The New Lottery Company Limited & Anor v The Gambling Commission

This litigation arises out of what the Claimants describe as “the most financially significant procurement process in UK history”, namely a procurement process run by the Gambling Commission (“the Commission”) for the award of the Fourth National Lottery Licence (the “Fourth Licence”) pursuant to section 5 of the National Lottery etc. Act 1993 (“the NLA 1993”).

The First Claimant (“TNLC”) is a company established by the Second Claimant (“N&S PLC”) for the specific purpose of competing in the Fourth National Lottery Competition (the “Competition” or “4NLC”). The Northern & Shell group of companies (“the N&S Group”), under the chairmanship of Mr Richard Desmond, acquired the Express Newspapers group in 2000, Channel 5 in July 2010 and, shortly thereafter, the Health Lottery. The Health Lottery, a collection of nationally marketed local society lotteries, each contributing to health related good causes, was launched by the N&S Group in October 2011.

The procurement process for the Fourth Licence took place between October 2020 and March 2022. On 15 March 2022, TNLC was informed that it had been unsuccessful in obtaining the Fourth Licence and that the Commission had decided to award the Fourth Licence to the First Interested Party, the UK subsidiary of the Second Interested Party (known at that time as SAZKA Group A.S.) (together “Allwyn”). The Third Interested Party, the previous incumbent operator of the National Lottery (“Camelot”), was the reserve bidder with TNLC in third place in the Competition. Save where it is necessary to distinguish between them, I shall refer to the Interested Parties in this judgment as “the IPs”.

The Claimants now make two claims against the Commission. In the first claim (“the Process Claim”) they challenge the fairness and integrity of the Competition process and its outcome, relying upon alleged breaches by the Commission of the Concession Contracts Regulations 2016 (“the CCR 2016”). They contend that the Commission was in manifest error in scoring TNLC as a “Fail” in respect of important Pass/Fail elements of the Competition and that it was also in breach of obligations of transparency which caused or contributed to these erroneous scores. They contend that, but for these failures on the part of the Commission, TNLC would have passed the Pass/Fail requirements. They also contend that in light of manifest errors by the Commission in the approach taken to Pass/Fail requirements for Allwyn and Camelot, those two bidders should have failed (such that it would have been impossible for either of them to win the Competition), alternatively that had the Commission acted properly in accordance with its duties it should have disqualified both Camelot and Allwyn from the Competition. In the circumstances, the Claimants contend that TNLC would have won the Competition and they seek damages of in excess of £1 billion in compensation for lost profits. Their original claim at the outset of the trial also included an alternative allegation that TNLC lost a real chance of winning the Competition, but this is no longer pursued.

The Claimants’ second claim (“the Modifications Claim”), which is said not to be dependent upon success in the Process Claim, challenges modifications which have been made to (i) the agreement between the Commission and Allwyn (“the Enabling Agreement”) which governs the transition to the Fourth Licence; and (ii) the Fourth Licence itself. The Claimants allege that these modifications resulted in a contract to run the National Lottery that was significantly different from that on which TNLC made its bid in the Competition. They claim that these were “substantial” amendments within the meaning of Regulation 43 of the CCR 2016 and/or that they were foreseeable to a reasonably diligent authority such that a new competition (which they refer to as “5NLC”) should have been run for the modified contract pursuant to Regulation 43(10). The Claimants say that TNLC would have had a real chance of winning 5NLC and they seek damages for the loss of that chance (again in excess of £1 billion), together with (at least in their pleaded case) a declaration of ineffectiveness in respect of the modifications made in 2023.

Commensurate with the potential significance of the claim, each party was represented at trial by substantial legal teams. The Claimants were represented by Daniel Toledano KC, Michael Bowsher KC, Azeem Suterwalla KC, Maximilian Schlote and Khatija Hafesji. The Commission was represented by Sarah Hannaford KC, Rachael O’Hagan, Rose Grogan, Barney McCay and Monty Fynn. The IPs were represented by Mark Howard KC, Joseph Barrett KC and Malcolm Birdling.

Notwithstanding the size of the claim and the legal resources available, I observe at the outset that the Process Claim has been advanced by the Claimants in an apparently unfocused manner, leading to various of the (numerous) original issues being dropped at the outset of trial, at the outset of closing submissions and even during closing submissions by the Claimants. In many cases, the issues were not dropped until it was specifically drawn to the Claimants’ attention by the court or by the other parties that they had not been addressed in the Claimants’ written closing submissions or that there no longer seemed to be any viable basis on which they could be maintained. The extent of this moveable feast was regrettable and (given the legal resources available to the Claimants) inexcusable. It led to significant time being wasted by the other parties in dealing with issues which were subsequently abandoned. It also risked leaving the court with an imperfect understanding of how the case was being advanced. To describe this as surprising, given the nature and alleged value of this claim, would be an under-statement.

Whatever my views on the approach taken by the Claimants to the litigation (which will be best addressed in the context of arguments on costs at the consequentials hearing following this judgment), I nevertheless bear firmly in mind that the question of whether the Claimants can make out any of the remaining live issues such that they can succeed on their significantly narrowed Process Claim and on their Modifications Claim (which has survived to the close of trial largely intact) must of course be determined on the merits in the usual way.

The National Lottery is, as its name suggests, something of a national institution, recognised the length and breadth of the country. It is operated under a licence held by the operator and it is underpinned by a statutory framework set forth in the NLA 1993 which, amongst other things, identifies its statutory purpose as being to maximise returns to good causes (“Good Causes”). These returns are paid by the licensee to the National Lottery Distribution Fund (“NLDF”).

Since its launch in 1994, the National Lottery has raised more than £50 billion for Good Causes (distributed by 12 Distributor Bodies in the form of more than 650,000 individual awards as at June 2025), transforming lives through its contribution to communities, heritage, sports and the arts throughout the UK. It has funded a wide range of public interest activities, from large scale projects such as a contribution of £2.2 billion towards the cost of the London 2012 Olympic and Paralympic Games, to local community projects such as foodbanks and children’s centres. In addition, 12% of the price of all tickets in National Lottery games is paid to HM Treasury in Lottery Duty (as at June 2025 some £21.4 billion since it began), making a significant contribution to the public purse.

Players must be 18 or over to participate in the National Lottery. As at the date of the Competition, roughly 12 million people were taking part in the National Lottery Lotto game and there were 8 million winners each week across all games. As at that date, this had resulted in £75 billion being awarded in prizes (as at June 2025 increased to more than £95 billion) and the creation of more than 5,700 millionaires. Retailers who sell National Lottery tickets have earned more than £8 billion in sales commissions.

The National Lottery is regulated by the Commission, an independent statutory body responsible for awarding the licence authorising a person to operate the National Lottery in the UK and the Isle of Man. The Commission is established as an executive non-departmental public body of the Department of Digital, Culture, Media and Sport (“DCMS”). It is common ground that it is a contracting authority within the meaning of the CCR 2016. Both the DCMS and the Commission have statutory duties under the NLA 1993 to uphold high standards of propriety and participant protection in the running of the National Lottery. These are set out in section 4 NLA 1993:

Under section 5(2) NLA 1993, only one licence can be on foot at any one time and, under section 7 NLA 1993, each licence must not exceed 15 years in duration.

In carrying out its function of granting a licence, the Commission must establish a process for written applications to be made, specifying the information it requires to determine whether to grant the licence, and the date by which such applications must be submitted. Further, the Commission must not grant a licence unless satisfied that the applicant is a fit and proper person to run the National Lottery and must revoke the licence if, at any point during the licence period, it considers that the licensee is not fit and proper.

Running the National Lottery is highly complex and involves managing numerous operational elements, including organising games with a high degree of security and integrity, retailer management, logistics, financial management (including holding funds as part of a security trust for the benefit of players and funding distribution to Good Causes), customer support, promotion, security and game development, and design. At its heart, it is dependent upon technology for the operation of its core systems and keeping these systems up to date is a very significant expense.

The first three licences to operate the National Lottery (granted under section 5 NLA 1993) were held by Camelot. The third licence, awarded to Camelot on 1 February 2009 (“the Third Licence”), was a 10 year licence (extended after initial grant to 14 years) with a statutory long-stop date of 31 January 2024. A periodic licensing cycle has an important role in creating incentives for National Lottery technology to be refreshed and for other aspects of the National Lottery (such as the mix of games) to be upgraded. It also ensures an appropriate balance between the Commission’s statutory duty to maximise returns for Good Causes and the commercial interests of the operator in running a viable business notwithstanding the very significant levels of investment required.

The operation of the National Lottery under Camelot involved draw-based games such as Lotto and EuroMillions together with scratchcards and online interactive Instant Win games.

Between around July 2019 and March 2020, the Commission was involved in a period of market engagement in parallel with its work in designing the Competition and proposals for the Fourth Licence. Mr Andrew Wilson (Competition Commercial Director) was responsible for the market engagement phase, assisted by N.M. Rothschild & Sons Limited (trading as Rothschild & Co) (“Rothschild”), a multi-national investment bank and financial services company.

Mr John Tanner was appointed as Senior Responsible Owner (“SRO”) of the Competition programme with effect from 1 July 2019, directly accountable to the Commission CEO and Board, under the oversight of the Parliamentary Under Secretary for Sport, Heritage and Tourism. As SRO, Mr Tanner had personal responsibility for delivery of the Competition programme and (amongst other things) was accountable for the delivery of its objectives and policy intent.

In May 2020, the timescales for the Competition were extended to account for delays arising due to the COVID-19 pandemic.

On 26 August 2020, the Commission published a Selection Questionnaire (“SQ”) as the first stage of the Competition with a commencement date of 28 August 2020 and a submission deadline of 2 October 2020. On 31 August 2020 the Commission published a notice in the Official Journal of the European Union advertising the Competition for the Fourth Licence, which was to have a duration of 10 years.

The purpose of the SQ was to assess whether a relevant Proposed Licensee would “possess the relevant professional and technical capacity and capability, and the financial and economic standing, to run an operation on the scale and complexity of the National Lottery”. The SQ provided that it would be a condition of the Fourth Licence that the Licensee was a special purpose entity (“SPV”) established in the UK which carried on no activities other than operating the National Lottery. Prior to submitting an SQ response, each applicant was required to return a signed copy of the Application Process Agreement (“APA”) which detailed the terms on which applicants were able to participate in the Competition, including confidentiality provisions and terms as to access to a repository of information set up in a secure Virtual Data Room (“VDR”) hosted by Intralinks.

Clause 2.8 of the SQ, entitled “Conflicts of Interest”, required applicants to disclose to the Commission any conflict of interest or potential or perceived conflict of interest that may arise in connection with the Competition. Clause 5 of the SQ informed applicants that if they passed through the SQ stage they would be subject to Fit and Proper Checks “which will be a further aspect of ascertaining the suitability of the Proposed Licensee to run the National Lottery and benefit from it”.

Each applicant was required to pass various sections at 9.1-9.8 of the SQ, including (i) propriety; (ii) financial management; and (iii) resources to support application. At the end of the SQ process, any applicant who was unsuccessful would not be invited to proceed in the Competition.

Seven applicants completed the SQ and, of these, five were successful in progressing to the next stage, namely International Game Technology Limited (“IGT”), Allwyn, Camelot, TNLC and Sisal S.p.A (“Sisal”). IGT did not go on to bid in the Competition because it joined forces with Camelot as a Key Subcontractor. The remaining four applicants proceeded to the next (second) stage of the Competition.

The outcome of the SQ stage was communicated to applicants on 26 October 2020, with the Invitation to Apply (“ITA”) being issued to the successful applicants at the same time, together with a covering letter from Mr Wilson. In his foreword, Mr Wilson said this:

Also on 26 October 2020, the Commission issued a Transition Guidance Note, a Deed of Commitment, the Section 6 Licensing Guidance Note and the Fit and Proper Applicant Note. All applicants successful at SQ were granted access to the VDR.

The ITA set out the details of the National Lottery opportunity, together with the process and requirements associated with submitting an application and information as to how applications would be evaluated. It was accompanied by the Proposed Form of Fourth Licence setting out the detailed conditions relating to the operation of the National Lottery that applicants were required to consider when responding to the ITA. Section 1.3.1 provided that the Fourth Licence would be for a period of ten years. The Commission explained that the term of the existing Third Licence would end on 31 July 2023 and that it was intended that the Fourth Licence would start on 1 August 2023 and end on 31 July 2033. The Implementation Period was expected to commence in October 2021.

There can be no doubt that, through the ITA, the competing bidders were being invited to invest very substantial time, money and resources into their applications, including building a comprehensive business plan, demonstrating the criteria in respect of the Pass/Fail questions and presenting a compelling financial proposition relative to their competitors. The Claimants’ pleaded bid costs of £17 million demonstrate the level of financial investment required to compete. However, the potential prize was enormous: a 10 year exclusive licence to run an internationally high profile lottery brand as an effective monopoly, worth over time in excess of £1 billion to its operator.

In its Introduction at Volume B, the ITA explained that the Fourth Licence represented a “step change in the approach to regulating the National Lottery” in that it was “centred on an outcomes-focused approach to regulation”. Thus it was intended to “provide greater opportunity for innovation and flexibility to cope with changing future conditions”. The “outcomes”, set out in the Fourth Licence at Condition 1.2, were that the National Lottery would be carried on “(a) with all due propriety; (b) in a way which protects the interests of Participants; and (c)…so as to maximise the amount being paid out of the net proceeds of the National Lottery to Good Causes”. The Fourth Licence therefore places responsibilities on the Licensee to achieve outcomes that are consistent with the duties set out in the NLA 1993, but does not prescribe how the Licensee should go about achieving these outcomes.

In addition to complying with law and regulation, the ITA explained that the Licensee “must comply with Best Practice, being the standard to be expected of an experienced and professional person doing a particular thing and seeking to secure the outcomes set out in Condition 1.2 [of the Fourth Licence]”. The Commission stated that it intended to run a “fair, open and robust competition in line with its Statutory Duties and principles of public law”.

In Volume C, the ITA set out “Process and Instructions”. It explained that the ITA stage of the Competition was made up of two phases and that applicants were required to provide a “full form of response” at both phases. This two-phase approach was designed to provide applicants with an equal opportunity to refine their Applications throughout the ITA Stage:

Volume C included the following:

The approach to Evaluation was set out in Volume D, section 7, of the ITA by reference to four sections, as follows:

Applicants were required to achieve a minimum mark of at least 6 out of 15 across all five Business Plan Areas and a minimum mark of at least 9 out of 15 in at least half (3 or more) of the Business Plan Areas. The ITA warns that “[a]ny Applicant who fails to achieve the minimum mark will automatically fail the Evaluation”. Applicants’ Good Causes Contribution proposal would only be counted if their Business Plan passed the required threshold marks.

The total score for an applicant was to be derived from the Licensee’s Proportion of Surplus Weighted Score (15% of the Total Score) and the combined Business Plan and Good Causes Contribution Weighted Score (85% of the Total Score). The simplistic formula was therefore: Licensee’s Proportion of Surplus Score + [Good Causes Contribution Score x Business Plan Score (including Solution Risk Factor)] = Total Score (assuming a Pass in the Pass/Fail Areas).

Applicants were required to provide a consolidated Risk Register containing “a complete and accurate explanation of each risk identified by the Applicant and how it will be mitigated”. Where a risk was specific to an area of Evaluation or an individual Business Plan Area it would be considered as part of that area of Evaluation. However, where the risk was considered to be “solution-level” (i.e. it was an issue giving rise to risk “when considered in the context of two or more individual Business Plan Areas”) it would be considered as part of the Solution Risk Factor (“SRF”). The ITA explains that the SRF “will be used to address the impact of cross-cutting aspects of the Applicant’s Business Plan”. The application of a SRF was capable of reducing the Business Plan Mark by “a whole number percentage between 0-15%”. The Commission had “a discretion to determine that an Applicant whose SRF is 15% will Fail the Evaluation”.

Each applicant was also required to submit a detailed Financial Template in support of its Application alongside Supporting Financials (additional quantitative information and calculations) and Supporting Narrative (additional qualitative information and calculations) (together “the Financial Response”). The Financial Response was to be used as a tool to support evaluation. It included a Financial Strength Scenarios component which required responses to reflect different assumed scenarios having regard to a Base Case. This component, which was evaluated as part of financial strength on a Pass/Fail basis, was required in order to evidence that an applicant “will have sufficient funding in place throughout the Implementation Period and the Licence Term in the event that costs exceed forecasts and/or revenues fall short of forecasts”.

Volume E of the ITA contained the Commission’s Statement of Requirements, which provided an introduction to, and overview of, the requirements of the Fourth Licence and further detail on the evaluation of Applications. This Volume dealt with:

Volume F, entitled “Your Application”, contained the specific questions that Applicants were required to respond to. The criteria in the ITA were assessed by reference to an applicant’s responses. I shall return to look at these in detail when I come to address the issues in this case, but for now I note that ITA Questions 1-9 were concerned with the Pass/Fail Areas. Relevant Questions for the purposes of these proceedings are:

A critical element of PPF under the Fourth Licence were the trust arrangements for the 4NL Trust in which the Participants’ funds were to be protected. In brief summary, a proportion of the money generated from ticket sales is deposited into trust accounts from which prizes are paid.

A Short Form Trust Deed together with the Commission’s Regulatory Handbook was issued alongside the ITA.

There were a number of different roles within the Evaluation Team established by the Commission:

Evaluators, SMRs and Moderators received general and area specific training from the Commission before Phase One including through the issue of a detailed and lengthy Evaluation Manual which identifies the objectives of the Competition from the Commission’s perspective as being “to run a fair, open and robust competition” which should be transparent and allow for “genuine competition between Applicants”. The Manual explains the evaluation approach in detail, including the lawful approach to evaluating Applications and how to evaluate Applications against the Pass/Fail criteria. The Manual was updated and further training was provided before the evaluation of the Phase Two Applications. It was not alleged at trial that any of the Evaluators did not have the appropriate skills, experience or qualifications for the areas they were tasked with, although an issue as to training remains.

During the course of the Competition, an internal process was established to enable Evaluators to raise Clarification Questions (“ECQs”). These would be raised through SMRs who would either direct the Evaluator to existing training material or take the ECQ to the CQ Panel, a panel consisting of Mr Wilson, members of the Commercial Team and relevant SMRs, which was also tasked with responding to Clarification Questions raised by Applicants. These were recorded and responded to in CQ trackers.

Owing to the fact that the Competition involved requirements linked to themes of a specialist and complex nature such as financing agreements, complex financial models and the operation of regulated fund management or trust mechanisms, the Commission recognised the need to obtain specialist input from legal and financial advisers. Hogan Lovells International LLP (“Hogan Lovells”) were retained to provide legal advice, while Rothschild were retained to assist with financial advice.

Phase One Applications were submitted on 16 April 2021.

Phase One Feedback was put together by the Commercial Team having regard to comments received from Evaluators on the Applications. This Feedback was then provided to each of the applicants on 16 July 2021 under cover of a letter from Mr Wilson.

Following Phase One, the Oversight Team was commissioned by Mr Wilson to carry out an independent review in order to identify learning points and areas for improvement at Phase Two. The results of this exercise were recorded in an Oversight Review Report dated 22 June 2021. This report stated that “[t]he combined lessons learnt at Phase One will be used to enhance the evaluation of Applications during Phase Two Evaluation”.

During Phase Two, and consistent with its desire to put into practice “lessons learnt” from Phase One, the Commission issued a number of further Notes for Applicants. These included (in so far as relevant):

On 4 August 2021 the Commission issued an Applicant Note amending the Competition timeline. The Third Licence was now to be extended by 6 months to expire on its statutory longstop date of 31 January 2024. A further Applicant’s Note dated 12 August 2021 extended the deadline for Phase Two submissions by an additional four weeks to 15 October 2021. The target date for award of the Fourth Licence was now 25 March 2022, with Licence commencement circa 22 months later on 1 February 2024.

TNLC attended two feedback sessions on 4 August 2021 and 7 September 2021.

On 15 October 2021 Allwyn, Camelot, TNLC and Sisal submitted their final Phase Two Applications. TNLC’s Application made clear that TNLC was part of the N&S Group, which was “the current operator of the Health Lottery”.

Allwyn’s Application was based on a 22 month implementation period, including 3 months’ contingency.

Between 25 October and 1 November 2021, the applicants had an opportunity to present their Applications to the Commission (presentations which each lasted for four or five hours). These presentations did not form part of the Evaluation.

Evaluation and moderation then took place towards the end of 2021 and in early 2022. In parallel, the SRF Evaluators considered the applicants’ Risk Registers together with their Applications with a view to identifying SRFs. They concluded that none of the risks identified by the applicants was an SRF because each one had been adequately taken into account in the Business Plan Areas considered by other Evaluators. In addition, the SRF Evaluators conducted a ‘top down’ review during November and December 2021 designed to identify any SRFs which had not been highlighted within the Business Plan Area Workstreams. The process was documented in two excel logs, a Working Log providing the reasons why a potential SRF was being considered and details of whether and how the risk was considered by Evaluators and an Advisory Log, which contained the Commission’s reasons for determining that a potential risk did not meet the criteria to be evaluated as an SRF. SRF review meetings then took place in January 2022 and Mr Wilson also reviewed the information in the Logs. No SRFs were identified for any of the applicants, leading to the Commission concluding that the application of SRFs was not applicable to the evaluation of any applicant’s Business Plan Area such that an SRF of 0% was applied to all applicants for the purposes of the score calculation.

Until oral closing submissions, the Claimants maintained a complaint about the Commission’s approach to the evaluation of SRFs. However, in circumstances where the Claimants accept that their complaint about SRFs has no causal relevance to the Process Claim and also has no bearing on the Modifications Claim owing to the fact that the Claimants cannot say how SRFs would have been dealt with in a counterfactual world and (crucially) whether the approach to SRFs would have made any difference to the gap in scoring between Allwyn and TNLC in the context of a 5NLC, that claim has now been abandoned.

During the Competition, the Commission’s Licensing team carried out Fit and Proper Checks to satisfy itself that all applicants and specific related entities were fit and proper persons to run, or benefit from the running of, the National Lottery. The outcome of this assessment was recorded in a report that addressed all applicants, the final version of which was dated 11 February 2022 (“the Fit and Proper Report”). It determined that all of the applicants were “fit and proper”.

Evaluation and moderation concluded by February 2022. Thereafter the Commission reported to its Board on the outcome of the Competition (“the Outcome Report”) and recommended Allwyn, a global leader in the lottery industry with operations across seven countries, as the Preferred Applicant and Camelot as the Reserve Applicant. Both these applicants met all of the criteria in all four mandatory Pass/Fail Areas and satisfied the Business Plan Mark thresholds. The Outcome Report records that both TNLC and Sisal failed to pass all of the Pass/Fail Areas.

The overall scores were as follows:

In light of its failures, TNLC’s Application was not included in the final ranking of applicants, albeit that its bid was evaluated and (as is also common ground) its position relative to Allwyn and Camelot was as follows:

The Outcome Report, which was approved by the Commission’s Board on 8 March 2022, records that Phase One and Phase Two of the Competition “were carried out in accordance with the Evaluation Approach” in the ITA and that:

In a section dealing with additional aspects relevant to the Competition, the Outcome Report states that:

Outcome Letters were issued to applicants on 15 March 2022, at which point the 10 day voluntary stand-still period required by the CCR 2016 commenced. During this period the Commission was not permitted to announce the outcome of the Competition so as to create a window for unsuccessful applicants to consider whether to issue proceedings.

A document identifying the reasons for TNLC’s failure in the Competition (which ran to over 72 pages) (“the Detailed Rationale”) was provided to it on 23 March 2022.

On 31 March 2022, Camelot issued proceedings against the Commission challenging the decision to award the Fourth Licence to Allwyn and seeking to set aside that decision. Camelot Global Lottery Solutions Limited was joined to the proceedings pursuant to an application notice dated 5 May 2022 (“the Camelot Proceedings”).

On 6 April 2022, IGT, now one of Camelot’s subcontractors, issued proceedings against the Commission, making a similar challenge (“the IGT Proceedings”). IGT’s grounds of claim included allegations that Allwyn’s proposals for transition to a new technology provider, Scientific Games International Limited (“SGI”) and its new technology system (“Symphony”) raised unacceptable risks which should have led to the Commission excluding Allwyn’s Application from further consideration, or scoring it down.

The effect of the Camelot and IGT Proceedings was to trigger an automatic suspension on contract-making (“the Suspension”) under Regulation 56 CCR 2016 such that the Commission was not permitted to enter into the Enabling Agreement with Allwyn until the Court ordered that the Suspension be lifted. The Commission issued an application to lift the Suspension pursuant to Regulation 57(1)(a) CCR 2016 which succeeded at first instance. However, the Court’s Order of 1 July 2022 lifting the Suspension was stayed by Order of the Court of Appeal pending an appeal by Camelot and IGT, for which permission was granted.

On 13 April 2022, TNLC issued the Process Claim, at this stage limited to recovery of TNLC’s bid costs in the alleged sum of approximately £17 million. Unlike Camelot and IGT, it did not seek to set aside the decision to award the Fourth Licence to Allwyn.

Shortly thereafter (and as recorded in an Order of O’Farrell J dated 17 August 2022), the Process Claim was stayed with TNLC’s consent behind the Camelot and the IGT Proceedings “until judgment on liability…or any other earlier order” in those proceedings.

In anticipation of the Suspension being lifted after an appeal that was due to be heard by 14 September 2022, the Commission wrote to Allwyn on 2 August 2022 seeking confirmation as to whether Allwyn wanted to make any changes to the Enabling Agreement. The Commission had already decided that amendments would be necessary to reflect the new sanctions requirements as a result of the Ukraine war.

Allwyn responded to the Commission in a letter dated 17 August 2022. Specifically, it confirmed that its Board remained confident in its ability to deliver its transition plan assuming that the Suspension was lifted shortly after the September hearing in the Court of Appeal and subject to certain identified constraints. However, it stated that this would inevitably lead to additional costs and risk for Allwyn. It went on to identify a number of factors which it said should be taken into account by the Commission in the Enabling Agreement Confirmation Process including (i) the legal challenges which were ongoing and of uncertain duration; (ii) the conflict of interest in respect of ensuring a smooth transition arising by reason of the challenge from Camelot; (iii) the uncertain timing of the Enabling Agreement; (iv) the compression of time available to achieve transition by 1 February 2024; and (iv) statements from Camelot’s solicitors in the Camelot Proceedings that it was not confident in delivering a fully compliant transition to enable commencement of the Fourth Licence in February 2024. Accordingly, Allwyn proposed various amendments to the Enabling Agreement, together with corresponding amendments to the Cooperation Agreement. These amendments included changes to specific dates related to transition and a change in the definition of Recoverable Implementation Costs (“RICs”), so that Allwyn could recover costs incurred on certain transition activities which the effect of the Suspension might otherwise have prevented it from recovering.

In September 2022, shortly before the appeal against the Court’s decision to lift the Suspension was due to be heard, Camelot and IGT withdrew their appeals to the Court of Appeal against the Order of the High Court lifting the Suspension. The Suspension was lifted on 12 September 2022 and the Commission was therefore free to enter into the Enabling Agreement with Allwyn, which it did on 16 September 2022.

Pursuant to the Enabling Agreement, Allwyn was required to achieve Fully Implemented Commencement (“FIC”) to transition to the Fourth Licence by 1 February 2024, the day after the Third Licence expired on its Statutory Longstop date. The delay in entering into the Enabling Agreement had the effect of shortening the Implementation Period available to Allwyn to transition to the Fourth Licence from 22 months to 16 months.

Key modifications to the Enabling Agreement made at this time (“the 2022 Modifications”) included:

From September 2022 onwards, transition was subject to ongoing review and scrutiny by the Commission’s Incoming Transition Governance Board (a joint Commission/Allwyn Board) and the Commission’s Joint Transition Governance Board (held between Camelot, Allwyn and the Commission).

Part of Allwyn’s transition from the Third Licence to the Fourth Licence involved upgrades to technology, in particular replacing IGT’s retail terminals with retail terminals provided by Scientific Games (Allwyn’s technology subcontractor). This was to be completed in stages during the Implementation Period, first by installing Scientific Games software onto the IGT terminals (a process known as “Splitting the Disk”), then by switching the terminals from using IGT software to using Scientific Games software, and then finally replacing the IGT terminals with Scientific Games terminals. Splitting the Disk required a new commercial agreement between Allwyn and IGT because IGT was not obliged to provide this service.

Negotiations between IGT and Allwyn were difficult and protracted. IGT did not agree to undertake the process of Splitting the Disk for the Fourth Licence and so Allwyn could not finalise the necessary commercial agreement.

In February 2023, Allwyn acquired Camelot at a cost of circa £120 million. Camelot duly discontinued the Camelot Proceedings against the Commission on 16 February 2023. The IGT Proceedings continued.

In March 2023, Allwyn formally notified the Commission that what it saw as IGT’s continued attempts to obstruct transition constituted an Implementation Issue that materially threatened Allwyn’s ability to deliver transition and its Application.

Further to the hearing of a preliminary issue in June 2023 regarding IGT’s standing to bring a claim under the CCR 2016, the Court held in a judgment handed down on 28 July 2023 that IGT (as a subcontractor and not an applicant in the Competition) lacked any cause of action under procurement law (see IGT v Gambling Commission [2023] EWHC 1961 (TCC)). IGT commenced an appeal but ultimately discontinued it.

In the meantime, between 24 March 2023 and August 2023, the Commission carried out an Implementation Review, as permitted under the terms of clause 18 of the Enabling Agreement. This was designed to assist the Commission to determine how it should progress Implementation in light of the continuing difficulties faced by Allwyn owing to the ongoing IGT Proceedings, specifically, Allwyn’s difficulties in reaching an agreement with IGT. The Commission had become increasingly concerned that Allwyn would not now be able to fulfil its obligations under the Enabling Agreement and achieve FIC by 1 February 2024. Allwyn proposed a plan to address the delayed Implementation, which ultimately became known as “Plan Gemini” (also known as Plan C+).

On 9 July 2023, IGT’s lead representative in the negotiations with Allwyn (Mr Fabio Cairoli) sadly died.

Between around July and September 2023, the Commission and Allwyn engaged in negotiations as to the appropriate form of an amended Enabling Agreement to reflect Plan Gemini. In a letter from the Commission to Allwyn dated 3 August 2023, the Commission expressed the view that (consistent with Plan Gemini) there was now a need to amend both the Enabling Agreement and the terms of the Fourth Licence if the Enabling Agreement was to continue.

The Commission’s Board approved the principles for an amended Enabling Agreement and Fourth Licence at a meeting on 15 August 2023, having considered a paper prepared by Mr Tanner setting out the outcome of the Implementation Review. The paper recorded that, whilst the Commission’s assessment was that a substantial cause of Allwyn’s delivery issues were “matters outside [its] control” (including Allwyn’s relationship with IGT and the reduced Implementation Period resulting from the Camelot Proceedings), nevertheless it was not possible to determine with certainty “the overall balance of factors which [had] contributed to those issues”. The paper concluded that it would not now be possible for Allwyn to implement its full Application immediately following expiry of the Third Licence (as required by the Enabling Agreement signed in September 2022) and recommended that modifications be made to the Enabling Agreement and the Licence.

Allwyn and the Commission signed an updated Enabling Agreement and Licence on 25 September 2023. I shall return to the detail of the modifications (“the September 2023 Modifications”) made in due course but, in summary, the effect of the September 2023 Modifications was to allow for Allwyn to transition into the Fourth Licence while still being required to continue to implement its complete Application as proposed during the Competition. The amendments thus permitted the Enabling Agreement and the Fourth Licence to run concurrently, thereby enabling Allwyn to transition to the Fourth Licence with “Initial Functionality” (i.e. Allwyn would operate the National Lottery on the then existing basis). “Full Functionality” (i.e. all the parts of Allwyn’s implementation that it had planned to implement by the start of the Fourth Licence) was to be achieved by 29 September 2024 (or, if no longer reasonably practicable, by 28 February 2025). Various other dates and milestones were also amended and a provision was added giving the Commission the ability to extend the Fourth Licence for an additional two years.

In October and November 2023 correspondence ensued between the solicitors for TNLC (“BCLP”) and Hogan Lovells, acting for the Commission, over the amendments made to the Fourth Licence. This correspondence is relevant to a time bar defence to the Modifications Claim to which I shall return later in this judgment.

On 12 December 2023, Allwyn and the Commission agreed to further amendments to the Enabling Agreement (“the December 2023 Modifications”) which relate to information and confirmations that are to be provided to the Commission by Allwyn as part of its revised transition arrangements and other minor changes to wording to reflect the September 2023 Modifications.

On 2 January 2024, following months of negotiations with Allwyn, IGT filed a Notice of Discontinuance and the stay on TNLC’s Process Claim was lifted (as of 22 January 2024) by Order dated 9 February 2024. Allwyn was finally able to conclude negotiations on an agreement with IGT to support transition.

On 19 January 2024, the Commission published a Contract Modification Notice in respect of the modifications. The notice (i) summarised the substance of the modifications; (ii) explained that the estimated value of the Licence was reduced by £254,000,000 compared with the estimated value at the date the Licence was entered into (i.e. from £8.187 billion to £7.933 billion), albeit that if the 2 year extension were to be granted, the value of the Licence would revert to £8.187 billion; and (iii) explained that the modifications were lawful for the purposes of the CCR 2016 because (a) they were not substantial; and (b) in any event, they were necessary as a response to the delay in implementation caused by litigation with Camelot and IGT and/or protracted and challenging negotiations regarding handover from IGT to Allwyn. The issues involving IGT were said to constitute unforeseeable circumstances under CCR 2016 Regulation 43(1)(c).

On 1 February 2024, the Fourth Licence, as modified, was granted to Allwyn and came into effect.

The Modifications Claim was commenced by TNLC on 2 February 2024.

On 26 June 2024 (“the June 2024 Order”), Waksman J ordered that the Process Claim and the Modifications Claim were to be jointly managed and that there be a Stage 1 Trial to deal with (i) breach of duty; (ii) causation; (iii) sufficiently serious breach; and (iv) whether the Claimants are entitled to any non-monetary remedies (with quantum specifically excluded). At the same time, Waksman J allowed an application by the IPs to participate at the Stage 1 Trial including “permission to file a statement of case…, evidence, make written and oral submissions and cross-examine witnesses, only insofar as the Allwyn Parties have a separate interest to [the Commission]” in respect of the issues raised in Allwyn’s statement of case and any other issues to be determined at the Stage 1 Trial.

Following disclosure in November 2024, the Claimants amended the Process Claim significantly to expand the allegations pursued and to seek TNLC’s alleged loss of profit from the Fourth Licence. This has not been particularised in the Process Claim, but the damages sought are said to be “of a similar order” to those claimed in the Modifications Claim, subject to not including two additional years at the end of the licence period (i.e. a claim of £1,317 billion less two years’ profit of £136 million each = £1,045 billion). The amendments included numerous claims of manifest errors in the scoring of TNLC’s, Allwyn’s and Camelot’s Business Plan Areas, together with a new allegation that, had its Application been scored correctly, TNLC would have won the Competition.

Over the course of these proceedings, the statements of case in both the Process Claim and the Modifications Claim have been the subject of numerous amendments. All references to them in this Judgment will be to the most recent versions.

In the months before trial, and during the trial itself, including during closing submissions, there has been a considerable narrowing of the Process Claim advanced by the Claimants.

On 14 July 2025, the Claimants abandoned existing allegations of manifest error by the Commission in relation to the scoring of the Business Plan Areas, specifically that TNLC should have scored higher than both Allwyn and Camelot overall in relation to the 5 Business Plan Areas. This was a very significant abandonment because it was TNLC’s failure in the Business Plan Areas which led to the 30% gap between its score in the Competition and the scores of Allwyn and Camelot. References to “the gap” in this judgment will be to this 30% gap in scores.

Nevertheless, at the PTR at the end of July 2025, there remained 64 live issues between the parties in the Process Claim (many of which included numerous sub-issues) running to 32 pages. There were 17 live issues in the Modifications Claim running to 8 pages.

On 18 September 2025, the Claimants informed the parties that they did not intend to pursue various allegations of apparent bias in the Process Claim.

In their opening skeleton argument for trial (mostly within footnotes) the Claimants abandoned further claims in the Process Claim, including as to alleged conflicts of interest and further allegations of apparent bias. On 7 October 2025 (during the Court’s reading period), the Claimants provided revised pleadings in both the Process Claim and the Modifications Claim together with a revised List of Issues (addressing abandonments made in the Claimants’ written opening).

Having identified that the latest List of Issues did not capture all issues that appeared to have been abandoned by the Claimants in their opening submissions and in light of concerns raised by the Commission in their written opening submissions that it was unclear which issues remained live, the Court requested by email on 8 October 2025 (the day before the start of the trial) that the Claimants provide a further version of the List of Issues to reflect those that remained live at trial. An email was sent by BCLP later the same day containing a yet further swathe of abandonments, including serious allegations as to preferential treatment of Allwyn, the remaining allegations of apparent bias, allegations relating to lack of due diligence and individual allegations relating to various manifest errors. On the first day of trial (9 October 2025), TNLC indicated that it would produce a further revised List of Issues to reflect these abandonments, which was subsequently provided on 11 October 2025 together with a revised draft Particulars of Claim.

After the exchange of written closing submissions, but the day before the start of oral closing submissions, the Claimants served a yet further revised List of Issues in the Process Claim and the Modifications Claim abandoning further issues, including an allegation in the Modifications Claim that the challenged Modifications were brought about wholly or substantially by reason of Allwyn’s failures to meet its obligations under the Enabling Agreement. The Court identified at the start of the Claimants’ oral closing that the revised List of Issues in the Process Claim did not appear to reflect the extent of the abandonments now reflected in the Claimants’ 240 page written submissions and directed that a yet further List of Issues in the Process Claim be provided the next day.

In accordance with this direction, BCLP provided a letter to the Court the following day identifying further issues that had now fallen away and enclosing a revised List of Issues. The abandoned issues included allegations concerning the Commission’s approach to the evaluation of “Fit and Proper”, yet further allegations relating to alleged conflicts of interest, a complex and substantial allegation of manifest error by the Commission in connection with the Media & Communications Protocol which had taken up a considerable amount of time in cross examination at trial, and an allegation as to the use of Camelot 3NL personnel for 4NLC. Importantly, as explained by Mr Toledano, the abandonments removed the scope for the Claimants to pursue a loss of a chance claim (a key plank of the Claimants’ case up to that point) in the Process Claim.

On the third day of closing submissions, following further questioning as to the viability of other aspects of their case, the Claimants abandoned two issues on which they had previously relied (i) for the purposes of enabling them to “close the gap” and (ii) as being relevant to the question of whether TNLC would have had a real chance of winning a 5NLC in the counterfactual (the latter question arising in the context of the Modifications Claim). The first abandoned issue concerned the Commission’s approach to the evaluation of SRFs and the second (on which there had been a significant focus during the evidence owing to allegations of untruthfulness on the part of at least one of Allwyn’s witnesses) was on the approach that the Commission had taken in providing feedback to Allwyn on its Operator Share of Surplus (“OSS”) and whether that feedback had been the catalyst for a reduction in Allwyn’s OSS at Phase Two.

Unfortunately, this was not the end of the difficulties with identifying the Claimants’ case. It became clear during oral closing submissions that the Claimants’ closing skeleton argument was not entirely accurate in its characterisation of certain aspects of the Process Claim such that it remained difficult to understand what the consequences might be of findings that the Court is being invited to make by the Claimants – in particular whether the Claimants are relying on allegations in combination to establish causation. In an attempt to address this issue and provide some clarity, I required the Claimants to provide the Court with a clear exposition, which they did on the penultimate day of closing submissions in the form of a table.

On the last day of closing submissions the Claimants provided what I understand to be the final version of the List of Issues for the Process Claim, which abandoned a yet further issue in relation to alleged conflict of interest. At close of trial, the List of Issues for the Process Claim has reduced from 64 to 26 main issues. Where I refer to them by number in this judgment I shall refer to their original numbers, consistent with the approach adopted by the parties. I do not understand there to be a revised Particulars of Claim which reflects only these remaining issues. The List of Issues in the Modifications Claim runs at close of trial to 15 issues. It is common ground that Allwyn has a separate interest in various of these remaining issues.

Owing to the abandonments I have referred to above, there are now substantial swathes of evidence in the trial to which I need have no regard and in respect of which I need make no findings.

During closing submissions, an issue arose as to the relationship between provisions in the Enabling Agreement that permitted amendments to be made to the Fourth Licence and the CCR 2016, including a new point as to the applicability of Regulation 43(1)(a). Given the lack of sufficient time to deal with the point and the fact that the parties appeared to disagree on the relevant law, I invited the parties to provide the Court with further written submissions following the close of trial. On Monday 8 December 2025, (i) the Claimants and (ii) the Commission and the IPs (acting for these purposes together) provided Post Trial Notes. The Claimants provided a slightly updated Post Trial Note the next day.

From these Notes, it was clear that there was considerable disagreement between the parties on the applicable law and the real significance of the point was somewhat difficult to discern. Accordingly, I invited the parties to make further oral submissions (limited to the issues raised in their Notes) at a hearing which took place on 13 January 2026 (“the Further Hearing”). I am satisfied that in light of this hearing, all parties had a full opportunity to address me orally as to the law and to take me to any relevant authorities on which they wish to rely.

The Commission and the IPs submit that in an attempt to bolster a vague, high level and unparticularised case, the Claimants have sought in submissions and in cross examination to advance new and unpleaded allegations. They contend that (i) the Claimants’ unwieldy and unparticularised pleading has made it impossible for them to know what needed to be addressed by their witnesses; and (ii) the Claimants’ attempts to advance unpleaded matters at trial (without making an application to amend, notwithstanding objections made by the Commission and the IPs from time to time to topics advanced in cross-examination) would, if the Claimants were to be permitted to pursue these unpleaded allegations, give rise to significant prejudice. Indeed the IPs contend that the unfairness would be particularly acute in their case owing to the fact that their involvement at trial was circumscribed by reference to the Agreed List of Issues. The IPs contend that the matters in respect of which the Claimants went “off piste” in cross-examination include issues which, had they been pleaded and identified in the Agreed List of Issues for trial, would have given rise to a separate interest on behalf of Allwyn. In all the circumstances, the Court is invited by the Commission and by the IPs to disregard all allegations that have not been pleaded.

The Claimants reject this criticism, inviting me to look carefully at their pleaded case, the List of Issues (which has been tied closely to the statements of case) together with the evidence that has been served in response to that pleaded case. They submit that it is clear that the Commission and the IPs have in reality understood the case that was being advanced and come to court ready to meet that case.

In turn, the Claimants also allege that aspects of the case advanced by the Commission and by the IPs are unpleaded and accordingly should be disregarded by the Court.

I intend to deal with these allegations (which need to be considered separately and in context) as and when they arise in connection with the remaining live issues. I observe however, that the pleading of the material facts on which a claimant relies in his particulars of claim is not only required by the CPR, but is also essential to the orderly and fair conduct of a case. As Coulson LJ said in Standard Life Assurance Ltd v Building Design Partnership Ltd [2022] 1 WLR at [39], citing his earlier judgment in Pantelli Associates Ltd v Corporate City Developments No 2 Ltd [2011] PNLR 12 at [11]:

Although this observation was made in Pantelli in the context of a professional negligence claim, Coulson LJ made clear (at [40]) that it was not to be confined to such claims: “[t]hese are the basic ingredients of any statement of case against any defendant”. Coulson LJ went on at [41] to refer to Towler v Wills [2010] EWHC 1209 (Comm) per Teare J at [18]):

These observations echo useful guidance given by Mummery LJ in Boake Allen Limited & Others v HMRC [2006] EWCA Civ 25 at [131]:

In so far as these authorities were focusing on pleadings produced by a claimant, it is important to point out that similar principles apply also to a defendant. Thus in Al Rawi v Security Service [2010] EWCA Civ 482; [2010] 4 ALL ER 559 at [18] per Lord Neuberger MR:

Nevertheless, it is also true (as the Claimants submit) that there is scope for the Court to permit a departure at trial from a formally defined case where it is just to do so (Huseyin Ali v Dinc [2022] EWCA Civ 34, per Birss LJ at [25]). However, I do not read this as a general license either to depart from the basic pleading requirements identified above, or to circumvent the close scrutiny that would be applied by the Court to any application to make a late amendment at trial (see for example, on amendments Kawasaki Kisen Kaisha Limited v James Kemball Limited [2021] EWCA Civ 3 per Popplewell LJ at [17] and [18] and on late amendments Steenbok Newco 10 Sarl v Formal Holdings Ltd [2024] EWHC 1160 (Comm), per Bryan J at [8]-[31])). It will only be just to permit a departure from basic pleading requirements at trial where any such departure is consistent with the requirements of the overriding objective and does not cause prejudice to the other side. This is most unlikely to be the case where an attempt is made at trial to run an entirely new and unheralded factual case not previously foreshadowed in the pleadings.

I shall return later in this judgment to apply these principles in the context of the parties’ various allegations of inadequate and unparticularised pleadings. For now, I should address one additional point on pleadings which arose during closing submissions.

The Claimants suggested that absent objections during cross-examination to matters being explored with witnesses that were outside the scope of the pleaded case, it was not permissible for a party later to complain of expansions to the pleaded case. In support of this proposition it was further suggested that if “pleading” objections had been raised during cross-examination (of the type that were raised by the Commission and the IPs in closing), there would have been scope for the Claimants to consider whether they needed to amend their statement of case.

I do not accept this submission and nor do I accept that this is a case in which the Commission and the IPs failed to make their position on the pleadings crystal clear. As the authorities to which I have referred above make plain, it is a fundamental principle that the scope of any civil case is defined by the pleadings. The fact that a claimant elicits evidence during cross-examination which might give rise to a new material fact does not permit it simply to rely on that material fact in closing. That must be so whether or not the opposing party objects to the approach taken during cross-examination. In the event that a claimant wishes to rely on a new material fact discovered at trial, it must make an application to amend its pleadings. It cannot avoid the need to make an application to amend by suggesting that the defendant should have raised an immediate objection. That would be to place far too high an onus on the defendant and would undermine the importance of ensuring that parties understand the case that is being advanced against them and have a proper opportunity to meet that case, just as it would undermine the smooth progress of trial and the importance of the balancing exercise that must be conducted by the Court when considering an application to amend.

In any event, a review of the transcript confirms that the Commission and the IPs made it abundantly clear throughout the trial (both in submissions and in cross-examination) that they objected to the Claimants running arguments which were not pleaded. For pragmatic reasons and so as to avoid the need for constant rulings on the point, I indicated that I would permit the Claimants to cross-examine witnesses as they saw fit whilst at the same time making it clear that I expected the cross-examination to be relevant to the pleaded case. I also made it clear that I expected to hear submissions in due course as to the relevance of any evidence to which objection was taken in light of the pleaded case. In advance of closing submissions, I observed that insofar as pleading objections were being made, it would be for the Claimants to satisfy the Court that the necessary facts had been pleaded. I also said that I had no intention of permitting the Claimants to advance new matters “through the back door”. In this context I expressly referred to the fact that there had been no suggestion that the Claimants wished to make an application to amend.

Accordingly I consider there to be no basis for any complaint by the Claimants that they have somehow been lulled into a false sense of security over whether or not a formal application to amend might be required. Indeed prior to closing submissions, the Claimants appeared to acknowledge that they must stick to their pleaded case:

In their written closing submissions, the Claimants criticised the lack of disclosure by the IPs, asserting that they had “refused to provide anything other than very limited disclosure despite their wide ranging participation rights in the Proceedings and the obvious procedural need for the same”. In so far as this suggested an obligation on the IPs to provide disclosure, this criticism was neither fair nor justified, as I understood Mr Toledano fairly to accept in his oral closing submissions.

The IPs are not parties to the proceedings and have no automatic disclosure obligations. However, they agreed to provide documents referred to in their statement of case in so far as those documents had not been disclosed by the Commission. The Claimants then sought specific disclosure from the IPs (citing both CPR r.31.12 which governs specific disclosure by a party and CPR r.31.17 which governs non-party disclosure). By an Order made by Sir Vivian Ramsey on 1 May 2025 (amended on 12 May 2025) the Court required the IPs to disclose any known adverse documents falling within specific identified categories. Some aspects of this Order were agreed. In relation to disputed parts, including in respect of so-called ‘Category 5 documents’ relating to the delay in the transition of the Fourth Licence to Allwyn, the Judge explained in his judgment ([2025] EWHC 1710 (TCC) at [70]) that if the IPs wished to provide witness statements for trial in support of the factual allegations pleaded in their statement of case then (for that purpose) they were to be treated as parties to the proceedings under CPR r.31.12 and must exhibit to those witness statements any known adverse documents having made enquiries of the relevant people. There was no requirement for Allwyn to undertake electronic searches. The Judge explained at [93] that, alternatively, he would have made a similar order under CPR r.31.17.

In the event, the IPs did serve witness statements addressing the factual case set forth in their pleadings, including as to the reasons for the delay in the transition of the Fourth Licence to Allwyn. However, they disclosed no adverse documents, explaining in a witness statement from Mr Willits that no such documents had been identified. This was queried by BCLP in letters dated 23 June 2025 and 21 July 2025, but the IPs, through their solicitors Quinn Emanuel, rejected any suggestion of non-compliance with the Order in a letter of 28 July 2025. In the event, the Claimants chose not to cross examine Mr Willits at trial, leaving his evidence unchallenged.

In the circumstances, it does not seem to me that any criticism may be levelled at the IPs for an absence of disclosure, just as it could not be suggested (and was not) that the Court could properly draw any adverse inference. If the Claimants had wished to test the IPs’ witness evidence by reference to documents which had not already been disclosed by the Commission, and if they were dissatisfied with the approach adopted to disclosure by the IPs, then, as Mr Toledano fairly accepted, it was open to the Claimants to make a further application for specific disclosure, whether under CPR r.31.12 or r.31.17. They did not do so.

On the first day of trial the Court made a Confidentiality Order continuing existing arrangements for a confidentiality regime at the request of the parties for the purposes of protecting confidential information disclosed in these proceedings. The existence of this regime meant that (in some cases) evidence on which the parties relied at trial was designated “Tier One” or “Tier Two” Confidential Information. I made it clear to the parties, however, that as much of the trial as possible must be in public in order to secure the proper administration of justice.

During the course of trial, de-designations were made by various of the parties such that it was possible for all witnesses to be cross-examined in open court. I am most grateful to the parties for their cooperation in this regard.

I do not understand there to be any objection to this judgment being published in its entirety.

TNLC served witness statements from 3 witnesses for the trial, each of whom attended to give evidence.

The Commission complains that “substantial proportions” of TNLC’s witness statements are not relevant or admissible and/or do not comply with PD57AC. Specifically the Commission submits that, in their statements, TNLC’s witnesses (i) seek to advance their subjective disagreement with the Evaluation and the reasons for the scores, together with providing commentary on the Commission’s scoring documents; and (ii) seek to give evidence as to their interpretation of the ITA and other instructions given to applicants. I was not invited to determine this issue before the relevant witnesses gave evidence, but the Commission made clear that they did not intend to cross examine on aspects of TNLC’s witnesses’ statements which they considered to be irrelevant or inadmissible. The Claimants did not criticise this approach in closing, and I consider it to have been an entirely proportionate and sensible approach to adopt.

Evidence falling within the first category (subjective disagreements and commentary) is (as Fraser J, as he then was, recognised in Bechtel Ltd v High Speed Two (HS2) Ltd [2021] EWHC 458 (TCC) (Bechtel) at [136]):

Further, evidence falling within the second category (interpretation of the ITA and other documents) is also irrelevant and/or inadmissible and/or not in compliance with PD 57AC. Interpretation of tender documents is a matter for the Court to consider on the basis of the understanding of the reasonably well-informed and diligent tenderer (“the RWIND tenderer”) and not the views of a losing bidder: see Healthcare at Home v Common Services Agency [2014] UKSC 49 at [12] and [26]-[27] (“Healthcare at Home”) and Bechtel at [139]:

For present purposes there is no need for me to try to determine whether each of the numerous complaints made in Hogan Lovells’ letters dated 22 and 29 September 2025 about the Claimants’ witness statements (rejected in BCLP’s letter of 1 October 2025) are well-founded, although I have no doubt that some are. Equally, there is no need for me to identify where BCLP is right that specific evidence is designed only to contextualise the actions TNLC took at the time. There is also no need for me to determine whether similar criticisms made by BCLP in their letter of 1 October 2025 of the Commission’s evidence are justified.

Instead, I intend to focus on the available evidence in relation to each remaining issue and to consider the weight to be attached to that evidence, always bearing in mind the principles identified in Bechtel and Healthcare at Home. I did not understand any of the parties to object to such an approach.

Mr Martin provided two witness statements for trial. He is Group Commercial Director of N&S PLC and a director of TNLC. He managed the acquisition by the N&S Group of the Health Lottery in February 2011 and oversaw its launch in October of the same year. In mid-2019 he became involved in early discussions relating to the proposed Competition and thereafter he oversaw N&S PLC’s involvement in the tender process for the 4NLC. His role was (broadly) to set the strategy for the bid and to understand and manage the process from N&S PLC’s point of view, including managing the bid team to ensure that they delivered a bid capable of winning the Competition and managing the costs of the bid process.

I found Mr Martin to be a straightforward witness who was doing his best to assist the court.

Mr Mills provided two witness statements for trial. He has served as the Non-Executive Chairman of TNLC since June 2020, albeit that TNLC has not been active since early 2022 save for the purposes of pursuing these proceedings. For a short period prior to his appointment to this role, he was a member of a small team within N&S PLC which was preparing the ground for N&S PLC to compete in the 4NLC bid. Mr Mills had no detailed involvement in procurement processes prior to his involvement with 4NLC, albeit that in his long career as a civil servant (spanning the period between 1974 and 2007) and in his role as chairman of the governing body of an independent school in London he had exposure to several projects that involved a procurement process.

In his initial role as Bid Chairman and thereafter as Non-Executive Director of TNLC, Mr Mills exercised a general oversight role in relation to bid preparation with his principal focus being on the Business Plan Areas of the bid. He also led the Claimants’ interactions with the Commission during the period of the Competition, attending all meetings with the Commission and drafting most of the Claimants’ written communications with the Commission.

I did not find Mr Mills to be an entirely straightforward witness. He was prone to give very long answers to questions which frequently failed to address the specific question posed of him and it was necessary to warn him on a number of occasions of the need to answer the question that had been put to him. It also became clear that he was concerned to “play down” any negative observations made by himself or members of the bid team about (amongst other things) feedback they had received from the Commission. This led to him seeking to “explain” the meaning of communications apparently in order to put a more positive spin on them. On occasion it also led to him inviting the Court to ignore the plain meaning of the words in the bid documents and the feedback that TNLC had received.

In the circumstances, while much of Mr Mills’ evidence was not of central importance to the issues in this case, I consider that, where it is relevant, I must treat it with caution, testing it against the available contemporaneous documents and any other relevant evidence in so far as is necessary.

Ms Taylor provided two witness statements for trial. Between January 2020 and March 2022, she served as Head of Finance of TNLC. Between 1997 and September 2014, Ms Taylor worked for Camelot, the then incumbent operator of the National Lottery, during the first, second and third National Lottery Licences.

In her role as Head of Finance at TNLC, Ms Taylor was responsible for the main financial model behind the bid, with support from PWC who were instructed as one of TNLC’s external advisers.

Ms Taylor was plainly a straightforward witness who was at all times doing her best to assist the Court.

The Commission called evidence from 10 witnesses at trial. These witnesses were cross-examined by various members of TNLC’s team. A few were also cross-examined by Mr Howard on behalf of the IPs.

Mr Wilson provided three witness statements for the trial. Between September 2019 and the end of March 2023 he was the Commercial Director at the Commission. In this role he was responsible for instructing the Competition commercial team to work on the commercial strategy and evaluation approach (which covered the SQ stage as well as the ITA stage). The commercial team was part of the wider 4NLC team which was led by Mr Tanner. Mr Wilson was involved in the review and approval of recommendations made by others regarding the rejection or approval of potential SRFs raised during Phase Two of the Competition and took part in the commercial assurance process which involved attending some of the Business Plan Area moderation meetings. Towards the end of the Competition he oversaw the production of the Detailed Rationale documents, the Board Outcome Report and the Outcome Letters to applicants.

Owing to a health condition, Mr Wilson attended the trial remotely and a detailed protocol was agreed for his cross-examination which involved shorter days and regular breaks. He was also provided with many, but not all, of the documents to which he was taken in cross-examination in advance. Owing to his central involvement in the Competition on behalf of the Commission, Mr Wilson was cross-examined over 5 days. Unusually he was cross-examined by two separate members of the Claimants’ counsel team, an approach which was agreed to by the Commission but which should have been canvassed at the PTR in order to obtain the Court’s permission. Such an approach is often capable of being oppressive and it should certainly not be regarded as the norm in the Business and Property Courts.

Throughout this lengthy (and, quite obviously, exhausting) cross-examination, Mr Wilson came across as an invariably careful and straightforward witness. He often showed an impressive knowledge and recall of the detail of the Competition and he frequently made appropriate concessions without hesitation when required to do so. From time to time it was clear that he could not grasp what was being put to him, that he needed to re-read documents before he could answer questions on them or that he had answered too quickly and that, on reflection, his answer was different. However, given the obvious strains caused by his health condition, this was not surprising. I have no doubt whatever that Mr Wilson was doing his best to assist the Court (in very difficult and trying circumstances).

Mr Tanner provided two witness statements for the trial. He joined the Commission on 1 July 2019 as an Executive Director of the Commission and was SRO. He was responsible for the programme (“the Programme”) for delivery of the Competition to award the Fourth Licence and for oversight of the implementation of the successful application. He remains personally accountable both for the ongoing delivery of that Programme and to Parliamentary Select Committees for the implementation of the Commission’s strategy and policy in the project. As SRO, Mr Tanner was responsible for various of the project teams that made up the Programme, including the teams that worked on (i) the policy and design of the Fourth Licence and the Competition; (ii) the evaluation of applications in the Competition; (iii) the transition from the Third Licence to the Fourth Licence; and (iv) the oversight and assurance of Allwyn’s implementation (as Preferred Applicant).

During the cross-examination by TNLC of Mr Tanner, the Commission disclosed some new documents not previously provided to the other parties. This was extremely unfortunate because it meant that certain points had been put to Mr Tanner in cross-examination (and accepted by him) on a wrong basis. Upon this issue being raised, Mr Toledano very properly accepted that, in light of the new documents, his cross-examination had indeed proceeded on a wrong basis and he corrected the position in his further cross-examination of Mr Tanner. Mr Tanner was then cross-examined by Mr Howard for the IPs and his attention was drawn to further matters which it was suggested should have been brought to his attention during his cross-examination by TNLC. In light of this cross-examination, Mr Tanner changed some important aspects of the evidence he had given in answer to his cross-examination by TNLC.

During his lengthy oral evidence, Mr Tanner struck me as an honest and entirely straightforward witness. He was often concerned to ensure that he had the context of any particular question and he took care to read the materials that were being put to him. In the circumstances, his preparedness to make numerous concessions against the Commission’s interests, including concessions which set him at odds with various things that he had said in his witness statement, only highlighted the seriousness with which he approached the giving of his oral evidence and his understanding of the importance of being as accurate as possible in the answers that he gave. Although he was led during the cross-examination by the IPs into resiling from some of those concessions, I have no doubt that he did so honestly after proper consideration of the new points that were being made to him.

Ms Sheldon provided two witness statements for the trial. She is a Director for Policy Implementation and Evaluation at the Commission and undertook the role of lead Evaluator during the Competition in relation to PPI. Although her evidence was sometimes a little confused and she did not always have a very clear recollection of specific documents or of the detail of the task with which she was involved (including – and perhaps unsurprisingly – when she was asked about entirely new points not previously foreshadowed in the pleadings), I have no doubt that she was doing her best to give accurate evidence.

Ms Jones provided two witness statements for trial. She is a Chartered Accountant who now works for the Commission as a Senior Financial Performance Manager. During the Competition, Ms Jones undertook the role of lead Evaluator for Financial Strength for Phase One and lead Evaluator dealing with the Financial Strength Question 8 evaluation area for Phase Two. Prior to this, Ms Jones had already been working for the Commission as a financial specialist on the 3NL Regulation team.

Although she had refreshed her memory of the documents prior to giving evidence, Ms Jones did not always have a clear recollection of specific events or discussions that had taken place at the time of evaluation and moderation. Nevertheless, I have no doubt that she was doing her best to assist the Court.

Mr Ellerbeck provided two statements for trial. He is a Strategy and Insight Manager at the Commission. He was initially involved in the Competition as part of the Shadow Games Assessment in December 2020 and January 2021 and thereafter he became lead Evaluator for the Portfolio Business Plan Area for Phase One and Phase Two of the Competition.

Mr Ellerbeck was a confident, clear and straightforward witness whose evidence I have no difficulty in accepting.

Ms Severne provided two witness statements for trial. She is a Chartered Global Management Accountant and acted as a Financial Strength Evaluator in Phases One and Two of the Competition, focusing specifically on Financial Strength Question 9.

Ms Severne was a somewhat erratic witness, at times appearing to remember clearly the role she had undertaken during the Competition and at other times appearing confused. Under cross-examination by Mr Suterwalla for TNLC, she sometimes appeared to be both strong-minded and deliberately obtuse and she occasionally exhibited a misplaced confidence in her own recollection. By contrast, when cross-examined by Mr Howard for the IPs (largely through the use of open questions) she appeared lucid and familiar with the evaluation task that she had undertaken. Overall I formed the view that although it was probably not always reliable, her evidence was not ultimately intended to be unhelpful to the Court. However, I shall need to consider it with care, as necessary, by reference to other available evidence.

Mr Hanby provided one witness statement for trial. He is a partner at EY. From March 2019 onwards he led the EY team that supported the Commission’s Commercial team which was responsible for the design and delivery of the Competition. From September 2019, he reported to Mr Wilson. During Phase One of the Competition, Mr Hanby was a moderator for the Transition area of the applicants’ Business Plans. In Phase Two, he was selected by the Commission to perform two roles: first as a Moderator for the Technology section of the Operations Business Plan Area and the Participant Protection (Pass/Fail) element of the Evaluation, and second as the Risk SMR, supporting the SRF component of the Evaluation process.

Mr Hanby was cross-examined only in respect of his involvement in, and knowledge of, the process of identifying SRFs. His evidence in response to this cross-examination appeared to me to be clear and consistent, albeit that it is for the most part no longer relevant. I have no hesitation in concluding that he was doing his best to assist the Court.

Mr Tuchner provided two witness statements for the trial. Since November 2017, he has been the Director of the National Lottery Promotions Unit (“the NLPU”), an organisation which raises public awareness of the Good Causes that the National Lottery funds. In this role he interacts with the operator of the National Lottery “almost on a daily basis”. Mr Tuchner acted as lead Evaluator during the Competition in the Branding Business Plan Area, and, during that time, he temporarily stood down from his role as Director of the NLPU.

Mr Tuchner was cross-examined solely on the issue of conflict of interest. He appeared to me to be an entirely straightforward witness who was doing his best to assist the Court. The issue which concerned him fell away during closing submissions.

Mr Reid provided two statements in the trial. He carried out various consulting roles between 2020 and 2022, including for the Commission. During the Competition, he acted as an Evaluator in relation to Operations (Operating Model), a Business Plan Area and PPF.

Mr Reid was a straightforward witness who was plainly doing his best to assist the Court.

Ms Pugh-Stanley provided one witness statement for the trial. Since March 2019 she has been an Anti-Money Laundering Manager at the Commission. Ms Pugh-Stanley acted as an Evaluator in respect of Propriety during the Competition.

Although slightly non-plussed by the questions posed in cross-examination, I formed the view that Ms Pugh-Stanley was plainly trying her best to assist the Court.

In addition, the Commission relies upon:

Falling into the first category were statements from:

Falling into the second category were statements from:

The IPs called three witnesses to be cross-examined at trial. Two of those witnesses (Mr Kleinhampl and Mr Dlouhý) were provided with the assistance of an interpreter as a precautionary measure. However, their English was fluent and they did not need to resort to her assistance. As I have mentioned, the IPs also relied on the unchallenged evidence of Mr Harry Willits, who was not required for cross-examination at trial.

Mr Kleinhampl provided two witness statements for trial. He also relied upon a witness statement provided by him in connection with the Camelot and IGT Proceedings. He is Investment Director at Allwyn Services Czech Republic a.s., which is a subsidiary of the Second Interested Party. Mr Kleinhampl was a member of Allwyn’s Competition bid team between the end of 2018 and 2021, focusing on the financial part of Allwyn’s bid. He reported to Mr Alastair Ruxton. After that he worked nearly full time on post-bid management and implementation of Allwyn’s bid until June 2023 (serving as interim Chief Financial Officer for AEL between January and June 2023).

With the exception of his evidence about the difficulties encountered by Allwyn in the period prior to entering into the Fourth Licence (which is not challenged), very little of Mr Kleinhampl’s evidence remains relevant to the outstanding issues at trial.

Mr Dlouhý provided one witness statement for trial. He also relied upon a witness statement provided by him in connection with the Camelot and IGT Proceedings. Since 2016 he has been the Chief Investment Officer of Allwyn, where he is responsible for its investments and strategic development.

I formed the view that Mr Dlouhý was a straightforward witness who was at all times doing his best to assist the Court.

Mr Ruxton made two witness statements for the trial. He was employed by Sazka Group UK Limited in June 2020 to act as Allwyn’s Bid Director, with responsibility for the overall project management of the bid. In that role he had regular contact with Mr Wilson and Mr Tanner at the Commission. Following the Outcome Notification on 15 March 2022 he became the Corporate Services Director in April 2022.

Once again, with the exception of his evidence about the difficulties encountered by Allwyn in the period prior to entering into the Fourth Licence (which is not challenged), very little of Mr Ruxton’s evidence remains relevant to the outstanding issues following the trial.

Owing to the time that has passed since the Competition and the complexity of the evaluation process, both the Claimants and the IPs suggested that the Court should have regard to the well-known guidance in Gestmin SGPS SA v Credit Suisse (UK) Ltd [2020] 1 CLC 428 (Comm) per Leggatt J (as he then was) who made various observations as to the fallibility of human recollection, before concluding at [22] that:

Although none of the parties referred to it, the Court of Appeal considered this question again in Martin v Kogan [2020] FSR 3. Given the slightly more nuanced approach taken by the Court of Appeal, it is important that I set out what Floyd LJ said at [88]:

The present case is not a commercial case involving abundant documentation, but it is a case in which the relevant documents are of the utmost importance. The best evidence of an applicant’s bid is inevitably to be found in its Application document. The best evidence of the consensus reasons for the Evaluators’ decisions at moderation are the Moderation Notes. In this regard I agree with the observations of Fraser J in Bechtel at [138] to the effect that:

As mentioned above, the Court has of course heard evidence from a number of Evaluators who have been cross-examined at length by the Claimants. I reject a submission made by the Claimants in closing to the effect that if, during his or her oral evidence, an Evaluator was unable to give any explanation of what was meant by a particular finding in the Moderation Notes that “does lend itself to an error having been made”. In my judgment, to conclude as much would be to fall into an error similar to that identified by Leggatt J in the final sentence of the citation from Gestmin to which I refer above. It is no more a fallacy to suppose that the recollection of a confident and apparently truthful witness is necessarily reliable than to suppose that because a witness is confused or has forgotten events which occurred some time ago, a manifest error must have been made. Confusion or lack of recall as to the reasoning of the Evaluators might of course be relevant to that question, but it is most unlikely to provide a complete answer. I note that the Claimants appeared to accept in their written submissions that it is in fact unsurprising that the Evaluators did not have a clear recollection of events “given the complex and technical nature of the areas which they evaluated and the fact that the moderations took place approximately 4 years ago”. I agree. The Claimants did not explain how this acknowledgement could be squared with the submission I refer to at the beginning of this paragraph.

When considering the evidence relating to the issues in this case, it seems to me that I must evaluate the entirety of the available evidence, testing the witness evidence against contemporaneous documents and looking carefully at the context in which the witness gave that evidence – which might (if appropriate) include the nature of the questions posed in cross-examination and the extent to which the witness was being asked to address hitherto unheralded issues for which he or she was not prepared. I do not read Gestmin as disapproving of such an approach and, to my mind, it is the only approach to be taken to a case of this sort, consistent with the guidance in Martin v Kogan.

By the end of closing submissions, the Claimants had accepted that to win the Process Claim they must now establish that (but for the alleged breaches by the Commission): (i) TNLC would have passed every one of the 12 Pass/Fail Areas in respect of which it was failed during the Competition; and (ii) that both Allwyn and Camelot would have been removed from the picture, either because they would each have failed in one or more Pass/Fail Areas, or because they would have been disqualified from the Competition. This is the inevitable consequence of the narrowing of the Claimants’ case to which I have referred above. If the Claimants fail to convince the Court of the existence of a manifest error in relation to only one of the ‘Fails’ in the 12 Pass/Fail Areas, then the Process Claim will fail. If the Claimants cannot establish that both Allwyn and Camelot should have been removed from the Competition then the Process Claim will fail. The Process Claim in its final form thus represents a very significant challenge for the Claimants.

No doubt for this reason, it was suggested in closing submissions by Mr Howard that the Claimants’ decision to lead with the Modifications Claim in oral closings was a tacit acknowledgement that their case now depends upon that claim. In circumstances where, however, the Process Claim remains live (albeit in a slimmed down form) and has been robustly argued by the Claimants in closing submissions, this is not a conclusion that it would be appropriate for me to draw absent proper analysis. I must look carefully at the Process Claim to see whether, notwithstanding the high hurdle they have to surmount, the Claimants have made out their case on the evidence at trial.

Against that background and in summary only, the remaining issues for the Court on the Process Claim are broadly:

There remain two live issues, albeit that it is difficult to understand where they fit in the context of the Process Claim and it is not suggested that they have any causal link to the Claimants’ claim for damages. Issues 25(b) and 26 are concerned with whether the Outcome Rationale identified weaknesses in TNLC’s Business Plan responses in 3 respects which were not highlighted in the Phase One Feedback and which amounted to breach of the Commission’s transparency obligations. I shall return to this in due course.

It is worth bearing in mind from the outset the background rationale for rules relating to public procurement. This was recently succinctly identified by Coulson LJ in Optima Health v Secretary of State for Work and Pensions [2025] EWCA Civ 127 at [59] and [60] (“Optima”), as follows:

It is common ground that:

Regulation 8(1) CCR 2016 sets out the core duties imposed on the conduct of concession contracts procurements:

Unlike the Public Contracts Regulations 2015 (“PCR 2015”) and the Utilities Contracts Regulations 2016 (“UCR 2016”), which set out prescribed procedures, the CCR 2016 (which implement Directive 2014/23/EU (“the Directive”) on the award of concession contracts) provide the contracting authority with more freedom to organise the procedure leading to the choice of the concessionaire. No separate issue on the Directive arises in this case following the UK’s departure from the European Union after Brexit and it is common ground that it may be considered where appropriate when construing the CCR 2016, which constitute retained law. I note that its recitals (at (1) and (68)) contemplate the need for “an adequate, balanced and flexible legal framework for the award of concessions” and recognise that because “[c]oncessions are usually long-term, complex arrangements where the concessionaire assumes responsibilities and risks traditionally borne by the contracting authorities…and normally falling within their remit”, contracting authorities “should be allowed considerable flexibility to define and organise the procedure leading to the choice of concessionaire” – always subject to compliance with the Directive and the principles of transparency and equal treatment.

This flexibility is reflected in Regulation 30 CCR 2016 which provides that:

Pursuant to Regulation 50 CCR 2016, a contracting authority owes a duty to an economic operator from the United Kingdom to comply with CCR 2016. A breach of such duty “is actionable by any economic operator which, in consequence, suffers, or risks suffering, loss or damage” (Regulation 52(1)). Proceedings for that purpose must be started in the High Court (Regulation 52(2)).

The Court’s role in a public procurement challenge of this type has been explained in a number of well-known cases, including BY Development Ltd v Covent Garden Market Authority [2012] 145 Con LR 102 (“BY Development”), per Coulson J (as he then was) at [8]-[11]; Willmott Dixon Partnership Ltd v Hammersmith & Fulham LBC (“Willmott Dixon”) [2014] EWHC 3191 (TCC) per Mr Recorder Acton Davis QC at [78]-[84] and [157]-[159]; Woods Building Services v Milton Keynes [2015] EWHC 2011 (TCC) (“Woods”) per Coulson J at [14]; Stagecoach East Midlands Trains Ltd v Secretary of State for Transport [2020] EWHC 1568 (TCC) (“Stagecoach”) per Stuart-Smith J (as he then was) at [62]-[65]; Bechtel at [13] and [19]-[25] and Siemens v HS2 [2023] EWHC 2768 (TCC) (“Siemens”) per O’Farrell J at [142]-[146].

The Court’s role is confined to review. It involves the exercise of what has sometimes been described as a ‘supervisory jurisdiction’; i.e. a jurisdiction to supervise the process undertaken by the contracting authority and to review whether proper procedures and the basic principles underlying the relevant Regulations have been respected. However, even this function is limited. The Court is reviewing the decision of the contracting authority solely to determine whether that decision is vitiated by a manifest error (i.e. an error that has clearly been made) or a misuse of powers, and to ensure that the contracting authority did not clearly exceed the bounds of its discretion. In other words, the Court is applying a test which is very similar to, if not the same as, the Wednesbury test of irrationality applicable in domestic judicial review proceedings (see Associated Provincial Picture Houses Ltd v Wednesbury Corp [1947] 2 ALL ER 680, [1948] 1 KB 223).

As the authorities make clear, in carrying out its role, the Court should not undertake a comprehensive review of the tender evaluation process, and neither should it substitute its own view as to the merits or otherwise of the rival bids for that already reached by the contracting authority. Aside from the fact that the Court is quite obviously poorly placed to do this (not having the institutional and practical competence and experience of the contracting authority), it would be wrong for it to trespass on the jurisdiction given by Parliament to the contracting authority to exercise a broad discretionary judgment as to the outcome of the public procurement process. It is inherent in the exercise of such an evaluative judgment that a range of reasonable views will usually be available. Absent a manifest error or other breach of the principles of fairness, equal treatment and transparency, it would be anomalous and contrary to the public interest if the Court could be persuaded by a losing tenderer, acting with the benefit of hindsight and following a process of forensic scrutiny which is only found in ‘heavy’ contested litigation, to re-evaluate the different bids and to adopt a different view or judgment from that taken by the authority. There is “no judicial remedy for subjective dissatisfaction at losing a procurement competition” (Bechtel at [258]).

It is for this reason that, as Fraser J observed in Bechtel at [25], a court faced with challenges to the contracting authority’s evaluative judgment will apply a “suitable recognition of the institutional competence” of those charged with the decision making process, paying appropriate regard to their margin of discretion in respect of matters falling within their subjective professional judgment. A manifest error will not be established merely because, on mature reflection with the benefit of hindsight, a different decision might have been arrived at.

It is also clear from the available authorities that a manifest error in the reasoning that contributed to a decision that is challenged or a score that is awarded does not necessarily mean that the decision or the score is itself manifestly erroneous. What must be demonstrated (the onus being on the disappointed tenderer) is that the decision that was made, or the score that was given, was in manifest error (see J Varney & Sons Waste Management Ltd v Hertfordshire County Council [2010] EWHC 1404 (QB) per Flaux J (as he then was) at [193]).

As to the meaning of “manifest error”, it is not necessary to import an additional requirement that the error must be “fundamental”, though “it must be of sufficient materiality to justify the Court’s intervention” (Stagecoach at [65])). In Lion Apparel [2007] EWHC 2179 (Ch) at [38], Morgan J said simply that “A case of manifest error is a case where an error has clearly been made”. In Gibraltar Gaming and Betting Association Ltd v Secretary of State for Culture, Media and Sport & Ors [2014] EWHC 3236 (Admin) at [100], Green J (as he then was) considered the meaning of the word ‘manifest’, observing, however, that definitions are “helpful only to a degree. What has to be ‘manifest’ is the inappropriateness of a measure”. An error will be manifest:

In Siemens (at [146]) the Court applied these legal principles and identified that the approach to be adopted in respect of the scoring challenge in that case was as follows:

I respectfully agree and will apply the same approach here.

In general terms, the purpose of the requirement for equal treatment is to ensure the development of effective competition leading to the selection of the best bid. As Coulson LJ observed in Optima at [61], the definition of equal treatment can be found in Fabricom SA v Belgian State (Case C-2103) (“Fabricom”) [2005] ECR i/1559:

Although the Claimants’ position in opening appeared to be that the principle of equal treatment was strict and involved no margin of discretion, they had significantly softened their stance by the time of closing. Indeed I now understand it to be common ground that the principle of equal treatment is not hard edged and that the two-stage framework identified in Fabricom (of comparability on the one hand and objective justification on the other) attracts, at each stage, a significant margin of discretion (see R (Rotherham Metropolitan Borough Council) v Secretary of State for Business Innovation and Skills [2015] UKSC 6 (“Rotherham”) per Lord Sumption at [25]-[27])).

Lord Sumption pointed out in these passages that the two limbs of the framework “will often overlap” and he cited with approval Lord Hoffmann’s observation in R (Carson) v Secretary of State for Work and Pensions [2006] 1 AC 173 to the effect that dividing the reasoning into two stages is “artificial” and that “[t]here is a single question: is there enough of a relevant difference between X and Y to justify different treatment?”. At [28], Lord Sumption observed that the answer to this question, on the facts of that case (where the relevant regulation called for a complex policy judgment based on a broad range of factors), “may ultimately be one for the court, but the nature of the question requires a particularly wide margin of judgment to be allowed to the decision maker”. However, the extent of the margin of appreciation will always depend on the particular circumstances of the individual case, or, as the Claimants put it, the particular context of each allegation (see Ryhurst Limited v Whittington Health NHS Trust [2020] EWHC 448 (TCC) (“Ryhurst”) per HHJ Stephen Davis sitting as a High Court Judge at [41]). In this case the Commission contends, and I agree, that it has a wide margin of appreciation on matters of equal treatment given (a) the complexity of the Competition and (b) the wide range of relevant factors and interests involved.

The need for flexibility in this context was explained in Optima at [62] as follows:

It is only once a failure to confer equal treatment has been established (whether because the difference in treatment falls outside the margin of discretion or is considered to be ‘arbitrary or excessive’ (see Stagecoach at [26])) that the contracting authority has no further margin of appreciation.

The principle of equal treatment cannot be relied upon to found complaints which seek to compare the contracting authority’s treatment on one aspect of an unsuccessful tenderer’s response with its treatment of an entirely different area of other tenderers’ responses. It does not “embrace an analytical exercise based on wholly different parts of the tender from those on which the claim is founded” (see R (Hersi & Co Solicitors) v Lord Chancellor [2018] PTSR 850 (“Hersi”) per Coulson J at [110]-[117]).

The equal treatment principle (including non-discrimination and transparency) requires the contracting authority to act in the evaluation in accordance with the published terms of its decision-making procedure for assessing bids (see Energysolutions EU Ltd v Nuclear Decommissioning Authority [2016] EWHC 1988 (TCC) per Fraser J at [255]). The contracting authority may not subsequently change one of the essential conditions for the award if it may have enabled tenderers to submit a substantially different tender (see Stagecoach at [28]).

Although a freestanding obligation in itself, transparency is the inevitable corollary of the principle of equal treatment because it is transparency which enables compliance with the principle of equal treatment to be verified (Bechtel at [305]). For tenderers to apply on an equal footing they must be in a position of equality both when they formulate their tenders and when those tenders are being assessed. This requires clarity in advance over what they must and must not do in providing a compliant bid. As Coulson LJ observed in Optima at [61]:

As I have already mentioned, to facilitate a determination of whether the invitation to tender is sufficiently clear to enable tenderers to interpret it in the same way, so ensuring equality of treatment, the Court applies the yardstick of the reasonably well informed and normally diligent tenderer (“the RWIND tenderer”), as explained in detail by the Supreme Court in Healthcare at Home. This is an objective standard which does not depend on evidence of the actual or subjective ability of particular tenderers to interpret award criteria in a uniform manner.

Describing this principle in Optima Coulson LJ said this at [33]:

The award criteria and their weightings are key factors which the contracting authority will take into account when evaluating the bids and which must therefore be clearly and unequivocally disclosed to tenderers. However, it is not necessary for every consideration that may be taken into account by the contracting authority when evaluating tenders to be spelled out in advance. The principle of transparency only requires a contracting authority to provide such information as is required “to ensure that the basic principles, of equality (and non-discrimination) and transparency, are not infringed” (see J Varney & Sons Waste Management Ltd v Hertfordshire County Council [2011] LGR 770 per Stanley Burnton LJ at [49]-[50] and Willmott Dixon at [140]: “…it is clearly unnecessary for a contracting authority to spell out anything and everything which will improve a bid if it is included, and will lose credit if it is omitted”).

In eVigilo ECLI:EU:C:2015: 166, the CJEU emphasised (at [56]) that in considering whether there has been any breach of transparency, an important consideration will be whether the bidder sought clarification.

I did not understand it to be controversial that the principle of proportionality requires that measures adopted by contracting authorities or utilities “do not exceed the limits of what is appropriate and necessary in order to attain the objectives legitimately pursued” and that, “where there is a choice between several appropriate measures, recourse must be had to the least onerous” (Case T-195/08 Antwerpse Bouwerken v Commission [2009] at [57]). The Court recognised in Bechtel (at [312]-[313]) that one of the purposes of proportionality is to balance (and help limit) procedural burdens. The principle is not hard edged and includes a margin of discretion, the degree of that margin depending, as in the case of the equal treatment obligation, on the nature of the decision in question (see Ryhurst at [46]-[49]).

In MLS (Overseas) Ltd v The Secretary of State for Defence [2017] EWHC 3389 (TCC), at [64]-[80], O’Farrell J explained that an authority will only be entitled to disqualify a tenderer for non-compliance with a tender rule if the authority has clearly and unequivocally stated the rule and explained that disqualification will be the consequence of non-compliance (and has made expressly clear whether disqualification will be mandatory or discretionary).

Although, as I have explained above when dealing with the Issues, these allegations are intended to be supportive of the allegations of manifest error in relation to the Pass/Fail Areas, they arise in respect of factual events which fall before the Evaluations as a matter of chronology. It was for this reason that the Claimants addressed them first in their written closing submissions on the Process Claim and I shall adopt the same approach. In doing so, however, I note that, in closing, there was some degree of overlap in the parties’ submissions between the topics of undisclosed criteria, inadequate feedback and manifest error. I have endeavoured to keep them separate, but it is inevitable that I shall have to cross-refer to findings made on one topic when dealing with another.

The vast majority of the issues arising under this heading concern TNLC’s Application in relation to PPI. In looking at these issues, it is worth starting with the criteria that the ITA required an Applicant to demonstrate if it was to be awarded a ‘Pass’ for PPI. Relevantly, these included (at 8.2):

The Introduction to the Process at section 5.1 of the ITA explained the two phase process that would be followed by the Commission in the Competition and stated that Applicants would be provided with feedback after Phase One in relation to their Phase One Applications “so that they may have the opportunity to address any weaknesses, omissions, ambiguities or risks in their proposals before submitting their Phase Two Applications”. Under the heading “written feedback”, section 5.3.4 said this:

The Commission provided all applicants with Phase One Feedback. TNLC’s feedback was provided on 16 July 2021 and covered the Pass/Fail Areas and the Business Plan Areas. It was provided under cover of a letter which confirmed that the Commission had “focussed on identifying any specific or material weaknesses, omissions, ambiguities or risks relating to Applications and highlighted where an aspect of any Applicant’s response might result in a ‘Fail’ at Phase Two”. The letter pointed out (amongst other things) that:

and

TNLC’s feedback (including the covering letter) ran to 96 pages of detailed feedback. It was summarised at a high level in the letter as follows:

TNLC’s complaints in relation to the Phase One Feedback fall within two main categories:

A preliminary issue arising between the parties is the scope of the Commission’s commitment in respect of the provision of feedback at Phase One. The Claimants contend that the RWIND tenderer would understand from the wording of section 5.3 of the ITA (“will highlight”) that the Commission was committing to provide feedback on any weakness, omission, ambiguity or risk which might result in a Fail at Phase Two. They contend that the threshold was deliberately set low and the parameters set wide for the circumstances in which feedback would be provided and the issues and matters that the feedback would cover. In oral closing, the Claimants accepted that section 5.3 would not be read by the RWIND tenderer as requiring the Commission to set out every weakness in the Phase One Feedback, rather it would be read as confirming a responsibility to provide feedback on any material matter that might lead to a Fail.

The Commission says that it was clear from the covering letter that the feedback was not exhaustive. I agree. Section 5.3.4 of the ITA does not state that every single point that might be considered to be a weakness or criticism at Phase Two would be set out in the feedback at Phase One. Looking at the covering letter and the ITA together, I consider that the RWIND tenderer would have understood the Commission’s role under section 5.3.4 to involve highlighting (where possible given the information provided by the Applicant) “an aspect” of a response which might result in a Fail at Phase Two, but that it would not have considered the reference to “an aspect” to cover every last detail at any level of granularity that might be viewed as a weakness. I agree with the Commission that, although the Phase One Feedback was a crucial element of the process, the RWIND tenderer would not therefore have considered the Commission’s task to be unduly onerous or to require it to identify every last point in an Application that could be considered a weakness.

Nevertheless I agree with the Claimants that the RWIND tenderer would have expected to be told of any material weakness on an aspect of an Application that might result in a Fail at Phase Two (always assuming the Application to include sufficient detail to enable the weakness to be identified), and that it would expect that weakness to be clear from the substance of the Phase One Feedback. I also agree with the Claimants that this interpretation of the scope of the Phase One Feedback is consistent with the need for transparency and fairness (cf. Clinton (t/a Oriel Training Services) v Department for Employment and Learning [2012] NICA 48 at [35]), particularly where an aspect of an Application might lead to a bidder being removed from the Competition (which a fail in one of the Pass/Fail Areas had the effect of doing).

Mr Wilson’s evidence at trial was consistent with this. When asked what the Commission meant when it said that the feedback would not be “exhaustive”, Mr Wilson said this:

I consider this approach to reflect the observation of Fraser J in Bechtel at [280] (albeit in a slightly different context) to the effect that it is not necessary “to impose a counsel of perfection upon contracting authorities” of a type that the Regulations do not require. In closing, the Claimants submitted that they were not seeking to impose a counsel of perfection in the sense that they accepted that every last detail did not need to be identified by the Commission. In my judgment, however, as I shall go on to explain, it is clear from careful analysis that the imposition of a counsel of perfection is exactly the approach that the Claimants are in fact inviting the Court to adopt.

Before I turn to consider the very specific individual complaints raised by the Claimants, I observe that, overall, the Commission provided TNLC with very substantial feedback. In relation to PPI, the covering letter identified a number of headline concerns including a lack of detail and supporting information in respect of TNLC’s approach to managing underage and excessive play. The Commission also pointed out the lack of a clear baseline by which TNLC would continue to measure compliance with its Participant Protection Strategy and the success of its ability to discourage excessive play. The feedback itself, provided in tabular form, set out detailed comments by reference to “Related Evaluation Sub-Criteria” in relation to both PPI and Financial Strength.

Against that background, it is in my judgment unsurprising that Mr Mills accepted in cross-examination that TNLC had been given “an enormous amount of material” and “considerable feedback”, that such feedback included “quite a lot” of statements that the Phase One response lacked detail and supporting information and that TNLC knew that it had “[t]ons to do” and that it “hadn’t done enough on Phase 1”. Mr Mills’ immediate response upon receipt of the Phase One Feedback in an email of 16 July 2021 was that “on the surface it looks fairly grim”, while TNLC’s bid director, Mr Walker, expressed the view in an email of the same date that “there are numerous areas we need to significantly improve during Phase 2”. He described some of those areas as “alarming”. In an email of 22 July 2021, Ms Wendy Lawrence (said by Mr Mills to be an important plank of the TNLC bid team), described the “collective view” of the bid team in the following terms: “the GC have given us clear feedback that we have pushed that from credible into incredible territory, and that we are in danger, not only of not winning, but of failing to meet the minimum criteria”.

In relation specifically to Financial Strength, and in addition to the high level summary referred to above, the covering letter to the feedback identified at the outset that TNLC’s funding package was still “in development” and that therefore, a lack of detail in the response made it impossible “to assess if the Applicant would fully meet the requirements of Financial Strength at Phase Two, both in terms of the providers of finance and the composition of the funding package”. It went on to identify a variety of areas which were not covered by TNLC’s response. I did not understand the incomplete nature of TNLC’s Application in this regard to be in dispute. Mr Martin confirmed in his statement that the funding package was “not materially complete” at the end of Phase One and that it was “still in development”, while Mr Mills explained in his statement that the Phase One submissions “did not cover every area that we knew would need to be covered in Phase 2”, identifying “the technology area” as an example.

Instead of submitting “a full form response” at Phase One (as required by the ITA at 5.1), TNLC made a positive decision not to provide detail on every aspect of its Application. In so doing, it appears to me that it forfeited the right to complain about an absence of detailed feedback in areas where its own Application lacked material detail. Mr Mills accepted in cross-examination that the Commission couldn’t give feedback on proposals that it had not yet seen.

The Claimants’ specific complaints are set out in one paragraph of their PoC, as follows:

In broad terms, the Commission contends that these points of detail have been cherry-picked, that they cannot possibly be relied upon to show that the Phase One Feedback was so deficient as to be unlawful and that where TNLC does not challenge every single reason for its failure on PPI, it is unclear in any event how these isolated points advance TNLC’s claim. As to the latter point, the answer appears to be that the Claimants say that the alleged lack of appropriate Phase One Feedback, when combined with specific points made as to manifest error, should have resulted in a Pass in respect of both PPI and Financial Strength because if the Phase One Feedback had been provided, TNLC would have taken it into account, thereby strengthening its Application.

The parties have distilled the Claimants’ pleaded case into six separate issues which I shall now address in turn.

Although the first issue identified on this topic is said simply to be PPI, there is no separate allegation pleaded in respect of PPI, beyond those listed in the paragraph referred to above (all of which form individual issues). There is no basis whatever for any general finding that Phase One Feedback on PPI was generally deficient, and I did not understand the Claimants to suggest during closing submissions that I should treat this issue as a ‘stand-alone’ point. Accordingly, I can move straight to the substantive complaints raised.

A requirement of Question 4 at section 22.3 of the ITA was the provision of a Participant Protection Strategy (“PPS”) which was:

One of the reasons given by the Commission for failing TNLC on PPI in the Detailed Rationale was that its Application “does not adequately demonstrate a joined up and cohesive Participant Protection Strategy as required by Q4 in the ITA”. This related to the Third PPI Criterion.

There was some debate at trial over what the words “joined up and cohesive” would mean to the RWIND tenderer. In my judgment they would have their ordinary meaning: namely that all elements of an applicant’s PPS must work together effectively in a consistent and complimentary way.

TNLC’s Phase One Feedback in relation to PPI Question 4 refers on numerous occasions over 5 ½ pages to a lack of detail, a lack of clarity, and a failure to provide supporting information. Other feedback includes: a failure to provide the rationale for a specific proposal; inconsistency in the response; a failure to identify relevant policies and procedures; issues which TNLC does not appear to have considered; an issue which is underdeveloped; a failure to acknowledge the requirements of the Licence Conditions; and a failure to provide a clear baseline by which to measure compliance with TNLC’s PPS.

It is common ground that there is no reference in the Phase One Feedback to the lack of “a joined up, cohesive strategy”. However, in my judgment, the scope and extent of this feedback is quite plainly indicative of the absence of such a strategy. I reject TNLC’s submission that the only message being conveyed by the feedback (when considered as a whole) was a message about a lack of detail – that was a significant message, but it was very far from being the only message. Mr Wilson said as much in his written evidence, which was then tested in cross examination. Specifically, it was put to him that the absence of a joined up, cohesive approach needed to be spelt out if that was a criticism that might be made at Phase Two. Mr Wilson’s response, with which I agree, was “I don’t think so. That was apparent from the rest of the comments made in the feedback”.

To my mind one cannot view the Phase One Feedback in isolation (focusing as TNLC does on the absence of the express words “joined up, cohesive strategy”) without bearing in mind the knowledge and understanding of its recipient. TNLC was familiar with the requirement that it should present a joined up, cohesive strategy, as Mr Mills acknowledged in cross-examination. Furthermore, it was clear from his oral evidence that the real issue for TNLC was not a failure expressly to refer to a joined up and cohesive strategy but rather a fundamental disagreement with the Commission over whether TNLC’s proposals in fact amounted to a joined up and cohesive strategy. This much is clearly illustrated by the following exchanges in his cross examination:

TNLC relies heavily upon Mr Mills’ evidence in his statement to the effect that if TNLC had been given express feedback as to the lack of a joined up and cohesive strategy such feedback “would of course have been taken into careful account in preparing the Phase 2 submissions” and TNLC would likely have sought clarification from the Commission about exactly what was meant by that criticism. However, I agree with the Commission’s submissions on this point. TNLC knew perfectly well that it needed to provide a joined up and cohesive strategy and the absence of an express statement to that effect in the Phase One Feedback can have made no difference. In any event it was obvious from that feedback that the Commission did not view TNLC’s strategy as joined up and cohesive. TNLC disagreed with that feedback, as Mr Mills confirmed. In the circumstances, I do not consider Mr Mills’ evidence (that if TNLC had had such feedback it would have done something different) to be reliable and I reject that evidence.

In my judgment the allegation of inadequate feedback in respect of the lack of a joined up, cohesive strategy fails. There was in fact no deficiency in the feedback given. To find it deficient merely because the words “joined up, cohesive strategy” are not used would indeed be to require a counsel of perfection. In any event, even if the Phase One Feedback was deficient in not expressly referring to a joined up and cohesive strategy, TNLC was not prejudiced at Phase Two. It knew it needed to provide a joined up cohesive strategy and it considered that it had done so. The addition of those specific words in the Phase One Feedback would have made no difference.

In their closing submissions on this issue, the Claimants submitted that no definition, guidance or training had been provided to the Commission’s Evaluators on the concept of a “joined up and cohesive approach” and that, in the circumstances, the Commission’s Evaluators had no clear understanding of what was meant by it. This point appears to be of more relevance to the allegations of manifest error, but in any event I reject it. In my judgment, the concept of a “joined up and cohesive approach” is readily explicable and comprehensible without training or guidance. The Claimants have not established that it is a concept that was not understood by Evaluators, or indeed that it would not be well understood by the RWIND tenderer. I certainly do not agree that it would be safe to infer a lack of understanding purely because the Phase One Feedback did not expressly refer to the lack of a joined up and cohesive strategy (as I am invited to do by the Claimants).

The First PPI Criterion required the applicant to satisfy the Commission “that the Proposed Licensee will do everything it can to ensure that the interests of every Participant in the National Lottery are protected”.

One of the reasons given by the Commission for failing TNLC on PPI in the Detailed Rationale was that its PPS “does not adequately demonstrate how its proposed measures will ensure that the interests of every Participant of the National Lottery are protected” (emphasis added). Mr Wilson accepted at trial that this was a standalone reason for failure.

TNLC makes the point that the requirement is to “do everything it can to ensure”, but that there is no requirement to demonstrate in response to Question 4 on PPI how an applicant’s proposed measures “will ensure” the protection of the interests of every participant in the National Lottery.

Pausing there – this is a somewhat semantic point which (perhaps unsurprisingly) it took Mr Wilson a little while to grasp in cross examination. However, having understood the point, he accepted that there was “a subtle difference” between the wording in the ITA and the wording used in the Detailed Rationale, namely that the relevant criterion required evidence of a strategy designed to achieve a particular outcome, whereas the criticism in the Detailed Rationale was (as he put it) “a criticism about outputs”. It was then put to him that the difference in the wording meant that there could have been no feedback on the specific point being made in the Detailed Rationale at Phase One:

The cross-examination then moved on to a different topic and Mr Wilson was not challenged on this evidence, which I accept. Looking at the Phase One Feedback, it is abundantly clear that the Commission was concerned about numerous deficiencies in TNLC’s response which together meant that there was a need for TNLC to provide a great deal more detail at Phase Two if it was to satisfy the requirement that it had done everything it could to protect the interests of participants. That the Detailed Rationale uses language which does not exactly track the words of the relevant criterion is not a reason to find that there was an absence of feedback or that TNLC would have done anything different. In closing TNLC asserted that “[h]ad this feedback been provided, the evidence demonstrates that TNLC would have taken it into account and passed in respect of this point”, but it provided no references to any such evidence and I reject this submission. Mr Mills’ evidence in his witness statement certainly does not descend into detail about how this would have been achieved.

There is nothing in TNLC’s case on this issue and in my judgment this allegation fails.

The Fourth PPI Criterion is relevant to this allegation. Further, Section 11.2.1 of the ITA identified as a requirement in connection with PPI that:

Best Practice was defined at 3.2 of the ITA and in Condition 4.3 of the Fourth Licence by reference to the standard to be expected of an experienced and professional person:

Conditions 4.4-4.5 of the Fourth Licence went on to say this:

In the Detailed Rationale, the Commission identified that TNLC’s PPI Question 4 response “does not adequately demonstrate how its proposed approach to preventing underage play and not encouraging excessive play would align with Best Practice (Licence Condition 4.3)”.

As pleaded, the Claimants’ complaint appears to be that there was a failure to provide feedback to the effect that the Claimants’ Phase One Application did not comply with Best Practice. There are no particulars in the pleading going beyond this bald assertion and no attempt to link it to anything specific. As a general assertion it is manifestly incorrect; as Mr Wilson says in his statement, the Phase One Feedback makes “multiple references to Best Practice”.

The Phase One Feedback on PPI expressly says that:

As articulated in closing and as put to the Commission’s witnesses, the Claimants’ real complaint appears to be both narrow and unpleaded. They complain that in relation specifically to excessive play, the Phase One Feedback made no reference to Best Practice. Setting aside the pleading point for a moment, it is certainly the case that, as Mr Wilson frankly acknowledged in cross-examination, the section of the Phase One Feedback dealing with “[n]ot encouraging excessive play” makes no direct reference to Best Practice (although there is such a reference in relation to underage play). However, as Mr Wilson also pointed out, that section includes “a considerable amount of feedback” on the weaknesses in TNLC’s Application on this topic, including numerous references to a failure to provide “substantive detail” or “supporting information”. I tend to the view that it is (again) a counsel of perfection to require the Commission to provide feedback on alignment with Best Practice when wholly inadequate information has been provided as to TNLC’s approach to reducing excessive play – a rather more fundamental problem.

In any event, it is clear from Mr Mills’ evidence that TNLC well knew that its responses on all aspects of PPI needed to align with Best Practice, that TNLC had “determined to adopt a professional approach” and that it appreciated that the relevant codes of practice were “complicated and we had to be on top of them”. Mr Mills accepted in cross-examination that TNLC knew that it had to provide more detail generally of the Best Practice that it said applied and that a casual reference to Best Practice was not enough: “you had to explain what was in the codes of practice”. This is also clear from a contemporaneous email sent by Mr Mills to his team on 4 August 2021:

In my judgment, this narrow point on which the Claimants now rely should have been pleaded if it was to be advanced. However, even if it had been pleaded, I do not consider that it would have been successful. While there was no reference to Best Practice in connection with excessive play in the Phase One Feedback, TNLC’s Application lacked relevant detail. Further and in any event, TNLC knew of the importance of showing that all aspects of its PPI response aligned with Best Practice and that the feedback was not exhaustive. There is no basis whatever for the suggestion in the Claimants’ closing that if a reference to Best Practice had been made in connection with the Commission’s feedback on excessive play “TNLC would have incorporated it and passed in respect of this point”. I was not given any evidence reference in support of this proposition, and I note that Mr Mills’ evidence in his witness statement certainly does not go this far.

I reject the Claimants’ case on this issue.

The Detailed Rationale stated that in respect of TNLC’s Phase Two Question 4 response:

The Commission accepts that feedback to this effect was not given in the Phase One Feedback on PPI, but it makes two points. First it says (by reference to the evidence of Mr Wilson) that TNLC was told in the Phase One Feedback that it needed to provide more detail about the risks associated with its proposed marketing affiliate in the feedback given in respect of TNLC’s response to Channels (Question 11) and Portfolio (Question 13). Specifically it was told that key commercial risks and mitigations under Question 11 included that:

and that its response under Question 13 on the mix of games that it was proposing:

In oral closing, the Commission pointed to the Sixth PPI Criterion and submitted that this made it clear that the overall Business Plan and ITA submission had to be aligned with any response in respect of PPI. Further the Commission observes that the feedback on which the Claimants rely expressly refers to the answer to Question 11.

Mr Wilson fairly accepted in cross-examination that TNLC could not have been expected to appreciate from the feedback in respect of Question 4 that a criticism was being made in similar terms to the criticism subsequently set out in the Detailed Rationale (namely over the use of a marketing affiliate in the context of PPI). However, as the Commission correctly points out, the criticism in the Detailed Rationale expressly referred to TNLC’s answer to Question 11 (in respect of which Phase One Feedback as to the lack of detail in respect of the use of affiliates had been provided).

Second, the Commission says that, as Mr Wilson explained, the Commission provided as much feedback as was possible in the circumstances given that TNLC’s marketing affiliate proposal lacked detail such that the ability of the Evaluators to provide more detailed feedback was affected. Specifically, Mr Wilson observed in his evidence that the feedback under Question 13 highlights “that there was a lack of detail in this area which would have affected the evaluator’s ability to highlight any deficiencies at Phase 1”. I accept this evidence.

I reject the Claimants’ case on this issue. In my judgment Phase One Feedback on the use of affiliates was provided to TNLC under Questions 11 and 13. The Sixth PPI Criterion informed Applicants that Evaluators would be looking across the entirety of the Business Plan and the Application in respect of compliance with the requirements of PPI. The Detailed Rationale mentioned a failure under Question 4 but expressly tied it to TNLC’s response to Question 11. I can see no genuine basis for any complaint on the part of the Claimants that inadequate feedback was provided.

This allegation arises in respect of Question 9 of the ITA pursuant to which the applicant was required to “demonstrate the financial standing of [its] supply chain and describe how [it] will ensure that supply chain disruption risks are minimised during the Fourth Licence Term”.

An applicant’s response to this question was required to include: “[t]he processes, procedures and controls in place for each Key Subcontractor to ensure that they are sufficiently financially resilient in the event of supply chain disruptions…”. The ITA went on to state that:

TNLC’s Phase One Feedback stated (both in the covering letter and, later, under Question 9) that “[t]he Applicant’s response does not clearly describe the Applicant’s processes, procedures and controls associated with assessing and monitoring the financial strength of its supply chain”.

A reason provided by the Commission in the Detailed Rationale for TNLC’s “Fail” in respect of Financial Strength was that:

As became apparent during the cross-examination of Mr Wilson, the Claimants’ point on this was another semantic one. They contend that there is a difference between the Phase One Feedback which focused on the need to “describe” the relevant processes, procedures and controls and the Detailed Rationale which points out a failure “to demonstrate” how processes, procedures and controls would be used. However, this case appears to me to be unsustainable on the evidence.

The following exchange took place between Mr Suterwalla and Mr Wilson during cross-examination:

I accept Mr Wilson’s evidence on this. TNLC was told in the Phase One feedback that it needed “to describe” (or provide more detail/information) in relation to processes, procedures and controls. In circumstances where TNLC’s response on Financial Strength was underdeveloped and it had not sufficiently described its proposed processes, procedures and controls, it is very difficult to see (as Mr Wilson says) that any more detailed feedback could or should have been given. I reject the suggestion that the Commission should or could have provided feedback on processes, procedures and controls which had not yet been properly articulated by TNLC.

In their written closing submissions the Claimants sought to run an entirely new case to the effect that the Phase One Feedback omitted to refer to a failure to demonstrate TNLC’s “organisation structure” (a point raised in the Detailed Rationale to the effect that “[w]hile the Applicant sets out its general approach to managing supply chain risk, it has not adequately described its procurement policy, procedures and associated organisation structure”).

However, although this case was said in closing to be “more significant” than the Claimants’ original case on this issue, it was not put to Mr Wilson and it is not pleaded. It appears to have arisen out of answers given by Ms Severne in her cross-examination. Absent any prior warning of this case or any attempt to seek to amend to plead this new case, I do not consider it fair or just to permit the Claimants to advance it. In any event, it is again very difficult to see how TNLC could expect detailed feedback covering all possible grounds ultimately relied upon at Phase Two to support a “Fail” in circumstances where its Application on Financial Strength was underdeveloped at Phase One.

The Claimants’ case on this issue fails.

The Claimants contend that the Detailed Rationale identified weaknesses in TNLC’s Business Plan responses which were not highlighted in the Phase One Feedback. However, as I understood their submissions in closing, the only continuing relevance of this allegation is that the Claimants wish to rely upon it in the Modifications Claim in support of their argument that they would have taken steps to improve their bid in a counterfactual 5NLC and that there was a real chance that they would have won a 5NLC. Mr Toledano submitted that although the “feedback points” in relation to the Business Plan Areas “won’t make up the gap” nevertheless “that doesn’t mean that they don’t close some of the gap” and in that case “the gap in its entirety is not a reliable starting point for 5NL”.

The problem for the Claimants with this approach is that there has been no attempt to plead such a case in connection with the Modifications Claim and I cannot see how, on ordinary pleading principles, it would be appropriate for me to permit the Claimants to advance a completely unpleaded case in that, entirely separate, claim. Even if I am wrong about that and ought to consider the point because it has been pleaded and argued in connection with the Process Claim, I consider there to be nothing whatever in this allegation.

First, this is because the Claimants only criticise a very small proportion of the reasons given by the Commission for TNLC’s low scores on the Business Plan Areas. They do not make out any case as to what TNLC’s scores would have been had they been given the feedback they say should have been given and nor do they provide any assistance as to how the Court could legitimately conclude that “the gap” could or would have been narrowed for the purposes of a 5NLC to any particular extent. The Claimants’ case on this (which is put no higher than that success on these allegations would “suggest” that the gap could have been narrowed in a 5NLC) simply does not go far enough.

Second, on the available evidence, there is nothing in the Claimants’ complaints in any event; as I explain below, I consider that appropriate feedback was provided in respect of each of the areas in which complaint is made and that the various points raised by the Claimants were, or should have been, well understood by TNLC.

I turn then to consider the three complaints pursued by the Claimants.

One of the reasons given in the Detailed Rationale justifying TNLC’s mark of 9 out of 15 for its Question 13 Portfolio Business Plan Area response was that it had not considered “the potential effects of cannibalisation across the entirety of its portfolio”. The term cannibalisation is used in connection with lotteries to refer to the effect of the introduction of a new game on an existing game: players move to the new game, thereby reducing the number of players continuing to play the original game.

The Claimants accept that the Phase One Feedback identified that TNLC had provided only “limited analysis of cannibalisation effects”, but they say that, in context, this was a reference only to cannibalisation in connection with the introduction of Powerball, EuroMillions and EuroMillions Multiplier. It was not, they say, a reference to the need for TNLC to consider cannibalisation across the entire portfolio of its proposed games. Their pleaded case is to the effect that the Phase One Feedback should have highlighted this weakness across the entire portfolio. This is supported by evidence from Mr Mills to the effect that he did not understand the Phase One Feedback to apply to the entirety of the portfolio.

I reject this case for the following main reasons:

One of the reasons why TNLC received a mark of 9 out of 15 for its Channels Business Plan Area response was that the Commission concluded in the Detailed Rationale that TNLC had not adequately demonstrated “how the Lottery Extras Scheme would work e.g. the mechanics of redeeming rewards”. The Claimants’ pleaded case is that the Phase One Feedback failed to highlight this specific issue.

I reject that case, not least because the Claimants made no attempt to make any submissions on the pleaded point in closing. None of their witnesses gave any evidence as to why the feedback provided was deficient.

As Mr Wilson pointed out in his statement, TNLC was made aware that a lack of detail about how the proposed Lottery Extras Scheme would work was a matter for which it could be marked down in the feedback at Phase One, which stated that:

In my judgment there is accordingly no basis for the pleaded complaint.

In cross-examination of Mr Wilson and in closing submissions, the Claimants sought to develop a new and unpleaded point by reference to a different weakness identified in the Detailed Rationale in response to Question 4 (PPI) to the effect that “[t]he Applicant refers to encouraging known play (‘Lottery Extras’) (Q4, p.14, Section 4.3.5) but does not include targets for converting anonymous play, the details of the rewards, or detail on how it intends to use this specific data to prevent excessive play”. The Claimants’ new case was that no feedback had been provided at Phase One as to concerns about the introduction of Lottery Extras impacting upon PPI requirements. I note that this case was advanced without any acknowledgement that it was in any way inconsistent with the pleaded case.

I reject the attempt to make out this new case through cross-examination and in closing submissions. Mr Wilson had been given no opportunity to consider this case in advance of preparing his statement, the Claimants’ witnesses had not addressed it, and at all times during the trial (including in their closing submissions) the Commission focused (as it was entitled to do) only on the pleaded case.

The Claimants rely on the fact that when he was asked about the new point, Mr Wilson said in cross-examination that the feedback in the Detailed Rationale was “building on additional points”, but they do not focus on the fact that he went on to qualify that answer by saying that “[w]hat we can’t tell, of course, is what additional information the Evaluators had in front of them in respect of the applicant’s Phase 2 submission in this area”. The Claimants made no attempt to address this latter point.

In the circumstances, even assuming that I had been prepared to permit this new point, I would also have dismissed it on the grounds that it was clear from the Phase One Feedback that further information was required as to how Lottery Extras would work and that, absent an understanding as to what further information was in fact provided by TNLC at Phase Two, it would be unfair to criticise the appearance of more detailed observations on Lottery Extras in the Detailed Rationale. I am certainly not in a position to determine on balance that the Phase One Feedback on Lottery Extras was inadequate.

One of the reasons why TNLC received a mark of 3 for its Operational (Operating Model) Business Plan Area response was because (as explained in the Detailed Rationale) the Commission considered that TNLC had “not finalised its long-term location strategy which leaves its operating model unclear beyond Year 2 and risks significant staff turnover”. The Claimants allege that this was not a point that was highlighted at Phase One.

The Commission accepts that no specific feedback was given at Phase One on the failure to finalise location strategy, but they point to the fact that in its Phase One Application TNLC set out its “current proposal” whilst at the same time making it clear that “[t]he location strategy will be refined in due course”. Mr Wilson’s evidence in his statement (which I accept) is that “[h]ad they not said in their submission at Phase One that they were still working on the location strategy, they would have been criticised for not having one, but there was no point in providing specific feedback on this, as they had already said “the location strategy will be refined in due course” – they implied they were going to deal with this before making their Phase Two submission. They didn’t, so we criticised it at that point”.

Mr Martin acknowledged in cross examination that TNLC had not provided any timeframe in its Phase One Application for the refinement of the location strategy and, in the circumstances, the approach taken by the Commission, as explained by Mr Wilson, appears to me to be entirely reasonable. Against that background I do not consider that the Commission can be criticised for not providing feedback.

In cross-examination, Mr Wilson fairly accepted that information had been provided by TNLC as to its “current proposal”, i.e. as to different sites and locations, albeit that he pointed out that there was an issue about the level of detail. It was then put to him that the point made in the Detailed Rationale about not finalising a long-term strategy “could have been made on the back of” the information in the Phase One Application. Mr Wilson responded “[i]t wasn’t summarised in that way, no, that’s correct”.

I am not clear as to what Mr Wilson meant by this and the cross-examination then moved to another topic. However, I do not take from this answer that Mr Wilson was changing the evidence he had given in his witness statement, and it was not suggested to him that he was. Importantly it was never suggested to him that the Commission was wrong to understand from the wording of the Phase One Application that the location strategy would be refined in the Phase Two Application. In my judgment that is the end of the matter. I reject the Claimants’ case that, in all the circumstances, there was an obligation to provide feedback at Phase One as to the failure to finalise the location strategy.

I reject the Claimants’ case that the Commission’s Phase One Feedback was deficient as alleged, whether in respect of Pass/Fail Areas or in respect of Business Plan Areas. Accordingly I also find that there has been no breach by the Commission, individually or cumulatively, of the principle of transparency (Issue 26).

It is common ground that the ITA must be clear, that it must set out the Competition requirements and that applicants must be able to understand what they are required to address in their bids. Ms Sheldon confirmed in her evidence that “clarity is absolutely crucial”. It would be a breach of the principle of transparency if TNLC’s bid had been assessed by reference to a criterion which had not been made known to applicants. However, the Commission denies that it applied any undisclosed criteria. By way of overarching comment, it asserts that the Claimants have relied on a series of selective extracts from various parts of the Detailed Rationale which constitute some, but not all, of the reasons why TNLC failed to pass PPI.

I turn first to the four specific complaints of undisclosed assessment criteria raised by the Claimants in respect of PPI, each of which is identified in the sub-headings set out below. In doing so it is worth observing that both the Claimants and the Commission were at times guilty of straying into the territory of subjective evidence in relation to this issue. I have dealt with that evidence below, but I have determined each complaint by reference to the RWIND tenderer test.

The Particulars of Claim plead that:

Although this plea is brief, I do not understand the Commission to allege that it is unparticularised or that they cannot understand it. The allegation arises in respect of the First PPI Criterion. Mr Wilson dealt with the pleaded allegation in his first witness statement. Both Mr Wilson and Ms Sheldon were cross-examined on the point.

In their closing submissions, the Claimants assert that:

Accordingly, the Claimants say simply that the risk of unaffordable levels of play, taken into account by the Evaluators and included in the Detailed Rationale as a reason for failure in respect of PPI, was an undisclosed criteria.

On close analysis of the evidence, I reject this case for the following main reasons.

Section 11 of Volume E of the ITA deals with PPI. Section 11.1 of the ITA sets out the context for the requirements that follow at 11.2. Specifically it says this:

Pausing there, although the Claimants are right to say that there is no express reference to unaffordable levels of play, to my mind the references to “people who gamble beyond their means” and to the effects of gambling which include “debt” are plainly (and would be understood by the RWIND tenderer as being) references to the concept of unaffordable gambling.

The Statement of Requirements for Applicants in respect of PPI is then set out at section 11.2. The Licensee must “do everything it can to ensure that the interests of every person who plays, engages with or is exposed to the National Lottery are protected”. This reflects the overriding duty at section 8.1 of the Proposed Form of Fourth Licence provided to Applicants and cross-referenced in Question 4 (PPI) of the ITA. In my judgment, these requirements would be read by the RWIND tenderer in their proper context. Specifically, they would be seen against the background of the categories of participant that the Commission has identified as being “particularly at risk”.

In cross-examination, Ms Sheldon was shown section 11.2 of the ITA and it was put to her that there is no reference to unaffordable play. She responded that there was not “a specific reference to it” but she went on to say (in evidence that was not referred to by the Claimants in closing) that unaffordable play “is a component of—a recognised component of excessive play, with reference to Best Practice”. I accept this evidence. In so far as Ms Sheldon appears to have accepted that Applicants did not need to address the concept of unaffordable play (and the transcript is not entirely clear), such acceptance is inconsistent with her clear evidence that unaffordable play is a recognised component of excessive play. Furthermore, Mr Wilson expressed a similar view when he said that unaffordable and excessive play were “linked in some cases”.

Ms Sheldon also observed in cross-examination that she thought unaffordable play was “also mentioned in the Regulatory Handbook”. She was right about that, as was clarified during her re-examination. The Regulatory Handbook includes a section entitled “Not encouraging excessive play” at sections 11.12-11.15. Section 11.15 explains that “we may have particular regard to any specific socio-demographic groups that, based on relevant evidence, may be more vulnerable or susceptible to excessive play”. A footnote identifies Vulnerable Participants as “likely to include people who gamble more than they want to [and] people who gamble beyond their means…”. Ms Sheldon confirmed in re-examination that this was what she was thinking of when she referred to the Regulatory Handbook.

Question 4 at Section 22.3 of the ITA identifies section 11 of the Regulatory Handbook (amongst other sections) as being relevant to PPI and expressly informs applicants that they:

During the course of his cross examination by Ms Hannaford, Mr Mills was taken to the Detailed Rationale and specifically to the reference to the failure on the part of TNLC to demonstrate how it proposes to address risks of unaffordable play. The following exchange ensued:

Mr Mills was then taken to section 11.1 of the ITA and shown the passage set out above dealing with “Vulnerable Participants”. The following exchange then took place on the issue of unaffordable play:

To my mind, although evidencing Mr Mills’ subjective understanding of the ITA (which is not legally relevant to the question of transparency), this evidence is entirely consistent with the Commission’s evidence to the effect that unaffordable levels of play are generally understood to be an aspect or component of the concept of excessive play.

Standing back, I consider it to be plain that the RWIND tenderer would have understood from the ITA and the Regulatory Handbook that there was a need to address unaffordable levels of play and further that it would have understood this to be an aspect of excessive play. The criteria were sufficiently clear to permit a uniform interpretation. Furthermore, that TNLC did in fact understand this means that, even if I am wrong about the understanding of the RWIND tenderer, this allegation in itself cannot have caused any loss. This causation point was canvassed by Ms Hannaford in closing submissions in response to a question from the Court, and I invited the other parties to address me if they disagreed. The Claimants did not return to the point in their reply.

In all the circumstances, the claim of undisclosed criteria in respect of unaffordable levels of play fails. For the sake of completeness I should add that I fail to see how the issue of training of Evaluators is relevant to the issue of transparency or the understanding of the RWIND tenderer. The Claimants did not seek to analyse the point in their closing submissions. I shall return to the question of training when I come to address the Pass/Fail Areas.

The Claimants’ pleaded case is as follows:

I did not understand the Claimants at trial to be pursuing any allegation in relation to “other matters” related to TNLC’s previous experience. TNLC’s complaint is that it had not understood (because the point had not been disclosed) that there was a requirement to show that it had sufficient resources to support the Chief Compliance Officer. I did not understand the Commission to take any pleading point in respect of this allegation.

Question 5 in section 22.3 of the ITA asked applicants to:

It went on to say “Please note: you should ensure that all your projected revenues and costs of delivering associated with this proposal are captured in your Financial Template”.

The Third PPI Criterion must be borne in mind in the context of this allegation.

The Detailed Rationale stated in respect of TNLC’s Question 5 response:

The Claimants assert that under the heading “Allocation of responsibility (Named Individual and Role) for our [Participant Protection Strategy “PPS”] and Compliance with our Licence Obligation to Protect Participants’ interests”, in response to the first bullet point set out above in Question 5 of the ITA, TNLC made the following points in section 5.2 of its Phase Two Application:

At section 5.3 of its Phase Two Application (expressly dealing with the second bullet point in Question 5), TNLC stated that working groups would be set up to take responsibility for a series of initiatives designed to implement core elements of the PPS which were categorised into various “broad tasks”.

The Claimants say that this approach is consistent with what the RWIND tenderer would have understood was required in response to Question 5; namely that bullet points 1 and 2 were separate and that the CCO was not a participant protection “tool” within the meaning of the second bullet. They say that, by contrast, the RWIND tenderer would have understood bullet point 1 of Question 14 (Operating Model) to require an applicant to set out the resources that it would be deploying, including those supporting the CCO role. Accordingly, the Claimants contend that where there was no requirement in bullet point 1 of Question 5 to set out the “resources” for the CCO, the reason relied upon by the Commission for failing TNLC for its PPI Question 5 involved the application of an undisclosed criterion.

Once again, I reject this case. Reading Question 5 itself and looking at the guidance on the response to Question 5 as a whole (and taking this in the context of the Third PPI Criterion), I consider that the RWIND tenderer would understand that Question 5 was seeking details as to how applicants would “implement, manage, monitor and adapt” their PPS and that this required the identification of a plan to implement “tools methods or procedures, covering…resource requirements” (emphasis added). Given that the first bullet point required the identification of one or more named individuals who would be responsible for the PPS, the RWIND tenderer would have understood that the requirement to identify “resource requirements” would require information about the resources that would be deployed to support the CCO and to make the role of (in TNLC’s case) CCO effective. I do not consider that the RWIND tenderer would treat each of these bullets as a stand-alone requirement. The reference to “resource requirements” is very general and can only sensibly be read as covering all resource requirements for the PPS, including in relation to personnel. This had to be dealt with “comprehensively”.

Although not relevant to the understanding of the RWIND tenderer which must be determined objectively, Ms Sheldon explained in her statement (and I accept) that the Commission had expected to see detail on the training and resources that TNLC would deploy to support the CCO role. She fairly accepted in cross-examination that the first bullet of Question 5 does not “specifically” refer to the provision of information about resources in connection with the CCO, but she went on to say that she considered the first two bullets to be “linked” such that once the individual had been named under the first bullet point, the next requirement for the Evaluator was to determine “how can we be confident that there are adequate resources to support that individual”. She made the point in a slightly different way when she said “So the CCO role is important and obviously will be the person that heads this up, and the second bullet is relevant to that, in terms of delivery of it”.

The fact that, as the Claimants contend, (i) none of these points made by Ms Sheldon is supported by the Moderation Notes in the sense that those notes simply set out the Evaluator’s conclusions; and (ii) the RWIND tenderer would have had a particular understanding in relation to an entirely different Question in a different non-Pass/Fail section of the ITA, does not assist on what the RWIND tenderer would have thought in relation to Question 5.

In closing, the Commission pointed to Mr Mills’ witness statement in which he states that TNLC set out “in detail” in its Phase Two Application its corporate and senior management structures together with how it would evaluate the human resources that would be inherited from Camelot. I agree with the Commission that it is implicit in this evidence that TNLC in fact understood what was required under Question 5 (in other words that it understood Question 5 in the same way as the RWIND tenderer would have understood it). This much is clear from Mr Mills’ cross-examination, during which he confirmed that TNLC “needed to provide structure”, in other words the senior governance structure in which any named individual would sit. The following exchange then took place between Ms Hannaford and Mr Mills about the second bullet point in Question 5:

Once again, while this evidence does not assist on the understanding of the RWIND tenderer, it confirms that TNLC had the same understanding of the requirements of Question 5 as the Commission and, indeed, that TNLC considered that it had satisfied those requirements in its response to Question 5 (a matter to which I shall have to return in the context of the Pass/Fail Areas). In fact, as I have determined above, both the Commission and TNLC appear, on the evidence, to have interpreted the ITA in the same way as the RWIND tenderer would have done.

Accordingly, I consider that the Commission did not apply undisclosed criteria in relation to resources relating to the named individual, as alleged by the Claimants. Further and in any event, this complaint cannot have any causative effect. TNLC knew, both from the terms of the ITA itself, and from feedback received at Phase One, that it needed to address the detail of its resourcing plans including as to its human resources.

The Claimants’ pleaded case is that:

The Claimants go on to assert that the statements made in assessment of the Application by reference to Best Practice “are at odds with the Claimants’ understanding of what Best Practice requires”.

The Fourth PPI Criterion is relevant to this allegation. Further, Section 11.2.1 of the ITA identified as a requirement in connection with PPI that:

As mentioned above, Best Practice was defined at 3.2 of the ITA and in Condition 4.3 of the Fourth Licence by reference to the standard to be expected of an experienced and professional person. I have already set out conditions 4.4-4.5 of the Fourth Licence.

In the July Applicant Note, the Commission provided (amongst other things) a Licence Update, which included further explanation as to the Best Practice requirement at clauses 4.3 and 4.5 of the Fourth Licence, including that:

The Commission issued CQ 540 on 30 July 2021 focusing on the reference to ‘Relevant Government or Public Authority or any Recognised Industry Body’ in Condition 4.4 of the Fourth Licence:

Given the definitions and explanations in relation to the concept of Best Practice available to applicants to which I have referred above, it is perhaps unsurprising that the Claimants’ case in closing no longer focused on the allegation that the concept of Best Practice was undisclosed. Indeed, although the Claimants submitted in closing that, in his oral evidence, Mr Wilson had accepted that limited information had been provided to applicants as to the meaning of the concept of ‘Best Practice’, a review of his evidence clearly establishes that he did not concede anything of the sort. Instead he explained (correctly) that the definition of Best Practice was to be found in the Fourth Licence together with the subsequent clarification provided by the Commission.

In my judgment it is plain from the extracts in the ITA, the Fourth Licence, the July Applicant Note and CQ 540 referred to above that the concept of Best Practice was not an undisclosed criterion, and I reject the Claimants’ case to the contrary. The RWIND tenderer would have understood the concept of Best Practice having regard to Conditions 4.3-4.5 as referring to the standard to be expected of an experienced and professional person conducting the Lottery so as to secure the outcomes referred to in Condition 2.1 of the Fourth Licence. The RWIND tenderer would have understood that this included the need to refer to any relevant codes and guidelines that may set those standards.

This is in fact how TNLC understood the concept of Best Practice. In his first witness statement, Mr Mills confirmed that Best Practice was a defined term in the Fourth Licence. Under cross examination he accepted that he had been “completely aware that [TNLC] had to comply with best practice as defined in 4.3 and in the defined terms of the licence”, that he had been aware of the July Applicant Note and that he had considered the clarification in that Note to the effect that Best Practice was to be viewed in the context of the activities of the Licensee as “a useful and sensible clarification”. Mr Mills also observed that the July Applicant Note had made no change to the definition in Condition 4.3 “which [he] thought was a very realistic and appropriate and common definition of best practice”. He went on to reiterate that it was a “routine and standard definition” which he had seen “in many situations” and he confirmed that he knew that in TNLC’s bid it was necessary to provide details of the Best Practice that applied, what was in relevant codes of practice and the desired outcomes. Indeed, TNLC had also received Phase One Feedback on the approach to be taken to Best Practice.

The Claimants’ case as it is now advanced is that the concept of Best Practice as it was in fact applied by the PPI Evaluators was “amorphous”, without any real definition or precision, and went beyond the definition as set out in Licence Condition 4.3. This is really an allegation of manifest error to which I shall return later in this judgment.

In its Defence, the Commission alleged that “any challenge in relation to the use of [the term Best Practice] is time-barred as it was included in the ITA” (Issue 46). However, given the change of emphasis in the Claimants’ case I do not consider this point to remain relevant. Had the Claimants continued to contend that the meaning of the phrase ‘Best Practice’ was undisclosed in the ITA, then the principles to which my attention was drawn by the Commission in Mears Limited v Leeds City Council [2011] EWHC 40 (QB) at [70] (to the effect that grounds for bringing proceedings will arise from the point at which a claimant knows or ought to know of the infringement regardless of whether there has yet been a decision to eliminate a tenderer) would be apposite. But where, as now, the Claimants’ focus is on the application of the concept of Best Practice by the PPI Evaluators (of which the Claimants were only aware at the time of receipt of the Detailed Rationale), there is no basis for a determination that such case is time-barred.

TNLC proposed a mystery shopper programme as a method of monitoring the performance of Physical Sales Locations in preventing underage and excessive play. TNLC’s response to Question 4 explained that:

However, Evaluators concluded, as reflected in the Detailed Rationale, that TNLC’s proposal:

The Claimants’ pleaded case complains that “the requirement for this level of detail is not set out in the requirements of the ITA”.

Looking closely at the ITA, I do not see that this case is sustainable. Question 4 of the ITA required that an applicant’s PPS “must contain a complete set of measures to protect Participants’ interests”, which includes “preventing underage play” and “not encouraging excessive play”. This is to be seen in the context of the need to provide a response which deals comprehensively with issues and subheadings as set out in the Third PPI Criterion.

In my judgment, reading the ITA as a whole, these passages would have been understood by the RWIND tenderer as requiring it to set out the detail of the measures that it was proposing. In relation to a particular measure, the RWIND tenderer would also have understood that it needed to deal comprehensively with how that measure would help to prevent underage play or would ensure that it was not encouraging excessive play – in other words it needed to demonstrate the efficacy of the PPS strategy.

I do not consider that this requirement for detail amounted to an undisclosed criterion – the question of whether sufficient detail had been provided was then a matter for the Evaluators. I agree with the Commission that the observations in the Detailed Rationale about TNLC’s mystery shopper proposal simply reflect its assessment of that proposal against the published criteria and its conclusion that TNLC’s proposals lacked detail.

In opening submissions there seemed to be a hint that the Claimants recognised that this case on undisclosed criteria may prove difficult because they identified an alternative case, namely that “the level of detail [the Commission] referred to went beyond what was needed to demonstrate the efficacy of TNLC’s PPI strategy”. However, this alternative case was not pleaded and I did not detect any suggestion that it was being maintained in closing submissions.

Once again, and as a matter of fact, TNLC understood the need for detail in respect of its mystery shopper proposal. It had been provided with Phase One Feedback as to the need for details to be provided in respect of the mystery shopper approach and Mr Mills confirmed in his oral evidence that he was clear that TNLC needed to provide detail about the approach that would be implemented and whether it would be successful. It was his view that sufficient detail had been provided, albeit he accepted that it would have been possible to add more detail. However, he observed that “we foreswore that, partly because this wasn’t the biggest issue in our bid”.

The Claimants’ allegations of undisclosed criteria fail. None of the matters it identifies as undisclosed criterion falls into that category and I agree with the Commission’s submissions in closing that TNLC has wrongly conflated the criteria in the ITA for assessing the Applications with the reasons for the scores awarded. I also agree that, even if I am wrong in my analysis of these allegations, any breach on the part of the Commission would be immaterial. This is because TNLC relies for the purposes of these allegations on only some of the many reasons why TNLC failed to meet the relevant PPI criteria. A finding of breach of one or more of these allegations (which on the Claimants’ case would then require the Court to ignore any reasoning relating to the undisclosed criteria) would still leave TNLC in a position where it had failed PPI because it had failed multiple criteria in that Area for multiple reasons.

Further and in any event it is clear from the Claimants’ evidence that in respect of each of the alleged undisclosed criterion, TNLC knew that it was required to provide the relevant information such that the Claimants can establish no causal link to any loss.

TNLC failed PPI/PPF and Financial Strength. TNLC failed 4 out of 6 criteria for PPI (ITA Section 8.2); 4 out of 8 criteria for PPF (ITA Section 8.2.1); and 4 out of 7 criteria for Financial Strength (ITA Section 8.3). As I have already said, a fail in any one criterion was sufficient to result in an overall fail for the Pass/Fail Area under the ITA. Compliance with the criteria was assessed by reference to an Applicant’s answers PPI Questions 4 and 5; PPF Questions 6 and 7 and Financial Strength Questions 8 and 9. The Claimants allege manifest error in respect of the Commission’s evaluation of each of TNLC’s Fail scores.

The Claimants accept that the threshold for establishing a manifest error is high and that the Court will afford Evaluators a margin of discretion. However, they contend that that margin must necessarily be narrowed where, as they say occurred in this case, there was a lack of training/guidance as to how to apply the relevant criteria (at least in respect of PPI), together with the fact that the records of the Evaluators’ reasoning (in the form of the Moderation Rationale) are very limited. For present purposes, I note that the allegation of a lack of sufficient training is itself a separate issue (Issue 2(c)), albeit that I understand it to have significantly narrowed over the course of the trial and it is best addressed on the facts of this case in the context of the specific issues where I understand it to be prayed in aid.

As for the allegation of “limited records”, there is no pleaded allegation based on the limited nature of the records or the absence of “verbatim” notes of the moderation meetings – points that were nevertheless put to various witnesses in cross examination. There is nothing in these points. There was no requirement in the Evaluation Manual or elsewhere for a detailed or verbatim note of the Moderation meetings and there is no legal requirement for a verbatim note to be kept. As Fraser J said in Bechtel at [311]:

In addition the Claimants say that the alleged lack of training/guidance explains the inability of individual Evaluators whilst giving evidence to articulate their reasoning (Issue 2). The Claimants appear to rely primarily upon evidence of the approach of the PPI Evaluators (specifically Ms Sheldon) to support this submission and they extrapolate from it that there was “an inconsistent application in how the criteria were applied as between the Applicants, because the PPI evaluators were uncertain as to when a weakness would constitute a failure, with them seemingly taking a more permissive approach to Allwyn, and a less permissive one for TNLC” (emphasis added). Thus, the Claimants contend that without prejudice to, and in addition, to their case on manifest errors in the PPI evaluation, “had the PPI evaluators taken the same permissive approach in how they treated weaknesses in Allwyn’s PPI bid when evaluating TNLC’s PPI bid, then the PPI evaluators would have passed it”. I shall return to this when I come to address the allegation that Allwyn should have failed the PPI evaluation.

In their closing submissions for the first time, the Claimants sought to rely upon Lancashire Care NHS Foundation Trust v Lancashire County Council [2018] EWHC 1589 (TCC) per Stuart-Smith J at [49]-[55] in support of the proposition that if the evidence (both oral and documentary) leads to a conclusion that the Evaluators were unclear, or not agreed on, the approach they should be taking to the criteria they were applying, this would, or is very likely to have had, a direct bearing on the Evaluators then falling into error when reaching certain findings. However, while I accept that I must consider all of the evidence in the round in arriving at my decision, I approach this submission with a degree of caution. The paragraphs on which the Claimants rely in Lancashire Care concern a rather different point; namely an allegation of insufficient reasons. Those paragraphs refer to guidance given both by the Court of Justice and by the Supreme Court (in Healthcare at Home) to the effect that the reasoning followed by the public authority must be disclosed in a clear and unequivocal fashion and that any failure to explain why scores were awarded will fail the most basic standard of transparency. However, there is no pleaded allegation of insufficient reasons in the present case. Mr Suterwalla accepted in oral closing that the present case does not fall into the same category as Lancashire Care.

Nevertheless, as Ms Hannaford points out (and despite the express disavowal on the part of the Claimants of any intention to advance a case that the Commission’s conclusions were unlawful for a lack of reasons), a number of new assertions are in fact made by the Claimants in their closing written submissions to the effect that “no reasoning” or “no further reasoning” was provided, that there was an “absence of any or any sufficient reasoning” and that the Commission’s reasoning “is wholly unsatisfactory”. As I understood the Claimants’ case, this was said to be relevant to “the evidential picture”, albeit not a necessary or pleaded part of any allegation of manifest error.

I agree with the Commission that in this regard, the Claimants appear to be seeking to “have their cake and eat it”. An allegation of inadequacy or insufficiency of reasons is a serious allegation as to lack of transparency. I do not consider it appropriate for a party who has failed to plead such an allegation to assert for the first time in closing submissions that there has been such a failure, but to seek to avoid the need to plead it by asserting that the failure is purely part of “the evidential picture”. As was clear from their written closing submissions, what the Claimants were really attempting to do by raising the point was to bolster the existing pleading of manifest error. This is neither fair to the Commission, nor consistent with the overriding objective. If the Claimants had wished to rely on a lack of sufficient reasons in support of their allegations of manifest error that could and should have been pleaded. It is far too late to advance such a case for the first time in closing submissions at trial – it is not a case that the Commission could have anticipated in light of the evidence served in advance of trial or in respect of which it could be said that there is no prejudice. The Commission had no advance notice of it and no opportunity to consider how it might address such a case. Its written closing submissions (unsurprisingly) do not mention the point.

In general response to the Claimants’ pleaded case on manifest errors, the Commission submits that the matters relied upon are unparticularised and “are no more than generalised disagreements with the scores awarded and do not disclose any manifest errors”. It contends that the scores awarded were within the discretion of the Commission and that in any event, TNLC cannot possibly establish that it should have passed every Pass/Fail Area that it in fact failed at moderation. It rejects the submission that there was a lack of appropriate training or guidance or that different approaches were taken by the Evaluators to different bids.

Under this part of the judgment on manifest error, I shall deal also with the allegations of manifest error made by the Claimants in respect of the Commission’s approach to the Applications made by both Allwyn and Camelot. So as to try to avoid duplication in so far as is possible, I shall group the Claimants’ allegations together under three headings: PPI, PPF and Financial Strength.

The Commission relies upon the Moderation Rationale and the Detailed Rationale, which was prepared on the basis of the content of the Moderation Rationale, as evidencing its reasons for the scores awarded to each Applicant. The Commission also relies on the evidence of relevant Evaluators.

There were three individuals involved in the evaluation of PPI, Ms Penny Williams, Ms Julie Williams and Ms Sheldon. Only Ms Sheldon, the lead Evaluator, gave evidence.

The requirements for PPI were set out in the ITA at section 8.2 (containing the Pass/Fail criteria), section 11 (containing an explanation of the context and requirements) and section 22.3 (containing Questions 4 and 5). These Questions were:

There were 6 PPI criteria in section 8.2 of the ITA which had to be “demonstrated” if an Applicant was to achieve a Pass. For present purposes I am concerned with the First, Third, Fourth and Sixth PPI Criteria, each of which was failed by TNLC. These are set out above at paragraph 215.

An applicant would Fail where:

The First PPI Criterion reflects the Fourth Licence conditions which include (at condition 8) an overriding duty on the Licensee to “do everything it can to ensure that the interests of every Participant in respect of playing, engaging with or being exposed to, the National Lottery and every Game are protected”.

The Claimants allege manifest error in evaluating PPI in respect of 6 discrete matters (Issues 47(a)-(f)). The pleaded allegation in relation to each of these issues is that there has been a “determination in error” by the Commission in a specific respect, which I understand to be an allegation of manifest error in decision-making. They also allege that the “Fail” outcome in respect of PPI generally was in manifest error “because that outcome did not accurately reflect the comments made (if any) by evaluators” (Issue 48). I shall now deal with each of these allegations in turn.

As is clear from the Moderation Rationale, TNLC failed the First PPI Criterion for three reasons. The first was that:

This was further explained in the Moderation Rationale under the “weaknesses section” in the following terms:

The Claimants’ pleaded case is that “[t]he Defendant determined in error that [TNLC] placed reliance on existing arrangements under the Third Licence without having adequately taken into account [TNLC’s] actual proposals in this respect” (emphasis added). The Claimants go on to plead that TNLC “proposed to update its proposed arrangements during the Implementation Period when further information concerning the existing arrangements was made available to it” and that this was an approach which was consistent with representations as to an acceptable approach made to it by the Commission and its advisers.

The Claimants’ case developed substantially over the course of the trial. In opening submissions they appeared to abandon the suggestion that the Commission had not adequately taken into account TNLC’s actual proposals. Instead, the Claimants now asserted that the manifest error was the Commission’s finding that “TNLC’s reliance upon certain 3NL arrangements meant that it had not adequately demonstrated how these would be consistent with the requirement [in the First PPI Criterion]”. The pleaded case that TNLC had followed guidance provided by the Commission (which guidance had been ignored by the Commission in its Evaluation) seemed to have been abandoned.

In closing submissions, the Claimants’ complaints, in summary, appeared to be (i) that there was no further reasoning for this Fail; (ii) that it can be inferred from Ms Sheldon’s evidence that there were in fact no substantive differences between 3NL and 4NL; (iii) that the Evaluators erred because they did not actually evaluate whether TNLC’s proposals (some of which carried over from 3NL) were doing everything they could to ensure that the interests of every Participant in the National Lottery were protected; (iv) that absent any contrary evidence the Court should find that the proposals made by TNLC (even if they did not show their “workings out”), were sufficient and therefore “that the [Commission] fell into clear error”; (v) that TNLC did seek to mitigate the risk of using Third Licence arrangements; and (vi) that no reasoning was provided in the Moderation Rationale for the conclusion that there was “an inadequate form of mitigation. This was therefore also a manifest error”.

Returning for a moment to the Claimants’ pleaded case, I find that (as now appears to be accepted) the Commission did not make a manifest error in concluding that TNLC had relied on existing arrangements under the Third Licence. That should really be the end of the matter. There is no application to amend to plead any alternative case and I reject the suggestion that the absence of reasons is here being legitimately used by the Claimants purely for evidential purposes. On the contrary, it appears now to be a major plank of the Claimants’ case. In circumstances where there is no pleaded case of lack or insufficiency of reasons, I reject the criticisms made by the Claimants identified in the previous paragraph at (i) and (vi).

What of the remaining points now made by the Claimants in closing submissions? There can be little doubt that they do not form part of the Claimants’ pleaded case and that (beyond addressing their understanding of the way the case had been put in opening submissions), the Commission did not deal with them in their written or oral closing, meaning that the Court has been left to work out what, if any, significance or relevance they might have – an obviously unsatisfactory and unfair position. For this reason alone I reject the Claimants’ case on this issue.

Even assuming, however, that I am wrong to determine this point on the grounds of a failure to plead the case, on analysis I do not consider any of the Claimants’ points in closing to establish a manifest error.

First, there is most certainly no scope for the Court to infer that there was no substantive difference between the Third Licence and the Fourth Licence (the Claimants’ point (ii) above). That would be wholly inconsistent with the available evidence.

The Phase One Feedback expressly referred to the differences between the two Licences, including making clear that TNLC would need to explain why Third Licence policies and procedures would comply with the Fourth Licence:

TNLC sought clarification on this feedback at a Clarification Meeting on 4 August 2021. In seeking that clarification, TNLC expressly acknowledged that it appreciated “the difference of approach in the Fourth Licence compared with the Third”. In a response that clearly establishes that the Claimants’ pleaded case (to the effect that the Commission’s conclusions at Moderation were somehow at odds with guidance given to TNLC during the Competition) is misconceived, the Commission said this:

TNLC recognised the existence of differences in its Application in respect of Question 4, although (notwithstanding the content of the Phase One Feedback and the clarification provided at the meeting on 4 August 2021) it did not explain how or why its proposal to continue the existing arrangements under the Third Licence, at least during the Implementation Period, would comply with the requirements of the Fourth Licence. At 4.1.3 of its Application, it dealt with the development and refinement of the PPI Strategy during the Implementation Period saying this:

Ms Sheldon’s evidence was that there were “some substantive differences between the conditions” in the two Licences, although she did not identify what those were. I accept that evidence (which is consistent with the documents) and reject the Claimants’ submission that her failure to point to specific differences during her evidence means that “the Court should be cautious in finding that there were in fact such differences” and that on their case “there were no such substantive differences”. This submission is flatly contrary to the evidence (including the Claimants’ own witness evidence) and thus unsustainable. Mr Mills volunteered the information during his cross-examination that the main differences between the two Licences:

In other words, the Fourth Licence included additional obligations which meant (as was clear from the Phase One Feedback) that its requirements could not be met purely by proposing compliance with the Third Licence.

As to the Claimants’ new case that the Commission did not actually evaluate whether TNLC’s proposals satisfied the First PPI Criterion (the Claimants’ point (iii) above), this submission appears to be based on oral evidence from Ms Sheldon that, while it might be possible for some Third Licence arrangements to be acceptable, “it was for applicants to demonstrate that was the case”. The Claimants point to the fact that Ms Sheldon explained that the Evaluators’ approach to “adequate demonstration” of the First PPI Criterion was not to decide whether or not TNLC’s proposals would or would not protect the interests of every participant but rather their approach was to view the ITA as requiring an applicant to demonstrate that this was the case “and we decided that the applicant had not done that. They had not demonstrated and as a result it may not be suitable” (Claimants’ emphasis). As Ms Sheldon went on to explain, the Evaluators could not “take a judgment” that the ITA requirements had been met “in the absence of the applicant evidencing that” and that “the expectation is for applicants to put forward proposals and evidence [as to] why they will meet [the requirements]”.

I cannot see that there is anything wrong with this approach, which is entirely consistent with Ms Sheldon’s written evidence to the effect that “TNLC had not shown why we should be confident that retaining Third Licence arrangements would be satisfactory to protect participants in the Fourth Licence”. To my mind, Ms Sheldon’s evidence simply reflects the approach set out clearly in the ITA. A failure “to demonstrate” (i.e. a failure to provide sufficient proposals and evidence) in respect of the First PPI Criterion would mean that the Applicant could not satisfy the Commission that it met the requirements of that Criterion. I cannot see that a conclusion that an applicant has failed to provide sufficient information to enable the Commission to be satisfied one way or the other involves either a failure to evaluate or a manifest error. It is certainly not a conclusion that I can second guess and nor have I been given any basis on which to do so.

I add that the cross-examination of Ms Sheldon focused on TNLC’s proposal that it would continue with the “current limits and controls” (i.e. those under the Third Licence). The point being made by Mr Suterwalla (which now feeds into the alleged failure to conduct an actual evaluation) was that the Evaluators had not arrived at a conclusion that the existing limits and controls were unsuitable to protect the interests of every participant. As I understood it, the premise of this cross-examination was that the Commission in fact could and should have made a decision that the existing limits and controls were capable of satisfying the First PPI Criterion because there were no material differences between the two (“there might be certain things which…would not require evidence”). But for reasons I have already explained that premise was incorrect. Once it is clear that there are important differences between the Third and the Fourth Licences (which were well known to TNLC), it is plain that a decision to fail an applicant because of its failure to explain how the continuation of existing limits and controls under the Third Licence will meet the requirements of the Fourth Licence falls well within the margin of discretion of the Evaluators. There is nothing irrational in arriving at a conclusion that, absent sufficient evidence, TNLC had not demonstrated the First PPI Criterion to the satisfaction of the Commission. The Commission did not fall into manifest error because it failed to take a ‘leap of faith’ (in Ms Sheldon’s words) in the absence of evidence.

This bleeds into the Claimants’ point that, absent contrary evidence, the Court should find that TNLC’s proposals were sufficient (notwithstanding that they did not show their ‘workings out’) (the Claimants’ point (iv)). The Claimants do not explain what they mean by not showing “their workings out” in this particular context, but I understand them to mean that even if they did not provide the evidence to support the proposition that their proposals to utilise existing arrangements under the Third Licence complied with the First PPI Criterion, nevertheless the Court should find that those proposals did in fact meet the Criterion (i.e. “were sufficient”).

There is no proper basis on which the Court could make such a finding which is tantamount to an invitation to the Court to substitute its own view for that of the Commission. I reject the Claimants’ case that it should do so.

There is also no proper basis on which the Court could determine that (as to the Claimants’ point (v)) TNLC’s Application did in fact seek to mitigate the risk of using the Third Licence arrangements. TNLC had been told that the arrangements under the Third Licence may not be sufficient to meet the requirements of the Fourth Licence and (having regard to the examples identified in point 7 of the weaknesses section of the Moderation Rationale) I cannot see that the Commission’s decision that there was a failure to demonstrate how that risk would be mitigated could possibly be said to fall outside the range of reasonable conclusions.

Finally, I should return to the topic of training. There is no pleaded issue in relation to the general inadequacy of training – the Claimants’ Particulars of Claim instead focus on specific concerns, none of which appears ultimately to be pursued. This led to the Commission submitting in closing that Issue 2(c) no longer arises.

However, it was the Claimants’ case in closing that the Evaluators’ training was inadequate because they received no guidance on the standard which would need to be met for “an adequate demonstration” of the PPI Criteria. In circumstances where Ms Sheldon accepted that Evaluators were not given a “fixed definition”, the Claimants’ case appeared to be that therefore each Evaluator may have had a different idea as to what the threshold would be for “adequate demonstration”. The Claimants suggested that Ms Sheldon’s evidence was “unclear” as to whether she and the other Evaluators specifically considered what they understood the test to mean before they went on to moderate and reach a consensus decision.

I reject this submission. The question of whether an applicant has provided sufficient evidence to demonstrate compliance is certainly capable of being approached differently by different Evaluators, but the purpose of moderation is to flush out and resolve any such differences. I reject any suggestion that it involved a concept that needed to be defined or that in failing to define it the Commission thereby provided Evaluators with inadequate training.

Further and in any event, I note that Ms Sheldon expressly confirmed during cross-examination (and I accept) that at Phase Two:

In the circumstances I can see no scope to criticise the consensus view reached by the Evaluators at moderation. Accordingly, I also reject the Claimants’ submission that there should be a “narrowing” of the margin of discretion to account for this issue. My conclusion on this point will apply to each of the issues below which raise the question of whether TNLC “adequately demonstrated” compliance with the PPI Criterion.

For all the reasons set out above, I reject the Claimants’ pleaded case on this issue together with the allegations they advanced in their written opening, the allegations advanced in cross-examination of Ms Sheldon and the allegations made in their closing submissions. I find that there was no manifest error in the Commission’s evaluation and that the Evaluators’ conclusions were within their wide margin of discretion (which remains unaffected by any issue in respect of their training).

As is clear from the Moderation Rationale, TNLC failed the First PPI Criterion for two further reasons. These were that:

This was further explained in the Moderation Rationale under the “weaknesses section” in boxes 6 and 9 in the following terms:

The Claimants’ pleaded case on this Issue is that:

I pause there to note that this case was wholly unparticularised. There was no attempt to identify the “considerable detail” in TNLC’s proposals on which the Claimants relied or to explain why this detail should have been enough to satisfy the First PPI Criterion or why the Commission was wrong to determine that it did not do so, particularly given the detailed reasons as set out above. I am inclined to agree with the Commission’s overarching submission on this Issue that this complaint is no more than a vague and unparticularised assertion that a decision made by the Commission was wrong.

In their opening submissions, the Claimants sought to address the lack of particularisation by explaining why, in TNLC’s view, the Commission should have concluded that TNLC had provided sufficient evidence as to how its measures relating to constraining excessive and underage play would work in practice. Specifically, the Claimants relied upon sections 4.3.2 and 4.3.3 of TNLC’s Application (both concerned with not encouraging excessive play) together with evidence from Mr Mills as to specific aspects of TNLC’s Application, culminating in his view that “our Phase 2 submissions included ample detail on these proposed measures”. I shall deal with the points made by the Claimants in opening before turning to the (rather different) points made in closing.

The relevant ITA requirements included (i) the First PPI Criterion at section 8.2; and (ii) the requirement in section 22.3 under Question 4 that “as a minimum” an Applicant’s PPS must contain “a complete set of measures to protect Participants’ interests” and that these measures should include “preventing underage play” and “not encouraging excessive play”. These reflected the requirements in Licence Conditions:

TNLC was well aware of these requirements because it received more than two pages of Phase One Feedback on preventing underage play and not encouraging excessive play, including that TNLC’s proposals lacked detail. The Phase One Feedback expressly pointed out that if areas which were missing detail and evidence were not addressed at Phase Two, “the resulting lack of certainty is likely to undermine confidence in [the] Application when it is considered afresh by evaluators at Phase Two”. Furthermore, TNLC expressly referred to these requirements in its Application.

Notwithstanding the Phase One Feedback provided to TNLC, the Evaluators identified a variety of areas in respect of which insufficient details had been provided by TNLC (as set out above). Under cross-examination, Mr Mills acknowledged that various of the points made in the Moderation Rationale were correct: specifically that TNLC provided no rationale for the proposed level of deposit and spend limits and did not state whether and how participants would be encouraged to set limits. These concessions no doubt fed into TNLC’s submission in closing that “not every point in Point 9 [of the Moderation Rationale] was flawed”. They are also entirely consistent with Ms Sheldon’s evidence, which I accept, that TNLC could and should have gone into more detail on the topics of underage and excessive play.

In their written closing submissions, the Claimants identified six additional points on the basis of which they sought to argue that “the clear preponderance” of the reasons in Box 9 of the Moderation Rationale were flawed. However, I reject this submission. Three of these points are invalid in light of findings I have made earlier in this judgment because they rely on an asserted failure to give adequate feedback (Lottery Extras) and the application of undisclosed criteria (the risk of unaffordable play and Mystery Shopping Visits), each of which I have dismissed.

As for the remaining points, one ignored a concession made by Mr Mills (deposit and spend limits) and the remaining two (hard stops and behaviour driven player protection) reflect only a subjective disagreement (raised by Mr Mills in his evidence) with the Commission’s approach which (if valid or admissible at all) would do no more than undermine the specific reasons which are reliant upon those points (although it is not clear that the Claimants were even alleging irrationality in relation to these points). The Evaluators took the view that TNLC had not provided appropriate information and they provided a number of reasons for that, many of which are not challenged or (insofar as they were challenged) those challenges have fallen away.

In all the circumstances I can see no basis on which to find that the Commission has acted outside the margin of its considerable discretion in respect of this issue.

The Moderation Rationale makes clear that TNLC failed the Third PPI Criterion on the following grounds:

As I have already mentioned earlier in this judgment, section 22.3 of the ITA (Question 4) included the requirement that Applicants provide “a joined up, cohesive strategy to protect the interests of all Participants”. In the same section of the ITA, Question 5 required Applicants to provide details of the “appropriate allocation of responsibility (named individual and role) for the Participant Protection Strategy” and “a plan to implement new participant protection tools, methods or procedures, covering timelines, resource requirements and mitigations against any risks related to implementation”.

The Claimants’ pleaded case on this issue is that “[t]he Defendant determined in error that [TNLC’s] proposals did not adequately demonstrate a joined up and cohesive strategy or demonstrate sufficient resources to support the Chief Compliance Officer. [TNLC] did adequately demonstrate each of these things”. In addition, the pleaded case makes a point about a lack of understanding on the part of Evaluators as to the difference between a feature of a bid which would probably be treated as a failure and one that would be treated as a weakness. I understand this latter point to be relied upon by the Claimants in connection with an allegation of inconsistency in the approach taken by the Commission to the evaluations of TNLC and Allwyn and I shall return to it later.

Once again, this Issue is unparticularised and simply asserts that the Commission’s decision was wrong.

In closing submissions, the thrust of the Claimants’ case on the allegation that the Commission had determined in error that TNLC’s proposals did not adequately demonstrate a joined up and cohesive strategy was that (i) there was “no reasoning” in the Moderation Rationale on this point and (ii) that absent any or any sufficient reasons the Court could not be satisfied that TNLC did not submit a joined up and cohesive approach to its PPI or that there was a valid basis for the PPI Evaluators to conclude that TNLC had failed to provide adequate demonstration against this Criterion.

As explained earlier in this judgment, there is no pleaded case on lack, or insufficiency, of reasoning and I reject these submissions.

Ms Sheldon’s evidence, which I accept, is to the effect that the PPI Evaluators considered that TNLC’s Phase Two Application was lacking in detail, that TNLC had not adequately turned its mind to the ITA and Fourth Licence requirements, and that TNLC had attempted to defer addressing how they would meet all of the criteria at the Application stage. This thinking is evidenced by the Moderation Rationale in respect of Question 4, which sets out numerous weaknesses in Box 9. In the circumstances, I agree with the Commission that it was entirely rational for the Commission to conclude that TNLC had not adequately demonstrated a joined up and cohesive PPS and I reject the Claimants’ case that this determination fell outside the scope of the Commission’s discretion.

As to the Claimants’ case that the Commission determined in error that TNLC’s Application did not demonstrate sufficient resources to support the Chief Compliance Officer, I have already rejected the Claimants’ case of an undisclosed criterion in respect of proposed resources. However, without prejudice to their case that there was no requirement to demonstrate resources to support the CCO, the Claimants’ submission in closing was to the effect that it is clear on the face of TNLC’s bid that it did in fact explain how the CCO would be supported and that the PPI Evaluators’ finding to the contrary was a plain error.

Ms Sheldon’s evidence, which I accept, is that while TNLC’s Application mentioned the specific role of CCO, it did not include detail on training and resources that would be deployed to make the role effective. She explains that the expectation was that Evaluators would see a “sensible high-level implementation plan, to show how this is going to work in practice”. This expectation is plainly reflected in the reasons given for the Fail in respect of the Third PPI Criterion.

Under cross-examination, Ms Sheldon accepted that TNLC had provided “some details of headline roles that work with the CCO”, but she maintained that an “additional level of detail of teams” was required so as to provide confidence in TNLC’s ability to deliver its proposals. Ms Sheldon rejected attempts to suggest that issues of resourcing were solely matters for Question 14 and she explained that Evaluators were not permitted to cross-refer between questions and that each question should stand alone.

In circumstances where Question 5 required each applicant to set out resource requirements, as part of the detail as to how it would implement, manage, monitor and adapt its PPS, I reject the suggestion that the Commission acted irrationally or outside the margin of its discretion in determining that TNLC’s proposal provided insufficient details as to the resources supporting the CCO. I agree with the submissions made by the Commission that the PPI Evaluators were entitled to consider that TNLC should fail as a result.

In their closing submissions, the Claimants sought to run a new, alternative case, namely that if Question 5 did require greater detail in relation to resources than had been provided for by TNLC then “had Ms Sheldon attended the moderation session for this BPA [a reference to Question 14, Operating Model], as it was intended she do, the concern would have evaporated”. This was a shift from the Claimants’ position in their opening submissions, to the effect that the corporate governance structure proposed in Question 2 provided adequate demonstration of resources to support the CCO. In cross-examination, Ms Sheldon accepted that had she attended the moderation in respect of the Operating Model she would “potentially” have been aware of details in relation to resources to be provided to the CCO in TNLC’s bid. However, she believed that the requirement to attend the moderation for Question 14 had been changed, albeit that she could not clearly recall. I fail to see how this new case, even if it had been advanced at the outset, supports the proposition that the Commission acted in manifest error.

I reject the Claimants’ case of manifest error in respect of this issue. In my judgment the Commission acted within the margin of its discretion.

TNLC failed the Fourth PPI Criterion, as set forth in the Moderation Rationale, because:

This failure is further explained in the weaknesses section in Box 9 (which is set out in paragraph 391 above), in which there are two express references to specific proposals being “not consistent with current Best Practice”.

I have already dealt in some detail earlier in this judgment with the ITA requirements in respect of Best Practice, with the Phase One Feedback on Best Practice and with TNLC’s knowledge of those requirements.

The Claimants’ pleaded case on this issue is that “[t]he Defendant determined in error that the First Claimant’s proposals did not adequately align to relevant best practice or guidance. In this respect the Applicant did so”. There are no particulars to explain how TNLC’s proposals in fact aligned to Best Practice or guidance, or why the Commission acted in manifest error in arriving at the decision that they did not.

In their written opening submissions, the Claimants sought to address the lack of particularisation by explaining that TNLC’s Question 4 response made clear that (i) it would adapt (not simply adopt) the procedures and policies under the Third Licence which it was asserted were themselves “indicative of best practice”; (ii) they “as a whole” had experience through the Health Lottery; (iii) TNLC would seek accreditation from various governance bodies such as World Lottery Association and GamCare; and (iv) TNLC would comply with various codes (albeit these were not identified). The Claimants’ opening submissions went on to say that “[t]hrough a combination of not properly understanding or misapplying the concept of best practice and failing to adequately consider TNLC’s Q4 response, the GC made a manifest error”. I note that the alleged “misapplication” of the concept of Best Practice here appears to be closely related to the allegation to which I referred earlier in this judgment that the concept of Best Practice is “amorphous” and that it was applied by the Commission without definition or precision.

In closing, the Claimants said very little about this allegation. They did not appear to seek to rely upon the points made in opening submissions. As far as I can see there was only one short paragraph in their written closing submissions addressed to the point (in the section dealing with Issue 47(b)) which was in the following terms: “[a]s to the criticism that TNLC’s strategy did not adequately demonstrate how its proposals in relation to underage or excessive play would work in practice, the [Moderation Rationale] evidences that the PPI evaluators considered this was inter-related to their conclusion that TNLC had not adequately demonstrated how its proposals would align with Best Practice…Ms Sheldon confirmed this in her oral evidence”. This paragraph then fed into the submission that “whilst not every point in [Box] 9 was flawed, the clear preponderance were” and that it followed that the Evaluators’ conclusions (including that TNLC’s proposals did not align with Best Practice) could not stand.

As was clear from this submission, the Claimants were relying upon their submissions in respect of Issue 47(b) to cover their pleaded case on Best Practice. However, for reasons I have already explained in respect of that Issue, the Claimants’ case fails.

For the sake of completeness, I should address the other allegations that I have identified above, in case it was in fact the Claimants’ intention to continue to rely upon them. In my judgment they do not add up to a manifest error. In particular:

For all the reasons set out above, the Claimants’ case on this Issue fails.

TNLC failed the Sixth PPI Criterion for the following reason (set forth in the Moderation Rationale):

Under the heading “weaknesses” at box 11, the Moderation Rationale effectively repeats the same point, albeit making clear that TNLC’s proposal to use an affiliate for marketing is included in its response to Q11 (Channels).

Ms Sheldon explained in her written evidence, and I accept, that it was not the PPI Evaluators’ role to evaluate branding or marketing but that if there were points which they needed to be aware of which came out of other evaluation areas, they would consider them. Although she did not have a clear recollection (and there was nothing in the Moderation Rationale to assist), Ms Sheldon said in cross-examination (and I accept) that she thought that risks identified by Evaluators in other areas that might be relevant to PPI would have been passed to the PPI Evaluators for discussion during moderation. This is consistent with the Commission’s overall approach to evaluation. She said that this would not have involved the PPI Evaluators being shown the whole response to Question 11 but “some information was passed to us by the SMR”. Earlier in her cross-examination Ms Sheldon confirmed that she was thinking of an extract from TNLC’s response to Question 11 which said this:

The Claimants’ pleaded case is that “[t]he Defendant determined in error that [TNLC] had not adequately demonstrated that it would ensure that its marketing affiliate would ensure that its activities were not detrimental to Participants’ interests. In this respect, the Applicant did do so”. No further particulars were provided.

In their opening submissions, the Claimants relied upon the evidence of Mr Martin that TNLC’s “affiliates explanation was provided in the Channels bid response” (i.e. in response to Question 11) and that “[i]t goes without saying that if you are going to engage a marketing affiliate then you would have appropriate measures in place to ensure that suppliers complied with your general operating requirements…”. Mr Martin’s written evidence made no suggestion that PPI-specific risks related to TNLC’s marketing affiliate proposal had been identified in its PPI response to Question 4.

Mr Martin’s oral evidence at trial was in the same vein. He accepted that where TNLC was proposing to engage a marketing affiliate it was necessary to have “appropriate measures in place to ensure player protection”, but he said those measures had been explained “in the operations section” of TNLC’s Application. In fact, neither TNLC’s Channels response, nor its Operations section contains an explanation of the PPI risks that arose from TNLC’s proposed use of a marketing affiliate or TNLC’s proposals for addressing those risks. As to Mr Martin’s suggestion that “it goes without saying”, I agree with the Commission that this is plainly wrong. Applicants were required to demonstrate how their proposals satisfied the requirements of the ITA and the Fourth Licence.

In their closing written submissions, the Claimants took a different tack. First, their focus appeared to be upon an absence of reasons for the decision of the Evaluators. As I have already explained, this is not open to them absent a properly pleaded case to this effect. Second, the Claimants relied upon the fact that TNLC’s Question 4 response includes a section entitled “4.2.5 Marketing Communications” which (they now submit) expressly provides that “TNLC’s marketing partners would be subject to rigorous checks”. They failed to explain why this section had neither been highlighted in their opening submissions nor dealt with in the evidence of Mr Martin.

Section 4.2.5 includes the following:

Section 4.2.5 of TNLC’s Question 4 response was raised with Ms Sheldon in cross-examination and it was suggested to her that this section was proposing “a rigorous process for signing off on marketing communications”. Ms Sheldon responded that there was a difference between advertising and affiliate platforms as identified in TNLC’s response to Question 11. Ms Sheldon was then asked to look at section 4.3.4 of TNLC’s Question 4 response, which is in very similar terms to part of Section 4.2.5, and it was again put to her that this made clear that marketing partners would be subject to rigorous checks. Ms Sheldon again responded that there is a difference between an affiliate that is enabling sales and “somebody that is doing marketing”. She said that she did not recall the discussion in relation to affiliates very well but that she thought that the expectation was that further information should have been provided by TNLC (“there are other aspects to affiliates that would be over and above what is articulated here”).

Although Ms Sheldon’s evidence on this topic showed a lack of recall, and although I accept that the Fail in respect of Question 4 expressly arises in the context of “advertising and marketing” rather than the use of affiliate platforms to enable sales, on balance and in light of the evidence, I do not consider that it would be appropriate to infer (as the Claimants invite me to do) that the Evaluators must inevitably have fallen into error. I note that the Claimants’ point about the significance of sections 4.2.5 of TNLC’s response to Question 4 had never been raised prior to Ms Sheldon’s cross-examination (including in TNLC’s own evidence) and so Ms Sheldon was dealing with the point for the first time. It is perhaps unsurprising that she could not “convincingly” explain the thinking of the Evaluators this long after the event. However, I consider it important that while she fairly accepted that section 4.2.5 “could be relevant, in terms of having controls generally” she also continued to maintain her position that insufficient evidence had been provided. She pointed out that “this might be about the way that this was articulated and the level of detail associated with it. There could have been a disconnect in how it has been articulated in different places”. I also note the reference in the Moderation Rationale to condition 10.1 of the Fourth Licence, which provides that “the Licensee must do everything it can to ensure that the way in which the National Lottery products are promoted, sold and made available does not damage any of the Matters to be protected…” (emphasis added).

In my judgment, it was within the margin of discretion of the PPI Evaluators to determine that insufficient detail had been provided by TNLC and accordingly there is no basis to determine that the Commission made a determination on this point in manifest error.

In closing submissions, it was accepted by the Claimants that these two identified issues did not give rise to a separate breach. Instead, they submitted that drawing the strands of their submissions on Issues 47(a)-(e) together “the findings and reasons put forward by [the Commission] why it failed TNLC’s Qs 4 and 5 responses have not withstood scrutiny, nor been adequately justified by [the Commission] at trial”. Given the findings I have made in respect of Issues 47(a)-(e), I reject that case. The Commission made no manifest error in failing TNLC for PPI.

The Claimants submit that the Commission manifestly erred in awarding Allwyn a Pass for PPI. Its pleading on this point, although somewhat difficult to follow owing to the fact that it also deals in the same paragraph with Propriety, PPF and Financial Strength, is to the effect that Allwyn should have failed PPI because:

The Claimants provide no further particulars in relation to these allegations, but at trial it became apparent that the Claimants rely specifically upon two emails sent on the same day (16 November 2021) by Ms Kristina Kaku, the SMR for PPI, to (amongst others) Ms Sheldon. In the first email (timed at 11:19 am and entitled “PPI Risks from Branding” (“the Branding Email”), Ms Kaku identified what she described as “risks flagged from a Branding evaluator” for three of the Applicants, including Allwyn (Applicant 6). Ms Kaku stated “we can discuss these during Moderation to determine materiality”. Specifically, Ms Kaku observed that Allwyn was:

In the second email, timed at 4:54pm, and entitled “PPI Potential Risks from Propriety – Applicant 6” (“the Propriety Email”), Ms Kaku identified “potential risks to PPI” which had been raised by an Evaluator in respect of Propriety. Again, she observed that “we can discuss these during Moderation to determine materiality”. Specifically, Ms Kaku noted that Allwyn’s Question 3 response meant that it was proposing deposit limits which, from a player protection point of view, “do seem quite high and potentially out of the affordability range for most people”. Ms Kaku said she wanted to “flag this as a potential PPI issue”.

This was a reference to Allwyn’s response to Question 3 of the ITA (which fell under “Propriety”), a question which focused on the risks associated with financial crime. Under the heading “Spend Limits, higher-risk Games, payment mechanisms and higher-spending Participants”, Allwyn said this:

In their opening submissions, the Claimants accepted that the Moderation Rationale for PPI shows that the fact of deposit limits (i.e. the point raised in the Propriety Email) was discussed but they submitted that “crucially the appropriateness of the limits themselves was not”. As for the matters raised in the Branding Email, the Claimants relied upon the content of the Moderation Rationale in support of their submission that there had been no discussion of these matters. The Claimants went on to assert that the failure to consider these matters, properly or at all, and dismiss them as immaterial, means that Allwyn failed to demonstrate compliance with the Sixth PPI Criterion (“[t]here is nothing in the Applicant’s Business Plan or any other part of their ITA submission that is non-compliant with the Commission’s Statutory Duty to ensure that the interests of every Participant in the Lottery are protected”). Accordingly, they submit that there was no rational basis on which the Commission could have awarded a Pass in the PPI Evaluation to Allwyn.

In closing, the Claimants appeared to place reliance upon the First PPF Criterion (identified in paragraph 458 below and concerned with the Funds Protection Outcome), the Sixth PPI Criterion and the ITA requirement under Question 4 that an applicant’s PPS “must contain a complete set of measures to protect Participants’ interests, including… Not encouraging excessive play”. They then went on to assert that Allwyn should not have passed either the First and/or the Sixth PPI Criteria (it is unclear whether the earlier reliance upon the First PPF Criterion is in error).

I agree with the Commission that the Claimants’ pleaded case on these issues is vague and unparticularised. I also note that, even at trial, the Claimants’ case has not been entirely consistent. Nevertheless, I bear in mind that Ms Sheldon was able to deal with the issues raised by the Claimants in her witness statement and that it is therefore difficult to see any prejudice to the Commission or to Allwyn in permitting the Claimants to pursue the case they sought to advance in closing. Accordingly, I decline to determine these issues on a pleading point.

Looking at the evidence, I accept the submissions made by the Commission and by Allwyn that there is nothing in the complaints as they are now articulated.

Ms Sheldon’s evidence in her statement (which I accept) is that “Allwyn were fairly strong on PPI and were definitely a pass”. She explains that Allwyn was “providing a level of detail which reassured me as an evaluator that they had thought through various challenges and come up with clear solutions”. She recalls that there was a process “behind the scenes” to ensure that concerns raised by the Evaluators of other sections were passed to Evaluators dealing with the relevant section. She says she does not recall how the concerns raised in the Branding Email were dealt with but explains that generally “we did consider issues flagged from other evaluation areas and they were taken into account when we decided on whether the result was a pass or fail”.

Under cross examination Ms Sheldon went further, confirming that there had been “a conversation” at moderation but that she could not remember the specifics. Having been shown the Branding Email and the Propriety Email she said this:

I accept this evidence, which appears to me to fit with the probabilities. Specifically, I note from the PPI Moderation Rationale for Allwyn that the moderation took place on 17 November 2021 (the day after the Branding Email and the Propriety Email were sent by Ms Kaku). I also note that Ms Kaku was present at the moderation. I consider it most unlikely that she would not have expressly raised points she had drawn to the attention of the Evaluators the previous day in two separate emails and expressly flagged for discussion at moderation. Indeed, as explained below, there is evidence that several of Ms Kaku’s PPI concerns raised on 16 November 2021 were considered at Moderation. Further, I note that the content of the Moderation Rationale demonstrates that the risks associated with excessive play were discussed; the Commission concluded that Allwyn had demonstrated its understanding of those risks and had included relevant mitigations and appropriate controls. While I accept that there is no specific reference to the marketing issues raised in the Branding Email, I consider on balance (and I find) that those issues would have been discussed and taken into account, consistent with Ms Sheldon’s evidence to that effect.

Turning to the content of the Propriety Email, I take the same view. It is clear from the Moderation Rationale (and accepted by the Claimants) that proposed deposit limits (including the £500 deposit limit) were expressly discussed and assessed because details are set out in Box 3. I reject the Claimants’ case that it should properly be inferred that “the appropriateness” of the deposit limits was not discussed. The deposit limits were set out in Box 3 to the Moderation Rationale as examples of the “appropriate controls” proposed by Allwyn. In any event, I note the content of a detailed spreadsheet entitled “Highlighted Risks from Moderation Tracker” (which shows the extent to which risks identified in one area were being flagged in other areas and then tracked to ensure that they were resolved). This spreadsheet includes confirmation that the concern flagged in the Propriety Email had been considered at the Moderation meeting. The outcome recorded says: “considered, determined to not be a risk to PPI”. I note that this spreadsheet also refers to a number of other PPI risks raised by Ms Kaku on 16 November which it expressly records as having been considered. Although it is not entirely clear, it appears to me to be very likely that one of these risks was the risk identified in the Branding Email.

For all the reasons set out above, I do not consider there to be any proper basis for the Court to interfere with the Commission’s determination that Allwyn’s application for PPI was a Pass.

I should here return to the Claimants’ allegation that there was an inconsistent application of the ITA criteria as between TNLC and Allwyn. As I have already indicated, the Claimants contend that it can be inferred from Ms Sheldon’s evidence (and specifically what they say was her inability to explain why weaknesses noted against Allwyn’s PPI submission did not constitute a failure) that “there was inconsistent application in how the criteria were applied as between the Applicants, because the PPI evaluators were uncertain as to when a weakness would constitute a failure with them seemingly taking a more permissive approach for Allwyn and a less permissive one for TNLC”. They point to a pleading at paragraph 31.3 of their Particulars of Claim in support of this proposition.

The pleading on which the Claimants rely has been referred to above in connection with Issue 47(c). It asserts (essentially as an addition by way of amendments to an allegation of manifest error in relation to the Commission’s finding that TNLC had not adequately demonstrated a joined up and cohesive strategy) that various paragraphs in Ms Sheldon’s witness statement demonstrate a lack of understanding by the Commission’s Evaluators “of the difference between a feature of a bid which would properly be treated as a failure and one that would be treated as a weakness”. The pleading goes on to assert that “[t]his lack of transparency led here to an inconsistent application of the evaluation criteria”.

There is no similar allegation pleaded in relation to Allwyn’s Application and no suggestion in the Claimants’ pleading that particular “weaknesses” identified in respect of Allwyn’s Application should have given rise to a Fail, just as there is no wide-ranging pleaded case to the effect that the Commission took a more permissive approach to Allwyn than to TNLC. Had the Claimants wished to advance such a case then I consider that it should have been properly pleaded. While the pleading references paragraphs in Ms Sheldon’s witness statement which refer to “weaknesses” identified in the Moderation Rationale for both TNLC and Allwyn, it does not come close to raising the issues which the Claimants now seek to pursue.

However, even if I am wrong about the absence of any proper pleading, the case as now advanced is, in my judgment, unsustainable on the evidence. The paragraphs relied upon in Ms Sheldon’s statement record that weaknesses were identified in respect of both TNLC and Allwyn in the respective Moderation Rationales. Ms Sheldon explains (as is clear from the content of the Moderation Rationale documents themselves) that “[t]he points we put in the boxes which recorded weaknesses of an application were not necessarily points which would give rise to a fail” and goes on to say that the weaknesses identified for Allwyn “did not meet the threshold for a fail”.

Ms Sheldon was taken in cross-examination to the “weaknesses” section of the Allwyn Moderation Rationale, and she was asked why (notwithstanding the identified “weaknesses”) Allwyn had nonetheless been awarded a Pass. There followed a long passage of cross-examination during which Ms Sheldon said she was “struggling” to remember the detail. However, she explained that the weaknesses identified in respect of Allwyn “were not so sufficiently concerning that they would amount to a fail” and that the Evaluators had taken a view as to “how material or not these are considered to be”. She went on to say (in respect of a weakness identified at Box 7) that “we were satisfied that there was enough information there for it to be credible, albeit that there were some things that might need to be refined”. Mr Wilson confirmed in his cross-examination that he understood that the weaknesses identified in respect of Allwyn were “not material enough to affect the award of a pass”.

I accept Ms Sheldon’s (and Mr Wilson’s) evidence which is entirely consistent with the statement in the Moderation Rationale that:

Although I understand the Claimants’ point that weaknesses were identified in respect of Allwyn’s Application which did not result in a Fail (whereas the weaknesses identified in respect of TNLC’s Application did result in a Fail), it was well within the Commission’s margin of discretion to weigh up the materiality of identified weaknesses and to take a view as to whether they should give rise to a Fail or not. I accept the Commission’s pleaded case that where an applicant passed a Pass/Fail Question, Evaluators identified weaknesses which would need to be addressed if the applicant were to become the Licensee. The Court cannot second guess this approach or intervene to find that it was somehow flawed. It was not obviously wrong. Ms Sheldon’s inability to recall the details of the process is not surprising given the complexity of the Evaluations and the time that has passed since they were carried out. In my judgment, her poor recollection thus provides no basis for an inference of inconsistent treatment. It also provides no basis for the finding that I was invited to make by the Claimants in their written closing submissions (notwithstanding the absence of any proper pleaded case to this effect) that “had the PPI evaluators taken the same permissive approach in how they treated weaknesses in Allwyn’s PPI bid when evaluating TNLC’s PPI bid, then the PPI evaluators would have passed it”.

I should add that Ms Sheldon says in her statement (and I accept) that the process that the PPI Evaluators undertook to assess the Allwyn Application was “the same as that which we followed for the other applications”. I did not understand this evidence to be directly challenged in cross-examination and do not consider there to be any proper basis on which I could draw any different conclusion.

Protecting Participants’ Funds was addressed in section 8.2.1 of the ITA which explained that:

Section 14 of the ITA contained an explanation of the context and requirements while 22.4 identified the Questions that Applicants must answer in relation to PPF. For present purposes, only Question 7 is relevant: “Please provide your proposals to the Required Responses set out in Appendix G of the 4NL Trust Explanatory Note” (“the Required Responses”). The Required Responses in their updated form were located in the July Applicant Note, Appendix B, as confirmed by Mr Reid in re-examination.

There were 8 PPF criteria in section 8.2.1 of the ITA which had to be “demonstrated” if an Applicant was to achieve a Pass. Relevant for these purposes are the First, Sixth, Seventh and Eighth PPF Criteria:

An applicant would Fail where:

The First PPF Criterion required that the applicant met the Funds Protection Outcome, as expressly defined in the ITA by reference to Condition 16.1 of the Fourth Licence, which provided:

Guidance on Funds Protection was available at Appendix C to the July Applicant Note. A footnote in Appendix C addressing the terms of Condition 16 of the Fourth Licence stated that “A ‘do everything it can’ obligation requires the Licensee at all times to be able to satisfy the Commission that it has taken all reasonable steps and exercised all due diligence for the specified purpose”.

There were five individuals involved in the evaluation of PPF, Martyn Smith, Mr Reid, Mark Dwyer, Patrick O’Sullivan and Hugh Brady. The latter two were Evaluators provided by Redington. Mr Reid’s evidence, which I accept, is that the people in the PPF team brought “different skills and different experience”.

TNLC failed 4 of the 8 PPF Criteria, namely the First, Sixth, Seventh and Eighth, as set out above. In each respect the Claimants allege that the Commission was in manifest error and that TNLC should have been awarded a Pass.

The Claimants’ case (of manifest error in relation to each of the grounds for awarding a Fail) is captured in only one paragraph of the Claimants’ Particulars of Claim:

The Claimants no longer seek to pursue allegations that the Detailed Rationale in respect of PPF did not reflect either TNLC’s Application or comments made by the Evaluators. They also no longer seek to allege that, in moderation, Evaluators had pre-determined that the Application would fail PPF “and therefore carried out only a perfunctory review of the Application”. These were serious allegations which were not formally abandoned until closing submissions.

The Claimants’ case in relation to PPF takes a similar form to its case on PPI. It alleges (Issue 50) that the Commission determined four matters in error (which, had they each been scored a Pass would have led to a Pass overall on PPF). It also alleges that the Fail outcome on PPF was in error because it did not accurately reflect the contents of TNLC’s Application (Issue 49). The Commission contends that this case is wholly unparticularised and that, as was the case with PPI, the Claimants have sought to expand upon their pleaded case at trial in ways that should not be permitted by the Court. The Commission also contends that the Claimants’ case that TNLC ought to have passed PPF is “wholly untenable” owing to a deliberate choice on its part not to follow the rules of the Competition.

Question 7(3) was in the following terms:

The Final Reserve Balance was important because, as Mr Reid confirmed in his cross-examination, it was required to ensure that in the event of enforcement action (such as an insolvency event) the Trustee could promptly meet the Protected Obligations under the Fourth Licence.

TNLC’s Application (under Question 7(3)) calculated its costs (in the event that the Trust was wound up) as being £23 million. TNLC proposed that it could offset “assets of at least £8.3 million from the EuroMillions Relevant Deposit”, which it stated were “freely available”, against this £23 million:

TNLC proposed that the £15 million Final Reserve Balance would be funded by a surety bond in that amount to be provided by Barclays Bank Plc and Société Générale in equal proportions.

As explained in the PPF Moderation Rationale, TNLC failed the First PPF Criterion because its response to Question 7(3):

This point was explained later in the Moderation Rationale at Box 2 as follows:

A further concern was raised under the “weaknesses” section to the effect that TNLC’s website-only solution for claiming prizes would cause delays and would exclude Participants that do not have digital access. This was “not consistent with the Funds Protection Outcome (Licence Condition 16.1)”.

TNLC’s pleaded case for this allegation (as set out above) is limited to the allegation that the Commission “determined in error that [TNLC] had not adequately demonstrated that its proposals ensured the Funds Protection Outcome would be met”. It provided no particulars of this allegation.

In opening, the Claimants specifically pointed to the risks identified in the two sub-paragraphs in Box 2 (set out above). The Claimants said (by reference to the evidence of Ms Taylor) that the Commission’s reasoning failed to recognise that the Claimants’ reliance on the EuroMillions Relevant Deposit was stated in the context of an Enforcement event involving the winding up of the Trust, which would itself take time such that the EuroMillions Relevant Deposit would not be required immediately. Therefore a delay in the return of the EuroMillions Relevant Deposit was “not a significant factor” with respect to TNLC’s proposal.

In closing the Claimants’ case was advanced on three bases. First, the Claimants assert that the PPF Evaluators fell into error because they relied upon “a combined risk” which was “on any view, a very low one”, namely that (i) the £8.3 million EuroMillions Relevant Deposit would not be received until after 6 months, as opposed to within that period; and (ii) that without the £8.3 million, there would be insufficient funding “until the £8.3m was received”. This reflected the argument advanced in opening.

Pausing there, it is difficult to see how taking a decision based on an acknowledged risk, even if it is “very low” or “not significant” (which is not something that the Court can sensibly determine) can be irrational or outside the scope of the Commission’s margin of discretion. The evidence from Ms Taylor and from Mr Reid (in his statement and given orally) illustrated that there was potential for doubt over the level of risk that was to be attached to the possibility that the EuroMillions Relevant Deposit would not be available until six months after an Enforcement event such that the Trustee would not have funds to discharge Participant Obligations. Ms Taylor accepted in cross-examination that the EuroMillions Relevant Deposit may not be returned for some 6 months and that it could not be used immediately – in other words it was not “freely available”. Mr Reid accepted in cross examination that it may take time to wind up the Trust once an enforcement event (such as insolvency) occurred such that there may not be an immediate call on the funds. In re-examination he explained that “we don’t actually know whether it would take two months three months, six months but the risk is if it took anything near three months, anything near six months, the trustees would not have enough money to fund all the activity by the receiver, etc. to repay all the participant obligations. So that was the risk created by having to wait for six months at least for EuroMillions to pay back that deposit”. I accept this evidence and I find that the Commission’s determination that there was a risk in this regard was neither unreasonable nor irrational.

Second, the Claimants assert that even if the PPF Evaluators acted reasonably in discounting the £8.3 million, “they were wrong to conclude that TNLC did not then identify any headroom within its contingency funds which could be used to cover any shortfall”. Specifically, they now rely upon TNLC’s response to Clarification Questions concerning Question 7(4) which identified that out of a headroom of £49 million, only £29.8 million would be needed to fund the Minimum Primary Reserve Balance Threshold, thereby leaving approximately £19 million to cover any shortfall. The Claimants therefore contend that it was factually incorrect for the PPF Evaluators to conclude that there was a risk arising by reason of a shortfall relating to the return of the EuroMillions Relevant Deposit.

This was an entirely new case only advanced for the first time in cross-examination of Mr Reid. It relies upon a new allegation that the Commission formed an erroneous conclusion in light of the available information.

I am not inclined to permit this unheralded attempt to expand the Claimants’ case. This allegation should have been pleaded if it was to be pursued. It is not fair to a defendant to be faced with an allegation of factual inaccuracy such as this for the first time in cross-examination. The Commission did not have the opportunity to put this point to the Claimants’ witnesses, as it might well have wished to do.

As to its merits, the Claimants cross-examined Mr Reid on the point. He was taken to a TNLC Clarification Question response which dealt with a question raised by the Commission in respect of Q7(4) (in other words a different question from the one with which this Issue is concerned). The response confirms that there was a “headroom of £49 million” in TNLC’s funding arrangements, which came from two sources: £24 million in cash provided “through initial equity” and £25 million “available under an equity call arrangement up to the end of Year 3 of the Licence Period” (“the £25m Contingency”). Mr Reid confirmed that bearing in mind that TNLC would need to use £29.8 million to fund the Minimum Primary Reserve Balance, that would leave circa £19 million still available “at the start of the Licence period … assuming that money was not used for anything else”.

It was put to Mr Reid that the availability of this £19 million “would meet the concern” about how TNLC would fund the £8.3 million shortfall in the event of money not being available from Euromillions, because TNLC would have £19 million “spare”. However, Mr Reid responded:

Mr Reid accepted that the content of the Moderation Rationale (which referred to TNLC’s response to “the Commission’s request of ‘Further Clarification required on Trust balance/Reserves Q7(4)’ sent 25 October 2021”) implied that the issue of headroom had been raised “and we’ve concluded there was nothing in particular [in the response] that would cover EuroMillions”. Mr Reid was asked whether “in principle” he would accept that, while he was referring to the fact that the £25m Contingency was not going to be available after the third year of the Licence, “the funding could be replenished”. He responded that “[t]he funding situation could have changed but we had nothing in the response to indicate that and nothing in the response to indicate that any funding replacement would actually be used to fund this balance difference”. Mr Reid was then taken to a statement in the Clarification Response which made clear that TNLC’s general account was forecast to grow from the start of the Licence period and that “as a result we would expect the additional cash to be available to provide further top ups”. Mr Reid’s view of this was that TNLC was clarifying that they would expect cash to be available for further top ups, but he pointed out that “again, there’s no reference to actually using any of that funding for the final reserve balance”. Ultimately it was his evidence, which I accept, that the point had been considered by Evaluators, that they had looked at the Clarification Response to see if it contained anything that might help and that “the consensus view was no one had identified anything that could”.

In light of this evidence (and even if I had been prepared to permit the Claimants to run it), I would have rejected this new point. In closing the Claimants asserted that the Evaluators had “missed” the fact that there was headroom of £49 million and that, even if part of that had been used it could be “replenished”. However, that submission is not supported by Mr Reid’s evidence. TNLC’s best point (perhaps) was that Mr Reid was mistaken when he said initially that there was nothing in the Clarification Response to indicate that the funding position might change; however, his evidence was clear that the point had been considered by reference to the Clarification Response and that there was nothing to suggest that any funding replacement would actually be used to fund the balance difference. I consider that it was within the margin of the Commission’s discretion to take this view.

Third, and finally, the Claimants sought to advance a case by reference to the Commission’s reasoning in the Moderation Rationale at Box 4, under “weaknesses” to the effect that the Commission was wrong to conclude that TNLC’s “proposed website-only solution for claiming prizes could cause delays and would exclude Participants that do not have digital access”. Essentially, the Claimants now allege that there is nothing in the Licence Conditions or in the ITA statement of requirements for PPI or PPF that requires an applicant to provide a physical as well as a digital method of making claims and that, accordingly, it was a manifest error for the PPF Evaluators to rely on this reason in concluding that TNLC’s approach was not consistent with the Funds Protection Outcome (Licence Condition 16.1). This they say is “all the more so” in circumstances where the Funds Protection Outcome “did not have a precise definition”.

There is nothing in the Claimants’ statement of case, evidence or opening submissions even to alert the Commission to the fact that this point would be run and, once again, I am not inclined to permit it. The first time the Commission had any notice of the point was when it was put to Mr Reid in cross-examination.

In any event, Mr Reid explained in his evidence that TNLC’s proposal was “inconsistent with the licence condition in terms of promptly discharging all participant obligations”, a point on which he was not challenged. Allied to this evidence he explained that “a digital solution would reduce the complexity for participants who could use a digital solution” (the clear implication being that complexity and thus delays may be experienced where participants could not use a digital solution).

Condition 16.1 of the Licence requires the Licensee to “do everything it can to ensure that at all times the Funds Protection Outcome is achieved”. The Funds Protection Outcome, as defined in Condition 16.1 “is that at all times…(a) funds are available to enable Protected Obligations to be promptly discharged; (b) all Protected Obligations are promptly discharged”. Protected Obligations under the Licence include obligations to pay prizes. I can see no basis whatever for forming the view that the Commission was in manifest error in determining that the Applicant’s proposed solution “could cause delays” and that it would not therefore be in line with Licence Condition 16.1.

Mr Reid did not agree with the proposition that if a physical means of claiming prizes was required under the Licence it would have been mentioned. He pointed to the obligation in the Licence “to make sure that participants are paid and paid properly and as part of protecting interests…there is an obligation there to make sure there we’re not disadvantaging individuals who are unable to use digital channels in terms of getting their payments back”.

I reject the Claimants’ case that, even assuming a properly pleaded case (or any pleaded case on this point) it has established a manifest error.

TNLC failed the Sixth PPF Criterion because (as set out in the PPF Moderation Rationale) it did not:

Under the heading “weaknesses”, Box 3 said this:

The Claimants’ pleaded case goes no further than the assertion that the Commission determined in error that TNLC had not adequately demonstrated that it “would have sufficient reserves to ensure the Funds Protection Outcome”. In opening, the Claimants sought to address the lack of particularisation in this pleading by submitting that the Commission was wrong to rely on the fact that TNLC had not referred to insurance in its Clarification Response (a point that had been trailed in the evidence of Ms Taylor). The Claimants point out that TNLC had relied upon the availability of insurance in its Application Response to Question 7(4), at 7.4.5. They say that the option of using “headroom”, identified in the Question 7(4) response was intended only as an “alternative” to the solution already proposed in relation to Question 7(4) and they submit that “the potential risk of Implementation cost overrun only arises if TNLC relies solely upon the headroom in its funding arrangements, it does not arise if TNLC relies upon the availability of insurance, which was the preferred solution it indicated in its submission”.

Ms Taylor’s evidence explained that the use of insurance was proposed as a mitigation in TNLC’s Application in circumstances where there was a difference of opinion over whether funds held in the Third Licence Trust would be transferred to the Fourth Licensee. The Application recorded that TNLC’s “proposed mitigation if the funds do not transfer is to put in place prize insurance so that the guaranteed prizes can be fully funded at all times”.

In closing, however, the Claimants appeared to have abandoned this point (“putting aside the issue of prize insurance”). Instead they sought to advance an entirely different case to the effect that the “key aspect” of the Commission’s reasoning was the risk of an “Implementation cost overrun” but that this was “not a genuine risk” identified by TNLC but rather “a hypothetical scenario that applicants were required to address as part of their Financial Strength response (i.e. Financial Scenario 3)”. The Claimants submitted that “the evidence shows that PPF Evaluators did not adequately consider the content” of TNLC’s Clarification Response which explained that:

The complete mismatch between this new case and the case advanced in opening meant that the Commission’s closing written submissions inevitably focused primarily on the submissions made by the Claimants in opening.

Once again it is completely unfair and inappropriate for the Commission and the Court to be presented with an entirely new case in closing submissions and I decline to permit it. The Court has no submissions from the Commission to assist on the point beyond general submissions about the evidence which might be said to relate to this issue. In any event, the point is of no merit. At its heart is the question of whether the Evaluators could properly have arrived at the view (in light of all the information they had received from TNLC) that there was a genuine risk of cost overrun. Mr Reid addressed this point in his evidence:

I accept this evidence. It is neither irrational nor does it suggest conduct falling outside the scope of the Commission’s margin of discretion. During Mr Reid’s cross-examination, the Claimants appeared to rely upon an admitted failure to look at what TNLC was saying in its Question 31 (Scenario 3) response. However, Mr Reid’s evidence was that “the instruction from the Gambling Commission…was we focused on the question we’d been asked. If there was a need to go and read another question, then that’s not something you should take into evaluation. You should not be reading other documents”. That this was the approach the Commission would take at Evaluation was made clear to all Applicants in the July Applicant Note. Mr Reid went on to accept (fairly) that if the Clarification Response “had included more information” it could have been taken into account, but it did not. Although he was then taken to the more detailed information in TNLC’s Application in respect of Question 31, it was not directly put to him that if the Evaluators had taken this information into account, then they would have arrived at a different assessment in relation to risk.

Accordingly, I reject the Claimants’ case that it was “simply irrational” for the PPF Evaluators to ignore the detail “behind” the information set out in the Clarification Response. I also reject the suggestion (which was not directly put to Mr Reid) that, had this material been considered, the PPF Evaluators would have concluded that “the risk was a limited one at most”.

The PPF Moderation Rationale records that TNLC failed the Seventh PPF Criterion because it did not:

Under “weaknesses” in Box 6, this point is repeated and expanded upon to add the words “and does not provide any rationale for using Microsoft Excel for reserve monitoring or fully demonstrate how any potential risks associated with using spreadsheets would be mitigated (Q7.7, p.2, Section 7.7.2)”.

As with TNLC’s other PPF manifest error allegations, the Claimants’ pleaded case is limited to an allegation that the Commission determined in error that TNLC had “not adequately demonstrated how it intended to operationalise the Trust Arrangements”. No further particulars were provided.

In their written opening submissions, the Claimants explained that their case was that it was “simply incorrect” to say that TNLC had provided insufficient evidence in this regard and further that, of the four Evaluators, only Mr Reid criticised (and failed) TNLC’s response to Question 7(7) on this basis in his own Evaluator Note. The Claimants pointed out that TNLC’s Application explained that “the finance team would use an Excel-based analysis to check whether the threshold or minimum reserve levels had been reached”.

Save that the Claimants appeared in closing to have abandoned the allegation that Mr Reid was the only PPF Evaluator who made this point (the Evaluators were unanimous at Moderation that TNLC should fail, as Mr Reid confirmed in his evidence), they continued to pursue the allegation that the PPF Evaluators’ reasoning was wrong because, as a matter of fact, TNLC had explained how reserves would be replenished.

Setting aside the point that (again) this case was never pleaded and should not be permitted for that reason alone, there is nothing in this allegation. Mr Reid confirmed in cross-examination that the matters set out in Box 6 “are the reasons for failing the operationalisation of the trust”. He accepted in cross-examination that “in the round” (looking at the Clarification Response which related to Question 7(4)), it was wrong to say that TNLC had not explained how the Primary Reserve would be replenished, but he went on to say that:

I understood this answer to be referring to the fact that the Clarification Response was concerned with a different issue (how any loan paid by TNLC to the Primary Reserve could be replenished and not how funds could be replenished more generally).

Even assuming that, as the Claimants submit in closing, Mr Reid’s evidence set out above supports the proposition that the Commission made “a plain error” in its reasoning as to the lack of explanation by TNLC as to “the mechanism for replenishing reserves” (which in my judgment it does not), it is important that Mr Reid also made the point in his evidence that:

Another reason concerned the use of Microsoft Excel, but the Evaluators’ decision on this was not challenged in the Particulars of Claim and no case was pursued in respect of this reason in closing. There is no basis on which to conclude that the overall decision to fail TNLC in respect of the Seventh PPF Criterion was manifestly in error or outside the scope of the Commission’s discretion and the Claimants’ cross-examination of Mr Reid did not even attempt to establish such a case. It was not suggested to Mr Reid that if the alleged error had not been made TNLC would have passed in respect of this Criterion and nor was that suggested in closing.

As is clear from the PPF Moderation Rationale, TNLC failed the Eighth PPF Criterion on the grounds that it did not:

Once again, the Claimants’ pleaded case is limited to an allegation that the Commission determined in error that TNLC had “not adequately demonstrated how its proposed reporting would enable compliance to be monitored”. No further particulars were provided and the Claimants’ evidence did not expand further on this point.

The first time that the Claimants sought to explain this allegation was in their opening submissions in which they contended that “the main reason given seems to have been provided solely by Mr Reid and is not properly explained”. They went on to say that “in any event, TNLC’s bid submissions did adequately explain reporting and compliance”.

In closing, the Claimants observed that the point was short. They accepted that TNLC had not set out an Environmental and Social Governance Policy (“ESG Policy”), but they contended that it had instead set out a “pathway to producing one”, a proposition with which Mr Reid appeared to agree. They pointed to the approach taken by other PPF Evaluators to ESG Policy, as evidenced in their individual Evaluator Notes (Mr Smith did not consider it a basis to fail TNLC, Mr Dwyer did not mention ESG Policy and the Redington Evaluators (Mr O’Sullivan and Mr Brady) considered TNLC’s approach to ESG Policy a sensible one). They then relied upon Mr Reid’s concession that if the lack of an ESG Policy had been the “only weakness point, fail point” that it was “possible” that it would not have been a reason to fail TNLC for PPF, albeit that he added “but I can’t say that for definite”. He also pointed out that “describing the ESG Policy was a key…requirement of answering the question”.

Where, however, the lack of an ESG Policy was not the only reason identified in the Moderation Rationale for the failure of TNLC on the Eighth PPF Criterion, I do not see where this takes the Claimants (even assuming it is appropriate to permit them to advance an entirely unheralded case in closing, which in my judgment it is not). As Mr Reid explained in his evidence, and I accept, the lack of an ESG Policy was “one of several areas” within PPF where TNLC “had not documented policy as requested in the question”.

There is no basis on which I could find that the PPF Evaluators’ decision to fail TNLC in respect of this criterion was in manifest error or outside the scope of the Commission’s margin of discretion. I accept Mr Reid’s evidence that the Evaluators carried out a thorough evaluation of TNLC’s bid and were unanimous at moderation that it should fail. The Moderation Notes were approved by all Evaluators. That the Evaluators may have taken different views prior to moderation does not undermine the outcome following the moderation process.

In closing I did not understand the Claimants to suggest that there was any “stand-alone” issue on PPF arising in respect of Issue 49 (“Was the fail outcome in respect of PPF in error because that outcome did not accurately reflect the contents of TNLC’s Application?”). The Commission pointed out that no specific features of TNLC’s Application had ever been identified and this allegation does not appear to have been put to Mr Reid (save in so far as it overlapped with the issues at Issue 50). Accordingly, for all the reasons discussed above, I find that there was no manifest error.

Similarly I did not understand there to be a “stand-alone” issue in respect of Issue 50(b) (“Did the Commission determine in error that TNLC’s bid should fail in respect of PPF?”). Again, there was no manifest error.

Given my findings in relation to the pleaded issues (and indeed the unpleaded issues), there is no need for me to deal here with the Commission’s submissions in closing that TNLC could never have passed PPF owing to its refusal to follow the rules of the Competition: specifically that it refused to apply a Bid Assumption set out in the July Applicant Note. I shall instead address the question of the Bid Assumption in connection with the Issues arising in respect of Financial Strength.

The Claimants do not suggest that either Allwyn or Camelot should have been failed on PPF.

The requirements for Financial Strength were set out in the ITA at section 8.3 (containing the Pass/Fail criteria) which explained that:

There were 7 Financial Strength criteria in section 8.3 which had to be “demonstrated” if an Applicant was to achieve a Pass:

An Applicant would Fail where:

Further information on Financial Strength was set out in section 13. Section 22.5 identified the Questions that Applicants were required to respond to in dealing with Financial Strength. These were:

Amongst other things, Question 8 required applicants to provide with their Phase Two Applications copies of legally binding financing agreements to evidence that the applicant had sufficient finances committed and available to enable it to meet the Financial Strength requirements. Various categories of evidence to support the availability of equity funding were also required. Applicants were required to demonstrate how they would have sufficient financial resources to meet the costs they would incur in connection with Implementation and transition under all specified scenarios. The Fourth FS Criterion involved demonstrating that the proposed financing structure “is obtainable and implementable and funding providers have the financial capacity and capability to support financing commitments”.

Responses to Question 9 were required to include a completed Key Subcontractor Financial Strength Template, the “processes, procedures and controls in place for each Key Subcontractor to ensure that they are sufficiently financially resilient in the event of supply chain disruptions” and details of any financial risks identified by the applicant which might disrupt the supply chain.

Section 23 of the ITA sets out guidance on an applicant’s Financial Response. This was to consist of a “Base Case” (to be provided under Question 28) designed to act as “the principal forecast”, together with a “Breakeven Case” (to be provided under Question 29), designed to act as “an alternative forecast in a breakeven scenario” and an “Upside Case” (to be provided under Question 30). Section 23.1 explains that the Financial Strength Scenarios (to be completed in response to Question 31) “will model the impact of decreases in revenue or increases in costs (as compared to the Base Case), on the Licensee’s ability to meet its obligations under the Fourth Licence, Enabling Agreement and Cooperation Agreement”. Applicants were required to complete the Financial Strength section of the ITA with reference to the outcome of these Financial Strength Scenarios.

Section 23.7 of the ITA set out the Financial Strength Scenarios that Applicants were required to address in their response to Question 31. It explained that:

The Financial Strength Scenarios identified in the ITA were replaced by a new list of Financial Strength Scenarios set out in the July Applicant Note. Relevant to the Issues arising in this case was Financial Strength Scenario 3 (“Scenario 3”), which required applicants to demonstrate financial resilience in circumstances where “[i]nvestment costs (Implementation Costs and forecast capital expenditure throughout the Fourth Licence Term) are 50% higher than those projected in the Base Case” – in other words, as explained in TNLC’s bid “all the operating costs, directors’ remuneration and capital spend incurred” would be 50% higher both during the Implementation Period and throughout the Fourth Licence term.

The July Applicant Note and its Appendices also contained additional amendments and guidance. Yet further guidance was provided in the Financial Strength Applicant Note.

The three Evaluators for Question 8 were Nick Thomas, Stephen Spencer and Sarah Ann Jones. Only Ms Jones, who was the lead Evaluator, gave evidence. She explained that as part of the application process, she had identified that she would need support analysing complex financial structures and finance documentation and that, accordingly, the Commission had put in place additional support provided by Hogan Lovells and Rothschild both at Phase One and Phase Two. Ms Jones confirmed in her oral evidence (and I accept) that this, together with the applicant guidance notes, was sufficient to enable her to undertake her role. Ms Jones also raised a number of Clarification Questions on how the guidance notes should be applied.

The Evaluators for Question 9 were Peter Morland, Stefan Sanchez and Caroline Severne. Only Ms Severne gave evidence.

TNLC’s funding package was summarised in response to Question 8. In summary, TNLC proposed a funding package of £216 million (plus the £25m Contingency) for its Base Case. This comprised £71 million of equity financing to be provided by The New Lottery Company Holdings Limited (a wholly owned subsidiary of N&S PLC and the immediate holding company for TNLC) together with external funding of £145 million provided by Barclays, Société Générale and HSBC. These bank facilities of £145 million comprised a £120 million term loan facility and a £25 million Revolving Credit Facility (“RCF”). The £25m Contingency financing was available from N&S PLC through a binding equity call contract.

TNLC failed 3 of the 7 Financial Strength Criteria for Question 8, namely the First, Second and Third FS Criteria.

The Commission’s reasons for failing TNLC in relation to Financial Strength are set out in the Question 8 Moderation Rationale and the Detailed Rationale. The Question 8 Moderation Rationale sets out a consensus rationale statement which first identifies the Financial Strength Criteria that TNLC has failed and then goes on to refer to a “combination of factors” which “considered together” gave rise to a material risk. Ms Jones confirmed that this was a summary of the “key reasons” for the decision to fail TNLC and she explained that this was “a holistic assessment, in terms of whether the applicant had provided sufficient evidence to demonstrate whether it could establish and maintain the financial strength of the applicant” and that “some of the factors were significant—very significant, and some were less significant, but were considered aggravating, so sort of added to the overall risk…as part of the holistic assessment”. Although the Claimants sought to suggest in cross-examination that it was only the combination of factors together which gave rise to a material risk, Ms Jones rejected that suggestion, observing that “we failed it because there were a number of factors which gave rise to a material risk”. I accept that evidence.

The Claimants allege that the Commission was in manifest error in its decision on various factors identified in the Moderation Rationale and that TNLC should have been awarded a Pass (Issues 52(a)-(f)). I deal with these under appropriate headings below.

In its Question 8 response, TNLC explained that “[d]uring the Licence Period, the generation of working capital through trading activities provides the funding required for the further capital investment, which is largely delivered in years one and two of the Licence with refreshes in key areas staged throughout the Licence”. Under the heading “Risk Assessment”, TNLC stated that during the Licence Period the key risks that affected the sufficiency of the financing were (amongst others) “[t]he requirement to maintain working capital”. TNLC’s response was supported by its Financial Model.

As recorded in the Question 8 Moderation Rationale, the Evaluators concluded that “the Applicant’s Base Case model is materially reliant on assumed working capital inflows creating a risk that the Proposed Licensee’s funding will be sensitive to deviations from those assumptions” and that TNLC had not demonstrated how it would mitigate this risk. This referred back to the First FS Criterion.

This reason was expanded upon in Box 2 under the heading “weaknesses” as follows:

The Claimants’ pleaded case on this issue is that:

As explained in closing, the crux of TNLC’s complaint is now that the Question 8 Evaluators failed adequately to scrutinise TNLC’s proposed use of working capital in order to inform themselves of (i) whether it presented a risk; and (ii) if so, the extent of that risk.

Ms Jones’ evidence in her witness statement, which I accept, is that (as recorded in the Moderation Rationale), the Question 8 Evaluators had determined that TNLC was materially reliant on working capital inflows (in her oral evidence she explained that “materially reliant” simply meant “reliant”). Her statement then records that the funding of capital expenditure modelled for years 1 and 2 (a total of £227 million) “was dependent on the robustness and deliverability of the working capital assumptions rather than certainty of funds provided through equity or loan arrangements” and that “[g]iven the magnitude and importance of the working capital movements we concluded there was a risk to the timely funding of this expenditure”. Although TNLC relied on a number of mitigations, the Evaluators concluded that it did not adequately demonstrate that these would all be available and/or deliverable in a manner compatible with the Licence.

Ms Jones’ evidence on this topic was explored at some length during her cross-examination. Ms Jones explained, and I accept, that the Question 8 Evaluators reviewed TNLC’s Base Case Model including the “further workings behind it” to ensure that they understood where the figures came from. They were aware from TNLC’s Base Case Supporting Narrative that it had based its working capital assumptions on an analysis of Camelot’s Annual Reports – Ms Jones confirmed her view that this was “reasonable” although she subsequently explained that there was inevitably “an element of risk” around making assumptions as to the generation of income. Ms Jones confirmed that the Question 8 Evaluators were also aware of a Clarification Question on the issue of working capital together with TNLC’s response to that question (dated 17 December 2021) which Ms Jones said had been considered. Ms Jones explained that it was not the role of the Evaluators to arrive at a view as to the robustness or deliverability of TNLC’s assumptions but that a cost modelling team had looked at the models (although she had no recollection of receiving their views on TNLC’s Model).

Ms Jones was clear in her evidence that the fact that the capital expenditure was being funded through working capital inflows was the risk that Evaluators were concerned about: “working capital inflows aren’t certain, in terms of when they arise”. This gave rise to an “inherent risk”. This was particularly so given that “the Commission’s guidance was very clear about having committed funds and sources of funds being clear and deliverable” (see for example the First and Third FS Criteria). Ms Jones fairly accepted that applicants had not been told in the ITA that they could not rely upon working capital but she said that “it carries a risk, and it carries more risk than if you’d had the…loan arrangement in place or other types of fund”. She pointed out (correctly) that “TNLC actually identified a risk themselves about working capital and proposed some mitigations for dealing with that risk”. It was in this context that Evaluators then looked at the mitigations that TNLC was proposing.

I accept Ms Jones’ evidence which does not appear to me to support the conclusion that the Question 8 Evaluators acted irrationally or in error. TNLC says that it was incumbent upon the Evaluators to scrutinise (and analyse) TNLC’s Model in order to reach a conclusion on whether its proposals presented a risk and, if so, the extent of the risk. I reject that suggestion. TNLC chose to make assumptions as to working capital; that these were reasonable assumptions did not mean that they did not carry risk – that will invariably be the case with assumptions, as TNLC itself recognised in its bid when it specifically identified the requirement to maintain working capital as a risk.

It was not irrational or erroneous to form the view that the use of working capital was more risky than other forms of funding or that, in the circumstances, the Commission needed to be satisfied that there were appropriate mitigations in place. There is no basis on which I could properly find, as the Claimants invite me to do, that there was an insufficient basis upon which to conclude that TNLC’s proposals to use working capital funding presented a risk to the timely funding of capital expenditure and I decline to do so. In my judgment the Evaluators’ decision fell well within the scope of the Commission’s margin of discretion.

TNLC’s suggested mitigations for the risks in its proposals were threefold: first it proposed to “flex” its dividend declarations which it said would be consistent with its dividends policy; second it proposed using the £25m Contingency; and third it suggested using asset financing “as an effective mitigation” for some of the financial risks within the funding package more generally. I shall return to these when considering Issue 52(f).

As I have identified above, TNLC’s Application included a debt facility with Barclays as the lead arranger. This was dated 5 October 2021 and was described as “£145,000,000 Single currency term and revolving facilities agreement” (“the Funding Agreement”).

The Question 8 Moderation Rationale identified a material risk (in respect of the Third FS Criterion) in relation to TNLC’s proposed debt funding, specifically that:

In Box 3 under the heading “weaknesses”, the Moderation Rationale repeated this point as follows:

In their pleaded case, the Claimants alleged that this conclusion was manifestly erroneous because it was based on a mischaracterisation of “the nature of the conditions of [TNLC’s] proposed debt funding”. In their opening submissions, the Claimants sought to explain this further, pointing out that the relevant requirement in the Third FS Criterion was that there should be no “material conditions associated with funding”. They said that the Commission had erred in regarding the conditions associated with the provision of the debt funding as “material conditions”. They alleged that these conditions were in fact “customary financing conditions” and that the Evaluators had done little more than note the existence of conditions in the Funding Agreement, without giving proper consideration to whether they “were anything other than immaterial or whether there was really any prospect of those conditions being triggered so as to cause TNLC to lose access to the funds”.

In closing, the Claimants chose largely to focus on the fact that Ms Jones had often been unable to recall the thought process undertaken during moderation in respect of the conditions. They made a couple of points about the change of control provisions, and they submitted that absent documentary evidence on the “hair triggers” point and absent proper explanations from Ms Jones, “the only viable conclusion is that this point was obviously wrong”. They did not seek to suggest that the Commission had made a manifest error overall in the view it had taken as to the risks arising by reason of the conditions in TNLC’s Funding Agreement.

Guidance on the approach that the Commission would take to conditions in Finance Agreements was provided to Applicants in Appendix A to the July Applicant Note. This guidance expressly recognised that Finance Agreements may include conditions. It went on (at paragraphs 7.4-7.8) to provide further guidance on the appropriateness of particular types of conditions and the circumstances in which these might be acceptable. Where a Finance Agreement was with an Unrelated Finance Provider who was a commercial lender, the Commission stated that any “material adverse effect” or “material adverse change” condition “may not undermine the Financial Strength Requirement”, subject to (i) that condition excluding matters such as “due diligence, the operation or performance of the National Lottery, regulatory or legal change or the nature, structure or characteristics of the Applicant or Licensee” and “any reasonably foreseeable scenarios of change”; and (ii) the applicant demonstrating (including through the Implementation Contingency Protections) how it will ensure that there is “sufficient resilience to ensure that a failure to achieve a milestone will not, in any reasonably foreseeable scenario, result in the Licensee being unable to implement its Application” and “sufficient commercial incentive on the Incoming Licensee to ensure that the Licensee implements the Application”.

Further detailed guidance on conditions in finance agreements with Unrelated Finance Providers was given to applicants in the Financial Strength Applicant Note at section 3. Amongst other things, the Commission stated that:

Ms Jones explained in her witness statement, and I accept, that Evaluators had concerns about TNLC’s debt funding arrangements as a consequence of various conditions included in the Funding Agreement. Specifically, as set out in the Question 8 Moderation Rationale this included concerns in respect of:

In addition, as Ms Jones explained, a “certain funds” period was important “because it restricted the number of conditions that applied during the draw down period”. Accordingly the absence of such a provision was a “relevant consideration”. The Claimants also made no mention of this in their closing submissions.

In her oral evidence Ms Jones explained, and I accept, that she had immersed herself in the detail of the conditions at the time, that she had had legal assistance and that the Evaluators had discussed the conditions in moderation. I can see nothing improper or unreasonable in Evaluators seeking legal advice in respect of the interpretation of complex legal documents and there is no pleaded case that the interpretation put on those documents was obviously wrong. Furthermore, Ms Jones rejected the suggestion that she had delegated or deferred her evaluation role to the legal advisers. I accept her evidence. Although she did not always have a clear recollection of the detail (unsurprising given the complexity of the points on conditions in the Funding Agreement, particularly the “hair trigger” provisions), I can see no basis on the evidence to find anything other than that the Commission took a rational approach to the evaluation of conditions and that it acted well within the scope of its discretion in determining that they presented a risk. The Commission was entitled to conclude (with the benefit of legal advice) that the conditions in the Funding Agreement (or lack of provisions) might give rise to a risk of TNLC being unable to access funding and/or of its repayment obligations being triggered. Even if the Claimants are right that clause 23.4 of the Funding Agreement in fact provided for materiality (a point I need not decide), the Claimants have not even sought to make out a case in respect of the material adverse change conditions or the absence of a “certain funds” period.

I agree with the Commission that the question of whether the conditions were “material” within the meaning of the Third FS Criterion (raised by the Claimants in opening) was a matter of judgment for the Commission. By way of example, there is no basis on which the Court could properly find that the Q8 Evaluators were wrong to regard the change of control provisions as “broad” and it would not be appropriate for the Court to descend into the arena on this point. I also agree with the Commission that the Claimants’ submissions in opening really amount to no more than subjective disagreement over the extent of the risk to be attached to these conditions.

The Moderation Rationale identified as a material risk that:

Under the heading “weaknesses” it also identified that:

The Claimants’ pleaded case is that the Commission “mischaracterised and misrepresented [TNLC’s] proposed repayment profile and made the incorrect assessment that there is a risk that [TNLC] would be unable to meet its repayment obligations”. In addition, the Claimants alleged that the Commission “failed adequately to take into account” TNLC’s proposed mitigations.

Ms Jones confirmed in her oral evidence that the concern for Evaluators was that TNLC’s loan arrangement needed to be repaid and that this created a “pressure point” and an “intramonth low point” which could be accommodated in the Base Case but could not be accommodated when other risks were taken into account, including in Scenario 3 where it was a “definite problem”. The Claimants attempted to establish that the concern of Evaluators really only arose in relation to Scenario 3, which, without being taken to her witness statement, Ms Jones appeared to accept. However, in re-examination, Ms Jones explained (and I accept) that the repayment profile issue (which she described as “a big bullet point”) created stress points in areas other than Scenario 3.

This conclusion appears to me to be supported by the fact that it is clear from TNLC’s own Application that there was a very real risk that it would be unable to meet its repayment obligations in Scenario 3.

TNLC’s Question 31(b) response “Financial Strength Scenarios” says this under the heading “Sufficiency of funding during the Licence Period”:

In addition, the response confirms that, in this scenario ahead of mitigating actions, two of three banking covenants would not be met. The mitigating actions identified were (as accepted by Mr Martin in cross-examination) “negotiation with suppliers on costs and timings of cash flow” (i.e. trying to delay payments to suppliers), adjustment of plans, for example deferring capital expenditure programmes (i.e. deferring costs that TNLC would be incurring in developing its proposal for the National Lottery) and seeking additional finance. It was plainly well within the Commission’s margin of discretion to determine that these presented a risk.

Prizes payable to winners of National Lottery Games are generated by ticket sales. A proportion of the money generated from ticket sales is deposited into trust accounts from which prizes are paid. This helps to combat the volatility in prize payout that is inherent in a system which inevitably involves fluctuations in the number of players and differing prize pots. The use of these prize reserves enables the operator to build a pool of extra money for use as a buffer in the event of an unexpectedly high number of individual winners for any given game. Over time, these reserves tend to exceed the amount of money that is needed to pay out prizes, even taking account of volatility. However, they are not generally available for the operator to withdraw owing to the fact that they are regarded as belonging to the players who contributed to them through the purchase of tickets.

During its time operating the Third Licence, Camelot introduced Prize Reserve Trust 4 (“PRT4”) and Prize Reserve Trust 5 (“PRT5”) to hold reserves. Law Debenture was the trustee. Ms Taylor (who worked for Camelot before being employed by TNLC) understood that when these prize reserves were set up, “there was a strong intention” that the funds would be preserved for any subsequent operators of the National Lottery, who could then return the funds to the players via the normal operation of the games (if needed to account for game volatility) or through special prize draws (to the extent there were any ‘excess’ amount in the reserve). In other words, the funds in these reserves would simply transfer to any new operator; they would not return to Camelot or be distributed to Good Causes.

It was on the basis of this understanding that TNLC prepared the financial aspects of its Phase One Application (including its Minimum Primary Reserve Balance (“the MPRB”) of £29.8 million) which assumed that the balances in PRT4 and PRT5 would be available for the incoming operator (although this was not expressly stated in the Application). From an email dated 8 September 2021 from Mr Mills to the Commission, it is clear that TNLC had assumed in its financial model that the trust balances in PRT4 and PRT5 were potentially £130 million. Ms Taylor explained in her evidence that in the absence of those balances, where TNLC would potentially be taking over games which therefore did not have a prize reserve “a significant cash balance would need to be immediately available to ‘seed’ the prize reserve”. This would be required to ensure from the outset that prize payouts for various of the existing National Lottery games (including Euromillions and Lotto) could be guaranteed.

The July Applicant Note explained that assets of the Third Licence Trust were held for the benefit of the beneficiaries of that Trust and would be applied for that purpose. The Commission’s objective was to ensure that “obligations to Third Licence Prize winners will be paid out of Third Licence monies (and the Incoming Licensee will not have any net liability for those amounts) but, in accordance with the Third Licence Trust, Third Licence monies will not generally be available for broader Fourth Licence purposes”. In other words, applicants would not “inherit any net liability for Third Licence prizes” but they would also not “inherit any “net funding” for Fourth Licence prizes”. In her oral evidence, Ms Taylor explained that her understanding of this was that the incoming licensee would be able to pay off the prizes that had already been rewarded or won from the existing trust, but that they would not be inheriting PRT4 or PRT5.

Consistent with this, the July Applicant Note included guidance that applicants should assume in their Phase Two Applications (“the Bid Assumption”):

Ms Taylor’s written evidence was that, upon sight of this guidance she realised there was “an issue with the approach being proposed” by the Commission in relation to trust balance. In her oral evidence, Ms Taylor confirmed that, put another way, this was the first time she had realised that what she thought would happen to the trust balances “was not what the Commission thought”. She confirmed that it “was clear” to her that the Commission thought that PRT4 and PRT5 would not transfer to the incoming Licensee. On the basis of the instructions in the July Applicant Note, TNLC would be required to fund its MPRB of £29.8 million from the outset of the Licence – it would not have the comfort of the existing reserves in PRT4 and PRT5.

There followed various interactions between TNLC and the Commission around the question of whether TNLC needed to apply the Bid Assumption in its Application. I shall need to return to these in a moment, but suffice to say that TNLC ultimately decided not to update its funding package to reflect the Bid Assumption. It put in its response to PPF Question 7(4) on the basis that the balances in PRT4 and PRT5 would transfer to TNLC. Specifically, it explained that “[t]here are existing funds within 3NL Trust that are due to transfer to the Next Licensee under the terms of that Trust…The receipt of these funds will provide the initial funding for the 4NL Trust Primary Reserve”.

TNLC was asked a Clarification Question with respect to its PPF Question 7(4) response, which it answered on 1 November 2021. In summary, the Commission asked, “what alternative sources of funding or other contingency exists in the event that either no funds, or a lesser amount than expected, transfers from the 3rd Trust to the Next Licensee?”. The Commission noted references in TNLC’s Application to the existence of funds or funding agreements “which can be called upon to provide contingency reserves” and it asked TNLC to set out (i) the extent to which such funds could be deployed to fund trust reserves under the Fourth Licence; (ii) the extent to which such funding arrangements were anticipated to take the form of loans; and (iii) in the case of any such loan or proposed loan, details of how, when and on what terms this loan would be repaid.

TNLC responded that there was a headroom of £49 million in its funding arrangements, derived from £24 million in cash (provided through initial equity) and the £25m Contingency. TNLC observed that in the Base Case these funds would be available at the start of the Licence Period and “could be used to provide a loan to the Premium Reserve Trust” in their entirety in the event that no, or fewer than expected, funds were to be transferred over from 3NL. If there were an over-run on costs during the Implementation Period, that “would potentially reduce the £49 million headroom available”, but TNLC expected to mitigate that overrun as described in the mitigations in respect of Scenario 3 and it said that in addition it had “received interest” from a number of major banks to provide asset funding arrangements.

TNLC went on to say:

TNLC also explained that funding for the Primary Reserve was to be provided in the form of a loan which would then be repaid from reserves accumulated from the prize structure. TNLC went on to say that, on average, the Primary Reserve was expected to increase by £3.6 million per week. TNLC proposed a mechanism whereby this sum would be shared, with 50% being used to repay the loan (subject to not falling below the MPRB threshold) and 50% remaining in the Primary Reserve.

Against this background, the Moderation Rationale identified a yet further factor giving rise to a material risk, as follows:

Under the heading “weaknesses” in Box 1, the following additional reasons were provided:

The Claimants’ pleaded case on this issue is that: “[r]egarding the funding of opening Trust balances, [the Commission] applied in error a bid assumption that the prize reserve balances from the Third Licence Trust would not transfer to the new licensee in order to form the opening balances for the Fourth Licence Trust”. In its Defence, the Commission responds that the Bid Assumption was explained in the July Applicant Note and it therefore rejects the suggestion that it was applied in error.

In their closing submissions, the Claimants continued to maintain that the Commission was wrong to apply the Bid Assumption, essentially on the grounds that (i) on its true interpretation, the effect of the 3NL Trust Deed was that the remaining balances in PRT4 and PRT5 would transfer over to fund the trust balances in 4NL; but that in any event (ii) TNLC’s Application explained that it would have sufficient funds even if the balances in PRT4 and PRT5 did not transfer (i.e. it only needed £29.8 million of headroom in its £49 million funding arrangements); and (iii) TNLC’s Clarification Response of 21 November 2021 explained that these funds would be replenished and that 50% of the £3.6 million weekly increase in Primary Reserves could be used to repay the loan.

Notwithstanding that neither (ii) nor (iii) is pleaded, the Claimants submit that it was “a clear error” for the FS Evaluators to conclude that the MPRB of £29.8 million (assuming it had been used to fund the 4NL Trust balances) would not be available for contingencies, in circumstances where TNLC had explained in its Clarification Response that it would be replenished. Although questions were put to Ms Jones to the effect that Evaluators failed to take into account TNLC’s proposal that it would put in place prize insurance, I did not understand this point to be pursued in closing submissions.

To address the question of whether the Bid Assumption should have been applied, I need to return to look at the detail of the interactions between the Commission and TNLC following the issue of the July Applicant Note. I note, however, that it is wholly unclear to me how this issue genuinely remains live in circumstances where the Claimants say in a footnote to their closing submissions on this issue that they no longer pursue the allegation that it was a manifest error for the Commission to find that the prize reserve balances from the 3NL Trust would not transfer to the new Licensee.

Notwithstanding Ms Taylor’s understanding of the clear implications of the Commission’s guidance as to the Bid Assumption, TNLC does not appear to have taken any steps to address the issue until 19 August 2021 when Ms Mimi Curran emailed Mr Mills (with the subject heading “Agenda for next GC call”) stating that Ms Taylor had a concern about “something worrying” in the July Applicant Note, specifically that “[t]he GC appears now to be saying that the reserves that have built up in Licence 3 which are intended to transfer to the 4NL Licensee are not going to be allowed to fund prizes in the fourth licence…”, and that she wanted to discuss it with the Commission.

This discussion took place on 7 September 2021 (nearly two months after the July Applicant Note) at a Clarification Meeting. TNLC pointed out that it considered the July Applicant Note to contradict the terms of the Third Licence “which states that these balances, which should represent reserves for future prizes, not prizes already won, do indeed transfer to the Incoming Licensee” and it requested clarification. Mr Mills followed up this request the following day (8 September 2021) with an email to Mr Wilson in which he emphasised “the materiality of the point at issue” on the grounds that TNLC had “based our financial model on the due availability” of approximately £130 million held in PRT4 and PRT5.

The Commission responded in a letter dated 21 September 2021, disagreeing with TNLC’s interpretation of the 3NL Trust deed and saying this:

Pausing there, it was clear at this point that TNLC and the Commission had, as Ms Taylor explained, a “difference of opinion” as to the legal interpretation of the 3NL Trust Deed. However, as Ms Taylor also confirmed, it was clear from this letter that for the purposes of the Competition (consistent with the content of the July Applicant Note) the funds from PRT4 and PRT5 would not transfer across to the incoming Licensee.

Mr Mills wrote again to the Commission on 24 September 2021 saying that TNLC had taken legal advice on the issue and that it continued to disagree with the Commission’s view of the interpretation of relevant clauses in the 3NL Trust Deed. Furthermore, Mr Mills suggested that the approach of the Commission in its letter of 21 September 2021 was different from its earlier guidance, including in the July Applicant Note. Mr Mills went on to say that:

In my judgment, Mr Mills was wrong to suggest that the Commission’s approach had changed since its July Applicant Note (as Ms Taylor accepted in cross-examination) and also therefore wrong to suggest that TNLC was having to address it at an “incredibly late stage in the process”. On the contrary, TNLC had known about the Bid Assumption and its consequences for over two months, since 16 July 2021. This was pointed out by the Commission in a further letter dated 1 October 2021. Nevertheless, TNLC chose not to update its financial model to reflect the Bid Assumption, a decision which Ms Taylor confirmed was “directly contrary” to the Commission’s instructions.

Against that background, I agree with the Commission that the FS Evaluators were plainly correct to proceed as they did. The Commission had asked Applicants to apply a Bid Assumption and Evaluators were obliged to apply it.

Turning to the Claimants’ unpleaded point that, effectively, the Commission was wrong to conclude that TNLC would have insufficient funds in circumstances where the Bid Assumption applied, I am not inclined to permit this new case, which appears to have been developed for the first time through the cross-examination of the Commission’s witnesses. However, even if I am wrong to deal with this on a pleading point, it has no merit, for the following reasons.

As I understand the Claimants’ criticism in cross-examination of Ms Jones and in closing it is that FS Evaluators focused in the Moderation Rationale on the figure of “up to £49 million” (rather than £29.8 million) as being the minimum amount that TNLC had to find if the Bid Assumption applied and TNLC was required to fund the Trust Balances itself. Alternatively that, if they in fact focused on the £29.8 million figure as the minimum head room needed (as Ms Jones confirmed in her evidence had in fact been the case, and I accept), then “the Moderation Note does not disclose any recognition or consideration of the fact that the £29.8 million would be replenished” (a reference to the content of the Clarification Response).

I reject this submission which, as is clear from Ms Jones’ evidence, represents a misunderstanding of the approach the Evaluators adopted. Evaluators were concerned (as appears from the Moderation Rationale) that in the Financial Strength Scenarios, the injection of funds by TNLC into opening Trust Balances would render those funds unavailable as contingencies for the Financial Strength Scenarios. As Ms Jones explained, the issue was “how these factors flow into each other” and “if scenario 3 happened, the 25 million wouldn’t have been available to fund the opening trust balances”. She also said that it did not matter that the Primary Reserve may be replenished on a weekly basis once TNLC started operation of 4NL, because the key issue for Evaluators was that TNLC had to “fund [the MPRB] from day 1…they had to establish the 29.8 on day 1”.

Accordingly, I reject the suggestion that the Evaluators’ determination that there was a risk to the solvency of the Licensee and its ability to access funds when required was outside the margins of the Commission’s discretion or arrived at in manifest error. I shall return to the question of mitigation in respect of Issue 52(f) below.

Given my findings on the other issues arising under Issue 52, I need deal with this issue only briefly. I note in particular that the Claimants put their submissions on it in closing no higher than that “this reason for failing TNLC’s Q8 response should be discounted/set aside”.

It is common ground that condition 16.7 of the Fourth Licence envisaged that the enforcement of any security held over shares in the Licensee would be “subject to the prior consent of the Commission, in its absolute discretion”. This was relevant to TNLC’s Application because it had proposed a Debenture between TNLC and HSBC in which TNLC Holdings (“TNLCH”) (TNLC’s immediate parent company) had proposed to give security to the lending banks over the shares that TNLCH held in TNLC.

In a Clarification Response dated 12 December 2021, TNLC provided a detailed explanation as to why it said there was no conflict between the terms of the share charge included in the Debenture and the requirements of the Licence.

The Moderation Rationale said this:

The Claimants’ pleaded case is that the Commission “incorrectly determined that the security granted over the shares in [TNLC] conflicts with the conditions of the Licence and creates a risk that those funds will not actually be available”. This was said to have been “based on a misreading of the debt funding documents by the Defendant”. No particulars were provided to explain how or why the Evaluators’ approach had involved a “misreading” of the debt funding documents.

Under cross-examination, Ms Jones explained (in summary) that both she and the legal team had reviewed TNLC’s Clarification Response and that (although she had no clear recollection of it), the legal team would have given their view as to how the conditions operated during a “deep dive session” and that the Evaluators would then have formed their own judgment based on that advice. Given the role of the legal team, I am inclined to accept that evidence, which appears to me to fit with the probabilities.

I have already observed that there is nothing inappropriate about the Commission obtaining legal advice on technical provisions and I add that it was always envisaged in the Evaluation Manual that legal support would be available to Evaluators. The Claimants have never advanced any form of pleaded case to suggest that the resort by the Commission and its Evaluators to legal advice was wrong or in error. No submissions were made to me orally as to the true legal position on the terms of the Debenture (and nor have the Claimants ever sought to advance such a case in their pleading) and, although the parties addressed the question of interpretation in their written submissions, I do not consider that it would be appropriate for me to determine the point. Suffice to say that I do not consider it to have been manifestly erroneous to conclude (with the benefit of legal advice) that the terms of the Debenture (even when read in conjunction with the associated Facility Agreement) conflicted with the Licence conditions.

In my judgment the conclusion arrived at by the Evaluators fell well within the margin of their discretion. I decline the Claimants’ suggestion that I should “discount” this reason for failing TNLC’s Question 8 response.

The Claimants’ pleaded case is that the Commission “determined in error that [TNLC’s] proposed mitigations did not adequately address the risks identified by [the Commission]. In this respect, the Applicant did do so”. This pleading was both unparticularised and vague.

In the evidence of Mr Martin and Ms Taylor and in their opening submissions, the Claimants sought to provide particulars. They contended that TNLC’s bid “effectively mitigated” the risks identified by the FS Evaluators in the FS Moderation Rationale. Specifically, the Claimants said that these mitigations involved (i) the £24 million headroom in the funding; (ii) the £25m Contingency; (iii) TNLC’s ability to “flex” its dividend policy (i.e. instead of declaring dividends it could retain cash); (iv) the option of asset financing for capital expenditure; and (v) the possibility of managing costs (to avoid or reduce any cost overrun) and the means to reduce commitments (e.g. in relation to the trust balances through prize insurance). Even in the worst case (Scenario 3) of a cash shortfall of £79 million, this could be managed.

In closing submissions, the Claimants’ position appeared to have narrowed in that they now identified only three points on which they relied: (i) the £25m Contingency; (ii) the option of asset financing; and (iii) the proposed flexing of dividends. Accordingly I shall deal only with these points in this judgment. I understand it to be accepted by the Claimants that there is no scope to pursue their former complaints in relation to the remaining mitigations.

The FS Moderation Rationale explained that in relation to TNLC’s proposed mitigations, it had not demonstrated how they “will adequately address the material risk” identified earlier in the Moderation Rationale. This included a failure to demonstrate to the Commission’s satisfaction that, in relation to the £25m Contingency:

I note that the Claimants make no criticism in their closing submissions of the second and third bullet points set forth above, which, even without the first bullet point, are therefore reasonable concerns to raise in respect of the proposal to rely upon the £25m Contingency as a mitigation.

As to the first bullet point, the Claimants direct my attention to Box 2 of the FS Moderation Rationale under the heading “weaknesses” which says this:

The reference here to the £25m Contingency having already been utilised is a reference to it being used to fund the Trust Balances. As I understand the Claimants’ case it is (i) that where TNLC needed £29.8 million for the Trust Balances (as discussed above) and given that it had an initial cash headroom of £24 million, “the FS evaluators incorrectly concluded that all of the £25 million call option would have been utilised when considering this mitigation” and (ii) that they failed to take into account that other mitigations were proposed in respect of the Trust Balances “which would make it unlikely that the £25m call option would be needed, although it would be there as a fallback option”.

The Commission took the view (and I find) that the problem with TNLC’s reliance upon the £25m Contingency was that it was put forward as mitigation for a number of different risks, as Mr Martin accepted in his evidence. In fact, it was proposed as mitigation for four different risks, notwithstanding that the money could only be used once. These were (i) funding the Trust Balances if the Commission applied the Bid Assumption (as the Commission had confirmed that it would); (ii) cashflow during the Implementation and transition period; (iii) Scenario 3 (where the £25m Contingency was insufficient to meet the £79 million shortfall). Mr Martin accepted in his evidence that there would remain a £29.8 million shortfall in any event, a difficulty which could only be addressed if the Commission allowed TNLC to change the parameters for Scenario 3 by taking into account TNLC’s statement that 50% of its costs in the Implementation period are contracted costs); and (iv) shortfalls in working capital inflows, where TNLC identified that there would be 1 month out of 120 months that it would need to take mitigating action to maintain the Anticipated Normal Balance – this would involve using the £25m Contingency “if that was the only remedy available”.

Bidders were required to demonstrate compliance with the Financial Strength Scenarios, whilst taking into account the other risks inherent in the Base Case. As Ms Jones explained in cross-examination: “…if you had to fund the opening trust balances and use the £25 million for that, you could still have portfolio volatility after…and you wouldn’t have the funding to manage that, and you could still have a problem with the working capital cash flows”. This meant, as the Commission points out, that the same money could not be used more than once for risks which could occur at the same time. The Claimants’ focus in closing on the use of the £25m Contingency in connection purely with the Trust Balances does not begin to address this issue and it certainly does not establish that the Commission’s approach to the £25m Contingency fell outside the margin of its discretion.

Further and in any event, it was plainly reasonable for the Commission to take the view that the mitigations suggested in respect of the Trust Balances were not satisfactory. They included (as I have already said) deferring and negotiating payments with TNLC’s suppliers and deferring capital expenditure. I agree with the Commission that this was not a sensible or realistic basis to mitigate cost overruns, particularly by a company bidding for a significant and high profile contract such as 4NL. As the Commission points out, TNLC could not possibly know whether its suppliers would agree to proposals for different payment terms. Furthermore, non-payment of suppliers’ invoices could impact on TNLC’s ability to operate the Licence. I reject the Claimants’ case that these proposed mitigations “would make it unlikely that the £25 million call option would be needed” just as I reject the submission that the £25m Contingency would be there as a “fall back” option. In circumstances where the £25m Contingency was being relied upon by TNLC to mitigate three other risks, the concern that it would not be available in this scenario was not manifestly wrong. While Mr Martin’s evidence was that TNLC considered that “£25 million would be enough to cover all eventualities” and that the headroom in working capital would be sufficient “as a whole”, the Commission was entitled to take a different view – that it did so was neither irrational nor unreasonable.

In my judgment, the Commission’s view that the £25m Contingency was inadequate to mitigate the risks identified was within the margin of its discretion.

TNLC’s bid proposed using £80 million asset financing to mitigate the risks arising under Scenario 3. The Evaluators observed in the FS Moderation Rationale that “the Applicant does not satisfactorily demonstrate how the asset finance would be deliverable in practice in a manner which was compatible with the trust security requirements (under Licence Condition 16.7(p))”.

The Claimants’ case in closing appears to be that arriving at this conclusion without further consideration was in error. Specifically, they point to the fact that Ms Jones accepted during cross-examination that there could be other forms of asset licensing (such as a leasing arrangement which would not involve any security over assets) and they contend that the Commission erred in failing to explore these options with TNLC, i.e. by way of a Clarification Question.

In light of the way the case is now put, I do not understand the Claimants to be challenging the concerns raised by the Evaluators, which, on the evidence were plainly justified: the asset financing mitigation involved no more than preliminary proposals in the form of two non-binding letters from banks which were “indicative only”. Furthermore (contrary to the Phase One Feedback) the proposal did not explain how TNLC would implement the asset financing given the restrictions on the grant of security over a Licensee’s assets.

In my judgment, the Commission was plainly within the margin of its discretion in determining that insufficient evidence had been provided in respect of the proposal for asset finance. There was no requirement that it should seek to explore TNLC’s proposals any further. TNLC provided no evidence to the Commission that they might be able to source compliant funding and there was thus no reason for the Commission to think that any further Clarification Question would achieve a more satisfactory response – at the very least it was not unreasonable for the Commission to take that view.

TNLC’s response to Question 8 proposed not paying dividends in various instances, including for the purposes of managing working capital requirements in months when shortfalls were forecast. In these months, TNLC proposed that the level of the dividend would be reduced “to ensure the cash balance remains positive with a degree of headroom” and that this would obviate the need to use the £25m Contingency. Generally, TNLC explained that there was flexibility within its financial model “for each annual dividend to be removed, with the funds left to accumulate to the following year end”. Mr Martin and Ms Taylor both gave evidence that this was an option to mitigate various risks within TNLC’s funding package.

The Moderation Rationale identifies that the Evaluators’ concern about the proposal to “flex” dividends was twofold: (i) “how [TNLC] will access the dividends during the term of the loan in the event that the dividends have already been paid out”; and (ii) “how it defines sufficiency of cash”. This was further explained as follows:

The case put by the Claimants in closing on dividends appeared to amount to no more than a subjective disagreement with these detailed points, which, in my judgment, were well within the margin of discretion of the Commission. It was suggested that the concern as to the concept of sufficiency of cash “lacked substance” (albeit that the Evaluators were right to say that TNLC had not defined “sufficient cash”) and that holding the dividends in a blocked account was in fact to the benefit of TNLC’s lenders. However, Ms Jones explained in her evidence, and I accept, that the Evaluators’ view was that even if TNLC decided not to pay dividends there was “still a degree of risk”. Evaluators “wanted to understand” what TNLC were proposing, but there was not enough detail. This was a view the Evaluators were entitled to take. The points raised by the Claimants certainly do not add up to a manifest error on the part of the Commission.

For all the reasons set out above, I reject the Claimants’ case in relation to mitigations. The FS Evaluators identified a number of risk factors in respect of Financial Strength, and they concluded that there was inadequate evidence that the mitigating factors identified by TNLC would be able to address those risks. This conclusion was within the margin of the Commission’s discretion.

In closing, and without prejudice to its response to each of the pleaded issues, the Commission submitted that TNLC’s funding package was patently under-funded and that, accordingly, TNLC’s challenge to the detailed Financial Strength Question 8 “is simply fanciful”.

I need not deal with this in any detail given the outcome of the individual issues identified above. However, I find that TNLC’s bid was plainly deficient in two important respects which, in my judgment, materially affected its ability to demonstrate financial resilience and thus to pass Financial Strength:

These considerations are relevant to the Modifications Claim and I shall return to them when I come to consider what would have happened in the counterfactual scenario of a 5NLC.

Allwyn’s financial package consisted of a total package of £440 million comprising (i) a Parent Group (SAZKA Group a.s. (“Sazka”)) Equity Commitment Letter (“ECL”) of £380 million, supported by £380 million of guarantees provided by a consortium of investment grade rated banks (“the Bank Guarantees”) and (ii) a five year commercial Revolving Credit Facility (“RCF”) of £60 million provided by HSBC UK Bank plc. The RCF was intended as a contingency protection to provide “a liquidity buffer for working capital and capex needs”. It remained undrawn in the Base Case and most of the Financial Strength Scenarios.

In the FS Moderation Rationale, for Allwyn, the FS Evaluators identified various matters which supported a Pass, including under the heading “Deliverability of Funding” that:

The Claimants allege in their pleaded case that the Commission made a manifest error in assessing that Allwyn’s response in respect of Financial Strength should be scored a Pass. Specifically they say that the Evaluators made a manifest error in:

In opening submissions, the Claimants provided further particulars, explaining that Allwyn had committed to maintaining an RCF throughout its Licence Period, but that its bank guarantees were only in place until October 2025 and the RCF expired in 2026. However, at trial the Claimants did not put any questions to Ms Jones on the subject of the duration of Allwyn’s equity financing and nor did they seek to cross-examine Mr Kleinhampl on the pleaded case.

Instead, in closing, the Claimants advanced a different case, namely that Ms Jones’ evidence had been to the effect that the guarantees were “key” (because of concerns around the ECL), but that Allwyn’s evidence in respect of the guarantees was deficient. The Claimants pointed to a Note completed by “All Evaluators”. Under the heading “Guarantees”, it said this:

The Claimants say that this point “did not find its way into the Moderation [Rationale]” and that the Moderation Rationale “discloses no analysis of how the guarantees would be called in practice, and whether the uncertainty as to the order in which they would be called might delay payment or give rise to dispute”. The Claimants now contend that “[w]ithout an analysis or adequate analysis of this issue, the FS evaluators were unable to satisfy themselves as to both the deliverability of the funding and the ability of Allwyn to remain solvent during [4NL]”.

Allwyn submits (correctly) that this new case is not pleaded, that it was not explored with Allwyn’s witnesses and that it is unfair to Ms Jones to criticise her evidence in respect of an issue that has never previously been identified. I agree, and I am not prepared to permit it for that reason alone. However, and in any event, there is, in my judgment, no basis on which I could properly conclude that the Commission fell into manifest error in awarding a Pass to Allwyn for Financial Strength in connection with the Fourth FS Criterion (i.e. deliverability of funding).

Ms Jones explains in her statement, and I accept, that (as is also clear from the Moderation Rationale), the FS Evaluators identified that the uncertainties around the nature of the funding and debt could present a material Financial Strength risk, but concluded that this was “fully mitigated by the Investment Grade bank guarantees given directly to the Licensee for the duration of the equity drawdown period”. Ms Jones’ evidence in cross-examination was consistent with this. She confirmed that (although the equity commitment had not been “discarded” by the Evaluators), they had relied upon the guarantees. She explained that “the guarantees…were a way which was allowed under the financial strength guidance notes to demonstrate that the provider was financially resilient to provide those funds” (a reference to Appendix A to the July Applicant Note), that if Allwyn’s parent company was unable to pay then the banks were “on the hook” for the money and that they “were there to mitigate the risks that we identified with deliverability of funding”.

Ms Jones was taken to the “All Evaluators” Note but said she could not recall the point under the heading “Guarantees”. She was not questioned further on that Note. She was then taken back to the FS Moderation Rationale and it was put to her that it showed insufficient analysis of the relationship between the equity injection and the guarantees, to which she responded that Evaluators had satisfied themselves that Allwyn could draw on the guarantees if required. Finally it was put to her that absent further analysis the Evaluators could not be satisfied as to “the source of funds for Allwyn’s proposal”. She responded “I think we satisfied the source of funds because it was backed by investment grade banks”.

In light of Ms Jones’ evidence, which I accept, there was no manifest error in dealing with Allwyn’s financing arrangements. The “All Evaluators” Note, evidencing, as it does, a step on the way to the final decision of the Evaluators, takes matters no further and, in any event, does not record that Allwyn should fail owing to issues with its guarantees. The Moderation Rationale reflects the unanimous view of the FS Evaluators that Allwyn should Pass. Accordingly, as Allwyn submits, it was reasonable for the Commission to take the view that the guarantees were a secure element guaranteeing the availability of the required funds. There is no basis whatever for the Court to intervene. Although the Evaluators did not compare bids, I observe that Allwyn’s bid was very different from TNLC’s bid – it involved a funding package of twice the amount proposed by TNLC, the vast majority of which (as I have said) was backed by guarantees from investment grade banks.

The Sixth FS Criterion was directly relevant to the assessment of Financial Strength Question 9. It focused on whether the Applicant’s supply chain “is of sufficient financial standing that it does not cause a material threat” to the delivery of the 4NL obligations. Ms Severne explained that she understood the word “material” in this context to mean “measurable, quantifiable” and that if a risk was “remote or unlikely to occur” that would not have resulted in a Fail. She also accepted that the requirement in the Sixth FS Criterion for the applicant and its proposed Subcontractor to have “adequate processes, procedures and controls in place to ensure supply chain continuity and minimise any adverse impact on National Lottery operations” did not mean that “any” adverse impact on supply would result in a Fail.

The rationale identified in the FS Question 9 Moderation Rationale for failing TNLC was:

The Claimants’ pleaded case identifies no express manifest error in relation to the evaluation of Question 9. Instead it asserts that the Commission determined that TNLC:

I agree with the Commission that this is an inadequate pleading. It was expanded upon by the Claimants in opening with an entirely new set of allegations. In summary, the Claimants now sought to allege that the Commission’s evaluation in relation to three of its Subcontractors (Intralot, Carrus and Leap) was manifestly wrong in varying respects and further that TNLC had in fact provided a full explanation of the processes, procedures and controls that would be deployed in respect of its supply chain and that its contracts with its subcontractors reflected this.

I have considerable sympathy for the submission made in closing by the Commission to the effect that it has been unable to deal properly with the Claimants’ case on Question 9 in advance of trial, including because, had the case advanced in opening been properly pleaded, the Commission’s evidence could have been directed at that case. Looking at Ms Severne’s first statement, it plainly does not begin to address the points on which the Claimants now seek to rely. In her second statement, she responds to limited evidence given by Mr Martin about Intralot and to one short point made by Mr Martin in respect of central monitoring processes and procedures, but again it contains very little on the points now raised by the Claimants. To my mind this is extremely unfair and may well explain some of the difficulties encountered by Ms Severne in dealing with the cross-examination. As I have said before, it is not the way in which litigation in this Court should be conducted.

On this basis alone, I am inclined to dismiss the Claimants’ case on this issue. Furthermore, and bearing in mind TNLC’s failure to date to persuade me of the merits of any of its other allegations of manifest error, I can see no purpose in making this judgment longer than is necessary by dealing with the complex and detailed arguments advanced by the Claimants in closing over 12 pages on Question 9. This is the last of the 12 areas in respect of which the Claimants need to establish that they should have passed. Where their case has failed on every other area I cannot see that it is proportionate or necessary to deal further with this issue.

For all the reasons I have given, the Claimants have failed to establish that the Commission acted in manifest error in failing TNLC for Financial Strength. I did not understand Issue 57(h) (“the Commission determined in error that TNLC’s bid should fail in respect of financial strength”) to be a stand-alone issue. The Commission made no such error for all of the reasons I have given.

Allwyn’s Question 9 response addressed its six Key Subcontractors’ financial resilience. Of these, only one was identified as “high risk”, namely SGI. However, Allwyn stated that the risks associated with SGI as a sole supplier of technology and logistics (and sole supplier of scratchcards) were mitigated by its financial resilience and its adherence to controls, processes and procedures. Amongst other things Allwyn pointed to the financial circumstances of SGI’s parent company, identified the extent to which SGI’s business had been resilient through economic cycles and market disruptions, and pointed to the decision to create a stand-alone lottery business, whilst at the same time noting that the stand-alone business would be a global leader.

In its Question 9 response, Allwyn also set out its processes, procedures and controls for financial resilience. In her evidence, Ms Severne explained that Allwyn was here “evidencing that they have a process in place to ensure that they are mitigating the risk associated with any supply chain issues and they are also describing how they will avoid the risks associated with the adoption of new subcontractor relationships, how they are going to identify roles and responsibilities in their organisation, to do the checks and balances, to make sure that the risk is reduced…in a professional and controlled fashion”. I accept this evidence which appears to me to be borne out by the document. Ms Severne also explained that it was her understanding that these processes, procedures and controls would apply to SGI.

Also in its Question 9 response, Allwyn identified its “Licensee continuity planning” in the event of SGI sustaining financial or operational problems:

The Claimants’ pleading on this point alleges that Allwyn ought to have failed Question 9 due to risks arising from its Key Subcontractor, SGI. Specifically it alleges that (i) significant risks were identified in the financial strength of Allwyn’s supply chain, in particular in relation to SGI; (ii) during the course of evaluation it was identified that Allwyn was relying on a concentration of services from SGI such that there was a risk of overdependence upon that provider; (iii) Evaluators failed to take sufficient account of the plans for the divestment of SGI from its previous owner and the consequences of that for the operational and financial reliability of Allwyn’s offer; (iv) Evaluators expressed concerns that the proposed mitigations were unsatisfactory; and (v) Evaluators failed to identify and take account of the fact that SGI’s Symphony system (on which Allwyn’s solution was based) was merely a “not yet operational concept” and that the information provided about Symphony was only a draft which had yet to be approved. This is alleged to be a “fundamental flaw in the assessment of the bid and a manifest error”.

In closing, however, the Claimants abandoned some of these complaints (including the last one) and focused on others, namely that the Commission erred (i) in failing adequately to assess the mitigations provided; (ii) in treating SGI’s credit rating as a mitigation for its high risk turnover ratio; (iii) in concluding that SGI was sufficiently financially resilient notwithstanding the fact that it lacked a parent company guarantee; (iv) in determining that an upcoming change in ownership of SGI was not relevant to its assessment of the “strength of the parent” and the availability of support from the wider group; (v) in determining that Allwyn had adequate processes, procedures and controls in place in the absence of any evidence in Allwyn’s bid of alternative supply; and (vi) in determining that Allwyn had adequate processes, procedures and controls in relation to scratchcards notwithstanding that SGI was the sole supplier and it would take 18-24 months to replace SGI’s services.

Once again, I am inclined to the view that this fluid and ever-changing case was also unfair. Again, Ms Severne had not had the opportunity to know how the Claimants’ case would be advanced or to address it in her witness statement. Furthermore, while the Commission’s closing submissions on this point addressed the case made in opening, the Claimants’ closing submissions came up with new and previously unheralded allegations which the Commission’s closing submissions did not address. In this sense, the parties’ submissions were ships passing in the night and the Court has nothing in the way of written submissions from the Commission on the detailed points that are now being pursued.

Once again I refuse to permit the Claimants to rove around in the evidence and come up with a new and unpleaded case in closing. It is unfair and contrary to the requirements of the overriding objective to permit them to do so. However, in this instance, because any one of the points raised in respect of Allwyn could be of significance in the context of establishing that Allwyn should have failed in the Competition, I set out below as briefly as I can my conclusions on the substance of this complaint in case I am wrong on the pleading point.

The Moderation Rationale shows significant analysis of the position of SGI, which is described as having a “high” risk level (a reference to its turnover ratio of 122%). Under the heading “weaknesses” is a lengthy section identifying the risks attached to the use of SGI together with various mitigations, including its prime shadow credit rating of AAA (described by Ms Severne as “excellent”) “which indicates a strong historical performance”, the financial standing of its parent company (£683 million in cash on its balance sheet as at 30 June 2021), the fact that its sale to Brookfield Business Partners, a large investment fund, would create a standalone lottery business “with strong recurring revenue backed by long term contracts” and was therefore “not considered to create any material supply chain risk”, and the potential to obtain services from other providers such as IGT, Pollard Banknote, Intralot, Playtech and Neogames. SGI’s position as the sole provider of scratchcards is identified as a concern and it is said that “a dual supply arrangement would provide more confidence” given the time it would take to replace SGI. However, the Moderation Rationale also explains that the Commission considers that the weaknesses identified (whether considered individually or in combination) “do not result in a failure of any of the ITA criteria for Financial Strength”.

I accept Ms Severne’s written evidence, which accords with the available contemporaneous documents, to the effect that there was substantial consideration of Allwyn’s use of SGI as a Key Subcontractor during the moderation meeting. Ms Severne also points out that Allwyn scored well on five out of six subcontractors and the provision of financial information. Ms Severne observes that Allwyn proposed mitigations in relation to SGI involving alternative suppliers and parent company support. Ms Severne confirmed in her evidence, and I accept, that the Moderation Rationale reflected the unanimous view of all Evaluators.

As I have already observed, Ms Severne’s oral evidence was sometimes confused and it was clear that her recollection of the detail (certainly in the absence of sight of the contemporaneous documents) was poor. She appears to have found the questions from the Claimants particularly challenging. However, on careful reflection, I am not inclined to the view that I should therefore find that the Commission fell into error or that, as the Claimants suggest, she was “demonstrably not applying the criteria as she was required to, but instead holding applicants to standards that she herself considered to be important”. This was an extremely complex area of evaluation and that process took place more than four years ago. In my judgment, the Moderation Rationale is the best record of the thinking of the Evaluators and it is clear from that record that they gave full and detailed consideration to the risks posed by SGI and to the mitigations advanced by Allwyn in respect of those risks. Ms Severne was of course not the only Evaluator. That numerous detailed criticisms can now be made in light of a lengthy and wide-ranging forensic exercise in cross-examination of a witness who was plainly struggling to recall the detail does not mean that the Commission acted in manifest error in passing Allwyn and I reject the suggestion that it did.

Interestingly, when she was taken to the contemporaneous documents by Mr Howard, Ms Severne provided a clear explanation of the basis for the Commission’s decision-making at the time. She explained that:

She also explained that Allwyn’s Question 9 response was “impressive” in identifying a variety of “bespoke tests” to warn of threats to the supply chain (including those arising from SGI). She pointed out that in her view it offered evidence of “procedures and policies that would…reduce any risks associated with subcontractors themselves”.

I accept this evidence which appears to me to be consistent with the content of the FS Moderation Rationale, in that it reflects the view taken by the Evaluators at the time. Ms Severne explained that it was her understanding that:

As Allwyn submits, it is in my judgment clear from a detailed analysis of the contemporaneous evidence that the Commission’s decision to pass Allwyn could not possibly be described as irrational or unreasonable. As Ms Severne explained, Allwyn’s Application justified a pass because all but one of its Key Subcontractors passed the prescribed metrics. SGI, the sole exception, passed some but not all of those metrics. However it is clear that, after detailed investigation, the Commission concluded (entirely rationally) that this did not pose a material risk in light of SGI’s good credit rating, strong historical performance, parent support, strength following a change of ownership, and the potential for services to be obtained from alternative suppliers (described by Ms Severne in her evidence as “major [providers] of software, hardware for running lotteries and gambling businesses”). That investigation included seeking clarification from Allwyn as to the change in ownership, which provided a detailed response on 5 November 2021.

In that response, Allwyn explained that the Scientific Games Corporation (“SGC”) had agreed to sell its global lottery business to Brookfield Business Partners LP, a leading global alternative asset manager with over $625 billion of assets under management. However, it also pointed out that (i) the transaction was not expected to close until Q2 of 2022 (i.e. after the Outcome Notification following the Competition); and that (ii) it was possible that the transaction would not be completed at all (for example because closing conditions were not met), although the working assumption was that it would be completed. The response provided a high level analysis of the impact of the sale on Allwyn’s Application, including that Allwyn was “confident” that the transaction would not have any adverse impact on its Application, that assurances had been received from SGC, that the Commitment Agreement with SGI was legally binding and unaffected by the transaction and that it was possible that the transaction might improve SGI’s financial strength. The response also provided comfort on transitional arrangements and technology and operations.

It seems to me that the criticisms now raised by the Claimants (identified only during the course of trial) ignore the holistic approach that the Commission took to its evaluation exercise. Some mitigations identified by the Commission may have been more or less valuable in terms of the weight to be attached to them based on the available evidence, but overall, the Commission was entitled to form a view as to whether the mitigations when viewed together with all of the other available information (including the existence of appropriate processes, procedures and controls) were sufficient. The Commission took the view that they were sufficient and that was within its margin of discretion. There was no tension in considering the issue of parent support alongside the strength of SGI following a sale in circumstances where the sale was not certain and would not complete before Q2 2022.

For all the reasons set out above, there is no basis for the Court to interfere in the Commission’s decision to Pass Allwyn in respect of Financial Strength Question 9.

The Claimants’ pleaded case is that “Evaluators raised significant concerns relating to the financial strength of Key Subcontractors IGT and Hughes. However, these concerns were not reflected in the final moderation sheet with no further explanation provided. These weaknesses ought to have resulted in the Reserve Applicant being scored as a fail in relation to this area”. This is a short and apparently discrete point about a failure to take into account specific weaknesses in the context of the evaluation.

That was broadly the way in which the point was advanced in the Claimants’ opening submissions, the premise of the complaint being a failure to reflect significant concerns about both IGT and Hughes Network Services Ltd (“Hughes”) in the Moderation Rationale.

In closing, however, the Claimants sought to advance an entirely new case based on the following allegations: (i) that the Moderation Rationale evidences an “adjustment” to Hughes’ credit-rating from Ca to Baa – a manifest error because the Commission was turning a blind eye to information relevant to the risk posed by the credit rating and thus the financial standing of Hughes; (ii) that the Commission placed undue weight at Moderation (in manifest error) on Experian reports obtained by Camelot for each of its Key Subcontractors, when the ITA said nothing about the potential for Experian reports to provide satisfactory evidence in relation to subcontractors with sub-prime credit ratings; (iii) that the Commission failed (in manifest error) to consider whether Camelot had proposed adequate mitigation in the form of evidence of the processes, procedures and controls to ensure the financial resilience of Hughes in the event of supply chain disruption; (iv) that the Commission erred in not identifying the absence of evidence of an ability on the part of Camelot to source alternative supply in the event of an issue with Hughes; and (v) that the Commission erred in relying on the availability of alternative suppliers by way of mitigation. In short, the Claimants now contend that “the evidence shows that on a fair and rational application of the ITA, [the Commission] ought to have determined that Hughes was not sufficiently financially resilient to withstand market/financial disruption and Camelot did not have adequate processes, procedures and controls in place to mitigate for this specific risk”. Accordingly the Claimants contend that the Commission made a manifest error in determining that Camelot should pass Question 9.

I am not inclined to permit this very significant and unheralded expansion to the Claimants’ case. Once again, the Commission had no notice of this case and Ms Severne’s witness statements (unsurprisingly) do not address these points, beyond dealing generally with the allegation that the Evaluators’ concerns about Hughes should have resulted in a Fail. The Court is left in closing with written closing submissions from the Commission which deal with the pleaded case together with some additional points put to Ms Severne in cross-examination, but without any clear understanding of the way in which that cross-examination would be used in closing. The Court has no written submissions from the Commission on the detailed points now raised by the Claimants and there was insufficient time in closing submissions for the Commission to address all of the new points made against them.

Nonetheless, because this is a point on which the Claimants rely for the proposition that Camelot should have failed in the Competition, and in the event that I am wrong on the pleading point alone, I must do my best to deal with it.

The Moderation Rationale addresses the question of supply chain financial strength, saying this:

The Moderation Rationale goes on to say that Camelot’s Risk Register demonstrates various financial and operational risks that have been considered and how its proposed policies and procedures for supplier selection, governance and management would mitigate these supply chain risks. Camelot had also provided “high level contract terms”.

Under the heading “weaknesses” the Moderation Rationale identifies IGT and Hughes as both presenting a weakness, albeit that the Claimants now focus solely on the approach taken by the Commission to Hughes (referred to in the Moderation Rationale as HSNL). The weaknesses in respect of Hughes are recorded as follows:

The final box of the Moderation Rationale (also under the heading “weaknesses”) concluded that:

The Moderation Rationale stated that the weaknesses were not sufficient to result in a Fail. The overall result was a Pass.

In her written evidence, Ms Severne explains (as is the case) that concerns the Evaluators had about Hughes were reflected in her own Evaluator Notes and in the Moderation Rationale. She points out that Camelot scored well on nine of its eleven subcontractors and that its Application “exhaustively laid out the process, procedures and policies necessary and outlines a variety of tools to mitigate any concerns including establishing alternative supply with substitutes”.

Camelot’s Question 9 Application confirms the accuracy of Ms Severne’s evidence. Camelot highlighted its “unique appreciation” gained over three Licence Terms of assessing and continuously monitoring financial standing to minimise the risk of disruption to the supply chain. Amongst other things, Camelot explained its three key processes for management of its subcontractors, its use of Supply Chain Risk Management (“SCRM”), together with its approach of mitigating disruption risk by managing all Subcontractors through the Supplier Performance and Relationship Management (“SPRM”) process. It provided a summary of the standing of each Subcontractor.

In the case of Hughes (a Key Subcontractor) it stated that Hughes was:

From a table setting out key metrics concerning all 29 Subcontractors, it was clear that Hughes was a “Retail Communications Network Provider” and that the value of the proposed contract was £4.6 million. Under the heading “Supply chain resilience: alternative available”, Hughes was marked as “Yes”, although no details were provided.

In her oral evidence, Ms Severne could not recall how the “adjustment” to Hughes’ credit rating in the Moderation Rationale had come about, but it was not put to her in cross-examination that the Evaluators had taken the wrong approach to the identification of Hughes’ credit rating, much less that the Evaluators had “turned a blind eye” to relevant information. It was also not put to her (or anyone else) that the Commission had placed undue reliance on the Experian reports or that such reliance was non-compliant with the ITA.

The Claimants explored with Ms Severne the content of her own Evaluator Note on the subject of Hughes. Her note identified the fact that there was “little evidence of contingency plans to ensure uninterrupted supply to the National Lottery should a Key Subcontractor fail or become insolvent” (a direct reference to the evidence requirements of the ITA) and it also identified that Camelot had not provided evidence of its ability to “source supply from a different supplier”. This, she said in her Evaluator Note, was a Fail risk for Camelot.

Ms Severne’s observations in her Evaluator Note on this point were not dissimilar to those in the Evaluator Notes of the other two Evaluators, to which she was also taken in evidence. Mr Sanchez identified that although Camelot had referred to the availability of other suppliers “these are not detailed in the response” and he also identified that Camelot had not addressed the ITA requirement to “provide evidence”. Mr Morland identified in his Evaluation Note that there was “[n]o direct evidence of mitigation through arrangements of an alternative supplier contract[s] in place, although there is a note that alternative supplier available”.

The following exchange between Mr Suterwalla and Ms Severne then took place:

Ms Severne accepted that Camelot had not identified an alternative supplier for Hughes, but she said this about the Evaluators’ conclusions in the final box of the Moderation Rationale (set out above), when it was put to her that they were inconsistent with the Evaluators’ Notes on the subject of Hughes:

In my judgment, this answer (which I accept) once again illustrates the holistic approach that Evaluators took to moderation. I bear in mind that the sole criterion with which the Question 9 Evaluators were concerned was the Sixth FS Criterion which required an assessment as to whether the Applicant’s supply chain “is of sufficient financial standing that it does not cause material threat” to the ability to meet the obligations under 4NL and whether the Applicant and its Key Subcontractors “have adequate processes, procedures and controls in place to ensure supply chain continuity and minimise any adverse impact on National Lottery operations due to any potential supply chain disruptions”. Consideration of the position of Hughes was only one of a large number of considerations.

The evaluation as a whole required a multi-faceted investigation of the proposals advanced by the applicant, the risks identified and the extent to which those risks could be mitigated. I reject the Claimants’ submission that the Commission ought to have determined that Hughes was not sufficiently financially resilient to withstand market disruptions, a point that was not put to Ms Severne in cross-examination and is by no means self-evident from the information provided about Hughes in Camelot’s proposal. I also reject the Claimants’ submission that the Commission ought to have determined that Camelot did not have adequate processes, procedures and controls in place to mitigate the risks identified in relation to Hughes. The Evaluators were best placed to assess the processes, procedures and controls that were in place and it is clear that they considered Camelot’s “historic use of its sourcing and SCRM process” to amount to mitigation. There is no basis for the Court to find that that assessment was obviously wrong, irrational or outside the margin of the Commission’s discretion.

Finally, the Claimants submit that if the Commission had made the determinations about Hughes that they say it should have made, it would follow that “it was not open to [the Commission] to conclude that Camelot’s supply chain was of sufficient financial standing to not pose a material threat to its ability to deliver on its contractual obligations”. It was not put to Ms Severne that this would be the only logical outcome of a decision that the evidence in relation to Hughes was unsatisfactory and it is clear from her evidence that she would not have agreed with such a proposition. As I understood her evidence, the fact that there was no evidence of an alternative supplier in relation to Hughes was not determinative of the entire evaluation (a point I understand the Claimants to acknowledge in their closing submissions). In the circumstances I fail to see how the Claimants can succeed in their case that the Question 9 evaluation in respect of Camelot should have been scored as a Fail overall.

In conclusion, there is no reason to suppose on the evidence that this investigation was not carried out properly by the Evaluators or that they failed to take account of relevant information. All three Evaluators were aware of the absence of details regarding an alternative supplier for Hughes, but it is clear from the Moderation Rationale that they considered that, in light of the content of its proposal, Camelot had done enough to satisfy them as to its overall supply chain strength. There is no basis whatever for the Court to intervene in that determination. It fell within the margin of the Commission’s discretion and it was not in manifest error.

The Claimants allege in their Particulars of Claim:

This is said to be a breach of the principle of equal treatment and a manifest error.

The Claimants provided no particulars of these allegations and (as far as I can see) did not deal with them in their written opening submissions. This led to the Commission expressing the view in their written closing submissions that (at least) issue 63 had been abandoned.

During the course of closing submissions, the Commission and the Court queried whether these issues remained live and it was confirmed by the Claimants’ solicitors in a letter dated 26 November 2025 that they did. They identified specific paragraphs in the Claimants’ written closing submissions in which they said these issues were addressed and so I shall focus on the submissions in those paragraphs in considering the issues. I observe however that, given the absence of anything in the Claimants’ opening submissions, the Commission had no means of understanding how the Claimants’ case on these issues was being put in advance of closing – an unfair and unsatisfactory state of affairs. Once again, it has left the Court without any written submissions from the Commission on the point.

Issue 53 is said to be addressed at paragraphs 191.2 and 192.3 of the Claimants’ closing submissions and is now tied to the Commission’s approach to the evaluation of Financial Strength Question 9. In those paragraphs the Claimants assert: (i) that the Commission treated TNLC and Camelot differently in connection with the approach it took to the provision of parent company guarantees in respect of Subcontractors; and (ii) if the failure by TNLC to describe the details of potential arrangements with alternative (named) suppliers was a reason to fail TNLC, then TNLC was treated differently to Camelot because Camelot received a Pass even though it had not named or otherwise identified alternative suppliers in its Application (as discussed above in relation to Hughes).

TNLC’s Financial Strength Q9 proposal included reference to Carrus Gaming, a Key Subcontractor who was to deal with “terminals and supply of spare parts”. It provided information about Carrus Gaming, including that the Carrus Group “has provided a company guarantee for Carrus Gaming (see Appendix 22)”. Ms Severne’s evidence was that she had accepted this as “adequate evidence” of the parent company guarantee. The Question 9 Moderation Rationale (which expressly refers to the parent company guarantee) nevertheless expressed the view that “while the Applicant has proposed some mitigations, it has not adequately demonstrated that [Carrus Group] would be of sufficient financial standing to not cause a material threat…”. Ms Severne explained that the existence of the parent company guarantee was treated as a mitigation, although her evidence was somewhat unclear as to why it was not good enough as a mitigation to “move that particular subcontractor to a pass situation”. However, she did observe (consistent with the evidence she gave on other issues) that “[t]here were many things that contributed to the decision of whether or not Carrus was of sufficient financial standing; not just the one mitigation”.

Ultimately the key point being made in cross-examination was that there had been no analysis of the parent company guarantee. This was not accepted by Ms Severne who explained that:

Against that background, I reject the Claimants’ case that the Commission erred in “not accepting the guarantee as mitigation” – that was not the purport of Ms Severne’s evidence. As she explained, and I accept, the parent company guarantee was treated as mitigation but there were many factors which played into the decision as to whether Carrus Group would be of sufficient financial standing and this was only one. To this extent there is no inconsistency of treatment with the approach that the Commission took to Camelot’s sub-contractor, IGT (where the existence of a “12-month guarantee from IGT plc group” which was “also supported in the notes to IGT’s audited accounts” was also treated as mitigation).

Ms Severne was expressly challenged on what was said to be “inconsistent standards” in relation to the treatment of these two parent company guarantees but she roundly rejected the point:

As Ms Severne went on to explain, “it’s to do with the context of that particular mitigation and what surrounds it”. I accept this evidence which appears to me to be entirely consistent with the approach Ms Severne took throughout. Accordingly I reject the Claimants’ allegation of unfair treatment in relation to parent company guarantees.

The second point relied upon by the Claimants under Issue 53 is effectively that a different approach was taken by the Commission to its evaluation of alternative suppliers in respect of the TNLC and the Camelot bids. However, I reject this point, which again fails to understand the complex factual evaluation involved in the Moderation. In any event, as I read the Moderation Rationale for TNLC’s Question 9 response, it identifies the availability of alternative suppliers as a positive point, whilst at the same time evaluating as a weakness that “the Applicant has not described the details of potential arrangements with these suppliers”. There is no suggestion that the failure to provide those details is in itself a reason to fail TNLC. In so far as Ms Severne’s evidence appeared to suggest the contrary, I consider that she was clearly mistaken (she was simply wrong to say that this issue “was noted [as] grounds for failure”). Accordingly I reject the Claimants’ submission that there is any inconsistency of treatment here owing to the fact that TNLC was failed and Camelot was passed. I also note that this point was ultimately prayed in aid by the Claimants to support the proposition that the Court should disregard an apparent “absence of potential arrangements” as a reason to fail TNLC. The Claimants cannot have it both ways. I agree that this was not a reason to fail TNLC but that must also mean that there was no inconsistent treatment.

Issue 63 is said to be addressed in one sentence at paragraph 162 of the Claimants’ written closing submissions. It arises in connection with the evaluation of Financial Strength Question 8, and in particular the approach adopted by the Commission to the evaluation of change of control conditions.

Ms Jones was asked about the approach of the Question 8 Evaluators to Camelot’s conditional funding. Ms Jones explained that Camelot’s funding conditions were substantially different from TNLC’s funding conditions and carried much less risk. She could not remember whether the reasoning that had applied to the Camelot bid (i.e. of considering how likely a change of control was) had also been applied to the TNLC bid, although she accepted that it should have been. In any event, she explained (and I accept) that these matters were the subject of detailed discussions including with technical advisers and during moderation.

In so far as the Claimants seek to advance a case in light of this evidence that the Commission in fact treated TNLC and Camelot differently (which is not in fact clear from paragraph 162 of their written closing submissions), I reject that case. I do not consider it to be an appropriate inference on the evidence. Aside from the fact that Camelot’s funding conditions were plainly very different from TNLC’s funding conditions, Ms Jones expressly confirmed in her witness statement that she applied the same evaluation and moderation process to TNLC as she applied to the other applicants and I accept that evidence, which was unchallenged. Her evidence in cross-examination went no further than to say that she could not recall whether the same reasoning had been applied to both TNLC and Camelot. On balance, I find that it was.

Further and in any event, it was not expressly put to Ms Jones that the Question 8 Evaluators had treated TNLC and Camelot differently. In the circumstances it is not now open to the Claimants to advance a case of unequal treatment on this basis.

The requirements for Propriety were set out in the ITA at section 8.1. Applicants were required to demonstrate how their Proposed Licensee would run the National Lottery “with all due propriety” in line with the Statutory Duties.

Section 10 of the ITA contained an explanation of the context and requirements, including that operating with due propriety required the Licensee “to demonstrate high standards of corporate governance” in keeping with the UK Corporate Governance Code. Under Section 10.2, the ITA stated that “as a minimum” an applicant must (amongst other things) “establish an Audit Committee” (10.2.3) and “in order to meet the standard of Best Practice” it must have “adequate policies, procedures and controls in place to manage and mitigate money laundering risks…” (10.2.4).

Section 22.2 identified the Questions that Applicants must answer in relation to Propriety. For present purposes, Questions 2 and 3 are relevant:

There were 7 Propriety criteria in section 8.1 of the ITA which had to be “demonstrated” if an Applicant was to achieve a Pass. Two are relevant for present purposes:

An applicant would Fail where:

The guidance in section 22.2 of the ITA made clear that the response to Question 2 “…should demonstrate alignment with Condition 22 of the Fourth Licence (Ensuring Good Governance) and the application of the UK Corporate Governance Code to the environment in which the National Lottery operates”. Further it identified that “as a minimum” the response to Question 2 should provide an overview of various matters, including:

Condition 22 of the Licence included provisions in relation to the UK Corporate Governance Code (“the Code”), as follows:

In a Clarification Response to a query raised in August 2021 and sent to all Applicants (“the August CR”), the Commission explained that:

The Commission stated that Condition 22 was part of Propriety and that it would evaluate and decide whether to give its consent (to the particular departure from the Code that was being mooted by the applicant raising the question) on the basis of information provided at Phase Two. The Commission went on to say: “In order to evaluate the Applicant’s response to the question at Phase 2, the Applicant will need to provide further information” and it set out what that information should include.

The August CR ended by making the following point:

It was Ms Pugh-Stanley’s evidence, which I accept, that the Propriety Evaluators were aware of the content of the August CR.

In a response to a Clarification Question issued to all Propriety Evaluators on 8 December 2025 (“the December CR”), the Commission advised that

The guidance in section 22.1 of the ITA on Question 3 identified that “as a minimum” the response to Question 3 should (amongst other things):

The guidance further stated that:

The Evaluators for Propriety were Ms Pugh-Stanley, Jenny Lythgoe and Mark Skinner. Ms Lythgoe was lead evaluator, but Ms Pugh-Stanley provided a witness statement and gave oral evidence. In addition to the training that all Evaluators received, Ms Pugh-Stanley’s evidence was that she had spent a year in the licensing team “looking at corporate structures and assessing corporate documentation which was relevant to question 2”. Mr Smart, the SRF Evaluator, also attended some moderation meetings for the Propriety evaluation area in order, as Ms Pugh-Stanley explained in her evidence, to provide advice on the Code. His evidence, as I have said, was not challenged.

The Claimants submit that the Commission made a manifest error in passing Allwyn in respect of Propriety, Question 2.

The Claimants’ pleaded case on this Issue is as follows:

However, the allegation in this paragraph as to the meeting, the advice alleged to have been given and the failure to correct that advice (albeit not expressly abandoned) was not pursued at trial. Mr Wilson, who attended the meeting referred to by the Claimants, was not cross-examined on the point and the Claimants did not mention it in their closing submissions. In the circumstances, I can see no need to deal with Issue 59(b)(ii) (“Did the Defendant inform Allwyn that [compliance with the UK Corporate Governance Code] was not a strict requirement?”).

Instead, the Claimants sought to pursue a case which arose only in the statements of case relating to Allwyn. In Allwyn’s response to the Claimants’ pleading, it asserted that the Code is directed to public limited companies, that Allwyn was a private limited company, that “the tender documents and [the Commission’s] practice provided for derogations to be approved as appropriate” and denied that “any of the matters raised were material and/or required any scoring down”. The Claimants replied that Allwyn’s obligation to comply with the Code was derived from the ITA and the terms of the proposed Licence. They asserted that “[w]hether derogations might have been appropriate and lawful, the failures by Allwyn to comply with the UK Corporate Governance Code both could and should have warranted Allwyn failing to meet the relevant Pass/Fail tests so that its tender could not succeed in the competition”. No particulars of these alleged failures to comply with the Code have ever been provided.

It was the combination of these pleadings that appears to have been captured in Issues 59(b)(i), (iii) and (iv) which ask (in summary) whether each bidder was required to comply with the Code, whether the Commission assessed Allwyn’s Propriety on the basis that it did not need to comply with the Code and, if so, whether that was lawful. No doubt in light of these issues, Ms Pugh-Stanley addressed in one paragraph of her statement some general points relating to departures from the Code.

In their opening submissions, the Claimants explained for the first time that Allwyn’s bid departed from the Code in that it did not adhere to the requirements for Audit and Remuneration Committees. They asserted that, absent prior authorisation from the Commission (which they said had not been given), it was a manifest error to pass Allwyn for Propriety. They pointed to Allwyn’s failure to meet the Fourth Propriety Criterion relating to alignment to relevant Best Practice and/or Commission guidance.

In their closing submissions, the Claimants spent more than 10 pages on this issue, criticising Ms Pugh-Stanley for her oral evidence (notwithstanding that she had no express notice of the points that the Claimants intended to pursue) and making a variety of, in some cases, new (and serious) allegations.

Despite the submissions made by the Commission and Allwyn in closing, I am not convinced that I should determine this issue on a pleading point. The List of Issues evidences that the parties well understood that a key issue for the Claimants concerned whether the Commission had acted unlawfully in assessing Allwyn’s Propriety on the basis that it was not required to comply with the Code. Both Ms Pugh-Stanley and Mr Smart dealt with the issue (albeit at a high level) in their statements, and I am not inclined to the view that the Claimants should be precluded from advancing the point at trial. I do consider, however, that their extensive criticism of Ms Pugh-Stanley’s oral evidence on the grounds of her lack of recall, her allegedly inaccurate reference to documents and the fact that she raised additional points not dealt with in her witness statement, is unfair. Ms Pugh-Stanley was doing her best to respond (some four years after the event) to a searching and highly forensic cross-examination by Ms Hafesji.

Turning to the detail of the case as it is now put, Allwyn’s Question 2 Application included a request for departure from Code provisions at Q2-4.3 in the following terms:

In support of a Pass, the Propriety Moderation Rationale identified that Allwyn “demonstrates alignment with both Licence Condition 22 and the application of the UK Corporate Governance Code to the environment in which the National Lottery operates”. After setting out some evidence supporting this proposition, the Moderation Rationale went on to say this (clearly a reference to the passage set out above in Allwyn’s Application):

The reference to “Provision 24” is a reference to Provision 24 of the Code which requires that the Board should establish an audit committee of independent non-executive directors, with a minimum membership of three, that the chair of the Board should not be a member and that “at least one member has recent and relevant financial experience”.

It is accepted by the Claimants that, as a private limited company, not listed on the London Stock Exchange, Allwyn was not required to comply with the Code. However, the Claimants point out that condition 22 of the Licence requires compliance with the Code and that there is no scope for disapplication of the Code absent prior written consent from the Commission. They say that the effect of condition 22 is to disapply the “comply or explain principle” identified in the Code. They point to the Fourth Propriety Criterion which they contend could only be satisfied if an Applicant had demonstrated compliance with the Code or set out “equivalent measures to the satisfaction of the Commission”. They rely on the August CR in support of the proposition that while the Commission could not provide consent to a derogation from the Code at the evaluation stage, bidders were nevertheless required to explain how any proposed derogation met the requirements of the ITA. They point out that Evaluators were expressly told in the December CR to consider the likelihood of a derogation being granted when evaluating applicants.

Thus the Claimants contend that the Propriety Evaluators were required to assess proposed derogations against the evaluation criteria, particularly where they concerned aspects of the Application which formed part of the minimum response from bidders (as was the case in relation to the audit committee). They rely on Ms Pugh-Stanley’s evidence to assert that there was an unlawful failure to assess “a critical aspect of an Applicant’s submission against the terms of the ITA”.

Ms Pugh-Stanley’s written evidence, which I accept, is that following discussions between the Evaluators it was agreed that Allwyn should pass for Propriety. The concerns she had expressed in her own Evaluator Notes were either addressed through the clarification process or those discussions. She records (correctly) that as part of the Propriety evaluation “we had to assess whether applicants were aligned with the Code and, if not, to identify the risks of any departures from the Code as part of our evaluation”. She then explains that:

Mr Smart’s unchallenged evidence explains that he recalls a “long debate” at moderation about Allwyn’s proposed departure from the Code (which as I understand it involved an audit committee with a slightly different make-up from that required under Provision 24 of the Code), including “how critical or not” that departure was and whether mitigations could be put in place. He explains that the conclusion of this discussion was that “the proposed departure was not critical and the Evaluators decided that [Allwyn’s] transparency regarding this point was sufficient to allow it to pass”. I understand the reference to transparency to be a reference to the fact that Allwyn had set out the rationale for the proposed derogation and an associated risk in the Risk Register (as stated in the Moderation Rationale). The Evaluators plainly also identified that there were relevant mitigations because the Moderation Rationale expressly records the existence of “an appropriate mitigation in the event that the Commission does not provide consent”.

In her oral evidence, Ms Pugh-Stanley explained that there was a flexibility regime built into the Code and that the wording of the Licence and ITA reflected that flexibility in that it recognised that there might be circumstances in which strict compliance with the Code is not practicable. Departures from the Code, with the Commission’s consent, were thus allowed for in the ITA and in the Licence.

She also explained that the Evaluators had been told by the Commission that they should not evaluate the derogation letter (which she did not read as it was outside the page limit for the Application) as that was a separate matter for the Commission:

Pausing there, this appears to me to be supported by the August CR, which made it clear that while an evaluation as described by Ms Pugh-Stanley and Mr Smart in their evidence would take place at Phase Two, consent to a proposed derogation could not be provided by the Commission as part of the evaluation stage. Although the Evaluators therefore did not determine the ultimate merits of the proposed derogation, they did discuss, as Mr Smart confirms, the extent to which it was “critical” and whether there were mitigations in place.

Looking at the detail of Allwyn’s Application (which Ms Pugh-Stanley confirmed that she had done), I find that this can only have involved a discussion of the nature of the derogation proposed, as disclosed in the Application, together with the mitigation identified in Q2-4.3. This is plainly a reference to the final sentence of Q2-4.3 set out above. The discussion must also have involved Q2-6.5, namely a section of the Application dealing specifically with the audit committee which (as Ms Pugh-Stanley explained) makes clear “what the audit committee will be doing, how they propose to do it and how often they’ll be meeting and who will be on that as well [as] who will be invited to join”. It also says that: “On the Start Date of the Fourth Licence Term, the Audit Committee’s membership will comprise two independent non-executive directors…and one director representing SAZKA Group…who has the requisite recent and relevant experience” – this is the derogation that Allwyn seeks.

I also consider that it is reasonable to infer, given that Ms Pugh-Stanley had reviewed the whole proposal, that Evaluators would have had in their minds other relevant aspects of Allwyn’s proposal relating to corporate governance. This is in any event clear from the evidence set out in the Moderation Rationale in respect of the conclusion that Allwyn had demonstrated alignment with Licence Condition 22 and with the Code.

I reject the Claimants’ case that it was irrational to pass Allwyn in these circumstances. In particular (and having regard to the key points made by the Claimants in their lengthy submissions on this point):

In all the circumstances, I reject the suggestion that the Commission acted irrationally or outside the scope of its margin of discretion in scoring Allwyn as a Pass for Propriety Question 2. I consider this to deal with the points raised in Issues 59(b)(i) and (iii). Dealing specifically with issue (iv), the Commission did not act in breach of its duties of transparency, equal treatment or non-discrimination in passing Allwyn on Propriety. I observe that it is clear from Camelot’s Moderation Rationale that it too identified an intention to depart from the Code in a number of respects, including Provision 24. There is no allegation of unlawful or irrational conduct in relation to this aspect of Camelot’s bid.

The Claimants submit that the Commission made a manifest error in passing Camelot in respect of Propriety, Question 3.

The Claimants’ pleaded case on this Issue is that the Commission made a manifest error of assessment in awarding Camelot a pass, “[i]n particular (although not exhaustively):”

In their written opening submissions, the Claimants took a different tack. They identified two possible Pass/Fail risks identified by Ms Pugh-Stanley in her own Evaluator Notes which it said she had been right to identify because they failed to meet the Second and the Fourth Propriety Criteria in the ITA. It was no longer suggested that these comments had been “dropped” without explanation. Instead, the Claimants focused only on the second comment (to the effect that there was a lack of clarity around the allocation of responsibility for the disclosure of information around money laundering and whether the proposals complied with best practice), accepting that it had been identified as a weakness in the Moderation Rationale but asserting that this in itself was a manifest error because the Fourth Propriety Criterion required the response to be aligned to relevant Best Practice.

This is plainly an entirely new case, previously unheralded and unpleaded. Ms Pugh-Stanley’s evidence dealt only with the question of whether concerns raised by the Evaluators had not been considered in detail and had been dropped without explanation. At the time of preparing her statement she had no understanding that the focus would be on concerns that she had raised or that it was being suggested that the manifest error was relying on one of those concerns as a weakness rather than as a reason to fail Camelot.

I consider that this should not be allowed. The issue that the Claimants now seek to explore has not been pleaded and it has not been included in the List of Issues. Even the Claimants observe (in a footnote to their written submissions) that Issue 60 “is not pursued in the formulation contained in the LOI”. Ms Pugh-Stanley has had no notice of it and has therefore not addressed it in her evidence. Once again she is (unfairly in my judgment) the subject of considerable criticism from the Claimants, not least because it is said she had “come prepared to refer to a document” which was not referred to in her statement. But this must be seen in the context of an entirely new case being advanced for the first time in opening submissions. I fail to see how or why Ms Pugh-Stanley can be criticised for attempting to respond to that new case upon entering the witness box.

The Claimants suggest in closing that it was enough for them to assert in their pleading a manifest error in awarding a pass and to say “[i]n particular (although not exhaustively)”. In other words, that the use of the words “although not exhaustively” somehow permits them to run any case they wish at trial. This is not the way that pleadings work. Parties are entitled to know the case they must meet at trial and the insertion of words that suggest that there may be other matters on which a party will later wish to rely is nowhere near good enough to achieve this end. Had the Claimants wished to run a different case, it was incumbent upon them to seek permission to amend from the Court.

Even if I am wrong on the pleading point, I would have rejected the Claimants’ case on this issue in any event.

Under the heading “weaknesses” in the Moderation Rationale at Box 6, the Evaluators observe that “[t]he Applicant does not demonstrate who would be responsible for reporting known or suspected money laundering or terrorist financing activity”. They go on to set out some extracts from Camelot’s Question 3 Application including:

The Evaluators then say this:

Ms Pugh-Stanley’s clear evidence, which I accept, was that she and the other Evaluators understood Camelot’s Question 3 Application overall to be identifying Camelot’s CFO as its nominated person. She had come to the view that this “could have been clearer” but she explained that “she was left with the impression that it would be the CFO that would be the nominated officer and that’s a consensus view that we all came to”. I do not consider this impression to be inconsistent with Ms Pugh-Stanley’s Evaluator Note, as suggested by the Claimants and I note that the Claimants did not suggest that this impression was inconsistent with the Notes of the other Evaluators and nor did they seek to draw my attention to those notes. Ms Pugh-Stanley went on to say that she would have liked Camelot’s response to be clearer but:

I accept this evidence and I consider that this was a view that the Evaluators were entitled to reach based on the material available to them. Whilst it is true that it is difficult to see how the Moderation Rationale reflects this approach and while that has given me pause for thought (not least because of the guidance in Gestmin), nonetheless I do not consider Ms Pugh-Stanley to have been dissembling about this. When it was put to her at the end of her cross-examination by the Claimants that it was very clear that Camelot’s response was not aligned to Best Practice and that this is in fact what had been decided by the Evaluators (contrary to Ms Pugh-Stanley’s evidence) and that accordingly Camelot should have been failed, she responded “No, that’s not correct”. I accept that evidence. I note also that the Moderation Rationale states only that Camelot “does not describe how its approach aligns with Best Practice”.

The Commission was acting within its margin of discretion in taking the view that it was to be inferred from the content of Camelot’s Application that its nominated officer would be the CFO – the extracts from Camelot’s Question 3 Application referred to in Box 6 of the Moderation Rationale point out the role of the CFO. This would meet Best Practice. Ms Pugh-Stanley explained (and I accept) that this was nevertheless listed as a weakness because it raised “areas that we would want to know more in” but she explained (consistent with the explanation in the Moderation Rationale) that “something can be a weakness and not be a fail”.

I do not consider this to have been a manifest error.

Notwithstanding the detailed Phase One Feedback provided by the Commission, TNLC failed PPI, PPF and Financial Strength for a wide variety of reasons and they trailed far behind Allwyn and Camelot in their scores on the five Business Plan Areas. They also proposed a higher (less competitive) OSS than the other bidders. As the Commission points out, these proceedings have therefore not been brought by a bidder which lost by a small margin and TNLC has faced significant obstacles in trying to overturn its final position in the Competition. Out of deference to the Claimants’ arguments I have (for the most part) dealt with each of their (many) challenges, but, in the end, these have come to nothing.

For all the reasons I have given, the Claimants allegations of manifest error fail. Overall I consider that the Commission conducted a rigorous, methodical and fair process which resulted in rational conclusions which it was entitled to reach. Applicants had numerous opportunities to seek clarification and information from the Commission as to the process and evaluation criteria, including the opportunity to submit Phase One Applications for feedback. The Evaluators had a significant margin of appreciation in undertaking the scoring exercise against each Question in the ITA – and that is particularly so given the complexities of the evaluation exercise required in the Competition. Although the Claimants may disagree with decisions made by the Evaluators, there is no basis for a finding that the Evaluators failed entirely to identify relevant matters, that they relied upon matters that should have been extraneous to the ITA or that they made some other clear error in the evaluation exercise.

In the ordinary case, one might expect manifest error to be easy to spot, certainly once all the relevant information is available to a claimant about the decision-making process. That these Claimants have been forced to reformulate (and often to reinvent) their case at every opportunity throughout this trial, including in closing submissions, is, in my judgment, a strong indicator that there is really no basis whatever for their claim of manifest error or, indeed, therefore, for the intervention of the Court.

Regulation 35 CCR 2016 is concerned with ensuring that Contracting Authorities take appropriate measures to prevent, identify and remedy conflicts of interest arising in the conduct of concession contract award procedures, so as to avoid any distortion of competition and to ensure the transparency of the award procedure and equal treatment of all candidates and tenderers. As the Claimants submit, this is a vital part of conducting any public procurement process.

Regulation 35 provides:

In Counted4 Community Interest Company v Sunderland City Council [2015] EWHC 3898 (TCC) at [32], Carr J (as she then was) observed that “other personal interest” (in the context of the similar provision in Regulation 24 UCR 2016), can be “directly or indirectly held. The phrase is very broad on its face and is clearly intended to add to the other conflicts identified”. In [33], she went on to express the view that “[t]he effect of a conflict can be subtle. Nor does the fact that the process was heavily documented rule out an operating conflict”.

Consistent with my observations earlier in this judgment, I note that Regulation 35(2) CCR 2016 is not replicated in either Regulation 24 PCR 2015 or Regulation 42 UCR 2016 (the equivalent provisions dealing with conflicts). Regulation 35(2) CCR 2016 imports what is effectively a proportionality limit on the measures that need to be adopted by a contracting authority in relation to the prevention or elimination of an identified conflict of interest.

The rules applicable to conflicts of interest in the specific context of UCR 2016 were considered by O’Farrell J in Siemens at [747]-[767]. She observed (at [748] by reference to eVigilo Ltd v Priesgaisrines apsaugos ir gelbejimo departamentas prie Vidaus reikalu ministerijos (Case C-538/13) EU:C:2015:166, [2015] All ER (D) 173 (Mar) at [42]–[44]) that the UCR 2016 imposed on HS2 a positive obligation to investigate, identify and remedy any conflicts of interest:

At [749]-[752] she went on to apply by analogy the test for apparent bias at common law, namely that of the fair-minded and informed observer:

At [753] O’Farrell J observed that the Court should have regard to admissible evidence about what actually happened in the course of the decision-making process. At [754] she concluded that:

I consider these observations to be equally applicable to Regulation 35 CCR 2016 and I did not understand there to be any suggestion to the contrary from the parties. I would add that “all the relevant facts” are not restricted to facts that would have been apparent at the time of the decision or to publicly available information, but include all the circumstances which have a bearing on the question of whether there was a conflict, including facts ascertained on investigation by the Court (see Re Medicaments and related Classes of Goods (No 2) [2001] 1 WLR 700 at [83]; Virdi V Law Society [2010] EWCA Civ 100 at [47] and R (Good Law Project) v Minister for the Cabinet Office [2022] EWCA Civ 21 at [82] (“Good Law”)). Furthermore, the matters to be considered include any explanation given by the decision-maker as to his or her knowledge or appreciation of the relevant circumstances, what was in his or her mind and what he or she knew or did not know. Where such an explanation is proffered, the question for the Court is whether or not the fair minded and informed observer would consider that there was “a real danger of bias notwithstanding the explanation advanced” (see Howell and others v Lees-Millais and others [2007] EWCA Civ 720 at [7]).

It is common ground that the Commission had to “take appropriate measures” pursuant to Regulation 35 CCR 2016 to prevent conflicts of interest and that Regulation 35(2) provides that these measures “shall not go beyond what is strictly necessary”. It is also common ground that these words import the exercise of a margin of discretion by the Commission when deciding what measures are appropriate and what is “strictly necessary”. The Regulations do not seek to regulate the minutiae of what “appropriate measures” may be or the circumstances that must be taken into account in deciding what is “strictly necessary” – these are matters for the contracting authority exercising a rational judgment in the context of the performance of its duties. The extent of the margin of discretion is wide (see R (All the Citizens) v Secretary of State for Digital, Culture, Media and Sport [2022] 1WLR 3748 at [60]).

I also did not understand it to be controversial that it is for the Claimants to establish: (i) the existence of an actual or perceived conflict of interest; (ii) that the Commission failed to take appropriate measures pursuant to Regulation 35 to identify, prevent or remedy such conflict; and (iii) that the existence of the conflict caused loss and damage to the Claimants – in other words, it affected the outcome of the Competition (see Siemens at [766]-[767]).

In closing, Mr Toledano suggested that (although it is not controversial) the principle at (iii) above does not apply to the way in which the Claimants put their case here, because that case “is all about Allwyn’s failure to notify and what the GC should have done about that. It is not about the impact of the conflict on the decisions”. I confess that I am not sure that the distinction that Mr Toledano was seeking to make was correct. There must be a causative link if the Claimants are to be entitled to a remedy (see Regulation 52(1) CCR 2016) and the link that I understand is alleged in this case is that the outcome of the Competition would have been different because the Commission should and would have disqualified Allwyn had it acted properly in dealing with the alleged conflict.

The Commission had a Conflicts of Interest Policy (“the COI Policy”) requiring it to ensure that all persons and/or entities (defined as a “Person”) engaged and/or employed by the Commission relating to the Competition “comply, and procure that any persons engaged by any Person comply” with this COI Policy. It defined a conflict of interest as any situation or circumstance which “could, or could reasonably be perceived” as a problem or give “the appearance of a conflict of interest”. It stated that “conflicts of interest need to be managed carefully”. It required Declarations of Interests from all Persons.

Section 6.16 of the ITA expressly dealt with Conflicts of Interest in the following terms:

The Claimants allege that, in relation to the involvement of Rothschild in 4NLC, the Commission failed to take adequate steps to prevent or resolve the appearance of a conflict of interest in breach of Regulation 35 CCR 2016 and/or its obligations of transparency and/or equal treatment. Issues 6 and 7 raise numerous factual questions to be determined in the context of this main allegation. An allegation of actual conflict of interest has been withdrawn.

Issue 9 raises the question of whether this allegation is time-barred. I shall return to Issue 9 once I have examined the substance of the main allegation.

Rothschild was a member of the Crown Commercial Services Framework Agreement (“the CCS Agreement”) and was awarded a contract by the Commission on 19 July 2019 for “the supply of provision of advice on and execution of specific corporate transactions” in respect of the Competition. Mr Edward Duckett was named as the Supplier’s Representative with overall responsibility for the supply of the Services and signed the Contract Award letter. The Services identified in the Contract Award letter included:

During his evidence, Mr Wilson explained that the Services set out in the Contract Award letter were subsequently amended so as to agree a revised role and responsibilities. Specifically, he explained that the requirement to assist in the evaluation of bids and the suitability of bidders was changed because “Rothschild weren’t there to assist in the evaluation of bids” and had “no evaluation role responsibility”. Instead, Mr Wilson explained that Rothschild “were there to support the Commission in the Commission’s evaluation and assessment of suitability”. In his witness statement, Mr Wilson said that Rothschild acted as the Commission’s financial adviser, including acting as another SMR to the Financial Strength Evaluators, attending moderation meetings for Financial Strength Question 8, and answering queries so as to assist the Evaluators to understand the financial aspects of applicant’s bids.

Although there appear to be no documents in the bundle reflecting the change in Rothschild’s services identified by Mr Wilson, I accept his evidence that the change took place and that Rothschild had the slightly more limited role that he identifies in his statement. This appears to me to fit with (i) the contemporaneous documents reflecting the process of evaluation; (ii) the evidence of Ms Jones; and (iii) the evidence of Mr Tanner (which I accept) who described Rothschild as the lead financial consultants, retained in the Competition to “offer depth of experience in the supporting assessment of the overall finances and to assist the Commission with the market engagement”. Mr Tanner also explained that although Rothschild were extensively involved in the process (and in fact had access, as the Commission admits in its Defence, to substantial amounts of information relating to the Competition, including the Applications), as far as he was aware they made no decisions about the content of the ITA, they never “sought to influence the scoring of Applications and they never had any other decision making role on any aspect of the Competition”.

In light of this evidence, I find that Rothschild was not a decision maker in the Competition (Issue 8). Its role was, as Mr Wilson accepted, “substantial and multi-faceted” and it had an influence on evaluations only in the sense that it occupied a supporting role (which included answering Clarification Questions and facilitating discussions on Financial Strength Question 8). However, Rothschild was not involved in evaluating the Applications and it was not put to Ms Jones that Rothschild (or indeed Mr Duckett) had in fact influenced the result of the Financial Strength Q8 Evaluations in any way.

I did not understand the Claimants seriously to challenge this characterisation of Rothchild’s role. Their case in closing was that they could not “put it as high as saying that [Rothschild] were a decision maker”, but that it matters not whether Rothschild was carrying out the evaluation or was merely playing a supporting role, because in either event it could not perform its role impartially and without an appearance of bias in circumstances where it had “an ongoing advisory relationship with one or more of the bidders or had done so in the recent past”.

Mr Dlouhý confirmed in his evidence (and I accept) that he had started meeting with Rothschild in around 2015 and that since that time the main point of contact at Rothschild for Allwyn had been Mr Duckett. Prior to the Competition, Mr Dlouhý would hold “usually like two to three meetings, regular meetings per year” and Mr Dlouhý said that he knew Mr Duckett “as well as the other gaming investment bankers that were focused on the industry”.

Towards the end of 2017, the Allwyn Group (which I shall refer to as Allwyn) was contemplating an initial public offering (“IPO”) in order to fund its growth in its existing lottery and gaming markets in the Czech Republic, Austria, Cyprus, Greece and Italy, and to enter new markets. It is not in dispute that in a parallel process, in January 2018, Allwyn engaged Rothschild to help find potential investors to make a minority investment into Allwyn as an alternative to the IPO. Allwyn signed general Terms of Business with Rothschild (“the 2018 Appointment”). Mr Dlouhý explained that in the months following this engagement he had “more intense communication” with Mr Duckett than had previously been the case. Allwyn paid Rothschild something in the region of €310,000 over a six month period for its work on the 2018 Appointment, which came to an end when Allwyn decided in October 2018 to put both the IPO and the plans for a further minority investment on hold owing to, amongst other things, the volatility of the market environment.

Pausing there, Rothschild’s involvement with Allwyn under the 2018 Appointment came to an end around 10 months prior to Rothschild’s engagement by the Commission, around 22 months before the Competition was formally commenced (as confirmed by Mr Wilson) with the issue of the SQ, on 28 August 2020, and some 2 years prior to Allwyn submitting its SQ on 2 October 2020. It involved a discrete task and it did not give rise to an ongoing advisory relationship. I did not understand the Claimants to suggest that, on its own, it is sufficient to give rise in the mind of a fair minded and informed observer to any real danger of conflict. Certainly the Claimants have never identified anything specific about that engagement which might lead a fair minded and informed observer to consider that there was a real possibility of the final decision in the Competition being tainted by apparent bias or conflict.

In 2019, Allwyn increased its stake in OPAP, the Greek Lottery operator, by making a voluntary tender offer (“VTO”). This was a major transaction which Mr Dlouhý confirmed was valued at €2.1 billion. As part of this process, Allwyn retained Rothschild (headed up by Mr Duckett as “deal captain”) to advise it in relation to the VTO, pursuant to an appointment letter dated 20 June 2019 (“the 2019 Appointment”). Rothschild’s role, as described in the 2019 Appointment, involved “acting as a financial adviser to Sazka Group on the introduction of potential co-investor(s)” in connection with the potential acquisition. Mr Dlouhý explained that the role was limited to advising on the so-called “junior” part of the financing – namely €750 million – and involved the provision of various services set out in the appointment letter which Mr Dlouhý described as “the usual scope of investment banking services for a co-investment of this nature”. Although the 2019 Appointment was formalised in June 2019, the work began in around April 2019. Once again, Allwyn had “more intense” communications with Mr Duckett and Rothschild during this engagement.

It is common ground that Rothschild had carried out all, or most of its work, by 8 July 2019, when the VTO was launched. In fact, Mr Dlouhý’s evidence, which I accept, was that he could not recall any work on the part of Rothschild after that date. There is certainly no documentary evidence of any work taking place after that date.

The 2019 Appointment stated that Rothschild’s remuneration would be on the basis of a success fee of €3 million. In addition, the letter provided for a discretionary fee of “up to €1,500,000” to be paid at the sole discretion of Allwyn based on an assessment of Rothschild’s “overall contribution” to the VTO. Rothschild invoiced Allwyn on 5 September 2019 for the sum of €3.25 million because, as Mr Dlouhý said, “their work was finished”. This included both the success fee and an element of the discretionary fee which Mr Dlouhý thought must have been the subject of prior discussion with Mr Duckett. Allwyn paid this sum on 22 October 2019. Mr Dlouhý explained that Allwyn was prepared to pay part of the proposed discretionary fee because Rothschild “provided good advice and delivered good work”, albeit “not stellar work”. He rejected a suggestion that Allwyn’s willingness to pay part of the discretionary fee was “in order to maintain a good relationship with [Rothschild] for the purpose of future potential projects” (“No, absolutely not”) and pointed out that the additional amount paid to Rothschild was quite low by comparison with discretionary fees paid on other projects. I did not understand the Claimants to challenge this evidence and I accept it.

There is a dispute between the Claimants and the IPs as to whether Rothschild’s engagement formally came to an end when the VTO was announced on 8 July 2019 or when it closed on 5 November 2019. Mr Dlouhý accepted it was the latter although the IPs contend that this acceptance was extracted on the basis of a misleading representation of the contract terms. However, I do not consider that I need make a decision on this. As a matter of fact, I have found that Rothschild ceased to carry out any further work on the VTO project after 8 July 2019. The fair minded and informed observer would recognise that, after that date, there was no ongoing advisory relationship between Rothschild and Sazka Group/Allwyn in connection with the VTO. The only contact appears to have involved discussions relating to the payment of Rothschild’s invoice which, I find, did not involve Allwyn seeking to obtain any ongoing advantage or “special relationship” with Rothschild in connection with future projects.

Accordingly, I reject the suggestion that there was any meaningful overlap in terms of substantive work between Rothschild’s engagement by Allwyn under the 2019 Appointment and Rothschild’s engagement by the Commission (commencing on 19 July 2019).

Mr Dlouhý described a meeting that he had attended between Allwyn, Mr Wilson on behalf of the Commission and Rothschild on 1 October 2019 designed to encourage Allwyn to become interested in 4NLC. Mr Dlouhý thought that Mr Duckett had been present acting on behalf of the Commission. He did not recall any discussion about the 2019 Appointment or the fact that it had not yet formally terminated (assuming that to be correct) or that the fee had not yet been paid. He expressed the view that this was not information that needed to be provided by Allwyn to the Commission because, as at the date of the meeting, Allwyn had not decided whether to take part in the Competition. I agree. The meeting on 1 October 2019 appears to have been an exploratory meeting only at which Rothschild was acting for the Commission and actual ongoing work on the VTO between Rothschild and Allwyn had come to an end. There is no suggestion that there was any discussion at the meeting which might have engaged a duty on the part of Rothschild or Allwyn to disclose a conflict.

Mr Dlouhý recalled another meeting between himself and Mr Duckett over coffee in March 2020 together with (after the Covid lockdown) phone and video calls, also including other team members and sometimes involving the Commission. Mr Dlouhý described Rothschild’s role at this time as marketing the Competition and talking to potentially interested parties, including Allwyn. In unchallenged evidence (which I accept) he said that these discussions focused on the process of the 4NLC and that he did not discuss Allwyn’s bid with Rothschild, whether as part of these discussions or at all.

Sometime in the first half of 2021, Rothschild contacted Allwyn with an investment opportunity which involved a small UK company that was developing a lottery-like product. There was a call between Rothschild and Allwyn, but Mr Dlouhý could not recall whether he had been on the call and he could not be sure whether Mr Duckett had been involved. In any event the matter appears to have gone no further. Mr Dlouhý explained that bearing in mind the timing of this call, he was certain that he had given instructions to all his team members that they should not discuss with anyone, including Rothschild, Allwyn’s bid. Mr Dlouhý also said that he did not recall discussing any other opportunities with Rothschild during the Competition. I accept this evidence.

In the Autumn of 2021, there was a discussion between Mr Dlouhý and Mr Duckett concerning Allwyn’s proposed acquisition of Scientific Games. Mr Dlouhý explained that it had been important to Allwyn to ensure that the Commission was properly informed of its plan to acquire Scientific Games, given that they were one of Allwyn’s Key Subcontractors, in advance of any public announcement. Mr Dlouhý thought that it was therefore entirely proper to explain the plan to Mr Duckett, given Mr Duckett’s background as an investment banker: “he understands very well how does this transaction work, and I found it appropriate to call him because I knew that he will pass the message and explain it, and there will be nothing lost in the translation in terms of the description of the transaction”. He confirmed (and I accept) that the conversation involved no wider discussion of Allwyn’s application or of its bid strategy. There is no evidence of any further contact between Allwyn and Rothschild in relation to the acquisition of Scientific Games.

Following the conclusion of 4NLC, regular meetings between Allwyn and Rothschild have resumed, just as meetings with other bankers operating in the gambling sector have taken place.

During the course of 4NLC it is common ground that a fund (R-Co Target 2024 High Yield) operated by Rothschild European Asset Management Practice (“RACM”), a separate Rothschild & Co entity based in Paris, held an investment in a bond issued by the SAZKA Group. The fund was established for third party investors, not RACM monies. This was confirmed in a letter from Simmons & Simmons on RACM’s behalf on 20 January 2025. Mr Dlouhý confirmed in his evidence, and I accept, that he had not been aware of this prior to these proceedings but that his finance team had looked into it and understood that RACM was holding 2-2.5% of the €300 million total bond size. It appears from an article in the Byline Times that this investment constituted just over 2% of the Fund’s net asset value.

It is common ground that Allwyn did not declare any conflict of interest during the Competition. It was Mr Dlouhý’s firm view that there was no such conflict. The Claimants say that this was a clear breach by Allwyn of the requirements set out in section 6.16 of the ITA (set out above) and that the Commission would have been entitled to treat the failure to identify a conflict as a matter requiring disqualification under the provisions of section 6.14 ITA. I shall return to this in a moment.

Although the Claimants’ original pleaded case was that the matters set out above amounted to an actual conflict of interest, it was accepted in closing that the highest the case could be put was that they gave rise to a perceived or apparent conflict of interest.

In my judgment, there was not even a perceived or apparent conflict of interest within the meaning of Regulation 35 CCR 2016 for the following reasons:

Further and in any event, even if the Commission did act in breach of Regulation 35 CCR 2016 in not taking appropriate measures to prevent, identify and remedy conflicts of interest, any such breach was not material in the sense that it would not have affected the outcome of the Competition. Rothschild was not a decision-maker, it did not evaluate any Applications, and it was not involved at all in the evaluation of PPI, or PPF (both of which TNLC failed). The Claimants have not established that they have suffered loss. That alone is sufficient to dispose of this aspect of their claim.

Given my conclusion that there was no appearance of a conflict of interest, I find that there was no reason for Allwyn to have notified the Commission of the existence of any conflict, or indeed to propose any mitigating steps. Accordingly there was also no breach of section 6.16 of the ITA.

In this regard I note that the ITA was not published until 26 October 2020, albeit that applicants were required to provide a conflict declaration when submitting their SQ responses by 2 October 2020. By this time, as pointed out above, it was over a year since Allwyn had been substantively engaged in an advisory relationship with Rothschild and eleven months since the final payment had been made by Allwyn to Rothschild in relation to its work on the 2019 Appointment. It is not alleged that Rothschild had any particular knowledge about the detail of Allwyn’s bid which might have led an impartial observer to express concern about the danger of conflict.

During the course of his cross-examination, Mr Wilson confirmed that if there was a conflict, he would have expected Allwyn to disclose it. He was then asked to assume various facts about the relationship between Allwyn and Rothschild (including that it was ongoing when the Commission engaged Rothschild) and he agreed that on the basis of those facts there was at least a perception of conflict. He was then reminded of section 6.14 of the ITA which provides the Commission with the right to disqualify an applicant for breach of the ITA and it was put to him that “had Allwyn not complied with its obligations concerning notification of conflicts” the Commission would have had a discretion to disqualify it from the Competition. He agreed with that proposition, and he went on to agree that it was “certainly possible” that “absent a sufficient explanation from Allwyn for its lack of disclosure of the situation” the Commission would have disqualified Allwyn.

This evidence was relied upon by the Claimants in closing but given that it was not premised on the facts as I have found them, I can place no weight on Mr Wilson’s answers. I have found that there was no appearance of a conflict and nothing for Allwyn to declare.

Accordingly, there were no grounds on which the Commission could lawfully have disqualified Allwyn.

In circumstances where I have found that there was no appearance of conflict, I cannot see that this issue takes matters any further. The Claimants’ pleaded case is that in failing to take adequate steps to prevent or resolve a conflict of interest or apparent conflict of interest, the Commission has “undermined the integrity of the overall 4NLC process and allowed Allwyn an unfair advantage”. Where there is no such conflict, this pleading does not even begin to get off the ground. Questions such as whether the Commission should have been alerted to a conflict, should have investigated a conflict, was entitled to rely on Rothschild’s conflicts of interest policy and the terms of its contract, including whether the Commission should have obtained individual declarations from Rothschild employees, are no longer relevant.

The Claimants’ only reason to pursue these issues, as is clear from their closing submissions, is to support a counterfactual case to the effect that if the Commission had carried out its own investigations it would have discovered the past engagements between Allwyn and Rothschild and “would have undoubtedly expected a disclosure from Allwyn about the …potential conflict” and that since there would have been no satisfactory explanation from Allwyn “the only rational conclusion” that the Commission could have reached was disqualification. This line of reasoning appears to me to be flawed for all the reasons I have already given.

In any event in case it is important, I find that:

The IPs allege that the claim in relation to conflict of interest was commenced outside the time limit prescribed by Regulation 53 CCR 2016. Regulation 53(2) makes clear that:

Regulation 53(6) makes clear that “proceedings are to be regarded as started when the claim form is issued”.

Here, the claim form was issued on 13 April 2022. It is thus common ground that if the Claimants knew that they had grounds to make a claim in relation to conflicts prior to 14 March 2022, then that claim is time-barred. It is well established that time can start to run before the end of a procurement in relation to earlier breaches (see Mears v Leeds City Council [2011] EWHC 40 (QB) per Ramsey J at [70]).

A question arises as to the degree of knowledge that is sufficient to start time running. This question was addressed in Sita UK Ltd v Greater Manchester Waste [2011] EWCA Civ 156, where the Court of Appeal adopted the test articulated by the Judge below, as follows: “the standard ought to be a knowledge of the facts which apparently clearly indicate, though they need not absolutely prove, an infringement” (per Elias LJ at [26] and [31]; per Rimer LJ at [91]). This will not involve “great detail” because that “would be likely to run counter to the principle that challenges should be indicated swiftly and mounted swiftly” (per Mann J in Sita UK Ltd v Greater Manchester Waste Disposal Authority [2010] EWHC 680 (Ch) at [130]). What is needed is knowledge of material which does more than give rise to suspicion of a breach of the Regulations but there can be requisite knowledge even if the potential claimant is far from certain of success. The Court should assess what the claimant knew, rather than being concerned with what it did not know (see BromCom Computers Plc v United Learning Trust [2021] EWHC 18 (TCC) at [16] and [56] (“BromCom”)).

As for the issue of constructive knowledge (i.e. whether the claimant should have known of the relevant facts), a claimant will have constructive knowledge if, upon reasonable enquiries, it should have discovered the alleged infringement. However, the Court should be cautious not to impose too onerous a standard on tenderers who do not have actual knowledge of an infringement of the Regulations, and equally, should not require a claimant tenderer to take steps that would be regarded as unreasonable to discover the infringement (see Matrix-SCM Limited v London Borough of Newham [2011] EWHC 2414 (Ch) (“Matrix-SCM Limited”) per Susan Prevezer QC sitting as a deputy High Court Judge at [13]).

In Siemens Mobility Limited v High Speed Two (HS2) Limited [2022] EWHC 2451 (TCC), (“Siemens v HS2”) Eyre J considered the standard by which the reasonableness or unreasonableness of particular enquiries or steps is to be judged saying this (at [65]-[66]):

It is common ground that the Claimants knew from an early stage of 4NLC (i) Rothschild’s role in the Competition; and (ii) that Allwyn was participating in the Competition, an awareness they had gained from monitoring references to Allwyn in the media. However at the heart of the dispute on limitation is the state of the Claimants’ knowledge about the prior dealings between Allwyn (then SAZKA Group) and Rothschild. The IPs say that those prior dealings in relation to OPAP had been in the public domain since 2019 and they rely on two transaction announcements from that time. Both announcements state that Rothschild acted as financial adviser to Allwyn in relation to Allwyn’s investment in OPAP, but they contain no other relevant details about the relationship between Rothschild and Allwyn.

Further, the IPs submit that the Claimants failed to provide evidence as to their state of knowledge and that it is “overwhelmingly likely” that the Claimants were aware of what was a publicly known and publicised link between Allwyn and Rothschild at an early stage of the Competition. Against that background they say it is not for a bidder wishing to challenge Rothschild’s involvement in 4NLC to sit on its hands and raise the issue in correspondence only after it discovers that its bid has failed. They remind me of the words of Dyson LJ in Jobsin.Co.UK Plc v Department of Health [2002] 1 CMLR 44 (CA) at [38] who made clear that a tenderer in this position:

The IPs also contend that adherence to this requirement is particularly important in the context of conflicts of interest where the Contracting Authority’s obligation is an obligation to put in place “appropriate measures” to combat and remedy conflicts. Finally, they suggest (relying upon BAA Ltd v Competition Commission [2010] EWCA Civ 1097 at [50]-[52]) that where a dissatisfied party to a decision making process makes a belated allegation of bias, it is for that party to establish by evidence its unawareness of relevant information. This, they say, the Claimants have singularly failed to do.

The Claimants contend that the central elements of their claim only emerged after the outcome of 4NLC. One of those elements was the discovery of the OPAP transaction involving Rothschild and Allwyn. However, they do not have any evidence to say exactly when that discovery was made. That transaction was referred to by Mr Mills in a letter to the Commission of 18 March 2022 in which he asked the Commission to confirm that it had satisfied itself that no member of Rothschild’s 4NL team was conflicted or could be perceived as such, because of this link. In closing, the Claimants suggested that this letter “shows that TNLC had then become aware of the bare fact of Rothschild’s role in advising Allwyn” but they accepted that Mr Mills’ evidence was to the effect that someone else at TNLC (Mr Roger Walker) had obtained the information and that he did not know when that information had been discovered.

I reject the IPs’ case that I can properly infer from this evidence that it is “overwhelmingly likely” that the Claimants had the requisite knowledge long before 14 March 2022, or indeed that I can draw any inference from the absence of Mr Walker as a witness. That leaves me with the IPs’ submission on the burden of proof.

Subject to a point I make below as to constructive knowledge, it does not seem to me that I need to resort to the burden of proof in order to determine this issue. Looking at the Claimants’ pleaded case (which must be the appropriate starting point when the Court is considering a time-bar point of this type) there is plainly a second important element to their claim, which relies upon information which it is not suggested was known to the Claimants prior to 14 March 2022. In an attachment to a letter from the Commission dated 8 April 2022, the Claimants were informed that the Commission had relied on confirmation from Rothschild that no conflicts had been identified through their own strict conflicts process. This information plainly fed directly into the Particulars of Claim, which expressly pleads the information contained in the 8 April 2022 letter and then pleads that:

It seems to me that, whether or not the Claimants knew about the involvement of Allwyn and Rothschild in connection with the OPAP transaction, that in itself was not sufficient to plead out this claim because it told them nothing about the way in which the Commission had dealt with any possible conflict arising from that relationship. Knowledge of a relationship would not, without more, indicate a breach of CCR 2016. It was only when the Claimants were informed that the Commission had relied on Rothschild’s own confirmation that they were able to allege a failure on the part of the Commission to take adequate steps to prevent or resolve a conflict, i.e. a breach of CCR 2016. As it turns out, this claim has been unsuccessful (not least because there is no actual or apparent conflict), but the mere fact that the Claimants might have known of the existence of facts which could have given rise to a conflict does not appear to me to be enough.

Assuming (for present purposes) that the Claimants were aware of the involvement of Allwyn and Rothschild in connection with the OPAP transaction much earlier than March 2022, should they have discovered that the Commission had relied upon Rothschild’s own confirmation in relation to conflicts through reasonable enquiry – in other words, ought they to have known that this was the case? If so, then the burden of proof will become important.

On balance, having regard to the enquiries which an RWIND tenderer acting reasonably would have made, I am inclined to think not.

The reasonableness of enquiries is a fact-specific question and applying the factors in Siemens v HS2 at [66], the time bar defence initially appears attractive. The 4NL is a significant and extremely valuable concession contract; the potential bias of a financial adviser to the Commission is a serious cause for concern; and it would have been very easy for TNLC to have raised a query with the Commission (see by way of analogy its MCP complaints made throughout the Competition and the speed with which TNLC in fact raised the query once, on their case, they discovered the issue).

However although the RWIND tenderer is “reasonably well informed”, it is not expected to know everything in the public domain. It is also not reasonable to expect the RWIND tenderer to allocate its resources during the Competition to searching the internet in the hope of finding potential grounds for bringing proceedings or disqualifying another applicant. The RWIND tenderer cannot be expected to make parallel enquiries in respect of all other known applicants and Commission-side employees and contractors with a view to identifying a potential conflict. That would impose an unnecessarily onerous standard on tenderers (see Matrix-SCM Limited at [13]).

Assuming for these purposes that the RWIND tenderer had discovered the OPAP press article during the Competition, it contained only a single sentence that “Rothschild & Co acted as a financial advisor to Sazka Group”. The revelation of this historic, one-off engagement during the course of the Competition would not, without knowledge of further details, have caused the RWIND tenderer to leap to the conclusion that there was a conflict or that there might have been an infringement of CCR 2016 on the part of the Commission in dealing with that conflict or that it needed to start asking questions. I consider that the RWIND tenderer would have been entitled to assume that the Commission and Allwyn were abiding by the rules of the Competition and that the Commission was complying with Regulation 35. The fact that TNLC (on its own case) decided to investigate the matter after it had discovered that it was unsuccessful in the Competition does not appear to me to shed light on the RWIND tenderer’s position during the course of the Competition.

In this context I return to the IPs’ submission that it is particularly important for a tenderer not to “sit on his rights” in the context of alleged conflict of interest. I agree, but of course a tenderer can only be said to be “sitting on his rights” in circumstances where he has sufficient knowledge to make a challenge. Mere knowledge of a previous relationship between Allwyn and Rothschild (even assuming the Claimants had this knowledge) does not appear to me to be enough to establish either actual or constructive knowledge. The challenge here was made not purely on the basis of the possible existence of a conflict but also on the basis that the Commission had not acted lawfully in dealing with that conflict.

Accordingly I consider that (if I am wrong on the central issue of whether there was a conflict) then the IPs cannot defend that claim on the grounds that it is time-barred.

I did not understand the parties to be at odds as to the relevant law.

The principle of equal treatment does not require a contracting authority wholly to neutralise or eliminate incumbency advantage – this is for the obvious reason that any incumbent to a re-retender will invariably have an inherent advantage which has nothing to do with the conduct of the contracting authority (see Case T-10/17 Proof IT SIA v European Institute for Gender Equality at [187]). As the Court of Justice said in Case T-345/03 Evropaiki Dynamiki v Commission at [70]:

Furthermore, as the Court pointed out in that case at [74]:

Nevertheless, in order to comply with the principle of equal treatment in this particular situation, “a balance must be struck between the interests involved” (Evropaiki Dynamiki at [75]) and (at [76]):

The above principles were set out and applied in BromCom Computers v United Learning Trust [2022] EWHC 3263 (TCC) per Waksman J at [144]-[150].

Case T-211/17 Amplexor v Commission is an example of a case in which a contracting authority took steps to neutralise an incumbent’s advantage by capping the incumbent’s recoverable costs at a lower level than the costs of non-incumbent tenderers. Relevant considerations, consistent with the case law referred to above, included whether there was an economic justification for the discrimination in the light of the principle of sound financial management, whether the measure was arbitrary or excessive, whether it infringed the rights of the existing contractor and whether it promoted healthy and effective competition.

In Evropaki Dynamiki the Court considered an argument that the European Commission had failed to adhere to the principle of equal treatment because of an alleged delay in making certain technical information available to the tenderers, with the exception of the successful tenderer. It held that, in such a case, the court must examine two questions: first “whether the unequal treatment alleged, consisting in a delay in providing the tenderers other than the successful tenderer with certain technical information, constitutes, as such, a procedural defect in that information that was in fact necessary for the preparation of the tenders was not made available to all the tenderers as soon as possible”; and second, if such a defect is established, whether “but for that defect, the procedure could have had a different outcome”. The Court explained that “such a defect can constitute an infringement of the equality of opportunity of tenderers only in so far as the explanations provided by the applicant demonstrate in a plausible and sufficiently detailed manner, that the procedure could have had a different outcome as far as it was concerned”.

Against that background, the Claimants submit that if a contracting authority seeks to take steps to mitigate an incumbent’s advantage so as to achieve what it believes will be a level playing field, for example by requiring an incumbent to take certain steps and measures, then if the incumbent does not take such steps, the incumbent will have obtained an unfair advantage. If the contracting authority then fails to take any steps to address that unfair advantage it will be in breach of its equal treatment obligations. That is what the Claimants say has happened here. I shall need to consider this submission against the background of the evidence.

It is common ground that the Commission recognised from the outset that Camelot had an incumbent advantage and that it should be neutralised in so far as was reasonably possible (Issue 23(a)), although the Claimants contend that this recognition was “only partial”. Mr Tanner’s unchallenged evidence was that one of the key objectives of the Competition (consistent with the Commission’s intention to align with the requirements of the CCR 2016) was to provide a level playing field for both new entrants and the incumbent. This was particularly important because the Commission was operating in a situation where Camelot had been the operator of the National Lottery for nearly 30 years. Mr Tanner explained that the Commission recognised that the overall Competition would need:

One of the steps adopted by the Commission in order to achieve a level playing field involved setting up the VDR to provide information to applicants for the purposes of preparing their Applications. These documents included confidential information about the Competition together with documents derived from Camelot’s operation of the Third Licence. Access to the VDR was regulated by the terms of the Application Process Agreement (“the APA”) and required the provision of confidentiality undertakings. TNLC signed the APA on 2 July 2020.

The APA required applicants not to disclose the material in the VDR outside the preparation of their Application, albeit, in the case of Camelot, there was a requirement to operate a “clean team” (essentially a Competition team that was separate from Camelot’s employees working on the ongoing Third Licence). As Mr Tanner explained in his witness statement, the idea behind this was that Camelot’s clean team would not receive confidential information and documents from the rest of the Camelot team other than through the VDR. This was plainly a means of seeking to neutralise, in a technically easy way, the advantage that Camelot would otherwise have had from its ongoing access to Third Licence information. As Mr Tanner said, the principle was that all documents used by the Camelot clean team would be available to all applicants in the VDR.

The Claimants’ pleaded case is that (i) the Commission “failed to ensure or adequately to ensure that all applicants had equal access to information during the 4NLC process”. Specifically they point to the redaction of documents in the VDR which had emanated from Camelot and to the delay in the production of material by Camelot and/or the fact that such material was subject to “unnecessary and limiting confidentiality provisions”; and that (ii) Camelot was able to make information available to its bid team before it was made available to other bidders. In respect of the latter, the Claimants’ Reply pleads some further particulars about the sharing of information. An additional allegation as to the breach of information barriers by the use of part-time personnel working in both the clean bid team and the team working on the Third Licence has been abandoned.

The Commission rejects these allegations. In short, it maintains that it took adequate steps to make information available to applicants and that it acted appropriately in responding to data breaches. In closing, the Commission addressed in detail what it understood to be existing allegations in the evidence as to access to redacted documents, information about the Mystery Shopper Contract, information about the three IGT contracts in the VDR, information about the Watford Leases and an allegation about the Bid Assumption. However, as I understand the Claimants’ closing submissions, they no longer seek to advance any of these points.

Instead, they seek to rely upon three alleged “data breaches” concerning the use by Camelot’s bid team of information that should have been available only to its team working on the Third Licence. They allege a failure on the part of the Commission to act reasonably and proportionately in dealing with those breaches and in neutralising the incumbency advantage and they contend that, accordingly, Camelot obtained an unfair advantage. The Claimants’ submissions can best be addressed by dealing chronologically with the alleged breaches. In doing that, it is, in my judgment, important to take account of all the relevant correspondence passing between the Commission and Camelot, as opposed to merely the letters highlighted by the Claimants in their closing submissions. It is only in this way that a full picture of events can be pieced together.

In advance of the launch of the Competition, on 4 December 2019, the Commission wrote to Camelot setting out the measures it considered Camelot needed to take in order to ensure a level playing field in the Competition. Amongst other things, the letter:

Pausing there, the Claimants submit, and I accept, that it was clear from this letter that the Commission was concerned to address the timing advantage that Camelot might have if it made use of information before sharing it with the Commission. It was also clear that if Camelot broke the ground rules set by the Commission, disqualification (or enforcement action in relation to the Third Licence) was a real possibility. Mr Tanner frankly accepted both of these points during his cross-examination.

The Claimants say that Camelot broke these ground rules repeatedly and that the first breach occurred almost immediately. They rely on the content of Camelot’s reply dated 18 December 2019. In that letter, Camelot disputed the need for ground rules and suggested that the Commission’s approach “would risk disadvantaging Camelot” as a prospective participant. However, it also welcomed the importance of a Competition that was “fair to all potential participants including in relation to the Confidential Information to which all such applicants should properly have access”. It described the Commission’s intention of ensuring access by all bidders to the VDR as a “correct priority” and an appropriate approach that was a practicable, fair and proportionate means of addressing any actual or perceived incumbency advantage. It pointed out that the Commission already had “much of” the Current Licence Confidential Information and that it was continuing to engage with the Commission on this front. However, Camelot did not accept that its use of Current Licence Confidential Information in connection with any preparations it may be making in relation to potential participation in the Competition required the Commission’s consent, and it did not agree to the separation of the 3NL team and the 4NL bid team. Nevertheless, Camelot disclosed various categories of Current Licence Confidential Information which it said had been “considered by Camelot to date in the course of its work relating to Camelot’s potential participation in the Competition”. Camelot did not accept that “knowledge” or “know how” of Camelot staff fell within the definition of Confidential Information.

Mr Tanner accepted in his evidence that many of the categories of information referred to by Camelot in this letter would be critical for any potential bidder at the proposal stage and that it was clear from Camelot’s letter that it had already been looking at Current Licence Confidential Information in order to inform its prospective bid. On this basis he accepted that there was already a breach of the Third Licence and that Camelot’s conduct undermined the level playing field in the competition “at this stage”. I observe that “at this stage” was at around the time the draft ITA was issued to the market, albeit that it did not at this time include Volume D (Evaluation including Pass/Fail criteria) or Volume F (Your Application including the Questions to be answered by Applicants). I understand this to be the First Data Breach to which the Claimants refer in their submissions.

The Commission responded to Camelot’s letter on 23 December 2019, making it clear that its position remained as set out in its earlier letter of 4 December 2019, i.e. that Camelot must not use Current Licence Confidential Information for the purpose of the Competition unless compliant with the APA (and subject to seeking and receiving consent from the Commission). The Commission also made clear that Camelot required the Commission’s consent to tender in the 4NL Competition because this was regarded as an “Ancillary Activity” under 3NL.

On 17 January 2020, Camelot wrote again to the Commission, directing its letter to Ms Mandy Gill, Head of Compliance. In this letter, Camelot noted the Commission’s position as set out in its letter of 23 December 2019 with which it “respectfully” disagreed and it reserved its rights in the event of any future enforcement action. However, Camelot reiterated that it welcomed the Commission’s desire to ensure a level playing field and therefore, “to provide the Commission with the assurances that it requires”, Camelot provided further information and confirmations to the Commission. These included lists of full time and part time Camelot staff involved in Camelot’s Competition Activity. In addition, Camelot confirmed that, to support a level playing field for all potential bidders, it agreed that “all material Current Confidential Information that potential bidders need to know…must be made available to them in the Competition data room”. Camelot also confirmed that it would compare a more detailed list of the categories of information provided in its letter of 18 December 2019 with the list of information that the Commission had outlined in connection with the draft ITA would need to be included in the VDR. Camelot confirmed that it would notify the Commission “if there is any information that it has or intends to use for potential bid purposes that is not on the Commission’s proposed VDR list, which should be added, to ensure a level playing field” and that it would continue to notify the Commission of any further categories of Current Licence Confidential Information considered by Camelot in connection with its potential participation in the Competition. Camelot expressed its willingness to “work further” with the Commission on these issues as required and sought confirmation that the Commission was content for Camelot to proceed on the basis of the further assurances provided.

There appears to have been a little delay in the Commission deciding how to respond to this letter. Internal emails between 24 and 28 January 2020 show the Commission discussing how to respond. Some are privileged because of the involvement of General Counsel, but what is clear is that the Commission was taking the matter extremely seriously. In an email of 24 January 2020, Mr Tanner referred to the possible need to consider “whether exclusion from the competition follows. That would clearly be a very significant consideration”.

The Commission responded on 3 March 2020 explaining again that it considered participation by Camelot in the Competition for the Fourth Licence to amount to Ancillary Activity under the Third Licence such that it required consent. The Commission also restated that the use of Current Licence Confidential Information by Camelot for the purposes of its bid in the Competition would require its approval. Absent any request from Camelot for approval to undertake these activities, the Commission stated that it could not give Camelot the assurances it required. The Commission went on to outline the undertakings it would require from Camelot if it were to grant an application for approval, including undertakings as to the use of Current Licence Confidential Information.

Camelot signed the APA on 11 March 2020 governing its access to information in the VDR.

On 12 March 2020, the Commission wrote to Camelot in advance of a meeting that was due to take place on 16 March 2020. The Commission stated that an issue for the meeting would be the sharing of confidential information and Camelot’s obligations under the Third Licence. The Commission stated that it wished to “fully understand your perspective”.

Following the meeting, on 20 March 2020 the Commission issued an “Advice to Conduct” letter to Camelot in respect of conditions 6.1 and 20 of the Third Licence. This letter (described by Mr Tanner as “the lowest point on the escalator of enforcement activities”) explained that the Commission had considered the disclosures made by Camelot in its letters of 18 December 2019 and 17 January 2020 and confirmed its view that Camelot needed to seek consent for Ancillary Activity and for use of confidential information in connection with the Fourth Licence Competition. The letter recorded that “[w]e have agreed that an application in relation to written consent will be made by [Camelot] by close of business on Friday 27 March”. In relation to the use of Current Licence Confidential Information that had already taken place by Camelot, the letter stated that it was the Commission’s view that Camelot should have sought approval for such use but that, having considered the matter, “the Commission has decided not to take formal enforcement action on this occasion”. There was no further identification of the Commission’s rationale for this decision.

On 30 March 2020, Mr Tanner wrote to Camelot on behalf of the Commission and asked it to confirm by 6 April 2020 (amongst other things) that it would not make further use of data provided by its Third Licence team to its Fourth Licence team or of any information or data derived from that data until that information had been made available in the VDR. Mr Tanner confirmed in his evidence that he sought this confirmation because he recognised that if Camelot continued to use the data “they would continue to benefit from the headstart” and that, if the Commission was to maintain or create a level playing field it needed to take action immediately.

It seems that further discussions then took place between the Commission and Camelot as to its use of Current Licence Confidential Information, because on 3 April 2020, Ms Gaby Heppner-Logan of Camelot emailed Ms Gill following up on those discussions. Specifically she explained that there had been a “thorough review” of any additional confidential information or data sources to which Camelot’s Competition team had had access and that “barring the potential for one or two discrete items” all of the data that had been accessed or used to date had been identified and that it was “almost all used in February and March”. She categorised the data into 7 main areas and said that the Commission would be provided with consolidated source datasets for all data not previously provided falling within these 7 categories. She noted Camelot’s view that “[a]ll bidders should also be free to bring their ‘know how’ such as knowledge, skills and experience of their own market and operations, for the benefit of planning their own bid, without disclosure to other bidders”.

Pausing there, Mr Tanner confirmed that the 7 categories of document identified in this email were “very broad” and that he thought they would be relevant to anyone looking to prepare a bid for 4NL. I understand this to be the Second Data Breach on which the Claimants rely. An internal Commission email of 15 April 2020 suggests that this new disclosure amounted to circa 600 documents although Mr Tanner thought it was unlikely that there were two groups of 600 documents (information having earlier been provided to the Commission that the first tranche of disclosure amounted to 600 documents). I note in this regard that the 15 April 2020 email goes on to say that the Commission does not know how many documents it has received.

On 6 April 2020, the Commission issued a second Advice to Conduct letter, again in relation to Conditions 6.1 and 20 of the Third Licence. The letter explained that the Commission had reviewed the further disclosure provided in accordance with the 3 April 2020 email and observed that this was “additional” to the confidential document disclosure that had been notified previously and which had been dealt with by way of the first Advice to Conduct letter. The Commission said this:

The Commission explained that it had not yet formed a view as to “what does and does not constitute know-how and synthesis of data”. However, it made clear that it now expected Camelot “immediately (by 10am on Tuesday 7 April 2020)” to seek the Commission’s written consent under the Third Licence to participate in the Fourth Licence Competition.

The Claimants put to Mr Tanner in cross-examination that it was not clear from this letter why the Commission had decided not to take any further enforcement action, but Mr Tanner disagreed saying that “the Commission is saying that it’s considered all the circumstances”. He also pointed out, as is clear from the letter itself, that the Commission was noting assurances received from Camelot.

Within the timescale set by the letter of 6 April 2020, Camelot wrote to the Commission on 7 April 2020 formally applying for the Commission’s written approval (for the purposes of Condition 6.1 of the Third Licence) for Camelot to undertake the activity of participating in the Competition. This was said to include the use of Current Licence Confidential Information “to the extent only that use of such Confidential Information either has been notified to the Commission before the date of this letter or is subsequently subject to the terms of this letter”. On the assumption that approval would be granted by the Commission for Camelot’s participation in the Competition, the letter then provided various confirmations, including as to lists of staff working on the Competition bid, the provision of Confidential Information that Camelot wished to use in its Application to the Commission so as to ensure it could be made available to all bidders, and confirmation that its Fourth Licence bid team would only access information from the VDR and not directly from Camelot’s Third Licence team. Camelot further confirmed that it would put in place “the necessary systems and procedures to prevent the transmission of Confidential Information directly from [Camelot’s Third Licence team] to staff deployed on a Camelot bid”. Finally, Camelot agreed that, in the event that it submitted a bid, it would provide a “comprehensive schedule” of all Confidential Information relating to the running of the National Lottery that it had relied upon in its Application.

The following day, 8 April 2020, Mr Tanner wrote again to Camelot noting that the deadline of 6 April 2020 identified in his letter of 30 March 2020 had passed without a response. In particular he said he was “very concerned” that no undertaking had been received from Camelot that it would stop making continued use of Third Licence data until that data was made available via the VDR. Accordingly, Mr Tanner invited a response “by no later than 17:00 hours today otherwise we are going to have to consider what steps we should take. The Commission takes very seriously its responsibility to ensure the principles of disclosure and use of information apply fairly and consistently to all potential applicants…throughout the competition”. In addition, Mr Tanner confirmed his understanding that the Commission had now received copies of all “data disclosed previously”. He indicated that he expected to be provided with the further data referred to in the 3 April 2020 email from Ms Heppner-Logan by close of business on 15 April 2020.

An internal Camelot email dated 8 April 2020 between Ms Heppner-Logan and Mr Nigel Railton (Camelot’s CEO) evidences an internal discussion about this request to “stop the work of the L4 team, potentially until the VDR is launched in June”. Camelot’s view was that this was not appropriate given that the data used had already been provided to the Commission or “is being” provided to the Commission. Mr Tanner accepted in cross-examination that Camelot appeared to be “pushing back on a request to stop the work of the team”.

Mr Railton wrote to the Commission in response to Mr Tanner’s letter of 8 April 2020 later that same day saying this:

It appears that the “pause” in the activity of Camelot’s bid team continued for a period of at least 3 weeks (referred to in an email dated 1 May 2020), while discussions continued between Camelot and the Commission.

On 15 April 2020, Ms Helen Venn, the Commission’s Executive Director of Licensing and Compliance, sent an email to Mr Tanner on the subject of “Camelot – Confid data”. She explained that she had been giving the matter thought and reviewing emails. In advance of a meeting “tomorrow” she set out some thoughts on the action that the Commission might wish to take. She noted that “points we need to cover” included following up again with Camelot “to get a full list of data” shared with its bid team, plus determining “whether some or all of this data has been shared with us”. She then went on to identify some “scenario planning” to which I shall return in a moment.

On 17 April 2020, Mr Railton wrote to Mr Tanner suggesting that the Commission had acknowledged that a fair competition could be achieved if arrangements to safeguard the use of information by the Camelot bid team prior to its release into the VDR were put in place. Mr Tanner’s subsequent email of the same day shows that he was awaiting a list of data shared with the bid team. He made clear that “[u]nderstanding what information has been shared, when and how it has been used is key to our being able to agree the arrangements necessary to support a fair and vibrant competition”.

On 20 April 2020 Ms Heppner-Logan sent Mr Tanner an email attaching 8 data lists of information that had been shared with its Fourth Licence bid team. The email confirmed that the data on the list had already been provided to the Commission, with the exception of the data in list 8 (“Camelot L4 April Declared Consolidated Data Sources”), which was in the process of being prepared and would be provided to the Commission in late April/early May 2020. The email explained that the data in the first 7 lists had been used in late 2019/early 2020 and that the data in list 8 had been used in February/March 2020 (as summarised in the 3 April 2020 email).

As is clear from an internal email of 21 April 2020, the Commission carried out its own assessment of the data sensitivity and the potential benefit/use by Camelot’s bid team for all the data declared. In an internal Commission email dated 23 April 2020, Mr Tanner explained to Ms Venn and Mr Wilson (amongst others) that the Commission were “actively reviewing the data which has been passed to [Camelot’s] bid team to assess its potential impact on the competition and what might be required to level the playing field” observing that “[w]e can only complete that work once we know what use the bid team have made of the data and whether other applicants will have the necessary time to do the same analysis with or without adjusting the competition timeline”. Mr Tanner said that consideration needed to be given to the conditions that might be imposed on a restart of Camelot’s bid team. I shall return to this email again in a moment.

In an email dated 23 April 2020 from Camelot to the Commission, Camelot set out some level of detail as to what it had used Third Licence data for in the context of the Competition, including to assess the feasibility of the Commission’s bid documents. Mr Tanner accepted in cross-examination that this usage had potentially given Camelot a “headstart” in the Competition, albeit that the Competition documents had still not been finalised and he thought that other applicants working in the lottery industry could well have had access to similar information. He frankly accepted, however, that Camelot was not like other bidders owing to its incumbency.

An email from Camelot to Mr Tanner dated 29 April 2020 records that it had been agreed at that point that documents on lists 4 and 7 (identified in the 20 April 2020 email) would not be accessed by Camelot “until they are in the VDR”, although Camelot could use and develop materials that its bid team had already created which may reflect information in these documents. Mr Tanner accepted that the use of such “derivative documents” continued potentially to give Camelot an incumbency advantage.

In a letter dated 4 May 2020, the Commission gave its consent to Camelot’s participation in the Competition on the detailed undertakings provided by Camelot, including as to staff working on the Fourth Licence Application, information sharing between the Third and Fourth Licence Teams and use of the VDR. The Commission reiterated that data in lists 4 and 7 must not be used “for the purposes of developing the bid” until it was published through the VDR and sought confirmation that the “feasibility work” for which the data had been used to date was the limit of such use and that such data had not been used “in any activity to commence the preparation of any bid response”. Mr Tanner robustly rejected the suggestion that there was an artificial distinction between the feasibility work and the preparation of the bid explaining that:

In addition to the undertakings provided by Camelot, all applicants were required to put in place ring fencing arrangements. Camelot’s ring fencing arrangements were attached to a letter to the Commission dated 20 May 2020. That letter confirmed that none of the data that had been used by Camelot to date in connection with the Competition had been used in any activity to “commence the preparation of any bid response” by the Camelot bid team, in that it had not involved drafting the content of any bid that Camelot may decide to submit – that was “quite some way in the future, not least because the Competition has not formally begun and the issue of the Final ITA (which may itself then be subject to further clarification and amendment) lies quite some way in the future”. Camelot confirmed its understanding that it was able to continue to use and develop derivative documents as long as this was not in connection with the preparation of any bid response.

Camelot’s ring fencing arrangements included (amongst other things) physical separation between the Third and Fourth Licence teams, mandatory training for all Fourth Licence team members, prohibitions on contact between Third and Fourth Licence teams, specific processes for identifying information that Camelot wished to use, notifying the Commission and only using that information once it was placed in the VDR. The ring fencing arrangements also set out agreed processes for dealing with ‘know how’ – such ‘know how’ would only be made available to the Fourth Licence team once it had been evaluated for source data and any source data made available through the VDR to all Applicants. Camelot Executives also signed personal undertakings confirming that they would comply with the ring fencing arrangements.

In closing, the Claimants invited the Court to look at the First and Second Data Breaches together and they submitted (without reference to all of the documents to which I have referred above) that the Commission “not only absolutely failed to mitigate the significant advantage which Camelot had obtained through the data breaches but, in fact, allowed Camelot to continue to benefit from the advantages it had improperly obtained”. The Claimants submit that this appears to have happened because the Commission had, at an early stage, irrationally ruled out the prospect of disqualifying Camelot from the Competition. They go on to say that Camelot’s breaches amounted to serious misconduct, gave rise to “irremediable prejudice to the level playing field” and that “the only rational outcome in these circumstances was disqualification”.

Before I consider this submission in detail, I note that in closing, the Commission submitted that this allegation had not been pleaded. Certainly it is right to say that the Particulars of Claim make no allegation of irrational, unlawful conduct on the part of the Commission in effectively ruling out the possibility of disqualification and nor do they assert that the only rational outcome was disqualification. Once again this appears to be a development of the Claimants’ case. The Claimants’ Particulars of Claim goes no further than to say that the Commission failed to take “adequate steps” to ensure that other applicants were not disadvantaged by the data sharing between Camelot’s Third Licence and Fourth Licence teams. It then goes on to plead that “[a]ppropriate actions would have included the Defendant disqualifying Camelot from the competition”. This is rather different from an allegation that the Commission had closed its mind to the possibility of disqualification and that it was irrational to do anything other than disqualify Camelot. I consider these to be material facts which, if they were to be relied upon, should have been pleaded. The Claimants’ Reply provided some additional particulars in relation to the allegation of shared information but did not remedy the inadequacies of the existing pleading in the Particulars of Claim.

Ms Grogan also made the point in closing that the Claimants had not put squarely to Mr Tanner in cross-examination that the Commission should have disqualified Camelot, whether at the time of the First, or Second Data Breach. As I understood Mr Toledano’s submissions, he accepts that the point was not directly put, but he contends that he “did enough”. Looking at the transcript with care, as I have done, I am inclined to agree with the Commission that the point was not adequately put. At no stage was it put to Mr Tanner in terms that the Commission should have disqualified Camelot, that that was the only rational approach or that it had closed its mind to that possibility. The highest the point appears to have been put by Mr Toledano was to ask whether it was “possible that the real reason that enforcement action in relation to 4NL wasn’t taken” was because the Commission “wanted to keep [Camelot] in the competition because that [it] thought would be good for the Competition”. Mr Tanner’s response was:

Mr Toledano did not go on to suggest that the only rational course of conduct would have been to remove Camelot.

These two points alone made by the Commission in closing are sufficient in my judgment to take the wind out of the Claimants’ sails in relation to the First and Second Data Breach. The case that the Claimants now seek to run has not been adequately pleaded and was not put to the Commission’s witnesses. Accordingly I refuse to permit it.

Furthermore, I reject the Claimants’ submission in closing that the only evidence of the Commission’s thinking at the time consists of two documents which “evidence an irrational approach to the issue”. I accept Mr Tanner’s evidence in his statement that, in general terms over this time, the Commission was considering whether Camelot had an advantage as an applicant and how that could be mitigated. I also accept his evidence that he had in mind the potential sanction of disqualification if any breach was serious enough (evidence which is supported by his email of 24 January 2020 in which he identified the possibility of exclusion). As for the documents on which the Claimants rely:

Further and in any event, Mr Tanner’s clear evidence in both his written and oral evidence, which I accept (and which is a view that the Commission was entitled to arrive at), is that disqualification would have been disproportionate:

Dealing as swiftly as I can with the main planks of the Claimants’ arguments, I find that:

The Claimants submitted in closing that if the Court does not agree that the First and Second Data Breaches met the disqualification threshold as of May 2020, then it is “evident” that disqualification was “inescapable” by the date of the Third Data Breach. Once again, this is not pleaded and it was not put to Mr Tanner, creating the same immediate difficulty for the Claimants in seeking to advance this contention. I consider that the point cannot be advanced for these reasons alone and I decline to permit it.

Turning to the evidence (and without prejudice to the previous paragraph), it is clear from a letter from the Commission to Camelot dated 13 August 2020 that during a Data Workstream meeting on 11 August 2020, Camelot had identified a further set of “non-data information” which it had not included in the schedules of material that had already been provided to the Commission. This included a retailer training manual that had been provided to Camelot’s bid team but had not been included in the Schedule. Mr Tanner said in the letter that given the assurances received in Camelot’s letter of 17 April 2020 to the effect that all confidential information disclosed to the bid team would be shared with the Commission “we are now extremely concerned that there seems to be such information outstanding that was not listed in CUKL’s original List 8”. Mr Tanner said that “reflecting on” the 17 April 2020 letter:

In an internal email to Ms Gill and Ms Venn dated 19 August 2020, Ms Webb of the Commission confirmed that the Commission had now received all but one of the latest disclosed documents and had determined that they did in fact relate to data. She and her team were of the view that “this is a deliberate attempt to hide the fact that information has been shared with the L4 team and thus created an unfair advantage”. Mr Tanner agreed in cross-examination that the breach was serious “albeit one that appears to have happened at the same time as the previous breaches”. He did not accept that he could form any view as to whether this was a deliberate attempt on the part of Camelot to hide its conduct because Ms Webb had set out no evidence in support of such a conclusion.

Indeed, in a responsive internal email dated 21 August 2020, Ms Gill was rather more circumspect, saying instead that “this latest disclosure does not accord with the content and spirit of previous comms from [Camelot]”. She observed that this was the third time that this had happened and that “[t]his sort of conduct is not consistent with our expectation of the licence holder, current or future, and raises some issues around suitability”. Mr Tanner confirmed that he agreed with this in that it raised in his mind “questions around suitability”. He could not remember when questioned what action he took next, but it is clear from the documents that he wrote to Camelot on 25 August 2020 (in conjunction with Ms Venn) asking for clarifications in relation to a letter of 17 August 2020 from Camelot explaining its position and saying that this was required to enable the Commission to assess its next steps. The letter ended:

On 27 August 2020, by email, Camelot confirmed that transfer of the “final 9 files” to the Commission data share system had taken place.

Camelot provided a detailed 9 page response to the Commission’s concerns on 2 September 2020, saying at the outset:

It was not suggested to Mr Tanner (or any of the Commission’s witnesses) that the proper (and only) reaction to Camelot’s Third Data Breach was disqualification, or that that should have been the reaction following receipt of the 2 September 2020 letter. Accordingly, while it is true that there is no evidence as to how the Commission dealt with the Third Data Breach (in light of Camelot’s explanation of 2 September 2020), it is not open to the Claimants to contend that the only appropriate course of action would have been to disqualify Camelot.

The Claimants contend that the paper trail as to the Commission’s thinking goes cold at this point and that this is consistent with the Commission having “essentially discounted any serious consideration of disqualifying Camelot”. I reject the invitation that I should draw such an inference. I bear in mind that all of the missing data was provided by Camelot to the Commission and that there is no suggestion that there were any ongoing issues. I cannot see that it would be appropriate in the circumstances to determine (as I am invited to do) that the only rational response on the part of the Commission was to disqualify Camelot (notwithstanding the content of the 2 September 2020 letter, which was not even referred to in the Claimants’ closing submissions). Not only was this not put to Mr Tanner, but it was also not suggested to him that there was anything about the category of documents that were being disclosed late that caused additional disadvantage to other Applicants.

The Commission was dealing with a balancing exercise. By the time of the opening of the Competition, there appears to have been no concern around the disclosure of documents or the use of the VDR. The Commission had ensured that all data now disclosed by Camelot had been included in the VDR. I repeat the points I have already made. The Claimants have failed to establish that the Competition could have had a different outcome but for the late provision of information into the VDR.

In all the circumstances I reject the Claimants’ case that there was any breach of CCR 2016 by the Commission in dealing with Camelot’s incumbency advantage. Given Camelot’s status as operator of the Third National Lottery it was not “technically easy” to neutralise the advantage it inevitably already had by reason of its knowledge of its own operations. However, I consider the Commission to have taken appropriate, proportionate and reasonable steps in all the circumstances to ensure equal treatment. Even if it could be argued that there was a defect in its conduct arising by reason of Camelot gaining a headstart over other bidders through its early access to data (including the data disclosed in August 2020), there is no evidence that, but for that defect, there would have been any different outcome (see Europaki Dynamiki). Given that I have dismissed TNLC’s claim of manifest error, its suggestion that there is somehow a real chance that, without its incumbency advantage, Camelot would have scored lower than TNLC, is fanciful.

The Claimants submit that their case on incumbency advantage is a reason why the Court should not approach what would have happened in a 5NLC (for the purposes of the Modifications Claim) on the basis that TNLC’s lower score in 4NLC is a safe or reliable starting point or on the basis that the gap between its score and the higher scoring bids in that competition was as significant as might otherwise appear. In light of the analysis set out above, I reject that submission.

Finally, Issue 24 requires me to consider whether the allegations as to Incumbency advantage are time-barred. Looking carefully at the pleadings, it is not clear to me that the Commission’s pleaded limitation defence concerns the only remaining allegation of incumbency advantage that has been pursued at trial. The Commission’s Defence does not plead that the paragraph in the Particulars of Claim in which this allegation is made (namely 26.2(aa)) is time-barred and it is not clear that its general plea that the second sentence of paragraph 26.2 of the Particulars of Claim is time-barred in fact relates also to 26.2(aa). The evidence on which the Commission relies in closing is expressly concerned with redactions and does not touch on information sharing. Given this lack of clarity, the conclusion I have reached on Issue 23 and the absence of any detailed submissions on the point in closing, I decline to address it further.

The Claimants have failed to establish any aspect of the Process Claim. In my judgment, the Commission reached a lawful and objectively justifiable outcome. There are no grounds for the Court to find that the Commission did not assess tenders on an equal basis (Issue 3).

Accordingly, the Claimants have failed to establish that TNLC had any real chance of winning the Competition. The Claimants are therefore not economic operators who have suffered or risk suffering loss and damage (Issue 1A).

There is accordingly no need to consider the causation issues arising in issue 64. There will be no need for a quantum hearing in this claim. Issue 65 (whether any breaches were sufficiently serious) falls away.

For all the reasons set out above, the Process Claim is dismissed.

It is common ground that the 2022 Modifications (relating to RICs) and the September 2023 Modifications (together referred to as “the Challenged Modifications”) required a new concession contract award procedure in accordance with CCR 2016 Regulation 43(10) unless they fell within one of the two gateways relied upon by the Commission in its Modification Notice. These gateways are (i) modifications that are not “substantial” (Reg 43(1)(e) and 43(9)) and (ii) modifications which have been brought about by circumstances which a diligent contracting authority could not have foreseen (Reg 43(1)(c)).

The Claimants’ case is that neither of these gateways applies:

If they are right on this score, then the Claimants contend that by agreeing to the Challenged Modifications without running a fresh 5NLC, the Commission is in breach of the CCR 2016. They claim damages based on what they say is the (only) relevant counterfactual, namely what would have happened in a 5NLC. They submit that it does not matter that TNLC failed in the 4NLC and that the outcome of the Process Claim is also not determinative because “[a]rmed with the [Detailed Rationale] and the knowledge of other bidders’ good causes contribution and OSS, TNLC would have had a real and substantial chance of winning such a competition”.

The Commission and the IPs reject the Claimants’ case on Modifications. In short, they say that the Challenged Modifications were a response to delays experienced by Allwyn and that they fall within one or both of the relevant gateways in the CCR 2016. Even if the Claimants could show that a 5NLC should have been carried out, they say that TNLC had no chance whatever of winning it. Thus TNLC has suffered no loss by reason of the decision to put in place the Challenged Modifications and is not entitled to any of the remedies sought.

There have been some changes to the Claimants’ case as it was advanced before trial, but a number of the issues identified in the List of Issues for the Modifications Claim remain the same. These are (in summary) set out below and retain their original numbering:

As for issues that are no longer advanced, I record that at the outset of the trial and until delivery of written closing submissions, Issue 7 remained live, namely whether the need for the Challenged Modifications was brought about “wholly or substantially by Allwyn’s failures to meet its obligations under the Enabling Agreement”. The Claimants’ pleaded case states that these failures were “repeated and persistent”. Unsurprisingly, this allegation was taken seriously by the IPs and was addressed at length by Mr Willits and by Mr Kleinhampl on behalf of the IPs in their witness statements. In the event (but without any express abandonment of the allegation) the Claimants did not attempt to run this case at trial. They did not put their pleaded case on the cause of the delays to Mr Tanner, and they did not seek to challenge Mr Willits’ evidence. When cross-examining Mr Kleinhampl and Mr Ruxton, Mr Toledano did not ask any questions at all about the Challenged Modifications.

In their written closing, the Claimants submitted (somewhat weakly) that Allwyn’s “own flaws as regards transition” contributed to the delays that necessitated the Challenged Modifications. However, they also said this: “[t]he Court need not resolve Issue 7…”.

I agree with the IPs that it is most unsatisfactory in the circumstances of this case, where Allwyn’s alleged failures have been pleaded and pursued to trial, for the Court to be invited to make no resolution on the point. The Claimants had every opportunity to advance their pleaded case but chose not to do so. The apparent attempt to keep it alive whilst at the same time indicating that it need not be resolved is inappropriate. Once the Claimants had decided that Issue 7 would not be pursued with the IPs witnesses, that Issue should, in all fairness, have been abandoned.

The correct course for the Court, as it seems to me, is to accept the IPs’ unchallenged evidence as to the cause of the Challenged Modifications and to determine Issue 7 against the Claimants. Accordingly, I find that the need for the Challenged Modifications was not brought about “wholly or substantially” by any failures on the part of Allwyn. The Claimants’ challenge to their lawfulness thus falls to be determined on the basis that the Challenged Modifications were caused by the litigation brought by Camelot and IGT and by the obstruction on the part of IGT in respect of transition. I shall return to make necessary findings of fact on this in a moment.

Although the List of Issues continues to record that the Court is required to determine whether the Claimants are entitled to a declaration of ineffectiveness in respect of the Challenged Modifications and also raises a question as to the time limit for bringing such a claim, the Claimants’ position in closing was that they were not “pressing for a declaration of ineffectiveness”. The Commission’s evidence on overriding reasons of general interest was not challenged at all (Issue 16). Instead the Claimants suggest that an appropriate remedy for breach would be contract shortening.

Regulation 43 of CCR 2016 makes provision for the modification of concession contracts during their term. I set out below relevant parts of Regulation 43 in which I have also emboldened those provisions on which the parties specifically seek to rely:

As became clear during the course of the trial, the parties are not in agreement as to the approach to be adopted to various aspects of Regulation 43. In particular I understand the following matters to be in issue: (i) the date on which the Court should assess foreseeability under regulation 43(1)(c)(i); (ii) whether the specific and particular factual causes of the modifications, including their nature and magnitude, need to be foreseen under Regulation 43(1)(c)(i); (iii) the burden of proof to be applied under Regulation 43(9)(b)(ii); and (iv) the scope of the admissible evidence when considering whether a modification is unlawful under Regulation 43(9). Falling within this latter point is a dispute as to the approach the Court should take to the contractual comparison exercise between the original and modified contracts when considering the question of change in economic balance under Regulation 43(9)(c). I shall deal with each of these disputed legal issues in turn.

On the question of the date on which the Court should assess foreseeability under Regulation 43(1)(c)(i), the Commission and the IPs submit that the date of publication of the tender documents is the appropriate date. The Claimants say that they can establish the necessary foreseeability on any date the Court may choose, but they suggest that the concession award decision (in September 2022) is the appropriate date because the Challenged Modifications are modifications to the Enabling Agreement entered into on 16 September 2022, pursuant to the concession award decision dated 15 September 2022. The Claimants say that the only other possible relevant date is the date of the Outcome Notification on 15 March 2022, observing that ordinarily nothing would turn on the difference between notification of outcome and award but pointing out that here, owing to the Suspension, there is a 6 month delay between the two dates.

There appears to be no English authority on this point, and the wording of Regulation 43(1)(c)(i) provides no real assistance. All parties referred me to the Directive, Recital (76) which begins with the sentence “Contracting authorities and contracting entities can be faced with external circumstances that they could not foresee when they awarded the concession, in particular when the performance of the concession covers a long period” (emphasis added). The Claimants acknowledge that the term “award” is not clearly defined in the Directive but they say this sentence puts the matter beyond doubt. They refer me (to similar effect) to Case C-683/22 Adusbef at [63]:

The IPs (with whom the Commission agrees) rely upon a later passage in Recital 76 which they say makes clear that the focus is in fact on what was foreseeable to the contracting authority at the time the tender documents were published:

On balance, I prefer the Claimants’ submissions and consider that in the ordinary course the appropriate vantage point for the assessment of foreseeability will be the date of the award of the Concession Contract. I consider this to be tolerably clear from the first sentence of Recital 76 of the Directive. Furthermore, given that (as the IPs submit) the principal purpose of the modifications rules (as explained by the CJEU in Pressetext Nachrichtenagentur GmbH v Republik Österreich (Bund) (Case C-454/06) [2008] Bus LR D118 (“Pressetext”)) is to prevent contracting authorities from undermining the integrity of public procurement procedures by making changes to public contracts after the contract has been awarded, it appears to me to make good practical sense to test the issue of foreseeability as at the moment the contracting authority awards the contract (rather than at some earlier point before the authority has had to commit (finally) to its terms).

I do not consider the passage on which the IPs rely to undermine this analysis. I do not read that passage as indicating that the key date for the assessment is the date of publication of the tender documents but rather as providing guidance on the notion of unforeseeable circumstances. To rephrase it slightly, circumstances will only be unforeseeable where, despite reasonably diligent preparation of the initial award (taking into account the factors identified), those circumstances could not have been predicted. This is not an observation on the timing at which the assessment is to be made, but on the standard of preparation that is to be expected of a contracting authority before it can assert that the circumstances could not have been predicted.

Given that neither the Commission nor the IPs sought to argue in favour of the possible alternative date of March 2022 (i.e. the Outcome Notification), I see no reason to consider it further and decline to do so. The relevant date, in my judgment, is September 2022.

On the second question as to what it is that needs to be foreseen, the IPs submit that the relevant legal question is whether the specific and particular cause(s) of the modifications, including (in particular) the nature and magnitude of any relevant factual matters, should have been foreseen. They also say that where there is a combination of circumstances, that combination must be foreseen. They rely upon Salt International Ltd v Scottish Ministers 2016 SLT 82 (“Salt International”), a case in which it was alleged that there had been a breach of the Public Contracts (Scotland) Regulations 2006 (“the 2006 Regulation”) (a predecessor provision of Regulation 32 of the PCR 2015 – see Good Law at [36]) which permit the use of a negotiated procedure without the need to seek new tenders pursuant to prescribed procedures when the time limits in the prescribed procedures cannot be met:

The Court of Session upheld the findings of the commercial judge (amongst others) that the need to purchase larger than anticipated quantities of de-icing salt had arisen in a situation of extreme urgency and had been brought about due to the severity and prolonged nature of the winter weather in Scotland during “winter 1” which had not been forecast and was unforeseeable.

I am bound to say that I do not consider this case to be of any real assistance. Aside from the fact that the provisions of the 2006 Regulation are plainly different from those with which I am concerned (not least because of the requirement for extreme urgency), I doubt whether its approach to foreseeability provides a basis for articulating the relevant legal question in the terms identified by the IPs. It seems to me that (as described by the Court of Session) the case was determined on its own, very particular, facts: essentially the unexpected climate conditions were unforeseeable. The Court of Session refers to facts which might have pointed in a different direction (at [47]) but concludes that the judge was entitled to reach the decision he did on the evidence.

The wording of Regulation 43(1)(c)(i) is (perhaps deceptively) straightforward. Whether it is applicable must (as the Claimants submit) be determined on the facts of the particular case before the Court. The question to be decided is whether the need for modifications was brought about by “circumstances which a diligent contracting authority or utility could not have foreseen”. Although this begs a question as to how one is to interpret the concept of “circumstances” and, specifically, whether it is to be interpreted in a very granular fashion, requiring all aspects of the “circumstances” to have been foreseen (including their magnitude and extent), I do not consider that I am assisted in determining this question by Salt International. Rather, as it seems to me, the correct approach is to consider the question of foreseeability when I come to look at the facts.

On the third question of the burden of proof to be applied when considering Regulation 43(9)(b)(ii), it is common ground that the burden of proof rests with the Claimants. However, the battle lines are drawn over what is required to satisfy that burden. Must it be satisfied on the balance of probabilities (as the Commission and the IPs contend) or by reference to “real prospects” (as the Claimants contend)? Each side relies on authorities which appear to point in different directions.

In a nutshell, the Claimants contend that the “would have allowed for” language in Regulation 43(9)(b)(ii) indicates that the Court is required to determine only whether there is a real prospect that the modifications might have led to the acceptance of a different tender response. They accept that (on the authorities) the wording of Regulation 43(9)(b)(iii) requires an assessment on the balance of probabilities (and have abandoned their case on 43(9)(b)(iii) because they accept that, on the evidence, they cannot satisfy that standard) but, nevertheless, they say that there is good reason to adopt the real prospect test in relation to Regulation 43(9)(b)(ii), namely that, in the relevant hypothetical, the bids (from the Claimants but also from third party bidders) would have, or might have, been different. Thus (they submit) requiring proof to the balance of probabilities would create too high a burden. They say that support for this approach may be found in the judgment of Waksman J in James Waste Management LLP v Essex County Council [2023] EWHC 1157 (TCC) (“James Waste”).

The Commission and the IPs, on the other hand, point to the natural and ordinary meaning of the words “would have”, to the Claimants’ concession that these words in the context of Regulation 43(9)(b)(iii) require proof on the balance of probabilities and to the need for consistency of interpretation. They pray in aid the decision in Pressetext and the judgment of Andrews J (as she then was) in Edenred UK Group v HM Treasury [2015] EWHC 90 (QB) (“Edenred”).

I prefer the submissions of the IPs and the Commission on this point, essentially for the following reasons.

The opening words of Regulation 43(9)(b) refer to the introduction by modification of conditions which “would have” resulted in one of three possible outcomes then identified in sub-paragraphs (i)-(iii). The natural and ordinary meaning of the words “would have” supports the conclusion that the applicable burden of proof is the balance of probabilities.

Further support may be found for this interpretation in Edenred. Andrews J was concerned with the question of whether there had been a material variation to an existing public contract. At [103] she referred to Pressetext, observing that a variation is material under EU law principles as explained in Pressetext (at [35]-[37] of the decision) if it meets one of three criteria, including (at [35]) that the change:

Pausing there, although couched in the language of “material” variation (which it is common ground is not materially different from a “substantial” variation), these are almost exactly the same considerations identified in Regulation 43(9)(b)(i) and (ii) and the language “would have allowed for” is the same. Andrews J then went on to consider whether the amendment in that case extended the scope of the services to be provided under the existing contract, finding that it did not. However, if she was wrong about that (and there had been a variation to the services to be provided from those that had been advertised) she held that the variation was not material because it met none of the characteristics of a material variation identified in Pressetext. At [119] she explained that the amendments did not “introduce conditions into the Outsourcing Contract which, had they been part of the initial award procedure, ‘would have allowed for the admission of tenderers other than those initially admitted or would have allowed for the acceptance of a tender other than the one initially accepted’”. She then went on in the same paragraph to say this:

I agree with the IPs that in this passage Andrews J made plain that “would” in this context means that the assessment is to be on the balance of probabilities when considering (in that case) material modifications. This is further explained at [123]: