No compensation in spite of loss of rights (Malta, First Hall of the Civil Court)

30 July 2010, Valletta (Ref: Citaz. Nru. 1125/2007). A contractor who came second in a tendering process was not awarded material damages after the original award was declared vitiated by the Courts of Justice.

The issue concerned a tender for leak repairing work, which was awarded to the contractor who made the lowest bid (a certain ‘Dimech’). The work was intended to be done in phases, and approval of the first phase by the quality inspectors was to entitle the winning party to carry out the second phase. The contract specifically stipulated that at least 90% of the work in the first phase had to pass quality control inspection. In case of failure the contract stipulated: ‘In the event that the Board confirms that the quality control has failed, the contractor will be charged the full cost of the quality control effected by the Board, and will not be allowed to participate further in any of the remaining stages of the project. In this situation the Corporation will retain the full right to review the tender adjudication and contractor selection process and whall re-allocate the project to another Contractor.’

The quality controllers found that more than 10% of the work done in the first phase was defective, but accepted Dimech’s explanations and ‘promises of a better performance for the future’ and allowed him to carry out the second phase. Further to this, the Plaintiff (who came second in the tendering process, and expected to be asked to carry out the second phase of the contract) successfully instituted court action (Grezzju Ellul v. Joseph V Spiteri nomine et ref. Citaz. 142/2002) and obtained an annulment of the decision to award the second phase in breach of the contract. However, by the time the case was decided, the work on the second phase was completed. Hence the present action for damages.

The Court in the present case ruled that there was nothing irregular about the manner in which the contract was initially awarded to Dimech as the lowest bidder. On the other hand, Dimech should not have been allowed to carry out the second phase. Had the Committee abided by the contract, the second phase would have been awarded to the plaintiff. This notwithstanding, it resulted that plaintiff did not suffer material damages, so was not entitled to any form of compensation:
 
’13. ...plaintiff cannot expect to be awarded the profits for work he did not carry out, because this would amount to unjustified enrichment. Under the circumstances, the most he can expect is compensation for was is referred to as his ‘negative interest’ i.e. the interest not to waste money, time, resources, opportunities as a consequence of the defendants’ irregular actions...
14. ....From the evidence it emerged that plaintiff did not incur additional expenses, or lose any other opportunities, to bid for the second phase of the project...
15 In effect, therefore, plaintiff did not suffer any material damages...’
 
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