The Court of Appeal has handed down judgment in the appeal of Braceurself Ltd v NHS England [2022] EWHC 1532 (TCC), upholding the first instance decision of the High Court that whilst NHS England (the NHS) had committed a manifest error of assessment in evaluating Braceurself Limited's (Braceurself) responses, that the error was not sufficiently serious to warrant an award of damages.
The background
The NHS completed a procurement for the provision of orthodontic services. Braceurself was the incumbent provider, and one of two bidders for the lot in question. Braceurself's bid was unsuccessful, as they had been scored 2.25% lower than the winning bid. Braceurself challenged the NHS decision and the court decided that the NHS had made a manifest error in respect of one of the scores awarded. It was concluded that had it not been for a misunderstanding by the evaluation team on the difference between a 'stair climber' and a 'stair lift' used to access the first floor premises, Braceurself would have had their existing score increased by 2.5%, meaning that they would have submitted the highest scoring bid (albeit by just 0.25%).
Whilst Braceurself was successful on the question of liability, the Francovich (Francovich v Italian Republic [1995] ICR 722) criteria requires a breach to have been sufficiently serious, in order to allow an award of damages .The Francovich criteria apply to breaches of European law, and since the Public Contracts Regulations 2015 are derived from European law, the criteria applies to procurement claims. Until this case, there has been very little case law on whether a breach that alters the outcome of a procurement, so that the wrong bidder was awarded the contract, would itself be sufficiently serious.
In a subsequent judgment on the question of damages, (Braceurself Ltd v NHS England [2022] EWHC 2348 (TCC)) the court concluded that whilst the breach had altered the outcome of the competition, it had not been sufficiently serious to sound in an award of damages. Mr Nissen KC, sitting as a Deputy High Court Judge considered factors from the Factortame case (Reg v Secretary of State, Ex p. Factortame Ltd [2000] 1 AC 524, HL), and concluded that the breach was inadvertent and minor, and the procurement was otherwise carefully planned and well organised. It had been a single breach in a very close competition and whilst it had resulted in a significant impact on the outcome, the breach itself was not 'sufficiently serious'.
The key issues
Braceurself appealed the first instance decision to the Court of Appeal. A key question in dispute was where a party had lost out on a contract that it should have won had it not been for the contracting authority's manifest error, was the significant consequence of the breach decisive on the question of whether the breach itself was sufficiently serious and able to sound in damages?
The court also considered whether the Factortame factors of excusability and state of mind should be applied in this case, whether Braceurself had been left with an effective remedy, the factorial evaluation exercise undertaken by Mr. Nissen KC, and the standalone challenges raised in the Respondent's Notice.
The first Issue: effect of the breach on sufficient seriousness
The court rejected Braceurself's argument that the consequence of the breach was decisive of the seriousness of the breach. The Court of Appeal concluded that whilst the consequences of the breach were a factor in considering whether a breach was 'sufficiently serious', it is not determinative.
The Court of Appeal considered that to determine that the breach was sufficiently serious purely because it had caused Braceurself to lose the bid, and regardless of the circumstances of the breach itself, would run the risk of muddling the second and third Francovich conditions – namely that the breach must be sufficiently serious, and that there must be a direct causal link between breach and loss. The approach to the second condition should not focus on the consequence of the breach, but on the nature and quality of the breach: the test depends on all the facts and circumstances of the breach.
The second issue: excusability / state of mind
Braceurself argued that the issue of excusability (as per Factortame) was limited to mistakes of law and not of fact. This argument was rejected, with the Court of Appeal concluding that there is no material difference in principle between the two for the purposes of the "sufficiently serious" test. Additionally, the argument that a manifest error can never be excusable was rejected, as it "must always turn on the facts" (see paragraph 79 of the judgment).
The court also clarified that the excusability and state of mind factors will remain relevant, event in absence of bad faith.
The third Issue: has Braceurself been left without an effective remedy?
Braceurself had argued that it was entitled to an effective remedy and effective judicial protection when its rights under the Public Contracts Regulations 2015 had been breached. As is often the case, the court had considered, on an interim application to lift the automatic suspension of contract award some time earlier, that damages would be an adequate remedy. Braceurself argued that the court was therefore obliged to award damages in this case, despite the Francovich conditions not being met.
This argument was rejected by the Court of Appeal, for lack of authority, and clarified (at paragraph 113) that "the principle of effectiveness is concerned with whether or not there is a proper remedial process. It does not provide a guarantee of success; neither does it create an entitlement where otherwise there is none."
For all the reasons above, the appeal was dismissed.
What next?
Bidders and contracting authorities alike must be live to the very real issue that where a breach of the Regulations causes a contract to be awarded to the 'wrong' bidder, damages will not automatically be available. Organisations will need to carefully consider the 'nature and quality' of the breach, rather than focussing solely on the consequences of the breach. We expect further litigation on these issues to provide further clarity as bidders try to distinguish their own claims from the unique facts in Braceurself.
This issue may also play out at a much earlier stage of the proceedings, and particularly, on the question of whether the automatic suspension of contract award should be lifted. We anticipate that the question of whether damages will truly be an adequate remedy will be a key focus of those applications, alongside the provision of evidence on the trivial or 'excusable' nature of the breach in question.
