Phones 4U Ltd ((in Administration)) v EE Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Roth |
| Judgment Date | 20 July 2020 |
| Neutral Citation | [2020] EWHC 1943 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: CP-2018-000038 |
| Date | 20 July 2020 |
[2020] EWHC 1943 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
COMPETITION LIST (ChD)
Rolls Building
7 Rolls Buildings
Fetter Lane
London
EC4A 1NL
THE HONOURABLE Mr Justice Roth
Case No: CP-2018-000038
Kenneth MacLean QC and Owain Draper (instructed by Quinn Emanuel Urquhart & Sullivan UK LLP) for the Claimant
Meredith Pickford QC and David Gregory (instructed by Clifford Chance LLP) for the First Defendant
Robert O'Donoghue QC and Hugo Leith (instructed by Covington & Burling LLP) for the Second Defendant
Marie Demetriou QC and David Scannell QC (instructed by Norton Rose Fulbright LLP) for the Third Defendant
Hearing date: 3 July 2020
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
THE HONOURABLE Mr Justice Roth
INTRODUCTION
This judgment concerns applications by the First to Third Defendants for security for costs. The issue in dispute is not the question of security as such, since the Claimant (“P4U”), which is in administration, has agreed to provide security to all the Defendants. However, the First to Third Defendants seek security at a higher level than the 65% of their costs estimate which has been agreed by P4U with all the other Defendants. That is because these three Defendants submit that security should be ordered on the basis of a potential award of indemnity costs. P4U contends that this is inappropriate and that the standard basis, as applied in respect of the other Defendants, should be applied.
To appreciate how this issue arises, it is necessary briefly to explain the nature of the proceedings.
THE PROCEEDINGS
P4U was one of the two major retail intermediaries for mobile telephones in the UK until it went into administration in September 2014. The other major retailer of that kind was Carphone Warehouse (“CPW”), which merged with Dixons in mid-2014. These proceedings, which are brought by the administrators, are principally concerned with the events of 2013–2014, leading up to what was effectively the financial collapse of P4U.
The First Defendant (“EE”) was at the time a 50–50 joint venture (“JV”) between the Second Defendant (“DT”) and the Third Defendant (“Orange”). At the material time, EE, the Fourth Defendant (“Vodafone”) and the Sixth Defendant (“O2”) were all mobile network operators (“MNOs”) providing connections in the UK. The Fifth Defendant (“Vodafone Group”) is the parent of Vodafone, and it is common ground that the two Vodafone defendants constitute a single undertaking for the purpose of EU and UK competition law. Similarly, the Seventh and Eighth Defendants are related companies to O2 and it is common ground that those three companies constitute a single undertaking for the purpose of EU and UK competition law. I shall refer to the Fourth and Fifth Defendants together as “Vodafone” and to the Sixth to Eighth Defendants together as “Telefonica”.
P4U had a series of agreements with each of the MNOs for the supply of connections to retail customers, whereby P4U could arrange for a customer to ‘sign up’ for supply through one of the MNO networks. At various points between about January 2013 and September 2014, the agreements which each of O2, Vodafone and EE had with P4U either expired and were not renewed or the relevant MNO gave notice terminating its agreement. P4U alleges, in summary, that these events were not the result of independent action by these competing MNOs but followed exchanges or commitments between the Defendants, which infringed the prohibitions on anti-competitive agreements or arrangements under UK and EU competition law; and that such conduct was at least the principal reason why the MNOs ceased to deal with P4U. Further, P4U contends that the MNOs would have continued to deal with it in the absence of such anti-competitive conduct, in which case P4U would not have been forced to go into administration.
Hence the Particulars of Claim state, in the summary of P4U's case at para 3(j):
“… P4U avers both as a primary fact based on the existence of the “commitments” and as a reasonable inference from the commitments and the other pleaded circumstances that the Defendants (or some of them) unlawfully colluded:
(i) to each cease trading with one or other of the retail intermediaries in the UK market (which intermediary, in the event, was P4U);
(ii) alternatively, to cease trading with P4U specifically; and/or
(iii) further or alternatively, to put P4U out of business and then to acquire the whole or parts of P4U's business and/or assets at a fraction of their value once P4U was placed into administration.”
As regards both Orange and DT, P4U contends, as clarified in its responses to Part 18 Requests for Further Information, that DT and Orange “participated directly and actively in the infringement”, and further that the decision by EE to cease supplies was “in substance, taken by [DT] and/or Orange and/or was the result of decisive influence from those companies”. P4U also argues that DT and Orange form part of the same undertaking as EE for the purpose of UK and EU competition law and are liable on that basis for any infringement by EE.
In addition, P4U raises a distinct breach of contract claim against EE based on an express obligation of good faith and on alleged implied terms in the P4U-EE agreement; and claims in tort as against Orange and DT for procuring or inducing that breach by EE, or alternatively conspiracy to injure P4U by unlawful means, i.e. the breaches by EE of its contract.
INDEMNITY COSTS AND SECURITY FOR COSTS
CPR rule 44.2 gives the Court a broad discretion as to costs. The rule provides, insofar as is relevant:
“(4) In deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including –
(a) the conduct of all the parties;
(b) whether a party has succeeded on part of his case, even if that party has not been wholly successful;…
(5) The conduct of the parties includes —
(a) conduct before, as well as during, the proceedings….
(b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;
(c) the manner in which a party has pursued or defended its case or a particular allegation or issue….”
In Excelsior Commercial and Industrial Holdings Ltd v Salisbury Hammer Aspden & Johnson (A Firm) [2002] EWCA Civ 879, the Court of Appeal held that while there was an infinite variety of situations which might justify an award of indemnity costs under the rules, “the critical requirement” was that “there must be some conduct or some circumstance which take the case out of the norm”: per Lord Woolf LCJ at [32]. See also per Waller LJ at [39]:
“The question will always be: is there something in the conduct of the action or the circumstances of the case which takes the case out of the norm in a way which justifies an order for indemnity costs?”
There are now a number of judgments at first instance which seek to summarise the circumstances which fall within this principle. The parties here relied on the summary by Tomlinson J in his costs judgment in Three Rivers District Council v Bank of England [2006] EWHC 816 (Comm) at [25], which included the following:
...“(5) Where a claim is speculative, weak, opportunistic or thin, a claimant who chooses to pursue it is taking a high risk and can expect to pay indemnity costs if it fails.
(6) A fortiori, where the claim includes allegations of dishonesty, let alone allegations of conduct meriting an award to the claimant of exemplary damages, and those allegations are pursued aggressively inter alia by hostile cross examination.
(7) Where the unsuccessful allegations are the subject of extensive publicity, especially where it has been courted by the unsuccessful claimant, that is a further ground.
(8) The following circumstances take a case out of the norm and justify an order for indemnity costs, particularly when taken in combination with the fact that a defendant has discontinued only at a very late stage in proceedings;
(a) Where the claimant advances and aggressively pursues serious and wide ranging allegations of dishonesty or impropriety over an extended period of time;
(b) Where the claimant advances and aggressively pursues such allegations, despite the lack of any foundation in the documentary evidence for those allegations, and maintains the allegations, without apology, to the bitter end;
(c) Where the claimant actively seeks to court publicity for its serious allegations both before and during the trial in the international, national and local media;
(d) Where the claimant, by its conduct, turns a case into an unprecedented factual enquiry by the pursuit of an unjustified case;
(e) Where the claimant pursues a claim which is, to put it most charitably, thin and, in some respects, far-fetched;
(f) Where the claimant pursues a claim which is irreconcilable with the contemporaneous documents;
(g) Where a claimant commences and pursues large-scale and expensive litigation in circumstances calculated to exert commercial pressure on a defendant, and during the course of the trial of the action, the claimant resorts to advancing a constantly changing case in order to justify the allegations which it has made, only then to suffer a resounding defeat.”
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