This week the High Court handed down judgment in what was, from one perspective, a straightforward commercial case. The claimant purchaser had sued a supplier of goods for breach of contract and was awarded damages equal to the amount it had paid.
The defendant supplier, in turn, failed both in its defence and its counterclaim. The amount of damages—£122m—was high, but the High Court often hears far more valuable and complex claims. On the face of it, the giving of this judgment was a normal day’s work for the business and property bench of the High Court.
But from other perspectives, it was an extraordinary case. It was, for example, a rare case of this particular buyer of goods and services—the government of the United Kingdom—actually going to court to enforce its contractual rights against a counterparty. Central government, which spends billions of pounds on procurement every year, invariably does not sue its contractors when things go wrong.
And what made this case remarkable were the circumstances. It was, of course, about the purchase of PPE equipment during the Covid crisis via the so-called VIP lane, where certain suppliers were able to obtain privileged introductions from well-connected parliamentarians and other figures.
In this case the government contracted for sterile gowns manufactured in China. The supplier was PPE Medpro, a company incorporated on the very same day—12 May 2020—as it was referred to the health department by Baroness Mone.
Mone was neither a director nor shareholder of that company but she was, from this judgment, its champion lobbyist. At a critical stage, according to the judgment, the PPE Medro negotiator “engaged his ‘big gun’ – contacting Baroness Mone who then took up the fight on behalf of Medpro direct with […] the Cabinet Office threatening further escalation.”
Mone sent an email to the Cabinet Office (which indicates the input of lawyers) insisting a contract had already somehow been entered into. She wrote “the committee sign off, the finance sign off, the verbal conversations on the urgency of goods and the signed returned contract, all constitutes a contract, with a legal and moral obligation on [the Department of Health and Social Care]”.
But this was not correct of law or fact. The matter was still entirely subject to contract. The supplier may well have been incurring costs in anticipation of a contract, but at this stage this was at their own risk. In that email, however, a parliamentarian was falsely stating to the government that a high-value contract was already in place and that the government was thereby obliged to purchase the goods. In fact, the final price had not even been determined. There had not even been a best or final offer.
There is plenty else in this judgment which is eye-catching about the reality of commercial lobbying for lucrative government contracts. Civil servants were being placed under intense pressure and bombarded with emails and calls as this supplier wished to avoid the risk of setting up production without a final contract in place.
Yet the government does not come out of this blameless either. The company did provide technical information when requested. Indeed, the official dealing with the negotiations even sent an email with “Gowns have been approved by Technical!” in its subject line. The judgment reveals various limitations with not only the assessment of the standing of the contractor but also of the technical detail of the bid. The supplier may have been deficient in this case but the purchaser had not been impressive either.
Indeed, although the contract claim was straightforward it was not entirely one-sided. The government claimed to have rejected the goods (which, if it had succeeded, would have prevented the need to show contractual breach and damages), but the court found that this had not happened within a reasonable time. The government also failed in a further claim for more than £8m of storage costs simply because it did not have documentation and receipts.
There are news reports that PPE Medpro may be entering administration. If so, this raises the question of whether it was worth the government suing the company at all if it was not going to be good for damages.
The answer to that question must be “Yes”—and for three reasons, two of which will be welcome to the government.
First, the government by enforcing its contractual rights is sending a public signal to other suppliers. Many who provide works, good and services to the government assume that the government will never go to court, and bid and act accordingly. Even if the government does not recover its damages here it will have a valuable encouraging effect in other procurement contexts.
Second, a High Court judgment is not a trivial thing, and it will make other legal proceedings easier against anyone who wrongly profited or otherwise benefited from this contract award. In this way a finding of civil liability is not an end in itself, but a means to other legal ends.
And third, over 87 pages the judgment provides a richly detailed insight into the sometimes murky world of government contracting. There is stuff in this judgment which would never usually be revealed by a hundred freedom of information requests.
In particular, the judgment provides a case study of how practically suppliers can and do exert pressure on officials (and ultimately ministers) and how the government responds to that commercial pressure. One can perhaps understand why the government, like many large organisations, does not want its pre-contract negotiations served up in public documents.
But there is a public good in transparency in the commercial dealings of government. Not only is the government a massive purchaser, but it does so with public money so as to provide a public service. Those contracting with the government obtain certainty of payment. There is no good reason for the detail of government contracts to be hidden, only private selfish reasons. Sunlight may not cause sterility, but it is often the best disinfectant.
