Humber Oil Terminals Trustee Ltd. v Associated British Ports

These are appeals from the order of Sir Andrew Morritt C. dated 24 February 2011 by which he struck out the amended Particulars of Claim in four actions pursuant to CPR Rule 3.4 and ordered that the original Particulars of Claim be reinstated.

Permission to appeal was given by Patten LJ on 17 June 2011 following an oral hearing.

The respondent in each appeal, Associated British Ports ("ABP"), is a privately owned company. It owns and operates 21 ports in the UK. It is the UK’s largest ports group and holds about 23 per cent of the UK market. ABP is the freehold owner and operator of the port of Immingham on the south bank of the river Humber. One of the facilities of the port is the Immingham Oil Terminal (“the IOT”), which was constructed in the 1960s to serve two inland refineries called the Lindsey Oil Refinery and the Humber Refinery (“the Refineries”). The former is owned by Total UK Ltd ("Total") and the latter is owned by ConocoPhillips Ltd ("Conoco"). Since June 1966 the IOT has been operated by Associated Petroleum Terminals (Immingham) Ltd ("APT"), a joint venture company owned and controlled by Total and Conoco.

The appellant in each appeal, Humber Oil Terminals Trustee Limited (“HOTT”) is another joint venture company of Total and Conoco. ABP is the landlord and HOTT is the tenant under four leases of land on which the IOT is situated (“the Leases”). The Leases were for terms which expired on 31 December 2009 or 1 January 2010. HOTT is currently holding over under section 24 of the Landlord and Tenant Act 1954 (“the 1954 Act”).

Negotiations for an extension of the Leases took place in 1995 and subsequently from 2005. In July 2008 ABP indicated to HOTT that its preferred course was to take operational control of the IOT. No agreement was reached in the negotiations.

In January and June 2009 ABP served on HOTT notices under section 25 of the 1954 Act to terminate the Leases. In each of those notices ABP indicated that it would rely upon the ground in section 30(1)(g) of the 1954 Act (viz. “on the termination of the current tenancy the landlord intends to occupy the holding for the purposes, or partly for the purposes, of a business to be carried on by him therein”) in opposition to any application by HOTT to the court for the grant of a new lease pursuant to section 24 of the 1954 Act.

In December 2009 HOTT commenced four actions (one for each Lease) in the Grimsby County Court for new leases. ABP served Defences in January 2010 in which, among other things, it relied upon the ground of opposition in section 30(1)(g) of the 1954 Act. The relevant part of the Defences on that aspect was as follows:

“The Defendant intends to occupy the premises (and all associated land holdings presently leased to the Defendant) for the purposes of a business to be run by it for the import and export of oil products with a view to (a) ensuring continuity of supply to Total and Conoco (and their respective refineries) and (b) exploring and implementing the supply of oil and other products which are deemed appropriate over or through the premises, to other third parties.”

On 16 March 2010 District Judge Richardson ordered, among other things, that all the actions be transferred to the Chancery Division of the High Court; there be tried as a preliminary issue in each action whether, on the determination of HOTT’s current tenancy, ABP intends to occupy the holding for the purposes, or partly for the purposes, of a business to be carried on by it therein, within the meaning of section 30(1)(g); until the determination of the preliminary issue all further proceedings be stayed except for the issue of interim rent.

Up until this point, then, the actions were continuing in an entirely conventional manner as claims for a new tenancy under the 1954 Act, to which the landlord objected on one of the grounds in section 30. They then took an unconventional turn. On 16 July 2010 HOTT applied for permission to serve amended Particulars of Claim raising issues of competition law. No draft amended Particulars of Claim were supplied in support of that application. Deputy Master Lloyd nevertheless granted permission on 4 August 2010.

Amended Particulars of Claim were served on 15 October 2010. They ran to 28 pages and 107 paragraphs (some of which included several sub-paragraphs). It is not necessary, for the purpose of this appeal, to give more than the following brief summary of the allegations in them.

The amended Particulars of Claim stated, in outline, that ABP has a dominant position in a relevant market, and has abused its dominant position for the purposes of section 18 of the Competition Act 1998 (“CA”) and Article 102 of the Treaty on the Functioning of the European Union (“Article 102”). It has done so in that, during the course of negotiations over the terms on which new leases might be granted and in its Defences, ABP has sought to impose excessive selling prices in the form of excessive rents and/or refused to grant leases otherwise than in return for such excessive selling prices; it has relied on the ground of opposition in section 30(1)(g) of the 1954 Act; it seeks to exercise its rights as owner of the land on which the IOT is situated as a means of acquiring all or part of that part of the business of APT concerned with the IOT and would thereby in practice acquire all of HOTT’s equipment used in operating that part of the IOT on terms entirely suited to its commercial self-interest. Those allegations were the subject of considerable elaboration in Part III of the amended Particulars of Claim.

The alleged abuse by demanding excessive rent in the negotiations since 1995 was addressed in paragraphs 64 and 70 to 80 of the amended Particulars of Claim. Reference was also made in those paragraphs to proposals as to charges contained in a document sent by ABP to HOTT on 26 March 2010 entitled “MOU between Associated British Ports and Humber Oil Terminals Trustee Limited” (“the MOU”) in the context of the continued use of the IOT by HOTT if there were no new leases.

Paragraphs 65 and 81 to 84 of the amended Particulars of Claim concerned the allegation that the rents specified in ABP’s Defences are significantly in excess of market rates based on the normal economic value of the land and assets. Paragraph 82 contrasts, for example, the difference between the alleged existing rent of £2,850,000 under the Lease for the jetty comprised in the IOT and the rent proposed by ABP of £23,000,000.

Paragraphs 66 and 85 to 89 of the amended Particulars of Claim concerned the allegation that ABP is not entitled to rely on section 30(1)(g) of the 1954 Act because its reliance arises as the result of its failure to extract excessive rents from HOTT for access to an essential facility. Paragraph 88 alleged that ABP is not and will not be capable of operating the essential facility and cannot guarantee efficient security of supply to the Refineries.

That allegation was the subject of elaboration in paragraphs 67 and 90 to 96 of the amended Particulars of Claim. In those paragraphs it was alleged that there is a high degree of integration between the IOT and the Refineries; as the operator of the IOT, APT’s functions are fully integrated with those of the Refineries; the only way ABP could successfully and efficiently operate the IOT would be to use the assets, systems, knowledge, expertise and personnel of HOTT and APT and to allow APT to continue to operate under the control of the Refineries without interference from ABP; ABP’s aspirations to introduce third party traffic are misconceived; and in the light of all those matters, any attempt by ABP to control the IOT independently would place the Refineries’ operations at substantial risk.

Paragraphs 68 and 97 to 100 concerned the allegation that ABP has abused its market power and position of freehold owner by using the ground of opposition in section 30(1)(g) of the 1954 Act to expropriate a part of the refining facilities, having failed to extract excessive rents from HOTT as part of commercial negotiations. It was alleged, in that context, that the Refineries cannot operate without continuing HOTT’s operations, and that the MOU shows that ABP intends to impose ships dues, goods dues and cargo handling charges which are excessive and far beyond the normal economic value of the facilities offered.

It was alleged that, alternatively, if, contrary to all those matters, ABP is entitled to rely on the ground of opposition in section 30(1)(g) of the 1954 Act, HOTT “will rely on the matters pleaded herein, in particular but not limited to those at paragraphs 90 to 96, in order to negative any intention on [ABP’s] part to occupy the holding for the purposes, or partly for the purposes, of a business to be carried on by him therein”.

The relief sought in the prayer to the amended Particulars of Claim included the following two declarations:

“1.

A Declaration that the Defendant may not rely upon ground (g) of Section 30(1) of the 1954 Act to resist the Claimant’s application for new tenancies pursuant to the provisions of Section 24 of the 1954 Act;

2.

A Declaration that in seeking to obtain an excessive rent for the renewal of the Leases and/or seeking to resist the Claimant’s application for a new tenancy pursuant to the provisions of Section 24 of the 1954 Act and/or seeking to rely upon ground (g) of Section 30(1) of the 1954 Act and/or proposing commercial arrangements that would not afford the Refineries adequate security and would be made available only at excessive costs, the defendant has abused its dominant position contrary to the provisions of Chapter II CA 1998 and Article 102 TFEU”

By applications dated 17 November 2010 ABP applied in each action for an order under CPR Rule 3.4 striking out the competition law claims that were added to the original Particulars of Claim, or alternatively summary judgment.

For the purposes of the applications before the Chancellor, it was accepted by ABP that, in the context of CA s.18 and Article 102, it is both an undertaking and in a dominant position in a relevant market, and that, if any conduct of ABP is properly to be regarded as an abuse of its dominant position, then it may affect trade both within the United Kingdom and between Member States.

The Chancellor concluded, nevertheless, that the competition claims should be struck out. He said (at [52]) that the simplest course would be to strike out the whole of the amended Particulars of Claim and direct that the original Particulars of Claim be reinstated. The Chancellor’s reasons for that conclusion may be summarised briefly as follows.

The Chancellor considered that the allegations in paragraphs 64 and 70 to 80 of the amended Particulars of Claim (as to abuse of dominant position by demands for excessive rents in the negotiations), and in paragraphs 65 and 81 to 84 of the amended Particulars of Claim (as to the seeking of excessive rents in ABP’s Defences) were defective on their face for the following reasons. First, he rejected (at [20]) the contention of HOTT’s counsel that to propose, in the course of negotiations, prices which are excessive is of itself and without more abusive conduct within CA s.18 and Article 102. Secondly, he said (at [33]) that any element of compulsion which might arise from ABP’s dominant position was negatived by the jurisdiction of the court (in these 1954 Act proceedings) to assess the rent or price on the basis of the statutory formula in section 34 of the 1954 Act, which necessarily excludes any ransom element. Thirdly, he considered (at [34]) that the failure of HOTT to make any attempt at particularising the facts and matters relied on to establish either that the rents proposed were excessive to the point of being unfair for the purposes of CA s.18 and Article 102 or that that they would have an effect on competition and consumers also justified the striking out of those allegations. So far as concerns the proposal in the MOU relating to harbour charges, he said (at [35]) that it was not a proposal for terms of a renewed lease; it was no more than a proposal put forward in negotiations; and it was rejected.

The Chancellor said (at [37]) that the allegation in paragraph 66 of the amended Particulars of Claim should be struck out either because mere reliance on the ground of opposition in section 30(1)(g) of the 1954 Act cannot of itself amount to an abuse of a dominant position or because it fell to be dealt with in conjunction with the allegations in paragraph 67 (inability to operate the IOT independently of the Refineries and ABP’s lack of knowledge and resources to operate the IOT efficiently, effectively, or at all) and paragraph 68 (exercise by ABP of its rights as owner of the land on which the IOT is situated as a means of acquiring all or part of the business of APT concerned with the IOT and the Refineries).

The Chancellor considered (at [46]) that the allegations in paragraphs 67 and 85 to 96 should be struck out for the following reasons. Firstly, there was inadequate distinction drawn between the reply to ABP’s reliance on section 30(1)(g) of the 1954 Act (absence of the intention required by that ground of opposition to the grant of a new tenancy) and the competition claim. Secondly, the issues raised in those paragraphs of the amended Particulars of Claim were not a present claim: the competition claim articulated would not arise unless and until the defence of ABP to the claim for a new lease succeeded. Thirdly, if ABP’s defence does succeed so that the issues then arise, there would be bound to be further negotiations: past negotiations could not amount to the abuse of a dominant position in such unknown future circumstances. Fourthly, even if the competition claim was a present issue and it was assumed that there would be no further negotiations, there was no proper pleading of the anticompetitive effect of what was alleged.

As to the allegation in paragraph 68, amplified in paragraphs 97 to 100, the Chancellor considered (at [51]) that those paragraphs should be stuck out for the following reasons. First, unless and until the defence of ABP to the claim to a new lease has succeeded the issue addressed in those paragraphs cannot arise. Secondly, if the defence does succeed, the exercise of ABP’s property rights, without more, cannot constitute an abuse of a dominant position for the purposes of either CA s.18 or Article 102. Thirdly, HOTT and APT will also have property rights in relation to tenant's fixtures, such as pipework and similar matters and the common pumping station, to which ABP has no claim. They will necessarily trigger further negotiations, and the issue of abuse of a dominant position would have to be judged in the light of those unknown future circumstances. Finally, no proper particulars had been given of how, why and in what respect any such conduct would affect customers or be anticompetitive.

It was not necessary in the circumstances for the Chancellor to deal with ABP’s alternative applications for summary judgment.

Following the issue on 16 March 2011 of HOTT’s notices of appeal from the Chancellor’s judgment, Morgan J ordered on 28 June 2011 the determination of the following preliminary issue in each action:

"… the issue of whether the Defendant intends to occupy the holdings for the purposes, or partly for the purposes, of a business to be carried on by it therein, within the meaning of Section 30(1)(g) of the Landlord and Tenant Act 1954, and if so when, and in what circumstances the Defendant so intends; but so that such issue shall not include any question as to the lawfulness of that intention as a matter of competition law".

The trial of the preliminary issue therefore detached the question of proof of ABP’s intention, for the purposes of section 30(1)(g) of the 1954 Act, from the competition claims, which the Chancellor said the amended Particulars of Claim had inadequately separated out. The preliminary issue was directed at whether, irrespective of any competition claims, ABP was able to prove its intention for the purposes of section 30(1)(g) in the sense explained by Asquith LJ in Cunliffe v Goodman [1950] 2 KB 237 and applied by the Court of Appeal in Chez Gerard Ltd v Green [1983] EGLR 79.

The preliminary issue was tried by Vos J between 18 and 22 July 2011. On 29 July 2011 he delivered his judgment in favour of ABP. His conclusions were set out as follows in [146] of his judgment:

“(i)

ABP intends to occupy the IOT for the purposes, or partly for the purposes, of a business to be carried on by it at the IOT.

(ii)

ABP intends to occupy the IOT for the purposes, or partly for the purposes, of a business to be carried on by it at the IOT at the termination of the Leases, whenever that occurs. The most likely circumstances of that occupation involve ABP entering into a commercial arrangement with HOTT, whereby HOTT pays ship and cargo dues and APT operates for ABP the cargo facilities at the IOT. But even if that does not occur, it is likely that ABP will occupy the IOT from the termination of the Leases for the purposes of providing port facilities to third party oil companies or traders.”

HOTT has appealed the decision of Vos J. That appeal has not yet been determined.

The decision of Vos J has prompted a re-casting of HOTT’s appeals from the Chancellor’s judgment, including a revised skeleton argument in support of the appeals and an application by HOTT for permission to re-amend the Particulars of Claim, and an application by HOTT to adduce new evidence on the appeals.

The notices of appeal contain 17 grounds of appeal, but, by the time of the hearing before us, only the following five grounds were intended to be relied upon: the status of proposals made in the course of negotiations; excessive pricing; refusal to offer adequate and efficient access to the IOT; alleged defective pleading; the existence of a compelling reason for the appeal.

As a result of exchanges with the Bench, at a very early stage in his helpful oral submissions Mr Nicholas Green QC, for HOTT, further narrowed HOTT’s position on the appeals. Mr Green said that a major issue was whether or not an offer made in the course of negotiations can, in principle, be an abuse of a dominant position. Secondly, he submitted that, in the exercise of any national statutory power under the 1954 Act to grant or (pursuant to section 30(1)(g)) to refuse the grant of a new lease, the court would have to take into account any applicable Community law. If a new lease is granted, its terms must be non-abusive in competition terms. If, on the other hand, ABP recovers possession of the IOT and operates it, ABP must continue to provide access on terms which are non-abusive. HOTT’s case is that the terms which have so far been offered, whether on the basis of the grant of new leases, or for access if there are no new leases, are abusive. Mr Green accepted that, depending on the outcome of the appeal from Vos J and other arguments, there are a number of factual permutations which could arise. At the heart of HOTT’s concerns on this appeal is that all its competition claims have been struck out, and it faces the prospect of, at the least, an argument from ABP that HOTT cannot raise any competition arguments in the future.

ABP has served respondents’ notices that the Chancellor’s judgment should be upheld on further grounds; alternatively, that ABP should be granted summary judgment in respect of certain issues in the amended Particulars of Claim.

The scope for complexity, cost and extensive arguments to which competition claims give rise both generally, and specifically in the present case, is illustrated by the preparations for these appeals, which are essentially concerned with the adequacy of the pleading in statements of case (the amended Particulars of Claim and the draft re-amended Particulars of Claim). HOTT’s skeleton argument runs to 50 pages and 202 paragraphs. ABP’s skeleton argument runs to 48 pages and 162 paragraphs. There are 4 bundles of authorities, and 4 appeal bundles. Two days were set aside for the hearing. In the event, as a result of discussion between the Bench and counsel, and the helpful and sensible approach of counsel, it has been possible to identify a strictly limited number of issues upon which the appeals turn, and it was possible to complete oral argument in less than a day.

It seems to me clear that the Chancellor was not determining as a matter of law that competition claims will always be irrelevant to proceedings for a new lease under the 1954 Act which are defended on the ground of opposition in section 30(1)(g), or that he was determining as a matter of law that competition claims are and will necessarily be irrelevant in these proceedings. His decision proceeded essentially on grounds that the amended Particulars of Claim were inadequately and in parts confusingly pleaded; some of the allegations related to past negotiations and would be or would be likely to be overtaken by future negotiations; and, should HOTT be entitled to new leases, past offers would be overtaken by the duty of the court to fix the terms of the new leases.

It is convenient to begin with the allegation that the rents proposed by ABP in negotiations were abusive. I entirely agree with the Chancellor’s decision that those allegations are irrelevant as matters stand. The issue as to future rents only arises if and when it is determined that HOTT is entitled to new leases pursuant to the 1954 Act. I can see no arguable basis in law for any allegation that ABP is precluded from relying on section 30(1)(g), even if it has the requisite intention for the purposes of that sub-section, because it originally negotiated for new leases at excessive rents and only decided to rely upon section 30(1)(g) having failed to secure agreement to those rents.

Furthermore, if it is established that HOTT is entitled under the 1954 Act to new leases and the parties cannot agree the rent, the rent will be determined by the court pursuant to section 34 of the 1954 Act. The statutory measure to be determined by the court is the rent at which the holding might reasonably be expected to be let in the open market by a willing lessor to a willing lessee. That measure excludes any ransom element. It is unclear to me in those circumstances what concern HOTT could legitimately have that the court will fix a rent that is abusive in competition terms. It may be argued that, in ignoring any ransom element, established competition principles would be helpful to the court in fixing the open market rent pursuant to section 34 of the 1954 Act in the case of a monopolist landlord or one in a dominant position in the relevant market for the purposes of CA s. 18 or Article 102. That, however, certainly does not require any pleaded reference to past, unsuccessful negotiations. I do not consider that the Chancellor has ruled out such assistance of competition law principles as a matter of law, although I confess I am highly sceptical about it. If it remains an issue, the relevance of those principles will be determined in due course as part of the process of the fixing of rent by the court.

Turning to the other competition claims in the amended Particulars of Claim, a major problem was that they failed to separate out sufficiently three different matters: (1) allegations relevant to the absence of intent (in the Cunliffe v Goodman sense) for the purposes of section 30(1)(g); (2) allegations of abuse of dominant position relating to the terms of access if, and when, the claims for new leases pursuant to the 1954 Act are dismissed and which, if such allegations were substantiated, could properly be remedied by the court in separate competition proceedings; and (3) other allegations that are said, as a pure matter of competition law, to preclude refusal of the grant of new leases pursuant to the 1954 Act, irrespective of section 30(1)(g).

It was the failure clearly to distinguish between those different allegations which underlay the Chancellor’s criticism of the amended Particulars of Claim, and, in particular, his observations that there was a confusion between section 30(1)(g) “intention” points and other competition points; that some points were only relevant to future matters, including possible future negotiations; and that competition points, particularly alleged anti-competitive effect, had not been adequately pleaded. I entirely agree with his criticism of those matters and with his conclusion that, in the circumstances, the most appropriate order was to strike out the whole of the amended Particulars of Claim and direct that the original Particulars of Claim be reinstated.

Subject to appeal, Vos J has now decided the section 30(1)(g) Cunliffe v Goodman “intention” issue in favour of ABP. What remains unclear is precisely what allegation or allegations are presently made which fall within category (3) in paragraph [39] above. Those are the only competition allegations which ought properly be included in these 1954 Act proceedings. Strictly, they ought to be pleaded by way of Reply. It seems to me quite clear, as I have said, that the Chancellor did not decide as a matter of law that it is never possible for a defence to a claim for a new tenancy under the 1954 Act to be precluded on competition grounds generally or on any particular competition ground. He did not decide that issue one way or the other. What he did decide, plainly correctly in my judgment, was that no such ground, with any real prospect of success, had been properly and clearly pleaded in the amended Particulars of Claim.

It is important in this context to distinguish between the allegations in category (2) in paragraph [39] above and those in category (3). If ABP were to establish the ground of opposition in section 30(1)(g) of the 1954 Act, so that the claim for new leases was dismissed, and ABP were then to seek to impose terms of access on HOTT which were an abuse of a dominant position within CA s.18 and Article 102, but that abuse could be prevented (by injunction or otherwise) in separate competition proceedings, I cannot see that such potential abuse could possibly preclude reliance by ABP on section 30(1)(g). It is, at least at first sight, difficult to see why any such abuse could not be addressed in separate proceedings in that way. In the circumstances, and bearing in mind (subject to appeal) the findings of Vos J as to ABP’s intention to occupy the IOT and the prospect of its practical implementation, it is very difficult to understand the basis for a competition law objection to ABP’s defence based on section 30(1)(g).

As I have said, however, the Chancellor did not decide the point as a matter of substantive law, nor is it a point we need to decide or should decide on this appeal. If, therefore, HOTT wishes to raise a competition law point precluding ABP from relying on section 30(1)(g) in these proceedings, it must identify some abuse within CA s. 18 and Article 102 which (1) would arise if the claim in these proceedings for new leases was refused, and (2) could not be prevented or remedied in separate competition proceedings by HOTT against ABP, and (3) is not precluded by the findings of fact of Vos J (subject to appeal). That point should be pleaded by way of Reply. It would be a matter for the parties to consider, and the court to decide, the most efficient way of resolving any such issue in accordance with the Overriding Objective in CPR Rule 1.1.

If HOTT considers that it has sound grounds now for establishing that, if these proceedings under the 1954 Act were dismissed, the terms on which ABP would grant access would be an abuse of its dominant position which could and should be restrained by the court, it would be a matter for HOTT to decide whether to commence separate proceedings now to restrain such abuse or to wait until the final disposal of these 1954 Act proceedings and the outcome of any further negotiations. If it commences such proceedings before the final disposal of the present proceedings, it runs the risk of an order that they be stayed as premature. On the other hand, HOTT might have legitimate reasons why it would want to progress them, and should be entitled to progress them, at this stage. I express no view on the point since we heard no submissions on it.

In the light of everything I have said, I would dismiss the appeals.

I would also dismiss the application for permission to re-amend the Particulars of Claim. I do not consider that, in principle, it is right to entertain on the appeal a statement of case which is materially different from that which the Chancellor ordered to be struck out. In any event, I would also dismiss the application on the ground that the draft re-amended Particulars of Claim are defective since they suffer from many of the same defects as the amended Particulars of Claim in that they repeat the allegation of abuse by virtue of the demand for excessive rents in the course of past negotiations, and they do not clearly distinguish between the three different categories of allegations in paragraph [39] above, and they do not restrict or clearly restrict the competition allegations to those in the third category in paragraph [39] above (bearing in mind also in that context the findings of fact of Vos J).

I would also dismiss HOTT’s application to adduce new evidence on the appeal. Such evidence does not meet the difficulties in HOTT’s appeal to which I have referred above.

It is not necessary to make any decision on the matters raised in ABP’s respondent’s notices.

Finally, I would repeat what Mummery LJ emphasised during the hearing of the appeal: that the parties should seek, through their statements of case and directions of the court, the most efficient, cost-effective, timely and simple way of determining the various issues in dispute between them, if appropriate by identifying separate issues for determination.

For the reasons I have given, I would dismiss the appeals. I also would refuse the application to re-amend the Particulars of Claim.

I agree.

I also agree.