Granville Technology Group Ltd ((in Liquidation)) v LG Display Company Ltd

Hearing date: 3 August 2023

Approved Judgment

This judgment was handed down remotely at 10.30am on Wednesday 16 August 2023 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

This appeal is concerned with the court's equitable jurisdiction to award compound interest in a claim for damages for infringements of competition law. The judge, Mr Adrian Beltrami KC, sitting as a Deputy Judge in the Commercial Court, struck out the claim for compound interest in respect of the period after the various claimants went into administration, holding that it had no prospect of succeeding. The claimants now appeal against that decision.

Background

The respondents, who are the third and fourth defendants in this action and can be referred to together as “LG” or “the defendants” as there is no need to distinguish between them, were participants in a price-fixing cartel leading to sales of liquid crystal display (“LCD”) panels in the European Union, including the United Kingdom, at inflated prices, contrary to Article 101 of the Treaty on the Functioning of the European Union (“the TFEU”). LCD panels are the main components of thin, flat monitors used for (among other things) televisions, computers, digital watches and pocket calculators. The cartel operated between October 2001 and February 2006. The members of the cartel took deliberate action to conceal the meetings in which they colluded with each other to fix prices and to avoid detection of their arrangements.

Between 2006 and December 2010 the European Commission carried out an investigation into the operation of the cartel. That resulted in a Decision dated 8 ^th December 2010 (“the Commission Decision”) addressed to LG and to other members of the cartel. The Commission found that the addressees had infringed Article 101 “by participating … in a single and continuous agreement and concerted practice in the sector of Liquid Crystal Display panels for TV, notebook and monitor application” and ordered them to bring the infringement to an end immediately insofar as they had not already done so. Fines were levied on the participants, including in LG's case a fine of €215 million.

This is a “follow-on” damages claim by the appellant claimants, who were manufacturers of personal computers and who claim to have been victims of the price-fixing by the members of the cartel. They have been in liquidation for many years. The first claimant, Granville Technology Group Ltd, ceased trading and went into administration on 27 ^th July 2005, followed by liquidation on 15 ^th January 2007. The second claimant, VMT Ltd, entered administration on 5 ^th August 2005 and liquidation on 15 ^th January 2007. The third claimant, OT Computers Ltd, entered administration on 29 ^th January 2002 and liquidation on 5 ^th April 2004. However, the claimants do not allege that their insolvency was caused by the activity of the cartel.

The proceedings

The claim form in this action was issued on 7 ^th December 2016, one day short of six years since the date of the Commission Decision. It asserts infringements of Article 101 of the TFEU and Article 53 of the Agreement on the European Economic Area, and a breach of statutory duties owed pursuant to section 2(1) of the European Communities Act 1972. Claims against other defendants have been settled, leaving LG as the only remaining defendants. A trial lasting five weeks is due to commence in October 2023. The Commission Decision is binding on LG, which means that the trial will not be concerned with liability, but only with issues of causation and loss – principally, whether the cartel caused prices to be higher than they otherwise would have been, and whether or to what extent the unlawful infringements caused the claimants to suffer loss.

After taking account of the settlements concluded with other defendants, the claimants quantify their claim against LG in the sum of about £19.75 million. This is inclusive of interest of about £13.5 million, calculated on a compound basis to 30 ^th June 2022 but continuing to accrue thereafter. Thus interest represents more than two thirds of the total claim.

In respect of the relatively short periods before they ceased trading and entered administration, the claimants' case is that as a result of the unlawful “overcharge amounts” which they were required to pay in order to purchase products incorporating LCD panels during the period of the cartel, they borrowed money from banks and others on which compound interest was payable, which they would not otherwise have done or would not have done to the same extent. They claim to recover this loss as damages, pursuant to the decision of the House of Lords in Sempra Metals Ltd v Inland Revenue Commissioners [2007] UKHL 34, [2008] 1 AC 561. The defendants accept that this is an arguable claim which must go to trial.

The claimants accept that once they entered into administration, interest on their liabilities to their banks ceased to accrue, so that the intervention of the insolvency regime precludes proof of loss in accordance with Sempra Metals. In respect of the periods since they entered administration, which represent much the greater part of the periods for which interest is claimed, the claimants say that they are entitled to recover compound interest on their damages pursuant to the court's equitable jurisdiction, as described by Lord Brandon in President of India v La Pintada Compania Navigacion SA [1985] AC 104. This includes power to award compound interest “in cases where money had been obtained and retained by fraud”. The claimants say that the defendants' conduct consisted of “intentional and/or serious wrongdoing”, which was deliberately concealed so as to prevent the pursuit of the claims and the recovery of damages by victims of the cartel; and that this conduct amounted to what would be regarded in equity as fraud.

We were not told precisely what the effect on the quantum of the claim would be if the claimants are confined to simple interest pursuant to section 35A of the Senior Courts Act 1981 in respect of the post-insolvency period, but plainly it would substantially reduce their claim.

The judgment

By an application notice dated 3 ^rd October 2022, the defendants sought to strike out, alternatively sought summary judgment on, the claim for compound interest in respect of the post-insolvency period. It was accepted that there is no material difference between the test to be applied for strike out under CPR 3.4(2)(a) and the test for summary judgment under CPR 24.

The judge heard full argument on the issue and concluded that he should determine it. It was a question of law which did not depend on factual circumstances and it would be a benefit to the parties for settlement purposes to know where they stood on this issue. His conclusion was that there was no basis to invoke the court's equitable jurisdiction to award compound interest in respect of the post-insolvency period. In his judgment, which is commendably succinct and was produced with commendable promptness, he reasoned as follows:

“37. As it emerged during the course of the hearing, the issue for determination is a narrow one. Is the allegation of deliberate concealment, as pleaded, sufficient to engage equity's jurisdiction within Lord Brandon's first limb, or is it arguably sufficient so as to leave the matter for trial? I have come to the clear conclusion that it is not. This is for the following reasons:

38. First, I will assume without deciding that, in theory at least, conduct which involves the deliberate concealment of a wrong, may in appropriate circumstances be capable of being characterised as an equitable fraud, given the very broad scope of the concept described in Grant & Mumford. This seems most likely where the concealment is itself a breach of duty but I do not need to explore the limits.

39. Second, however, that can only be the beginning of the enquiry. Especially given that broad scope, it cannot be enough for a party merely to point to some conduct which might fall within the definition of the term. So much is clear from Black v Davies. What has to be established is that ‘ money had been obtained and retained by fraud’.

40. Third, as it seems to me, this must mean that the ‘ fraud’ must be the cause of action or at least an element of the cause of action and, in any event, that it is the fraud which has caused money to be obtained and retained. Further, and as per Black v Davies, the money must be a ‘ fund which [the fraudster] has had in hand which he has, or is deemed to have, made use for his own benefit.’

41. Fourth, applying this analysis, the contention fails at multiple levels. The allegation of deliberate concealment is not itself a cause of action. Nor is it even alleged to be part of the cause of action, appearing only in the Reply for a different purpose. In any event, the deliberate concealment is not alleged to have caused LG to obtain and retain a fund for...