WH Newson Holding Ltd & Ors v IMI Plc & Ors

This is a follow-on action for damages allegedly caused by a cartel operated in contravention of EU competition law. The present applications raise yet another issue concerning section 47A of the Competition Act 1998 (“section 47A”), the scope of which has given rise to considerable litigation since it was introduced by the Enterprise Act 2002.

On 3 September 2004, the EU Commission issued a decision in Case COMP/E-1.38.069, finding that a complex international cartel (“the cartel”) had operated for some 13 years concerning the supply of copper plumbing tubes (“the Decision”). The Decision was addressed to 21 companies and imposed total fines of €222.3 million. The three defendants to the present proceedings were among the addressees of the Decision. The 1^st and 2^nd Defendants are related English companies, and were fined along with a third company in the same group, Yorkshire Copper Tube Ltd (“Yorkshire CTL”) €44.98 million. The 3^rd Defendant is a Swedish company, which was fined along with some of its subsidiaries a total of €32.6 million. Those penalties included a 10% discount for cooperation.

The 21 Claimants are all companies now in the group owned by Travis Perkins plc and were purchasers of copper plumbing tubes at the material time. They allege that they suffered loss through the payment of higher prices (“the overcharge”) or, insofar as they may be unable to recover for that overcharge because it was reflected in increased prices to their customers, through loss of business (“volume effect”).

The Defendants brought appeals against the Decision to what was then the Court of First Instance (now the General Court) of the EU, that were dismissed (save for a reduction in the duration of the 1^st and 2^nd Defendants’ involvement in the cartel) by judgments delivered on 19 May 2010. On 17 May 2012, the Claimants commenced the present action before Competition Appeal Tribunal (“CAT”) pursuant to section 47A.

By order made on 24 July 2012, the CAT transferred these proceedings to the High Court under section 16(5) of the Enterprise Act 2002. That order was made at the Claimants’ request and consented to by the Defendants on the basis that it was agreed the claim in the High Court could be no wider than a claim under section 47A. The proceedings therefore continue as a case subject to the conditions of section 47A. Thus it is that although the jurisdiction created by section 47A is vested exclusively in the CAT, the question raised of the scope of section 47A falls for determination in this court and not the CAT.

As noted above, the claim is for damages resulting from the cartel, for which the Defendants are alleged to be jointly and severally liable. As is usual in such cases, a claim is pleaded on the basis of a breach of statutory duty under Article 101 of the TFEU and/or section 2(1) of the European Communities Act 1972. However, further or alternative claims are pleaded on the basis of the tort of conspiracy to use unlawful means, the unlawful means being the violation of Article 101 TFEU.

The relevant paragraph of the Claimants’ pleading is paragraph 24, which is as follows:

“(a)

The Defendants, as Cartelists, (and each of them) breached the statutory duty imposed by Article 101 TFEU (ex Article 81 EC) and/or s.2(1) of the European Communities Act 197[2].

(b)

Further or alternatively, the Defendants, as Cartelists, (and each of them) participated in a conspiracy to use unlawful means, namely the agreed entry into arrangements contravening Article 101 TFEU (ex Article 81 EC).

(c)

Further or alternatively, each company in IMI (and unknown directors or controllers thereof to be particularised upon disclosure herein), including specifically the First and Second Defendants, participated in a conspiracy to use unlawful means when they agreed and/or combined with the other IMI companies named in the Decision to effect IMI’s participation in arrangements with the other Cartelists contravening Article 101 TFEU (ex Article 81 EC).”

IMI is defined as comprising the 1^st and 2^nd Defendants and Yorkshire CTL. Since Yorkshire CTL is the only other IMI company named in the Decision, the allegation in para 24(c) effectively concerns the 1^st and 2^nd Defendants and Yorkshire CTL and “unknown directors or controllers thereof.”

All three defendants apply to strike out para 24(b) and the 1^st and 2^nd Defendants apply to strike out para 24(c) under CPR rule 3.4(2)(a) on the basis that such tortious conspiracy claims fall outside the statutory jurisdiction of section 47A.

I was told by Mr de la Mare QC for the Claimants that the reason for the inclusion of the additional causes of action in para 24(b) and (c) is that it was considered that the rules on remoteness of damage may be different (i.e. more beneficial) for claimants in a conspiracy claim and that such claims would enable them to recover as damages their own costs of investigating the effects of the cartel which they otherwise might not recover in a claim for breach of statutory duty. It was also suggested that they might be in a better position with regard to any argument about the ‘passing on’ of the overcharge. Whether any of those suggested distinctions with a breach of statutory duty claim are valid and whether the alternative claims are really of material benefit are not for determination on the present applications.

Section 47A is headed “Monetary claims before the Tribunal”. Section 47A(1)-(2) are as follows:

“(1)

This section applies to:-

(a)

any claim for damages, or

(b)

any other claim for a sum of money.

which a person who has suffered loss or damage as a result of the infringement of a relevant prohibition may make in civil proceedings brought in any part of the United Kingdom.

(2)

In this section “relevant prohibition” means any of the following -

(a)

the Chapter I prohibition;

(b)

the Chapter II prohibition:

(c)

the prohibition in Article 101(1) of the Treaty;

(d)

the prohibition in Article 102 of the Treaty.”

It is unnecessary to set out in full the eight subsequent subsections of section 47A. In essence, the section provides that:

Moreover, a claim under section 47A is subject to a special limitation period. Section 47A(3) disapplies the limitation period that would otherwise apply to the claim made in civil proceedings; and by virtue of rule 31 of the Competition Appeal Tribunal Rules 2003 a claim under section 47A may be made within two years of the later of the end of the period referred to in para (ii) above or the accrual of the cause of action. That may lead to a significantly extended limitation period. Hence, in the present case, the claim was brought on 17 May 2012, just within two years of the judgments of the Court of First Instance. By that time, the ordinary limitation period that would otherwise apply to such a damages claim had expired, since that would commence, at the latest, at the time of the Decision (pursuant to section 32 of the Limitation Act 1980).

In summary, the Defendants submitted that the basis of a claim under section 47A (“a section 47A claim”) was the decision of the competition authority (or CAT) finding an infringement of the “relevant prohibition.” The question of liability in a section 47A claim is therefore determined by that decision, and for a claim to fall within the statutory jurisdiction, the issues for decision must be confined to causation and quantum. The Defendants relied in support on recent judgments by the Court of Appeal in section 47A cases. By contrast with a claim for breach of statutory duty that comprised the infringement of the “relevant prohibition”, a claim for an unlawful means conspiracy involved distinct legal elements and therefore facts which had to be established to found liability, and thus was not coterminous with the infringement decision. In particular, essential elements of the latter cause of action were that the defendants had an intention to injure the claimants; and that the claimants had suffered damage.

The Claimants argued that it is clear that the statutory jurisdiction for a section 47A claim is not limited in the manner submitted by the Defendants from the language of section 47A(1) and the circumstances in which such claims might arise. The scope of section 47A is not restricted to a particular cause of action. Further, the judicial statements cited by the Defendants were all made in the context where this issue did not arise and could not be applied literally. In any event, as regards the claim here in para 24(b), that did not involve any factual inquiry beyond the scope of the findings in the Decision.

As mentioned at the outset, a number of issues concerning section 47A have been considered by the Court of Appeal. In Enron Coal Services Ltd v English Welsh and Scottish Railway Ltd [2009] EWCA Civ 647, [2009] UKCLR 816, it was held that a section 47A claim must be based on the findings of infringement in the competition authority’s decision. It was not open to the claimant to allege a particular infringement of competition law on the basis of facts set out in the authority’s decision that are not held by the decision to constitute an infringement. In that case, the infringement was of the domestic and EU prohibitions of abuse of a dominant position (i.e. Article 82 EU [now Article 102 TFEU] and the Chapter II prohibition). That part of the section 47A claim which alleged the abuse of excessive pricing was struck out on the basis that infringement decision of the Office of Rail Regulation (“ORR”), on which the claim was based, had not found such an abuse. After setting out the terms of section 47A, Patten LJ stated in the lead judgment at [30]-[31]:

“…The jurisdiction of the Tribunal is therefore limited to determining what are commonly referred to as follow-on claims for damages based on a finding of infringement of the Chapter II prohibition or Article 82 which has been made by the OFT or one of the sectoral regulators such as the ORR who enjoy concurrent powers of enforcement in respect of the Chapter II prohibitions … The existence of such a finding is not only a pre-condition to the making of a claim under s.47A(1). It also operates to determine and define the limits of that claim and the Tribunal's jurisdiction in respect of it….

For there to be such a claim (and, with it, the jurisdiction of theTribunal to adjudicate upon it) the regulator must have made a decision of the kind described in s.47A(6). The use of the word "decision" makes it clear that s.47A is differentiating between findings of fact as to the conduct of the defendant made as part of the overall decision and a determination by the regulator that particular conduct amounts to an infringement of the Chapter II prohibition. It is not open to a claimant such as ECSL to seek to recover damages through the medium of s.47A simply by identifying findings of fact which could arguably amount to such an infringement. No right of action exists unless the regulator has actually decided that such conduct constitutes an infringement of the relevant prohibition as defined. The corollary to this is that the Tribunal (whose jurisdiction depends upon the existence of such a decision) must satisfy itself that the regulator has made a relevant and definitive finding of infringement. The purpose of section 47A is to obviate the necessity for a trial of the question of infringement only where the regulator has in fact ruled on that very issue...”

And further, at [60], he summarised the task of the CAT in this section 47A claim as being “to identify the findings of infringement and award damages for any loss or damage which they have caused.”

Jacob and Carnwath LJJ agreed with this judgment, and in his own brief judgment Carnwath LJ emphasised (at [64]):

“…the need for a determination by the regulator of an infringement as a foundation for liability under section 47A. It is not enough to be able to point to findings in the decision from which an infringement might arguably be inferred…”

Following the trial before the CAT in which the claimant’s case was dismissed, Enron came back before the Court of Appeal: Enron Coal Services Ltd v English Welsh and Scottish Railway Ltd [2011] EWCA Civ 2, [2011] UKCLR 303. The issue on appeal was whether the CAT’s conclusion that the claimant had failed to establish causation of the alleged loss was incompatible with the findings of fact in the ORR’s decision. The determination of that issue, involving close analysis of the ORR decision, is not relevant for present purposes, but in the introductory section of his judgment, Lloyd LJ (with whom Patten and Jacob LJJ agreed) discussed the CAT’s jurisdiction under section 47A. He stated at [8]:

“The right to bring a follow-on claim before the Tribunal does not affect the right of a party to bring the sort of proceedings in court that were already possible, so a party which considers itself to have been the victim of anti-competitive behaviour, and to have suffered loss as a result, has a choice: it may bring ordinary proceedings in the High Court (I speak only of England, even though the 1998 Act applies throughout the UK), or, if a relevant regulator has held there to have been an infringement, it may bring proceedings in the Tribunal. If it proceeds in court, it can allege, and must prove, whatever infringements it wishes to rely on as having caused loss. If a regulator has found there to have been an infringement, before or during the course of the proceedings, it will have the benefit of section 58 [of the 1998 Act] under which it can rely on the regulator's findings of fact. On the other hand, it may proceed in the Tribunal, in which case it is limited to the infringements found by the regulator, but the question of infringement is concluded by the regulator's decision, leaving only the issues of causation and quantification of loss to be decided by the Tribunal.”

While Enron was an abuse of dominance claim, Deutsche Bahn AG v Morgan Crucible Co [2012] EWCA Civ 1, [2012] UKCLR 279, was a claim for damages following a cartel decision by the EU Commission. The issue there concerned the effect on the statutory limitation period of an appeal only against penalty and not against the substantive finding of infringement. In his judgment (with which Etherton and Sullivan LJJ agreed), Mummery LJ referred to the scheme of section 47A and said, at [105]:

“Liability for infringement has already been established in the Commission Decision and is binding on the parties and the Tribunal. Only issues of causation and quantum are left to be determined by the Tribunal. ”

However, Enron and Deutsche Bahn were both claims for breach of statutory duty and the question of the application of section 47A to another cause of action did not arise. So also were the other cases under section 47A which have come on appeal: BCL Old Co Ltd v BASF SE [2009] EWCA Civ 434, [2009] UKCLR 789; BCL Old Co Ltd v BASF plc [2012] UKSC 45; and Emerson Electric Co and Ors v Mersen UK Portslade Ltd [2012] EWCA Civ 1559 (a judgment given since the hearing of the present applications).

As Mr de la Mare correctly submitted, the issue is one of statutory interpretation. In that regard, it is necessary to have regard to the principles governing such interpretation. It is now well-established that the courts should adopt a purposive approach to such construction. As Lord Steyn stated in A-G's Reference (No 5 of 2002)[2004] UKHL 43, [2005] 1 AC 167. at [31]

“No explanation for resorting to a purposive construction is necessary. One can confidently assume that Parliament intends its legislation to be interpreted not in the way of a black-letter lawyer, but in a meaningful and purposeful way giving effect to the basic objectives of the legislation.”

Moreover, it has long been accepted that the court can consider the likely practical consequences of adopting the alternative interpretations. If one construction is likely to produce absurdity, inconsistency or inconvenience, that will be a powerful factor supporting the alternative, even if it involves applying a more strained meaning to the language.

The starting point is therefore the language of the statute. Section 47A(1) is broadly framed and expressly covers not merely “any claim for damages” but also “any other claim for a sum of money” (my emphasis). As Mr de la Mare put it, the provision is “cause of action neutral” provided that the claim is for loss caused by infringement of a “relevant prohibition.” There is nothing to suggest that it is limited to the particular cause of action of a claim for breach of statutory duty. Indeed, since the remedy for breach of statutory duty is normally a claim for damages, the statutory reference to “any other” monetary claim suggests the contrary.

Moreover, as Mr de la Mare pointed out, a claim for loss caused by the infringement might lie in contract. For example, in the case of a bid-rigging cartel, where the successful tender incorporated a warranty that the tender was made independently and free of collusion (as is sometimes the case), the claimant may bring a claim for damages for breach of warranty as well as, or alternatively to, breach of statutory duty. And when an exclusive dealing contract is found to violate Article 101 TFEU or the Chapter I prohibition, the claimant may have a restitutionary claim to recover monies paid under it. Such claims clearly fall within the ordinary meaning of section 47A(1) and there appears to be no good reason to restrict the language so as to exclude them from its scope. But deciding such claims of course involve the court making findings regarding the contract as part of its determination of liability. Accordingly, while the judgments of the Court of Appeal referred to above are clear authority establishing that the section 47A jurisdiction cannot involve allegations of infringement of competition law beyond those determined by the decision of the competition authority or regulator, I do not think that the references to the CAT deciding only “causation and quantum” can be taken literally, and applied to claims very different from those in which the observations were made. Such judicial dicta cannot be taken out of context so as to limit the meaning of the statute.

In his oral submissions, Mr de la Mare gave the further illustration of a claim brought by a foreign claimant for damages suffered abroad by reason of an international cartel, for which the proper law under the Rome II Regulation (Regulation (EC) 864/2007) would not be English law, and to which the English law concept of breach of statutory duty may not correspond to the applicable cause of action under the law governing the tort. Although this suggestion was not fully explored, it seems to me a further reason why section 47A should not be restricted to the cause of action of a claim for breach of statutory duty.

However, it does not follow that section 47A(1) is to be given the full breadth of its literal meaning. It is obviously not intended to confer jurisdiction on the CAT for any monetary claim which a person who has suffered loss or damage as a result of the infringement of competition law may bring in civil proceedings. It seems evident, and unsurprisingly the Claimants did not suggest the contrary, that the claim must be in respect of that loss or damage. Thus section 47A creates a statutory remedy before the specialist Tribunal for a particular category of claims based on infringement of competition law. In Deutsche Bahn, Mummery LJ at [106] characterised the purpose and scheme of section 47A as:

“more about the allocation and distribution of judicial business within the system of domestic courts and specialist tribunals by allowing, presumably for reasons of convenience and case management, monetary claims for breaches of competition law to be brought, in specified circumstances, in the specialist Tribunal, instead of by ordinary action in a court of law.”

To that I would respectfully add that although the question of infringement of competition law has been decided and is binding on the CAT, the specialist expertise of the Tribunal may be considered of benefit in such cases in determining the counter-factual question of what the prices or costs would have been in a more competitive market (i.e. in the absence the anti-competitive agreement or conduct that constituted the infringement), an issue on causation and quantum that often involves expert economic evidence.

In Emerson, the Court of Appeal upheld the decision of the CAT that a claim under section 47A cannot be brought against a defendant who was not an addressee of the competition authority’s decision. Such a defendant is not subject to a prior decision that it has infringed a relevant prohibition. In considering the approach to jurisdictional issues under section 47A, Mummery LJ (with whom Moore-Bick and Black LJJ agreed) said this (at [8]):

“Caution, as well as a patient and practical intelligence, is highly desirable in s.47A cases. The Tribunal and the courts should steer well clear of "the hazards of commitment" to narrow preconceived attitudes conditioned by domestic law, but they must not be overawed by the panoramic view of a new legal landscape that includes dominating EU legal doctrines, such as the powerful principles of effectiveness and legal certainty. They must not lose sight of the basic elements of fair procedure or of the root principles of the rule of law, though they may be modified in their application to cases originating in the EU context.”

Although those observations were directed more specifically at the relationship with EU law and Commission decisions, applying that practical approach I consider that the objective of section 47A is to provide the means for a claim to be brought in the specialist Tribunal against parties who have been held to have infringed the relevant competition law prohibition for financial loss which that infringement has caused to the claimant. Hence section 47A does not permit a claim to be brought against other defendants: Emerson. Nor, in my judgment, will it generally permit claims to be brought in the CAT for conduct that is distinct from the infringement, even when the infringement is an element that has to be established to complete the cause of action. Thus the examples of a breach of warranty or restitutionary claim for money paid under a void contract may fall within section 47A, since it is the infringement of competition law that constitutes the breach or establishes the entitlement to restitution. The determining criterion is the factual nature of the claim, not the cause of action with which it is clothed.

It is in the light of that construction that I turn to consideration of the two conspiracy claims pleaded here.

The claim under para 24(b) is of a conspiracy to use unlawful means. That is pleaded on the basis that this was constituted by the entry into the cartel that infringed Article 101 TFEU. No other form of agreement or unlawful means is relied on.

Mr Harris QC (for the 1^st and 2^nd Defendants) supported by Mr Rayment (for the 3^rd Defendant) argued that an unlawful means conspiracy involves further factual allegations distinct from the finding of infringement. The ingredients of the tort are conveniently set out in Clerk & Lindsell on Torts at para 24-95:

“This form of the tort is committed where two or more persons combine and take action which is unlawful in itself with the intention of causing damage to a third party who does incur the intended damage. It is not necessary for the injured party to prove that causing him damage was the main or predominant purpose of the combination but that purpose must be part of the combiners’ intentions.”

The Decision found that this was an infringement of Article 101 TFEU by object: i.e. that the participating undertakings had the object of distorting competition, rather than merely entering into arrangements which had that effect: recitals 499-506, 603. Moreover, the Decision found that the cartel had a substantial anti-competitive effect: recital 501; and led to substantial price increases in the UK: recitals 213, 277.

Nonetheless, the Defendants sought to argue that this was not an intention to injure the Claimants, since the Claimants were not end-users of copper piping tubes and the Defendants were indifferent as to whether the higher prices they charged were passed on by such intermediate purchasers to the end-using customers.

In OBG Ltd v Allan [2007] UKHL 21, [2008] 1 AC 1, Lord Nicholls explained this ingredient of the tort as follows:

“164.

…A defendant may intend to harm the claimant's business either as an end in itself or as a means to an end. A defendant may intend to harm the claimant as an end in itself where, for instance, he has a grudge against the claimant. More usually a defendant intentionally inflicts harm on a claimant's business as a means to an end. He inflicts damage as the means whereby to protect or promote his own economic interests.

165.

Intentional harm inflicted against a claimant in either of these circumstances satisfies the mental ingredient of this tort. This is so even if the defendant does not wish to harm the claimant, in the sense that he would prefer that the claimant were not standing in his way.

166.

Lesser states of mind do not suffice. A high degree of blameworthiness is called for, because intention serves as the factor which justifies imposing liability on the defendant for loss caused by a wrong otherwise not actionable by the claimant against the defendant. The defendant's conduct in relation to the loss must be deliberate. In particular, a defendant's foresight that his unlawful conduct may or will probably damage the claimant cannot be equated with intention for this purpose. The defendant must intend to injure the claimant. This intent must be a cause of the defendant's conduct, in the words of Cooke J in Van Camp Chocolates Ltd v Aulsebrooks Ltd [1984] 1 NZLR 354, 360….

167.

I add one explanatory gloss to the above. Take a case where a defendant seeks to advance his own business by pursuing a course of conduct which he knows will, in the very nature of things, necessarily be injurious to the claimant. In other words, a case where loss to the claimant is the obverse side of the coin from gain to the defendant. The defendant's gain and the claimant's loss are, to the defendant's knowledge, inseparably linked. The defendant cannot obtain the one without bringing about the other. If the defendant goes ahead in such a case in order to obtain the gain he seeks, his state of mind will satisfy the mental ingredient of the unlawful interference tort. This accords with the approach adopted by Lord Sumner in Sorrell v Smith [1925] AC 700, 742:

“When the whole object of the defendants' action is to capture the plaintiff's business, their gain must be his loss. How stands the matter then? The difference disappears. The defendants' success is the plaintiff's extinction, and they cannot seek the one without ensuing the other.””

In my judgment, although the Defendants’ purpose in entering into the cartel was to promote their own economic interests, it is wholly unrealistic to regard this as divorced from the causation of loss to purchasers of copper plumbing tubes, even if the loss caused to the Claimants might not correspond to the Defendants’ gain. On the basis of OBG, I consider that this element of the tort can be established on the basis of the finding of infringement in the Decision alone.

The Defendants also contended that the requirement of damage for a cause of action in conspiracy represents an additional element over a claim for breach of statutory duty. That is misconceived. The claim is brought under section 47A, for which financial loss is an essential element. A section 47A claim cannot be brought only for a declaration. Further, injury or damage is a necessary ingredient of the cause of action for breach of statutory duty (unless the statute otherwise provides); the breach is not actionable per se: see Halsbury’s Laws of England (5^th edn), Vol 97, para 495.

Accordingly, I find that the claim in para 24(b) falls within section 47A and should not be struck out. I should make clear that the position might be otherwise in the case of a conspiracy claim brought following a decision which held that an agreement infringed Article 101 or the Chapter I prohibition only by effect. It is unnecessary to reach a view in that regard in the present case.

The claim under para 24(c) is also for an unlawful means conspiracy. However, it is significantly different from the claim just considered. Here, the alleged conspiracy is not the agreement comprising the cartel reached between addressees of the Decision, but an antecedent agreement between the 1^st and 2^nd Defendants and others. That agreement was not the subject of the Decision, nor could it amount to the infringement of a relevant prohibition since it is alleged to have been reached between companies in the same group (and thus part of the same economic entity for the purpose of competition law) and individuals who are not undertakings.

Although the unlawful means relied on is the entry into the cartel and it is the cartel which led to the damage, that cannot alter the fact that the focus of this claim is very different from that of the infringement established by the Decision. As Mr de la Mare accepted (and indeed the pleading expressly recognises in the reference to disclosure), this allegation involves a factual inquiry as to alleged misconduct wholly outside the boundaries of the Decision. (Whether an arrangement reached between a company and its “controllers” can amount to a conspiracy in any event was not argued on this application.)

I have no hesitation in concluding that such a claim therefore falls outside the scope of section 47A, properly interpreted as set out above. This view is reinforced by consideration of the position of Yorkshire CTL. As it happens, Yorkshire CTL was an addressee of the Decision, although for whatever reason no claim is brought against it in these proceedings. But suppose Yorkshire CTL was not an addressee of the Decision, or the conspiracy alleged a combination involving another company in the IMI group that was not an addressee. In that event, the non-addressee company would in principle be liable on the conspiracy claim, if sued. However, Mr de la Mare accepted that such a company could not be sued under section 47A, on the basis of Emerson. (Footnote: ¹) Accordingly, if the Claimants’ argument were correct, a conspiracy claim could be brought under section 47A claim involving allegations against companies who could not be made defendants to the claim because of the limited scope of section 47A, whereas they could of course be defendants if the claim were brought in the High Court. Indeed, it may be said that a similar consequence would flow in the present case, since the individuals alleged to be party to the conspiracy could not be sued since they are not addressees of the Decision (and could not infringe Article 101 TFEU in any event), but this claim would involve the inquiry into and determination of allegations made against them. Such practical considerations accordingly support a construction of section 47A that precludes proceedings of this kind being brought in the CAT.

For these reasons, I conclude that the claim alleged in para 24(c) of the claim form does not fall within section 47A and should be struck out.