We consider the material impact of the decision below and how this significantly impacts on procurement challenges and when damages can be awarded.
Facts
The case concerned a procurement conducted by the NHS for a £32.7m contract facilitating the provision of orthodontic services in East Hampshire (the "Lot"). Braceurself Limited ("Braceurself") was the incumbent provider of the services and was the unsuccessful bidder with the Lot being awarded to a provider called PAL. There was a 2.5% difference between the scores.
Braceurself challenged the decision and issued proceedings against the NHS, which triggered the automatic suspension against awarding the contract. The NHS applied to lift the automatic suspension and, on the basis that "damages would be an adequate remedy in principle", the application was granted. Subsequently, Braceurself applied to add a claim for damages which was also granted.
Issues at Trial
At trial, the High Court was required to consider (i) whether there had been a breach of the PCR; and (ii) if so, whether the breach was "sufficiently serious" to warrant an award of damages.
The "sufficiently serious" test derives from EU law (commonly known as Francovich damages, being the second limb of the three-fold test established in Francovich v Italy (C-C/90) [1991] ECR 1-5357). The issue was considered in in Energy Solutions EU Limited v Nuclear Decommissioning Authority [2016] EWHC 3326 (TCC) where the High Court held that where a breach resulted in the contract being awarded to the "wrong" bidder, the "sufficiently serious" test would be satisfied to enable damages to be awarded.
Braceurself's bid had been marked down for reference to a "stairclimber". Braceurself's complaint was that the evaluators had assumed a "stairclimber" was a form of fixed stairlift, when it was a more flexible device, proposed to assist with accessibility issues. Braceurself therefore alleged that its bid should not have been marked down and that its score should be increased from a 3 to a 4. Due to the 2.5% scoring difference, Braceurself argued that had it not been for the confusion over the terminology and marking down, it would have been the successful bidder. It therefore alleged that this automatically rendered the breach "sufficiently serious" to warrant an award of damages.
The High Court acknowledged that the factual misunderstanding arising out of the nature of a stairclimber device was a "manifest error with drastic consequences". However, it considered that this manifest error was not sufficiently serious to warrant an award of damages because the breach was a single one, it was inadvertent, and in the context of an otherwise carefully-planned procurement, it was minor and excusable. Specifically, the High Court commented that Braceurself's case was "far removed" from Energy Solutions, which involved multiple scoring errors in the context of a multi-billion pound contract. It therefore dismissed Braceurself's claim and ordered Braceurself to make a payment on account of 85% of the NHS' costs.
Issues on Appeal
Braceurself sought permission to appeal which was granted to satisfy a "need for such clarification" in respect of which failure to award a contract to the most economically advantageous tender was "sufficiently serious" to warrant an award of damages.
The appeal was brought on three grounds:
- If the breach of procurement law was causative of loss of the contract (i.e. the "wrong" bidder won the procurement), that breach alone was automatically "sufficiently serious" to result in an award of damages;
- When assessing the seriousness of the breach, it was irrelevant that the breach was "excusable" or "inadvertent"; and
- The principle of effectiveness in EU damages required that where the contract was awarded to the "wrong" bidder such that a contractor had been deprived of a contract it should have won, the unsuccessful bidder should either be awarded the contract or damages – it should not be left without a remedy.
The Court of Appeal dismissed all three grounds in what has been described as a landmark judgment. It determined that the principle of whether a breach is "sufficiently serious" is more concerned with the nature and quality of the breach by the infringer, than with the consequences of the breach for the damaged party. In other words, the effect of the breach is not alone determinative as to whether the breach itself was sufficiently serious to warrant an award of damages. The Court of Appeal concluded that the High Court had already carried out a balancing exercise by noting that the breach was a single, inadvertent and excusable one and this was likely to be highly relevant to an assessment of as to whether it was "sufficiently serious".
The Court of Appeal also rejected Braceurself's argument that not awarding damages would give rise to an "incoherent and unjust outcome". It concluded that it is possible for there to be circumstances where an automatic suspension is lifted on the basis that damages are an adequate remedy, but damages are not subsequently awarded at trial because the "sufficiently serious" test is not satisfied.
The Court of Appeal therefore upheld the High Court's decision on seriousness on the basis there had been no error at law and Braceurself's appeal was rejected.
Comment
This is an important decision, demonstrating that it may well be significantly more difficult to recover damages in procurement claims. In particular, questions remain where the threshold lies to determine what is "sufficiently serious" to warrant an award of damages. In Braceurself, the breach was a single one, inadvertent and in the context of an otherwise carefully-planned procurement minor and excusable, but no clear guidance has been provided regarding how many breaches there needs to be to pass the sufficiently serious test to warrant an award of damages. These factors will need to be borne in mind when considering whether to bring a procurement claim, and the judgment may pose more questions than it solves.
