The 2019 rail franchising litigation - procurement: Legal privilege and a duty to give sufficient reasons

Introduction

As we noted in our first article, on 17 June 2020 Mr Justice Stuart-Smith handed down judgment in the 2019 Rail Franchising Litigation, one of the largest and most complex procurement and commercial judicial review claims litigated to date in the UK.

DLA Piper acted for the Secretary of State for Transport (the "SoS") and the Department for Transport (the "DfT") in the proceedings and in particular in relation to the claims brought by Stagecoach in respect of its disqualification from the South Eastern competition.

In our first article, we considered the Judge's findings in general terms. In this, our second article, we examine the Court's findings as they relate to legal privilege and the duty to give sufficient reasons.

The question of the relationship between seeking to preserve legal privilege in connection with legal advice given to decision makers and the duty on public bodies to give “sufficient reasons” for their “public law” decisions is one that is often overlooked or not well understood by those who advise decision makers leading either to a failure adequately to evidence the grounds on which a decision was made or conversely the forced disclosure of legal advice that the public body did not intend should be placed into the public domain. This article is therefore required reading for contracting authorities and those who advise such bodies.

The Duty to Give Reasons

The law relating to both the duty to give reasons (paragraphs 75-76) and that relating to the need for a decision maker to provide proof of their reasons and reasoning (paragraphs 66-74) were both helpfully and succinctly summarised by Mr Justice Stuart-Smith in his judgment.

As noted previously, that case related to a decision by the then SoS in connection with three separate rail franchise competitions to exclude the Claimants from each process because they had submitted deliberately non-compliant bids. The Claimants were challenging the legality of the decision to exclude them on a variety of grounds both substantive and procedural. The issues raised by the challenge necessitated a very detailed examination of the way in which the decision to exclude had been taken and the reasoning supporting that decision. This required the judge to summarise the relevant law.

The first point to note at paragraph 75 of the judgment was that the judge found that:

“It is common ground between the parties that there is a duty to provide reasons for a decision such as the disqualification in the present case and that the obligation to state reasons is an essential procedural requirement. The level of detail which must be given in order to satisfy this duty will inevitably be context and fact specific.”

In a procurement context, it seems logical to conclude that the same principle must apply with equal force in all analogous situations, so this would include, for example:

1. Any decisions relating to the actual evaluation of a procurement and indeed Mr Justice Stuart-Smith referred to his own decision in Lancashire Care NHS Foundation Trust & Another -v- Lancashire County Council [2018] EWHC 1589 (TCC) where he considered in detail the duty to give sufficient reasons in the context of the way in which a tender had been evaluated;


2. Any decision to cancel a procurement post award thus depriving the winning bidder of their award¹ ; or


3. Any decision to exclude a bidder from a tender process on either one of the mandatory grounds under Regulations 57 (1) –(3) of the PCR or to do so on one of the discretionary grounds provided for in Regulations 57 (4) and(8) and/or any later decisions relating to the adequacy of self-cleaning under regulation 57(13) or otherwise permitting an excluded bidder to stay in a bidding process (see regulations 57 (6)-(7) ) potentially to the detriment of other bidders.

In each case, it is important to appreciate that the relevant decision will be a “public law” decision made in the context of the conduct of a procurement process. The duty to give reasons will not apply to essentially commercial decisions made, for example, in the context of the performance of a contract once it has started to be performed.

The substance of the duty to give reasons was summarised in Case 272/06 Evropacki Dymamiki [2008] ECR-11 00169 where the ECJ determined that:

“In accordance with settled case law, the statement of the reasons on which a decision adversely affecting a person is based must allow the Community Court to exercise its power of review as to its legality and must provide the person concerned with the information necessary to enable him to decide whether or not the decision is well-founded”.

This is clearly a highly case / fact specific requirement and the extent of the reasoning and the detail provided to justify any reasoning must be judged accordingly.

Proof of Reasons and Reasoning

At paragraphs 66 to 74 of his judgment, Mr Justice Stuart-Smith usefully summarised the current law in England and Wales in relation to the requirement for decision makers to be able to evidence the actual reasons for their decision and the underlying reasoning supporting those reasons at the time the decision was made. In this regard, the Judge said:

“66 The requirement that “the reasoning followed by the Authority which adopted the measure” must be disclosed “in a clear and unequivocal fashion” means that two things may need to be proved to the satisfaction of the Court when it exercises its supervisory jurisdiction. The first is what reasons and reasoning were followed by the Authority in deciding to adopt the measure. The second is that the contracting authority has disclosed the reasons and reasoning clearly and unequivocally and in sufficient detail to enable the person concerned to defend their rights and the Court to exercise its jurisdiction.”

In practice, this is a logical extension to the law relating to the duty to give reasons and it means that when public bodies are going to make decisions they need to be alert to the fact that the decision maker(s) must be able to evidence the basis on which their decision was taken so it is clear that all relevant considerations were taken into account and that none were omitted and that those matters taken into account were correct and not founded upon any misunderstanding or error of law.

In the litigation, this was a potentially sensitive issue because whilst there was good evidence of the communications and reports submitted up to the SoS for him to consider in the context of considering his decision to exclude the non-compliant bidders there was, in that case, no clear paper trail evidencing the basis on which SoS analysed the issues or then made his decision. It followed that the Judge had to infer from the surrounding documentation that was available to him what that decision and reasoning were. In that case, the Judge was persuaded that there was sufficient evidence before him, but in many cases it would be extremely difficult to do so and the lack of an adequate paper trail could, of itself, be fatal to the legality of the decision forcing the relevant decision make to re-consider a fresh start.

This is, therefore, an issue of some considerable significance and the obvious conclusion is that careful consideration must be given to ensuring that important decisions are properly documented at the time they are made. However, the process of documenting such decisions and the supporting reasoning then gives rise to other challenges.

The “Vexed” Question of Legal Privilege

In the context of the issues considered above, it must be self-evident that in very many cases a decision maker will receive legal advice and that such advice will form a significant part of the information that is then relied on by the decision maker to make their final decision on an issue. In that regard, the legal advice will very often cover a broad range of issues concerning not just the legality of the decision itself but the potential legality of other alternative decisions as well as the risks of legal challenge in connection with different options and other factors that may potentially be relevant to the way in which the decision is finally taken. Clearly, such advice if disclosed in full could create a very real risk of legal challenge being brought against the decision maker. This creates an obvious tension.

Waiver of Privilege

It is clear that as analysed above the duty to give reasons means that to the extent that the legal advice given to a decision maker has formed part of their reasoning and has supported or justified the reasons for their decision then that analysis should lawfully be available to any person affected by the decision and any Court called upon to review the decision.

However, this clearly creates an obvious legal tension.

The first point to note is that if a redacted legal advice note is disclosed or alternatively if a memorandum recording a decision maker’s analysis and reasoning only selectively quotes from the legal advice provided to the decision maker, there is a material risk that such selective disclosure will permit a challenger to apply to Court for disclosure of the full advice on the basis that there has in-effect been a waiver of privilege in the entirety of the advice. Partial disclosure of legal advice will always create a material risk of a waiver argument being raised.

However, the alternative approach which is often adopted of simply referring to the fact that “legal advice” has been part of the information put before a decision maker without either summarising or disclosing the salient parts of that legal advice is an incredibly high risk approach to adopt as it will inevitably lead to an attack by any challenger on the basis that it is clear that the legal advice formed part of the decision maker’s reasoning and hence the entirety of such advice must now be disclosed or the decision maker will be in breach of their duty to give reasons and as summarised at the start of this article this may, of itself, give rise to an effective ground for challenging the decision.

In this regard, it is not sufficient for the decision maker to try to rely on legal privilege as a justification for withholding relevant legal advice. It is clear in the case of public bodies that pursuant to Section 42 of the Freedom of Information Act 2000 the legal privilege exemption from providing disclosure is not an absolute protection against a requirement to make disclosure of information and instead if the public interest in disclosure outweighs the public interest in maintaining the exemption then the privilege must be overridden. It is clear from repeated decisions of the Information Commissioner that in any case where the duty to give reasons has been engaged and legal advice forms part of that matrix, then the public interest in requiring disclosure should always override any claim to try to maintain legal privilege and refuse disclosure.

The same analysis will almost certainly apply in the context of analysing a public body’s duty of candour when faced with potential litigation. Trying to argue that legal advice relied on to support a decision should nonetheless remain privileged and so should not be disclosed under the duty of candour when a legal challenge has been threatened is unlikely to be a tenable approach to adopt. This is especially sensitive in a procurement law context where the very tight timescales within which to launch legal challenges requires urgent disclosure of relevant information. This means that a public body that purports to deal with an urgent request for information under the auspices of FOIA is setting itself up to be criticised for acting in a manner that was consciously calculated to frustrate the making of disclosure within a time frame that would permit a challenger to understand the reasons for the decision and to bring their challenge within the relevant limitation period (usually one month from the date of any breach of the PCR).²

The logical conclusion is that whenever in the context of a procurement process or any other public law decision making process legal advice is prepared to support that process considerable care needs to be taken as to the way in which that advice is provided to the decision maker as there should be a working assumption that the advice may come in to the public domain. It will almost always be preferable that such advice is prepared at the time the decision is to be taken and is contained in a free standing memorandum. The use of a free-standing self-contained advice minimises the risk that disclosure will risk legal privilege in any other earlier or distinct advice being waived.

By contrast if a decision maker is provided with a pack of materials containing a selected series of legal advice memoranda or emails produced over time there will be a very high risk that privilege in all emails or memoranda in the same series will have been waived meaning that even advice withheld because it was considered irrelevant or had been superseded would then have to be disclosed creating unnecessary confusion. The same may be true if parts of such advice had been redacted prior to being provided to the decision maker.

Clearly, the advice provided to a decision maker must be comprehensive and must contain the advice relevant to the decision being made at the time that it is actually made so that there is proper disclosure of the actual advice relied on to support or inform the reasoning of the decision maker. However, this approach will mean that all other collateral advice that is not directly relevant to that process or which has been discarded or superseded earlier or was based on an incorrect analysis of the facts at an earlier point in the procurement should not then be threatened with possible disclosure based on a potentially successful waiver of privilege argument.

Conclusion

All too often decision makers and those advising them simply do not appreciate the ambit of their legal duty to give reasons and to support that disclosure with the underlying reasoning to support their reasons. This failure increasingly leads to judicial criticism of the failure to make prompt or effective disclosure but far more damaging is the fact that it can then lead to far wider uncontrolled disclosure of material and, in particular, a far wider and more damaging disclosure of legally privileged material.

A little extra thought and care in the way papers are provided to decision makers and the way any decision is documented or justified can pay significant dividends in containing and managing risk.

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¹In theory this may also be true of a decision pre-award / pre-evaluation though the discretion to cancel at that stage is usually going to be so broad that in practice such considerations will almost always be academic.
²The time periods were longer in the Rail Franchising litigation solely because of the fact that the procurements were not governed by the Public Contracts Regulations and instead were subject to European Directives with direct effect in the UK.