Time limits for damages claims based on public law breaches during rail franchise procurement
25 February 2020
This case highlights the very different, and often very strict, time limits that apply in different private law and public law claims. Rejecting the Secretary of State’s attempt to strike out part of the claims against it, the Court of Appeal confirmed that the six-year time limit for damages claims applies to a procurement conducted outside the Public Contracts (and similar) Regulations. However, the three- month judicial review time limit may apply to other private law claims in this context. The decision highlights the importance of considering time limits when challenging, or defending, public body decision-making. Where the public law act engages private law rights, damages and other remedies may still be available where the time limits for judicial review have passed – provided that judicial review is not being sought by the back door: Secretary of State for Transport v Arriva Rail East Ltd & ors  EWCA Civ 2259.
These claims arose out of the Secretary of State for Transport’s decisions to disqualify four claimant train operating companies from the competitions for the East Midlands, South Eastern and West Coast rail franchises.
Alleging that the design and conduct of the procurements as well as the decisions to disqualify them were unlawful, the four claimants commenced Part 7 proceedings seeking various private law remedies, including damages, injunctions and declarations and also judicial review to challenge the disqualification decisions.
The Secretary of State unsuccessfully attempted at first instance to strike out those parts of the Part 7 claims which related to the design and conduct of the procurement on the basis that the claims were brought outside the three-month time limit to judicially review the acts. Arguing that the underlying claim was a public law challenge, the Secretary of State argued that the claimants could not seek private law remedies, which were dependent on establishing the public law illegality of those acts and decisions. The principal issue on appeal of the strike-out application was therefore the applicable time in which the claimants’ Part 7 claims should have been brought.
Time limits – usually very short in the context of procurements or public body challenges
This case highlights the very different, and often very strict, time limits that apply in different private law and public law claims.
- Damages – A claim for breach of statutory duty is a tort claim with a six-year limitation period (s2 Limitation Act 1972). In this case, the claim arose under s2(1) European Communities Act 1972 for an alleged breach of EU law duties, subject to the Francovich principles (ie that damages are available where the rule of law infringed was intended to confer rights on individuals, the breach was sufficiently serious, and there was a direct causal link between the breach of obligations and the damage sustained by the injured party).
- Judicial review – A very short time period applies as proceedings must be started promptly and in any event within three months of the decision or action being challenged.
For procurement challenges, the comprehensive procedural rules in the Public Contracts Regulations, Utilities Contracts Regulations and Concession Contracts Regulations emphasise the need for rapidity and generally proceedings must be started within 30 days from when the claimant first knew or ought to have known that the grounds for starting proceedings had commenced. Although these claims did involve a government tender exercise, the procurement rules expressly exclude rail franchise procurements so the Court of Appeal had to consider which time rules were applicable in the absence of express statutory guidance.
Time limit for Part 7 claims which inextricably raise public law issues
At first instance, Stuart-Smith J held that the applicable time limit for the Part 7 claims was (subject to potential exceptions) six years, rejecting the Secretary of State’s argument that he should have imposed a three-month time limit by analogy with the judicial review procedure.
Coulson LJ for the Court of Appeal broadly upheld this decision but was more willing to differentiate between the different Part 7 remedies sought by the claimants.
- Francovich damages claims – the six-year time limit applied. There was no reported authority confining a Francovich damages case to the three-month time limit for judicial review, and there was no compelling principle why that would now be appropriate. The damages claims were not an attempt to undo the public law event which gave rise to the claim and so urgency was not so key.
- Declaratory relief and/or injunctions – the “cross over” relief which procedurally could be sought in private or public law claims. The question here was whether it was an abuse of process to bring a private law claim to get around the short three-month time limit for judicial review. The Court of Appeal found no difficulty or prejudice in the first instance judge’s decision to determine this at the trial rather than on the strike-out application. However, Coulson LJ gave a strong signal by stating it was “likely” that claims for declarations were also subject to the six-year time limit but that injunctions “may well fall on the other side of the line” – as seeking to set aside the underlying public law decision is “a very different thing” to a Francovich damages claim. Coulson LJ also called upon the trial judge to ensure that such claims for injunctions were not used to circumvent the judicial review time limit in procurements falling outside the Public Contracts (and similar) Regulations.
Judicial review time limits in a “fluid process”
The Court of Appeal also rejected the Secretary of State’s second ground of appeal regarding the precise starting point for the three-month judicial review time limit (potentially only relevant to injunctions). In a fluid decision-making process such as the rail franchise procurements, the Court of Appeal did not accept that there was a clear demarcation between the Secretary of State’s decisions to issue the tender documents, seek re-bids and then disqualify the claimants. While it was not accepted that the time limit necessarily ran from the first of these decisions, as claimed by the Secretary of State, the Court of Appeal held that precisely when the period started to run was a matter to be decided by the judge at trial.
Although an orthodox application of established principles, this outcome may come as a surprise to potential claimants in a public procurement competition, who have long been required to proceed with speed, even when seeking damages.
However, this decision is not only relevant to procurements conducted outside the specific procedural rules in the Public Contracts (and similar) Regulations, it also applies more generally to any private law claim which inextricably raises public law issues and highlights when they may benefit from a six-year time limit.
This case summary is part of the Allen & Overy Litigation and Dispute Resolution Review, a monthly publication. If you wish to receive this publication, please contact Amy Edwards, firstname.lastname@example.org.