Court of Appeal Upholds Stringent Criteria for Damages in Public Procurement Challenges

Citation: [2024] EWCA Civ 39
Judgment on

Introduction

The case “Braceurself Limited v NHS England (No 2: Substantive Appeal)” dealt with a dispute over a public procurement process for the provision of Orthodontic Services. This case in the Court of Appeal (Civil Division) centered around whether the High Court had correctly applied the legal principles governing public procurement challenges, particularly assessing the seriousness of a breach under the Public Contract Regulations 2015 (PCR) and the principles derived from European Union (EU) law, notably the Francovich conditions.

Key Facts

Braceurself Limited, the appellant, was an incumbent provider for a Lot in a public procurement concluded by NHS England, the respondent. The appellant’s tender was unsuccessful, and the Lot was awarded to another company, PAL. The appellant alleged breach of the PCR and subsequently claimed damages. A key element of their claim hinged on a scoring error related to accessibility (referred to as marking area CSD02), which, if corrected, would have rendered the appellant’s bid the most economically advantageous.

Initially, upon challenge, the automatic suspension of the contract award was lifted by the High Court on the understanding that damages would be an adequate remedy for the appellant. However, at the substantive trial, the High Court identified just one of several claimed breaches. In a later judgment, the High Court determined that this breach was not “sufficiently serious” to warrant damages under the Francovich conditions. The appellant appealed this decision.

The appeal significantly focused on the application of the Francovich conditions, which require (1) the rule breached must confer rights on individuals, (2) the breach must be sufficiently serious, and (3) a direct causal link between the breach and damage sustained. The Court of Appeal scrutinized whether the single error identified in the procurement process—that but for which the appellant would have been awarded the contract—was of itself sufficient to meet the “sufficiently serious” breach threshold.

The court reaffirmed the principles from the case of Factortame, particularly concerning the nature of the infringement and the extent of the discretion disregarded. It emphasized that an assessment of “sufficiently serious” is multifactorial and must consider factors such as the clarity and precision of the rule breached, the measure of discretion left to the national authorities, intentionality or inadvertence of the error, excusability of the error, the behavior post-infringement, and the persons affected.

The Court also addressed the principle of effectiveness, which requires legal protection of rights conferred by EU law, and how it interfaces with the issuance of damages.

Outcomes

The Court of Appeal dismissed the appeal, confirming that the High Court had not erred in principle. The key outcomes and legal points established are:

  • A finding that a contract would have been awarded to a bidder if not for a breach does not automatically mean the breach is sufficiently serious for damages.
  • The actual effect of the breach on contract award is not decisive for determining the serious nature of a PCR breach.
  • Assessing whether a breach is “sufficiently serious” requires taking into account the full context, including the culpability and state of mind of the infringer, not just the consequences of the breach.
  • Mistaken findings, such as errors of fact like the stair climber/stairlift issue, do not necessarily lead to a sufficiently serious breach, especially if other, correct concerns contributed to the decision.
  • The lifting of an automatic suspension on the basis that damages would be an adequate remedy does not preclude a subsequent finding that a breach does not warrant damages.
  • The ‘principle of effectiveness’ and the adequate remedy at the interim stage do not guarantee the awarding of damages if the Francovich conditions are not met at the final stage.

Conclusion

The Court of Appeal’s decision in “Braceurself Limited v NHS England (No 2: Substantive Appeal)” reiterates that misunderstood facts and the intentions behind actions are important considerations when determining the seriousness of a breach in public procurement law. It also underscores the distinction between various stages of litigation, each governed by its own principles. The ruling reflects a cautious approach to the awarding of damages in procurement disputes, demonstrating that even when a breach may affect the outcome of a tender, this alone does not surpass the threshold for damages to be due. The case further underlines that effectiveness in law is not a panacea for claimants, upholding the stringent application of the Francovich conditions.

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