Mastercard Inc. & Others v Deutsche Bahn AG & Others
| Jurisdiction | England & Wales |
| Judge | Lord Justice Sales,Lady Justice King,Lady Justice Arden |
| Judgment Date | 12 April 2017 |
| Neutral Citation | [2017] EWCA Civ 272 |
| Docket Number | Case No: A3/2016/1212 |
| Court | Court of Appeal (Civil Division) |
| Date | 12 April 2017 |
[2017] EWCA Civ 272
Lady Justice Arden
Lady Justice King
and
Lord Justice Sales
Case No: A3/2016/1212
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT (CHANCERY DIVISION)
THE HONOURABLE MR JUSTICE BARLING
[2015] EWHC 3749 (Ch)
Royal Courts of Justice
Strand, London, WC2A 2LL
Mark Hoskins QC and Matthew Cook (instructed by Jones Day) for the Appellants
Kieron Beal QC, Tristan Jones and Eesvan Krishnan (instructed by Hausfeld & Co LLP) for the Respondents
Hearing date: 22 March 2017
Approved Judgment
This appeal concerns an interlocutory decision by Barling J in relation to two sets of proceedings by the claimants, who are the respondents to the appeal (in this judgment I will call them the claimants), against the MasterCard defendants, who are the appellants (whom I will call MasterCard), involving claims for damages in relation to complex issues of competition law. The decision under challenge on this appeal is a decision by the judge to give the claimants permission to amend their claim form and particulars of claim to introduce a new claim, which was to be deemed for limitation purposes to have been commenced on the dates when the respective sets of proceedings were commenced by the claimants in December 2012 and February 2013 under the principle of relation back set out in section 35(1)(b) of the Limitation Act 1980. The claimants' application for permission to amend was made pursuant to CPR Part 17.4. The judge held that the new claim "arises out of the same facts or substantially the same facts" as claims already made by the claimants in the proceedings, within CPR Part 17.4(2), so as to justify the grant of permission for the amendment with the benefit of the doctrine of relation back. MasterCard submit that he was wrong so to hold.
At the outset I would like to pay tribute to the clarity with which Barling J described, with exemplary economy, the context in which the claimants' application to amend arose. I cannot improve upon his account and so gratefully incorporate the substance of the relevant part of his judgment in what follows.
It is common ground not just that the proposed amendment constitutes a new cause of action but also that there is at least a prima facie case that if permission to amend is not granted with "relation back", the defendants would be able to claim the benefit of a limitation defence in respect of the new claim for part of the period to which the existing claims relate. The parties are therefore agreed that the judge was only able to grant permission to amend pursuant to CPR Part 17.4(2), so that the new claim relates back to the date the original claim was brought, if the new claim "arises out of the same facts or substantially the same facts" as a cause of action in respect of which the claimants have already claimed a remedy in the proceedings. MasterCard are content to agree that the amendment may be made to introduce the new cause of action, but only if it is done in such a way that it does not have the benefit of relation back to the time when the original claim was brought in each set of proceedings, so that MasterCard are not deprived of any limitation defence they might have in respect of the new claim by operation of the "relation back" rule.
MasterCard have accepted in correspondence that the new claim can be introduced into the existing proceedings as an amendment which relates back to 7 August 2015, when the claimants' application to amend was served. This was the approach adopted by Field J in William Morrison v MasterCard [2013] EWHC 3271 (Comm) to avoid the necessity of the claimants there having to commence a new claim with resultant waste of costs, where he had found that the new claim did not arise out of the same or substantially the same facts. This result can be achieved either by the court refusing permission for an amendment unless the new pleaded claim itself in terms pleads the new cause of action only from that date or by the court making an order stipulating the relevant date for limitation purposes, which is what both sides invited the judge to do and again invite us to do, depending on what date we decide is the proper one. As a fall-back argument, the claimants submit that even if their primary contention that they satisfy the test in CPR Part 17.2(2) is not accepted, the appropriate date for this purpose would be 27 March 2015, when the new cause of action was first pleaded pursuant to a consent order permitting service of amended particulars of claim.
Background
The parties
The claimants are retailers operating in 18 European countries (17 EEA countries and Switzerland) who contend that MasterCard's interchange fee arrangements were in breach of EU/EEA and domestic competition law, and that as a result they have suffered loss. The defendants are or include the principal legal entities which own and/or operate the worldwide MasterCard credit and Maestro debit card schemes.
The MasterCard scheme
The MasterCard scheme is what is known as a four party payment card scheme. Such a scheme separates the function of dealing with merchants (referred to as "acquiring") from the function of dealing with cardholders (referred to as "issuing"). Each transaction generally involves a merchant, the merchant's bank (referred to as an "acquirer"), a cardholder and the cardholder's bank (referred to as an "issuer").
MasterCard itself does not fulfil the issuing and acquiring functions of the scheme. It owns the MasterCard trademarks and licenses them to thousands of financial institutions around the world. These licensees operate them in accordance with rules established and administered by MasterCard. The licensees will be either acquirers or issuers or both. The scheme rules impose an obligation upon acquirers (and, through them, upon merchants which wish to accept MasterCard cards) to accept all MasterCard branded cards, regardless of the identity of the issuing institution. This is referred to as the "Honour all cards" rule or HACR.
Because, by reason of the HACR, a merchant must accept all types of MasterCard issued by any issuer, acquirers have to deal with all issuers and issuers have to deal with all acquirers. Although issuers and acquirers are free to negotiate bilateral arrangements, such arrangements are by no means always put in place. To do so would result in a huge volume of bilateral agreements. The scheme rules, therefore, provide default terms of dealing which apply only where there is no bilateral agreement between an acquirer and an issuer. I am told that, in practice, the majority of transactions are conducted under the default terms.
Under the current default rules, issuers are generally liable to pay acquirers (and therefore acquirers to pay merchants) regardless of fraud or cardholder default. Furthermore, issuers are required to pay acquirers shortly after the transaction takes place, whereas the cardholder will not normally pay the issuer for some time. MasterCard state that, at least in part because of these factors, issuers' costs are greater than acquirers' costs, and that for this reason the default rules make provision for the payment of a multilateral interchange fee or "MIF" by acquirers to issuers. It is this MIF which is at the heart of the claimants' claims in these proceedings.
The scheme works in the following way. A cardholder uses her MasterCard credit or debit card to buy an item for £100 from a merchant. The issuer must pay the acquirer who then pays the merchant. The issuer deducts the MIF from the £100 before paying the balance to the acquirer. Thus, the MIF represents a cost to the acquirer which is generally deducted, along with the sum representing the acquirer's own charge, from the payment made to the merchant. The total deduction made by the acquirer is called the merchant service charge or "MSC". In return for this, the merchant is protected against fraud, cardholder default and is guaranteed payment, typically on the day following the transaction. The cardholder will generally have a significantly longer period to make the payment of £100 to her card issuer.
Different MIFs apply depending on the nature of the transaction. Where a card issued in one EEA state is used at a merchant who is based in a different EEA state, and the relevant issuer and acquirer have not negotiated a bilateral interchange fee, the "EEA MIF" applies. Where a card is used to pay a merchant who is situated in the same country as the issuer of the card, then the relevant "domestic MIF" for that country applies, always assuming that the relevant issuer and acquirer have not negotiated a bilateral interchange fee. There is also a MIF applicable (in the absence of a bilateral arrangement) where the card is used at a merchant situated in a different global region from the issuing bank, for example, where a US tourist uses her card issued in the US to buy goods in London. This is sometimes known as an "international MIF".
The Central Acquiring Rule ("the CAR")
Relevant to the present application is a MasterCard rule known as the central acquiring rule or "CAR". Under MasterCard's network rules, a bank which offers its services as an acquirer to a merchant based outside the acquirer's country of establishment is called a "central acquirer". The network rules provide that, in the absence of a bilateral arrangement between a central acquirer and the relevant issuing bank, the MIF payable by a central acquirer for an intra-country transaction (i.e. where the issuer and the merchant are in the same country) is the domestic MIF (if there is one) of the state of the transaction. If there is no domestic MIF and no relevant bilateral arrangement, the network rule provides that the EEA MIF...
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