Conspiracy, the CAT, and the Court of Appeal: “Here is a case unprecedented” (The Gondoliers, Act 2)

In W.H. Newson Holding Limited & ors v IMI plc & ors [2013] EWCA Civ 1377, the Court of Appeal has made some important new law regarding the scope of section 47A of the Competition Act 1998 and the tort of common law conspiracy.

The Court upheld Roth J’s decision (on which see Tom Richards’ blog) that it is in principle possible to advance in the CAT a follow on claim based on common law conspiracy. However, it held that because the claim followed on from a Commission Decision which did not contain a specific finding that the Defendant intended to injure the Claimant, the cause of action could not be made out without inviting the CAT to make additional findings – an invitation which the CAT was bound to decline in the light of Enron 1 and Enron 2.

Regarding the scope of section 47A, the Court rejected the defendants’ case that only breach of statutory duty may be relied on. In a decision with which Patten and Beatson LJJ agreed, Arden LJ reasoned that the statutory language “contain[s] no restriction on the type of cause of action on which a claimant may rely” (§20); and that there were several good reasons for thinking that Parliament did not intend that such restriction be implied (§23). For example, there was no reason to exclude from section 47A claims asserting causes of action under foreign law (§23). No unfairness was thought to arise from this interpretation, not least because only causes of action based on the findings of the relevant infringement decision can be asserted (§§21-22, §25).

In the light of Arden LJ’s reasoning, in principle any cause of action may be relied on for the purposes of section 47A. The relevant question will be whether the cause of action can be established based solely on the findings made in the relevant infringement decision. The underlined word is important. Arden LJ refused to adopt the claimants’ interpretation of the Enron decisions, and rejected as inconsistent with Enron 1 their submission that a “cause of action can come within section 47A if it relies on material facts not within the Commission’s infringement findings but consistent with it” (§§29-30). Accordingly, whenever a claimant needs to go beyond an infringement decision to establish its cause of action, it must sue in the High Court. In policy terms, it is not obvious why that should be so, and Newson is yet another reason for claimants to steer clear of the CAT if at all possible in all but the most straightforward cases (see also James Segan’s blog on Emerson).

Regarding common law conspiracy, the Court’s analysis will also give little comfort to claimants. Coupled with its approach to section 47A and the Enron decisions, the effect is that it will be a rare case where common law conspiracy is a viable cause of action in the CAT, because the infringement decision relied on will typically not contain findings sufficient to establish the intention requirement of the tort. Moreover, certain aspects of Arden LJ’s reasoning cast doubt on the viability of conspiracy as a cause of action in competition cases in general.

In Newson, the claimants had contended that the intention requirement was satisfied by the Commission’s findings that the defendants’ object was to distort competition, that their conduct had that effect, and that the effects included increased prices for copper piping tubes in the markets where the claimants purchased them. Roth J agreed that these findings sufficed, it being “wholly unrealistic” to regard the defendants’ self-interested purposes in entering into the cartel as “divorced from the causation of loss to purchasers” (§36). In this, the judge relied on the principle that where loss to a claimant is the means by which to secure a defendant’s gain, the intention requirement is met: e.g. see OBG Ltd v Allan [2007] UKHL 21, §§164-167.

Arden LJ held that the judge had erred in his reliance on this principle which, in her view, applied only “where loss to the plaintiff must follow from the object of the conspiracy…”, and that could not be said in Newson, because the claimants “might [have] be[en] able to pass on the price increases [for relevant products] to their customers… “ (§41). In reasoning with potentially serious implications for the law on conspiracy generally, Arden LJ rejected the argument that it suffices to establish the intention requirement that the claimant forms part of a class of persons (here purchasers) to whom a cartelist’s wrongful acts were targeted:

I would reject this argument. It deprives the requirement of intent to injure of any substantial content. It is tantamount to saying that it is sufficient that the conspirators must have intended to injure someone who might suffer loss from their agreement. If I might say so, the submission is reminiscent of the circularity of the words in The Gondoliers that “when everyone is somebody, then no-one’s anybody”

Arden LJ cited no authority for that analysis. There is at least some (not drawn to the Court’s attention) to the contrary: e.g. Grupo Torras SA v Al Sabah (No 5) [1999] C.L.C. 1469, 1634-1635. More generally, the analysis appears to attach a significance to the possibility of pass on which is not shared elsewhere in the common law, see e.g. in Canadian law, Pro Sys Consultants Ltd & anor v Microsoft Corp & ors 2013 SCC 57.

If English common law really is that conspirator must intend specifically to injure a particular claimant, that is high bar indeed – particularly in the competition context, and especially so in follow on claims.