Damages
In Killaree Lighting Services Limited v Mayo County Council [2025] IECA 7, the Irish Court of Appeal, in a judgment by Hyland J, substantively upheld a High Court judgment (Killaree Lighting Services Limited v Mayo County Council [2024] IEHC 79) which had upheld the contracting authority’s decision to exclude a tenderer from a competition for public lighting, on account of abnormally low prices submitted in its tender. The case is significant for its analysis and application of the law on abnormally low tenders and this is reviewed in our section on that issue.
Beyond this, the case is significant because it is the first time that an Irish court has ordered that an alternative penalty be imposed on a contracting authority.
Alternative Penalties
Regulation 13(1) of S.I. No. 130/2010 – European Communities (Public Authorities’ Contracts) (Review Procedures) Regulations 2010, as amended (the “Remedies Regulations”) makes provision for alternative penalties and provides:
“The Court shall impose an alternative penalty if—
(a) under Regulation 11(5), it declines to declare a contract ineffective, or
(b) in the case of an alleged infringement referred to in Regulation 11(7), it finds that the infringement occurred but declines to declare the contract ineffective.”
The relevant trigger here was Regulation 11(5), which provides that a Court may decline to order the remedy of ineffectiveness of the contract for overriding general interest reasons, even when the conditions for ineffectiveness in Regulation 11(2) are met.
Defective Standstill Letter
In this case, the Council issued a defective standstill letter. The Applicant was excluded from the competition because of its abnormally low tender. Under Regulation 5 of the Remedies Regulations, it was entitled to be informed of the decision reached concerning the award of the contract, the exact standstill period applicable to the contract, and a summary of the reasons for the rejection of its tender. The letter failed to inform the Applicant of the decision reached concerning the award and failed to state the standstill period. The trial Judge concluded that this was not a standstill letter within the meaning of the Remedies Regulations and that decision was not appealed by the Council. On appeal, therefore, it was accepted that the standstill letter was defective.
Conditions for Mandatory Ineffectiveness not met
In the High Court, O’Moore J refused to grant any relief arising from the breach concerning the standstill letter. First, the Judge did not accept that the conditions for mandatory ineffectiveness in Regulation 11(2) were met. These included the requirement that the breach “deprived the tenderer … of the possibility of pursuing pre-contractual remedies” (Reg 11(2)(b)(i)) and that this “was combined with a breach of the substantive Regulations that had affected the chances of the tenderer applying for a review to obtain the contract” (Reg 11(2)(b)(ii)). O’Moore J held that neither condition was satisfied. In the Court of Appeal, Hyland J disagreed with part of this analysis, in finding ([134]-[136]) that the first condition was met (drawing on the purpose of the Remedies Directive and the central role of an effective standstill period in allowing a disappointed tenderer to seek pre-contractual remedies). However, as Hyland J agreed that the second condition was not met (because Killaree had not identified any substantive infringements in respect of abnormally low tenders), the overall result – that mandatory ineffectiveness should not be granted – was upheld.
No Discretionary Ineffectiveness
The Court of Appeal also agreed with the High Court that a discretionary order of ineffectiveness under Regulation 11(7) was not appropriate. This was largely on public interest grounds, including the importance of the contract, the fact that it affected public safety, the fact that the award led to contracts being entered into by different local authorities and the question of legal certainty and Killaree’s own failure to take steps that, notwithstanding the defective standstill letter, might have allowed it to pursue pre-contractual remedies (having received the defective letter, it could have taken steps itself to ascertain whether and when the contract would be awarded).
An Alternative Penalty had to be awarded
The High Court declined to impose an alternative penalty, pointing out that the Applicant had not pleaded such relief. However, the Court of Appeal held that it was unnecessary for the point to have been pleaded. Hyland J explained at [167]:
“There is no doubt but that Regulation 13(1) is a very unusual provision. It effectively mandates a review body – in this case the High Court – to impose an alternative penalty if a declaration of ineffectiveness is not made where there has been a breach of Regulation 5(1). In this case the appeal has been brought and argued on the basis that the breach will be treated as a Regulation 5(1) breach, and the decision of the trial judge not to make a declaration of ineffectiveness has been upheld. As the trial judge himself acknowledges, that means the Court must impose an alternative penalty. That is an obligation placed upon the High Court by the Regulation. It is not optional. The legal basis for the Remedies Regulations is the European Communities Act 1972 and the obligations derive from Ireland’s membership of the EU. Accordingly, any pleading obligations imposed by Order 84A of the Rules of the Superior Courts – to the extent they would otherwise prevent the consideration of an alternative remedy – must yield to the primacy of EU Law.”
Hyland J also pointed out at [168]:
“The principle of effectiveness that was referred to by counsel for Mayo County Council does not have any application here, given that the Remedies Directive has gone beyond the general principle of effectiveness (and equivalence), and imposed an obligation on the Member States to ensure that specific remedies are available in national law. It could not be used to entitle this Court to disregard mandatory requirements of EU law as implemented by Irish law. Indeed, it would be very strange if a principle designed to ensure adequate remedies in the context of EU law were to be used to disapply a clearly binding provision of EU law on remedies. That disposes of the argument that the lack of pleading prevents or render unnecessary compliance with Regulation 13(1).”
Remittal to the High Court
Hyland J concluded by saying at [175] that “the question of whether a penalty should be imposed shall be remitted to the High Court to be heard and determined following whatever directions that judge hearing the matter shall deem appropriate.”
It remains to be seen therefore how the High Court will approach the question of the alternative penalty which, according to the Court of Appeal judgment, must be imposed in the circumstances where there has been a Regulation 5(1) breach but no order of ineffectiveness. This issue is novel and it will be of interest to see what factors are taken into account by the High Court in determining the issue.
