Vodafone Ltd v The Office of Communications

JurisdictionEngland & Wales
CourtQueen's Bench Division (Commercial Court)
JudgeAdrian Beltrami
Judgment Date17 May 2019
Neutral Citation[2019] EWHC 1234 (Comm)
Docket NumberClaim Nos. CL-2018-000296 CL-2018-000334 CL-2018-000331
Date17 May 2019

[2019] EWHC 1234 (Comm)

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice. Rolls Building

Fetter Lane, London, EC4A 1NL

Before:

Mr Adrian Beltrami QC

Sitting as a Judge of the High Court

Claim Nos. CL-2018-000296

CL-2018-000301

CL-2018-000334

CL-2018-000331

Between:
Vodafone Limited
Telefónica UK Limited
Hutchison 3G UK Limited
EE Limited
Claimants
and
The Office of Communications
Defendant

Michael Fordham QC, Emily Neill and Eesvan Krishnan (instructed by Towerhouse LLP) appeared on behalf of Vodafone Limited

Tom de la Mare QC and Tom Richards (instructed by DWF Law LLP) appeared on behalf of Telefónica UK Limited

Brian Kennelly QC and Daniel Cashman (instructed by Hutchison 3G UK Limited) appeared on behalf of Hutchison 3G UK Limited

Steven Elliott QC and Philip Woolfe (instructed by EE Limited) appeared on behalf of EE Limited

Pushpinder Saini QC, Ajay Ratan and Andrew Trotter (instructed by The Office of Communications) appeared on behalf of The Office of Communications

Hearing dates: 1, 2, 3 May 2019

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.

Adrian Beltrami QC:

Introduction

1

This is the trial of four actions brought under CPR Part 8. The Claimant in each action is a Mobile Network Operator and I refer to them collectively as the MNOs and individually as Vodafone, Telefonica (or O2), Hutchison (or Three) and EE. There is no material distinction between the claims in each action, save in respect of the individual quantum of the relevant MNO. The Defendant in each case is The Office of Communications ( Ofcom). The actions were commenced by Claim Forms dated, respectively, 3 May 2018, 8 May 2018 and 18 May 2018 (x 2). By Orders dated 26 June 2018, Popplewell J directed that the claims be tried together with a time estimate of 4 days, including 1 day pre-trial reading. I am grateful to Counsel for the efficiency of their submissions, which enabled the trial to be concluded within the allotted timescale.

2

By these actions, the MNOs claim restitution of certain payments made by them towards annual licence fees ( ALFs) for licences issued under the Wireless Telegraphy Act 2006 ( WTA 2006). The ALFs were calculated, demanded and paid pursuant to The Wireless Telegraphy (Licence Charges for the 900 MHz frequency band and the 1800 MHz frequency band) (Amendment and Further Provisions) Regulations 2015 (SI 2015/1709) (the 2015 Regulations). In circumstances more fully explained below, the 2015 Regulations amended, or more accurately purported to amend, the previously applicable regime under The Wireless Telegraphy (Licence Charges) Regulations 2011 (SI 2011/1128) (the 2011 Regulations). By Order of the Court of Appeal dated 22 November 2017, on an application for judicial review brought by EE and in which each of the other MNOs was an Interested Party, the 2015 Regulations were quashed.

3

It is in these circumstances that the MNOs bring their claims for restitution. It is common ground that they are entitled in principle to restitution to the extent that the licence fees were exacted from them by a public body without lawful authority: see Woolwich Equitable Building Society v Inland Revenue Commissioners [1993] AC 70 ( Woolwich No. 2), a decision discussed in more detail below. The sole issue before me, deceptively simple, is as to the measure of that restitution. It is described as follows in the List of Common Ground and Issues:

What is the appropriate measure of restitution? In particular, are the Claimants entitled to restitution of:

a. The difference between (i) the sums paid by the Claimants under the unlawful 2015 SI and (ii) the sums that were properly due under the lawful 2011 SI; or

b. The difference (if any) between (i) the sums paid by the Claimants under the unlawful 2015 SI and (ii) the sums that would have been due had Ofcom acted lawfully in accordance with the judgment of the Court of Appeal; or

c. Sums calculated by some other measure.”

4

The MNOs argued in favour of (a). Ofcom argued in favour of (b). The respective positions, very broadly stated, were as follows:

a. The MNOs relied on the fact that the consequence of the quashing of the 2015 Regulations was that the 2011 Regulations had remained in force throughout. Ofcom's sole statutory power to levy fees was accordingly under the 2011 Regulations. The MNOs argued that they should therefore obtain restitution of the difference between the fees in fact charged and the fees which were due under the 2011 Regulations. I shall refer to this as the recovery of the net sum.

b. Ofcom's response was to say that the Court is entitled, indeed required, to ask what could and would have been done in the absence of the 2015 Regulations. In that event, so it contended, there would (or, for present purposes, at least arguably would) have been different, lawful, Regulations in place. Accordingly, the measure of restitution ought to be the difference (if any) between the fees actually charged and the fees which would have been charged under such Regulations. To arrive at any different outcome would be to grant the MNOs a windfall and, correspondingly, to penalise Ofcom for its error. I shall refer to this as the recovery of the counterfactual sum, whilst noting (see below) that Ofcom's case might well be that the counterfactual sum is nil or an amount close to nil.

5

There were no disputes of fact in the actions. The amounts in issue, on the MNOs' case, are as follows:

MNO

Amounts paid under 2015 Regulations

Amounts payable under 2011 Regulations

Net sum

Vodafone

£76,245,025.10

£21,865,536

£54,379,489.10

Telefonica

£76,245,025.05

£21,865,536

£54,379,489.05

Hutchison

£44,390,398.53

£17,463,600

£26,926,798.53

EE 1

£139,823,997

£57,380,400

£82,443,597

6

These figures are agreed by Ofcom, though it disputes the entitlement to claim the net sum. Indeed, it disputes the relevance, or at least the material relevance, of the 2011 Regulations. It invites me, in the event that I find in its favour on the point of principle, that I order that the counterfactual sum be determined as follows:

a. Ofcom shall first identify the fees it would have charged had it acted lawfully; and

b. Should the MNOs dispute such sums, there be directions given, if and insofar as necessary, for the Court to determine the counterfactual sum, with liberty to the parties to apply.

7

The parties have agreed that simple interest be awarded on whatever sum is due, calculated at 2% above the Bank of England base rate from time to time. Such interest should run from the date of each relevant payment.

Factual narrative

8

As the facts are agreed, I can take the narrative largely from the Agreed Statement of Facts.

Radio spectrum and its licensing for mobile telephony

9

Ofcom is the statutory body responsible for the management and licensing of radio spectrum in the United Kingdom. It is constituted under the Office of Communications Act 2002 and exercises functions under, inter alia, the Communications Act 2003 ( CA 2003) and WTA 2006.

10

MNOs operate networks of base stations through which they provide mobile communications services. Mobile devices transmit and receive voice calls and data via radio signals sent to and received by antennae on those base stations. Radio spectrum is accordingly an essential input into the MNOs' businesses. Different parts of the radio spectrum may be identified by reference to their frequency, measured in Hertz and typically including a range of frequencies. For example, the 900 and 1800 MHz bands describe frequencies of 880 to 960 MHz and 1710 to 1880 MHz respectively. MNOs in the United Kingdom currently provide mobile communications services using the 800 MHz, 900 MHz, 1400 MHz, 1800 MHz, 2100 MHz, 2300 MHz and 2600 MHz bands.

11

Individual MNOs are granted rights to use blocks of spectrum within these bands by means of wireless telegraphy licences issued by Ofcom. Since 2000, spectrum made available for use for mobile services has generally been assigned via spectrum auctions. Before then, mobile spectrum was allocated according to administrative processes. The licences in question relate to the 900 MHz and 1800 MHz bands only. The former is exclusively held by Vodafone and O2 while the latter is held predominantly by Three and EE. This spectrum was allocated administratively rather than being assigned at auction.

12

The claims relate to the following licences as they stood during the claim period:

a. Vodafone: licence number 0249664.

b. O2: licence number 0249663.

c. Three: licence number 0931984.

d. EE: licence number 0249666.

The charging regime

13

Section 12 of WTA 2006 provides that wireless telegraphy licence holders must pay as licence fees such sums as Ofcom may prescribe by regulation:

(1) A person to whom a wireless telegraphy licence is granted must pay to OFCOM—

(a) On the grant of the licence, and

(b) If regulations made by OFCOM so provide, subsequently at such times during its term and such times in respect of its variation or revocation as may be prescribed by the regulations,

The sums described in subsection (2).

(2) The sums are—

(a) such sums as OFCOM may prescribe by regulations, or

(b) if regulations made by OFCOM so provide, such sums (whether on the grant of the licence or subsequently) as OFCOM may determine in the particular case.”

14

Section 122 of WTA 2006 applies to every power of Ofcom to make regulations under the Act. Such powers are exercisable by statutory instrument. Sub-sections (4) to (6) prescribe the circumstances in which the powers may be exercised:

“(4) Before making any regulations or order...

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