Mercury Communications Ltd v Director General of Telecommunications and Another
| Jurisdiction | UK Non-devolved |
| Judge | Lord Keith of Kinkel,Lord Browne-Wilkinson,Lord Slynn of Hadley,Lord Lloyd of Berwick,Lord Nicholls of Birkenhead |
| Judgment Date | 09 February 1995 |
| Judgment citation (vLex) | [1995] UKHL J0209-2 |
| Date | 09 February 1995 |
| Court | House of Lords |
[1995] UKHL J0209-2
Lord Keith of Kinkel
Lord Browne-Wilkinson
Lord Slynn of Hadley
Lord Lloyd of Berwick
Lord Nicholls of Birkenhead
House of Lords
OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT IN THE CAUSE
My Lords,
For the reasons given in the speech to be delivered by my noble and learned friend Lord Slynn of Hadley, which I have read in draft and with which I agree, I would allow this appeal.
My Lords,
I have read in draft the speech of my noble and learned friend Lord Slynn of Hadley. For the reasons which he gives I too would allow the appeal.
My Lords
The question on this appeal is whether an originating summons issued by the appellant ("Mercury") in the Queen's Bench Division on 17 December 1993 should be struck out, as the Court of Appeal by a majority held, or whether, as Longmore J. in the Commercial Court and Hoffmann L.J. in the Court of Appeal held, that summons should proceed to a hearing.
The matter arises in this way. By the British Telecommunications Act 1981 the exclusive privilege in respect of telecommunications previously enjoyed by the Post Office was vested in a public corporation, British Telecommunications Plc, though the Secretary of State was given power to grant a licence to other persons for the running of a telecommunication system. Such a licence was granted to Mercury in 1992 which allowed it to connect into the British Telecommunications system, and on 5 November 1982 an agreement was entered into between British Telecommunications and Mercury governing the interconnection of the two systems.
By the Telecommunications Act 1984 British Telecommunications' exclusive privilege was abolished and by Section 60 of that Act its property, rights and liabilities were to be vested in a company to be nominated by the Secretary of State. The latter and an officer appointed by him (the Director General of Telecommunications) were required by Section 3 of the Act of 1984 to carry out the functions vested in them in such way as they considered best calculated (a) to secure so far as reasonably practicable the provision in the United Kingdom of such telecommunication services as satisfy all reasonable demands for them, (b) to promote the interests of users in respect of prices charged for, and the quality and variety of, services provided and (c) to maintain and promote effective competition between persons engaged in commercial activities connected with telecommunications in the United Kingdom.
From the date of the abolition of British Telecommunications' exclusivity no person was lawfully to be able to run a telecommunication system in the United Kingdom unless authorised by a licence granted under Section 7 of the Act of 1984. Such a licence might authorise the connection of one telecommunication system to another and might lay down "such conditions … as appear to the Secretary of State or the Director to be requisite or expedient having regard to the duties imposed on him by Section 3". By Section 16 the Director is empowered by final order to make such provision as is needed for the purpose of securing compliance with a condition of the licence which the Director is satisfied is being contravened.
On 22 June 1984 the Secretary of State granted a licence to British Telecommunications which by condition 13.1 required British Telecommunications to enter into an agreement with any person ("the operator") licensed to "run a Relevant Connectable System, if the Operator requires it to do so". British Telecommunications could only require that the agreement be subject to the terms and conditions permitted by paragraphs 13.4, 13.5 and 13.6 of the Licence. Those permitted included terms which were agreed between the Licensee and the Operator relating to the charges to be paid by the Operator for anything done under or as a result of an agreement. If British Telecommunications failed to enter into an agreement as required by the Operator then the Director "shall, on the application of the Operator or the Licensee, determine the permitted terms and conditions for the purpose of that agreement which have not been agreed between the Licensee and the Operator being terms and conditions relating to the matters mentioned in paragraph 13.4 which appear to the Director reasonably necessary (but no more than reasonably necessary) to secure (a) that the Operator pays to the Licensee the cost of anything done pursuant to or in connection with the agreement including fully allocated costs attributable to the services to be provided and taking into account relevant overheads and a reasonable rate of return on attributable assets" and a number of other matters.
The charges fixed by the Director, if he is asked to do so by either party, must be in accordance with the detailed provisions set out in paragraphs 13.5A.1 and following. In particular the charges referred to and payable by the Operator in respect of the conveyance of any message shall cover "the Licensee's fully allocated costs of the conveyance calculated on a historic cost basis."
On 5 November 1984 the Secretary of State granted a licence to Mercury under Section 7 of the Act of 1984 for the running of a telecommunication system and on 18 March 1986 British Telecommunications and Mercury entered into an agreement which varied the 1982 agreement. The later agreement recited that on Mercury's application the Director General had on 11 October 1985 determined the permitted terms and conditions for the purpose of an agreement under condition 13 of the British Telecommunications Licence and those terms and conditions were contained in the agreement as set out in the schedule to the Director General's Determination. They covered a large number of technical and administrative matters to which it is not necessary to refer save that in clause 29 of the agreement provision was made for a review of the terms of that agreement.
Under clause 29 either party might after five years require a negotiation of the agreement if it reasonably considered that a fundamental change in the circumstances had occurred. After two years either party might request the Director General to determine whether he was satisfied, inter alia, that there had been a material change in circumstances since the agreement was made and, if so, to determine whether the agreement should be amended. Such Determination had to be in accordance with the same criteria as are laid down in condition 13 of the British Telecommunications licence. Following such Determination the parties were bound forthwith to modify, replace or amend their agreement in accordance with the Director's Determination.
On 9 June 1992 British Telecommunications told the Director General that British Telecommunications and Mercury had for three months been "discussing the possible replacement of the existing agreement for telephony interconnection with a new, negotiated agreement". They thought that they could successfully negotiate "a great majority of the terms of a new agreement" but, considering it unlikely that they would be able to reach an agreement on pricing, they jointly referred to the Director under clause 29 of the 1986 agreement the amounts to be charged for connection and the conveyance of calls. At the same time they emphasised that the items they were to try to agree might affect the pricing issue, that they were willing to discuss matters with the Director General and that as in the past they would like the opportunity of commenting on his draft Determination.
On 2 December 1993 the Director General made his Determination. In addition to dealing with connection charges and payments for the conveyance of calls he substituted a new clause 29 "Review", including "provisions which give flexibility both to the parties and to the Director General to deal with developments in the market and the regulatory régime". (Clause 43 of the Determination). Thus under the new clause 29.1 either party at any time may by serving a written review notice on the other seek to modify the terms of the purposes of the agreement if (i) either licence is modified or replaced in a manner which is significant for the purposes of the agreement, (ii) there is a material change in any relevant circumstance which significantly affects, or which either party reasonably expects significantly to affect, the commercial basis on which the agreement is founded, or (iii) there is any other event which the parties agree should give rise to a review of any term of the agreement under clause 29.1.3.
If such a review notice or a notice under clause 29.2 given within one month of 1 April 1997 requiring the agreement to be modified were served, the parties were obliged to discuss and to negotiate in good faith with a view to modifying the terms of the agreement.
The parties by clause 29.3.1 were obliged to incorporate the terms of the 2 December 1993 determination and on 1 October in each year thereafter to initiate a review of the charges thereby determined.
If unable to agree in their negotiations the parties were empowered by clause 29.4 to request a Determination by the Director General though by clause 29.5 his Determination should be limited to matters which he could have determined under condition 13 of the British Telecommunications licence or condition 12 of the Mercury licence and on the principles set...
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