The Court of Appeal and CAT hand down two important judgments in Le Patourel

27/05/22

The Court of Appeal and Competition Appeal Tribunal have handed down two important judgments in Justin le Patourel v BT. The judgments address a number of contentious points in the collective action regime, including:  the distinction between opt-in and opt-out proceedings; the supervisory powers of the CAT over collective settlements; the division of responsibility between the ‘case management tribunal’ and ‘trial tribunal’; the status of the Guide in resolving both substantive and procedural questions arising under the regime; and the scope of the appellate right in relation to decisions taken by the CAT.  

The underlying claim is brought under s.47B of the Competition Act 1998 by Justin Le Patourel on behalf of 2.3 million BT customers, alleging that BT charged excessive prices for various telephony services in abuse of its dominant position and in breach of the Chapter II Prohibition. That claim was certified on an opt-out basis by the Tribunal.

BT appealed the decision of the Tribunal to certify on an opt-out basis.

The Court of Appeal decision

On 6^th May 2022, the Court of Appeal ([2022] EWCA Civ 593) dismissed BT’s appeal that the Tribunal has erred in law in its decision to certify the claim on an opt-out basis.

BT’s grounds of appeal contended that:

1. The Tribunal had misdirected itself as to the proper meaning of the concept of ‘practicability’ under Rule 79(3)(b) of the CAT Rules, read together with paras 6.38 and 6.39 of the Guide, in particular in circumstances where it was possible for the Defendant to identify and contact the majority of class members.
2. The Tribunal erred in its construction of Rule 93(2) in concluding that it had jurisdiction to direct that the class could be compensated by means of an ‘account credit’ in lieu of a monetary award of damages.
3. The Tribunal erred in its understanding of the role to be performed by the merits test under Rule 79(3)(a) in determining whether claims should be certified on an opt-in or opt-out basis.

The Court of Appeal rejected those arguments. In reaching its conclusion, the Court of Appeal made a number of observations, many of which may have wider ramifications for the collective actions regime:

1. The Court summarised the approach to the appellate jurisdiction at [50]-[57].
2. There is no general preference for opt-in in the Competition Act or the CAT Rules, notwithstanding that the Guide provides that there is a “general preference” for opt-in proceedings; paras 6.38 and 6.39 of the Guide. The Tribunal has an unfettered discretion to determine the question of whether proceedings should be opt-in and opt-out ([68]).
3. The Court addressed the status of the Guide. Although the Guide has the status of a Practice Direction, it “was not drafted in terms intended to impose limits upon the exercise of discretion.  It was a tentative view as to how, in 2015, before the CAT had acquired hands-on experience, the President, quite reasonably, considered that the exercise of discretion might pan out.” [66]. In a post-script to the Judgment, the Court said at [112]: “we would respectfully suggest that there are a number of points made about collective proceedings which might, when the Tribunal considers that it has sufficient experience, warrant reconsideration in the light of that experience”.
4. The ability of parties to attract third-party funding is a relevant consideration when deciding whether to certify on an opt-in or opt-out basis [77].
5. The Court made observations about the nature of ‘damages’ in the collective action regime: “We think it arguable that an equally strong purposive interpretation of “damages” might lead to a conclusion that fungibility was not the sole defining touchstone of “damages” ([89]). The Court drew an analogy between the account credit and set-off: [93]. In this regard, it is noteworthy that in other jurisdictions, members of a class can sometimes receive compensation in the form of e-vouchers.
6. In elucidating the role of the merits test, the Court said that a relevant factor might be whether proceedings were follow-on or standalone; if they were follow-on, that may militate in favour of opt-out proceedings ([106]).

Transfer season: the CAT Judgment

On 20^th May 2022, the CAT gave a further judgment ([2022] CAT 21) concerning whether the Tribunal, having certified proceedings as opt-out collective proceedings, was required to transfer proceedings to a new trial tribunal, to be constituted at an appropriate stage post-certification of the proceedings.

The issue arose out of paragraph 6.7 of the Guide, which contemplates that (i) the proceedings will be managed by two different tribunals, a ‘case management tribunal’ and a ‘trial tribunal’, and that (ii) after certification, the case management tribunal “will, at an appropriate stage prior to trial” transfer proceedings to the trial tribunal.

BT took what the Tribunal described as a “responsible attitude” [11], drawing the Tribunal’s attention to these provisions and making submissions about the likely rationale underlying them, including the need to protect various features of the process of collective settlement.

Drawing on the Court of Appeal’s observations about the status of the Guide and relying upon the broad case management powers open to the CAT, the CAT found that, despite being drafted in mandatory terms, paragraph 6.7 was only one way of case-managing proceedings.

The Tribunal suggested and adopted a different course of action. Having heard the CPO application, it would also hear the trial. If the parties reached a collective settlement, “the President of the CAT can be requested to, and can appoint, a separate Tribunal panel to consider the settlement” ([9]).

The Court of Appeal Judgment can be found here.

The CAT Judgment can be found here.