In a Nutshell

There are four parts (and indeed four judgments) to this story, but to cut to the final chapter (at least the final chapter in the lower court; this case is now the subject of an appeal) the protagonist challenger (Braceurself) has been ordered to pay the costs of the procuring authority (NHS England) despite establishing that, had the authority not acted in breach of procurement law, Braceurself should have been awarded the contract. This means that even though Braceurself established as fact that it should have won, it has been left without the contract, or damages, and has now had to bear both its own costs of the litigation, and those of NHS England.

How did we get here?

On this initial outline, this appears to be a divisive outcome on costs to say the least. It is therefore worth considering the story that led to this point, and the basis for the court’s decision:

Chapter 1: Challenge & Suspension:

Braceurself challenged the authority’s award decision within the standstill period, thereby triggering the automatic suspension. At the first hearing the Court therefore had to decide whether the suspension should remain in place or whether this should proceed as a damages only action. Applying the American Cyanamid test, it lifted the suspension on the basis that, if Braceurself was successful at trial in establishing that it should have been awarded the contract, then damages would be an adequate remedy, therefore the authority could proceed with the award to its preferred bidder, even if later analysis would show Braceurself ought to have won.

Chapter 2: The Substantive Trial:here). Braceurself succeed in establishing a single breach and resulting scoring change (had there been no breach) would have been enough for it to be the winning bidder. However, importantly for the third and fourth chapters of the story, it failed on six other alleged breaches; the judge noted that the procurement had been otherwise well run; and that the single scoring breach was the result of a genuine mistake (essentially failing to differentiate a stairlift from a stairclimber).

The Court’s judgment on the substantive challenge (analysed

Chapter 3: “Sufficiently Serious” for Damages: here). The Court held that Braceurself was not entitled to damages because the authority’s breach of procurement law was not “sufficiently serious” to unlock the right to damages. This was despite Braceurself proving that the contracting authority had breached procurement law through manifest error in the evaluation, thereby altering the outcome. This judgment is the subject of appeal.

The judgment which caught most legal eyes was the Court’s determination of whether Braceurself should be awarded damages in light of the above (analysed

Chapter 4: Who should pay the costs of litigation? 

The final chapter in the lower court was therefore how costs should be awarded in light of the above outcomes. The starting point in procurement litigation is “loser pays”. However, who was the loser? Braceurself had succeeded in establishing it should have won; would have had a remedy had the suspension not been lifted in the first chapter; and had only failed to obtain damages because of the unique “sufficiently serious” gateway test for damages.

The Court held that Braceurself should pay the costs of NHS England on the ‘standard basis’

Basis for the Court’s decision on costs

 The claimant is indeed right to point out it achieved a measure of success. It not only proved an individual breach; it proved that breach also had a causal consequence which meant that overall it should have been the successful bidder.” At first look at this would seem like a good basis for Braceurself to seek to recover its costs from NHS England, rather than the other way around. However, the Court found that three factors drove the ultimate conclusion that it should be Braceurself paying the costs.

The Court acknowledged that “

Factor 1: Ultimate success:CPR44.2(4)) has a greater focus on ultimate success and gives limited weight to successes along the way. The Court therefore found that establishing there had been a breach a procurement law that changed the outcome of the procurement was “a mere step along the way” but that Braceurself had failed to obtain what it had ultimately come for, so called ‘dispositive relief’ (i.e. the contract or damages).

Previous cases have drawn a distinction between achieving successes “along the way” and who was ultimately successful. The key cost rule (

Factor 2: How much was unsuccessful: even though I do take account of the claimant’s success on a broader level, the force of the claimant’s point about its success is diluted by the fact that, although it did ultimately succeed in demonstrating a single breach which would have changed the outcome, the claimant failed in every other allegation of breach for which it contended. Although the claimant invites me to conclude it did not act unreasonably in taking the many issues it did, I am afraid I disagree. Many of those points were hopeless or borderline hopeless and others recognised as such and not pursued. I have formed the view that the narrowness of the competition had led the claimant to advance many claims with no real prospect of success and this is, in my judgment, not conduct which finds favour with the court and it detracts significantly from the claimant’s measure of success…” [26]

Although the Claimant did succeed in establishing a single breach (which would have changed the result) it failed to establish six other breaches which it had pursued. The key cost rules (CPR44.2(4)) requires the Court to consider this, both when looking at overall and partial success, but also the ‘conduct of the parties’. Here, the Court concluded: “…

Factor 3: What drove the costs?  very doubtful that the defendant’s costs were materially increased as a result of having to deal with those matters upon which the claimant succeeded”.

The vast majority of costs were generated by all the issues on which the Claimant had lost, in particular the six unsuccessful heads of breach. The Court was “

 Nor am I attracted to the claimant’s submission that a split order for costs would focus the minds of contracting authorities in the way proposed. I consider I should focus on the conduct of the parties to this action and not make decisions which reflect how other contracting authorities should behave in the future.”

As to Braceurself’s fallback argument, the Court further added: “

Conclusion 

The Braceurself judgments offer an illustration on the obstacles facing (even meritorious) challengers to procurement awards. Not only did Braceurself lose out on the award of the contract due to the lifting of the automatic suspension, it also was denied damages as a compensatory award and was further ordered to pay the defendant’s costs.

The judge in this case highlighted the discretion open to the Court under CPR 44.2 when considering costs orders, in particular the regard the Court may have to the conduct of parties during proceedings when making such an order.

The Court found against Braceurself on costs in particular because Braceurself only succeeded on only one of the breaches it was seeking to establish. However, this logic creates the risk of a catch-22. The Court appeared to acknowledge this: a bidder will want to try to establish as many breaches as possible because the greater number of breaches it can establish the more likely the court will determine those breaches were “sufficiently serious” to merit an award of damages. This creates an incentive for a bidder to plead multiple breaches, even if some are marginal.

Perhaps the particular flaw in this case was pursuing grounds which were “hopeless or borderline hopeless”. But would this logic have held if they had been more meritorious even if ultimately unsuccessful? If so, this potentially puts challengers to a very difficult decision about which breaches to pursue, seeking the balance the need to establish sufficient breaches to overcome the “sufficiently serious” test, against the risk of the kind of outcome seen in Braceurself both on damages and costs.

For those wondering about the quantum of Braceurself's cost exposure, the judgment concludes: "Having regard to all the circumstances of this case, I conclude that the appropriate percentage to be awarded by way of payment of account is 85 per cent of the defendant’s costs as identified, so that will be for marginally less than the £239,400 that has been identified."

Lloyd Nail (Senior Associate)Mark Gwilt (Solicitor) are members of Burges Salmon’s Chambers Band 1 Procurement Practice.

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