Quarmby Construction Company Ltd v Office of Fair Trading
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lloyd,Lord Justice Jackson,Lord Justice Laws |
| Judgment Date | 18 October 2012 |
| Neutral Citation | [2012] EWCA Civ 1552 |
| Court | Court of Appeal (Civil Division) |
| Date | 18 October 2012 |
| Docket Number | Case No: C3/2011/3355 |
[2012] EWCA Civ 1552
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE COMPETITION APPEAL TRIBUNAL
(LORD CARLISLE OF BERRIEW QC)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Laws
Lord Justice Lloyd
and
Lord Justice Jackson
Case No: C3/2011/3355
Mr Mark Friston and Mr Adam Aldred (instructed by Addleshaw Goddard) appeared on behalf of the Appellant.
Miss Kelyn Bacon and Mr Philip Woolfe (instructed by General Counsel's Office) appeared on behalf of the Respondent.
This is an appeal against an order as regards costs made by the Competition Appeal Tribunal on 21 October 2011. This followed an appeal by the appellants against a finding by the Office of Fair Trading that the appellants had infringed the Chapter 1 prohibition in Section 2(1) of the Competition Act 1998 and imposing for the three infringements that they found to have been committed a penalty of £881,749. The appeal contested both the finding of infringements and the amount of the penalty. It was unsuccessful in the challenge to the finding of infringements but the penalty was reduced substantially to £213,750.
The ruling which is challenged on this appeal is that of the Competition Appeal Tribunal which made no order as to costs of the appeal to it. With permission to appeal granted by Rimer LJ on limited grounds, the appellants appeal against that order, arguing that the correct order should have been that the OFT should have been ordered to pay up to 60 per cent of the appellants' costs of the appeal.
As before the tribunal on costs, the appellants were represented by Mr Friston and Mr Aldred; the OFT was represented by Ms Kelyn Bacon and, in addition before us, by Mr Philip Woolfe. I should say that the tribunal for this appeal consisted of Lord Carlile of Berriew QC, Ann Kelly and David Summers OBE; for reference, their decision on the substance of the appeal is found at [2011] CAT 11 and on costs [2011] CAT 34.
The case before the tribunal was one of a large number of cases arising from an investigation by the OFT into the practice of cover pricing in the construction industry. This is a practice whereby – and I describe it extremely briefly—on an invitation to tender for building works a company which does not want to win the contract agrees with one or more others who do to put in a high tender so that the others' tenders will be seen in a more favourable light. Plainly this would be a breach of the Chapter 1 Prohibition. It was very widespread in the construction industry. The OFT's investigation led to more than 100 undertakings being found to have infringed the prohibition and subjected to penalties.
Those rulings led to 25 appeals to the tribunal, some on penalty alone but six of them on liability and penalty. The appeals were managed by the tribunal in a proactive way with different panels being set up for different groups of appeals. The penalty only appeals were heard in three groups and the liability and penalty appeals were heard separately. There were strict time limits imposed for the hearings: half a day was allowed in each case for penalty and more time was allowed for disputes as to liability depending on the extent of the issues. In the present case a day-and-a-half was allowed for the liability argument, plus half a day for penalty, giving two days in all. The hearing before the tribunal took place on 6 and 7 July 2010 and the judgment, which turned out to be one of nine judgments by different panels, was given on 15 April 2011.
In its judgment on the substantive appeal in this case the tribunal dealt in turn with five different points relied on as going to the question of infringement or no, either in relation to the whole finding or as regards one or more of the three particular infringements which had been found by the OFT to have been committed. If successful, some of those challenges would have led to no liability at all for any penalty, others to liability only on a more limited basis. Each was rejected by the tribunal.
The tribunal then turned at paragraph 141 of its judgment to the question of penalty. The tribunal accepted, most significantly in terms of numbers, that the OFT had used for its calculations the turnover in the wrong year; that is to say in the latest available year instead of in the year preceding the date of infringement. It also accepted that the starting point percentage which had been taken at 5 per cent was too high and should have been 3.5 per cent. It upheld a criticism on the part of the appellants that the OFT's approach was incorrect to the question of whether the maximum fine threshold was too high. It also accepted as valid the criticism that the OFT should have had greater regard to the low margins prevalent in the construction industry. Overall, the tribunal accepted that the penalty in this case was disproportionate; its own assessment led to a reduction in the penalty, as I have said, to less than 25 per cent of the amount fixed by the OFT, the largest element in that reduction deriving from the use of the turnover for the wrong year.
However, the tribunal rejected several of the appellants' arguments addressed in relation to penalty. In the analysis and presentation adopted by the tribunal in its reasoning on penalty, it had refined 15 distinct grounds of appeal down to about 10. It rejected half of those while accepting those that I have already mentioned.
Inasmuch as the penalty was reduced by more than 75 per cent, more than £660,000, the appeal could be regarded as a success on the part of the appellants. In that the appellants remained the subject of a finding of liability for three chapter 1 infringements and a penalty of over £200,000, the success was heavily qualified.
As regards costs, the issue was argued not only by way of written submissions, as is usually the case before the tribunal, but at an oral hearing, which the tribunal regretted having allowed, as it said at paragraph 23 of its ruling. The appellants contended that the starting point should be that they had won the appeal, albeit not on liability and not on all points as regards penalty. They sought an order that they recover up to 60 per cent of their costs, obviously assessed in the proper fashion, whereas the OFT argued that there ought to be no order for costs.
The tribunal's powers as regards costs are set out in Rule 55 of the Competition Appeal Tribunal Rules 2003. Sub-rule (2) is the only one that I need to read. It is as follows:
"(2) The Tribunal may at its discretion, subject to paragraph (3), at any stage of the proceedings make any order it thinks fit in relation to the payment of costs by one party to another in respect of the whole or part of the proceedings and in determining how much the party is required to pay, the Tribunal may take account of the conduct of all parties in relation to the proceedings."
The tribunal has stated that it has a necessarily wide discretion as regards costs and it is plain that a rule in the terms that I have just read does give the tribunal a wide and general discretion in that matter. It has stated that it will consider all relevant circumstances of each case to ensure that the particular case is dealt with justly.
Here the tribunal took as the starting point the question whether either party could fairly be called the winner. Its answer was that neither side could. This was because, despite the substantial reduction of the penalty, the attack on liability failed and at least half of the submissions on penalty failed. In its decision on costs at paragraph 15, the tribunal started by considering whether any party could fairly be identified as the winner and went on immediately in the same sentence to say:
"In our view, neither party can be considered a winner in this case, such that the outcome cannot be described as 'binary' in the manner proposed by Mr Friston."
It went on:
"Whilst the Appellants succeeded in obtaining an overall reduction to the level of their fine, their appeal on ability was entirely unsuccessful and the Tribunal rejected at least half, if not the majority, of the Appellants' submissions on penalty."
At paragraph 16 it went on to say this:
"The just outcome, in those circumstances, is to make no order as to costs. Even if the Tribunal had been able to conclude that the Appellants could fairly be described as overall "winners", we would still have needed to consider the extent of the Appellants' success in relation to the multiplicity of issues raised in their Notice of Appeal, and the amount of work and time that was reasonably expended by the parties and...
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