We consider the impact of the decision below.
Facts
The case concerns a procurement relating to the supply of healthcare equipment and technology-enabled care services valued at c. £46m conducted by Devon County Council ("DCC") ("the Procurement"), in which Millbrook Healthcare Ltd ("Millbrook") (the incumbent supplier) was unsuccessful.
Millbrook proceeded to allege that DCC breached their obligations in the PCR 2015 by its approach to scoring and it issued a claim in the Technology and Construction Court ("TCC"), thereby triggering the automatic suspension.
Specifically, Millbrook raised concerns regarding the winning bidder's information security and financial standing, which were part of the Procurement's pass/fail criteria. Millbrook claimed that but for this breach (which resulted in a 2.5% difference in scoring), it would have won the Procurement. After having entered into a standstill agreement and conducting extensive due diligence to investigate and alleviate Millbrook's concerns, DCC ultimately decided to proceed with the winning bidder, Nottingham Rehab Limited.
DCC applied to lift the automatic suspension so as to enter into the contract, and in an important judgment, the TCC considered whether damages would be an adequate remedy for Millbrook if the suspension was lifted.
Key Issues for the TCC
The well-known case law authorities provide that damages are only available in procurement challenges where the contracting authority's breach is considered to be "sufficiently serious", a test derived in EU law (commonly known as Francovich damages).
Francovich sets down well-established legal principles that, interestingly, are being frequently considered in the TCC. For example, in Braceurself v NHS England [2024] EWCA Civ 39 the TCC held that a sufficiently serious breach should be determined by looking at the nature and quality of the breach, rather than the consequences for the affected party. The effect of the breach itself was not decisive in establishing whether it was sufficiently serious to award damages.
In this case however, the TCC had to consider (i) whether there had been a "sufficiently serious breach" and (ii) if so, whether damages would be an adequate remedy (i.e. to warrant the automatic suspension being lifted).
Millbrook asserted that lifting the suspension would result in reputational harm, loss of ability to compete in future procurements, and an impact on its market share such that damages would be an inadequate remedy. Interestingly, Millbrook had also indicated in open correspondence with DCC that it would consent to lifting the suspension if DCC accepted that the alleged breaches of duty, if upheld at trial, would be sufficiently serious so as to justify an award of damages. The basis of Millbrook's request was that even if the TCC found that there had been a breach, there was a risk that it might not be deemed sufficiently serious at trial, thus preventing any damages being awarded. Therefore, if the automatic suspension was lifted, Millbrook may lose any other remedy (such as the contract being set aside), leaving them without any recourse at all.
DCC refused to provide any such acceptance. Conversely, DCC submitted that the new contract would significantly benefit vulnerable users who relied on the care services. They claimed that delaying the implementation of the contract could not be adequately compensated by damages and that maintaining the suspension would undermine their ability to decide how to best procure and provide public services.
Judgment
Deputy Judge Anneli Howard KC rejected Millbrook's arguments and noted that many of Millbrook's points to establish the prejudice they faced were unsupported by evidence and were instead mere assertions. Specifically, Deputy Judge Anneli Howard KC noted that Courts will be 'cautious in accepting such claims without detailed evidence' and that losing contracts and subsequent profits is 'very much part of life'.
The TCC ruled that damages were an adequate remedy for Millbrook, deeming it just and appropriate in the circumstances (and despite DCC not admitting to a serious breach). Although a few brief comments were provided, the TCC did not deem it necessary to further assess in depth the adequacy of damages for DCC or the balance of convenience.
In its judgment, the TCC provided much-needed clarification that the assessment of whether a breach is sufficiently serious is not relevant to determining whether damages will be an adequate remedy at the interim stage. Deputy Judge Anneli Howard KC commented that 'where a defendant has admitted a breach, this is not decisive' and confirmed that there would be no inconsistency even if it is found that damages would be an adequate remedy at the interim stage but later found at trial that the breach was insufficiently serious to merit damages.
Comment
Most notably, contracting authorities and bidders alike should be live to the fact that the TCC will consider the facts closely when assessing whether breaches are sufficiently serious and of the need to provide clear and cogent evidence to support their case (such as relevant and persuasive accounting documents).
Contracting authorities in particular should note that there is little strategic benefit to conceding that an alleged breach of duty, if upheld at trial, would be sufficiently serious so as to justify an award of damages; the courts may lift the automatic suspension regardless.
DWF is a leading adviser on public procurement. We act for a wide range of clients, including many contracting authorities and key suppliers to the public sector. We have the expertise and experience to help public sector clients with both facilitating a procurement and responding to procurement challenges.
Feel free to get in touch with our procurement lawyers if it would assist to discuss any of the above, or indeed any other matters related to a public procurement (including responding to a procurement challenge).
With assistance from Megan Holroyd, who is a trainee in the Commercial team.
