UK: Court rules against damages for unsuccessful NHS England bidder

Why should I read this?

The Court of Appeal has found that, even though NHS England had wrongfully evaluated Braceurself Limited’s (“Braceurself”) response in a public procurement process, resulting in Braceurself not being awarded the contract, the error was not ‘sufficiently serious’ so as to warrant an award of damages in accordance with the leading EU case Francovich v Italy. The Court stated that the nature and quality of the breach were critical when deciding whether a breach is sufficiently serious enough to award damages, rather than the effect.

Below, we provide more detail on the original case and appeal, and discuss the implications of the judgment which will be of interest to authorities and bidders alike.

Background

In 2022, Braceurself, the unsuccessful bidder, challenged a decision by NHS England in respect of its procurement for orthodontic services. The outcome of the competition was very close with the successful bidder, PAL, scoring just 2.25% higher than Braceurself.

Braceurself brought the claim on the basis that NHS England was in breach of the Public Contracts Regulations 2015 for three reasons:

• NHS England was not transparent in its decision
• Braceurself did not receive equal treatment to PAL; and
• there were manifest errors in NHS England’s evaluation

At first instance, the High Court found no breach of transparency or unequal treatment but did identify a scoring error in the evaluation of the bids regarding premises accessibility. But for this error, Braceurself would have received an additional point to their score, making them the successful bidder instead of PAL.

In deciding the case, the Court considered whether Francovich damages should be payable. Such damages are awarded where a rule intended to grant rights on individuals has been breached, the breach is sufficiently serious, and causation exists between the breach and loss.

Whilst the Court found that NHS England committed a manifest error, no damages were due because the breach was not sufficiently serious. The breach was minor, inadvertent, occurred in good faith and occurred due to a misunderstanding. In addition, whilst the impact on Braceurself was significant, it was not existential so as to affect Braceurself’s solvency.

The Appeal

Braceurself appealed the judgment to the Court of Appeal on the basis of 3 arguments:

1. The effect of the breach, namely the fact that the contract had gone to a different bidder, meant the breach was sufficiently serious

The Court discussed how the effect of the breach alone cannot determine whether it is sufficiently serious to warrant damages. The focus should be on the breach itself, irrespective of its consequences (i.e. the wrong bidder being awarded the contract).

2. In the absence of bad faith, the excusability of the error and/or the NHS’s state of mind were irrelevant

The Court considered that there was no difference between factual and legal errors for the purposes of determining whether a breach was sufficiently serious, and a manifest error was an error of law. Therefore, in the absence of bad faith, NHS England’s excusability and state of mind were relevant factors.

3. Braceurself had been denied an effective remedy

The Court held that this would only be relevant if the sufficiently serious test could be met. Since it had not been met, damages were not recoverable, therefore there was no need for an effective remedy to be given.

Overall, the Court of Appeal upheld the original decision; the breach was not sufficiently serious so as to entitle a remedy in damages.

Next steps

The case highlights two important points for contracting authorities and bidders to consider:

• contracting authorities must ensure that tender documentation is sufficiently clear and detailed so as to avoid bidders from suffering losses caused by the authority’s mistakes; but
• if regulations are breached, the focus should be on the nature and quality of the breach rather than its effect

However, the Court noted that the facts of the appeal were highly uncommon – it is unusual that the matter of one scoring point, caused by an honest mistake on the part of the contracting authority, would change the outcome of the procurement. Therefore, whilst the case is significant, we wait to see its implications in practice.

The Court of Appeal issued its judgment in January 2024, and there is currently no indication that the case will proceed to the Supreme Court.

With thanks to Mikki Redhead, Trainee Solicitor, for her support on this article.