Court increases damages to unsuccessful bidder by 10 times

The Court of Appeal increased the damages awarded to a contractor by more than 10 times on the basis of the fact that the case involved an abuse of administrative discretion.

The decision was delivered in a case filed by Philip and Maria Seguna against the Żebbuġ local council.

The court heard that in 1997 the council had issued a call for tenders for cleaning of the locality. Mr Seguna claimed that he had submitted the cheapest tender but the council had decided to award the contract to the Public Cleaning Co-Operative. This decision, according to Mr Seguna, was arbitrary and abusive and he asked the First Hall of the Civil Court to award him damages.

In its judgment, the First Hall of the Civil Court had upheld Mr Seguna's writ and awarded him €2,230 in damages.

Both Mr Seguna and the council appealed to the Court of Appeal composed of Chief Justice Vincent Degaetano, Mr Justice Albert Magri and Mr Justice Tonio Mallia.

The Court of Appeal heard that the council had issued a call for tenders for four contracts fused into one. These covered the collection of domestic waste, the collection of bulky refuse, road cleaning and cleaning of public toilets. Mr Seguna quoted €107,180 for the tender and the co-operative quoted €111,840.

The council had decided that, prior to awarding the tender, it would give both bidders two weeks each to show what they could do but the co-operative refused to comply.

On October 1, 1997 Mr Seguna started his testing period but he was not allowed to complete it due to the fact that the co-operative blocked the roads with Scammels and protested in front of the council offices. The council decided to halt the test and on the same day held an extraordinary meeting at 7 p.m. and decided to award the tender to the co-operative.

Mr Seguna appealed from the first court's award of damages, claiming that he was entitled to payment of the loss of income he had sustained. On its part the council appealed on the basis that it could not be found guilty of illegal actions.

According to the council it was not responsible for the abusive actions on the part of the co-operative. The council had reached its decision to award the tender without undue pressure and with only the best interests of the village at heart.

But the Court of Appeal disagreed and declared that the council had been influenced by the violence and threats on the part of the co-operative. Two councillors testified that they had been approached by officials of the co-operative before the meeting and it appeared that they had been threatened. The council's decision had been taken suddenly after the chaos caused by the co-operative's employees and after violence and threats.

The councillors, the court noted, had been influenced by extraneous factors to the tender. It was true that the co-operative had been guilty of illegal action and that the council was a victim. But the council had not taken any action to annul its contract with the co-operative on the basis of fear. Nor had the council postponed taking its decision and requested further assistance from the police.

The Court of Appeal noted that the first court had awarded Mr Seguna €2,230 in damages as this sum represented the expenses he had incurred in the course of the negotiations and in the pre-contractual stage. However, the Court of Appeal ruled that this was a case of abuse of administrative discretion and not one of pre-contractual liability. When a person was deprived of his rights through a violation of the law by an administrative body the latter was responsible for all the damages its actions had caused. Consequently, the Court of Appeal ruled that the damages ought to reflect the loss of future earnings on the part of Mr Seguna.

In conclusion, after examining the workings of accountants, the Court of Appeal increased the damages payable to Mr Seguna to €26,788.