The much anticipated judgment in the Braceurself appeal has been handed down by the Court of Appeal. The Court of Appeal (led by LJ Coulson) has reaffirmed the position established by the High Court that despite a breach of the public procurement rules changing the outcome of a procurement, that is not of itself automatically ‘sufficiently serious’ to justify an award of damages.
Until Braceurself, it was generally assumed that a breach which changed the outcome of a procurement would be decisive on the question of sufficient seriousness. This judgment provides clarity on the relevant tests to be applied when considering a remedy in damages for a breach of the Regulations. The point is also made that the position should be no different under the new Procurement Act 2023, which will replace the current rules and come into force later this year.
Background
In Braceurself Limited v NHS England [2022] EWHC 2348 (TCC) (which we considered at the time in a Law Now available here), Braceurself was seeking damages from NHS England for their apparent breach of the Public Contracts Regulations 2015 (‘the Regulations’). The High Court found that NHS England had breached the Regulations, and that, but for the breach, Braceurself would have won the contract. However, no damages were awarded to Braceurself as the breach was not deemed ‘sufficiently serious’ to warrant a remedy in damages. The judgment surprised many procurement practitioners, as it was seen as a departure from the approach taken by the English courts previously.
In late 2022, the Court of Appeal granted Braceurself permission to appeal on the question of whether Braceurself was entitled to damages. The specific issue being appealed was the extent to which a failure to award a contract to the most economically advantageous tender is, in and of itself, sufficient to render the breach ‘sufficiently serious’.
Following the appeal hearing at the end of 2023, judgment was handed down on 30 January this year: Braceurself Ltd v NHS England [2024] EWCA Civ 39.
Court of Appeal Judgment
The test of an award of damages in public procurement cases was derived from the EU law precedent in Francovich v Italy (C-C/90) [1991] ECR 1-5357. In that case, the CJEU identified three conditions which had to be met to establish State liability to pay damages:
- the rule that has been infringed must be intended to confer rights on individuals;
- the breach must be ‘sufficiently serious’; and
- there must be a direct causal link between the breach and the loss of damages sustained.
In approaching the test, Coulson LJ commented that the Francovich test “is not a test that fits very easily either into the English common law generally, or the world of public procurement challenges in particular”.
In applying the Francovich test to the facts of Braceurself’s claim and dismissing the appeal, the Court of Appeal held that:
- On the question of whether the breach of the Regulations which wrongly deprived Braceurself of the contract was sufficient, without more, to demonstrate that the ‘sufficiently serious’ test (the second Francovich condition), “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.”
- The second and third Francovich conditions should not be collapsed into one: at the stage of second Francovich condition the nature and quality of the breach should be considered; the third Francovich condition deals with effect of the breach.
- As regards the effect of the breach and its relationship with the second Francovich condition, the Court of Appeal did not rule out any consideration of the consequences of the breach at that stage but that “to require the court to ignore the consequences may be artificial”. Where appropriate given the facts of a particular case, the consequences of a breach should be weighed in the balance when considering the second Francovich condition, but the consequences can never, on their own, automatically meet the ‘sufficiently serious’ test.
LJ Coulson made clear that the primary issue at hand was the second condition of the Francovich test.
In analysing what set of circumstances would pass the second tier of Francovich by amounting to a ‘sufficiently serious’ breach, LJ Coulson, with repeated reference to Energy Solutions EU Limited v Nuclear Decommissioning Authority [2017] UK SC 34, made clear that a ‘but for’ argument was not satisfactory. This does not remove the impact felt by the claimant as a result of the breach but it does clearly show that other supporting factors must be proven by a claimant if they are going to successful in their pursuit of damages.
LJ Coulson also made clear that no one factor can be decisive in assessing whether a breach meets the seriousness threshold. Consideration of all factors, including those which may prove material to the court’s assessment such as the presence of bad faith or intentional breach of the Regulations, will be required in assessing the seriousness of a breach on a case by case basis.
Emphasis was also placed on the error identified as having come about due to ‘inadvertence, misunderstanding or oversight’ rather than any fundamental flaw in an otherwise impressive and careful procurement exercise (the mistake made by NHS England amounted to a 2.5% reduction in the scoring of Braceurself’s bid which, in the wider context, was not seen as particularly ‘serious’ by LJ Coulson).
Commentary
Overall, the outcome of the Braceurself appeal makes for interesting reading for everyone involved in public procurement. The case is widely anticipated to become the benchmark against which damages claims for breach of the Regulations and the new Procurement Act 2023 will be measured.
The judgment will also need to be considered carefully in the context of applications to lift the automatic suspension on contract award (in cases where proceedings are commenced prior to the contract being entered into with the successful bidder). In the Braceurself case, at first instance the judge in the High Court had granted NHS England’s application to lift the suspension, giving as the primary reason his conclusion that in this case damages would be an adequate remedy.
Social Media cookies collect information about you sharing information from our website via social media tools, or analytics to understand your browsing between social media tools or our Social Media campaigns and our own websites. We do this to optimise the mix of channels to provide you with our content. Details concerning the tools in use are in our privacy policy.