Sufficiently serious breach? The Court of Appeal issue landmark decision regarding procurement challenges

Background

In February 2019, NHS England completed a nationwide procurement for the provision of Orthodontic Services in East Hampshire. The Appellant, Braceurself Limited, was the incumbent provider and one of two bidders for a Lot, which comprised a seven-year contract worth £32.7 million over its whole lifetime.

The Appellant’s bid was unsuccessful; the Lot was awarded to a company known as PAL in the proceedings.

One of the numerous criticisms made of the marking of the Appellant’s bid concerned accessibility of premises. The specific point centred on the evaluators’ assumption that a stairclimber – which the Appellant had included in its bid as a means of access to the first floor – was a form of fixed stairlift, when it was in fact a rather more flexible piece of equipment. The High Court judge accepted the submission that a manifest error had been made in the Respondent’s assessment of accessibility (because of the factual misunderstanding about the nature of the stair climber) and that this impacted on its score.

The judge then embarked on a consideration of the various factors relevant to the assessment of whether or not the breach / manifest error was sufficiently serious to justify an award of damages (or “Francovich damages”), a concept originating in European Law.

The Appellant’s argument before the High Court was the same as the argument pursued on appeal, namely that the individual breach altered the outcome of the competition (because, but for the breach, the Appellant would have been awarded the contract) and therefore the Appellant argued that this automatically meant that the breach was sufficiently serious to warrant an award of damages.

The first instance judge found the manifest error not to be sufficiently serious for a number of reasons which can be summarised as follows:

• It was a single breach in a very close competition;
• The misreading by the Respondent was at the excusable end of the spectrum and was a misunderstanding;
• The breach was inadvertent;
• The procurement itself was carefully planned.

The appeal

Francovich Damages / Sufficiently Serious

There were three main issues before the Court of Appeal:

• In considering whether the breach is ‘sufficiently serious’ for the purposes of Francovich damages, is the finding that, but for the breach, the contract would have been awarded to the Appellant, decisive?

The Court of Appeal concluded that the answer was ‘no’ – the effect of the breach is not and cannot be determinative of the issue as to whether the breach itself was sufficiently serious to attract an award of damages.

• Whether the Francovich balancing exercise meant it was sufficiently serious without more, such as culpability, excusability, absence of good faith etc.

The Court of Appeal concluded that the judge was right in the approach that he adopted and that he carried out the balancing exercise correctly. The Court of Appeal considered that, even before the judge came on to deal with the Francovich issue, the scene was already set for the critical conflict in the case: between the consequences of the failure, and the numerous positive findings that the judge made about the evaluation and the inadvertent nature of the error.

• Whether the principle of effectiveness required a remedy, the judge having found there to be a manifest error and that the contract should have been awarded to the Appellant, but having also denied the award of damages to the Appellant.

The Court of Appeal confirmed in this case that the principle of effectiveness had no further or separate role to play. The Court of Appeal considered that the principle of effectiveness is concerned with whether or not there is a proper remedial process, and that it does not provide a guarantee of success; neither does it create an entitlement where otherwise there is none.

Manifest Error

The Court of Appeal went further in this appeal, and made a rare reversal of a finding of fact in respect of the judgment in the lower court concerning the manifest error. Based on the evidence which the Court of Appeal confirmed that the judge failed to take into account, they concluded that it was more likely than not that the scores would have been left unchanged, and the correct bidder was therefore awarded the contract.

The Court of Appeal therefore reversed the finding of liability in any event meaning that, strictly, they did not need to consider the ‘sufficiently serious’ arguments, but the fact that they did address these first addresses the importance of the guidance handed down by them to practitioners in the field.

The full judgment can be found here.

NHS England was represented by Sarah Whittle (Legal Director) and Daniel Taylor (Associate), who instructed Fenella Morris KC and Benjamin Tankel of 39 Essex Chambers.

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