Appeals on the merits: only pick a hole if you can fill it

In his recent blog “Down the rabbit hole,”  Tom Richards described the “quasi judicial review within an appeal” contained in s.193(7) Communications Act 2003 as something of a Wonderland.

Last Wednesday it was the turn of the Court of Appeal to enter Wonderland. However, the judgment of Moses LJ in Everything Everywhere Ltd v Competition Commission and ors [2013] EWCA Civ 154 gives important general guidance on the evidence needed for an appeal “on the merits”. It is likely to be of assistance to appellants in a variety of contexts, whether or not they have ventured into this particular statutory Wonderland.

The statutory context is this. Decisions of Ofcom can be appealed to the CAT under s.192. That appeal is an appeal on the merits (s.195(2)). However, when an appeal to the CAT under s.192 relates to price control matters, then that price control matter must be referred by the CAT to the Competition Commission for determination (s.193(1)).  The Competition Commission’s determination is on the merits. When the answer of the Competition Commission comes back to the CAT on the price control matter the CAT is, in deciding the appeal on the merits, bound to decide the appeal in line with the Commission’s determination, except “to the extent that the Tribunal decides, applying the principles applicable on an application for judicial review, that the determination of the Competition Commission is a determination that would fall to be set aside on such an application” (s.193(7)).

In this case, Ofcom had imposed a certain cost measure. EE challenged that measure and the matter duly went to the Competition Commission. The Commission upheld Ofcom’s choice of cost measure. However, the Commission disagreed with Ofcom on an element of Ofcom’s reasoning which led to the imposition of the measure.

EE argued that the Commission’s decision suffered from a judicially reviewable error in that the Commission had to consider the consequences of its disagreement with Ofcom for the choice of the measure but, it was argued, the Commission did not have sufficient evidence before it to decide that Ofcom’s cost measure was the right one. EE contended that in those circumstances the Commission was not legally bound to decide the cost measure itself, and should have referred the matter back to Ofcom for further determination.

The Court of Appeal agreed with EE on the principle that there is no obligation on the Commission to reach a conclusion on the appropriate measure of price control in circumstances where it thinks the original decision is in error but is unable to fix an alternative solution. However, the Court considered that such cases would be rare.

Managing to fall within the category of such a “rare” case is only the beginning of the task for the appealing party.  The real challenge, as Moses LJ identified, is not showing that the Commission ought to have concluded it was unable to decide the price control measure, but rather, it demonstrating that that conclusion was a judicially reviewable error. The appealing party would have to show that it was unreasonable for the Commission to conclude it was able to determine the cost measure. That task was described by Moses LJ as an ”almost insuperable” one.

In the event the Court of Appeal did not have to apply this irrationality test, because, upon its reading of the Commission’s decision, the Commission didn’t find it lacked sufficient evidence to determine the price control (contrary to the way EE put its case).

The Court of Appeal also gave firm guidance on the requirement for appealing parties to put forward evidence on a merits appeal. Those defending the decision argued that, had the Competition Commission not had enough evidence to decide the matter, that was EE’s own fault and the appeal from Ofcom’s decision should have failed. The Court of Appeal took the opportunity to emphasis the requirements which an appellant must satisfy if it is to be successful on a merits appeal. Moses LJ emphasised “The appeal is against the decision, not the reasons for the decision. It is not enough to identify some error in the reasoning… if it is to succeed, the appellant must vault two hurdles: first, it must demonstrate that the facts, reasoning or value judgments on which the ultimate decision is based are wrong, and second, it must show that its proposed alternative price control measure should be adopted…” He reasoned that EE had had the opportunity to put evidence before Ofcom on the appropriate cost measure, and again had the opportunity to put evidence before the Commission on appeal to support its case on the appropriate measure and could have made good any deficiencies in the evidence available to the Commission, but did not do so. Moses LJ said that EE had “no right to a third attempt” to put forward evidence to support its case by asking for a remission to Ofcom.  

This is a clear message to those who seek to challenge a decision of Ofcom. It is not enough to find a flaw in Ofcom’s decision in order to win on a merits appeal. Picking a hole is not sufficient; a positive case for a different measure has to be put forward with supporting evidence. The further message is that, given the irrationality principles which apply in the jurisdiction, the Wonderland of a s.193(7) challenge is far from the most fruitful forum to in which to seek to unpick a price control decision.