Rise to the challenge: Injunctions and compensation under the Government Procurement (Judicial Review) Act 2018

What you need to know

• The Government Procurement (Judicial Review) Act 2018 (the Act) allows suppliers to apply to the Federal Court or Federal Circuit Court for injunctions and compensation for breach of certain Commonwealth Procurement Rules (CPRs).
• Applications for injunctions must be made within a tight time limit of 10 days, and a complaint must first be made and (in most cases) a reasonable attempt must be made to resolve it before the court can award an injunction.  The Act does not prescribe a time limit for an application for compensation.
• Key issues for the courts in early cases are likely to include whether time to apply for an injunction should be extended, standing, the application of the balance of convenience test (for injunction applications), and quantification of loss (for damages claims).

What you need to do

• Be prepared to brief lawyers urgently should you receive an application for an injunction.
• When preparing procurement budgets, consider whether allowances or contingencies should be included for tenderer compensation.
• Ensure your tender teams maintain good record keeping practices.
• Ensure compensation claims are settled in accordance with Appendix C of the Legal Services Directions 2017. 

In this article, we look at the availability of injunctions and compensation under the Act.

Injunctions

A supplier whose interests are affected by a breach of one or more relevant CPRs can apply for an injunction against Commonwealth entities and officials.  

Injunctions under the Act can compel or prohibit certain conduct, and can be made both where (i) an agency or official has engaged or proposes to engage in conduct which contravenes a relevant CPR (the Act refers to this as a "restraining injunction"), or (ii) where an agency or official has refused to or failed to do something, and that refusal or failure is or would be in contravention of a relevant CPR (the Act refers to this as a "performance injunction").

Legal proceedings applying for an injunction under the Act must be commenced within 10 days after the later of the contravention occurring or the supplier becoming aware (or when it ought reasonably have become aware) of the contravention.  Further time can be allowed if the delay is attributable to efforts being made to resolve a complaint, or if there are exceptional circumstances.

Before a court can grant an injunction, it must be satisfied that the applicant made a complaint and made reasonable attempts to resolve the complaint (unless it would be reasonable not to make an effort to resolve).  On a close reading of the Act, it appears permissible for the complaint to be made after the application for the injunction has been filed, provided that, by the time the court is making any orders, the complaint has been made and efforts made to resolve it (unless it would be reasonable not to make an effort to resolve).  However, aspects of the Act appear to assume that complaints will be made before proceedings are commenced.  This is an area of the operation of the Act that will likely need to be resolved by the courts.

Applicants and agencies will need to be cognisant of the Civil Dispute Resolution Act 2011 (Cth), which allows a court to consider whether genuine steps were taken to resolve the dispute before proceedings were filed when dealing with the matter.

Factors relevant to the issue of injunctions

Under the Act, if a public interest certificate has been issued, the Court must consider whether undue delay would be caused by issuing an injunction, and whether compensation would be an adequate remedy.  

If an interim injunction is sought, courts are likely to consider those matters regardless of whether a public interest certificate has been issued. The general law factors relevant to the issue of interim injunctions include whether there is a serious question to be tried (i.e. whether there is a serious question as to whether a relevant CPR has been breached), whether attempts have been made to resolve the issue, whether damages would be an adequate remedy, and whether the balance of convenience favours granting the injunction.

Compensation

A supplier whose interests are affected by a breach of the relevant CPRs can also apply for compensation under the Act.  Procedurally, it is easier to seek compensation than an injunction, because it is not necessary to make a complaint.

It is also procedurally easier to make a compensation claim because such a claim can be made at any time.  There is no limitation period prescribed in the Act.  It is not clear whether this was an intentional or inadvertent omission.  Commonwealth legislation that creates causes of action usually prescribes the time limit in which the action must be brought.  State and territory limitation laws may apply, but that is a complex question.  If it be the case that there is no limitation period applicable, claims made after lengthy delays may be able to be challenged on abuse of process grounds, as happens in claims where limitation periods have been abolished.

Compensation under the Act can only be awarded to cover the "reasonable expenditure" associated with the tender process and/or the making of a complaint.  Suppliers cannot apply for compensation under the Act for other forms of loss, such as expected revenue from a contract or for loss of profit, or loss of chance to tender for other work.  As we noted in our fourth article in this series, in relation to handling complaints, agencies should seek to minimise the costs incurred by tenderers when dealing with complaints, because there is a risk the agency will end up having to pay those costs later if a successful compensation claim is made.

Factors relevant to compensation

The size of any award of compensation under the Act will depend on the complexity and scope of a procurement, and any payments made to the tenderers to cover their costs of participating in the procurement process, which is common on very large/complex tender processes and tenders with a significant design element.  

Things to consider

In any case concerning injunctions and compensation, documentary evidence will play a key role.  Having good record keeping practices on procurement projects will be critical to responding to applications.  Corporate knowledge and availability of witnesses is also essential.  Personnel changes, particularly at a management level, should therefore be carefully managed, and file notes or minutes of meetings where significant decisions are being taken should be kept.

Additionally, agencies will need to be prepared to move swiftly if they are served with an injunction application.  Courts tend to list such applications for hearing quickly (especially if an interim injunction is sought – these are commonly heard on the day the application is filed).  Resources will need to be made available if the decision is made to defend the application.  An early assessment of prospects will be essential here.

Agencies may need to consider and account for the impact that potential compensation awards could have on procurement budgets.

In settling claims for compensation, agencies will need to bear in mind the requirements of Appendix C of the Legal Services Directions 2017.

Authors:  Melanie McKean, Partner, Rob Andersen, Senior Associate