Lindum Construction Company Ltd v Office of Fair Trading
| Jurisdiction | England & Wales |
| Judge | Mr Justice Morgan |
| Judgment Date | 19 May 2014 |
| Neutral Citation | [2014] EWHC 1613 (Ch) |
| Docket Number | Case No: HC13B01690 |
| Court | Chancery Division |
| Date | 19 May 2014 |
[2014] EWHC 1613 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
7 Rolls Building, London, EC4A 1NL
Mr Justice Morgan
Case No: HC13B01690
Mr Thomas De La Mare QC and Mr Andrew Scott (instructed by Ashurst LLP) for the Claimants
Mr Daniel Beard QC and Mr Julian Gregory (instructed by The Office of Fair Trading) for the Defendant
Hearing dates: 11 th, 12 th and 13 th March 2014
The issue
These proceedings arise out of a decision by the Office of Fair Trading ("the OFT") dated 21 September 2009 ("the Decision"). On 1 April 2014, after I reserved judgment in this case, the functions of the OFT were taken over by the Competition and Markets Authority ("the CMA"). The legislation which is relevant in this case, the Competition Act 1998 ("the 1998 Act"), has been amended to reflect the take over of the OFT's functions by the CMA. As all of the events in this case pre-date 1 April 2014, I will refer only to the OFT and to its position under that legislation and I will ignore the more recent changes. In the future, the position of the CMA, in relation to the issue which arises in this case, will be the same as the position of the OFT.
The 1998 Act confers upon the OFT a power to investigate, and to decide, whether a person has committed an infringement of the 1998 Act. If the OFT decides that an infringement has occurred, it has power to impose a monetary penalty on the infringer. The 1998 Act permits the person on whom the penalty has been imposed to appeal to a specialist tribunal against the imposition of the penalty and/or the amount of the penalty. The rules of the specialist tribunal lay down time limits for such an appeal to be brought.
What happens if the person on whom the penalty has been imposed does not appeal in relation to the penalty but instead pays the full amount of the penalty? Can such a person, within six years of paying the penalty, bring an ordinary action in the courts to recover the penalty, asserting that the penalty should not have been imposed in the first place? That is the first question raised in these proceedings. If the person on whom the penalty has been imposed does not appeal in relation to the penalty but does not pay the penalty, can it subsequently defend a claim by the OFT to recover the penalty from it on the ground that the penalty should not have been imposed in the first place? That is the second question raised in these proceedings. Both questions raise the issue whether the right of appeal conferred by the 1998 Act is the only permitted method of challenging the imposition of a penalty or the amount of the penalty.
The OFT decision
The OFT's Decision was made pursuant to Part I of the 1998 Act. In brief summary, the Decision concluded that a large number of persons (including the present Claimants) had infringed the Chapter I prohibition, imposed by section 2 of the 1998 Act. By the Decision, the OFT required such persons to pay penalties in respect of such infringements.
As required by section 31 of the 1998 Act, on 16 April 2008, before the Decision was made, the OFT gave notice of its then proposed decision to all persons who were to be affected by the same, including the present Claimants, and invited their representations. The notice took the form of a Statement of Objections which ran to (at least) 1647 pages. Between pages 1634 and 1647 of the Statement of Objections, the OFT set out the action it proposed to take in relation to the imposition of penalties on the parties found to have infringed the Chapter I prohibition. This description of its proposed action identified in detail the method by which such penalties were to be calculated, using five specified steps.
Each of the present Claimants made detailed written representations in response to the Statement of Objections. Each response addressed in detail the five steps intended to be used by the OFT for the purpose of calculating the penalties which were to be imposed.
On 21 September 2009, the OFT made the Decision. For more detail as to the background to, and the scope of, the Decision, I gratefully adopt the following description of the Decision by the Competition Appeal Tribunal ("the Tribunal") in Kier Group plc v Office of Fair Trading [2011] CAT 3 ("Kier"):
"1 On 21 September 2009 the Office of Fair Trading ("OFT") published a decision under the Competition Act 1998 ("the 1998 Act") entitled "Bid rigging in the construction industry in England" ("the Decision"). The Decision is the longest decision ever adopted by the OFT, running to nearly 2,000 pages. It followed an extensive investigation which took place over some five and a half years between April 2004 and September 2009 which was by far the largest undertaken by the OFT, in terms of the number of parties involved, the number of inspections made and the number of suspected infringements.
2 In the Decision the OFT found that, in the period 2000 to 2006, 103 undertakings had each committed between one and three infringements of the prohibition contained in section 2 of the 1998 Act ("the Chapter I Prohibition"). That prohibition applies to agreements or concerted practices which have as their object or effect the prevention, restriction or distortion of competition within the United Kingdom.
3 By far the majority of those infringements consisted of what can perhaps be referred to as "simple" cover pricing, to distinguish them from the six infringements described at paragraph 21 below. "Simple" cover pricing occurs where one of those invited to tender for a construction contract (Company A) does not wish to win the contract, but does not want to indicate its lack of interest to the client, for whose work it may wish to be invited to tender in the future. Company A therefore seeks a cover price from another company which is tendering for that contract (Company B). Company B will be seeking to win the contract and will have reached a view as to its own tender price. Indeed it may already have submitted its own tender to the client. The cover price which it provides to Company A will be at a level sufficiently high to ensure that Company A does not win. This price is submitted to the client by Company A as though it is a genuine tender. It should be noted that Company B does not reveal its own tender price to Company A – the cover price is an inflated price.
4 The OFT imposed penalties totalling approximately £129.2m in respect of 199 infringements."
In the Decision, the OFT made findings that each of the present Claimants had infringed the Chapter I prohibition and imposed on each of them a penalty in respect of such infringement. There are six Claimants in these proceedings. The Second Claimant is the ultimate parent of the First Claimant. In this judgment, it is not necessary to distinguish between a parent and a subsidiary company and I will refer to the First and Second Claimants together as "Lindum". The Fourth Claimant is the ultimate parent of the Third Claimant and I will refer to them together as "Interserve". The Sixth Claimant is the ultimate parent of the Fifth Claimant and I will refer to them together as "Willmott Dixon".
The penalty imposed by the Decision on Lindum was £496,017, of which £244,770.63 has been paid by instalments. The penalty imposed by the Decision on Interserve was £11,634,750, all of which was paid on 24 November 2009. The penalty imposed by the Decision on Willmott Dixon was £4,534,760, all of which was paid on 19 November 2009.
None of the present Claimants sought in any way to challenge the Decision around the time of the Decision. None of them then (nor indeed at any later time) sought to appeal either the findings of infringement or the decision to impose a penalty or the amount of the penalty.
The appeals
Other persons affected by the Decision did appeal under section 46 of the 1998 Act. Twenty five companies brought admissible appeals against findings in the Decision. Six of these appeals challenged both the relevant finding of infringement and penalty and the others appealed the amount of the penalty. A further company, Fish Holdings Ltd, wished to appeal findings in the Decision in relation to it. The time for it to bring such an appeal expired on 23 November 2009. Its notice of appeal was received by the Tribunal on 26 November 2009 and was therefore out of time. It applied for an extension of time for appealing. The OFT, as the Respondent to the intended appeal, left the decision as to an extension of time to the Tribunal. The Tribunal directed itself in accordance with its rules that it could only extend the time for appeal if the circumstances were "exceptional" and held that the circumstances were not exceptional and so an extension of time was refused: see Fish Holdings Ltd v Office of Fair Trading [2009] CAT 34.
In Kier Group plc v Office of Fair Trading [2011] CAT 3, the Tribunal explained a case management decision, which was made in relation to the 25 appeals, as follows:
"6. In the light of submissions provided to the Tribunal at a joint CMC held in January 2010 the Tribunal decided that, although there were certain common themes in the penalty appeals, it was not appropriate to determine those separately as preliminary issues, but rather to deal with them at the same time as hearing each appeal as a whole. Separate oral hearings in respect of each appeal were listed. For logistical reasons the penalty appeals were allocated between three panels of the Tribunal. The desire on the part of some of the appellants to intervene in other penalty appeals where common issues were...
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