British Telecommunications Plc v The Office of Communications, Court of Appeal - Civil Division, November 14, 2018, [2018] EWCA Civ 2542

Resolution Date:November 14, 2018
Issuing Organization:Civil Division
Actores:British Telecommunications Plc v The Office of Communications
 
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Case No: A3/2018/0709

Neutral Citation Number: [2018] EWCA Civ 2542

IN THE COURT OF APPEAL

ON APPEAL FROM THE COMPETITION APPEAL TRIBUNAL

THE HONOURABLE MR JUSTICE SNOWDEN, DR CLIVE ELPHICK AND PROFESSOR JOHN CUBBIN

Rolls Building

7 Rolls Buildings

Fetter Lane

London, EC4A 1NL

Date: 14 November 2018

Before:

SIR GEOFFREY VOS, CHANCELLOR OF THE HIGH COURT

LORD JUSTICE LEGGATT

and

LORD JUSTICE HADDON-CAVE

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B E T W E E N

BRITISH TELECOMMUNICATIONS PLC

Applicant/Respondent

and

THE OFFICE OF COMMUNICATIONS

Respondent/Appellant

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Ms Dinah Rose QC, Mr Josh Holmes QC and Mr Mark Vinall (instructed by the Office of Communications) appeared for the Appellant, Ofcom

Mr Daniel Beard QC and Mr Robert Palmer (instructed by BT Legal) appeared for the Respondent, BT

Hearing date: 23rd October 2018

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JudgmentSir Geoffrey Vos, Chancellor of the High Court (delivering the judgment of the court):

Introduction

  1. The issue raised by this appeal is whether the Competition Appeal Tribunal (the ``CAT'') was right to adopt the starting point that costs should follow the event in an appeal brought under section 192 (``section 192'') of the Communications Act 2003 (the ``2003 Act''). The Office of Communications (``Ofcom'') is appealing the CAT's decision dated 25th January 2018 (the ``Costs Decision''), which required Ofcom to pay 50% of the bulk of the costs incurred by British Telecommunications PLC (``BT'') in bringing its successful section 192 appeal against Ofcom's 2016 Business Connectivity Market Review (the ``Market Review'').

  2. In essence, the CAT's main substantive determinations ([2017] CAT 25) were that Ofcom had been wrong to conclude that it was appropriate to define a single product market for contemporary interface symmetric broadband origination (``CISBO'') services of all bandwidths, and that the ``Rest of the UK'' outside London comprised a single geographic market. These decisions concerned Ofcom's regulation of the ``business connectivity'' market.

  3. Ofcom's main submission was that the CAT ought to have proceeded on the basis that costs would not ordinarily be awarded against Ofcom in the context of a successful appeal under section 192 in the absence of unreasonableness or bad faith. It submitted that the starting point adopted by the CAT was inconsistent with authorities in other contexts and with the previous consistent practice of the CAT prior to its decision in British Sky Broadcasting Ltd v. Office of Communications [2013] CAT 9 (``PayTV''). Ofcom submitted that PayTV, like the CAT's Costs Decision which followed it, was wrong in law and based on a fundamental misunderstanding of the applicable authorities.

  4. Conversely, BT submitted that PayTV and the Costs Decision were right to draw a distinction between appeals against decisions made by Ofcom under its dispute resolution function conferred by section 185 of the 2003 Act (``dispute resolution appeals'') on the one hand, and appeals against decisions made by Ofcom in the regulatory context (``regulatory appeals'') on the other hand. BT submitted that the appeal in the present case was a regulatory appeal from Ofcom's market determinations following its decision to impose conditions on BT under sections 45, 47 and 87-91 of the 2003 Act and its conclusion that BT had significant market power (``SMP''). As such, the authorities from other contexts relied upon by Ofcom were inapplicable and certainly not binding on the CAT, and, properly understood, the earlier authorities were only consistent with a ``no order as to costs'' starting point for dispute resolution appeals.

  5. It may be noted at the outset that Lord Neuberger MR said in Regina (Perinpanathan) v. City of Westminster Magistrates' Court [2010] EWCA Civ 40, [2010] 1 WLR 1508, (``Perinpanathan'') at paragraph 75, admittedly in a slightly different context, that there were respectable arguments both (a) for a presumption that a successful party should recover some costs against the authority (the police in that case), and (b) for a starting point that costs should only be recoverable in so far as they were the result of unreasonable conduct by that authority (see paragraph 55 below).

  6. Neither side concentrated their submissions on the power of the CAT, as a UK tribunal, to regulate its own procedure and to adopt costs starting points that it regarded as appropriate in the context of its specific and specialist functions. In our view, however, this aspect will need to be considered further once the disputed legal position is resolved. We shall return to it in due course.

  7. Before returning to deal with the central issue as to the correct costs starting point, we shall consider (a) some of the essential procedural background, (b) the applicable procedural rules, (c) the CAT's Costs Decision in this case, (d) a brief summary of the parties' detailed arguments, and (e) the authorities that underlie the legal dispute between the parties.

    Procedural Background

  8. Ofcom undertook the Market Review pursuant to sections 84 and 84A of the 2003 Act. It made its Final Statement on 28th April 2016 (the ``Final Statement''). Under the 2003 Act, Ofcom was required (a) to identify the relevant product and geographic market(s) in accordance with EU law and guidelines (section 79), (b) to carry out an analysis as to whether there was a lack of effective competition in the defined market by reason of an entity's dominance (section 80), and (c) to decide what remedies to impose.

  9. On 29th June 2016, BT appealed to the CAT in relation to some of Ofcom's decisions contained in the Market Review. BT had also challenged Ofcom's proposed remedies, but that issue was adjourned for a future hearing. Between 10th April and 24th May 2017, the CAT heard evidence regarding BT's challenges to Ofcom's decisions concerning market definition.

  10. In a short ruling on 26th July 2017, the CAT quashed certain determinations made by Ofcom concerning market definition in its Final Statement. As a result, the remedies hearing became unnecessary. The CAT's full reasons were given in its decision dated 10th November 2017.

  11. The CAT's Costs Decision was promulgated on 25th January 2018. The CAT awarded BT 50% of its recoverable costs, after discounting those costs relating to the reports of one of BT's experts, Dr Bruno Basalisco, and those costs incurred for a hearing on 20th November 2017, in respect of which BT was ordered to pay Ofcom's costs. The CAT decided that the starting point for an assessment of costs under Rule 104(4) (``Rule 104(4)'') of the Competition Appeal Tribunal Rules 2015 (the ``Rules'') was that costs should follow the event. The CAT also ordered Ofcom to pay £500,000 on account.

  12. On 9th March 2018, the CAT granted Ofcom permission to appeal the Costs Decision on the question of the correct starting point. It observed that Lewison LJ had granted permission to appeal the costs decision in PayTV, even though that appeal never took place because the substantive judgment was overturned by the Court of Appeal in British Sky Broadcasting Ltd v. Office of Communications [2014] EWCA Civ 133. The CAT thought that the Court of Appeal's definitive guidance in this case would be valuable to both the CAT and the regulated sector in general, bearing in mind that the costs of appeals against regulatory decisions are large, and appeals are not infrequent.

    The Competition Appeal Tribunal Rules 2015

  13. Rule 104(2) of the Rules gives the CAT the discretion to make ``any order it thinks fit in relation to the payment of costs in respect of the whole or part of the proceedings''.

  14. Rule 104(4) provides the following list of factors that the CAT may take into account when making an order under Rule 104(2) determining the amount of costs:-

    ``(a) the conduct of all parties in relation to the proceedings;

    (b) any schedule of incurred or estimated costs filed by the parties;

    (c) whether a party has succeeded on part of its case, even if that party has not been wholly successful;

    (d) any admissible offer to settle made by a party which is drawn to the Tribunal's attention, and which is not a rule 45 Offer to which costs consequences under rules 48 and 49 apply;

    (e) whether costs were proportionately and reasonably incurred; and

    (f) whether costs are proportionate and reasonable in amount.''

  15. It may be noted that, unlike Rule 104, the general rule in normal civil proceedings is defined by CPR Part 44.2(2)(a) as being that ``the unsuccessful party will be ordered to pay the costs of the successful party''. Thereafter, however, CPR Parts 44.2 and 44.3 makes similar factors to those included in Rule 104(4) relevant considerations. It is particularly noteworthy that CPR Part 44.2(4)(b) is in identical terms to Rule 104(4)(c). Even though the statutory general rule is the general discretion in Rule 104(2) rather than costs following the event, Rule 104(4)(c), like the CPR, allows the CAT to take account of whether a party has succeeded on part of its case, even if that party has not been wholly successful.

    The CAT's Costs Decision

  16. The CAT first considered Rule 104 and CPR Part 44 and cited Quarmby Construction Co Ltd v. OFT [2012] EWCA Civ 1552 as having held that the CAT had a wide and general discretion as to costs under the previous Rule 55, which had been substantially reproduced by Rule 104. The CAT then said that ``[a]lthough there is no express starting point in Rule 104, for certain categories of case the [CAT] now has an established practice in relation to costs''. It gave an appeal against Ofcom's decision resolving a price dispute under section 185 of the 2003 Act as an example of a case where the starting point was that there should be no order for costs against Ofcom if it had acted reasonably and in good faith (citing The Number (UK) Ltd v. Ofcom [2009] CAT 5 at paragraphs 5-6 (the...

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