to execute the package. Alvis had experience in welding non-ferrous metals but none in fenestration. Mr Noble accepted that if the tenderers had not been capable of acquiring adequate experience equivalent to that of Alvis they would not have been included on the tender list. All had worked in welding non-ferrous metals and would not have been pre-qualified unless they had been capable of handling aluminium bronze. Thus Harmon had experience not possessed by any other tenderer. Secondly, prior to tendering, Mr. Kerr got in touch with Mr. Clatworthy. According to Mr. Clatworthy, Mr. Kerr asked that Mr. Michno of Harmon CFEM Façades SA should "specifically front this project" since "he does not want any visible USA connection and that we [Harmon] should play our European card" (see Mr. Clatworthy's fax to Mr. Michno of 1 November 1993). Mr. Clatworthy said that this was because of political sensitivity rather than for any other reason: "the job was a major UK project and it would preferable if was done by a UK or European company". Mr Boyle said in evidence that Mr Kerr, from whom he had learned of the NPB and its special features, had visited the Sitraco factory at Pinon to see it and to investigate Harmon's technical expertise with the materials proposed on the NPB. He said that the purpose was to pick Harmon's brains about the types of alloys which might be used. Mr Boyle said that Mr Kerr had told him that "the employer was probably looking for a UK contractor, if at all possible, and that the American side of the Harmon operation should take a back seat so as to give the impression that the employer would be dealing with a UK company. Mr Kerr recommended that I allow the European employees to lead the project." Mr Kerr's advice was duly followed.

29. Mr Boyle accepted in cross-examination that at that meeting Mr Kerr also expressed concern that Mr Boyle would be able to demonstrate to H of C that the project would be managed from Europe and not from the United States, that one of the difficulties if it were managed from both Europe and the United States would be logistical, and that Mr Boyle should therefore not be seen as being involved in the project. Mr Kerr's concerns also extended to other projects, and not just the NPB, as he had general responsibility for major projects within LML.

30. From November 1993 discussions took place between members of the project team about how tenders should be evaluated. In a letter of 18 November 1993, Mr. Kerr put forward LML's views, as required by paragraph 1.33 of Schedule 1 to the CMA. LML was against adding or adjusting contractors tender prices to take account of the client's indirect costs as that would not be objective. In addition they put forward a proposal that each tender should be marked by the project team against a series of criteria so as to produce a score or rating by which each tender might be compared with every other tender. LML's proposals were generally endorsed by G&T but not by MHP. On 29 November 1993 MHP set out its views. It considered that indirect costs should be taken into account and that a scoring system should not be used on the basis that "numbers are no substitute for words". It seems that MHP thought that scoring would not take account of differences in quality because it assumed that every tender would be presented on a like to like basis. Nonetheless, Mr. Kerr prepared a final document concerning the appointment of works contractors and submitted it to TBV Consult on 1 December 1993 as representing the team's views. In the covering letter Mr Kerr said:

31. This document was also entitled "Accountability and Audit Trail". Amongst other things, it stated:

276. The document proposed that there should be a "tender rating" regime and it concluded with a statement:-

32. Once again MHP took exception to parts of this document, as set out in a letter from Mr. Selby dated 19 December 1993, which had been prepared in conjunction with Mr. Pringle. In relation to the last quotation, the letter said:

279. As a result of MHP's preference for a subjective approach a rating system was not implemented. No formal record was kept of the tender evaluation process.

33. On 23 December 1993 the notice inviting applications for pre-qualification appeared in the OJ. The notice made it clear that it was "open to U S bidders". The notice read:

280. "UK - London: glazing

(93/S 250-70229/EN)

34. The advertisement was scrutinised by Mr Peter Linge, who acted as the Contracts Officer for the PWD. In a memorandum to Mr Makepeace of 5 January 1994 he said:

291. So Mr Linge plainly explained that there were set texts for awarding a contract and, if the second text was used, then the criteria had to be stated. Mr Makepeace replied on 10 January 1994:

295. Mr Makepeace could not throw any light either on what he meant by his prophetic words "treading a very narrow path so far as the tendering process is concerned" or as to why he did not put the criteria in the next notice for the fenestration package which appeared in the OJ except that it was inadvertent on his part not to have done so. In my view, taking into account not just the documents but the whole of Mr Makepeace's evidence to me, the oversight was not inadvertent but deliberate as Mr Makepeace wanted a nebulous phrase and did not want to specify matters such as price, quality of the factories, or experience of the contractor. He was certainly not disposed to take advice from Mr Linge who was three or four grades lower than himself. LML also advised in a letter of 24 January 1994 (which was copied to Mr Makepeace) that it was essential to keep on record the reasons for rejection if a tenderer was not qualified, referring to the Project Procedures Manual.

35. As a result of a telephone call from LML Harmon Contract (UK) Ltd asked for a pre-qualification inquiry document on 12 January 1994 and was sent it by LML on 25 January. It was returned on 16 February. Harmon did not therefore act in response to this advertisement although it was seen later by Mr Boyle. On 24 February Mr Clatworthy (who had also not seen the advertisement) gave Mr Kerr details of the experience of Harmon in the use of brass and bronze materials. Mr Clatworthy thought that the contract would not be awarded solely on the basis of the lowest price but that other factors such as design would be taken into account. Mr Boyle also accepted that the criterion specified of "overall value for money" did not mean the lowest price (and that tenderers would were to have design responsibility might be submit alternative or variants as provided by paragraph 12 of the notice).

36. The minutes of meeting no 9 for the fenestration package held on 20 January 1994 record that it was agreed that LML were to investigate the market further for the "possibility of a UK consortium suitable to carry out the works". Mr Makepeace explained that this resulted from the slender response to the advertisement in the OJ and from keenness (especially on the part of MHP) to consider small and specialised UK companies. He said that there was then little enthusiasm for a consortium and that he did not want to pursue this avenue, as evidenced by his later reaction to the draft of a letter which the initial responses to the advertisement had prompted Mr. Webber to consider on 18 February 1994 for dispatch to the Serjeant at Arms:-

298. In the letter Mr. Webber referred to a "most disappointing lack of response from domestic manufacturers - I think only one firm on the list can be called truly British". Mr. Makepeace annotated the draft by way of reply: "I am unhappy with the sentence marked below [some active lobbying by DOE...]. In discussion yesterday I understood this was not the intention, and we are now in the process of whittling down the long list. All the advice I have is that the firms do not exist so we would be treading towards the road of forced marraiges which would not be in the interest of the project." I deal with this subject below where I find that the subject was discussed with Mr Webber. Mr. Webber sent the letter on 22 February 1994. At the same time MHP's concern about the lack of interest from UK contractors led it to produce a report of 22 February 1994 formally setting out a proposal to split the fenestration work package into a number of small packages ostensibly to obtain more competitive prices for each element of work and achieve closer control over the activities of trade contractors, particularly in relation to technical matters. The report stated:

302. Later in the Report it listed possible firms from the United Kingdom who would be interested in carrying out the work. The firms did not include Harmon, but did include Alvis for assembly work (including sealing and weatherproofing). However, the Report noted that "the existing pre-qualification tender list would be eligible for the majority of the above packages, particularly 3, 7 and 8 - fabrication and erection". It then listed those Multi-Package Contractors, i.e. Gartner (Germany), Schmidlin (Germany), Secco (Italy), MBS (Germany), Früh Metallbau (Germany), TCC International (Germany), Schneider (Germany), Crittall (UK), Harmon (Canada), Supersky (USA), Permasteelisa (Italy), MBM Möckmühl (Germany) and De Schelde (Holland). Apart from Crittall, all those large enough to carry out the work as a single package were foreign.

37. MHP's proposal formed the basis of a report prepared jointly by LML, MHP, G&T and OAP (which was issued in March 1994) and, after discussions with Mr. Makepeace, formally submitted to him by Mr. Pringle of MHP on 15 March 1994. However, MHP's draft was altered so as to omit specific references to the UK companies that MHP had in mind, but the first reason given for an approach to procurement on a multiple package basis was still "to include a number of UK firms in addition to these firms thus increasing competition". ("These firms" were "large overseas cladding contractors with a single package approach".) Whilst Mr. Makepeace could not recall asking the project team to remove the references to UK companies, he did accept that he might well have done so "because it was not a relevant consideration". However, he readily accepted that the substance of MHP's paragraphs had not changed. Mr Pringle agreed that a letter of Mr Romaniuk in September 1995 was correct in stating:

38. I have no doubt that the decision to split the work up into smaller packages and to transfer responsibility for the design of the fenestration to AFE was to ensure that UK companies had a much better chance of being awarded or participating in some at least of the work available and that it was taken deliberately for that purpose by Mr Makepeace on the advice of the project team which was well aware of their client's interests. The defendant relied on Mr Makepeace's assertion that he and Mr Webber never discussed how to avoid too many contracts going overseas. Since Mr Makepeace and Mr Webber worked closely together I do not find it credible that there was no discussion on what was clearly a matter of concern to the project team and to the AWC (amongst others), unless of course it was so obvious that it did not need to be discussed (and it would have been impolitic to have recorded it). Mr Makepeace's evidence about Mr Webber's letter of 18 February was typical of his careful introduction of phrases calculated to avoid a direct and open answer:

305. Q. .... Mr Webber was your superior?

A. Yes.

306. Q. And is the director of the PWD?

A. Correct.

308. Q. Well, presumably you knew that was his view because you worked with him on a daily basis?

310. A. Yes, that is what I am saying.

311. Q. So this letter must have come as a surprise to you?

313. Mr Makepeace tended to introduce such seemingly innocuous qualifications as "as far as I can recall" in order to avoid giving an answer which he thought could or would be damaging. Mr Webber was, surprisingly, not called to give evidence, particularly since he dealt with the AWC, the Commission and officials of the House.

39. I also do not accept the submission made for the defendant that the project team wanted only to generate interest in the work and to encourage competition. A trawl had already been made and the catch had been disappointing. Other measures were needed if the work was not to be lost to the UK construction industry. Opening up the tender lists to companies which did not handle curtain walling as such was needed only to give UK companies a better chance of the work as the project team already had sufficient interest from companies outside UK capable of doing work of this kind. If the real concern had been to obtain highly competent specialists Mr Pringle's evidence showed that it would have been possible to do so whilst at the same time securing a reputable principal works contractor whose management and other skills were crucial to the successful execution of an important part of the project. (I do not deal with the issue of splitting up the work into smaller contracts or packages as an issue in itself as actually or potentially discriminatory and I therefore consider it as part of the overall case against H of C.)

40. The aim of the body known as the Construction Procurement Group (CPG) was to ensure that the British construction industry was kept in business. Its Chairman was Mr Nigel Thompson, a senior director and partner of OAP. It had Government support and backing. It was run by Mr Malcolm Dodds, a civil servant seconded by the DOE, an appointment made by the DOE to head the Group so as to further its prime objective of safeguarding the interests of UK companies in the construction industry. Although Mr Makepeace said that he had had telephone conversations with Mr Dodds on about half a dozen times only he confirmed that Mr. Dodds was actively pursuing a "Buy British" campaign for the fenestration package throughout the tendering period. Mr Dodds had also been in touch with Mr Noble. Mr Noble explained in his statements that his connection with Mr Dodds and the CPG predated his involvement with the NPB, as he had visited the London headquarters of the CPG in relation to another project. Mr Noble also said that Mr Thompson and he and Mr Dodds had been involved in a previous body called "Better Made in Britain" (BMIB). Mr Noble had been to three or four meetings of its "cladding group" during 1992/93 and also a Defence Manufacturers' Association (DMA) seminar in 1991 or 1992, which had been arranged or supported by BMIB. That seminar had been about the use of defence contractors on non-military engineering work. As a result of the seminar Mr Noble took part in some further discussion groups with defence firms, one of which was Alvis, in 1992 and early 1993. However Mr Noble then gained the impression that Alvis had decided not to develop its connections with the construction industry. He had had no further contact with Alvis until about late March 1994 when he learned that Alvis had shown an interest in the fenestration package. (Mr Noble had also been in touch with several of the companies on the tender list, including British firms, such as Briggs Amasco and Crittall, as well as overseas companies, such as Gartners, Schmidlin and Harmon.) Mr Noble said that it was obvious that Mr Dodds was trying to influence him but that he realised that he should not take such pressure into account, which I accept.

41. The AWC was naturally interested in who would be carrying out work on the NPB since, almost certainly in relation to one of Mr. Makepeace's reports, the clerk of the committee prepared a briefing for the chairman in which it was suggested that the following question might be asked

42. In a fax of 23 March 1994 MHP gave to LML names of potential UK subcontractors who might be interested in the fenestration package for the NPB. It included Alvis. It may be that the suggestion to approach Alvis originated from AFE. Mr Noble said in his supplementary statement that he recalled that "Alvis had already been identified as a potential tenderer prior to April 1994 when AFE commenced work on the package", and Mr Pringle said that Alvis was a new name to MHP (although within 18 months Mr Brand was to note that "[Sir Michael Hopkins] is very much an Alvis fan").

43. On 18 April 1994 the project team held a seminar at the Institution of Civil Engineers for pre-qualified trade contractors. Mr Michno attended (amongst others). On this occasion the project team told the contractors of the changes that had been made to the scheme (such as design by AFE) and of the five fundamental requirements governing its design of the fenestration package namely (1) a long design life (120 years); (2) the aesthetic appearance of the facade; (3) blast resistance; (4) integration with the ventilation system; (5) pressure equalisation. On 25 April 1994 Harmon CFEM Façades sent a letter to LML confirming Harmon's willingness to submit a tender on the new basis. The defendant relies on these requirements as being the criteria made known to contractors upon which the defendant would base its assessment of tenders. By this time, it was clear that the contractor would not be undertaking a design responsibility for the fenestration package. Accordingly these requirements might not have been regarded unless accompanied by further details.

44. Mr Makepeace authorised a new notice inviting pre-qualification was submitted for insertion in the OJ. This was done on 26 April 1994. The notice was substantially in the form previously used except that section 3 was altered as AFE was to be the designer and provision was made for the novation of supply packages. Sections 11 (criteria) and 12 (variants) were unchanged. Mr Makepeace therefore again ignored the advice that Mr Linge had given.

45. On 5 May 1994 Mr Mumford reported to Mr Collins of TBV Consult that 13 companies wished to be considered for tender:

316. Harmon CFEM Façades

317. Crittall Windows Ltd

318. Briggs Amasco Curtainwall Ltd

319. Rosyth Royal Dockyard

Glasbau Seele

MBM Fabri-Clad Ltd

320. Permasteelisa

321. Josef Gartner & Co U K Ltd

322. Impresa Castelli/Buiatti UK

CIR London Ltd

323. MBS Curtain Walling Ltd

324. Industrie Secco SpA

Schmidlin (UK) Ltd ...

2. Companies declining to be considered

325. Pollards Fyrespan Ltd

FR (UK) Ltd

326. Früh Metallbau

Antler Port Ltd

Solaglas Ltd

Felix (UK) Ltd

328. Harmon therefore headed the list but there was no mention of Alvis, although it had attended the April meeting. (Other UK companies were included in the list.) However on 22 May Mr Brand recorded in his diary that Mr Dodds (of the British Construction Group) had been in touch. Mr Brand noted: "Accept cannot require us to "Buy British" (which he said presumably came from Dodds) "they will review within a specified period, e.g. Alvis okay." Mr Brand accepted that he was aware that during the tendering process Mr Dodds was promoting British industry. Following a meeting between Sir Michael Hopkins, Mr Pringle and Mr Webber Mr Brand wrote a note on 24 May 1994 in which he recorded: "Arup Facade Engineering. Explain 'Buy British'". This was duly done for at the project review meeting on 26 May 1994 it was noted:

"AM" was Mr Makepeace. Mr Brand said that Mr Noble had then reported that Mr Dodds had contacted him and that Mr Makepeace was to circulate a note which would clarify the team's future contacts with Mr Dodds and the CPG in order that future contacts would be through Mr Makepeace rather than with members of the project team.

46. Given MHP's keenness that British contractors should not be left out I consider that Mr Brand made this note to remind him to transmit to Mr Noble of AFE the need to consider British contractors for the fenestration package. Mr Brand was not able to recall much, even when aided, so the fact that he did not remember such meetings or, rather more surprisingly, Sir Michael Hopkins' views, are of no significance. Mr Brand successfully conveyed the impression of a "teflon man" which may account for his position within LML as otherwise he did not display a grasp of the project.

48. It emerged in the cross-examination of Mr Brand that in 1992 LML had prepared a substantial handbook which contained in some detail the procedures which were to be adopted for the procurement of the packages and pulled together the procedures for all the activities covered by the construction management agreement. They were subsequently incorporated into the project execution plan, which was a document held by TBV Consult. In 1994 LML sent copies of it to TBV and to Mr Makepeace who clearly read it thoroughly. On 17 August 1994 Mr Makepeace wrote a lengthy letter to Mr Morehen of LML (L1/064) with his comments, one of which he described as "particularly important":

"Trade Contract Documentation

[Emphasis supplied].

49. This letter led to a revision of the project procedures manual so that the material parts followed Mr Makepeace's instructions and read [emphasis supplied]:

334. "2.0 Distribution and Evaluation of Tenders

339. - LML (Purchasing Manager)

- G&T (M Walker)

50. Mr Brand said that LML's Quality Assurance Manager was responsible for maintaining the manual but he would expect to be told by the client (through TBV) if there was any disagreement with it. LML appears to have complied with its obligations under the CMA to give advice on EC matters. Although Mr Makepeace in evidence tried to equate "lowest tender" as used by him and in this manual with "overall value for money" as used in the OJ advertisements it is clear that the two cannot be synonymous since the guidance given was to accept "the lowest tender which meets the requirements", ie in context of the manual, the "technical content". Thus it would be only if the tenders were indistinguishable in technical merit that the balance would be tipped in favour of the cheaper or cheapest. If they were uneven on technical merit it would necessary to evaluate which would provide "overall value for money" but for that purpose it would be necessary to establish criteria and to determine ranking. In my view the letter of 17 August 1994 was and was intended to be a clear instruction (using a modest degree of unravelling of the somewhat elliptic language used by Mr Makepeace) that the lowest tender should be accepted unless there were very good reasons not to do so. (Those reasons might include matters which if known earlier might have disqualified a tenderer from receiving an invitation to compete.)

51. Mr Makepeace's letter of 17 August 1994, and the revised Project Procedures Handbook were only disclosed by the defendant during the course of the trial as a result of Mr Brand confirming their existence. They were clearly important and relevant documents, and I ordered that an explanation should be given as to why they had not been disclosed earlier. The explanations given by Mr Goldmeier, a partner of Berwin Leighton, and by Mr Makepeace were each profoundly unsatisfactory and disquieting and, in the case of the latter, incredible. The absence of these documents from all the others that were covered by Mr Makepeace's witness statements, many of which are set out in his second supplementary statement, is remarkable. For Mr Makepeace to say that his letter of 17 August 1994 was "to my mind ... not one of any particular significance" is a typical but a striking instance of his ability to omit from his evidence that which did not assist him or the defendant's case. The Project Procedures Manual had in fact been on his shelf but, according to him, not referred to. I do not find this credible. His excuse that he did not include the documents in his witness statements because they were not referred to by the defendant's solicitors is, frankly, disingenuous. It seems that the defendant's solicitors had done little more than rely on the PWD and members of the project team to decide what files were relevant as a result of which they had therefore failed to examine all the files which might contain material that should be disclosed. To have overlooked one copy of a letter such as that of 17 August but to have overlooked all six copies of it both during discovery and during the preparation of the many witness statements shows a lamentable lack of proper understanding of the issues in the case or attention to them on the part of the qualified and unqualified staff of the defendant's solicitors and of proper supervision by the partner or partners responsible.

52. On 30 August 1994 Alvis informed LML that it wished to be considered for the fenestration package.

53. The decision to switch to AFE for the design led to delay. An internal memo from Mr Mumford to Mr Kerr dated 19 September 1994 indicated that there were reservations about certain aspects of the project.

- Gartner

- Harmon

353. - Permastillisa

- Schmidlin

But not MBM.

- Market

355. - Uniqueness of design

356. - Uniqueness of material

357. - "Hopkins Factor"

358. - Non standard procurement strategy.

366. - Pre-selection remains

367. - AFE tender info only (in detail)

368. - Design responsibility in total with trade contractor."

369. It is clear that one of the biggest factors was the involvement of AFE in the design. This was to recur. Similarly it was thought that MHP and its requirements (the "Hopkins factor") would effectively make the project less attractive and thus more costly.

54. On 13 October 1994 LML sent TBV Consult a list of the contractors who were to be invited to submit pre-qualification documentation. (It included Harmon CFEM Façades, Seele and Alvis.)

55. On 8 November 1994 LML produced its report on the tenders for the mock-up. Harmon/CFEM Façades submitted the lowest tender at -218,273 and on 2 November Harmon Contract (UK) Ltd was awarded the contract.

56. In order to retain the interest of prospective contractors a further presentation was held on 15 November 1994. Literature was handed out which outlined the design criteria being employed (now by AFE) which would be used by AFE to assess any proposals from tenderers. The event was attended by representatives of Harmon, Seele, Josef Gartner and Alvis, all of which had also again been sent pre-qualification enquiry documents. Mr Boyle was present. He agreed that the project team emphasised quality and that it was clear that the package would not be awarded solely on the basis of the lowest price. Pre-qualification inquiry documents were sent on the same day. On 25 November Alvis returned the completed documents to LML, followed by Harmon on 29 November 1994, and Seele on 1 December 1994. In Harmon's documents, the name of the company responding was stated to be Harmon Contract (UK) Ltd, although the documents were presented by Harmon CFEM Façades SA. They also made extensive reference to Harmon's worldwide business and specifically stated that it was the intention to obtain material from within the EEC if necessary. The personnel listed were not from the UK. The long section on quality assurance was largely in French. There can be no doubt therefore that Harmon intended to fabricate the material in France and to run the contract from that country.

57. A minute of a meeting of the Accommodation and Works Committee held on 17 January 1995 states: -

371. According to Harmon a "Buy British" policy was here promulgated by the AWC. Whatever may be the effect of the wish of the AWC Mr Webber and Mr Makepeace both attended the meeting and knew of the AWC's wish and of the reasons for it.

58. On 23 January 1995 Mr Kerr in a memorandum to the Chairman of LML, Mr Gregory, drew attention to disquiet over role of AFE and concern amongst tenderers. Some of Mr Kerr's other views are more directly relevant to the issues in this case and are worth quoting in full, although they include what Mr Mumford had said some months earlier. I have emphasised in italics particularly significant parts.

59. Harmon naturally relied on "be in no doubt there is a hidden agenda here regards UK supply" on the "Hopkins factor" (the full effect of which was yet to be seen) and on Mr Kerr's praise for Harmon's design capability as compared with AFE's. Just as there must be speculation on Mr Kerr's reasons for supplying Mr Boyle with inside information - he may have kept other tenderers in the picture to promote competition - so too it is not clear why Mr Kerr extolled Harmon in this way, although Harmon was more experienced in designing cladding and curtain walling than AFE, and the latter's fees were not obviously better value than asking a contractor to design and construct the fenestration. As Mr Kerr was not called, his role and relationship with Harmon remains somewhat enigmatic. Subject to that qualification (which is strictly irrelevant to the decisions that I have to make) his views as recorded in writing and as given to and by Mr Boyle are to be accepted as representing those of LML and, so far as Harmon was concerned, those of the defendant since Harmon dealt primarily with LML as the defendant's chief operational representative and had no reason not to treat them as such, including Mr Kerr's informal indications. Mr Boyle correctly did not regard as them as indiscreet and unauthorised leaks. They were given to Harmon to maintain it as a keen competitor and thus were as much for the benefit of H of C as of Harmon. Mr Mumford and others put Mr Duncan Smith of Alvis in the picture. The latter sent him a fax on 27 January 1995 saying that he was "now in touch with Crittall and Seele as you suggested and I will keep you informed of developments." On 15 February 1995 Mr Brand made a note of telephone conversation with Mr Noble in which it was recorded that Mr Makepeace wanted Alvis to be involved. It also recorded that Mr Dodds was trying to organise a consortium and that he had come to Mr Noble on this issue. The team was asked to attend a briefing meeting next Wednesday. Yet when questioned about this note, although Mr Brand confirmed that he had noted what Mr Noble had told him and said that Mr Noble was reliable and that he had no reason to doubt the accuracy of Nr Noble's recollections, he then said that he did not believe it as it would have been totally out of character for Mr Makepeace to have said it. Although neither Mr Makepeace nor Mr Noble were asked about this specific incident in cross-examination, Mr Brand's note does appear to me to have been inaccurate: Mr Noble was, as Mr Brand said, reliable and honest, the remainder of the note is plainly credible and I consider that it would have entirely consistent for Mr Makepeace to have pressed for the involvement of Alvis as a British contractor. Mr Brand's became uncharacteristically positive and precise at this point so his defensive attitude convinced me that there was indeed more to the introduction of Alvis than merely bringing in more competition.

60. LML was notified on 23 February 1995 by Mr Duncan Smith of Alvis's intention to form a joint venture with Seele to tender for the fenestration package. Seele and Alvis did combine (and so they are called Seele/Alvis). On 23 March Harmon asked that it should be substituted for Harmon Contract (UK) Ltd on the mock up and this was thereafter treated as an effective replacement of the former for the latter for all purposes. Mr Mumford also said that throughout from pre-qualification onwards the resources of the whole of the Harmon group were considered relevant and not those of a single company. On 4 May 1995 LML was sent documentation to establish that Harmon was in business from March 1995: VAT registration, insurance certificate; 714C certificate. Harmon CFEM Façades SA made a formal request to that effect on 23 May 1995. (Mr Makepeace agreed to the mock-up contract being assigned to Harmon on 26 June 1995.) Until the time when the plaintiff began trading and took over the mock up contract the intention had been that Harmon Contract (UK) Ltd would be the tenderer.

61. After this date and certainly by the end of May 1995 I accept that then or reasonably shortly thereafter the Project Team and the defendant knew

62. The mock-up did not proceed swiftly as Harmon had difficulties in carrying out the welding. They were in part due to the materials which it had to use being out of specification and in part to the need to learn how to handle the new materials. Performance improved after the French Welding (Institut du Soudure) gave advice. Indeed Harmon lost money on the mock-up contract and made provision for the recovery of its losses in its tender for the fenestration package (see later). Harmon's difficulties however led the Project Team to agree that "the mock-up was now being used as an effective R and D exercise" and that it was to be regarded as a "working tool" and that the AWC had been so informed. Mr Makepeace also confirmed that one of the primary purposes of the mock-up was to show the tenderers for the fenestration package. Mr Noble accepted that the experience of the mock-up was of benefit. Mr Boyle acknowledged that the mock-up was used to assess the quality of Harmon's work.

63. On 17 March 1995 LML sent to the OJ a notice inviting tenders, using the restricted procedure, for the Courtyard and the Roof. Interestingly it set out specific criteria of the award of the contract:

434. Appearance and Quality of Workmanship

435. Overall value for money."

436. Harmon tendered for the contract but was unsuccessful. Mr Brand agreed that if specific criteria were stated it was not permissible to take different criteria into account when assessing tenders. Other such changes were made to introduce additional and specific criteria, for example for the reinforced concrete structure ("technical ability and quality and workmanship") until by 1997 the notice said "factors that would be taken into account in determining the best submissions are quality of workmanship, price, quality and sufficiency of design facilities and programme." Mr Makepeace said that the changes evolved through discussion between LML and TBV Consult of which he was "probably aware" but not "actively involved in". I think it unlikely that his authorisation was not sought for changes from the policy set out in his letter of 17 August 1994 for the fenestration package. In July 1995 the Treasury's Central Unit on Procurement published an introduction to the EC procurement rules (J1/097) which Mr Makepeace said that he saw soon after. He also said that he then knew generally what it set out by way of summary of the legal position.

64. On 3 April 1995 LML submitted a short list of contractors to Mr Makepeace: Harmon, Gartner, MBM and Seele/Alvis with the recommendation:

438. There were however reservations so that, in relation to Harmon, LML recorded its concern about Harmon's handling of a contract for SmithKline Beecham and about the "ghost factory" in France.

65. The minutes of the AWC of 26 April 1995 show that it thought that "the contract for the construction of the [NPB] should be so arranged as to ensure the greatest possible participation by British companies in the tendering process including, if appropriate, the separation of the contracts into smaller elements". Similarly the Chairman's notes for a meeting of the AWC on 17 May 1995 read that he had conveyed

440. A report had been prepared by the PWD for a meeting of the ad hoc steering group on 19 April 1995 in which the process of tendering for the NPB was described. It recorded that the sifting and recommendation of companies for inclusion on the tender lists was carried out jointly by the Construction Manager and consultants but the tender list was approved by the project sponsor. The report then read;

...

66. In April 1995 AFE was in correspondence with LML about providing the tenderers with technical information including the provision of R and D Reports. There was a report by Alvis Vehicles Limited on welding trials which they had conducted with brass CZ 136 (the manganese brass specified by MHP and AFE). The report read in part :

67. The four companies selected were then invited to tender. In its letter of invitation of 19 May 1995 LML informed the tenderers (including "Harmon/CFEM Façades"):

460. So far as Mr Mumford was concerned there were no discussions about the implications of the last sentence. In the pricing notes there were standard provisions (in A and G) to price the tender as a lump sum contract notwithstanding the use of quantities and also provided both fixed and fluctuating prices. The General Preliminaries within the contract documents also included the following:

462. The Special Preliminaries provided:

(Other relevant parts of the tender documentation are to be found in Appendix B to this judgment.) In the preparation of its tender Harmon considered the use of aluminium rather than aluminium bronze as a cladding medium and put forward certain alternatives (see later). In my view it is clear that the changes were not ones which would affect the basic design of AFE and MHP (see clause 2.0 of the Special Preliminaries), the basis for which was not within the tenderers' knowledge. As Mr Josey rightly said a tenderer would not have the "faintest idea" how strong to make the units as there was nothing in the documentation about the blast loading - "what load or force of explosion he is to design blast loading to cope with?".

68. Interviews took place with the tenderers in June and July 1995. One of their purposes was to enable tenderers to get the tender documents clarified. The meetings with Harmon took place on 21 June and 10 July and were attended by Mr Boyle and M. Michno. The possibility of submitting alternative materials was discussed. Harmon's tender was prepared by a number of people, under the leadership of Mr Boyle, including M. Georges Voisin (whose evidence was the subject of a notice under the Civil Evidence Act Notices were given also in respect of Messrs Nassour, Keen, Piantoni, Bogacz and Avtus.), M. Michel Michno, and M. Robert Cazalet, assisted by others such as Mr Kurt Larson. Mr Gary Haider and Mr Gabriel Sahyoun were naturally also involved and had the final say. Later Harmon gave LML a copy of the tender summary - but not the real one as it had been suitably edited so as not to reveal everything. It appears to have struck a nice balance between giving the project team what they were looking for and what Harmon thought they actually needed. The detailed make-up was disclosed in the course of the proceedings. Mr Nisbet, was critical of certain aspects of the compilation of the tender, though this was partly due to his lack of experience (or recent experience). LML and G & T had no significant difficulties in understanding the documents that they were given, and in realising that the summary was deliberately incomplete. In my view the tender was carefully prepared in the precise and logical manner customary in France which can take some time to understand. As with any such compilation there were slips, and with the advantage of hindsight, errors, largely of judgment. I deal later with certain points that arise on its sufficiency but otherwise I conclude that it was well prepared, comprehensible, and sound.

69. The tenders were submitted at the end of July and opened on 31 July. Harmon's tender was signed by Mr Boyle "Duly authorised to sign for and on behalf of [Harmon], although the documents themselves came from Harmon CFEM Façades SA, and the experience proferred was not that of Harmon itself. In view the change of company that had been notified and LML's requirement that Harmon CFEM Façades should be prominent the tender is to be treated as having been submitted by Harmon. The tenders were all well above the amount previously budgeted: -20,000,000 on a fluctuating basis; -22,000,000 on a fixed price basis. Mr Baxter said that the difference was horrifying, even though it was the most expensive fenestration system that he knew of. G&T said that the cost/m2 was -3500 as against -1000/m2. The figures were:

(Seele/Alvis's error of -4.2 million was apparently a genuine error and in my view nothing now comes of it.) The prices were higher than expected in part because those advising H of C had not appreciated that it would be regarded as a high risk project which would attract a high margin. In the case of Harmon Mr Haider had decided that the margin should be about 60%. There was undoubtedly room for substantial reductions in all the tenders (a subject covered at some length in the evidence.)

70. Very soon afterwards Mr Boyle had a telephone conversation with Mr Kerr of Laing (with whom he was by that time on good terms socially) who told him that Harmon had submitted the lowest tender, that all tenders were significantly over budget, that it would be contacted in due course by the project team. The budget overrun came as no real surprise to Mr Boyle since the advertisement in the OJ had stated an overall estimated value of -17 million. There was however consternation in the project team about the extent to which the tenders were over budget. A meeting was held on 3 August 1995 at which it was decided to set up a task force:

71. A further meeting was held on 9 August 1995:

AFE - Neil Noble

Graham Dodd

500. Duncan Richards

Sean Billings

Bill Dunster

Steve Harris

+ AN Other

502. (Post meeting note: P Romaniuk will lead for MHP)

503. G&T - Mike Walker

Peter Baxter

LML - Mike O'Farrell

504. Jimmy [sic] Mumford

505. Paul Nettleship

John Haston

514. A. Blast loading

515. B. Design life and maintenance - strategy

E. Procurement

523. a) additional direct purchase of materials.

528. on 4th August and the company is to

529. be visited on 10th August.

531. shutdown and therefore further delay

532. action is delayed for this period.

534. further information without assurances

536. with them. Nevertheless they will

537. be pressed for further information.

538. A meeting is planned on 16th August.

539. Seele/Alvis -A detailed review has commenced and a

540. visit is planned for 11th August.

541. The analysis has revealed a tender

542. error with approximate saving of

543. -4.3m. The details of the analysis

544. are contained within attached notes

at B1, B2 and B3.

....

547. Paragraph 2.3 shows that had the AWC been available M Makepeace would have sought its views.

72. When asked about paragraph 2.4 Mr Baxter agreed that some of the ideas discussed a week earlier were not being followed through and that the items listed in paragraph 4.2 had not previously been identified by the project team as critical. In paragraph 14 of its defence H of C says that the fundamental requirements were (1) long design life; (2) aesthetic appearance; (3) blast resistance; (4) integration with ventilation system; (5) pressure equalisation and in paragraph 36A(6) these are said to be required by Regulation 20(4) of the PWR. Paragraph 38 of the defence says that Regulation 20(3) made the specific criteria: price, quality of finished product; technical superiority; manufacturing and technical capabilities; programming and organisational capabilities; and maintenance requirements.

73. On 11 August Mr Makepeace set out the terms of reference for the Task Force whose objectives were to reduce the costs of the tenders whilst maintaining:-

551. (d) environmental requirements and design philosophy;

74. Contacts took place between LML and the tenderers in August. On 10 and 11 August LML held meetings with Harmon in France (at Pinon) and with Seele/Alvis. Although Mr Mumford's statement contained a lengthy list of how Harmon's tenders were non-compliant in many respects he confirmed that other tenders were similarly deficient but that these respects played no part in the evaluation of Harmon's tenders since -500,000 was allowed by the project team for the possibility that, in any post-tender negotiations, the investigation and clarification of such points might result in an overall increase in the price. I do not therefore intend to consider them or their effect in any detail. It is quite normal for such tenders to be subject to numerous reservations. (The issues however raise a number of questions about other aspects of post-tender contacts.)

75. Mr Boyle was concerned to learn that the project team was going to speak to all tenderers since Harmon was the lowest and Harmon therefore thought that any discussions ought to take place with it. He said that on 10 August 1995, just before meeting the project team, he telephoned Mr Brand asking why it was necessary to look at Harmon's figures and that he was told the client needed to understand the reason why all the tenders were over the budget. Mr Brand explained that two Task Force teams had been set up, one to review the commercial aspects of each tender, ie to understand the costs, the other to work on design modifications so as to reduce the overall cost of the package. Mr Boyle said that he questioned Mr. Brand as to whether or not this action was in keeping with the EC procurement regulations and was told by Mr. Brand that if we did not cooperate with the Task Force we would be removed from further consideration: if Harmon did not play ball, its tender would go no further and it would be out. Mr Brand also told Mr Boyle that none of the present tenders would be accepted. This was borne out by Mr Kerr who also told Mr Boyle to co-operate with the Task Force since Harmon was the preferred contractor. I accept Mr Boyle's evidence. LML was clearly determined to comply with Mr Makepeace's wish to reduce costs. Mr Makepeace appointed Mr Nigel Quick of Arup Project Management as the chairman of the first task force.

77. The figure of -35 million stems from the discussions on 10 August 1995. In its tender Harmon had put forward some alternatives (H3/262). There were four "Technical Alternatives:

557. There were also four "Commercial Alternatives:

562. At the meeting on 10 August 1995 Harmon had given figures for three of the technical alternatives. For option (b) (the bronze anodised aluminium system) potential savings between -6 million to -20 million were forecast; for option (c) savings of between -12 million to -20 million were suggested. For option (d) a saving of -1 million was offered. After the meeting Harmon also indicated that the removal of a weld and its replacement by a silicone weather seal (option (a)) could result in a saving of about up to -2 million. Options (b) and (c) were however difficult to pursue since they would require a change of supplier, as Mr Josey also agreed. Gartners had also made a proposal for an aluminium solution which was similarly not viable.

78. Harmon's tender also contained a number of "clarifications": "Our Tender submission is based upon the following allowances and assumptions". They included :

568. I shall consider later the effect of these reservations although they were not thought to be significant at the time.

79. Returning to the project team's discussion of the tenders, I do not accept Harmon's case that there was never a comparison between the July 1995 tenders. I think that the reaction to the tenders was probably such a comparison but obviously only a superficial one since the high levels of the tenders received made it necessary to look for alternatives. There was certainly a thorough investigation of the make up of the tenders. There was also concern about the need to re-advertise this package. Mr Kerr asked for advice and on 21 August was informed by the Euro Information Centre that

573. Mr Romaniuk of MHP gave the additional reason that it might "deny Alvis, for example, or any other U.K. based company access to the re-tender, as well as the supply packages":

580. The letter was circulated. The reference to -12-20m was again a reference to the meetings on 10 August.

81. On 7 September LML met Harmon and Seele/Alvis to explain the design changes. The drawings had been sent on the same day. The possibility of further alternatives was raised. On 11 September 1995 LML invited Harmon to submit a revised tender. Harmon was told that it might again put forward other alternatives (which obviously had to meet the basic principles) in the following letter:

587. In my judgment Mr Boyle was absolutely right when he said when cross-examined that at the time this letter was received it was clear from his meetings with the project team that the emphasis had shifted to cost as the dominant factor: "Well, the project team was, if you will, moving the goal posts. They were changing the design. They were changing what we were tendering for. They were trying to achieve a budget and they were doing everything that they could think of to achieve that budget, and that was the emphasis that was expressed to us at every meeting." When asked about other considerations being in still in play and effective considerations in the tender process he replied: "Well, they had been examined, I would say, from our meetings in terms of what the project team and the client was willing to compromise on in order to achieve cost savings." In my judgment the letter was plainly telling tenders that the defendant was now interested in the tender which was the cheapest: "As previously stated our aim is to effect significant cost savings on this package.... ", with a reference back to earlier discussions in which this had been made plain. Harmon submitted that a second tender was not sought, merely a revised submission and not an offer capable of acceptance. In my view the terms of LML's letter are clear: a tender or offer was being requested. In addition the phraseology had changed so that, if anything, it was clearer that a tenderer was not entitled to put forward a new design. This was also the view of Mr Josey. Furthermore tenders were being sought for a revised design which was to replace the "base scheme" and which to be the basis for evaluating all tenders. H of C was avoiding having to re-advertise the fenestration package. The new design was thereafter treated as if it had been advertised. Therefore I do not regard this second request for tenders as simply a pricing exercise; it was a request for a tender capable of acceptance.

82. Seele's quotation of 22 September read in part:

589. - "Pricing Schedule (Revised Submission)"

590. - Fenestration

COMMERCIAL IN CONFIDENCE"

83. Option B2 offered two important and technically attractive features: first, Options A1 and A2 involved the use of wet silicone seals to provide weatherproofing whereas Option B2 offered a welded seal which was preferred by AFE on the grounds that they had two main advantages: longevity and certainty, ie ease of maintenance; secondly, it was similar to Option A1 and would therefore would have taken less time to modify the detail design drawings, as compared with Option A2; thirdly, it avoided the need to weld aluminium bronze to brass. A comparison of the approaches was helpfully illustrated by Mr Josey in his reports and in a number of sketches such as those in exhibit P4. Mr Josey was of the opinion that there was a significant design difference between Option B2 and Option A1. He highlighted the fact that Seele/Alvis had not proposed a permutation of option B as the procedures for the fabrication or manufacture of the glazing clamps were not the same. The original glazing clamps had been brass extrusions, very finely sculpted, in reasonably long lengths. In Option B2 the glazing clamps were machined from flat plate and cut and formed in a different fashion, with welding replacing a large number of bolt holes in the brass mullions (68 or more on certain types of panel and the clerestorey units. He adhered to this opinion when cross-examined and I accept it as summarised by Mr Josey in paragraph 3.18ff of his first report:

84. Mr Noble said that on a highly prestigious building of this kind, any risk of water penetration had to be reduced to an absolute minimum and that it was important also to keep maintenance costs and disruption to a minimum since the building's occupants were likely to be vociferous if things went wrong. Welding instead of bolts was therefore attractive. However the basis upon which Option B2 was put forward, namely "commercial in confidence", subsequently caused concern, as Mr Mumford acknowledged, as it prevented H of C obtaining a competitive tender from any other tenderer so as to make a comparison with it. On the other hand Seele/Alvis could hardly be criticised since it only followed H of C's requirement set out in the letters soliciting new tenders. H of C had thereby disabled itself from obtaining competitive tenders in any normal sense. The effects of this policy are examined later. Seele/Alvis's proposals were and were treated by the project team and Mr Makepeace as entirely complete. The savings were stated by reference to Seele/Alvis' previous tender so that there was a basis of comparison with a basic compliant tender.

85. On 25 September 1995 the results of the second round became known when four re-tenders were opened. Harmon offered a fixed price of -37,875,746 for option A. It was presented in the form of a modification of the original tender (ie as stipulated by LML) and purported to be a "fully compliant submission". It was just as much an offer capable of acceptance as the first tender. This second tender was -2,589,634 lower than the first tender. The adjustments are to be found in Harmon's internal documents. (The reduction was rather more than Mr Sahyoun would have wished.) Seele/Alvis's tenders were: for Option A on a fixed price basis -38,522,053; with fluctuations -34,889,393. It offered Option B at a fixed price of -37,237,447, with fluctuations at -33,604,787 and the variant option (B2) for the sum of -36,246,705. In summary therefore the position was:

Harmon

Seele/Alvis

Gartner

MBM

614. Seele/Alvis's fixed price tender for Option B was fractionally lower than Harmon's tender for Option A. Harmon then thought that Option B would result in a higher price. (MBM was thereafter excluded from further consideration.)

86. On 3 October 1995 Alvis wrote to the Chairman of the Accommodation & Works Committee to point out that Alvis were the only UK tenderer on the fenestration package. Seele/Alvis wrote further on 6 October:

87. Mr Boyle and Mr Michno met LML on 29 September 1995. The purpose of the meeting was to investigate Harmon's pricing. LML wrote subsequently to confirm its requirements - see LML's letter of 2 October 1995. I doubt that Mr Boyle said that either at this meeting or a little later that Mr Mumford told him that Harmon's tender should ideally be less than -34,000,000 since Mr Mumford was by nature unforthcoming. That information probably came from Mr Kerr. However I am sure that he asked Mr Boyle for savings and for a price for Option B. Mr Kerr had telephoned him to inform him of the other prices that had been received. Mr Boyle was told that all other tenderers were being asked to put in lower prices and alternatives. Accordingly Harmon wrote on 10 October 1995 reducing its fixed price for Option A1 to -33,969,939 (by reconsidering certain elements so as to arrive at -35,287,626, and then making a commercial reduction of -1,317,687. In its letter of 10 October 1995 Harmon asked for a meeting to discuss further reductions. Two days later Harmon put forward a price on a fluctuations basis of -30,969,968. This reduction was about -3m less than the second tender. Harmon also offered a further saving of -970,000 (suggested by Mr Gabriel Sahyoun who by then had been persuaded of the need for reductions) if it were awarded the roof light package (4350) as well as the fenestration package 4200. These letters were presented as revisions of the tender of 25 September and in my judgment each was a further offer which replaced the previous tender and offer.

88. It is surprising that both Gartners and Harmon were encouraged to submit a revised price on either Options A or B1 since both MHP and AFE thought that Option B2 was so technically superior to AFE's own design. It is now clear that B2 was technically superior to Options A1 and A2 and was buildable - see the evidence of Nr Noble; Mr Josey (paragraph 2.3.2 of his report) and Mr Blois-Brooke. Mr Noble agreed that from a simple, narrow technical perspective there was no point in asking for a re-tender on Option A1. However by this stage there was an increasing awareness of the need to comply with the PWR so in my view the reason was to generate the appearance of a competitive process whereby Option B2 would be eligible for selection. The pressure became even greater by the end of the month. (Mr Mumford had now read the PWR; it is remarkable that LML left him in ignorance of them for so long.) I do not consider that Harmon is to be criticised for not submitting a price for Option B. It was not obliged to offer one. (The letter of 11 September asked only for a revision of its previous submission.)

89. The task force met on 10 October. Notes were made of the meeting by Mr Brand. Mr Pringle agreed that Mr Quick had said that it was "OAP's preference is to go British if possible." However as there was a split view amongst the project team he might suggest proceeding with both. He would therefore go forward on both solutions which would give "the Committee [ie the AWC] the option to steer towards Alvis (UK based company)". Mr Pringle confirmed that the project team knew that Parliament and the AWC would have liked to have seen as many British companies awarded contracts on this package as possible. In my judgment taking into account other evidence about Mr Quick, Mr Brand's note was accurate.

90. The task force worked on producing a report throughout October 1995. Mr Pringle thought that Mr Mumford had caricatured him in his note of a meeting held on 12 October 1995 when he recorded MHP as advocating "Buy British". It was also agreed at that meeting that Sir Michael Hopkins would present the report to the AWC. Mr Pringle was with Sir Michael Hopkins on that occasion and, when questioned about it, did not deny that the AWC was told by Sir Michael that not only was Seele/Alvis's proposal technically better but that it was put forward by a British company which was in its favour. Mr Pringle agreed that the AWC had expressed a preference, if possible, to have a British contractor appointed. On 13 October 1995 LML sent to Mr Quick a cost comparison of all the options for the fenestration package submitted by each tenderer. This showed that Harmon's tender for Option A1 was the cheapest at -31,448,354. By comparison Seele/Alvis' tender on the same basis was -37,211,679. A note said of the price for Option B2 offered by Seele/Alvis at -34,559,127 (fixed):

91. A few days after 12 October a meeting of the project team took place at which, according to Mr Mumford and his notes, it was accepted that Harmon was the front runner, and MHP (who was represented by Mr Pringle, Mr Romaniuk and Mr Dunster) said that options A1 and B2 were technically very similar, but Mr Mumford felt that nevertheless since the package was over budget it was necessary to see whether pursuit of the others might reduce the cost. Nevertheless despite its views on technical similarity Mr Mumford noted:

629. - Harmon "the Big Shed"

..... ".

630. Mr Mumford loyally refused to accept that Buy British meant Seele/Alvis, although I cannot see what else his note could have represented, especially since it was followed by the somewhat derogatory appellation "Harmon - the Big Shed" - a reference to Harmon's factory in France. On 18 October all tenderers were asked to provide more information about their abilities. The letter to Harmon read in part:

....

92. A draft report was produced dated 18 October. It was called a "Cost Saving Review. It read in part:

650. a. security requirements as previously specified;

651. b. environmental requirements and design philosophy; and

652. c. project programme;

653. d. use of bronze;

654. e. concept of a long life building.

658. The Task Force was to report by the October A&W Committee meeting.

660. Arup Facade Engineering - Neil Noble

661. Gardiner and Theobald - Peter Baxter

662. Laing Management Limited - Jerry Mumford

663. Michael Hopkins and Partners - Peter Romaniuk

....

677. A2 Joseph Gartner -30.5m

B2 Seele-Alvis -32.4m

678. A1 Joseph Gartner -32.8m

....

685. The report's conclusion was:

93. At the time Mr Mumford queried a part of the report which read:

688. He annotated his copy : Why? It is clear that there was now no suggestion to the AWC that there was to be any comparison between A1 and B2 to see which might be technically superior. The change of approach came from Mr Quick, the task force leader, who was of course closest to Mr Makepeace and his thinking.

94. The progress report submitted to the AWC for October 1995 stated in part:

.....

...

....

....

95. The minutes of the AWC meeting of 18 October read:

97. Mr Boyle, Mr Larson and Mr Michno naturally all agreed that these inquiries into Harmon's managerial and technical abilities would be used in the evaluation of Harmon's tenders. Mr Boyle had arranged for Mr Kurt Larson, the project director of the Petronas Towers project in Kuala Lumpur to fly over as he had been proposed as project director for the fenestration package in association with Mr Michno. Mr Gabriel Sahyoun and Mr Voisin were also present with others from the proposed team. Mr Larson gave a presentation on project management and control systems. Mr Michno gave a presentation on manufacturing, specifically the staffing, equipment and proposed organisation and explained the resources available. (Mr Larson and Mr Michno when giving evidence struck me as highly competent and well able to harness and to maintain the resources necessary for the NPB.) It was accepted that Harmon would have to buy a CNC machine for the Sitraco factory. There were then very few welders at Pinon since there was not a lot of work in the factory at the time. Harmon had provided a full answer to the inquiry about welding and M. Michno's amplification in cross-examination satisfied me that Harmon should have been able to obtain welders of the requisite calibre, eg from the team working for M. Rayjal. However Mr Boyle pointed out in evidence that the project for the NPB was just as challenging as that for the Bibliothèque Nationale which had been handled primarily from Pinon. In addition Harmon's submission listed projects that it would be undertaking over the next few months. Their total value was over -10 million and they would clearly have revived or maintained operations at Pinon. Following the visit Mr Kerr telephoned Mr Boyle to say that the presentation had been well received. Harmon had moved ahead of Seele/Alvis as they were unable to identify where or how the project would be manufactured, and that Seele/Alvis did not appear to know what was needed for the project.

98. Another meeting of the project team was held on 25 October. By this time the team realised the difficulties that they faced as they were heading for a breach of the PWR, as both Mr Mumford and Mr Makepeace acknowledged. Mr Brand had a meeting with Mr Makepeace on that day at which Mr Makepeace took up LML's stance. Mr Brand noted "AM will be put in position of clarifying requirements , ie reasons for rejecting either G[artner] & A2, A1 or B2 must be clear - PWD may well have to have final word on this subject." He also recorded that Mr Quick had said that Harmon's factory was busier and that it had a "positive attitude". Nevertheless Mr Makepeace was well aware of the problem facing him since he asked the question:

706. Mr Baxter too was concerned about the decision that the task force should attempt to quantify the risk involved in placing the order for the fenestration package with each individual tenderer, by the addition of a percentage allowance to the tender price. The percentages would be used to weight the prices of the tenderers to indicate the differential in the team's assessment of risk as between the different tenderers. Mr Baxter accepted that the team should deal with differences in technical and management capabilities of the three tenderers, but he saw that as a matter of subjective judgment which could not be converted into money which is not subjective. He thought that the team was "straying into a very dangerous area". G&T took steps to warn Mr Makepeace of its misgivings at a meeting on 26 October.

99. LML and MHP conducted assessments of the tenders, each adopting a form of scoring or rating (which had been discarded at an earlier stage). Mr Mumford, for example gave (out of 10) for project manager: Harmon 7, Seele/Alvis 8, and Gartner 9; and, for project team, Harmon 8, Seele/Alvis 8, and Gartner 9. Indeed Gartner came out top of Mr Mumford's assessment with 131 against Harmon 100 and Seele/Alvis 117. MHP prepared a report on 6 November 1995 which gave Gartner 75%, Seele/Alvis 75% and Harmon 49%. However in cross-examination Mr Pringle (who did not appear to have had much real experience of contractors who carried out specialised welding) accepted that the document was an internal one "to clarify our thinking"; that it was not scientific and that MHP were reluctant to table it (which I do not accept) although they circulated it to everyone "to be discussed". The overall picture that they wished to paint was "what we were trying to establish". "It was subjective; it was intended to influence the task force." Although H of C relied on these assessments I consider that they are of little or no value, especially MHP's, as the cross-examination of Mr Pringle demonstrated how biased that firm was against Harmon. In addition as Mr Josey pointed out Harmon was not like many other curtain walling companies since it had project-managed some of the largest cladding projects in the world, by a process assembling very good designers, very good planners, and components from various different suppliers which are then be sub-assembled in a factory which has been purposely acquired. He therefore it thought almost incredible not to have sought references so as to assess Harmon's technical and managerial skills as they had been applied on previous projects. He said in paragraph 6.15 of his first report: "Normally one would expect references to be taken up, enquiries to be made of the architects of those projects and of the end users." In my experience it ought to be done at the prequalification stage so that the short list was properly complied. In my view the absence of these inquiries shows that Harmon's reputation had preceded it and that H of C's advisers did not consider it necessary to seek references at any stage. It is therefore all the more surprising that LML and others maintained at the trial that Harmon was not capable of organising the requisite teams and facilities.

100. Although Gartner had not been excluded, the project team and task force now concentrated on Harmon and Seele/Alvis. On 25 October Mr Makepeace sent a memorandum to Mr Webber with his views on Mr Quick's draft report. Amongst other things he said:

101. Mr Makepeace, when asked about this letter, said: "The concern was that we had a price from Alvis for the B2 version and we had no comparable price for B2. Effectively, it was looking rather like a single tender offer for a very large package and, in normal public procurement rules, one tries to avoid single tender packages." He agreed that single tenders were not allowed on this package. It is therefore clear that Mr Makepeace thought that Option B2 was so different from the others that it could not be treated as a permissible alternative or variant but as a new proposal which warranted competition but he saw the way out might be by getting revised prices for the base scheme. However he decided against that route.

102. Following the meeting it was decided that in order to ensure competition all three remaining tenderers would be asked to tender on both Options A1 and B2, but for the latter AFE was to produce a scheme that embodied the design concept of B2 without infringing Seele/Alvis' rights protected by the "commercial in confidence" tag. However Mr Makepeace got cold feet and he ultimately decided that the tenderers were all to be asked to re-tender with Seele/Alvis being asked to reprice Option B2, and Harmon and Gartner Option A1, although his first instruction in his fax of 26 October was that "all three companies should confirm their prices for options A1 and B2". Having given it further thought he revoked this instruction Had it been implemented there would have been competitive prices for both options but Mr Makepeace did not want this.

103. On the day of the meeting Mr Noble sent a fax to Mr Quick:

715. Mr Brand said that the fax was not entirely accurate as the decision was taken by Mr Makepeace himself. In my view Mr Brand is right as his recollection is consistent with Mr Makepeace's letter to Mr Webber. Mr Brand's note of the meeting recorded:

717. These views were not those of either Mr Brand of Mr Mumford but of those then present almost certainly Mr Quick expressed them (or possibly Mr Noble or Mr Sakula). Mr Brand thought that it was a foolish thing to say. It was obviously true. (The notes taken by Mr Brand and the fuller notes taken by Mr Mumford were accurate within their respective limitations.)

104. I do not accept Mr Makepeace's evidence that LML told him that the "commercial in confidence" restriction imposed by Seele/Alvis could not be broken. Mr Mumford said that no one in the project team even considered inviting Seele/Alvis to remove the "commercial in confidence" restriction on Option B2. The effect of Mr Makepeace's instruction was that H of C had no basis upon which there could be a "like for like" comparison of the revised tenders of Harmon and Gartner for Option A1 and of Seele/Alvis for Option B2. This was recognised by Mr Mumford to be like comparing "apples with pears". It is hard not to accept Harmon's submission that the tendering process was by now a charade. The project team had already decided that Option B2 was technically superior to Option A1 and that accordingly Seele/Alvis would be recommended as the successful tenderer. Nonetheless they went through the motion of asking for Harmon's best price for Option A1 knowing that it was not going to be accepted.

105. Mr Makepeace wrote a long letter to LML on 3 November in which he endeavoured to put on record a justification for his decision:

729. In this letter Mr Makepeace thus acknowledges that it is not possible to obtain tenders comparable to Seele/Alvis' tender from either Harmon or Gartners. In my view the letter also plainly gives clearance to the task force not to make cost the dominant factor as the key issue was now whether the package will be completed in time. (At this date Westminster Underground station was to be handed back by LUL in January 1997 - a date that was missed by a year.) Mr Makepeace confirmed that but for the time factor the package might have been retendered. Thus "management capabilities" are now of great importance and are to be an important criterion.

106. In accordance with Mr Makepeace's instruction LML on 30 October requested Harmon and Gartners to submit their current prices for Option A1 (the welded solution as opposed to the silicone sealant solution) and Seele/Alvis was similarly asked for its latest price for Option B2:

(The reference to the bolted alternative is relevant.) Again the letters clearly seeking a tender or offer, and in the case of Seele/Alvis without reference to another design.

107. Harmon's prices for Option A1 were -31,262,154 (fixed price) and -29,562,154 (fluctuating) - see its letter of 2 November, which is in my judgment an offer which replaces the previous tender of 12 October as it was presented in a form of a revision or amendment to that offer. Therefore as a result of the fourth round H of C now had in law only two offers available to accept from Harmon: Option A1 with either a fixed or a fluctuating price. Seele/Alvis's prices for Option B2 were -34,153,276 (fixed) and -32,363,375 (fluctuating). They similarly replaced the earlier offers. Subsequently Mr Kerr told Mr Boyle that Harmon was on the short list with Seele/Alvis. He said that the feedback was that AFE and MHP thought that Harmon's system would ultimately cost more because it would involve countless drawings on the part of AFE. Mr Kerr told Harmon that Seele/Alvis were higher but did not explain the differences between the options.

108. Mr Boyle therefore telephoned both AFE and MHP to find that whether Harmon's tender had been accepted "and not discounted for any technical reason". He said that on 7 November Mr Dunster confirmed that the tender was technically compliant, and that he had a similar conversation with Mr Noble. He therefore wrote to both on 9 November 1995 confirming the conversations:

734. Mr Boyle also spoke to Mr Mumford and on 9 November 1995 sent him copies of the letters to MHP and AFE:

737. Mr Mumford noted on his copy of the letter that Harmon had written "to make a point". He discussed the letters with MHP and AFE but did not think it necessary to challenge Mr Boyle's accounts. He merely sent the following reply:

739. When questioned about this letter Mr Mumford agreed that Harmon's tender was competitive and that although it might not have been fully compliant any non-compliance in its final tender was not a factor which the task force had taken into account in preferring the Seele/Alvis offer. This was undoubtedly the case as every tenderer had not complied strictly with the invitation in some respects but none was rejected or even the subject of material criticism at the time for non-compliance (nor indeed was it a reason for rejecting Harmon's tender). Mr Boyle immediately sent Mr Mumford a fax on 21 November 1995 asking him to explain why it was not accepted:

741. We are shocked by its contents.

745. The only answer that Harmon received was a letter dated 22 November 1995 from LML stating that Mr. Mumford would respond "in due course", but Mr Mumford never did so, despite a further letter from Mr Boyle. Discussions with Seele/Alvis started on 23 November as soon as Mr Makepeace had formally decided in its favour. I am sure that the project team evaded giving Mr Boyle an answer to what had without doubt taken place as it would have revealed that although Harmon's tender was competitive on price it was being compared with a materially different proposal which Harmon had not been asked to price.

109. Whilst this correspondence between Harmon and LML was taking place the task force report was nearing its final stages. At this point the CPG made another intervention, the timing of which was surely not fortuitous. On 2 November Mr Dodds sent a letter to Mr Noble:

750. Mr Noble agreed that the letter was written at a critical time. He said that he read it as certainly saying that there was good government support for not necessarily accepting the lowest tender and that it expanded on the concept of "overall value for money" so that other matters might be taken into account, but nevertheless he maintained that he did not treat it as an attempt to influence him. (It apparently failed in its objective.) In addition on 10 November 1995 Mr Dodds also sent a memorandum to Mr Nigel Thompson, the chairman of the CPG (and a partner of OAP), Mr Noble and to Mr Duncan Smith of Alvis plc which enclosed the following extract from Hansard (L1/136):

756. In my view one would have had to be pretty naive (which Mr Noble was not) not to realise that Mr Dodds' interventions were plainly signalling not just that it would be permissible not to accept the lowest tender but that Seele/Alvis' tender was to be accepted. For what other reason did Mr Dodds copy Alvis in to the circulation of the memorandum? I conclude that Mr Dodds knew that Seele/Alvis' tender was not the lowest and that other factors would have to be evaluated in order to justify selecting it in preference to the lowest tender.

110. Mr Quick prepared a further draft report dated 9 November 1995. It contained on page 2 a comparison of the offers submitted. Against an item "maintenance costs" OAP had inserted -400,000 for Seele/Alvis (B2) and -2,090,000 for Harmon (A1) and for Gartner (A1). These figures which were produced for Mr Quick by OAP (and not G & T) and were questioned by LML. Mr Mumford annotated his copy with LML's comments: "How is this calculated? In 19 Oct '95 report the difference in maintenance cost was -90,000. It is now -1600000." The adjustments for Risks had not been agreed. LML's view was that "all risks are to be controlled by the project team". Mr Nettleship who Mr Mumford said was a respected experienced engineer made the following additional remarks: "This is an ironic presentation. Then why were not all parties asked to price a scheme based on the original principles?" ... "We would be made to look incompetent if a report in this form became available to an unsuccessful tenderer!" Mr Mumford agreed that if the report had gone out in this form that Mr Quick had drafted without amendment, it would have been inaccurate. In my view there was nothing in this draft which, if inaccurate, was to the disadvantage of Seele/Alvis.

111. On 10 November 1995 Mr Mumford sent a letter with LML's views to Mr Quick:

761. By "more competitive" LML meant that Harmon was the lowest. Mr Baxter also sent detailed and critical comments on the draft in which he set out what he considered to be the true adjusted figures which in total were (fluctuating);

Harmon: -33,857,000

Seele/Alvis: -35,364,000

Gartner: -39,401,000.

112. Mr Quick did not reply with a letter although he telephoned Mr Mumford on 13 November 1995. Mr Mumford recorded the points made that Mr Quick had made in a fax to Mr Brian Zelly, the managing director of LML:

...

(Mr Mumford said that Mr Quick was not going to put anything about the budget in the Report.)

....."

113. Mr Mumford professed not to know what was meant by "play the game" but I am sure that he understood what Mr Quick was driving at, as he did not ask what he meant although he made a careful note it. LML, like G&T, was unhappy both with some of the figures that were being introduced in risk assessment and with the risk assessment itself as it could not be justified to an auditor. The "game" was to make enough adjustments so as to reduce the gap between the two tenderers to a margin that would justify the choice of Seele/Alvis for otherwise Harmon would be well ahead. (LML was however happy with the figures for maintenance.)

114. The task force report written by Mr Quick was submitted on 20 November. It recommended that Seele/Alvis tender for Option B2 should be accepted. It read:

"NEW PARLIAMENTARY BUILDING

3. QUALITY COMPARISON

4. CONCLUSION

800. We seek your endorsement of these actions."

115. The events leading to the preparation of the task force report leave no doubt that the objective or "game" as understood and endorsed by Mr Quick, MHP and AFE was to ensure that Seele/Alvis was presented as the preferred tenderer largely by "fudging the figures", both by introducing elements of "soft costs" which had previously not been considered either at all or as material and by the substitution of figures where they could or would not be supported by G & T or which were highly subjective. The effect was marked as the difference between Harmon and Seele/Alvis widened to about -2.4 million. Mr Quick obviously wanted the task force to recommend the acceptance of Seele/Alvis and when faced with the prospect of lack of unanimity sought clearance from Mr Makepeace to produce a majority report. It is clear to me that Mr Quick had been appointed for this very purpose. Mr Quick was the only member of the task force who Mr Mumford thought might possibly be in favour of a British contractor. He maintained that otherwise the project team had no such bias, although that is not a view that I share. MHP was plainly biased towards a UK contractor and towards Alvis (see for example Mr Pringle's evidence and the opposition to a shift to a performance specification) and AFE wanted Alvis for its skills. In my view Mr Fernyhough was entirely right to have put to Mr Mumford that Mr Quick's original draft was "a travesty of the truth", and to describe this part of the tender process in November 1995 as "a charade". Both descriptions are apt and accurate. I accept Harmon's case that the final report was slanted towards Seele/Alvis and I also accept that on the evidence before me Mr Quick was determined that the tender of Seele/Alvis would be recommended. The defendant did not call Mr Quick to explain what he did or why he did it. Thus the project team recommended Seele/Alvis even though its tender was about -2.4 million higher than the Harmon's price of -31,370,996 without any calculation to support its conclusion that it represented "best value for money".

116. Nevertheless on 23 November Mr Makepeace accepted the recommendation contained in Mr Quick's report and authorised further work to be done to overcome the lacunae in the report and discussions to commence with Seele/Alvis. (The discussions with Seele/Alvis turned out to be prolonged.) Mr Makepeace accepted that he knew that Seele/Alvis' tender was -2.4 million higher than Harmon's, that he had no facts, and only the opinions of the project team, to show that it gave overall value for money, that he was plainly not accepting the lowest tender. The adjustments made by Mr Quick were obvious although Mr Makepeace would not accept that the books were cooked.

117. The project team recognised that there were potential dangers in proceeding with a tender which was not explicitly the lowest and suggested in two places getting legal advice from Mr Fleet of Berwin Leighton, as appears from the package meeting minutes of 23 November 1995 which was attended by Mr Makepeace and from LML's letter to TBV Consult of 30 November 1995, which was copied to Mr Makepeace. Mr Makepeace accepted that it had been agreed to do so but he said that he reached his decision not to obtain legal advice having discussed the matter with Mr Webber although in his letter to Mr Webber of 28 November he himself proposed "not to do so on the basis that, at this stage, we are not actually rejecting Harmon's offer":

807. The last part of the last paragraph is a further example of not comparing like with like. It is very misleading.

118. In other respects Mr Makepeace's letter to Mr Webber is a remarkable gloss on the facts so here as elsewhere I noted Mr Makepeace's careful choice of words and his attempt to distance himself from reality and the consequences of his own actions all of which were in my view calculated not to give a completely straight and truthful account, which I am sure he would have given had it been in the defendant's interest to do so.

119. The AWC had met on 22 November 1995:

808. On 28 November the Chairman sent a pointed letter to Sir Michael Hopkins about cost overrun.

120. On 29 and 30 November 1995, the Chairman of the AWC, accompanied by Mr Webber and Mr Makepeace, visited Brussels where they met members of the European Parliament and others. The purpose of the visit was said to be in order to discuss the new building which was then being built for MEPs. However Mr Brand subsequently met Mr Makepeace and recorded in his diary:

810. Mr Makepeace maintained that on that visit there had been no discussion about whether or not acceptance of the Seele Alvis tender would conflict with EC Law and the PWR. However, this denial does not square with Mr Makepeace's own diary notes (and Mr Brand's note) and I do not accept it. Mr Makepeace's diary (exhibit P7) does of course record discussions concerning the new building in Brussels and comparisons between it and the NPB. There was however this note:

812. Mr Makepeace said that the discussion referred to the building in Brussels, although it is by no means clear that EC procurement regulations applied to that project. However I can make no further findings about what took place on that visit or about advice (if any) was given, beyond saying that the NPB project was raised and that there were discussions about procurement procedures.

121. At the request of Mr Makepeace Mr Quick was asked to improve its report in order to overcome its patent weaknesses:

821. It can be seen from the last paragraph in particular that Mr Makepeace was well aware of the problems that might be created by LML and G & T. His reference in the penultimate paragraph to the cost of delay is also remarkable as it was a constant.

122. Mr Quick produced a revised report within a few weeks. In his covering letter of 19 December 1995 Mr Quick said:

823. The Report read:

824. "Fenestration

Harmon/CFEM Seele/Alvis

-29,562,154 -32,363,375

Harmon/CFEM Seele/Alvis

29,562,154 32,363,375

830. [Secondary glazing] (62,804)

883 64,536

46,875 82,014

_____________ _____________

_____________ _____________

_____________ ______________

_____________ ______________

844. Contract Escalation up to

845. Const. Issue Drawings (5%) 1,535,348 (2,5%) 796,574

846. Contingency Post Contract (5%) 1,535,348 (5%) 1,593,148*

____________ ____________

-33,777,659 -34,252,681

____________ ____________

5.5. Risks/Soft Costs

Harmon/CFEM Seele/Alvis

847. Total Capital Spend 33,777,659 34,252,681

848. Travel Costs (differential) 50,000 -

849. Additional Contingency (2.5%) 767,674 796,574

850. Supervision (differential) 100,000 -

Maintenance 858,000 394,000

____________ ____________

851. Total with risk/soft costs -35,553,333 -35,442,255

____________ ____________

123. When giving evidence Mr Baxter of G & T was asked about the report in the light of his previous contribution to the work of the task force. He said that the figure of -679,631 which had been deducted from the Seele/Alvis price on account of advanced payment had been calculated on an assumption of 20% whereas previously he had assumed that 10% had been included in Harmon's tender. The addition of -150,000 for the interlayer had been reduced to -136,000 although he did not know of any good reason to do so. Furthermore although he had allowed an addition of -273,000 for the lightshelf this had become -167,000. Mr Baxter had used -300,000 for the lightshelf in adjusting Harmon's price which he had thought sufficient. He thought that the Seele/Alvis allowance should be -273,713. It was now -953,125. He said that he would have asked that the original figures should be retained. His replacement, Mr Walker, had also been unhappy about the favourable treatment of the Seele/Alvis' tender in the case of the advanced payment and the lightshelf. Had the items for the lightshelf and the advance payment been so stated the balance in favour of Harmon would have been about -1 million. In this report the differential for maintenance had reverted to -424,000, as compared to -1.6 million in the November report. Mr Barry's report contains a useful summary and discussion of the changes. He said that from beginning to end the tender process conducted by the project team was unusual at all stages and that he had not seen it before. He had seen nothing in the documents that he identified as a traditional tender evaluation process being undertaken. I entirely agree with Mr Barry's views. Although there are naturally various ways in which tender evaluations are carried out and reported on I too have never seen one such as this. Even if it had not been slanted it would have been unusual. One might have expected something like a rating or scoring system such as that proposed by LML (and partially used by it) which have would been aligned to the ranking of the criteria (and carefully weighted) and published alongside them so its operation could not override the ranking and so that the tenderers could see that it had been operated fairly. To try to put sums of money on subjective judgments, as was proposed on 25 October, was not sensible, as Mr Mumford said when he confirmed that the team had not agreed in advance the criteria that were to be used to assess the tenders.

124. The report was further revised on 2 January 1996. I am sure that the purpose of Mr Makepeace's request was that the final version should bridge any gap between the Seele/Alvis tender and that of Harmon since he was soon referring to the tender of Seele/Alvis as the "lowest", which was of course not true. First, in his report to the AWC for December 1995 Seele/Alvis are so called, which Mr Makepeace accepted was factually incorrect. Secondly, in his report of February 1996 to AWC he said:

853. Mr Makepeace also said, revealingly, that his audience knew "what was going on".

125. On the basis that the effective decision to engage Seele/Alvis had been taken on the basis of the November report, that of December 1995 might conceivably be regarded as part of an internal budgeting exercise but if that were so it would not have been necessary to have considered Harmon's tender or to have made notional adjustments to it so as to arrive at any comparison with Seele/Alvis. It is curious, for example, that adjustments are made for fluctuations but not on the same basis, that there are marked differentials against Harmon for travel (-50,000) and supervision (-100,000), and that a very substantial amount for maintenance (about -450,000) was added beyond Seele/Alvis' figure (although it might fairly represent the difference between Options A1 and B2). It is noteworthy that higher maintenance cost was deliberately omitted by H of C when reasons came to be given for rejecting Harmon's tender, even though Mr Pringle said that it was one of the new criteria which was actually used to assess the tenders. Mr Barry said that the financial adjustments made in paragraphs 5.3-5.5 were not legitimate for the purposes of assessing tenders. Since they had been excluded from the task force report they ought not to have been used in this report without qualification. In my judgment they were put in and had to be put in as the choice had to be justified on grounds of cost. Mr Noble in its witness statement gave engineer's reasons:

126. On 12 and 16 January 1996 Mr Boyle, prompted by a conversation with Mr Kerr, wrote to LML to offer further savings and assistance and to maintain contact with the project team. LML however declined these overtures.

127. During the negotiations with Seele/Alvis there were changes in H of C's policy about the terms upon which tenders had been invited. During the tender period it was made very clear to all tenderers that alterations to the terms would not be entertained. Once it was clear to Seele/Alvis that they were successful and that the contract was virtually in the bag and that H of C could not afford further delay they took a hard line in the negotiations. Seele/Alvis were able to exploit the fact that the preferred Option B2 was their proprietary product that they would not allow changes to it. LML was so concerned about their stance that it seriously considered an alternative. On 20 February 1996 it said:

857. First, it had been assumed that contracts made by H of C with designated suppliers would be novated with the trade contractor and for that purpose the terms of trade contracts provided for back to back liability. In reality H of C could not get satisfactory terms from the suppliers so the terms of the trade contract had to be renegotiated so that Seele/Alvis were permitted a limited degree of negotiating rights with the suppliers, and secondly their liability to H of C in respect of suppliers under the trade contract was limited. I deal later with the implications of these moves. An indication of the difficulties can be seen from the Mr Makepeace's report to the AWC for February 1996 to which I have referred. Mr Makepeace said that it was necessary to obtain legal advice on these points and on whether to award the contract to Seele/Alvis would comply with EC procurement law, as by mid February 1996 he was moving in the direction of entering into a contract with them. The steps then taken by Mr Makepeace (when a change of a contractor would have wrecked the programme for the project) contrast with his decision some three months earlier not to seek legal advice about the award of the contract to Seele/Alvis. (I shall not draw any inference about the nature of the legal advice that may or may not have been given.)

128. On 1 March 1996 LML sent TBV (with copies to Mr Makepeace and G & T) a reasonably detailed assessment of the costs which Harmon could have expended when tendering. It came to -164,000 (inclusive of 15% for overheads). An inquiry of this kind could only have been prompted by a belief that Harmon might have to be compensated.

129. Mr Boyle wrote again to Mr Brand of LML on 21 March 1996:

869. Mr Mumford took advice from Mr Fleet of Berwin Leighton about this letter as there was a standing instruction to that effect. Mr Makepeace wished to give the impression he was not consulted about these letters or the answers ("I do not believe so"; "not that I can recall") but I do not believe him as I am sure that he would not have left Berwin Leighton to decide H of C's policy and to draft letters that either had not been approved by him (which required him to have seen Harmon's letter) or were in accordance with his instructions. When asked about Mr Boyle's letter Mr Brand agreed that Harmon's tender was the lowest although he jibbed at agreeing that there were then negotiations with Seele/Alvis. The first reply proposed by H of C's legal advisers was:

873. The letter which Mr Brand sent on 26 March was also in accordance with advice given to H of C. It read:

877. Mr Brand accepted that if the letter meant that the team were still assessing the tenders then it was not true as the client had instructed the team to follow the recommendation of the task force. He also agreed that he signed letters on the instruction of Mr Makepeace to implement legal advice.

130. On the other hand Harmon was also taking legal advice. On 19 April 1996 it replied to a letter from LML's letter of 17 April:

878. ".....it does not address our concerns.

880. The letter was overtly copied to no less than three firms of lawyers (including Norton Rose) and to Mr Makepeace.

131. LML sent a predictable reply

132. On 2 April 1996 LML sent a letter to Mr Makepeace listing numerous significant amendments which had resulted from the negotiations. They included the fact that Seele/Alvis' off-site programme was very different as Seele/Alvis would not complete performance testing of the prototype joints etc until fabrication was well-advanced. In the cross-examination of Mr Mumford it became apparent that Seele/Alvis had taken advantage of the delays to the NPB and the elastic wording of the tender documentation to achieve better programming of the off-site work without affecting the price (indeed almost certainly saving them money).

133. The PWD sent Seele Alvis Fenestration Ltd a letter of intent on 4 April 1996 and another on 16 April 1996, as it took two weeks to deal with what Mr Mumford called "a small number of exceptions" raised by the company. Mr Brand agreed that after the first letter of intent had been sent there was no longer any reason not to withhold information from Harmon and that such a move had been discussed with H of C's legal advisers and their recommendation not to tell Harmon until the contract had been signed had been followed. Mr Brand would not be drawn as to whether the reason for the delay was to avoid the possibility of Harmon seeking an injunction. However all the evidence points to that conclusion. H of C was, I am sure, well aware that it had not followed the correct procedures and that its actions were open to challenge by Harmon.

134. Even after the second letter of intent had been signed by the contractor on 18 April 1996 Mr Mumford continued to hold discussions with the company. On 18 April 1996 Mr Dodds of CPG at the request of the DOE sent Mr Makepeace a fax with some additional wording to the text of a speech which the Rt Hon Selwyn Gummer MP, the Secretary of State for the Environment, was shortly to make to order to cover the advantages that the award of the contract would bring to Alvis, as UK manufacturer. Mr Dodds' draft referred to Alvis having "beaten the field of very tough international competition" and said "this diversification by Alvis from defence into construction marks the culmination of three years work by the Construction Procurement Group....". The draft had been cleared by OAP as well as Alvis which once again shows the close connection between OAP and CPG and the extent to which OAP and CPG had a common agenda to secure Alvis as the UK contractor. Mr Makepeace replied telling Mr Dodds not to "believe everything you read in the Press! Alvis have not secured the contract. A letter of intent has been issued..... but there is a major hurdle still to be cleared on contract value. We will not know the result until the end of the month.... . ...this is a Parliamentary not a Government project.... . In the circumstances at the very least a much more circumspect line is called for than in your present draft." This was written for the record as it is strikingly at variance with the facts. The final contract sum was -33,686,066.95.

135. The trade contract was sent to Mr Makepeace on 23 April and, after it had been approved by him and signed by the contractor it reached the Clerk to the House who signed it on 8 May 1996. That date was treated as the date of the award of the contract, notice of which was sent on 14 May.

136. The criterion given for the award to Seele/Alvis was "overall value for money". On 16 May 1996 LML informed Harmon that its tender was not successful:

137. Around this time the AWC was concerned to know the sources of the materials and work for each of the packages so Mr Makepeace formally asked LML for that information (L1/142). This was not the first such request from Mr Makepeace. The reply showed that for the fenestration package, 62% was thought to be of UK origin; 18% "European other"; 2% French; 6% Swiss and 12% German. The latter evidently comprised -1.5m profit for Seele and -2.5m for Seele's preliminaries (ie overheads). -2.5m was considered to be the management fee payable to Seele and Alvis.

138. In accordance with Regulation 22(1) Harmon wrote on 24 July 1996 asking for the reasons why it was unsuccessful:

139. Mr Leake of LML prepared a draft reply, the existence of which only became apparent on Day 12 of the trial. The parts placed in evidence read:

NON-DISCOVERABLE PASSAGE REDACTED (MATERIAL PRIVILEGED)

NON-DISCOVERABLE PASSAGE REDACTED (MATERIAL PRIVILEGED)

902. In these draft letters, LML set out its understanding of the basis of the decision to award the contract to Seele/Alvis. The salient factors were:

140. Mr Leake then sent the draft to H of C's solicitors (Berwin Leighton). As a result of his discussions with that firm (L1/172) Mr Leake then prepared a shorter letter which he sent to Mr Makepeace. In the form amended by Mr Makepeace it stated:

141. As a result of the advice given by Berwin Leighton the defendant suppressed factors (1) and (2) above - which were the decisive reasons - as well as factors such as (4) and introduced reasons which I consider never formed part of the decision. Mr Makepeace who as project sponsor took and was responsible for both the decision and for the letter characteristically gave no satisfactory explanation for not telling Harmon the true reasons for his decision why they were not awarded the contract. He said that he thought that the purpose of giving reasons was to give contractors information which they might be able to use to improve their performance in subsequent tendering exercises" and he gave other patently evasive answers to simple and direct questions. I have no doubt that he deliberately decided

920. Even the reasons given do not stand up to scrutiny. Harmon was not creating a new manufacturing facility but re-activating one that was still in use. It had a worldwide reputation for cladding, curtain walling and fenestration systems, and as Mr Josey said, its skills lay in project management and in starting from scratch so it was well able to revive a dormant factory. As for engaging "subcontract support for significant elements of the manufacturing process", Mr Mumford admitted that this was untrue. Harmon was proposing to do no more than the successful contractor: each was a company that was the vehicle which would not be carrying out anything other than administration (and in the case of Seele Alvis Fenestration Ltd even that was going to be handled by other companies) and which would subcontract to other associated companies all manufacturing, assembly and installation operations. Seele Alvis even subcontracted the machining of all the aluminium bronze components. Mr Josey rightly said that it was common for welders to be acquired and, I am sure that Harmon would have had no difficulty in securing sufficient competent welders who could if necessary be brought to the standards required. Accordingly H of C did not comply with Regulation 22(1) of the PWR either in giving the true reasons or in giving the reasons by reference to the basis upon which it was purporting to award the contract to Seele/Alvis and in so doing, once again, failed to treat Harmon fairly and openly. This is not an example of a semantic dispute about the expression of reasons. One has only to look at the successive reports of the task force to see that there never was any clear basis and that the reasons varied. The first report of 18 October said:

922. It proposed that the next stage was "to test the management and programme capabilities of Harmon/CFEM and Seele/Alvis...". So both A1 and B2 were level in terms of capital cost (including the so-called "soft costs") and maintenance costs but the second report of 20 November fastened on the superior quality of option B2, its low maintenance requirements and less risk of cost escalation in design development, and like the third report rated Seele/Alvis more highly for technical and managerial abilities. So it was or ought to have been essential for there to have been some record of the decision and the reasons for it, as LML had advised..

142. Mr Boyle said that the decision to start proceedings was taken in the light of the answer of 6 August and the project team's efforts to dissuade Harmon from further action, in particular conversations with Mr Aikenhead and Mr Kerr, as recorded in Mr Boyle's file note of 13 August which I find entirely plausible. (It is also consistent with and foreshadows certain respects in which this action has been defended.)

934. Not surprisingly at this point Mr Boyle fell out with Mr Kerr. The writ was issued on 13 August 1996. The notice required by Regulation 31(5)(a) was given by Harmon's solicitors' letters of 13 August 1996.

143. On 24 July 1996 Seele/Alvis Fenestration Limited wrote to LML offering to construct the weather seal by welding aluminium bronze and manganese brass, instead of bronze to bronze. It estimated the cost saving to be about -300,000. Mr Noble said that this proposal resulted from trials which the company had been carrying out into the feasibility of welding bronze to brass and because they had found that option B2 would not necessarily produce a weather tight seal. This change (rightly, in my view, described by Mr Fernyhough as a volte-face) naturally came as a surprise to AFE as there had been no prior reports that Alvis had run into any problems, although of course Alvis had experienced problems in carrying out the welding trials in April 1995. This proposal was swiftly followed up by another proposal on 25 July 1996 by which Seele/Alvis offered further savings of around -313,500 in the method of fabricating the cast on inner glazing clamp. Both proposals were very quickly accepted by the project team and implemented. On 5 August 1996 Mr Leake issued a Construction Manager's Instruction no. 534 authorising the later proposal. Both changes meant that the scheme was now virtually the same as the original base scheme in these respects. Mr Noble agreed that Harmon might well have been able to build such a scheme and that in terms of performance it was virtually identical to the base scheme. The net result is that in these two important features, the window rebate and the clamp, the scheme was effectively back to square one and that all the effort spent on endorsing the Seele/Alvis proposal as technically superior to Option A1, in developing alternative proposals and seeking alternative tenders was, to that extent, wasted. Although Mr Noble was naturally reluctant to express an opinion about why these changes were made, I conclude that Seele Alvis Fenestration Limited found that it would be in serious problems in attempting to implement Option B2 which it had put forward and that it was almost certainly likely to lose substantial sums on it unless it could devise alternatives and offer them as technically equivalent and financially attractive to H of C.

144. I now turn to the issues. Some will be considered individually; others will be grouped together so the order in the parties' list will not be followed slavishly. Some overlap or are repetitive. The formal answer to each is to be found in the list of the issues at the end of the judgment. That list reproduces the parties' references to the pleadings but I shall not generally refer to them, but since the defendant's case was directed to the pleadings I ought to say that I have taken them into account.

145. This issue masks or is the precursor to a number of questions, eg :

938. Harmon pleaded in paragraph 1 of the statement of claim that it was such a company prior to ceasing operations in March 1998. It did not specifically allege that another company in the group acted as agent for it or that it was not necessary to distinguish between the various companies in the Harmon group. H of C therefore argued that Harmon could not have been a company specialising in the supply, construction and/or installation of cladding and facades for buildings with operational and management headquarters established at Harmon CFEM Façades in France at any material time prior to its beginning to trade in 1995.

146. Clearly the main facts relied on by H of C are incontestable: Harmon Contract (UK) Limited was the company that was originally used as the vehicle for the Group's interest; it completed the February and November 1994 pre-qualification documents; it was intended to be the operative company; no one knew of Harmon CFEM Façades (UK) Limited until LML was notified in the spring of 1995. In addition H of C relied on the fact that fabrication was to be carried out in France, the project team dealt with French companies, and that Harmon's UK offices were little more than an accommodation address.

147. However, it is clear, first, that there was no objection to Harmon taking over: there was for example consent to the assignment or novation of the contract for the mock-up. Secondly, the project team was interested in the Harmon group with its worldwide expertise which was comparable to the other principals that were invited to tender (see for example paragraphs 62-64 of Mr Mumford's first statement). The investigations that had been made which led to the decision to accept Harmon's predecessor as pre-qualified were of the companies that would be able to harness the resources necessary to execute the fenestration package, not of an individual subsidiary. Thirdly, once LML had been notified of Harmon, ie the plaintiff, in the spring of 1995 other members of the project team, the PWD, and, in so far as can be discerned, H of C, all treated it as if it had been in existence from the outset, not as a newcomer, as pre-qualified and as equally capable of tapping the resources of the Group as the French company that was the previous vehicle, following LML's urging that a European company be used, although these European credentials were openly retained in the tender submissions. Fourthly, by the time the first tender was submitted in July 1995, Harmon, and not another company in the group, was treated as an acceptable tenderer. There were very good reasons to continue to deal with a UK subsidiary and not with a company that was not at least nominally resident here. Fifthly, it was thereafter treated as the contractor, whatever other companies were involved, and was specifically accepted as eligible to be given reasons for being unsuccessful. It is of course common for a group to operate through different companies.

148. Harmon also relied on Ballast Nedam Groep NV v. Belgian State [1994] ECR I-1289. In it the Court of Justice had to consider whether a group could be registered and thus pre-qualified (see PWR Regulations 14(1)(a) to (e), (h) and (i), 15(1)(b) and (c), 16(1)(b) and (c) and 17). The Court held that a holding company might be assessed by reference to the capabilities of its subsidiaries. It said:

149. The Court considered that decision again when Ballast Nedam returned as Case-5/97. It then affirmed its earlier opinion in paragraph 13:

150. Ballast Nedam shows that it is permissible to look beyond the immediate company to test its worth for the purposes of registration and pre-qualification. In my judgment it would be artificial to require a contract only to be let to the person who had been pre-qualified if in pre-qualifying account had been taken of the group or other resources available to it. It would mean that it would be impossible for an employer or a tenderer to agree to the substitution of another person as contractor. Where a joint venture had tendered it would prevent the joint venturers contracting in the form of a corporation or other legal person specially formed for that purpose. This is common practice and is recognised by Regulation 19 of the PWR and indeed was followed when, quite late in the negotiations, H of C permitted Seele/Alvis to substitute Seele Alvis Fenestration Ltd as the actual contractor. Similarly it might prevent a tenderer qualifying on the basis that it the bulk of the work would be executed by one or more sub-contractors whose performance had been perfectly acceptable to a contracting authority. It would be absurd if the worth, experience and abilities of such contractors were not to be taken into account, as either the tenderer or the contracting authority could be prejudiced as a result. This issue has therefore little merit or purpose.

151. In my judgment the answer to this issue is: Yes. Furthermore, Harmon is also plainly within the definition of a "contractor" under PWR since it was seeking to be awarded the contract. In addition I consider that Harmon may make a claim for breach of the Regulations or other obligation that may have been committed before it came on the scene in the spring of 1995, provided that it can establish that the breach had a continuing effect and would have affected its predecessor had that company continued to be the tenderer or "contractor" and that it also affected Harmon. Since Harmon was treated as the successor for all purposes of the company that had been pre-qualified, the defendant is not entitled to say that Harmon would not have been so affected. I shall deal later with whether Harmon can recover damages in respect of losses suffered by other Harmon companies.

152. Harmon's case was that all these members of the project team were agents of H of C for whose acts the defendant was liable within the principles set out in Bowstead on Agency, 16th ed., paragraphs 8-174 and 8-180, which were summarised as follows:

.....

153. H of C did not dispute that these entities were agents, but not in so far as they may have applied a "Buy British" policy and if LML were found to have acted as set out in paragraph 14B of the statement of claim. Thus if it were established that the project team initiated, propagated or applied a policy to ensure that the fenestration package was awarded to a UK contractor they did so outside their actual, or apparent or implied authority, and unless the defendant ratified that policy it is not bound by it.

154. Some of the terms of LML's contract are annexed to this judgment. They include paragraphs 1.33 (to which I have referred), 1.38 and 1.40 of Schedule 1 upon which Harmon relied:

...

...

155. The authority conferred by the agreement on LML plainly did not permit it to apply a "Buy British" policy. Even if Mr Brand or Mr Mumford had not read the PWR, paragraph 1.33 of Schedule 1 of the CMA, in referring to the Public Works Directive, expressly required LML to act in accordance with it and not contrary to it, quite apart from the unreality of supposing that LML was authorised to act in a discriminatory fashion. Any other member of the project team would be similarly constrained. However if the defendant thereafter acting through the Project Sponsor, Mr Makepeace, had authorised, encourage or sanctioned such a policy and if any member of project team had sought to implement it then clearly the defendant would be bound by its actions.

156. Otherwise the defendant held out these firms or companies as members of the project team having authority to negotiate and set the terms upon which tenders would be invited and contracts placed (including deviations from the technical specifications) within the scope of project as advertised in the OJ and as subsequently altered after the first tenders were received. This issue will be therefore be answered in the affirmative but with the reservations made by the defendant: that the project team had no express authority to apply a "Buy British" policy and LML were not authorised to make certain representations or to have said things as set out in paragraph 14B of the Re-re-amended statement of claim.

157. This issue may be relevant if Harmon cannot succeed in its case for damages under Regulation 31(3) of the PWR. In order for Harmon to succeed in an action for damages for breach of this Directive or these Articles it must establish:

952. These conditions or propositions are established by (in the case of the first) Marshall v. Southampton AHA (Marshall I) [1986] ECR 723 and, in the case of the other three, by Factortame III, Case C-48/93 [1996] QB 404. I here deal only with the first two of these pre-conditions.

158. As to the first, Harmon argue that the legislature is an organ of the State just as much as the executive and that, since the defendant has been created to enable the legislature to function, it should be treated as an organ or emanation of the State in the same way as if liability would attach if the project had been commissioned by a department of the executive. Counsel submitted that a broad approach was required and that the definition in Foster v. British Gas, Case 188/89, [1990] ECR I-3313, applied to an entity such as a public utility:

954. Harmon relied upon Johnston v. Chief Constable of the Royal Ulster Constabulary, Case 222/84, and Beentjes [1988] ECR 4635; [1990] 1 CMLR 287 in which the Court stated (at paragraph 12):

159. H of C maintained that, since it did not provide a public service but rather one of property management and, since it had no special powers beyond those resulting from the normal rules applicable in relations between individuals, it could not be regarded as an organ or emanation of the State. Reliance was placed upon the Preamble and section 2 of the Parliamentary Corporate Bodies Act 1992 (which has already been set out). Counsel submitted that the powers provided to the defendant by virtue of section 2(3)(a) and (b), amount to no more than powers ordinarily exercised by any individual whether corporate or incorporate, namely the power to deal with property and to enter into any contracts for the purposes of the House of Commons. The functions performed by the defendant were set out by Mr Makepeace in his supplemental statement (E4/40-91). They were provided for the benefit of the House of Commons and, it was submitted, somewhat boldly, that the House of Commons performed no public function. The defendant only came into contact with the public when it entered into such contract or arrangements as it made to enable it to discharge its functions which were essentially domestic and a service to the House of Commons. As such it was under no liability to comply with the provisions of the Treaty of Rome which were intended only to apply to a State (nor was it a legal person capable of committing the tort of misfeasance in public office).

160. In my judgment the answer to this issue is: Yes. I do not consider it too simple to start with the PWR for they were made to give effect to the Public Works Directives which in turn were made to give effect to the obligations contained in the Treaty of Rome. Under the PWR Parliament has decided that the House of Commons is, for the purposes of procurement of public works, at least, to be regarded as a contracting authority. When one looks at the contracting authorities listed in the PWR (not reproduced in my extracts from them) most, if not all, could also be characterised as organs or emanations of the State. The defendant has been created by the Parliamentary Corporate Bodies Act to perform certain functions on behalf of and for the purposes of the House of Commons including obtaining tenders for and entering into contracts for the construction of the NPB. It must therefore be regarded as the agent of the House of Commons. In any ordinary and functional sense, the House of Commons must be regarded as an organ of the State, certainly if the State comprises legislative, executive and judicial elements. I do not consider that the definition in Foster v. British Gas is exhaustive. The court was there dealing with the position of a public utility.

161. In argument I asked what would be the position if, for the benefit of the Foreign Office, a similar corporation sole had been created to look after embassies in other member states of the European Union - would it not also be subject to Treaty obligations as an organ of the State? Mr White suggested that the distinction was that the defendant was performing a housekeeping function and not a massive public service buildings function. Yet here the defendant is providing a building whose estimated cost was -250 million. Mindful of the Bill of Rights, I would nonetheless expect our legislators to be embarrassed if people thought that they considered expenditure of that order to be mere "housekeeping". If the NPB had been built by a government department for occupation by Parliament there could be no doubt that the department responsible would be an organ of the State. Does it make any difference that the building is being built with public funds but by the legislature directly? I think not. The State comprises a number of elements: legislature, executive, judiciary. They are in my judgment all organs of the State for the purposes of the European Treaties and European law. None are, as such, immune from suit for performing or not performing an obligation which is required of an organ of the State under the public works regime.

162. Put another way, the defendant is plainly a public authority for it was created by Parliament to serve the House of Commons which is obviously a public body. If it were not it could not have been included in the definition of "contracting authority" in the PWR. Section 2(6) of the Parliamentary Corporate Bodies Act puts the defendant in the same position as any other person: it is not to have Crown immunity, which might otherwise attach to it as a particular class of public body. No doubt the purpose for which the defendant exercises its powers as conferred by section 2(3) might be regarded as "domestic" in as much as it is "any purpose of the House of Commons", but many statutory bodies are created for the private functions only. The test is whether the functions for which they are created are public or private functions. I cannot believe that anyone would regard the erection of NPB as a private function or purpose. Its use may be confined to 210 Members of Parliament and their staff but it is just as much a public building as is the Palace of Westminster whose accommodation it is intended to supplement.

163. Furthermore, if it were necessary, I also conclude that the defendant is a person holding public office, on the basis that such a person is not confined to individuals but is also apt to describe a legal person such as a corporation. The powers set out in section 2(3) are of a public nature. Section 2(2) appoints an individual holding a public office (the Clerk to the House) as the defendant, so in my view the defendant is a person holding a public office.

164. In addition in Commission v. Kingdom of Belgium, Case 323/96, the court held that a legislature, the Vlaamse Raad, which had decided to have new premises built in Brussels, was obliged to follow the Public Works Directives. The court said:

and later:

966. In my judgment it must follow from the reasoning of the court that, if the Vlaamse Raad fell within the definition of a State for the purposes of public works directives such as 71/305 and within the meaning of Article 1(b) of Directive 93/37, then the defendant must also be an organ or emanation of the State and liable for damages for breach of Articles 6, 30 and/or 50-59 of the Treaty of Rome or for breach of Directive 93/37. The PWR were made to give effect to Directive 93/37 and should be interpreted in a manner consistent with its meaning. If the PWR have failed to implement the Directive, Harmon are entitled to rely on the Directive so H of C would then be liable for any non-compliance with its provisions since it is certainly an organ of the state for its purposes.

165. For the purposes of this issue the relevant date or dates are those in the spring of 1995, namely either 23 March 1995 when LML was informed of the wish to transfer the mock-up contract to Harmon, or 23 May 1995 when LML was told that Harmon would be the contractor or tenderer for the fenestration package. Harmon accepts (and it is clear) that it did not seek or wish to be a person to whom the fenestration package was awarded before 15 May 1995 when it was substituted for Harmon Contract (UK) Ltd or 23 May 1995 when it was first notified as the successor of Harmon Contract (UK). No issue therefore arises on the defendant's contentions in so far as they were that since Harmon did not become involved in the tender process until May 1995 it therefore can have no claim in relation to alleged failures before then.

166. However the defendant also contends that thereafter Harmon acted as agent for Harmon CFEM Facades SA ("Harmon SA") and would have contracted as agent for that company in the event that its tender had been accepted so any duty owed by the defendant was owed to Harmon SA and not to the Harmon. I reject this submission. For the reasons that I have already given, first, I consider that the tender was submitted by Harmon and, secondly, Harmon acted throughout as principal and not as agent so any duty owed by the defendant was owed to it. This issue will therefore be answered: Yes, from 23 May 1995.

167. I deal only with the main questions required by these issues since in so doing I shall inevitably cover the subsidiary points about the various events that occurred. Harmon no longer pursues issue 5(2) (the circumstances in which Alvis Vehicles Ltd and Seele Alvis became involved). I have already answered or effectively answered the following sub-issues of issue 5 in my conclusions on the factual background:

968. The answer is: No, it was submitted for Harmon Contract UK Ltd by Harmon CFEM Façades SA.

974. The answer to (a) is: Yes. The tender of 29 July 1995 was signed by Mr Boyle as a director of the plaintiff company even though it was largely prepared by Harmon CFEM Facades SA. It was in any event treated as having been submitted by or on behalf of the plaintiff so any irregularity is of no consequence. The answers to (b) and (c) are No. Harmon's tender was not complete and did not comply with the invitation to tender in that, for example, the pricing schedule had not been completed and it was subject to numerous qualifications and reservations. So too were all the other tenders to some extent non-compliant. H of C made a provision of -500,000 against the possibility that agreement of outstanding matters might increase the amount of the relevant tender amount and thus did not treated any non-compliance as insuperable. Mr Mumford admitted as much. Thus none of the respects in which the tender was incomplete or non-compliant was considered sufficient to disqualify the tender from further consideration or to require it to be treated as non-compliant. Harmon was not told that its tender would not be considered and by considering it and by inviting Harmon to submit further tenders based on the July tender without requiring them to be fully completed and complaint in all respects the defendant led Harmon to believe that there was nothing in its tenders that H of C thought to be incapable of negotiation and agreement and thereby waived the omissions and non-compliance.

976. The answer is Yes, in conversations with LML in August 1995, and in conversations with MHP and AFE in November 1995 Harmon was assured that its tender was technically compliant.

168. It will or should be apparent that some of the answers to issue 8(1A) are:

Answers: No.

Answer: No

169. Under the later heading of Other Issues I give formally the answer to issue 8(7):

981. The answer is Yes, H of C did not comply with Regulation 22(1) either in giving the true reasons or in giving the reasons by reference to the basis upon which it was purporting to award the contract to Seele/Alvis and in so doing failed to treat Harmon fairly and openly. In so far as it means that the defendant did not give the true reasons the answer is: Yes. Under that heading I also state that the answer to Issue 8(8) is: Yes.

170. Thus the remaining principal questions under this head are as follows:

984. (ii) minimum requirements

....

171. I shall try to treat each of these questions in a broadly chronological sequence. I shall first examine the standards by which tenders were to be assessed, and whether Harmon's tender satisfied those standards before considering whether there were any other factors which influenced the selection of Seele-Alvis of which Harmon may legitimately complain.

172. Harmon's complaint is that H of C did not comply with the requirements of the PWR but specified "overall value for money" as the criterion by which tenders were to be assessed and in not specifying standards by which "overall value for money" was to be determined. It will be recalled that Mr Makepeace had been explicitly warned by Mr Linge that words such as "overall value for money" were contrary to Regulation 20 and that LML had unsuccessfully put forward a system of scoring or rating by which tenders might be assessed.

"Overall Value for Money"

173. Harmon's case was that the provisions of Regulation 20(1) were mandatory and that by stating the award criteria in the OJ notices as "(other than price): overall value for money", H of C had elected for wording which was nebulous and imprecise, capable of different interpretations, not referable to either of the tests set out in Regulation 20(1)(a) and (b) and which was therefore not permitted by Regulation 20. H of C's case was that Harmon had construed the Regulations too narrowly (both Regulation 12 and Regulation 20). It submitted that the term "overall value for money" which had been used in both notices on December 1993 and April 1994 did not in itself constitute a breach of the Regulations since Regulation 20(1) did not require a contracting authority to identify in the advertisement whether it intended to award a contract on the basis of lowest price (Regulation 20(1)) or "most economically advantageous to the contracting authority" (Regulation 20(1)(b)). I reject this submission since the words of Regulations 12(2) and 20(1) are mandatory. It is true that the statutory notice required by Regulation 12(2) is loose in that item 11 in Part C of Schedule 2 only requires "The criteria for the award of the contract where they are not mentioned in the invitation to tender" when at that time those interested will not have access to the invitation to tender. However here the notices purported to state the criteria so Regulation 12(10)(e) and the invitation to tender therefore does not come into play. I deal later with the argument that nevertheless the requirements of the PWR were satisfied by the tender documents. Secondly, the words of Regulation 20 mean that a contracting authority shall not award a public works contract unless it either offers the lowest price or is the most economically advantageous to the contracting authority, and the contracting authority has to state which of those two options it intends to use.

174. Mr White submitted that a reader of the notices would have understood that H of C intended to award the contract to a contractor who had submitted the most economically advantageous tender. Reliance was placed on the evidence of Mr Barry in which, naturally, he had agreed that the advertisements conveyed to the reader that the award was not to be based on the lowest price. He also accepted that if "most economically advantageous" meant the same as "overall value for money" then he would have read the advertisement as an election for the second option. However, he also said, in answer to a question from myself, that the terms were elastic and that they were "both fairly loose terms that need definition". H of C also relied upon evidence from Mr Clatworthy and Mr Boyle although neither of them in fact accepted that the advertisement was to be read as referring to the second option.

175. H of C submitted that, as a matter of law, wording such as "overall value for money" could comply with Regulation 20. In Beentjes -v- The Netherlands, case 31/37 [1988] ECR 4635 the criterion had been whether the tender "appears the most acceptable to the awarding authority". The Court held that the compatibility of such provision with the requirements of Article 29 of Directive 71/305 which is not materially dissimilar to the wording of PWR Regulation 20 is a matter for interpretation by the National Courts. It said at page 4659:-

176. Similarly, H of C referred to R v. Portsmouth ex parte Coles (1997) 1 CMLR 1135 in which the criterion had been "best value for money". Tenders had been received from a number of private contractors and from the council's own in-house contractor. Although the latter had not submitted the lowest tender, it was awarded 40% of the value of one contract (the maintenance contract) and 60% of the value of another (the improvement contract). Keene J. held at first instance that the decision to award a proportion of the contract was made on the sole basis of the additional cost to the council for redundancy payments if its own contractor had not been awarded this proportion of the work. He held that it was important that the tenderers should have been told about the consequences that an award would have on its liability to make redundancy payments. However, he held that although the council had broken the requirements of Regulation 20(2) it did not mean it was obliged to award the contracts to the lowest tenderers. On appeal the Court of Appeal reached a different conclusion. It held that the council ought to have identified the criteria which it was going to apply to choose or select contractors and, having failed to do so, it could only award the contract on the basis of lowest price. Leggatt LJ referred to Gebroeders Beentjes BV -v- State of Netherlands Case 31/87, [1988] ECR 4635; [1990] 1 CMLR 287 and Commission v Kingdom of Belgium (Walloon Buses) Case C87/94, [1996] ECR 2043. He said at page 1142:

1022. Hobhouse L.J. said at page 1146:-

177. H of C argued that the judgment of Hobhouse L.J. showed that a failure to comply with the Regulations in not spelling out criteria in the invitation to tender might be made good at a later stage. Both that decision and the decisions of the European Court referred to in it (eg Walloon Buses and Beentjes) showed that compliance in substance was required rather than in form. In Walloon Buses the Court had held that there ought to be "observance of the principles of equality of tenderers and of transparency (see paragraph 88) and that there had been a breach of Article 27(2) of Directive 90/531 in that the contracting authority had taken account of the contents of letters submitted by one of the tenderers after the date for receipt of tenders. In Beentjes tenderers had been assessed on the basis of three criteria: experience for the work in question; ability to employ long term unemployed; and whether the tender "appears the most acceptable to the awarding authority". The Court held that the first was a legitimate criterion but did not require to be specifically publicised, and that the second criterion had been included in the notice requirements. However, the third criterion ought to have been set out in the contract documents or the contract notice. The Court said ([1988] ECR 4635 at 4658 and 4660):-

....

178. H of C therefore argued that the test was whether the tenderers would know of the basis upon which the tenders were to be assessed. It was submitted that the tender documents were understood by Harmon to set out the criteria by which its tenders would be judged, namely:-

1041. (b) Technical superiority of the products;

(These are the criteria stated in paragraph 38 of the defence.) They were made known to Harmon at the presentations in April 1994 and November 1994; at the meetings in June and July 1995; at the meeting in August 1995; at the meeting in September 1995; and at the meeting on 23 October 1995. In addition, on 18 October 1995 all tenderers were sent letters in identical terms asking for further information concerning their manufacturing, technical, programming and organisational capabilities. That letter stated (amongst other things):

1046. Mr Boyle and Mr Larson (and M. Michno, although in my view he was not a decision-maker) both knew that such matters would be used and could determine the outcome of the tenders. Therefore the defendant contended that it met the substantive if not the formal requirements of Regulation 20(3).

179. H of C also submitted that the criteria were set out sufficiently since Regulation 20(3) stated that the criteria on which contracting authority intended to base his decision should "where possible [be set out] in descending order of importance in the contract notice or in the contract documents". Regulation 2(1) defines "contract documents" as including "...the invitation to tender for or negotiate the contract, the proposed conditions of contract, the specifications or description of the work or works required by the contracting authority and of the materials or goods to be used in or for it or them, and all documents supplementary thereto;" Contract notice means of course the notice sent to the OJ in accordance with Regulation 12. It was therefore submitted that, given the wide definition of "contract documents" in Regulation 2(1), all that was required was that the criteria should be identified and publicised so that tenders had a sufficient opportunity of meeting them. This would be both consistent with the PWR and compliance with the principles of equality and transparency. H of C submitted that each of the criteria were known to Harmon:

5. Programming and Organisational Abilities

180. Harmon submitted that H of C's case was wrong. The decisive criterion for selection which was actually used by H of C, namely, technical superiority of the proposed option was not stated in any of the documents, nor was it brought out at any of the meetings by H of C. A distinction had to be made between the criteria set out in the tender documents and those which would be "the selection criteria". The Schedule of Deliverables could not contain the relevant selection criteria: Mr Mumford accepted that it was no more than a guide and that for example it did not even state "price" as a criterion. Mr Mumford stated that LML was not even aware at the time of the need to state selection criteria, so that they were not stated. Meetings could not be relied on. Mr Boyle had said that criteria were not in fact identified at the meetings and the notes of the meetings did not support H of C's case. In any event, notification at meetings would be insufficient since there had to be some documentary evidence in order to comply with the Regulation 20(1) and (3). Finally, Regulation 20(3) required that the criteria should be stated "where possible in descending order of importance". There was no ranking whatsoever in the documents relied upon by the defendant. Moreover, by the time of the second invitation to tender of August 1995, the dominant motivation of H of C was to reduce cost (see the invitation to tender itself) and Mr Boyle's evidence. Price was therefore dominant, at least superficially.

181. Mr Fernyhough criticised Mr White's submission that "overall value for money" was more comprehensible than "most economically advantageous" and submitted that the former although in common currency in English, did not have any precise meaning, whereas "economically most advantageous" was a term of art, with a precise meaning in each Community language as there is a direct equivalent phrase in each language. Thus in French the two selection criteria are "le prix le plus bas" or "l'offre économiquement la plus avantageuse". I do not think that the latter is precise in either language, although it may have meaning as a term of art.

182. I accept H of C's general submission that one should not be too concerned about the form but rather look to the substance. First, the words "overall value for money" are, in my judgment to be equated to "most economically advantageous" since a contracting authority, such as H of C, has only one of two options, as provided by the PWR. Although the notices were prepared carelessly and although Mr Makepeace deliberately ignored the advice which was given to him, apparently for the somewhat conceited reason that he knew better than Mr Linge, a lower grade official, as if somehow he could not have been right. Nevertheless it is to be presumed that a contracting authority such H of C for such a project as this is likely to have intended to have complied with the Public Works Regulations rather than to have intended to deviate from them. However both terms require further definition - a view confirmed by Mr Josey's practical experience. This can only be achieved, in my judgment, by a statement of the criteria that the contracting authority considers applicable to the tender and project in question. Neither "overall value for money", nor "most economically advantageous" are concepts which have any real meaning except in their context. They are not terms which mean the same whatever the subject-matter of the contract. Both require guidance as to how the subjective judgments implicit in them will be made. Both require criteria to make them meaningful: see Beentjes at paras 34 and 37. "Overall value" implies that "value will be assessed in a number of different ways, all of which will have to be taken into account before an "overall" value is found which in turn is seemingly refined by the pleonastic words "for money". "Most economically advantageous to the contracting authority" requires even more information since a tenderer preparing a tender or, more probably, one or more variants has to be given clear and precise guidance as to what from the point of view of the contracting authority may be the "most economically advantageous to" it. Unless a tenderer knows something about the economics of the contracting authority (not just its annual finances which are only part of the picture, although they might be determinative of running costs if that criterion were included) it will be impossible to work out what might be thought to be most economically advantageous in terms of maintenance or running costs or in terms of the elusive concept of technical merit. Assuming that such a concept is a proper element, which in my judgment it is not, technical merit is an intrinsically separate consideration which needs to be specifically identified. Price is the starting point for the exercise and it hardly needs to be stated. "Overall value for money" begs the question; how far is the contracting authority prepared to pay "more" to get something which is "better"?. One tenderer might well regard its proposal as providing excellent "overall value for money" and would challenge a competitor, for example, on the grounds that although its proposal might require higher running costs by way of maintenance, over the long term, the costs of maintenance would be lower than the costs that the competitor's product would incur in requiring replacements at short intervals. Ease of access for, and the duration of maintenance works could be decisive. Therefore it seems to me the real question is whether H of C provided selection criteria.

183. I reject H of C's case that the selection criteria were to be found in the extraneous contract documents. They might have been found there but they were not. I leave aside, for the moment, Harmon's case that the criterion actually applied was not that stated. In my judgment, the approach must be that set out by the European Court in Walloon Buses and Beentjes and applied by the Court of Appeal in this country in R -v- Portsmouth. The principles of transparency and fairness require a tenderer to know, without doubt, what objective criteria are going to be applied and, as Regulation 20 makes clear, their order of importance. All the criteria have to be stated - this is obvious but it is now made clear by Article 30(2) of Directive 93/97 - and to be identifiable as such, either because they are grouped in the same place or because they are clearly marked out. Indeed, the requirement that they should be stated in descending order of importance is perhaps the most significant pointer to the need for the criteria to be clearly identifiable as such and not merely requirements which must be complied with before the tender can be considered as a qualifying or compliant tender. In my judgment, all the references relied on by H of C in the general preliminaries, the special preliminaries and the specification are no more than standard requirements so that the tenderer presents the prospective client with the information which the client and his advisers want. Listed together or separately they do not in themselves convey to the tenderer the basis of the award leaving the tenderer to suppose that the basis must be the lowest price. They are no more than the general information which is called for on most tenders. They are not placed in any order of ranking, even (or especially) in the Schedule of Deliverables which formed an important part of H of C's case. The Schedule was, as Mr Mumford rightly said, no more than an "aide-memoire". It is headed:

1054. Particularly when compared with the post tender Schedule it is clear that both were provided to remind the tenderer (or contractor) of what was needed to be submitted and when. That relied on by H of C does not state that the crtieria by which the information is to be assessed, still less any order of importance. For example, the requirement to submit a method statement or programme is usually important so that the client can be satisfied both that the tenderer understands the nature of the work and its demands and that its approach to the contract will fit in with the overall requirements of the project. This is particularly the case with works or trade contractors working alongside each other. Obviously this information (and the other requirements relied on by H of C) might also be used in the assessment of tenders for the purposes of the award of the contract, as the experts and Mr Boyle naturally agreed. But precisely how it will be used will depend upon the criteria which are to be employed. It is not for the contractor to state the maintenance requirements (see clause 10.5.2) as the scheme designers should state what is called for. In my judgment, it is verging on the naive to suggest that price was stated to be a criterion: money is never out of the picture. The question, however, is if a tender is to be assessed on the basis of "overall value for money" or, "most economically advantageous to the contracting authority" is the place that the money is to play in the order of assessment. In this instance it became clear from July onwards that it was the criterion.

184. Even if cost were not the criterion Mr Pringle admitted that the criteria that were ultimately taken into account were very different from the ones he had thought the team was dealing with at the beginning:

1058. Mr Pringle also identified six additional criteria beyond those listed in his witness statement as the key criteria: experience of the contractors; manufacturing facilities and experience; price; programming ability; if a variant was proposed, the technical quality of the variant; samples. Some of these overlap or are repetitive which in itself provides further evidence of lack of agreement on meaningful criteria. Mr Pringle's evidence typically established that not only there never was any real agreement amongst the project team about the criteria which to be applied and that they changed over the period but also by the same token that the tenderers could not have known of them. They were never set out in any definable manner. Only cost or price was clearly brought home to the tenderers after July 1995.

185. H of C plainly never complied with the requirements of the PWR in its original notices in the OJ and that default was not made good by the invitation to tender and the tender documentation. It is, frankly, absurd to suggest that a contractor has to sift through hundreds of pages of what are, in the main, routine documents to identify those requirements which will be used to decide whether one tender is more appealing than another. A tenderer if treated fairly, which these tenderers were not, would be told at the outset of the documents: (a) here are the relevant criteria and (b) they are arranged in descending order of importance. Without the latter the former cannot be used to determine what might be "most economically advantageous to the contracting authority". They have also to be objective criteria - see Beentjes, which emphasised that they were needed so as not to involve "an element of arbitrary choice". Regulation 20 of the PWR following the Public Works Directive also refers to "objective grounds". So as regards selection criteria the answer to issue 5(1) is No.

186. Did the situation change after July 1995? In my judgment it did not get any better since although criteria such as those proposed by H of C were bandied about they were still not presented either as the determinative criteria (as opposed to extensions of the pre-qualification process) or in any order of importance. Furthermore I find it impossible to see how Harmon or Gartner could have been treated fairly or equally along with Seele/Alvis if they were not told of the proposal with which their tenders were to be compared. All that they were told (repeatedly) was that they had to bring their prices down. Harmon did do so. Harmon was not then told either that some trimming exercise would be carried out in order to factor in costs to increase the value of its tender over which it had little or no control given that it had been required to price only one or two options.

187. In my judgment H of C was bound in law to award the contract on the basis of price alone. First, it had failed to comply with the obligation to set out criteria in descending order of importance. In my judgment it is in exactly the same position as the contracting authority in R v Portsmouth which is directly applicable. Were the PWR not to be applicable the result would be same on the same authority and applying Beentjes and Walloon Buses. In Beentjes the Court held that Directive 71/305 required that if criteria other than price were to be relied upon in awarding a contract, they must be stated in the contract notice or contract documents and if they were not stated, the sole criterion for the award of a contract was the lowest price (paragraphs 18, 19, 21, 22, 31, 32, 33, 34, 35, 37 (ii) of the judgment). Secondly, the fresh invitations to tender, in themselves but particularly having regard to numerous contacts between LML (and other members of the project team) and Harmon made it clear that price was the dominant factor. Unless therefore there was something untoward (for example as mentioned in Regulation 20(6)) H of C was bound to accept the lowest tender. On the facts there is no doubt Harmon was the lowest if like is compared with like. The answer to Issue 8(1) overall is Yes, and to each of questions (a), (b) and (c) it is Yes (but it was not so awarded). The answer to Issue 8(2) is Yes to both parts.

188. This sub-head covers the following issues:

189. Regulation 20(4) of the PWR states:

1063. This Regulation might profitably have been re-considered in its transition from Article 19 of the Directive. In essence it appears to permit an authority which intends to award a contract on the basis of "most economically advantageous" to award it to a tenderer who submits an alternative proposal provided that such a tender complies with certain specified minimum requirements. In the OJ notices, under the heading "Prohibition on Variants" (where applicable), H of C had stated that:

1065. Clause 4.10.2 of the General Preliminaries states:-

1067. Clause 2.2 of the Special Preliminaries states:-

190. Harmon contended that the effect of Regulation 20(4) was that an alternative or variant could not be considered unless the tenderer had, at the same time, submitted a compliant tender. In my judgment, this is a correct reading although, on the facts, it may not ultimately be material. The reference to variants implies that in addition to the tender that was sought an alternative may be submitted. In any event the OJ notice followed that interpretation and accordingly it would not be fair to other tenderers to consider a variant unless it were accompanied by a compliant tender. Harmon also submitted that just as no selection criteria were ever stated so too there were no minimum requirements set out in the documentation as required by Regulation 20(4).

191. In practical terms the evidence of Mr Josey brought out an additional reason for requiring a tender which conformed to the invitation to tender to be submitted as well as any alternative tender since, if this were not the case then a contracting authority could not accept the alternative without first giving the other tenderers the opportunity of considering it for otherwise the tenderer would not have competed with the other tenderers which would contravene the principles of transparency fairness and equality.

192. LML's letter of 19 May 1995 however appeared to give a slightly different choice in that it suggested that the tenderer might submit a tender "which differs from the strict requirements of the tender invitations... or [my emphasis] submit an additional, alternative tender." However, the letter (and its successors) must be read together with the remaining documents, and in particular the general and special preliminaries. In my judgment, these make it clear that tenderers were only expected to submit alternatives on matters of detail relating to the execution of the basic design for the implementation of which tenders were being submitted and that the tenderers were not expected to submit alternative designs. Mr Josey, for example was of the same opinion, which I accept. For convenience I repeat what he said in his report (and when cross-examined adhered to this opinion):

1071. H of C submitted that even if it had not complied with Regulation 20(1) and was not entitled to make an award other than on the basis of the lowest price, it could nevertheless award the contract to a tenderer who put in a variant provided that it complied with the five basic principles or requirements to be found in the Specification and otherwise met the other requirements of the contractual documents. The award to Seele/Alvis could therefore be justified even if Harmon was the lowest tenderer.

193. In my judgment, as I have already indicated, the contract does not indicate that these requirements relied on as selection criteria are the minimum requirements for the purposes of Regulation 20(4), contrary to H of C's case. In addition Regulation 20(4) only applies if the authority is seeking the "most economically advantageous" tender. This must mean that it is entitled to do so, ie that it has complied with the Regulations by specifying criteria in descending order of importance. It does not apply if the authority is bound to accept the lowest price. In my judgment an authority which has not complied with the Regulations so that it is not entitled to award the contract on a "most economically advantageous" basis cannot still bring itself within Regulation 20(4) simply because it purported to comply with it. That would mean that an authority could pretend to elect for "most economically advantageous" and then contract on a basis which would not have been open to it.

194. The Regulations have of course been framed to cover a wide variety of situations. Many will be where the contracting authority will simply set out its requirements and then see how the tenderers propose to meet those requirements which may lead to the need to compare a variety of different ways or designs. Here, however, H of C had retained AFE and MHP as its designers and did not set out the requirements which their design was to attain so even if Regulation 20(4) had been available to it the statements made in the documents fall far short of a performance specification which is what "minimum requirements" in this context connote. It was not to be expected that the tenderers were to re-consider the consultants' fundamental design which had been considered by them and which had resulted in the schemes shown on the drawings and in the specification. The most obvious example is, of course, the basic principle of "blast loading". Even if a tenderer had wished to submit a radically different design it could not have done so without obtaining the information which was not to be found in the tender documentation, which was only known to the designers and which was subject to important security restrictions, since a vital part of the design had to take into account explosive forces which might be encountered in the event of a terrorist attack.

195. Accordingly, although H of C pointed to the evidence of Mr Clatworthy and Mr Boyle in which there were acknowledgements that alternative proposals could be submitted, I do not consider these do more than show a recognition of the obvious: that in relation to the detailed implementation of the design, it was open to tenderers to put forward alternatives, particularly bearing in mind that the tenderers might have skills and experience which were not available to AFE. However, the skills and experience would, in my view, be largely concerned with questions of fabrication and installation even though the tenderers were no doubt all well capable of carrying out the design work, which had been entrusted to AFE as indeed most of them had originally been treated as pre-qualified for that very purpose (before the decision was taken to use AFE as the designer).

1074. It was submitted that the third approach was permissible and would be consistent with the principles of transparency and equality of treatment in that all tenderers would know that they could submit alternative offers. In my judgment, the principles of transparency and equality point in precisely the opposite direction. First, I do not consider that tenderers can be treated equally or fairly if they are not given the criteria by which any variants are to be assessed. Obviously, if no criteria or minimum requirements are stated, then all tenderers are necessarily equally in the dark. However, the principles that have emerged from the decisions of the Court of Justice and applied by the courts of this country show in my judgment that that is not a fair or correct way in which tenderers are to be treated. In addition to the authorities to which I referred above, in the "Storebælt" case (Commission v Denmark Case 243/89), the Court made it clear that if variants were to be considered, then they had to comply with the requirements set out in the invitation to tender. That means that such requirements must there be stated clearly for otherwise the principle of fairness and equality will not be observed. Secondly, there can be no transparency if the contracting authority keeps to itself the criteria or requirements and does not reveal it to the tenderers. The only possible circumstance in which the third option might be permissible would be if the contracting authority not only did not state the requirements, but also said expressly that there were no requirements by which the variants would be assessed. Even that approach would have its difficulties. It might only be appropriate where the very nature of the project required the tenderers to ascertain the authorities' requirements, eg to carry out a feasibility study where apart from price each tenderer might have different ways of tackling the tasks. Even then it seems to me to run completely counter to the fundamental principles set out in the PWR and in the Directives.

197. Therefore if issue 8(2) had been answered: No then the answer to the first part of Issue 8(3) would have been: No, because the H of C had not set out the minimum requirements for the purposes of Regulation 20(4), because the variant permitted was of detail only and not a change of design and for the independent reason that Regulation 20(4) requires the tenderer of a variant to submit a compliant tender capable of being compared with the tenders of those who had not submitted such a variant. The second part of issue 8(3) will not be answered, even hypothetically. On my other conclusions Issue 8(4) does not arise but the answer would have been No. Issue 8(5) similarly does not arise but the first part would not have been answered although the answers to the two questions in the second part are obviously: Yes. If issue 8(5) had arisen for decision and if it was not common ground then I do not consider that it raises issues that are not justiciable for it could be shown that the project team's assessments were not reasonable.

198. This sub-head is the subject (in part) of the following issues:

199. Issue 5(3) is a preliminary to the main "Buy British" issues, upon which the parties took diametrically opposed positions. As it stands, the first part has to be answered: No. It was clearly the policy of the AWC that the greatest possible proportion of the work was carried out by UK companies (see the minute of 17 January 1995 the meaning of which is put beyond question by the Chairman's notes for the meeting 17 May 1995). However the AWC strictly could not direct the defendant to implement that policy. There is no evidence that the defendant ever formed that policy although I have no doubt that it was the policy that H of C thought had to be followed since on such an issue Mr Makepeace deferred to the views of the AWC. The defendant evidently delegated complete authority to Mr Makepeace as the Project Sponsor but I do not think that I can formally ascribe the policy (which he is said to have followed) to the defendant itself without more. It is inconceivable that the defendant and all others responsible for a building such as the NPB would not have wished it to have been built to the greatest possible extent by companies from this country (in the same way that it had been designed and managed by UK companies and firms). However, the more prominent and the more public the works, the less easy it is for authorities in the United Kingdom to realise such aspirations. First, the building was subject to the law and practice of public procurement which requires that contractors from other countries must be permitted to tender and, once permitted to tender, must be treated as fairly as a national company. Secondly, it would be commercially foolish to have pushed for UK participation at the expense of cost and quality. On the other hand, it would have been embarrassing if the major elements or trade contracts for the NPB had been awarded to companies that are either not based within the United Kingdom or which were subsidiaries of foreign companies. The building would not then have been a show piece for the UK construction industry. In the case of the fenestration package, the policy which the defendant must have taken to have adopted, was to try and ensure that UK companies were found which were capable of tendering successfully for the package in the hope that one of them would be successful. This is clear from the steps taken in 1994 to interest contractors from this country. They were only partially successful as a result of which it is clear that determined efforts were made which resulted in the formation of Seele/Alvis Consortium. From the point of view of AFE this joint venture had the additional advantage of ensuring that there would be at least one contractor known to it who was capable of handling the materials specified. Accordingly, the first part of issue 5(3) will be answered No, the defendant had no such general policy. So too for the purposes of issue 8(6)(a) there is no evidence that the defendant initiated any such policy.

200. I now turn to the wider and more controversial questions. Harmon's case was that there was a policy to encourage or permit the award of the fenestration package to a UK owned contractor and that the policy did affect the tendering procedure. (In this judgment I shall refer to UK contractors in the same way so as to exclude contractors registered in this country but owned or controlled by entities not resident here). Harmon did not of course criticise anyone for wishing to see that British contractors obtained a substantial part of the work available on the project. Mr Fernyhough accepted that it was necessary to show that the selection of Seele/Alvis, because Alvis was a British contractor, was a material factor in the award of the contract to that consortium. He maintained that it need not be a decisive or central, crucial factor or a dominant cause. In addition to the evidence gleaned from the cross-examination of Mr Makepeace, Harmon relied on the evidence contained in and concerning a number of documents such as Mr Webber's letter to the Serjeant at Arms of 18 February 1994, MHP's proposals in early 1994; Mr Kerr's memorandum to Mr Gregory of 23 January 1995; Mr Brand's notes of Mr Makepeace's views as recounted to Mr Noble; minutes of the AWC; Mr Mumford's note; MHP's letter of September 1995; and the evidence of Mr Pringle; the notes of meetings of the task force in October 1995 and the minutes of a meetingof the AWC. In addition Harmon relied upon the facts contained in exhibit D12A produced by Mr Makepeace which showed that of the forty three contracts which had then be awarded for the NPB only four had gone to companies which were obviously not British, the total value of which was -14.4 million.

201. In examining exhibit D12A Mr Makepeace rightly pointed out that even though a contract had been awarded to a British contractor it could well contain substantial foreign elements, or the contractor might be owned by an overseas company, e.g. Kvaerner Rashleigh and the prominent tower cranes which are manufactured by Wolff but which were supplied by a British company.

202. For H of C it was submitted that the decision to recommend Seele/Alvis was not influenced by the nationality of Alvis. Until a very late stage the project team considered that Gartner (a British company ultimately owned by a German company) was highly rated (both for its alternative solution and for its managerial, technical, programming kind of organisational skills). Furthermore, Mr Makepeace had consistently denied that his decision to accept the recommendation to proceed with Seele Alvis was influenced because Alvis were a British company. Harmon had not been able to rely upon any resolution of the AWC, or any action on the part of the DOE. H of C contended that a "Buy British" policy would only be relevant if Harmon had established that it would not have tendered for the fenestration package had it known that the defendant would operate a "Buy British" policy, alternatively that but for such a policy it would have been awarded the fenestration contract.

203. In my judgment, quite apart from the provisions of the Treaty the principles of equality, fairness and transparency require that a contracting authority should not allow national preferences to intrude into the procedure for inviting tenders or selecting contractors (although a contracting authority is, of course, entitled to know whether, for example, a contractor is likely to provide employment in the country in question, but only if that factor is a criterion for awarding the contract: see Beentjes). I accept Harmon's submission that it is not necessary to show that a national preference was a decisive or critical factor or the dominant cause. If it were, then it would almost certainly be blatant discrimination. In my judgment, it is sufficient if a particular tenderer who later becomes the contractor obtains a preference because of its nationality. Under the European Public Works regime the nationality of a European contractor or the origins of the work, goods, services or personnel must, as such, be immaterial. In the case of a consortium the preference may be for one member who need not necessarily be the major partner.

205. However, given the preference for MHP and OAP and AFE for Alvis, I am, secondly, completely satisfied that a material factor in the decisions to consider and to push for option B2 was that it would enable the Seele/Alvis consortium to gain a lead on grounds of technical superiority. Although Mr Makepeace denied it, it was clearly in the interests of all those responsible for making recommendations and taking decisions if a substantial contract of this kind was awarded to a consortium which contained a significant British element. The fenestration is one of the most distinctive features of this prominent building. Other elements are not so visible; others are temporary so there was less concern about the contractors for those packages being from other countries or UK subsidiaries (which comes to the same thing). When the facts are assembled it is in my judgment manifest that the dominant members of the project team, the architects and engineers, aided and abetted by Mr Makepeace, wanted Seele/Alvis to be the contractor. The evidence is that MHP was rooting for Seele/Alvis - as Mr Mumford recorded it: "Buy British!". Mr Quick from OAP, the project team leader chosen by Mr Makepeace, was pushing the task force towards option B2 because it was OAP's preference "to go British if possible" and because it would give the AWC "the option to steer towards Alvis (UK based company)". As Mr Brand also recorded "it would make PWD's life politically better if Alvis came in as the cheapest...". Notes such as these might not be sufficient in themselves were it not for other factors (such as the lack of a search for skilled enterprises supposedly comparable to Alvis which shows that reason was a pretext). But Seele/Alvis were not the cheapest so Mr Quick in consultation with Mr Makepeace produced reports which made them, if not at first the cheapest or cheaper, then, by fiddling the figures, sufficiently close to Harmon's tender that the choice could be justified on other grounds. If there had been another plausible explanation Mr Quick would have been the obvious person to give it. Mr Makepeace's explanations were not credible. Finally, of course, there is the debacle of trying to find reasons for the unjustifiable which perhaps says as much about the true motives of Mr Makepeace and those that must be imputed to the defendant, for by that time there can be no possible distinction between the two. However, thirdly, the steps taken to bring in and then to prefer Seele/Alvis because Alvis was British were not taken by the project team alone, influenced by the chauvinism of MHP and OAP, and by AFE's desire to have Alvis for its assumed in-house skills, without looking elsewhere, but were steps taken either with the full knowledge of Mr Makepeace, who if he was not at the relevant meetings, was kept fully in the picture by documents being copied or by telephone calls, or at his instance, of which perhaps the crucial examples were his refusals in November 1995 to obtain tenders that might have been truly comparable and to obtain legal advice about the propriety of going ahead with Seele/Alvis when the process had become in effect a one-horse race, despite warnings about taking this course which had been given since the latter part of October 1995. In my view the decisions which were initiated by Mr Makepeace and followed through by Mr Quick were intended to avoid the contract going to Harmon (for Gartner were out of the picture, even though it had technical advantages). Accordingly I have come to the conclusion that the defendant in the words of issue 8(6)(a) the defendant encouraged or permitted to continue a policy that the fenestration package should be awarded to a UK owned contractor, that that policy affected the tendering procedure, and, as I have already found, the defendant through Mr Quick and the task force applied arbitrary methods to favour Seele Alvis' tender at the expense of Harmon. These conclusions are plain breaches of the defendant's obligations to Harmon, whether those obligations arise from European law or purely in contract in domestic law. Thus the answer to issue 8(6)(a) and (b) is: Yes (although qualified in relation to (a)).

206. This head embraces the following issues:

207. Harmon's case was that a unilateral preliminary contract came into existence since by issuing invitations to tender H of C made an offer to the respective tenderers that by submitting a tender it would treat that as acceptance of an offer whereby it was under the following obligations:

208. Harmon submitted that this approach was consistent with that of the House of Lords in Harvela Investments Limited -v- Royal Trust [1986] AC 207 in which Lord Templeman said at page 233:

1085. Harmon based its case upon the judgment of Bingham L.J. in Blackpool and Fylde Aero Club -v- Blackpool Borough Council [1990] 1 WLR 1195 at pages 1201-1202. Reliance was also placed upon the decision of the Court of Appeal in Fairclough Building Limited -v- The Borough Council of Port Talbot (1992) 62 BLR 82, particularly the judgment of Parker L.J. at pages 90-91. Counsel also relied on Commonwealth cases: a number of Canadian cases including in particular Emery Construction Limited -v- St John's (City) Roman Catholic School Board (1996) 28 CLR (2d) 1 and George Wimpey Canada -v- Hamilton-Wentworth (Regional Municipality) (1997) 34 CLR (2d) 123; from New Zealand, Pratt Contractors Limited -v- Palmerston North City Council [1995] 1 NZLR 469; and from the Federal Court of Australia, Hughes Aircraft Systems International -v- Air Services Australia [1997] 558 FCA, 30 June 1997. Harmon submitted that as regards the contents of the implied contract, obligation (a) was supported by Blackpool Aero; obligation (b) was supported by Fairclough, Hughes Aircraft, and Pratt Contractors; obligation (c) required no authority; and obligation (d) was supported by Emery which also showed that such a contract might exist even though there was a statutory context.

209. Mr White submitted that no contract should be implied since the statutory scheme of the PWR provided not only a remedy but an adequate remedy for dissatisfied contractors and thus made it not only unnecessary to infer a contract but its very existence precluded any contract arising. Blackpool was distinguishable since there was no other remedy available to the tenderer and there were special circumstances including the tenderer's prior history of having successfully tendered for the contract which was the subject of the procedure. Even in the special circumstances of Blackpool the implied contract was limited to one in which a tenderer was entitled, as a matter of contractual right, "to be sure that his tender w[ould] after the deadline [for submitting tenders] be opened and considered in conjunction with all other conforming tenders...." (see Bingham L.J. at page 1202C-D). In Hughes Aircraft it was also claimed that the parties intended to form a contract.

210. In my judgment Mr White's submissions are correct as regards the original tender. In Blackpool the plaintiff had delivered its tender before the expiry of the deadline but it was never considered since the Town Clerk's staff failed to put it before the committee. In fact the successful tender was lower than that submitted by the plaintiff but the council had made it clear that they would not be bound to accept the lowest tender. Accordingly, the plaintiff commenced proceedings maintaining that the express request for tenders gave rise to an implied obligation on the part of the council to consider all tenders duly received. It was on that basis that the Court of Appeal dismissed the defendant's appeal against the trial judge's decision to accede to the plaintiff's contentions. The case is perhaps no more than authority for the proposition that a contracting authority undertakes to consider all tenders received. As the judgment of Bingham L.J. at page 1202 makes clear, that is the least to what a tenderer is entitled "not as a matter of mere expectation but of contractual right, to be sure that his tender will after the deadline be opened and considered in conjunction with all other conforming tenders, or at least that his tender will be considered if others are." The background for the decision included, in part, the following passage:

1087. However here the facts were that H of C was bound to proceed with the project; it had to accept some tender; and it had to give reasons if it rejected a tender. In Fairclough Building the issue was whether the defendant was in breach of contract in removing the plaintiff from the tender list because of a connection between the tenderer and the wife of its construction director who was a senior assistant architect employed by the council. In deciding that the council had acted properly and not in breach of contract, the Court of Appeal held that the defendant council was under a duty "honestly to consider the tenders of those whom they had placed on the short list, unless there were reasonable grounds for not doing so." That passage was held to be consistent with Blackpool, see Parker L.J. at page 92 and Nolan L.J. at pages 93-94. The only issue before the court therefore was whether the council had acted reasonably.

211. In examining the Canadian cases, it is at first necessary to bear in mind that the key factor is the commitment of the tenderer to the person to whom the tender was submitted. In The Queen in the Right of Ontario -v- Ron Engineering & Construction (Eastern) Limited [1981] 1 SCR 111 the tender had been supported by a tender bond. Estey J said at page 122-123: "The principal term of Contract A is the irrevocability of the bid... ". In a later case (Northern Construction -v- Gloge Heating & Plumbing (1986) 27 DLR (4th) 265, a sub- contractor was not able to withdraw a tender on the strength of which the main contractor had, to the sub-contractor's knowledge, submitted its own tender to an owner). However, a more generous approach was applied in Best Cleaners & Contractors Limited -v- R. in Right of Canada [1985] 2 FCR 293 and in Chinook Aggregates Limited -v- Abbotsford (Municipal Districts) (1989) 35 CLR 241. In the former case, after the tenders had been submitted, discussions took place with one tenderer about the possibility of awarding the contract for a longer period than that originally sought. The plaintiff was not consulted. In the event, the contract was awarded to the other tenderer but on the original basis. The decision turned on whether there should or should not be a new trial. The dissenting judgment of Pratt C.J. shows that he thought that there was an obligation to treat the tenderers fairly and equally, so the division of opinion was largely as to whether that had in fact occurred. In Chinook the plaintiff had not been informed that the defendant had a policy whereby if any local bidder was within 10% of the lowest price, then the local bidder would get the contract. By failing to communicate the policy to all tenderers, it was held that the defendant was in breach of its duty to treat all tenderers fairly. The decision was that of the British Columbia Court of Appeal. The judgment of the Court was delivered by Legg J.A. who said at page 248:

Emery Construction -v- St. John's (City) Roman Catholic School Board was, in the sense, the reverse. There the local policy was to be found in statute, which required preference to be given to local content. The plaintiff's tender was based upon the price of structural steel from a New Brunswick company, whereas its competitor had used the price from a local Newfoundland company. Its competitor was awarded the contract but if the plaintiff had used a Newfoundland sub-contractor its tender would have been higher than its competitor. The plaintiff lost. The Newfoundland Court of Appeal held that the statutory obligations had also become contractual obligations in the process of seeking tenders. Chinook and Emery therefore provide some useful guidance.

212. The views of other courts of these cases is instructive. In Pratt Contractors the contracting authority had its own specific procedure which it had publicised and incorporated as part of the tender documents. Gallen J. said (at page 481):

1090. He later said (at page 483):-

1092. I do not consider that the decision is therefore of direct assistance as there was a concession. (This decision is relevant also to some of the issues on damages and is considered again later.)

213. Similarly, whilst the judgment of Finn J. in Hughes Aircraft Systems is a valuable analysis of the law, it does not really assist me. Under the heading "Good faith and fair dealing" (at page 41) Finn J. felt obliged not to depart from the judgment of Gummow J., then of the Federal Court of Australia, in Service Station Association -v- Berg Bennett & Associates Pty Limited (1993) 45 SCR 84 in which, having considered North American jurisprudence, that judge said at (page 96):

1094. Finn J. went on to say that his own view inclined to that of Priestley J.A in Renard Constructions (ME) Pty Limited -v- Minister of Public Works (1992) 26 NSWLR 234 in which he had said :

1096. Finn J. went on to say:

1098. Finn J. also referred to the remarks of Gallen J. in Pratt Contractors at pages 478 - 479:

214. In my judgment it is clear from Blackpool and from the other authorities that there must be something more than a request for a tender which is to be submitted competitively along with others. An invitation to tender is by its nature not normally an offer; it solicits offers. It does not carry with it an obligation to accept any offer that is made in response to it, even if the customary disclaimer is not made. It would be quite a change if the very fact that tenderers were informed that competitive tenders being were sought was treated in law as an offer that any tenderer who submitted a tender would accept that to be treated fairly. It would intrude into the ordinary commercial freedom or discretion to accept or reject a tender or to negotiate with whoever seemed best in the eyes of the person seeking tenders. There must therefore be some good reason why obligations of the kind suggested by Harmon can arise.

215. In this instance tenders were sought using the restricted procedure under the Public Works Regulations which provides tenderers with some protection in as much as they should not be tendering along with any one who was not considered to be qualified to carry out the work in question and had satisfied other requirements. The restricted procedure is intended both to provide the contracting authority with a mechanism whereby tenders are only sought from a selected short list and to provide the tenderers with the knowledge that the competition will come from true competitors. In addition tenderers who had not been selected can challenge that decision. The PWR are seemingly comprehensive. They give disappointed tenderers rights to prevent the procedure from being abused and to obtain reasons and to question the award. The requirement to give reasons itself imports an obligation of fairness even if it were not grafted on by the decisions of the ECJ governing the interpretation of the parent legislation. I therefore consider that H of C is right in its primary submission.

216. On the other hand, the procedure of the PWR was not followed. H of C did not inform the other tenderers it would be considering Seele/Alvis' option B2 alongside tenders based on the new specification. If I am right in my conclusion that H of C only sought alternative details then can Harmon complain of the decision to consider Seele/Alvis's tender on the basis that it offered an alternative design? The discussions in the autumn of 1995 deviated from the PWR procedures in that they went beyond mere negotiations and clarifications. They entertained an alternative design, of which the other tenderers were unaware (at least formally). If Harmon cannot complain of the result under the PWR does this not mean that the PWR are not as comprehensive as they might first appear - or that they do not effectively control deviations of the kind adopted by H of C? In my judgment by repeating the offer to consider alternatives, on 11 September and on 2 and 30 October 1995, it was to be implied in that offer that by submitting a tender any alternatives would be equivalent to the schemes or schemes for which revised tenders were being sought and would be options only in terms of refinements of detail design which would reduce cost, albeit confidential to the tenderer but falling short of different proposals which were more than matters of detail but ones of changes of design, of which tenderers were not informed and therefore were entitled to assume were not matters which they needed to take into account. In my judgment even though all tenderers accepted that they would not be entitled to see alternatives of detail which were considered to be commercially confidential to a given tenderer, H of C in soliciting new or revised tenders under the European public works regime (to which effect is given by the PWR) impliedly undertook towards any tenderer which submitted a tender that its submission would be treated as an acceptance of that offer or undertaking and:

1103. These contractual obligations derive from a contract to be implied from the procurement regime required by the European directives, as interpreted by the European Court, whereby the principles of fairness and equality form part of a preliminary contract of the kind that I have indicated. Emery shows that such a contract may exist at common law against a statutory background which might otherwise provide the exclusive remedy. I consider that it is now clear in English law that in the public sector where competitive tenders are sought and responded to, a contract comes into existence whereby the prospective employer impliedly agrees to consider all tenderers fairly: see Blackpool and Fairclough.

217. H of C was in breach of all these obligations. In my judgment it also broke the implied duty to treat all tenderers fairly and equally by considering an alternative design without giving any other tenderer the opportunity of competing with it on its terms.

218. Thus my answers are: to Issue 6 - Yes, as regards the requests or invitations of 11 September, 2 and 30 October 1995; to Issue 7 - Yes, there were implied terms as follows:

and to Issue 10, Yes, in the respects set out in paragraph 14 (awarding the contract to Seele/Alvis and in not awarding it to Harmon), by reason of breaches of terms (a) (b) and (c) and of the implied duty to treat all tenderers fairly and equally by considering an alternative design without giving any other tenderer the opportunity of competing with it on its terms.

219. Issue 5(9) is: Whether the defendant's negotiations with Seele Alvis after 2 November 1995 resulted in the awarding of a contract to Seele Alvis on materially different terms to that upon which the plaintiff had tendered. (Paras 10(p), 10(q) and 10(r) Re-Amended S of C; paras 30A, 30B and 30C Re-Amended Def.). It is complemented by Issue 8(6)(c) which asks whether the defendant was in breach of the Regulations/other enforceable Community obligations in failing to treat the plaintiff equally or fairly. ... In particular, did the defendant ...(c) unlawfully enter into post tender negotiations with Seele Alvis? (Paras 14(vii)(a),(d),(g) Re-Amended S of C; paras 50(1)(4)(7) Re-Amended Def.). Both are followed by Issue 8(6A) which deal with what might have happened.

220. Harmon's case was that under EU law under the 1991 Regulations there were limited opportunities for post tender negotiations. It referred to the statement concerning article 7(4) of Council Directive 93/37 which stated that all negotiations with tenderers which distorted competition or which discriminated against other tenderers were inadmissible. In addition in this country in 1986 the Central Unit on Purchasing of H M Treasury published a Guidance Note No. 1 on Post Tender Negotiation (J/59), which was intended to be "a statement of good professional practice". In its introduction it said :

1109. The guidance note dealt with EC directives. Paragraph 2.2 stated:

221. In a later publication of July 1989 the CUP gave guidance on post tender negotiation as follows, in paragraph 2.1 (J/70):

222. Harmon's case was that H of C entered into lengthy, detailed and difficult negotiations with Seele/Alvis between November 1995 and May 1996 which resulted in the contract with Seele/Alvis Fenestration Limited containing terms which were materially different from those upon which tenders had been sought in 1995. Harmon submitted that they conferred advantages on Seele/Alvis which would have been reflected in the price had they been offered to Harmon which would have been able to have improved its competitive edge over Seele/Alvis, had it been given the opportunity to do so in 1995. The changes are summarised in LML's letter to H of C dated 2 April 1996. The changes were then described by LML as "significant". Harmon pleaded an extensive list in the Further and Better Particulars of the Statement of Claim but ultimately the changes upon which it relied may be considered under three typical and decisive heads:

1115. The background to this subject may be found in Mr Mumford's evidence which confirmed that all tenderers had been told on more than one occasion that H of C would not allow amendments to the tender conditions.

223. I have combined the separate complaints of direct negotiations with novated suppliers and the provision of "back-to-back" liability. The original scheme was that tenderers had to accept the novation of contracts already made between H of C and certain designated suppliers and to accept those suppliers as sub-contractors with full "back-to-back" liability. As Mr Boyle said this arrangement would have meant that he would have had to have dealt with five different contractors in as many different countries and therefore an allowance had to be made for that factor in the tender. Indeed, tenderers were apparently given copies of the proposed terms and conditions of the contracts that might be novated and were to allow a provisional sum of some -6,150,000 as the value of these sub-contracts. In the bill of quantities specific provision was required for an allowance within the tender price for "transport, waste, scheduling, checking, handling, storing, managing, risk and profit".

224. It appears that by November 1995 H of C had failed to tie down any of the proposed supply contractors and had not made any contracts which could have been novated. Mr Makepeace decided that Seele/Alvis should negotiate and conclude arrangements with the proposed suppliers - see paragraph 91 of his witness statement and paragraph 216 of Mr Mumford's statement. Seele/Alvis then discovered that there had been material changes to the terms and conditions of supply contracts which had been circulated to tenderers with the original invitation to tender. The contractors were apparently no longer to be "back-to-back" and required to accept the same responsibilities as the contractor under the principal trade contract. By this time Seele/Alvis were in a commanding position in the negotiations and were evidently in a position to exploit it to the full. Extensive revisions (indicated by underlining) were made to clause 22 of the trade contract so that it read, in part:-

225. Thus Seele/Alvis were able to negotiate with the suppliers but H of C was to have the last word as to the terms under the contract whereby Seele/Alvis had to have clause 22.6. Harmon's case was that, on the one hand, if it also had been able to negotiate directly with the sub-contractors, it might have been able to have avoided incurring the costs for which provision was made in its tender. Equally, the result of the new terms of the trade contract effectively gave Seele/Alvis a release from what might otherwise have been effective liability for the performance of all novated suppliers, whatever the circumstances. This too was clearly an advantage.

226. H of C maintains that the changes of which Harmon complain merely brought Seele/Alvis back to the position in which Harmon would have been in had it been awarded the contract on the basis on which it originally tendered, namely, that the contract would be back-to-back with those of the novated suppliers. Furthermore, there was no evidence of any possible allowance in for Harmon's tender which would have meant that its price could have been materially improved if it had been able either to negotiate directly with the suppliers, or to have contracted on the terms ultimately secured by Seele/Alvis. The changes are not therefore of a substantially different nature to those upon which the tenderers originally tendered, nor did they distort competition.

227. I do not consider that Harmon can complain about not having had at tender stage the right to negotiate with the novated suppliers since this was due to H of C's failure to line up the suppliers on the terms that had originally been contemplated when tenders were sought for the fenestration package. Harmon, if successful, would have been in the same position as Seele/Alvis and would have been able to exploit H of C's predicament. This is not therefore a case in which an authority makes post-tender changes which are to its benefit and which might produce different results from different tenders. Nor is it a case where an authority settles minor details or matters left unclear or unresolved at the tender stage, eg Harmon's list of clarifications and reservations which was matched by other tenderers and for which -500,000 was allowed by LML for possible increases in cost to H of C. What is here of consequence is the effect that H of C's default might have had on Harmon's tender for it might not have been as affected as Seele/Alvis. The changes secured by Seele/Alvis as reflected in the revision of clause 22 of the Trade Contract are detailed and complex and evidently were seen by it as highly necessary. Harmon too had flagged the position - see clarification 11 to its July 1995 tender which demonstrates the importance of the position of novated suppliers. In my judgment the changes were significant. Liability for suppliers selected by an employer is a very sensitive subject in the construction industry primarily for reasons of control and management risk and in turn for legal reasons (there is some case law which illustrates the points). It was, indeed, also so regarded by Mr Mumford in his letter of 2 April 1996 in which he stated:-

228. The implication of this statement is that the risk which Seele/Alvis declined to accept was a significant and material one which it was not prepared to price. Clearly, it regarded itself as potentially subject to an open ended liability and possibly exposed to having to withstand claims by H of C for failures on the part of the suppliers without effective recourse against them. In other words, if Seele/Alvis had not been assured of the original "back-to-back" liability, its price would inevitably have been higher. It therefore follows that if Harmon had been awarded the tender or had by November known of what transpired, its prices would also have been higher, or it would have sought to secure the same changes as Seele/Alvis made. Since, however, all tenderers were told firmly that there could be no alterations in the terms of the trade contract, the latter option would not apparently have been available at tender stage. It is sufficient for my present purposes to conclude that H of C's failure to realise the thinking behind the original tender could have affected any individual tenderer's approach to its tender. It is not in my view an answer to say that all prices would have gone up: the questions are: by how much, given that it was a competitive tender, or whether another tenderer would have insisted on the same or different changes in the contractual conditions, or both? Since H of C's predicament was known at a time when Harmon were being kept on hold as a potential lever in the negotiations which H of C was conducting with Seele/Alvis, it was not only open to H of C (which was asserting that it had not awarded the contract to Seele/Alvis) to have invited Harmon to re-consider its position in the light of the circumstances which were known to Seele/Alvis and H of C but not to any other tenderers. The failure to line up the suppliers was a very material alteration in the terms of tender and to negotiate only with one tenderer distorted competition and, particularly discriminated against Harmon whose competitive position vis-a-vis Seele/Alvis remained close and could not be ruled out, particularly since the position of the novated suppliers played a part in the assessment of the tenders. There was a failure to be transparent, fair and open and to treat Harmon equally.

229. The original invitation to tender provided that the maximum overall duration of the works might be of the order of 172 weeks, since 103 weeks were allocated for off-site activities, and 69 weeks for on-site activities (see exhibit D2). Harmon tendered accordingly, allowing 53 weeks for manufacturing only but with a possible overlap with on-site activities, since the earliest and latest starts for the installation works were earlier than the earliest and latest finishes for the off-site manufacturing operations. On 2 October 1995 LML wrote to both Harmon and Seele/Alvis confirming points arising out of post tender meetings. In each of the letters LML stated:

230. When Harmon submitted its revised price on 12 October 1995, it included in its "total commercial savings" of nearly -3 million a sum of -504,971 for "programme", to reflect the reduction in the period for window manufacture from 67 weeks to 56 weeks (i.e. between 1 October 1996 and 1 November 1997).

231. In the Seele/Alvis contract 89 weeks were allowed for off-site work from April 1996 to December 1998 with the start of the manufacture of windows commencing at the end of December 1996, and 70 weeks overall allowed for on-site work with an earlier start date of 1 August 1997 (later start 31 October 1997) and earliest finish, mid December 1997 (latest finish mid-March 1999). A further 16 weeks was however specified for a return to site to clean. This period had not previously been identified.

232. Harmon's case was that if it had known that there was to be a further reduction in the overall programme and in the overlap between the on-site and off-site activities it would have been able to offer a further reduction which Mr Boyle estimated might have been of the order of some -375,000. Otherwise, as Mr Boyle said, LML was against changes in programme. Harmon in particular relied upon the fact that they were being supplied with inside information by Mr Kerr and were determined to be the lowest tenderer so that they would have seized every legitimate opportunity to make savings.

233. H of C maintained that the compression to be found in the Seele/Alvis contract would not necessarily have occurred since Seele/Alvis were not in control of its earliest start dates. however, it seems to me that this would apply to any of the programme periods. H of C also challenged the estimates made by Mr Boyle, particularly since some of them appeared to overlap with the reduction of -504,971 offered in October 1995.

234. In my judgment it is clear by the time the Seele/Alvis contract was concluded, there had been a further significant reduction in the overall period which must have led to some savings in staff or overhead costs which were calculated on the overall duration of the project. It may well be that Mr Boyle's estimates were faulty but I am of the opinion that Harmon might well have been able to have allowed up to -200,000 if they had known of the reduction in the periods (overall and off-site) set out in the Seele/Alvis contract. H of C relied upon the supplemental report of Mr Nisbet, the defendant's quantity surveying expert, to the effect that there was no reduction, or at least a minimal reduction. However, for reasons given elsewhere I am not disposed to accept Mr Nisbet's opinion in preference to that of Mr Boyle which appears to me to be soundly based upon Harmon's internal and verifiable calculations. Again H of C in negotiating solely with Seele/Alvis on a sensitive matter such a programming was in breach of its obligation to treat Harmon openly, fairly and equally in not inviting them to state what its portion might be. There is an obvious distinction between revisions to programming pre-contract (where the terms of contract and the incidence of risk and cost are yet to be agreed) and those post-contract (where the contract will define the apportionment of risk).

235. Harmon's case depended largely on the fact that Mr Mumford had noted this in his letter of 2 April 1996. Provision was made for this liability was made in Harmon's tender. This is a minor matter of degree and is not material.

236. In my judgment the defendant made material changes in the post tender-negotiations with Seele/Alvis and in doing so it was in breach of its obligations in failing to treat Harmon fairly, openly and equally. Issues 5(9) and 8(6)(c) (and thus issue 8(6)) will be answered in the affirmative.

237. In order to succeed under this sub-head Harmon would in my judgment have to establish either that if it had been given the opportunity of competing with Seele/Alvis on these changes it either would have beaten Seele/Alvis or that it stood a reasonable chance of doing so in each case by making its tender more competitive. The effect of the changes had therefore to be quantified but of course, it is not possible to quantify the changes in respect of the novated suppliers. Harmon was clearly determined to be awarded the contract so I am sure that it would have made a reduction if appropriate. In my view Harmon would have reduced its tender by about -200,000 in respect of the programme. Thus all parts of issue 8(6A) will be answered: Yes, as regards the novated suppliers and the programme. The amount of reduction for the novated suplliers could have been around -300,000 and that for programme would have been about -200,000 but larger reductions could have been made.

238. The following issues are consequential. For completeness Issue 8(7) - was the defendant in breach of the Regulations in the manner in which it notified the plaintiff of the reasons for its failure to be awarded the fenestration package? (Paras 14(v),(vi),(vii),(e); Re-Amended S of C; paras 48, 49, 50(5) Re-Amended Def.) - will be answered: Yes, the defendant did not comply with Regulation 22(1) of the PWR either in giving the true reasons or in giving the reasons by reference to the basis upon which it was purporting to award the contract to Seele/Alvis and in so doing failed to treat Harmon fairly and openly.

239. The answer to this issue does not therefore deal with the questions arising out of issue 8 (8):

1123. H of C argued that it was entitled to rely on reasons which were not relied on at the time or which were not set out in the letter. There were also submissions about the extent to which an authority could rely on reasons which, if correct, ought to have led to the tenderer not being treated a prequalified. Here the answer in principle is clear from paragraph 37 of the opinion of Advocate General Darmon in Beentjes (see page 4649):

(See also paragraph 16 of the Court's decision at page 4656.) Plainly if Harmon had been no longer capable of executing the contract properly for reasons which had occurred since or which were not apparent or not reasonably discoverable prior to the invitation to tender then pre-qualification would not have barred H of C from relying on them. Under Regulation 22(2)(e) of the PWR (following its parent Directives) the authority has to prepare a record which will include the reasons for the award. That record is bound to be prepared contemporaneously as it is a record of each stage of the project and under the principles of openness and transparency cannot be written up after the event. Since the decision to award the contract to Seele/Alvis was effectively taken in November 1995 the reasons ought then to have been recorded. This was not done. Indeed it seems that at no stage was any note taken of the reasons for the decision for if one had existed it would not have been necessary for Mr Leake to draft the letter as Mr Makepeace could have done it straightaway. The reasons certainly cannot be ones which either were not held at the time when the decision was taken or which were or might have been held but were not recorded as such. An authority has to give the reasons as they were or ought to have been recorded and not an improved version of them. An authority which, for example, failed to send a letter or who inadvertently left out a reason will be unable to rely on an undisclosed reason. They have also be tied back to the grounds upon which the contract could properly be awarded (price, selection criteria or requirements). Under Regulation 31 a tenderer has a limited time to decide whether to challenge the decision and has therefore to reach its decision on the basis that what it is told is true and complete (or that there are no justifiable reasons) and that no other reasons will be or can be relied on, were a challenge to be made. As a matter of the interpretation of the PWR, quite apart from the light of the principles to be applied to them, H of C is not therefore entitled to rely on reasons other than those stated in the letter. The answer to Issue (8) is therefore: No. Harmon suggested that some estoppel might arise but that would only be so if I am wrong in these conclusions. In such event I accept that submission but only in so far as the tenderer might show that it had acted to its detriment, eg in commencing proceedings which it would not otherwise have done. This provides an additional reason for reading the PWR as I have done since proceedings should not be commenced and be defended except upon an open and fair disclosure of the true position. This issue will be answered: No.

1125. It was accepted by H of C that if I were to decide that it was an organ or emanation of the state (as I have done) and that it was liable for the pursuit of a "Buy British" policy (as I have done) then there would be a breach of article 6 of the Treaty. Mr White submitted, correctly, that Harmon's case for breach of Treaty obligations had been confined to discrimination on the grounds of nationality and not on the grounds on lack of openness and transparency, and he was not obliged to deal with such a case. I am not persuaded that there are any such obligations under Articles 30 and 59-65 for reasons which it is not necessary to elaborate since on my other conclusions the point is not determinative of Harmon's overall case. However that is not to say that the selection and pursuit of Option B2 might not have been a breach of the Treaty as it discriminated against other tenderers. I shall therefore answer this issue: Yes, but only as regards article 6 in awarding the contract to Seele/Alvis and in not awarding it to Harmon. The answer is given on the basis that it is sufficient if discrimination is a material factor in the decision.

241. During the course of the trial, Harmon applied to make further amendments to the statement of claim to introduce a case that the defendant was liable in the tort of misfeasance. Harmon also sought to introduce new claims for exemplary and aggravated damages. The amendments did not rely upon any facts or matters that had not already emerged and accordingly Mr White opposed the amendments primarily on the ground that the facts set out in the proposed new pleading, even if they were established, would not justify Harmon's case in law and that therefore leave to amend should not be given since the claim was bound to fail. However, I came to the conclusion it would not prejudice H of C if the amendments were to be allowed whereas there might be substantial prejudice to Harmon if leave to amend were refused in the case so that they could not advance its proposed claims. (I had rather more hesitation about the claim for aggravated damages.) Accordingly, I granted leave to Harmon, but subject to clarification of its case. The relevant issues are therefore:

242. I deal now only with the claim for misfeasance. Harmon's case was that H of C awarded the contract to Seele/Alvis when it knew or believed that, in doing so, it would be in breach of EU law and the 1991 regulations, and that Harmon would thereby be injured; alternatively, H of C was reckless as to these matters. Harmon also alleged in support of its claim for damages that H of C concealed from Harmon the true position regarding the award of the contract and at that time knew or believed that its conduct was unlawful and that Harmon would be injured thereby and it also intended to deny Harmon access to the courts in order to obtain an order preventing the award of the contract to Seele/Alvis. However, again in the alternative, it was said that H of C was reckless as to either or both of these matters. In essence, the case turns upon an allegation that Mr Makepeace awarded the contract to Seele/Alvis when he knew that he had no power to do so lawfully, and he knew that, in so doing, Harmon would be injured.

243. The elements of the tort of misfeasance have recently been considered by the Court of Appeal in Three Rivers District Council -v- Bank of England [1999] Eu LR 211. The decision was the subject of written submissions by counsel for the parties delivered subsequent to the close of oral submissions, for which I am indebted. (It was not necessary to call for further submissions whether written or oral.) It was an appeal from judgments of Clarke J. ([1996] 3 All ER 558 and 634). I shall return to these judgments later. I have first to decide whether the defendant could be liable for the tort of misfeasance: was it the holder of a public office?

244. For Harmon, it was submitted that the defendant had been created by statute in order to carry out certain activities for the benefit of the House of Commons. The definition of a "person holding public office" is wide. It included any person paid out of public funds and will owe duties to the public as to how the duty should be exercised (see Tampion -v- Anderson [1973] VR 715 at page 720. However, the principles were established in Henley -v- Mayor of Lyme (1828) 5 Bing. 91 at page 107 per Best C.J. who said:-

1135. Those who have held been liable for misfeasance included people who were not agents of the government or members of the executive. In Australia the definition of a public officer extended to a Member of Parliament (R v Boston (1923) 33 CLR 386). In Jones v. Swansea City Council [1990] 1 WLR 1453 Slade L.J. said at page 1471:-

In Bradford City Council v. Arora [1991] 2 QB 507 a local council exercising its powers to select individuals for employment was also found to be acting in a public law capacity.

245. Mr White argued that the nature of the defendant's office did not have the requisite characteristics of a public office. It was established "to hold land and perform [its functions] for the benefit of the Houses of Parliament" (see the preambles to the 1992 Act) in exercising its powers, particularly under section 2 of the Parliamentary Corporate Bodies Act 1992, it was not discharging a public duty since providing property, administrative and other services for Houses of Parliament were mere matters of housekeeping.

246. There is evidently no distinction between those who might be liable for the tort of misfeasance and those who might be guilty of the common law offence of misconduct in a public office. In R v. Bowden [1996] 1 WLR 98, which was referred to by Mr White, the Court of Appeal had to consider whether the maintenance manager of a local authority works department was liable for that offence. In dismissing an appeal against conviction on following a preliminary ruling by the trial judge, Hirst L.J. said at page 103:

In Jones v. Swansea City Council [1990] 1 WLR 54 it was common ground that the tort of misfeasance was capable of being committed by the council. Slade L.J. said:-

247. In my judgment the defendant must be regarded as a person who is capable of committing the tort of misfeasance. The question is not the status of the person for in R. v. Bowden a local authority maintenance manager was not too lowly an office holder to be criminally liable for actions which were considered culpable for reasons which stem from the same authorities which recognise the tort of misfeasance. The question is the nature of the office: is a person responsible for the discharge of certain functions the holder of a public office? As Slade LJ said in Jones v Swansea the nature of the power is not the test since a private power may held for the public good. So to describe the services provided by the defendant to the House of Commons as "housekeeping" not only understates them but is not relevant. The supremacy of Parliament was established over three hundred years ago. A person created specifically by Parliament to enable one of its Houses to have the services necessary for the discharge of its functions must be the holder of a public office in the provision of land, buildings, staff and other facilities and services. I cannot believe that any ordinary person would consider that the defendant was anything other than a public office holder and to describe its activities (which cover virtually all the support services required for the proper functioning of the House of Commons) as merely "housekeeping" denigrates the defendant's role in the maintenance of the House of Commons. In addition the appellation "an office of trust concerning the public" does not mean that an ordinary public office holder must be placed in some special trustworthy position. It is sufficient that the office holder is entrusted with certain powers and is relied on to discharge those powers properly. Issue 8(A) (1) will be answered: Yes.

248. The other elements of the tort which it is alleged were not present are "knowledge that the defendant's acts were unlawful"; "knowledge that the defendant's acts would probably injure the plaintiff"; and the broad general question of motivation or intuitive motivation also described as "targeted malice or dishonesty". In order to place the submissions made on behalf of the parties in their context it may be helpful to set out the conclusions of Clarke J. in Three Rivers District Council v. Bank of England (No 3) as summarised in the head note at [1996] 3 All ER 558 (which was accepted by counsel of both parties as accurate and as a useful starting point) and then to consider whether and to what extent that summary needs alteration in the light of the decision of the Court of Appeal and other authorities. The head note reads :-

....

249. "Dishonesty" thus remains a necessary element where the other requirements of knowledge of illegality and of knowledge or foresight of consequent injury have been established. In his judgment Clarke J. said at pages 581-582:

(Category (i) was actual knowledge; category (ii) was wilfully shutting one's eyes to the obvious and category (iii) was wilfully and recklessly failing to make such inquiries as an honest and reasonable man would make.) In the Court of Appeal Hirst L.J. said (at page 268) that such statement of principle had been "very largely approved by the Court of Appeal in New Zealand in Garrett and Rawlinson v. Rice, and we too think that it is a correct statement of the law". He went on to add some comments and clarifications primarily to emphasise the importance of dishonesty and to emphasise that dishonesty and knowledge (of some sort) were "rather like the chicken and the egg" so that whether a defendant has acted honestly or dishonestly was very much a jury question. He and Robert Walker LJ (who formed the majority) found assistance in Lord Nicholls's speech in Royal Brunei Airlines v. Tan [1995] 2 AC 378 in which he had said at page 391;

1152. However, Hirst L.J. disagreed with the submission that had been made to the effect that any knowing departure from a statutory obligation was sufficient to constitute dishonesty. The submission was based upon what Lord Nicholls had said in Royal Brunei at page 389:

1154. Hirst L.J. said (at page 270):-

1157. Ultimately therefore the court gave broad agreement to Clarke J.'s conclusions on the tort as set out in pages 632-633 of his judgment. For present purposes it may be sufficient to summarise the conclusion reached by the Court of Appeal in Three Rivers District Council v. Bank of England as emphasising that the tort of misfeasance may be committed where a person fails to make an honest attempt to perform the relevant duty when he has that degree of knowledge that a person in his position with his experience and intelligence and motivation might have expected to have used not to take the course that he did.

250. I therefore turn to the other ingredients of the tort. First, as to knowledge or the state of mind, Mr Fernyhough QC argued that Mr Makepeace actually knew that if he awarded the contract to Seele/Alvis he would in all likelihood be breaking the law. Alternatively, he argued that Mr Makepeace believed or suspected it to be the case, or that he was reckless (here used in the sense of indifference) as to whether that would be the case or not. Mr Fernyhough drew attention to Mr Makepeace's familiarity with the PWR and of the defendant's obligations under EU Procurement Law and official guidance from the CUP. For reasons which I have already covered it was the core of Harmon's case that there was a breach of the PWR and of the EC Procurement Law and that Mr Makepeace must have known of it, or certainly he was sailing close to the wind since he had been told by LML and had not taken any steps in October 1995 to resolve the question (see also). He knew that the course which was being taken in October 1995 was one which might not be competitive since he raised the problem in a letter to Mr Webber of 25 October. He knew that the problem might be solved if there was a re-tender for the base scheme which would provide a close comparison with Option B2. Interestingly, when asked how he saw the problem Mr Makepeace said:

1159. Mr Fernyhough emphasised the words "at that stage" but, equally, Mr Makepeace said that he saw the problem primarily as one of time, namely, that H of C was under increasing pressure to award the contract since if there was a significant delay in awarding the contract, the project could be jeopardised as the breathing space granted by the difficulties created by London Underground would be exhausted. Mr Makepeace recognised that there was a possibility that acceptance of Seele/Alvis's tender might not comply with EC Procurement Policy. In cross-examination Mr Makepeace tried to make light of the problem that presented itself to him in October 1995 but his reactions to questioning showed me that he well realised that he had then been skating on thin ice, to put it mildly, was clear from the discussions that he had with LML and others. In that month LML was first instructed to seek legal advice but then Mr Makepeace told LML not to do so on the basis that no decision had been made to award the contract to anyone at that stage. Mr Fernyhough naturally suggested that this explanation was incredible because the advice that was then to have been sought was as to whether or not it would be lawful to award the contract to Seele/Alvis. If H of C had been advised that it would not have been lawful, it would have been necessary to re-start the tender process. Accordingly, it would be to the advantage of H of C to have known its position at the earliest possible opportunity in order not to run the risk of further loss of time. In addition, Mr Makepeace was asked about LML's report for November, which recorded that at the Package Meeting on 23 November arrangements were made for a meeting to be held with Mr T Fleet of Berwin Leighton to

1161. Mr Makepeace said that the reason that advice was not sought was, again, that they were not finalising the choice at that stage. Yet the decision to award the contract to Seele/Alvis had already effectively been taken on 23 November. For all practical purposes the die was then cast. He denied that the real reason was that he thought that the advice would have been unfavourable. Advice was ultimately sought on 21 February 1996. Mr Fernyhough submitted that the inference could be drawn that H of C had then been advised that to award the contract to Seele/Alvis would or might well be in breach of the law since no competent solicitor with knowledge of procurement law could have advised to the contrary.

251. Privilege was claimed in respect of the advice given by Berwin Leighton at the time. Mr Fernyhough submitted that I could nevertheless properly draw certain inferences from the claim about what the advice might have been. Mr White submitted that no inferences adverse or otherwise could be drawn since it was well established that it was not permissible to do so: Wentworth v. Lloyd 10 HL Cas 589, and more recently R v Derby Magistrates' Court ex parte B [1995] 4 All ER 523 in which Lord Taylor said at page 537:

1163. Mr Fernyhough submitted that that traditional and well established view was subject to exceptions. He referred to Ridehalgh v. Horsefield [1994] Ch 205 in which Sir Thomas Bingham MR said:

1165. However, I consider that Ridehalgh v. Horsefield is dealing with the special situation of a wasted costs order where inevitably the questions may arise as to what has passed between the client and his lawyer. The ordinary rule is clear. If inferences were allowed to be drawn it would put pressure upon a client to waive privilege and thereby would be required to reveal matters which, in the end, might prove to have been best left secret when no adverse inference was drawn. Accordingly I decline to draw any inferences from the incontestable claim by H of C for privilege attaching to these communications between it and its lawyers.

252. More pertinently, Mr Fernyhough also relied upon the request to LML in March 1996 to advise on the likely quantum of Harmon's wasted tender costs which resulted LML in informing TBV Consult:

1167. The assessment of the costs was that the costs were about -165,000. Mr Brand confirmed that the reason for the request was the possibility of a claim against the defendant by Harmon for not accepting its tender. In my view this step would only have been taken because H of C recognised that its actions laid it open to such a claim. From November 1995 Harmon had been writing letters which could not have left their recipients in any doubt that it thought that it should be awarded the contract and wanted to know why it was not coming its way. They were scarcely veiled threats.

253. Mr Fernyhough submitted that the inconclusive correspondence that took place between Harmon and LML in 1996 about H of C's intentions was intended to prevent Harmon obtaining a court order against the award of the contract to Seele/Alvis under Regulation 31(6). Mr White maintained that any application for interlocutory injunction prohibiting the award would have failed. Accordingly, Mr Fernyhough submitted that since Regulation 31(6) expressly empowered the court to grant an order without limitation there was no reason to suppose that the court would have to consider whether there was a serious question to be tried. I think that it is most unlikely that a court would grant order as a matter of discretion (except on an application without notice) unless it was satsified a a good case had been made out at first sight. In reality I doubt very much if Harmon would have obtained an interlocutory injunction if American Cyanamid principles were applied even if it had been capable of giving the customary undertaking as damages would have been a sufficient remedy. However Regulation 31(6) in providing for a specific remedy without prejudice to the other powers of the court confers on the court an additional power the exercise of which is not fettered, for example, by the need for an undertaking or by damages being an adequate remedy. Indeed in very many cases it would be impossible for a disappointed tenderer to give such an undertaking, particularly where the damages payable would be disproportionate to the value of the contract. In my judgment the purpose of Regulation 31(6) is to provide an effective alternative remedy. It will not be effective (certainly within the principles of von Colson) if its exercise has to follow the principles applicable to the grant of interlocutory injunctions, or if there were to be any significant delay (which could be equally prejudicial to the contracting authority) before the merits of the application were heard and disposed of. Applications of this nature should be heard quickly, especially if they relate to the tendering procedure. The Regulation also contemplates permanent remedies. The measures granted by Regulation 31(6) will not be effective deterrents if they are not all readily available to a wronged contractor. In my view therefore H of C knew that it faced the prospect of action which would seriously disrupt the project and thus intended to prevent Harmon from being in a position to apply for an order under Regulation 31(6). On my other findings Harmon would have secured an order had it sought one.

254. Finally, reliance was placed upon the circumstances in which LML's draft of the letter giving reasons for the rejection of Harmon tender was altered so as to set out reasons which were untrue and did not give the true reasons of the contract award. This letter had been written on the instructions of Berwin Leighton who were in turn acting on the express instructions of the defendant. Mr Fernyhough maintained that H of C was trying to cover its tracks. Mr White however maintained that it was necessary to establish that H of C knew that such letters broke the Regulations.

255. Did Mr Makepeace know that what he was doing was wrong or did he believe or suspect it or was he reckless? Did he have an honest belief that he was doing right? Did he act as an honest person would have done in all the circumstances? Mr Makepeace was a highly experienced official and in charge of placing numerous contracts required for this massive project. Having had heard him give evidence over a number of days, I have no doubt whatsoever that he is very intelligent and capable, despite a somewhat deprecating manner which at times conveyed the impression that he could not know everything, that he might not be on top of his job, and that he deferred and had to defer to others, but which apparently belies a tough attitude which may verge on the arrogant and in which little room seems to exist for true self-criticism or correction. As I have found, he is well able to anticipate lines of questioning and to choose his words carefully in order to avoid making overt admissions, even if by so doing he inadvertently reveals that he is hiding something and he knows more than he is prepared to say. So far as I could judge he was left to run the project without any material supervision, as one would expect from someone of his standing, but with the customary consequence that he had to take decisions himself. Mr Webber took no active part and so far as I could see both he and Members of Parliament were only to be told as much as Mr Makepeace thought necessary. I am sure that he was always very familiar with the rules relating to the placing of contracts under the PWR and the European regime. He had been given LML's procedures manual and had required it to be altered. He knew perfectly well, for example, that "overall value for money" was not correct and was not pleased to be corrected by Mr Linge, so much so that he arrogantly refused to make the change when he could and should have done in the ensuing advertisements so that it took this action for there to be complete compliance. He knew that there ought to be criteria but did not want to tie himself down as he would lose flexibility. He knew that there had to be at least one strong UK contender for this major and prominent package. He encouraged and promoted the "Buy British" approach favoured, amongst the project team, by MHP and, for different reasons, by AFE. Once the second round of tenders was opened he knew that these consultants' favourite, Seele/Alvis, would be driven out of the running by Harmon unless their option B2 could be preserved. He therefore appointed Mr Quick in order that this could be achieved. Mr Makepeace saw the manner in which the task force under Mr Quick went about its work and acquiesced in it even though it resulted in a travesty of tender evaluation designed to shut out Harmon. Mr Makepeace knew that there was no competition for Option B2 and that the award to Seele/Alvis was not permissible under the PWR, he tried to create the semblance of a competition by asking for prices from Harmon and Gartner before formally making a decision. This might have worked had he not also decided to limit their participation and to exclude them from pricing anything which resembled Option B2, in flat disregard of the advice given to him.

256. In my judgment, it is thus clear that Mr Makepeace had more than merely well founded doubts about the propriety of the process leading to the award of the contract to Seele/Alvis for Option B2 without proper competition. These doubts were shared by others which led to discussions as to whether or not legal advice should be sought both in October 1995 and November 1995. The advice then given, eg by LML, was not taken. There is certainly a question mark over the effect of the visit to Brussels but I cannot find that it played a part in the decisions then taken. In my judgment, for the reasons that I have already given, it was obvious that to award the contract to Seele/Alvis on the basis of option B2 could and would not comply with the PWR or EC procurement law and I am sure that Makepeace knew it. Even if I am wrong in concluding that it was so obvious also to Mr Makepeace and to others in the project team, and to Mr Webber, with whom Mr Makepeace discussed these problems, I have reached the firm conclusion that Mr Makepeace did more than deliberately decide to ignore the problems but that he deliberately decided not to seek advice since he feared that the "wrong" advice (which I am sure he knew he would receive) would get in the way of what he had determined to do and would also inevitably dislocate the timetable for the project since it would require re-tendering. These were not the actions of an honest and reasonable man who would not only not have put himself at risk but would have sought advice to find out the true position. He therefore decided to award the contract to Seele/Alvis and he also decided not to explain to anybody else outside the project team and the PWD the nature of the predicament and dilemma facing H of C. Advice was sought but only when it would have been impractical to abandon Seele/Alvis, even though that consortium was taking every opportunity to drive a hard bargain - a situation which H of C could have avoided had not the decision been taken to shelve Harmon. If therefore Mr Makepeace did not know that the defendant could not lawfully award the contract to Seele/Alvis (which was bound to injury Harmon) he certainly was reckless. It was not an honest attempt to perform his duty as the defendant's project sponsor or the defendant's duties under the PWR and EU law. Mr Makepeace's bluff was effectively called when Harmon asked for reasons for the decision. He then falsified the reasons which had been correctly set out by LML. This was described for Harmon as covering his tracks and in my view provides cogent evidence of dishonest conduct on the part of a public official. Mr Makepeace plainly knew that the letter did not set out the true reasons. I have therefore no doubt in holding that H of C was guilty of the tort of misfeasance. This is not a case in which a public official was faced with a dilemma and had to form a judgment which any decision-maker has to make from time to time and which may later be criticised on its merits but not on the grounds of any lack of good faith or culpability on the part of the person entrusted with making the decision. The reasons why Mr Makepeace acted as he did explain, but do not excuse, his actions. Issue 8(A)(2) will be answered: Yes, in all material respects. (I do not think that it would seve any useful purpose to go thorough the whole of paragraph 14B.)

257. The following questions were presented under this heading:

1169. The following are the main causation sub-issues:

258. H of C accepted that for the purposes of Harmon's primary case under the Public Works Regulations, the provisions of Regulation 31(3) enabled Harmon to recover provided that it established, on the balance of probabilities, that there were breaches of the Regulations that caused the loss and damage for which it was claiming. Regulation 31(3) reads :

1176. As the contract had been entered into Regulation 31(7) only gives Harmon the right to damages. Here, "contractor" means, of course, "tenderer". Regulation 31(3) gives effect to directive 89/665, article 2(1)(c) of which required members states to ensure that the measures for enforcement included the power to award damages to persons harmed by their infringement. It is common ground that the general principles of community law in respect of the recovery of damages for breach of the community obligation are set out in Francovich v. Italy, Cases C46/93 and 48/93 [1991] ECR I-5357 and Von Colson v. Land Nordrhein - Westfalen, Case 14/83 [1986] 2 CMLR 430, namely

1180. In view of (1) above, it is not either necessary nor indeed desirable to consider the position in other countries, although the researches of counsel found a most a comprehensive series of studies which indicated that broadly the same approach will be applied throughout the European Union. However, there were differences between the parties' submissions on, in effect, the application of these broad principles. First, Harmon suggested that the impact of community law meant that the word "in consequence" in Regulation 31(3) should be read in a way which would enable there to be an effective remedy and accordingly the application of English rules as to causation (and indeed the measure or assessment of damages) should cede place to the broader principles of European law. On the other hand, H of C argued that Harmon had to establish that but for H of C's breaches, it would have been awarded the fenestration package on the basis of one of the tenders it submitted, and thus earned the margin for profit which it claimed. Similarly, it would have to establish that it would not have tendered for the fenestration package and would therefore not have incurred tender costs. Although some of the studies to which I have referred, (e.g. that by Herbert Smith) suggest that damages might be assessed by analogy to a case in tort, H of C suggested that the cases relied on by Harmon (e.g. (Lonrho v. Fayed) (No. 5) [1993] l WLR 1489 and paragraphs 1930-1937 in McGregor on Damages, 16th Edition, do not support the case that anything other than the ordinary proof of causation was required.

259. As a matter of general approach I consider that where compensation is sought by a tenderer for being deprived of an opportunity to be awarded the contract, the approach should be to award damages on a "contractual" basis rather than on a "tortious" basis, although the remedy is a statutory remedy and usually the assessment of damages for breach of statutory duty is akin to those for a comparable tort. However, before considering whether Harmon is entitled to recover its wasted tender costs, or its loss of profit, it is first necessary to establish, independently of my earlier answers on liability, whether Harmon would have been awarded the contract or what chances Harmon would have had of being awarded the contract, had there been no breach by H of C.

260. Harmon's principal case is that H of C was not entitled to award the contract to Seele/Alvis on the basis of Option B2. In September 1995, when Seele/Alvis's alternative was received, H of C could have asked Alvis to remove the "commercial in confidence" restriction attached to their proposal, but it did not do so. It could have asked all the tenderers to submit prices for all of the proposals put forward by the project team; it could have abandoned the attempt and started again, for example, on the basis of a performance specification complying with certain basic design criteria. By declining to take any of these courses, H of C was obliged to award the contract as a matter of law to the lowest tenderer which would have been Harmon. My answers to Issues 8(1) and (5) endorse this case. H of C, however, argue that in so far as Harmon's approach is based upon Beentjes and R v. Portsmouth then those cases do not determine that, as a matter of causation, Harmon would have been the lowest tenderer. H of C rely, with some force, on the evidence that it never intended to award the contract to the lowest tender and was looking for a balance between cost and technical acceptability. Whilst I see the force of that submission H of C could not in law have awarded the contract for Option B2 to Seele/Alvis as it could not have done so as a variant. That then leads to the position that it is unrealistic to suppose that H of C would have awarded the contract to a contractor it did not wish to employ for a design it did not wish to have executed so had H of C been faced with the consequences of its action (eg by being so advised in November 1995) it would perhaps have started again. First, on the facts H of C was boxed in by the slippages in the project timetable and had been saved from embarrassment only by the delays to Westminster Underground Station so in my view it is improbable that it would have taken such a course. Secondly, such an approach is incorrect since it is not necessary for Harmon to establish that they would have been awarded the contract but that they ought to have been awarded the contract, had H of C complied with its obligations and dealt with Harmon fairly under the PWR even if it had not also discriminated against it. It is therefore to be compensated for being deprived of its entitlement. I do not consider that it is a sufficient defence for H of C to say that it would never have awarded the contract to Harmon: it ought never to have got itself into that position in the first place.

261. H of C's corollary is that damages would be payable referable to a contract that would not have been entered into and accordingly Regulation 31(3) and (7) would be a penalty for the unwary. For the reasons that I have already indicated, I do not consider this to be true: the only issue is one of linking the defendant's undoubted breaches to the loss claimed by Harmon. Nor do I consider it helpful or necessary to have to assess damages as if there might be different results depending on, for example, whether the breach of the PWR was the failure to specify in the OJ notice the criteria upon which H of C relied, or its failure to act as it ought to have done in September 1995 by declining to consider Seele/Alvis's alternative proposal. The result will or should be the same: if the criteria had been specified, Harmon would have known of the basis and would either not have tendered or, if it did tender, would have been entitled to expect that its tender would have been considered on the prescribed basis. In the former case, it would certainly recover its tender costs; in the latter case, it would need to establish that its tender either would have succeeded or would have stood a good chance of succeeding.

262. Harmon said that its expenditure on the tender was about -500,000 made up of staff costs of -413,745.24, and other expenses of -27,000. Harmon rely upon the provisions of the Utilities Remedies Directive 92/13. Its recitals provide, amongst other things:-

1183. The operative part of the directive in article 2(7) states:-

1185. Harmon also rely upon comment in "Public and Utility Procurement" (1997) (by Judge Geddes):-

1187. Harmon adopted that proposition as part of its case and submitted that all its tender costs should be recoverable on that basis. H of C maintained that these words created problems for Harmon. First, even though the utilities directive (92/13) was earlier than the latest public works directive (93/37), no such words appeared in the works directive which suggested that a restrictve meaning might be given to the works directive and to the PWR, for although they stem from the earlier directives they reflect the remdies directive (89/665). Secondly, even if the wording in the utilities directive were to apply, Harmon would have to show that it had a "real chance of winning the contract" and that "as a result of the infringement that chance was adversely affected". Furthermore if the right to recover tender costs were to be as set out in the utilities directive then it was submitted that logically the right to recover loss of profits is to be determined by some other standard, i.e. something more than a real chance would need to be proved. H of C referred to the well-known observations of Stuart Smith L.J. in Allied Maples Group v. Simmons & Simmons [1995] 3 All ER 907 at pages 914-916:-

263. It was submitted that Allied Maples was not authority for the principle that damages for loss of the chance were available in tort in circumstances in which the loss of a chance was not dependent to any extent upon the "hypothetical action of the third party" but was dependent solely on matters within the control of the parties to the litigation. Accordingly, Harmon's case fell within categories (1) and (2) as set out in the judgment. Thus, it was submitted, Harmon had to establish the following on the balance of probabilities:-

1196. It was therefore not open to Harmon to establish that it had a real or substantial chance of avoiding its losses and should be entitled to damages that reflected the real or substantial chance lost.

264. Furthermore, if damages were to be assessed on a "tortious basis" then damages for breach of statutory duty must be assessed on the assumption that a defendant such as H of C would decide to discharge its statutory duties in a manner most beneficial to it and not in the manner beneficial to Harmon. Reliance was placed upon paragraph 386 of McGregor on Damages where it is stated that where the chance is dependent on the actions of the wrongdoer it is to be assumed that it will perform the contract in the manner most favourable to himself. Mr White submitted that by analogy the same principle should apply in a case such as this. I agree with such a general proposition but it is inapplicable. The interests of H of C were to get the project finished and although Option B2 was attractive or technically superior Harmon had tendered for an option which was equally suitable, and whatever reservations the project team may have had about Harmon's capabilities I do not consider that if it had come to the crunch H of C would have run the risk of further slippage by inviting fresh tenders. It would have accepted one of Harmon's November tenders.

265. Therefore I do not think that it is necessary to approach the matter in the interesting but somewhat sophisticated way suggested on behalf of H of C. First, I do not consider that the wording of the utilities directive detracts from the wording of the public works directive, or from the effect to be given to Regulation 31. There were probably good reasons why it was necessary to spell out in the utilities directive that which, in my judgment, is to be inferred from the works directive and the PWR. One good reason was to signal to potential claimants that they could not merely establish an infringement in order to recover the cost of preparing a bid or of participating in an award procedure where they would never have been runners in the race at all. Otherwise, a contracting authority who slipped up and had to compensate someone who had a real chance of being awarded the contract would also have to compensate all the other tenderers. In my view the words "in consequence" in Regulation 31(3) import the same concepts. A contractor will not suffer or risk suffering loss or damage in consequence of the breach if the loss would have been suffered in any case. Harmon suggested that it could recover tender costs since it had tendered in expectation that its tender would be treated equally and fairly and in accordance with the PWR, and that it would not have tendered at all if it had known that it would not have been so treated. There is however no real evidence to support this and in view of the evidence of Harmon's determination to obtain the contract, I doubt if Harmon would in reality have been deterred from tendering if, for example, the project had not been subject to the public works regulations but had been a private sector competitive tender.

266. In summary therefore Harmon is entitled to recover its tender costs, taken by themselves, on the grounds that it ought to have been awarded the contract and would then have recovered its costs. If, notwithstanding, H of C had decided to place the contract elsewhere then Harmon would have been deprived of the chance of recovering its costs. I assess that chance as virtually certain - say 90% - for I do not consider H of C would have been so perverse as not to accept Harmon's tender. It is not therefore truly an expression of a chance for the purposes of "loss of a chance" but more of probability. If H of C had decided to go for some other course such as to award the contract on the basis of a version of Option B2, but after giving the other tenderers the opportunity to tender on the basis of that option or to award it on the basis of a performance specification complying with certain design criteria but with the detailed design being provided by the tenderer, I consider Harmon would have stood as good a chance as any and better than most of being awarded the contract. Unlike the primary scenario (lowest price) there can be no certainty but there is surely a real and substantive chance that Harmon would been been awarded the contract. I therefore assess its chance of doing as 70%. (I develop my reasons later.) I consider it quite improbable that H of C would run the risks inherent in starting all over again, but would have accepted Haromon's tender which was the lowest. Harmon's capabilities were denigrated solely to advance Seele/Alvis and Option B2. Issues 11(A) will be answered Yes and sub-issues (2) and (3): Not necessarily, it is sufficient if it ought to have been awarded the contract.

267. Harmon's case was that in order to recover its gross margin or profit it had to establish that:-

268. Both parties say that the answer to sub-issues (3) (and (4)) under the heading "Causation" should be: yes, although there are obviously differences in the route or routes by which each of them arrive at the same conclusions and therefore I have given a qualified answer to sub-issues (2) and (3). Accordingly, the issue as to whether Harmon can recover its loss of margin or profit depends upon sub-issue (5): is Harmon able to establish that one of its tenders should have been accepted and, if so, which tender? I therefore answer this issue on the assumption that the answers I have previously given are incorrect, namely that H of C was obliged to award Harmon the fenestration package as a matter of law and therefore Harmon was entitled to the margin it would have earned on the tender which should have been accepted, i.e. that which it put forward in November 1995.

269. Harmon's case was that its fourth tender on 2 November 1995 should have been accepted by H of C. The only tender which H of C could lawfully consider at that stage was Harmon's tender; it was the only remaining tender based upon H of C's own design namely option A 1, and it offered the best overall value for money. Alternatively, Harmon contended that its first, alternatively its second, alternatively its third tender should have been accepted. Harmon also accepted that after the fourth tender in November 1995 H of C was entitled to continue negotiating with the tenderers but it argued on that basis Harmon would have still been the lowest tenderer. It wanted the contract and there was enough flexibility in its tender to allow for any further reductions in price. It would have made those reductions to be so required. Furthermore even if Harmon had been invited to submit a tender on a performance basis then with the undoubted resources of the Harmon group behind it, it would have been able to produce competitive designs of the highest quality. Indeed, that was one of the very reasons why Harmon was selected and encouraged in the first place, i.e. the ability of the resources of the Group. It was not suggested that the Harmon group was not then one of the world leaders in the design of cladding and fenestration systems.

270. Harmon in particular relied upon its criticisms of the work done by the task force which resulted in the report of December 1995 in which Harmon's tender was depicted as not being the best by only -111,000. If that exercise had been carried out properly then Harmon's tender would have produced the best overall value for money, using the internal criteria of the project team. Had Harmon been aware of the latitude granted to Seele/Alvis in the post tender negotiations, it would have also taken advantage of those improved terms and reduced its price.

271. Harmon of course accepted that it was impossible to answer sub-issue (5) as an unequivocal "yes" since, on certain scenarios, price would not have been the dominant factor, so that, just as it was not certain that Harmon would have succeeded, it was not certain that Harmon would have failed. Harmon certainly had a very good chance of success and, had it been given an opportunity to re-tender based upon its own designs, it would have been able to overcome the objections which materialised in August 1996, namely, that Harmon fell down on technical superiority and maintenance. Had these criteria been spelt out as part of a notional re-tender for design, then Harmon submitted that there was no reason to suppose that it would not have been able to meet them. If at that stage Harmon had been treated fairly and equally, why should it be supposed that it would necessarily have been unsuccessful?

272. H of C submitted that Seele/Alvis's November 1995 tender would still have been considered the most economically advantageous of all those received by H of C. Option B2 was technically superior; it gave better value for money on long term maintenance performance grounds; it would therefore have prevailed. I do not consider that it is really open to H of C to make this submission since in some way it supposes that option B2 may be taken into account when it is the very existence and acceptance of option B2 that gives rise to the issues which result in this sub-issue. Viewed in terms of a re-tender, it is in my view quite impossible to accept H of C's submission that the Seele/Alvis proposal would have succeeded since there is no comparable material from which one can draw the conclusion that Harmon's counter-proposal, had one been made on the same basis, would still have failed. Reliance on the work done by the task force is, once again, not comparing like with like. This part of H of C's approach seems to me to assume that it is necessary to decide what the outcome would have been had H of C complied with Regulation 20(4) which I regard as irrelevant.

273. H of C next submitted that if option B2 had to be discarded, then in September 1995 the project team would have carried out a comparison of the tenders for options A and option B and would have concluded that option B was technically superior because it relied upon welded joints. In addition, the maintenance requirements of option B were less onerous than those for option A - a conclusion supported by the evidence of Mr Josey. H of C assumed that tenderers would have been asked to submit their best offers for both schemes in order to ensure that the price for the fenestration package was as close to the budget as possible and that Harmon would have continued to refuse to price for option B. H of C relied on the fact that Harmon declined to re-consider its decision not to tender for option B and contended that the reason why Harmon did not do so was because option B required reliance on welding and Harmon regarded that as a high risk area, according to Mr Boyle. I find these assumptions and conclusions difficult to accept. First, Harmon had inside knowledge, through its contact with Mr Kerr (although Mr Kerr may have kept others similarly informed). Undoubtedly, if option B2 had dropped out of the picture and the race was between options A and options B, and Harmon learned (as it would have done) that option B was the front runner on technical grounds, then I have no doubt whatsoever that Harmon would have submitted a price for option B. It had not done so only because it had been led to believe that the race was on price alone. Furthermore, the fact that though Seele/Alvis and Gartner submitted lower prices for option B than for option A strongly suggest that Harmon would also, if it had re-considered its position, have offered such a lower price (see my later findings which justify this finding). By this stage H of C could not have accepted Seele/Alvis tender for Option B as it was no longer capable of acceptance but even if it had been H of C would have been bound to have asked Harmon for its latest price for that option (as it did not exist and would almost certainly have been highly competitive) and to have notified Seele/Alvis so that it too could reconsider its position.

274. In my judgment the resources and experience available to Harmon would have meant that it would have been able to overcome the risks of finding sufficient experienced welders and other technical problems, bearing in mind that it was well aware of the need to achieve high standards of welding on novel materials. (For present purposes I ignore that the fact that Seele Alvis Fenestration Ltd found a way to extricate itself from some of the problems although it is fair to assume that Harmon could well have done the same.) As will by now be clear none of the tenderers, apart Harmon, had practical experience of working with such materials (including Seele, unless one includes Alvis's experiments of April 1995). Its practical experience on the mock-up showed that the wishes of MHP and AFE could be realised and in this respect it was ahead of its rivals although the mock-up was available for inspection. I am quite satisfied that it would have been able to secure welders of the qualifications and experience required, especially with the help of the Institut du Soudure) just as a UK contractor has access to the Welding Institute.

275. H of C also submitted that it was quite unrealistic to assume that the fenestration package could have been re-advertised, eg on the basis of a performance specification and that Harmon would then have won. Other contractors would have been attracted including some who were deterred by the fact that AFE were the designers and it would be impossible to show that in those circumstances Harmon would have been awarded the fenestration package had H of C elected to go down this road. In my judgment it is not realistic to assume that H of C would have re-advertised the package on a performance or other basis. If it had taken that course, then I consider that Harmon would have stood as good a chance as any of obtaining the contract, i.e. 50:50. LML considered that it was top class designer and better qualified than AFE.

276. In my judgment if Option B2 were out of the picture, and if all the tenderers had been given yet another opportunity of putting forward their best prices for both options, then I have no doubt that Harmon would have risen to the challenge and would have submitted its best price and that it would have been able to reduce its existing prices to a level below that of Seele/Alvis's price for option B1: -33,604,787 (fluctuating/-37,237,447 (fixed). My reasons for this conclusion are based on Harmon's manifest determination to secure this highly important work; the resources available to it as a member of a group with a worldwide reputation; and its determination to establish itself in Europe if necessary, I have no doubt, by "buying" the contract were it necessary to do so. (The liquidator's report on its performance, if correct, bears this out.) In my view Harmon then wished to be one of the major players in the European cladding market and to re-build the share of the market which the companies which it had acquired once had. In the United Kingdom the NPB was the equivalent of the striking buildings in France some of which Harmon had effectively inherited, one of which it had successful managed to completion. However, H of C maintained that Harmon had insufficient latitude to reduce its price.

277. It is therefore necessary to decide approximately how much was included for gross margin and profit. Although issue 5(10) refers to all the tenders it is necessary only to consider the fourth tender as by that stage Harmon had already made certain reductions to remain competitive so that it represents the worst case. However if it were necessary to reach findings about the contents of the earlier tenders I would accept the conclusions set out in Mr Hay Davison's careful and persuasive reports, subject only to those matters that affect the fourth tender and which also affect the earlier tenders. Harmon submitted that the evidence of Mr Boyle in his third supplemental statement (as amended) showed that if necessary some of the assumptions made at tender stage would have been demonstrated to have been comfortable and more than sufficient to cover costs, e.g. in relation to management (see paragraphs 23 and 24 of his statement), in relation to installation, and in relation to matters covered by paragraph 42. Mr Hay Davison's report (F3/357;) showed that nearly -500,000 remained on page A/11 of the November tender.

278. Harmon pleaded that the fourth tender of -31,262,054 (fixed price); H4/22] had an estimated gross margin of -11,724,623. That calculation was based upon an assumed net estimated net cost being incurred of -19,537,501 which was the net cost in the July tender of -22,929,758 less: (1) the deductions made in September which came to -2,071,565, and, (2) the deductions made for the November tender which came to -1,320,690 (net of a 25% margin). Thus, the total reduction between July and November was -3,392,257. In its pleadings, Harmon stated that the gross margin comprised :-

279. It is not necessary to consider Harmon's case on currency rates if that assumes after acquired knowledge. In addition, if it were to be assumed that the matters which came to light after November 1995 (in relation to the novated suppliers and compression of the programme) were also to be taken into account, there would be further sums of money available, of about -200,000. H of C fielded Mr Nisbet, but his lack of experience in this field made his opinions in the main unrealistic and unreliable. I therefore accept Mr Hay Davison's figures and thus nearly all Harmon's pleaded figures, for a gross margin of about -11,724,653, before making allowances for overheads of -2,344,500 and other matters which produced a figure for unallocated gross margin of -8,498,015 (or 43.5% on net cost). I now turn to the costs which it is said would have had to come out this margin and which would have fettered Harmon's ability to compete. This section covers ground which also arises under the issues relating to damages. H of C's case was summarised in Exhibit D13 which listed items totalling -11,749,347 which if established would have reduced the gross margin to a negative figure of (-914,375). I omit some of the smaller items as my findings on them would not have affected the conclusion.

280. Inflation. H of C, following Mr Nisbet, suggested that the allowance of -1.4 million identified by Mr Hay Davison should be -1.7 million as this was the difference between Harmon's fixed price and fluctuating tenders. While this is correct Harmon's letter to LML of 12 October 1995 breaks the figure down into -1.4 m for inflation and -300,000 for currency hedge. This is higher than that pleaded but in my view is to be treated as covered by the allocated profit and risk. It is not however an answer at this stage to say it would not have been needed as it was thought to be required in late 1995. Harmon did not always give LML the correct figures but they are now available. Mr Nisbet did no more than point out the difference and could not support it against the allowance in the tender. No further adjustment is called for.

281. Overheads. H of C contested the figure of -3,321,375 advanced by Harmon and Mr Hay Davison. Its case was based on the percentage pleaded by Harmon in some particulars of 17.5% which, if applied to the net cost of the works in July 1995, produced a figure of -4,356,250. It argued that any reduction in the scope of work could not account for the difference and that the figure had to cover a number of substantial costs amounting to about -1,372,000: tendering (-435,000), insurance (-237,000), staff including Mr Boyle (-700,000), the London office, and financing. However overheads tend to overlap with margin and although H of C pertinently posed the question, the work done by Mr Hay Davison convincingly shows what the real figure is or is likely to be. I therefore accept it and make no adjustment under this head.

282. OMC. H of C naturally wished to see 4% for OMC deducted: -1,250,000. OMC was the shadowy enterprise which claimed an introduction fee of 4% for telling Harmon what was or was bound to be public knowledge. There is no evidence that it did anything useful. I doubt if OMC would indeed have got 4% and that it would have come out of the overheads for this contract, as opposed to some other group fund. The evidence of a binding contractual commitment is not at all clear and it seems remarkable to me that sums of this order would be payable as commission for apparently vestigial work, even though they would be not out of line if the building had been in some other countries. Harmon suggest a figure of -312,500, but the basis for this is speculative. However the evidence of Mr Clatworthy establishes that he thought there was an obligation to pay. He was the person who dealt with OMC. It is not necessary to establish a contract as such since the issue is whether a disbursement would have been made. I find that it would and that an adjustment of -1,250,000 needs to be made.

283. Novated Suppliers. Mr Nisbet suggested that an allowance of 7% would be reasonable on the work of novated suppliers, ie -460,000. Mr Hay Davison agreed that such a percentage would be reasonable. However in his supplementary report he pointed out that when Harmon was informed by LML (on 13 July 1995) of the provisional sums of -6,150,000 it was requested to provide lump sum mark-up (with breakdown) to cover management costs, inspection, quality control, wastage, transportation, expenses and profit. Harmon did not do so. Mr Hay Davison observed that, by using a conversion factor of FF 8.3/-1, -225,000 might be attributed to these heads of expenditure and risk. Mr Boyle also said in his third statement that part of the general management costs was referable to novated suppliers, and was cross-examined at some length about the amount of management that would be needed from which it became clear that the allowance that had been made was atypical for Harmon. Items may of course be treated as overheads when preparing the tender but here they would not have affected the result significantly. In my judgment there is no reason to assume that Harmon had not included sufficient for these costs in the main body of its tender make-up. It does not follow that by not providing the lump sum requested in LML's letter that such costs must come out of margin. They are all costs of a nature for which provision has to be made and it should be assumed that it was made elsewhere, in the absence of evidence of oversight.

284. Fabrication Costs. This is indirectly a challenge to the adequacy of Harmon's tender. The fabrication costs were based on a rate of FF 200 per hour given by Harmon Sitraco which was to carry out the work. The calculations made by M Voisin and others for fabrication costs came to FF 29,254,000. As the issue arose late it was not possible to hear from M Voisin and the point had not been put to M Michno. His witness statement gave evidence about his participation in the preparation of the tender and his consultations with personnel at Sitraco about the time required to fabricate the heavy panels, but he had no reason to deal with the rate or the meeting to which H of C referred. Harmon submitted that this was important because just prior to the submission of the July tender Mr Sahyoun met M Michno and after discussion decided to cut the figure to FF 17,500,000. It is not clear whether this was done because the figure was thought to be high or because it was a cut in the overall tender and it fell on that item. I regard the latter as improbable since cuts of that order are made across the board, as opposed to cuts in areas of genuine savings. Obviously the result is odd unless the cut was made in order to strip out of a composite rate elements duplicated elsewhere which might well be the case since the quotation was provided by a company within the group. However in that event one would have expected Mr Boyle to have explained it. However it is really for the defendant to establish that the cut must be treated as affecting margin which at that stage remained high - about 60%. Mr Nisbet could not of course assist as it was beyond his experience. Mr Hay Davison had not investigated the position although he evidently did not consider that the result was a patent under-estimate. I am not satisfied on the present evidence that I should conclude that the margin would have to be reduced by -1,469,250 as suggested by H of C.

285. Erection Costs. I reach the same conclusion, although for additional reasons in respect of H of C 's claim that a similar cut was made to these costs so as to reduce them from FF 6,800,000 to FF 2,500,000. The estimate had originally been based on figures provided by Cherif, a French sub-contractor. Here Mr Hay Davison made inquiries which justified that decision - see his second supplemental report, paragraph 15.05 ff. He thought that Cherif's hourly cost of FF 163 was excessive. His figure was based on London sub-contractors' current prices and equated to FF 100 per hour (which was the figure suggested by Mr Boyle), although he thought that a lower figure was more likely as it was a large project. Mr Nisbet did provide some check calculations but he was unable to give comparable evidence even about current prices for cladding and referred to the figure from Cherif thereby assuming the conclusion. I cannot accept his opinions which were in my view not only not based on relevant experience (unlike Mr Hay Davison) but were in places not independent but argumentative. The figure is justifiable if the hours are about 34,000. (I was surprised that Mr Nisbet was asked to give evidence as, despite his qualifications and lengthy experience, he was not qualified to deal with the key issues which resulted at times in a rather partisan and superficial investigation of the documents.)

286. Pinon. H of C maintained that Harmon failed to make any proper allowance in its estimates for tooling up and upgrading the factory at Pinon which was a "ghost factory" and not obviously capable of being restored to working order to meet the stringent requirements of the fenestration package. The work force had been dispersed and it was not clear how a satisfactory work force and equipment would be re-assembled. All this was of course apparent at the pre-qualification stage but, nevertheless, the project team allowed Harmon to proceed and invited it to submit a tender. In his report (F2/129), Mr. Blois-Brooke, H of C's expert, said this:

....

1202. The evidence from the Harmon witnesses naturally accepted that the factory was out of operation and would need work to bring it up to standard. Mr Larson, who knew very well how to manage difficult projects from long experience and was a reliable witness, saw no difficulty whatsoever in achieving this. (Mr Larson was rated highly by Mr Mumford in his risk assessment.) In cross-examination, he agreed that it would be necessary to set up a new production facility but he thought that H of C was being far too sophisticated since he had flown in from Kuala Lumpur where he had been responsible for the Petronas tower and where they had had to start from scratch "with the dirt floor and the flip-flops and the guys with no shirts". He accepted that at first sight the factory

but he said

287. M. Michno said that at the time when Harmon was submitting its tenders, the factory at Pinon was working on Harmon's project for SmithKline Beecham and the factory at Façalu was working on a building at Heathrow. There was a work force of about 50 people in each factory at that time. M. Michno said that it was intended to house the design staff at Pinon. The staff would be transferred from Orly. Mr Josey had visited Pinon and was satisfied that Harmon would have been able to store all the completed parts there ready for shipment to Westminster. Mr Blois-Brooke set out in some detail the steps that he thought would be required. Mr Nisbet estimated that some -136,000 would be required in order to provide tooling at Pinon. Mr Hay Davison comprehensively demonstrated in his report that adequate allowances had already been made in the tender for tooling up at Pinon and confirmed this in evidence. There should be no adjustment on this account.

288. Mr Hay Davison also took the view that whatever costs might be required for up-grading the factory at Pinon would form part of the capital costs of Sitraco and included in the price which Sitraco was to charge Harmon, i.e. FF 200 per hour. Some question arose as to which company might carry the cost but in my view that is irrelevant as this issue was whether such costs, if incurred within the group (as they would be), would be charged back to Harmon to be recouped from the revenue from the contract for the NPB. Normally however a contractor such as Harmon would not be concerned with the treatment of these costs as they would be incurred by another company acting as sub-contractor or supplier to Harmon and would form part of its overheads (as Mr Hay Davison said) so there would have to be some good reason why Harmon would have to include costs of this kind in its tender.

289. In my judgment in the absence of any evidence to indicate that such costs would be carried by a contractor such as Harmon, Mr Hay Davison's view is correct. Costs of this nature are the responsibility of the fabricator. They are not necessarily recovered from a particular contract if they are likely to be used again in the future for other projects. Even if they are not likely to be re-used again, they may have residual value. The major items of cost identified by Mr Blois-Brooke, eg the additional crane and the CNC milling machine, would not necessarily be treated as part of the expenditure exclusively required for the NPB. Although bought for the NPB contract they form part of the refurbishment of the factory and might reasonably be expected to be used again, and, if not, to be sold. Accordingly there would be amortised and included in Sitraco's overheads and be passed on to Harmon only through its charge eg FF 200 per hour. In my view, H of C's case falls short of what is required to show that Harmon ought to have included the costs of tooling-up in its own costs and that those costs are to be treated as coming out of the gross margin.

290. There was also a difference as to whether the cost of up-grading should be about -521,000, as suggested by Mr Hay Davison, or about -700,000, as calculated by Mr Nisbet. The difference was not so much one of assessment of cost, but as to whether Sitraco would have needed to have had additional overhead cranage beyond the two five-ton cranes which were there. Mr Mumford had taken the view that the cranage at Pinon was adequate, but Mr Blois-Brooke thought that to use the existing cranes "would have stretched [Harmon's] cranage a bit", although in most instances five-ton cranes would have been adequate. On this point, his opinions were always careful and considered. I do not consider that Sitraco would have risked the existing cranage and that some heavier cranage would have been installed. For this reason, Mr Nisbet's costings are probably closer to those required. By the same token, the installation of a heavier crane would clearly be a matter of value to the long term use of the factory and it is most unlikely, in my judgment, that its cost would have been charged by Sitraco to the work being done for the NPB.

291 Mock-up. The unrecovered costs of the mock-up would clearly have been charged to the NPB.

292. Surveyor and travelling. I regard these both as matters of judgment in estimating and I would not form a view that they were bound to have come out of the gross margin.

293. Storage in the UK. This was another surprising suggestion,namely that Harmon would have had to protect itself against the possibility of panels being delayed in transit to or at Westminster so that some buffer stock would be needed and a secure storage area provided in order that the policy of deliveries "just in time" was maintained. Obviously any contractor in the position of Harmon would allow for the possibility of delays en route but would normally assume that panels would be shipped from storage in France to England in a continuous flow, carefully planned as there were numerous types of panels. I regard this part of H of C's case as completely unrealistic.

294. Accordingly, I arrive at the conclusion that the following allowances should be taken out of the gross margin:-

1215. This would reduce the available margin from -10,834,972 (using Mr Boyle's figure) to -4,556,750 or, using Mr Hay Davison's figure of -11,724,653 to -5,446,431. In either case there would be sufficient latitude for Harmon to compete vigorously to obtain the contract and would probably not have need to "buy" it. Even if Harmon had under-estimated the cost of welding it had sufficient room for manoeuvre for I cannot believe that this element would have cost it more than -500,000. I see no reason to alter my assessment of Harmon's chances of obtaining the contract if H of C had proceeded to award it on the basis of a revised option B2 or on the basis of a performance specification. In addition the true margin is rather more equivalent to that required for risk or realisable profit of the order of 15%, which seems to me to be within the bracket that one would expect for specialist work of this kind carried out by major contractors where relatively high net profits are to be sought to counter the significant risks encountered during carrying out such work and, of course, the nature of the industry, including the cyclical flow of work. It is comparable to the figures reported by LML to Mr Makepeace in early 1996 about the geographical distribution of elements within Seele/Alvis' pricing. They included LML's views of where in the Seele/Alvis tender there were clearly to be found elements for profit and risk. However such elements tend to be spread around within the pricing so the true picture is probably that Seele/Alvis's allowances for group profit and risk were higher. It is noteworthy that all the contractors made substantial reductions so that all must have included some "fat" in their tenders.

295. I certainly reject the contention advanced on behalf of H of C that by the time Harmon submitted its fourth tender in November 1995 there was no profit remaining in it. Similarly, I reject the argument that Harmon had no room for manoeuvre either to reduce its prices still further, or to accommodate any post tender changes of the kind that occurred between November 1995 and May 1996. It must follow that if Harmon had been awarded the contract it also might have run into the same or similar problems encountered by Seele Alvis Fenestration Ltd which led to the reversion to the base design and it too would had to have bought itself out of them. In my judgment it had enough in its tender to be able to do so without material detriment.

296. Accordingly I answer issue 5(10): If running costs, overheads and contingencies, such as payments to OMC, are excluded the amount included in the plaintiff's tender for November 1995 for margin for risk and profit was between -4.5 million and -5.4 million. Since November 1995 tender was arrived at by substantial reductions on previous tenders, it must follow that the previous tenders contained at least those amounts, and probably about twice the amount in the majority of cases (since reductions of at least -5 million had been made).

297. The answers to issue 8 (6A) are (i) Yes, Harmon would have been able to establish that it would have reduced its tender prices had it been given the opportunity of reflecting the changes to the contract terms pleaded in paragraph 14 (viii) of the re-re-amended statement of claim; (ii) Yes, as regards the novated suppliers and programme, Harmon would have made a reduction in its tender price if it had been given the opportunity to do so. The reduction would have been at least -500,000 and, if commercially necessary, more; (iii) Yes, there was certainly a real chance that such a reduction would have been made by Harmon.

298. In answering questions (A) and (B) in Issue 11 in the affirmative I give the following answers to the sub-issues (1) Yes; (2) and (3) Not necessarily, it is sufficient if it ought to have been awarded the contract; (4) Yes; (5) Yes, either of the fourth tenders of 2 November 1995.

299. There is a degree of convergence between the parties on the issues relating to damages, e.g. it was accepted that for most purposes the relevant tenders were that of November 1995. This accords with my earlier conclusions since November 1995 was effectively the time when Harmon was disappointed and had reduced its price substantially so that any assessment of the amounts to which it is in principle entitled ought to be based upon its latest position. The issues about damages are concerned with matters of principle since there are excluded issues relating to the precise quantification of the claim. The full list is as follows but I have appended summaries of the parties' answers so that it can be seen that only some require a decision.

Both say Yes.

1225. Harmon say Yes; H of C say No. The answer is Yes for reasons set out above. I add only that if the damages to which Harmon is be entitled (under any head) are to be assessed on a "tortious" basis rather than a "contractual", nevertheless I see no reason why damages for "loss of a chance" should not be awarded as a matter of general principle for otherwise Harmon would not obtain compensation for the loss and H of C would avoid paying for its default. The duties owed under the PWR and under other enforceable obligations are essentially directed towards the loss of opportunity to tender or to contract and accordingly the damage contemplated must be such a loss.

1233. Harmon say 30-40%; H of C say no more than 15%.

1239. Both repeat the answers to issue 18.

Issue 23: Is the plaintiff entitled to its tender costs:

1246. Harmon say Yes; H of C say No.

1248. In addition the following general issue is relevant.

300. I shall examine the issues in the following order: 18 (and 22, 23 and 26), 12, 20, 21, 24 and 25. The other issues have been or will be answered either directly or indirectly.

301. I have already decided that H of C is liable under all four heads: PWR and Directives; Article 6 of the Treaty of Rome; implied contract and misfeasance. Harmon submitted that it was not necessary for its purposes to consider what damages were recoverable under the second and third heads if it was in principle entitled under the first head to all that it claimed, since Regulation 31(1) imposed on H of C a duty to comply with "any enforceable Community obligation in respect of a public works contract" so breach of that duty was actionable by a contractor under Regulation 31. Mr White argued, first, that the word "enforceable" excluded H of C (on the basis that it was not an organ or emanation of the state) - a submission which I have rejected; secondly, that the words could refer only to the Works Directive and its predecessors 71/305 and 72/277 which had to be mentioned as they were directly enforceable.

302. In my judgment Harmon is basically right in its submission. Regulation 31(1) is a useful and wide-reaching provision which ensures that actionable breaches of obligations imposed upon an authority by the Treaty of Rome, by an applicable and directly effective Directive or any other enforceable principle or requirement of Community law will entitle an aggrieved contractor to recover damages under this Regulation, rather than by means of some other route, such as reliance upon the general law. Indeed it is not necessary that the obligation should be one which usually or specifically leads to an award of damages. It could be an obligation which is enforceable in another way, such as by injunction or declaration. There is no reason to restrict it to obligations which of their nature are not otherwise enforceable by individuals since the obligation will not be enforceable unless it is owed to an individual and falls within the aims and purposes of the PWR. The obligations relied on by Harmon are plainly either directed to the objectives which gave rise to the PWR or are connected with them. Thus I accept Harmon's argument that losses which could be proved to result from infringements of Articles 6, 30, 59 to 65 of the Treaty are recoverable under Regulation 31(3) (subject to my earlier reservation about dealing with articles 30 and 59 to 65), provided of course that they are enforceable, ie where the authority is an organ or emanation of the state and where the claimant has a right as an individual. Similarly I see no reason to confine the applicable directives to Works Directives if they are otherwise relevant. However the primary purpose of the PWR is to give effect to existing obligations and I do not consider that it should be construed as creating rights where none existed before. It is therefore unnecessary to consider any other basis for the recovery of damages for breach of Treaty obligations under the Treaty, or for recovery of damages for breach of a directly effective Directive obligation as a matter of general law, although in my view if necessary it is plain that H of C's breaches are sufficiently serious and that damages are the appropriate remedy for Harmon's claims to be maintainable. I therefore do not need to consider further on what basis damages might be assessed for these purposes. Regulation 31 does not require a distinction to be made between a claim for breach of the Regulations and one for breach of another enforceable obligation.

303. There is no specific guidance in either the PWR or the directives (in particular directive 89/665) as to how Regulation 31(3) is to be interpreted in English law. There are no decisions directly on the question of the assessment of damages from the European Court of Justice, or any English Court.

304. As a matter of approach to Regulation 31(3) Harmon relied on some key decisions of the ECJ. In von Colson und Kamann v. Land Nordrhein-Westfalen Case 14/83, [1984] ECR 1891 it was said:

...

305. In Brasserie du Pêcheur v. Germany; R v. Secretary of State for Transport ex p. Factortame [1996] 1 CMLR 889 it was said :

1259. In that case the court had actually been invited to go further and to decide what might be recovered but, in the manner of courts, it declined to provide inferior courts with the guidance that they need. However, applying principles established or affirmed by von Colson, Harz, Marshall II [1994] QB 126 and Factortame, one may safely conclude that the amount recoverable under Regulation 31(3), whilst ultimately a matter for the English courts applying English law, must not result in an award which would be less favourable than would be available under national law. Harmon's alternative claim for breach of a preliminary contract may thus be relevant (as accepted by H of C). Even if the damages recoverable under Regulation 31(3) would be characterised in English law as damages for breach of statutory duty and or in the nature of those recoverable for a tort such as negligence, I do not consider that it either necessary or desirable to look at them in that way. Harmon maintained that the principle of "effectiveness" should also be applied. H of C, whilst accepting the principle of effectiveness, maintained that it had in fact been met by the provision of apparently sufficient remedy in Regulation 31(3). H of C argued that "effectiveness" meant that domestic law should only provide a remedy for breach of community law if otherwise there would have been no such remedy and that it was not necessary to consider the adequacy of the remedy. Certainly a remedy would be ineffective if it was not available because the domestic law conflicted with community law: see for example Marshall II. However in that case the court said (albeit in a different context but the principle is relevant):

306. In my judgment it is not enough that some remedy should be provided for, in my view, it is clear that from the cases culminating in Brasserie du Pêcheur that the remedy should be both adequate and a real deterrent. Accordingly, it is necessary always to take care to ensure that the result of applying a national law which purports to implement a directive will sufficiently meet the requirements of Directive 89/665. It follows that the interpretation of a national law purportedly giving effect to a directive such as 89/665 should be one which assumes that it is intended to achieve the objectives of the relevant directive, unless the language is completely inconsistent with that intention, in which case effect will have to be given to the parent Directive or other law or principle of law for the national law will have failed to implement it. Accordingly Regulation 31(3) must be read or applied in such a way that a contractor will recover all its losses incurred in consequence of the relevant breach even if such losses might not be recoverable under a comparable or analogous provision of national law for in that way the remedy will be both adequate and a real deterrent. The latter objective will not be met if a contracting authority were able to escape paying the full consequences of its breach.

307. Similarly I can see no reason why the special or general damages recoverable should vary depending on whether the breach or default is characterised as one for failure to comply with Treaty or like obligations (assuming that they fall outside Regulation 31(3)) of breach of contract or for misfeasance in public office provide of course that the underlying facts and results are the same, namely that the contractor has wrongfully been deprived of a contract or of a real and substantial chance of being awarded a contract (applying Allied Maples) and in consequence has wasted its costs of tendering or lost the chance of recovering them through the contract or has lost the net profit and contribution to overheads that it would have obtained or the chance of so doing. Indeed the objects of the Treaty and like obligations, of the implied contract and of the proper exercise of powers are precisely to avoid such situations.

308. H of C commented that Harmon's pleaded case on damage did not say how much of the gross margin is likely to be profit and that that omission was never made good during the evidence. I do not consider this to be relevant for the purposes of the present issues and, furthermore, it is by no means uncommon for an entity in the position of Harmon to be unable to be specific, not least because the margin is to cover provision against risks for which no other provision has been made or for which other provision might prove to be inadequate and profit. If the risks eventuate the expenditure diminishes and vice versa. Once a contract is completed, it is usually possible to be specific as to the amount of profit which would have been realised since by that time the risks will have eventuated and the effect can be costed. Similarly Harmon's claim, if it proceeds to be quantified, will have to be tested against the events that occurred during the performance of the contract by Seele/Alvis Fenestration Limited, for otherwise it may not be possible to decide whether Harmon would in reality have made the profit that they contemplated, had they been awarded the contract on the basis of the fourth tender. At this stage, also, account will have to be taken of the effect of post-tender negotiations, both those contemplated by Harmon in the reservations that they made under the heading "Clarifications" in its tender, and those which resulted from negotiations with Seele/Alvis, some of which might have the effect of decreasing risk and increasing profit all otherwise affecting the net estimated cost with consequential effect on the gross margin available for risk and profit.

309. H of C also maintained that Harmon could not recover those margins for profit and overheads that would have been earned by or recovered by other companies within the Harmon Group. This included the intra group margin of 25% which would have been included in the intra group accounting to other companies for the work materials and services provided by them to Harmon, since the basis upon which they were provided was costs, plus 25%. I am not yet concerned with the precise amount of the margin, or the companies which might have benefited from it, nor am I concerned, from these issues, to consider again or to decide whether the intra group margin would have had to have come from the gross margin, or whether it was already included in the net estimated costs. But I shall assume that it was the former. Otherwise a factual basis for the arguments presented by H of C will not be present.

310. Harmon however submitted that if it was contractually liable to another company within the Harmon group either in respect of tender costs or in respect of payment of gross margin or profit, under ordinary principles of law, Harmon was entitled to recover in respect of those matters, and the fact that Harmon was itself liable to account to other companies within the Harmon Group is irrelevant to Harmon's entitlement against the Defendant. The same result would follow even if Harmon had sub-contracted the work to other companies which were not within the Harmon Group. Where however Harmon had remitted margin or profit to another Harmon Group company but did so without there being any direct contractual liability to do so Mr Fernyhough submitted that modern judicial thinking shows that Harmon can recover the remitted margin or profit. He referred to In St Martins' Property v Sir Robert McAlpine [1994] 1 AC 85 Lord Griffiths said at page 97G as follows:

In Darlington BC v Wiltshier Northern Limited (1994) 69 BLR 1 at page 24G-H, Steyn LJ agreed with Lord Griffiths' statement and described it as "classic contractual theory". Mr Fernyhough also relied on Ballast Nedam Group NV v Belgian State (1994) ECR 1-1289 as the European Court of Justice there held that it was no bar to a company tendering for a contract that it intended the work to be carried out by its subsidiaries.

311. H of C's case was also that Harmon could not recover gross margin in circumstances in which the margin includes costs which Harmon would have had to incur had it been awarded the contract. Mr Boyle conceded that included in the overheads, at least, were costs that would only have been incurred if Harmon had been awarded the contract, e.g. the cost of the bond, or the cost of tooling but, again, I do not have to deal with these element for the purposes of the present issues.

312. As a matter of principle, I see no reason why Harmon cannot recover the intra group margin as part of its gross margin, since in my view it is again necessary to be realistic and commercial about activities incurred within a group and those incurred as a result of sub-contracts placed outside a group. There will be some projects where the contractor selects and employs another company within the group overtly as a sub-contractor but when, as here, it was intended that the combined resources of the Harmon Group, particularly in the European area, would be mobilised for the purposes of the project it is to be assumed that profits that would have been earned by any member company would have been treated as profits referable to the project, even though for internal purposes they might have been attributed to one or more subsidiaries. As I state elsewhere, H of C expected the Harmon Group to provide a tenderer and that it was not to be expected that the selected tenderer would not have called upon other companies within the Group to provide services and, indeed, capital for which and upon which those other companies would be entitled to show a return or profit. Clearly, if the contract had been awarded to Harmon, the intra group margin would have formed part of the cost to Harmon, as such, but it does not follow that it has now to be deducted from the gross margin and re-allocated under the head of net estimated cost if that cost does not otherwise include that group profit margin.

313. H of C also submitted that St Martin's only entitled a person to recover costs incurred by others, in the limited circumstances there contemplated. But the case was about the recovery of damages and whether costs or losses incurred by others could be included in such damages. If remedial works are executed the costs of doing so will be a loss unless and until they are recovered. There is no distinction therefore between losses actually incurred and prospective losses that equally result from the breach in question, nor is there a distinction between "Harmon's costs or losses" and losses of an economic character, such as loss of profit or loss of contribution towards overheads. However, as regards the latter, H of C is right in that Harmon cannot recover loss of contribution towards overheads that would only have been incurred had the project gone forward: subject to issue 27 and for the reasons already given in relation to tender costs, Harmon is entitled to recover that which it has lost as a result of not having the contract which may include the costs of maintaining managerial and other staff and other overheads which would have been funded by the fenestration package. Harmon relied on passages in Hudson's Building and Engineering Contracts 11th Edition, paragraphs 8-177 -8-179, and paragraph 154 in McGregor on Damages, as well as an American case, Vitex Manufacturing Corporation Ltd v. Caribtex Corporation 337 F.2d 795 (1967). Vitex is a well known decision of the US Court of Appeals, Third Circuit. It was a case of termination or repudiation. A factory in the Virgin Islands, which operated only from time to time, received an order and commenced manufacture. The order was then cancelled. It was argued that the claim by the manufacturer for its gross operating profit should be reduced by the rent of the factory during the period when manufacturing might have been carried out, but for the termination or repudiation. Staley C.J. said (at page 798 -[5]:-

...

314. Since Harmon took on other work in 1996-1997 then some of its overheads would have been met out of the other contracts and thus the loss claimed may have been avoided either wholly or in part. Similarly, if Harmon could reasonably have undertaken more work but declined to do so as a result of which it failed to take the opportunity to minimise or reduce its losses, its costs would to that extent be avoidable and irrecoverable. These are matters which will have to be investigated if and when the excluded issues are dealt with.

315. In so far as Harmon has a claim based upon a preliminary implied contract, then the same principles apply. In George Wimpey Canada v. Hamilton-Wentworth (Regional Municipality (1997) 34 CLR (2d) 123 (to which I have referred) the contractor was entitled to damages measured by the difference between the revenue that it would have received had it been awarded the contract and the cost that it would have incurred in performing the contract. In my view, that is no more than an obvious illustration of well established principles. In addition in Pratt Contractors Limited -v- Palmerston North City Council [1995] 1 NZLR 469 Gallen J awarded loss of profit.

316. All parts of Issue 18 (and Issues 22 and 23) will be answered in the affirmative. Issue 26 will be answered similarly but of course on the basis of a refinement of Harmon's definition of "gross margin" to which I now refer.

317. H of C's case has been considered under the heading of Causation where I have decided that it should be assumed that Harmon's fourth tender had an estimated gross margin of about -4.5 million to about -5.5 million. I have excluded costs which Harmon might have had to incur so as to reduce the margin available. To that extent I do not accept Harmon's definition in its substituted annotated Further and Better Particulars (A2/307);

1274. As a matter of principle H of C is right in its submission that Harmon cannot recover as damages quantified by reference to a gross margin costs which it would have incurred even if it had not been awarded the contract, such as the costs of tendering. They may be recovered in some other way. For the purposes of assessing damages gross margin differs from loss of profit only in so far as it includes a contribution to items of recurrent or fixed expenditure the cost of which must defrayed from earnings. Such costs may of course be recoverable as damages in some other way. The assessment of gross margin must take account of events which would have affected the performance of the contract for good or ill. The answer to this issue is: Yes.

318. I have already decided that damages for "loss of a chance" are really only to be awarded only if H of C was not obliged to award the contract to Harmon and ought to have sought new tenders. In such event the selection of one of Harmon's tenders does not arise. H of C is therefore correct in its submission that this issue should be not be answered "yes" although any assessment will require the construction of a hypothetical tender for Option A1 or B which would undoubtedly be based on the November tender. The answer to part (1) is therefore No, does not arise as a hypothetical tender would be used and the answer to part (2) is that based on option (a): the plaintiff is entitled in principle to quantify its claim by reference to a tender based on a November tender with such adjustments as may be necessary for the purposes of a hypothetical tender required by re-tendering in competition with others.

319. Under the heading of Causation I have concluded that if Harmon had been treated fairly and in accordance with the law Community Law, then H of C ought to have awarded it the contract on the basis of Option A1. If H of C had decided to award the Contract on the basis of Option B2, and if it had given other tenderers the opportunity to tender on the basis of that option, then Harmon stood as good a chance as any of being awarded the contract, and better than most - probably 70;30. In arriving at these conclusions I have endeavoured to apply the principles set out in Allied Maples v Simmons & Simmons [1995] 1 WLR 1602, in particular the observations of Stuart-Smith LJ at page 1614D which are relevant both to issues of causation and issues relating to the principles upon which damages are to be assessed:

1276. H of C submitted that generous discounts were made in assessing damages for loss of a chance. Mr White referred to Fisher v. Knibbe (1989) 6 WWR 130 (where the court awarded the plaintiff 15% of the damages he would have received as the value of a lost cause of action) and Yardley v. Coombes (1963) 107 SJ 575 (where there was a 66% reduction in the damages the plaintiff would have received had his negligence action been successful.) Both provide little help as each are concerned with the consequences of lost causes of action where the outcome is necessarily speculative and where the courts understandably take a conservative attitude so as to avoid holding the defendant liable for anything more than the minimum. Mr White was on surer ground in referring to Gregory v. Tarlo (1964) 108 SJ 209 (where the Court held that the plaintiff had a "formidable case", but still reduced the damages by 25%) and Dolmon v. Penrose (1983) 34 SASR 481 (a case described as "almost certain of success" where there was a 20% discount).

320. On the other hand it remains important to distinguish between the evaluation of the loss of chance of "success" ie being awarded the contact" and the probability that the whole of the likely profit might be recovered. In my judgment Mr Fernyhough's approach both recognised this distinction and was sensible and practical. He submitted that all that was here required was to make an assessment of the probability of the profit being earned. He suggested that it might be reduced by 50% to illustrate the risks and hazards inherent in construction work. In my view this is realistic and conservative and I agree with it since it is in my view a reasonable assessment, entirely consistent with experience of the incidence of risk on work of this kind. I therefore answer this issue: 35%.

321. Issue 24 poses the questions whether Harmon is entitled to recover tender costs prior to 23 May 1995. Harmon claim that it is entitled to recover all the costs incurred by it or by other companies within the Harmon Group in and towards preparing the tenders and that it is immaterial which company incurred the costs prior to 23 May 1995. All the costs were necessary to enable Harmon to submit its tenders commencing with the first tender on 31 July 1995. It should be immaterial to H of C how the costs were incurred and by which company, if they were otherwise reasonably and necessarily incurred and resulted in the tender or tenders that were presented. The fact that H of C did not know until 23 May 1995 that the Group had decided that Harmon should be the tenderer is equally irrelevant since H of C wanted the Harmon Group to submit a tender and had invited the company then put forward - Harmon CFEM Façades SA - to tender. H of C must have known have known therefore that that company, at least, would be incurring costs. Furthermore in respect of the work done after 31 July 1995 H of C expressly requested Harmon to re-tender on three further occasions and must have known that it would incur additional costs in preparing and submitting these tenders. If damages are recoverable on the basis that Harmon would not have tendered if it had known that it would not be treated fairly and lawfully, then the costs are all wasted costs recoverable as such.

322. H of C maintained that its objection was not to the claim for the cost of preparing tenders which would not otherwise have been incurred or on the grounds that the costs were incurred by other companies in the Group but it took issue as to whether Harmon was under an enforceable liability to pay such other companies. Its case was that the costs prior to 23 May 1995 and subsequently were not in fact incurred by Harmon and were incurred by others in circumstances where Harmon had failed to demonstrate any sort of liability or accountability. Mr Boyle had indeed confirmed that a management fee of FF 150,000 per month was paid for the services provided by Harmon to other companies but no claim was made in respect of that fee. Harmon had relied upon Ballast Nedam v Belgium [1994] ECR 1289 but that did not assist on the question of the recoverability of costs (or damages). Equally, in English law neither St Martin's nor Darlington v Wiltshier assisted the Harmon since the right to recover on behalf of others arose only "because the parties to the contract intended or contemplated that it should, their intentions being ascertained from its terms ... when this situation arises the plaintiff recovers damages in respect of financial loss which in fact has been borne by another person, and he is liable to account to that party accordingly". H of C maintained that the claim under Regulation 31(3) was not analogous to a case in contract nor, in so far as Harmon's case depended upon an implied preliminary contract, could Harmon recover substantial damages borne by another party, and there was no evidence that Harmon was liable to account to other companies in the Group. Harmon's insolvency meant that it would not now be able to make any payment. To allow recovery of tender costs would give Harmon a windfall because it would recover in relation to a loss that it did not itself sustain and for which it had no liability whatsoever to account to other companies many of which have either been wound up or sold (although I doubt if this is correct were the court to direct that the relevant amounts should be paid to a particular company). In addition, regulation 4 of the PWR defines a contractor as a person "(a) who sought, or seeks, or who would have wished to be a person to whom a public works contract is awarded and (b) who is a national of and established in a Member state". H of C argued that if Harmon's claim were accepted it would allow a contractor to recover for companies who would not be nationals of or established in a relevant state.

323. The question posed is one which commonly arises where a tenderer is a member of a group. Tenders are frequently prepared either wholly or in part centrally for a group of companies by the principal company and at times by a services company since it would not be economic to maintain an estimating staff for each operating subsidiary. These costs may or may not ultimately be charged out to the subsidiary. They are rarely the subject of a readily identifiable contract with the subsidiary, although in accounting and management terms there is generally a recognised liability to account internally, especially if the tender is successful. In commercial terms there can be no doubt that such costs are incurred for the benefit of the operating subsidiary and ultimately in order to keep its business and the business of the group going.

324. In this case, the claim is primarily made under the PWR so the issue as to whether tender costs incurred before 23 May 1995 (or after that date if incurred by others) is one which depends upon the interpretation and application of the Regulations. National law is relevant only to the extent that the result where community law is applicable, is not less favourable. In interpreting the PWR it is necessary not only to take account of Regulation 4, but also Regulation 19 in which a consortium defined as "two or more persons, at least one of whom is a contractor, acting jointly for the purpose of being awarded a public works contract". It says in paragraph (2): "The contracting authority shall not treat the tenderer of a consortium as ineligible.... on the grounds that the consortium has not formed a legal entity ...". Paragraph (3) reads

(This Regulation gives effect to Article 21 of the Works Directive.) Article 21 of Directive 93/37 states:

1279. Therefore, if a claim were made for infringement of the PWR by a contractor, it would not in my judgment be open to the contracting authority to say that costs had been incurred not by the contractor but by some other member of the consortium, and that member might not be a contractor as defined by Regulation 4, ie the person might not be a national or resident in a Member State. It is also pertinent that the notice placed in the OJ indicated that tenders were, for example, permissible from companies in the United States so a claim made on behalf of such a company was within the contemplation of H of C. Similarly, if the costs had been incurred by a joint venture, but it formed a legal entity which became the contractor, surely the costs of the joint venture would be recoverable by the joint venture or consortium which conceived the contractor.

325. However, Mr White maintained that the "contractor" should be given a narrow meaning. Directive 89/665 envisages that a remedy should be granted to a person harmed by the infringement, but Mr White maintained that Parliament had decided to confine the remedy to whoever qualified as a "contractor" and not to others. If this argument is correct, then it seems to me that there are problems: first, Parliament has not given effect to that directive, and secondly, as a result, if that person is not a "contractor" there is not an effective remedy to a person harmed by the infringement. Directive 93/97 defines contractor as including a "candidate", and this concept is reflected in the PWR whose definitions include those seeking to be contractors. I have already said that the effect of the remedy should be judged by its results, the proof of the pudding being in the eating. If PWR were to be interpreted as Mr White suggests, then, in my view, they would not provide an effective remedy. Part of its effectiveness is to be found in the principle that a contracting authority is to make proper reparation for the damages caused in consequence of the infringement. As a matter of policy therefore, and in order to avoid the PWR being ineffective, I would read them as entitling the contractor to recover all the costs reasonably and necessarily incurred in the preparation of a tender, whether by the contractor/tenderer itself, or by some other entity or entities at the request of that contractor/tenderer or for its benefit. From the point of view of the contracting authority they are all part of or contributing to an organisation which is seeking to be a contractor. In my view, the position of the consortium is instructive. If Seele/Alvis Fenestration Limited had been the claimant, there could in my view have been no doubt that it could recover the costs incurred by Glasbau Seele GmbH and Alvis Vehicles Limited, respectively (and by any of the many companies within each of the groups of which those companies were a part). Any other result would not be sensible commercially. Since the raison d'être of the Works Directive is to secure equality of treatment on public works contracts within the EU an interpretation of any law which put legalistic niceties before such commercial reality would not be acceptable.

326. It may therefore not be necessary to consider whether in the matter of English law such costs would be recoverable as damages, although if there is liability to Harmon for breach of the preliminary contract then its recoverability must be considered. Furthermore, if the assessment of damages under the PWR is to follow a "contractual" approach, as I have held, then the application of the PWR should at least not be inconsistent with such contractual damages.

327. In my judgment, the situation is akin to that in St Martin's or, rather, Darlington v. Wiltshier. H of C wanted Harmon Group, with its worldwide reputation, to take an interest in this project. It did so, being represented by a French operating subsidiary which, in turn, was specifically invited to tender by H of C. H of C shortly afterwards accepted the substitution of Harmon for that company when it was clear that preparations were already well in hand for the tender. Certainly by the time of the second, third and fourth tenders, H of C knew that preparatory work was being done, namely at Orly, and that Harmon's own offices in the United Kingdom were vestigial. By inviting the second, third and fourth tenders, is it to be supposed that H of C was requiring Harmon to re-do work that had already been done by others, so that it could be said to have been done by Harmon itself? In my judgment H of C knew that the Harmon's tender was being prepared for it by others in the Harmon group, and that Harmon could not itself have tendered without that assistance. H of C was derived considerable benefit from the work that Harmon and its associated companies had done because it enabled H of C to maintain competitive tendering.

328. Where one company within a group carries out work for the preparation of a tender by another company within that group which is or may be for the benefit of it or the group as a whole it is to be inferred that it has been requested and that if necessary the costs will be chargeable to the tendering company on the basis that it requested the work. It is not usual within a group for formal arrangements to be made for the preparation of tenders (as opposed to the execution of work which is and should generally be covered by tangible basis for recompense). There are no facts here to displace that inference. The arrangements that were made, such as the management fee, are not inconsistent with and do not preclude such an inference. In addition it was known to H of C that Harmon was looking to other companies for the work so that the fact that other companies were involved was within its contemplation. In my judgment to deny Harmon the opportunity of recovering such tender costs would be to recognise the proverbial "legal black hole" which it was the intention of the House of Lords in St Martin's to avoid, by the application of the principle in Dunlop v. Lambert which itself calls for an effective remedy. As Lord Diplock said in The Albazero [1977] AC 774 at page 846: "the rule [provides] a remedy where no other would be available to a person sustaining loss which under a rational legal system ought to be compensated by the person who has caused it." Thus, in my view, Harmon is entitled to recover tender costs incurred by other companies both before and after 23 May 1995. On whatever basis tender costs may be recoverable Issue 24 will be answered: Yes.

329. It would in my judgment be artificial and wrong to refuse Harmon its tender costs for its earlier tender and to limit its recovery to the minimal costs incurred after the third tender in presenting the fourth tender, particularly in the circumstances of this case where the request for the fourth tender was not genuine one and was colourable. Where a contractor is entitled to recover its tender costs the costs must be all the costs incurred in presenting the tender that was not accepted including costs incurred in the preparation of preceding tenders unless of course some of those costs were not reasonably incurred or were incurred only on at the tenderer's own initiative and were of no interest or value to the contracting authority. None of these reservations apply here so on whatever basis tender costs are recoverable Issue 25 will also be answered: Yes.

330. Issue 27 is :-

331. The relevant background to this issue is that on 26 February 1998 Apogee Enterprises issued a press release in which it announced that it was to "take an after-tax charge ranging from $3 million to $39 million... for its fourth quarter ending 28 February 1998." It continued:

332. As a result of the decision to withdraw its support, the directors of Harmon took independent advice from Deloitte & Touche as a result of which on 10 March 1998 the shareholders appointed a liquidator of the company. Subsequently the liquidator reported that in the period 1995-1996 in which the company traded,

333. Harmon contended that the appointment of a liquidator was irrelevant in the assessment of Harmon's damages. The appointment of the liquidator could not affect damage which Harmon had already suffered at the date of liquidation since that damage would have been incurred in the event. In the case of future loss of profits the question was "How much less of the plaintiff's wealth is in consequence of the defendant's act than it might have been had he exploited to the maximum advantage the opportunities which he was entitled to be given", (relying on Hart & Honoré: Causation in the Law, 2nd edition, at page 312). Furthermore there was value in having an executory contract even if Harmon might have been unable to perform it. Harmon's causes of action vested in the liquidator so that, for example, the liquidator could recover wasted tender costs and any other damages which Harmon had already suffered. Provided that a causal link existed to show that Harmon was entitled to the foreseeable consequences of the wrong, i.e. its loss of profit, H of C should not be entitled to take advantage of further misfortunes which might have befallen Harmon. Mr Fernyhough argued that an analogy existed with the case of a contractor who, by reason of a breach of contract on the part of the employer, was unable to generate sufficient revenue to finance his overheads. In such circumstances the claim would only succeed if the contractor could show that he was actually prevented from obtaining equivalent revenue from other contracts, i.e. that he had to turn work away or that he was unable to tender successfully for other contracts. Reliance was placed on City Axis Limited v. Daniel P Jackson (1998) CILL 1382. Pratt Contractors Limited v. Palmerston North City Council [1994] 1 NZLR 469 was merely "the exception which proves the rule". In addition Harmon ought to be able to establish that its poor financial condition was consequent on H of C's wrongs. If Harmon had been awarded the contract then its financial position would have been better and insolvency would or might have been averted. Indeed, Mr Fernyhough contended that since Mr Makepeace accepted that the non award of the contract would injure Harmon, it followed that Harmon's insolvency was foreseeable so that damages caused by that event were recoverable or, put another way, the H of C could not use it in order to avoid the consequences of its wrongful acts. Reliance was placed on McGregor on Damages 16th edition, paragraph 189:

1293. However the editors note that there are no cases of mechanical freaks in English law. Paragraph 246 was also relied on where intervening events are also discussed and in particular, Monarch SS v. Karlshamns Oljefabriker [1949] AC 196.

334. Moreover Mr Fernyhough argued that if Harmon were required to show that it would have been in a position to take advantage of the hypothetical opportunity denied to it by H of C, then if Harmon had secured the contract, there would at least have been a substantial chance that its parent company would not have presented the petition or that, if it had, Harmon would have permitted to continue trading to complete the works. Clause 1.4.1 of the trade contract required a guarantee from the parent company which might have provided an incentive to allow Harmon to continue. (This submission assumed that H of C could not have lawfully terminated Harmon's employment under trade contract.)

335. H of C contended that Harmon's liquidation was in principle relevant to the assessment of damages contemplated by Issue 27(a) and (b). In quantifying the profit that Harmon would have made or in assessing the loss of chance of being awarded the fenestration package (and thus recovering its profit) it would be necessary to look at what would actually have happened had Harmon been awarded the fenestration contract. In Pratt Contractors v. Palmerston North City Council [1995] 1 NZLR 469 Gallen J. took into account what had actually happened during the course of the performance of the works by the successful contractor in arriving at the loss of profit which he awarded (see pages 488-489). Issue 27 did not require a decision as to whether liquidation might have been averted had Harmon been awarded the contract.

336. Issue 27 does not specifically refer to Harmon's claim for wasted tender costs. Those are, in my judgment, completely unaffected by the appointment of a liquidator. The principles are in my view clear. Harmon's causes of action against H of C accrued in the middle of 1996. Those causes of action have now vested in the liquidator. Harmon were and are entitled, if H of C is liable, to recover (a) any damage that it has actually incurred and (b) any damage that is actually incurred in terms of costs thrown away or actual expenditure and (c) any damage that it has incurred in terms of loss of profits, or contribution to overheads which it would otherwise have recovered had it been awarded the contract. In assessing damages, all factors that have occurred since the breach and are in evidence at the time of the trial, are in principle relevant and may be relied upon by either the claimant and may be relied on by the plaintiff or the defendant. Acts which would have occurred and which would affect either a determination of liability or causation, or quantum, cannot be ignored. In the case of future loss and future profits or contribution towards overheads, the question is clearly what future profits or contribution towards overheads would Harmon have actually achieved had it been awarded the contract and had it performed the contract. The approach of Gallen J. in Pratt Contractors v. Palmerston North City Council was in accordance with principle. He took into account what had occurred during the performance of the contract by the contractor who was awarded the contract in order to see whether or not the claimant contractor would or would not have made a profit of the order claimed. If a risk were to supervene which would erode Harmon's margin, then the effect of that risk would have to be taken into account. For example, if there were strikes affecting ferries which would probably have delayed delivery of the windows to the NPB and if in turn those delays would have led Harmon to incur costs to make up lost time, or otherwise to accelerate or even to pay damages for late completion, then those factors would have to be taken into account in assessing Harmon's losses of profit. In other words, when it comes to the assessment of any damages to which Harmon may be entitled, it will be necessary to re-construct the likely sequence of execution of the contract and to form a view as to how much of the possible profit would have remained. By the same token, if by reason of variations or other events during the currency of the contract executed by Seele Alvis Fenestration Ltd there would have been an increase in profit or contribution towards overheads had Harmon been the contractor, then those factors will also have to be evaluated. Equally, Harmon may be able to show that its estimators over estimated certain costs and that in reality the outturn of the contract would have gone far better than contemplated so that its actual loss of profits would be greater than those which are presently calculated.

337. It therefore follows that the effect of an outside event such as the holding company deciding to pull out of its activities in Europe and to withdraw support from the plaintiff is a factor which may have to be taken into account. It seems that Harmon was, as a result of that decision, obliged to withdraw from certain contracts which it had in hand. It may be that it will be established that it would not have been necessary to withdraw from those contracts had the fenestration package for the NPB been sufficiently profitable for the liquidator to decide that it would be in the interests of the creditors and shareholders to continue the fenestration and other contracts. These are matters which will need to be investigated. If, on the other hand, it is established that the financial position of Harmon, or even if it had been executed, the fenestration package would have been such that it is probable that the liquidator would have been unable to continue the contract or to resist its forfeiture, then clearly the amount of profit which would actually have been recovered by Harmon had it been awarded the contract and carried it out would necessarily be affected by it, (although it is not unknown for profit to be in the early stages and the losses in the later stages of the contract so that a termination actually gives the contractor rather more than it might otherwise have received, even taking into account the costs of completion).

338. I consider that the analogy with a claim for the loss of contribution towards overheads is an apt one in that such claims require the establishment of certain underlying assumptions which, if not established, would materially affect the assessment that would otherwise be made. Those assumptions are ones which have to be tested and made good against the offence which has actually happened since the date of the breach.

339. At present, although it may not be necessary to reach a decision on it, I find considerable difficulty in accepting the proposition that Harmon's liquidation was foreseeable, if only because it appears to have been brought about by a decision on the part of the shareholders which took into account the trading position of a number of the companies within the Group.

340. Issue 27 will therefore be answered: It is to be taken into account under (a) or (b) in assessing any loss of profit to which the plaintiff may be entitled.

341. Issue 28 is as follows :

342. In the paragraphs referred to in these issues Harmon allege that H of C exercised its powers unlawfully and in doing so it knew or believed or suspected that it would or might cause damage to Harmon. I have found virtually all its principal allegations to be correct, although I have not accepted that Harmon has established that H of C was advised during the visit to Brussels in November 1995. However I do consider that H of C was intent on stopping Harmon from obtaining an injunction to prevent the award of the contract and to enforce its rights, and thus both did not inform it of the true position (but it did not thereby mislead Harmon as Harmon knew of the position, eg through Mr Kerr) and that it later misinformed Harmon of the true reasons for the award and put pressure on it to dissuade it from bringing proceedings to recover damages. Unless the decision of 23 November to negotiate with Seele/Alvis is to be treated as the decision to award the contract (which it was not) I do not consider that in that respect H of C was wrong not to put Harmon in the picture in the early months of 1996. It was entitled to protect its interests by its stalling letters. The PWR are not clear as to what constitutes the award of the contract - the decision itself, whether or not accompanied by a letter of intent, or the final conclusion in law of the contract (although I doubt if it the latter as the PWR and the Directives are concerned with the commercial steps) so it is not surprising if an authority will not admit to the award until it is "safe" to do so. I do not consider that principles of openness and transparency yet require a contracting authority to reveal that it had received advice to "obtain a legal opinion ... in view of the risk of delay arising from a judicial review of the order being placed with an offer higher than the lowest tender", or that it decided not to heed it, although of course by March 1996 it recognised that its conduct laid it open to a claim from Harmon for not accepting its tender. Its other later conduct in endeavouring to cover up its mistakes, eg by fabricating the reasons is of course not acceptable, but it did not materially worsen Harmon's position who by then was taking legal advice. Harmon maintain that it suffered distress, outrage and indignation.

343. Harmon contended that aggravated damages should be awarded effectively to provide full and proper compensation to Harmon, even though it might punish the defendant for its behaviour. It referred also to the European law requirement that an award of damages should also deter: see for example von Colson und Kamann v. Land Nordrhein-Westfalen Case 14/83, [1984] ECR 1891 to which I have referred. Mr Fernyhough submitted that the pre-conditions for an award of aggravated damages were :

1301. He relied upon Appleton v. Garrett [1986] PIQR T1 at page T4; Ministry of Defence v. Meredith [1995] IRLR 539 and the Law Commission Report on Aggravated, Exemplary and Restitutionary Damages (1997). The reference in those pre-conditions to "subsequent wrong" includes the manner in which a defendant conducts himself at trial (see Sutcliffe v. Pressdram Limited [1991] 1 QB 153, and, in the cases of discrimination, further victimisation of a plaintiff (Duffy v. Eastern Health & Social Services Board [1992] IRLR 251 at page 257) and an inadequate investigation of a complaint (Prison Service v. Johnson [1997] ICR 275 at page 287. All these cases of course involve individuals but Mr Fernyhough submitted that a Corporation could suffer "mental distress", and other injury of the types pleaded. For this purpose, he relied upon a decision of Caulfield J.in Messenger Newspapers Limited v. National Graphical Association [1984] IRLR 397, at page 407 who said :

344. Mr White argued that although Messenger Newspaper Group v. NGA was authority for the proposition that a corporate body might be awarded aggregated damages, Caulfield J. had not awarded on the basis of any damages for injured feelings, but the manner in which injury was caused. Mr White maintained that mental distress sustained by a plaintiff was required, in addition to exceptional or contumelious conduct or motive on the part of the defendant in committing a wrong. To that extent, Mr White accepted the basic formulation of the test for an award of aggravated damages suggested by Mr Fernyhough. However, he maintained that the facts did not bring Harmon within the necessary pre-conditions and that in any event no award for aggravated damages had been made for wrongs of the kind alleged against H of C. He placed particular reliance on Kralj v. McGrath [1986] 1 All ER 554. The plaintiff had been subjected to horrific and unacceptable treatment by the defendant obstetrician in the course of giving birth to a child which was born with severe disabilities resulting from the obstetrician's attempts and it died eight weeks later. Liability was admitted and the only issue was the quantum of damages. The claims included one for aggravated damages for the obstetrician's conduct towards her. Woolf J. considered the distinction between aggravated and exemplary damages, i.e. as set out in Clerk and Lindsell on the Law of Torts 15th edition at pages 242-243, that aggravated damages are distinct from exemplary or punitive damages and that, " except where exemplary damages are permissible, every award of damages, including aggravated damages, where appropriate, must be justifiable on the basis of compensation". He said :

1306. Furthermore Mr White submitted that the matters on which Harmon relied to establish mental distress were not sufficient to entitle it to an award of aggravated damages. The Court of Appeal in A B v. Southwest Water Services [1993] QB 507 had approved what Woolf J. had said in Kralj v. McGrath and had struck out a claim for aggravated damages made "on the basis that [the plaintiffs'] feelings of indignation were justifiably aroused by the high-handed manner in which the defendant dealt with the incident... and because they continued to drink the water for longer than would have been the case had the defendant reacted promptly, frankly and efficiently." Stuart-Smith L.J. said:

1309. Sir Thomas Bingham M.R. said (at page 532):

345. First, although H of C's conduct was reprehensible it is not such as to merit an award of aggravated damages even if all the other conditions were satisfied. In a nutshell, the case is a bad one but not exceptional. The conduct of H of C is certainly not contumelious (with the possible exception of its failure to disclose the documents relating to the project handbook), nor do I consider that its efforts to cover up amount to anything approaching a further victimisation of Harmon. Secondly, there is no real "mental distress" caused to Harmon as a result. Thirdly, I consider that Harmon was aware of the position (through its contacts with Mr Kerr) but it did not act. This may be because its letters did not produce sufficient evidence (although if it had acted it ought to have been available), or because it preferred to wait in case the negotiations with Seele/Alvis broke down in which case it would have been well placed to step into their shoes. Starting legal proceedings would not have helped. Furthermore, as a matter of law, I do not consider that an award of aggravated damages is available in a claim of this sort. As a matter of policy the approval by the Court of Appeal of the decision of Woolf J. in Kralj v. McGrath clearly establishes the limits to the award of aggravated damages. It therefore does not apply to ordinary disputes and certainly not to disputes which are essentially of a commercial nature however irate or sore the claimant may be about the defendant's conduct. If as a matter of application of the national law such claims are not allowed for breach of contract, breach of professional services, or for the other matters instanced by Sir Thomas Bingham MR in A B v. South West Water Services then those claims are similar in nature to Harmon's claims in this action which are therefore not eligible for an award on aggravated damages (subject to further consideration of the decision of the Divisional Court in Factortame V to which I shall return). Therefore, for the purposes of Regulation 31(3) and for the purposes of the obligations referred to in it (whether or not they are enforceable under it), damages do not include aggravated damages.

346. I do not consider that the remedy conferred by that Regulation is any the less effective, for the purposes of European law, as a result, both in the light of my findings as to fact, and for the policy reasons given by the Court of Appeal and, perhaps above all, because the plaintiff is a limited company. Although Messenger was cited in AB v. South West Water Services, I do not consider that it can be regarded as good law in the light of the decision in that case. In any event, I would not have followed it since it seems to me to be driven by its own very special facts and I do not accept the general proposition that a limited company can suffer mental distress or other injury of the kinds relied by Harmon (even if they had been established) so as to justify an award of damages, whether general or aggravated, save, perhaps, in those circumstances where the veil of incorporation may perhaps be pierced or the inanimate persona of a corporation activated so that the conclusion could be reached that the defendant's wrongful conduct was directed towards the owners or operators of the corporation as individuals as much as to the legal entity itself and that it would be proper to compensate the claimant corporation for that which was done to those running it or for whose benefit it had been created. It is however noteworthy that Caulfield J. did not make an award of aggravated damages on that basis but apparently did so rather more to mark the court's disapproval of the way in which the defendant had committed the wrong and its activities subsequent to the commission of the wrong. However, as I have already said, in the light of the decision in AB v. South West Water Services and I consider the decision is not one to be followed. Indeed, no instance was given to me of it ever having been followed.

347. In addition in von Colson und Kamann v. Land Nordrhein-Westfalen Case 14/83, [1984] ECR 1891 the Court was concerned to establish that damages were fully compensatory and, as such, that they would provide "a real deterrent effect on the employer". It said :

1312. In my judgment this case and its successor are not authority for the award of punitive damages in excess of true commercial compensation. They are directed to ensuring, for example, that an award for loss of profit should not be limited to a fixed or conventional percentage of the tender if to do so would not be an effective sanction and would fail to provide full compensation. In English law an award of general damages might conceivably be made, but not one of aggravated damages.

348. It was common ground that in English law exemplary damages can only be awarded where the defendant's conduct falls within one of the categories set out by Lord Devlin in Rookes v. Barnard [1964] AC 1129 at page 1226: (a) oppressive, arbitrary or unconstitutional acts by servants of the government; or (b) wrongful conduct which has been calculated by the defendant to make a profit for himself which may well exceed the compensation payable to the plaintiff; or (c) where exemplary damages are expressly authorised by statute; and (d) where the cause or causes of action upon which the claim for exemplary damages are founded is one for which an award of exemplary damages had been made prior to 1964. I shall return to the last point in due course. Harmon placed great reliance on the description of the first category by Lord Devlin:

1314. In addition Harmon relied upon the speech of Lord Wilberforce in Broome v. Cassell [1972] AC 107 at page 1120 in which he said:

349. Mr White contended that for a public officer or servant of government to be liable to pay exemplary damages, he must be discharging functions of government or acting as an instrument or agent of the government. Mr White referred again to AB v. South West Water Services in which Sir Thomas Bingham MR had said at page 531g:-

1317. In addition in Factortame V the Divisional Court said at [1997] Eu LR at page 530:

1318. "The word "government" is to be given a wide interpretation as potentially extending to agencies of government even at a local level, typically the police. (See, further, Broome v. Cassell). Thus, it has been established since 1964 that there are restrictions upon the award of exemplary damages in English law which relate not only to the character and motivation of the conduct complained of but also to the identity of the defendant. As Lord Devlin makes clear, private individuals or corporations, however powerful, are not liable to be punished in this way under the civil law, however oppressive and arbitrary their conduct may have been. The relevant defendant has to be a servant of government who has abused his position as a servant of the people."

350. H of C therefore submitted that it was not a servant of the government since it did not discharge executive or governmental functions and that in procuring the fenestration contract and in entering into a contract with Seele/Alvis, the defendant was entering "into contracts for the purposes of [the House of Commons] pursuant to section 2(3)(b) of the Parliamentary Corporate Bodies Act 1992. Therefore carrying out a function comparable to the commercial activities of South West Water and did not fall within Lord Devlin's category 1.

351. In my judgment the submissions on behalf of H of C on this point are correct. Lord Devlin drew a clear distinction between the actions of government and the actions of private individuals. The distinction is between the action of a government or executive acting upon an individual and in my view is quite distinct from the commercial transactions which are the subject of this case. Furthermore, I am not at all certain that Parliament can, for the purposes of Lord Devlin's first category, be considered to be the "government". Is it to be assumed that exemplary damages could be awarded against the legislature? The wide interpretation of public officer suggested by Wilberforce in Broome v Cassell coupled with AB v South West Water shows again that it is necessary to look not so much at the office as such but at its nature and the functions to be performed (see also Jones v. Swansea City Council [1990] 1 WLR 1453 per Slade L.J. at page 1471 to which I referred under the heading of Misfeasance). It does not follow that because the defendant is an organ or emanation of the state or is the holder of a public office that in discharging its functions it will be wielding executive or governmental powers of a kind that might attract exemplary damages, if they were exercised in an oppressive manner.

352. Mr White submitted that there were no oppressive, arbitrary or unconstitutional acts. On my findings the defendant's acts were unlawful but not everything that is unlawful is unconstitutional. However, since this part of the defendant's case was effectively a case that there was no ground upon which it could be held that tort of misfeasance had been committed it is not necessary for me to reach any further findings in relation to it.

353. Mr White also submitted that exemplary damages could not be awarded, even if the tort of misfeasance had been established, since it failed what is known as the "cause of action test", namely, that exemplary damages can only be awarded for a cause of action for which there has been an award made prior to 1964. This qualification has two limbs. First, is the cause of action one for which an award of exemplary damages had been made prior to 1964 (and this will include causes of action analogous to those for which award of damages had been made); and even if it was an analogous one had exemplary damages actually been awarded?

354. Mr Fernyhough submitted that the tort of misfeasance in public office was one for which exemplary damages had been awarded both prior to and since 1964. He relied upon Ashby v. White (cited by Lord Wilberforce in Broome v. Cassell) and a Canadian case: Roncarelli v. Duplessis (1959) 16 DLR (2d) 689. However it was submitted that, as a matter of both precedent and policy, it was not necessary to establish that there had been an award of exemplary damages in the case of an action for misfeasance since it should as a matter of policy be available in such cases. Mr Fernyhough recognised that whatever might have been left open by Lord Devlin in Rookes v. Barnard had almost certainly been closed by the majority in Broome v. Cassell, although he referred to what Lord Wilberforce had said at page 114 in the latter case. He naturally referred to the Law Commission's Report which states at page 55:

355. Mr Fernyhough submitted that the latter approach could particularly be justified in the context of the breach of European Community Law where it is clear that exemplary or punitive damages must be awarded where these would be available for a similar breach of national law since a national remedy for breach of a community right must be no less favourable than those available for similar claims or courses of action founded on domestic law. An award for exemplary damages for breach of Community law should not be ruled out, if such damages could be awarded pursuant to a similar claim or action founded on domestic law: Brasserie du Pêcheur SA v. Germany [1996] QB 404. In Factortame V [1997] Eu LR 475 at pages 531-2 the Divisional Court had considered whether exemplary damages should be awarded for breach of Community law, and in the course of doing so it decided that exemplary damages were available for the tort of misfeasance. It said :-

356. Mr White accordingly submitted that any claim for exemplary damages for breach of the Regulations had to fail. However, he submitted that the decision of the Divisional Court in Factortame V should not be followed in so far as it held that the tort of misfeasance might allow an award of exemplary damages. That the tort of misfeasance dates back for centuries was conceded, but Mr White argued that it was not the tort but the award of damages for the tort that was crucial. He relied upon the conclusion reached by the Law Commission in its report where it said at paragraph 4.25

1327. The Commission said (see footnote 119)

357. Mr Fernyhough's answer to this argument was to refer to a number of cases in which although the claim was for trespass to personal property and false imprisonment one could equally have been brought for the tort of misfeasance had such a tort then been widely recognised: Huckle v. Money (1763) 2 Wils. KB 205; Wilkes v. Woodes (1763) Lofft. 1; Benson v. Frederick (1766) 3 Burr. 1845 and, more recently, cases in which exemplary damages may be available for unlawful discrimination: Bradford City Council v. Arora [1991] 2 AC 507.

358. On this aspect Harmon's case can only succeed if it can establish that exemplary damages were awarded for the tort of misfeasance prior to 1964. In my judgment the Law Commission's view is to be preferred to that of the Divisional Court, especially since it does not appear that the latter was asked to decide the point now taken by H of C. Ashby v. White is a slender basis. Ultimately Ashby was awarded -200. It was an action upon the case but really for breach of the statutory right to vote. In Wilkes v Woodes Mr Wilkes got a verdict for -1000 for trespass, albeit that the evidence would have constituted the tort of misfeasance. There appear to be no other comparable cases which were cited to Mann J in Bourgoin SA v. Ministry of Agriculture (see pages 734 onwards) as instances of misfeasance in public office. Given that they are notable, it is surprising that they were overlooked if they were examples of misfeasance. Ashby was referred to by Clarke J. in Three Rivers but not for that purpose. In the absence of any compelling authority, I have to conclude that the cause of action test is not satisfied. In Factortame V the point was left open before the Court of Appeal for decision by the House of Lords. In the light of Broome v Cassell it is not for me to declare that such damages should be available as a matter of public policy.

359. Ought exemplary damages to be awarded? First, it is of course to be assumed that an award of damages under the PWR or for its other causes of action will fully compensate Harmon for its actual losses. H of C naturally submitted that no damages should be awarded. I agree. I have already said that it is a bad case but not exceptional. The defendant's conduct is not unconstitutional nor do I consider that it is oppressive which is no more than the effect of directed governmental power on an individual. Harmon was not oppressed in that ordinary sense of the word. To describe what has happened as oppressive, or as the excessive or insolent use of power (see Broome v Cassell) would mean that virtually every case of misfeasance would attract exemplary damages. The adjective "oppressive" here describes the abuse of governmental power. Similarly it was not arbitrary; it was calculated but not so much as to exclude Harmon but to secure Seele/Alvis. Harmon was the target as it was the only other contender. Had Gartner been in the running I have little doubt that, if at all possible, its tender would have been evaluated in such a way to exclude it also. There is therefore fault but no conduct falling within either categories 1 or 2 (see Rookes v Barnard) which would justify making an award to punish or deter H of C or to signal disapproval (see AB v South West Water at pages 528-529 per Sir Thomas Bingham MR). Issue 28 will therefore be answered: No, to (1) (2) (3) and (5); (4) does not arise.

360. I now set out in full the issues as presented by the parties (together with their explanatory text) and my answers to them interposed (where answers are required).

1331. There are numerous issues between the parties as to the various events that occurred during the advertisement of the tender procedure, the seeking of tenders by the defendant and the review of tenders by the defendant and its Project Team and the documents produced in the course of that procedure. The rival factual contentions are set out in paragraph 10 of the Re-Amended Statement of Claim; paragraphs 10 to 30C of the Re-Amended Defence; paragraphs 3, 4, 5 and 6 of the Reply; paragraph 12 of the Re-Amended Statement of Claim, paragraph 33 of the Re-Amended Defence.

1332. The main issues are as follows:

Issue 5:

Answer: No, in both cases.

Not answered as the issue was not pursued by the plaintiff.

Answer: No, the defendant had no such general policy.

(b) No.

(c) No.

Answer: No.

Answer: Yes.

Answer: Yes

Answer: Yes

Answer: Yes.

Answer: Yes.

Answers: Yes to all (but it was not so awarded).

Answer: Yes.

Answer: Yes.

Answer: Yes.

Answer Yes.

Answer: Yes to both.

Answer: Does not arise, but if it did: No.

Not answered

Answer: Yes.

1382. In particular, did the defendant:

Answer: Yes, save as to initiation.

Answer: Yes.

Answer: Yes.

Answer: No.

Answer: Yes.

Answer: Yes, in all material respects.

Issue 11:

Answer: Yes, see also below

Answer: Yes, see also below.

1396. The following are the main causation sub-issues:

Answer: Yes.

Answer: Yes.

Answer: Yes, either of the fourth tenders of 2 November 1995.