British Sky Broadcasting Ltd v Office of Communications (Interim relief) [2013] CAT 9 (09 May 2013) [2013] CAT 9

CAT
British Sky Broadcasting Ltd v Office of Communications (Interim relief) [2013] CAT 9 (09 May 2013)
[2013] CAT 9 · 2013-05-09
[40]" ... identical, or virtually identical considerations apply when the Law Society is advancing the public interest and ensuring that cases of possible professional misconduct are properly investigated and, if appropriate, made the subject of formal complaint before the Tribunal. Unless the complaint is improperly brought, or, for example, proceeds ... as a " shambles from start to finish " , when the Law Society is discharging its responsibilities as a regulator of the profession, an order for costs should not ordinarily be made against it on the basis that costs follow the event. The " event " is simply one factor for consideration. It is not a starting point. There is no assumption that an order for costs in favour of a solicitor who has successfully defeated an allegation of professional misconduct will automatically follow. One crucial feature which should inform the Tribunal ' s costs decision is that the proceedings were brought by the Law Society in exercise of its regulatory responsibility, in the public interest and the maintenance of proper professional standards. For the Law Society to be exposed to the risk of an adverse costs order simply because properly brought proceedings were unsuccessful might have a chilling effect on the exercise of its regulatory obligations, to the public disadvantage. "41. R (Perinpanathan) v. City of Westminster Magistrates' Court [2010] EWCA Civ 40 (" Perinpanathan ") concerned the costs of an application by the Metropolitan Police Commissioner for forfeiture of an amount of cash under the Proceeds of Crime Act 2002, on the ground that there were reasonable grounds to suspect the cash was intended for use in unlawful conduct, namely terrorism. The magistrates' court refused the forfeiture order, accepting that the cash was intended for lawful activity. However the magistrates refused to grant costs against the Commissioner, as they accepted that when the seizure took place and when applying for forfeiture, the Commissioner had reasonable grounds for suspicion. The Divisional Court dismissed an application for judicial review of the magistrates' refusal to award costs, and the Court of Appeal dismissed an appeal against the Divisional Court's judgment.42. In the course of his judgment Stanley Burnton LJ referred to case law in a number of areas, and cited at length from the Tribunal's ruling in RBS backhaul before commenting at [31] that:
"...the context of the proceedings before [the Tribunal] was very different from the present. What is relevant to the present case is the decision that a public authority carrying out a public duty and acting reasonably was not to be required to pay the costs of its successful opponent in litigation . " 43. As we have already discussed, RBS backhaul was an appeal against a dispute resolution decision of Ofcom under section 185, and the decisive paragraph in the Tribunal's ruling identifying that feature (namely paragraph 62 - see paragraph 9 above) was quoted by Stanley Burnton LJ. 44. The learned Lord Justice indicated that the principles in the City of Bradford case should be taken as applying in licensing proceedings in the magistrates' court and Crown Court, and also, in the light of Baxendale-Walker , in disciplinary proceedings before tribunals at first instance brought by public authorities acting in the public interest. He went on to say that whether the principle was applicable in other contexts would depend on the substantive legislative framework and the applicable procedural provisions. It was not applicable where the CPR applied (paragraph 40). 45. Ms Rose submitted that the criteria identified by Stanley Burnton LJ were satisfied in relation to the present case. It is true that the CPR do not apply to the Tribunal's costs jurisdiction, but we do not agree that the situations in Perinpanathan or Baxendale-Walker or City of Bradford provide close analogies to the present case. For the reasons discussed earlier, we consider that this case has a much closer connection with, for example, cases involving challenges to market investigation decisions. 46. In other passages in Perinpanathan to which Ms Rose referred us, Lord Neuberger MR (as he then was) stated that in cases where there was no principle that costs should follow the event, as for example in CPR Part 44.2(2)(a), guidelines could nevertheless be laid down for the approach to an award of costs in favour of a successful party. However, such guidelines should not be too rigid, and a balance struck between sufficient flexibility to do what is appropriate in the particular case and certainty enabling the parties to know where they stand. Lord Neuberger emphasised that it was desirable for courts to maintain an approach where it had been consistently applied, unless it was wrong in principle or contrary to authority (paragraphs 59 and 64). 47. Given that the Tribunal has not established a consistent practice that in successful section 192 appeals the starting point should be that no order for costs should be made against Ofcom unless it has acted unreasonably, and given also that in respect of most categories of proceedings falling within the Tribunal's jurisdiction the Tribunal has established as a starting point that costs follow the event, Lord Neuberger's comments about consistency point to the approach that should be adopted in the present case. 48. Ms Rose also drew attention to paragraph 73 of Lord Neuberger's judgment, where he commented that the judgment in Baxendale-Walker had given strong support to the notion that the principles in City of Bradford should apply: "where a regulatory body is reasonably carrying out its functions in court proceedings, at least where the rules of that court contain no presumption or principle that costs follow the event." 49. These remarks must presumably be read with his earlier comments about the desirability of following an established approach. Moreover they are made in respect of contexts admittedly very different from the one with which we are concerned. 50. In our judgment the considerations contained in the passage from Tesco quoted at paragraph 33 above are also applicable to a case such as the present, and the position and duties of Ofcom as a sectoral regulator, although clearly a relevant factor, do not justify "applying ... as a matter of principle (as opposed to on the specific facts of a particular case) a distinct and more indulgent approach to the award of costs against the decision-maker."
In order to provide the balance, referred to by Lord Neuberger, between sufficient flexibility to enable the Tribunal to do what is just in a particular case, and an appropriate degree of predictability, we consider that the starting point in cases such as the present should be that costs follow the event, even where Ofcom is the loser in the appeal. This approach aligns the present case with the starting point adopted by the Tribunal in most categories of case with which it deals, is consistent with the approach generally found in civil litigation, including, in particular, other public law cases, and provides ample flexibility to reach a just conclusion in each case. Using this starting point is justified in such cases as the present given that regulatory decisions of this kind often have very significant effects on the commercial interests of the regulated entity and sometimes also on the vital interests of other parties (as, for example, claimed by FAPL in the present case). The appeal route is the only recourse available to those affected by a decision which they consider to be erroneous or invalid. 51. In applying as a starting point that costs follow the event when considering costs of a successful section 192 appellant, we are not of course suggesting that other relevant factors should or could be left out of account. In Merger Action Group v. Secretary of State for Business Enterprise and Regulatory Reform [2009] CAT 19 , the Tribunal said:
"17. ...As the Tribunal has emphasised on numerous occasions, the width of the discretion enables the Tribunal to deal with cases justly and to retain flexibility in its approach, avoiding the risk of guiding principles evolving into rigid rules ...there is no inconsistency between the wide discretion, and an approach to its exercise which adopts a specific starting point. Without this there may be an increased risk of discordant decisions . ... 19. It is axiomatic that all such starting points are just that - the point at which the court begins the process of taking account of the specific factors arising in the individual case before it - and there can be no presumption that a starting point will also be the finishing point. All relevant circumstances of each case will need to be considered if the case is to be dealt with justly. The Tribunal's decision in relation to costs/expenses can be affected by any one or more of an almost infinite variety of factors, whose weight may well vary depending upon the particular facts. Beyond recognising that success or failure overall or on particular issues, the parties' conduct in relation to the proceedings, the nature, purpose and subject-matter of the proceedings, and any offers of settlement are always likely to be candidates for consideration, the factors are too many and too varied to render it sensible to attempt to identify them exhaustively." 52. As we have said, the position and duties of Ofcom as a regulator, together with the extent of any risk that an order for costs might have a chilling effect on Ofcom's activities in pursuit of its statutory duties, including its willingness to defend regulatory decisions made in pursuit of the public interest, are always likely to be included in the relevant factors when considering whether to make such an order and the amount thereof. Should an order for costs be made in favour of Sky, and if so what order? The main appeal 53. We remind ourselves of the need to consider this application in the light of its own particular facts and circumstances, whilst taking as a starting point that costs follow the event. 54. Ofcom submits that "the event" amounts to a score draw, in that Ofcom won on the first ground of Sky's appeal, Sky won on the second ground, and the Tribunal made no findings on the third and fourth grounds. In Ofcom's submission these last two issues - comprising impact assessment and pricing issues - accounted for a very significant proportion of costs, accounting for approximately 138 individual sub-issues and many days of oral evidence from experts before the Tribunal. Further, Sky adopted a disproportionate approach with minute criticisms of every aspect of Ofcom's detailed analysis, each of which Ofcom was obliged to address and respond to. Given that the Tribunal did not have to resolve them it cannot be said whether Sky was right to raise them or not, so the costs of these issues should lie where they fall. As to the other two grounds, whilst acknowledging that the costs of arguing the two legal issues comprised in ground 1 were not equivalent to the costs encompassed in ground 2, Ofcom submits that the latter costs were less than the costs of the unresolved grounds 3 and 4, and on that basis the appropriate order overall is that the parties should each bear their own costs. 55. We do not agree with this analysis of "the event"
. It does not reflect the fact that Sky is a clear winner. Although it lost on the two jurisdictional arguments, its appeal has been allowed and, subject to the stay we granted pending BT's renewed application for permission to appeal, the licence conditions at the heart of Sky's appeal are required to be withdrawn from Sky's licences. So, on the basis of its second ground - mainly relating to the negotiations - Sky achieved everything it could have hoped to achieve in its appeal. The starting point is therefore that an order for costs should be made in favour of Sky. Should Sky nevertheless be denied any costs in the present case on the basis of other factors, including those referred to in paragraph 52 above? 56. Given the size of the indicative amounts which have been referred to, it is likely that, even if these amounts were cut down to a significant extent, the costs ultimately payable by Ofcom would be substantial. As such the risk cannot be entirely excluded that costs of that order of magnitude might conceivably have some influence on Ofcom's approach should a similar case arise in the future. Further, it has rightly not been suggested that Ofcom has acted unreasonably or in bad faith. 57. However, the ground of appeal upon which Sky succeeded related almost entirely to Ofcom's misinterpretation of the factual evidence (mainly contemporaneous documents) of what had taken place in several sets of negotiations over the course of a number of years. These misinterpretations were significant, both in terms of their number and their pivotal relationship with the core competition concerns and the findings upon which Ofcom's regulatory action was founded. Further, the regulatory action in question was undeniably commercially intrusive, depriving Sky of any choice as to the person to whom, and the prices at which, it would wholesale its premium sports channels. If Sky wished to challenge Ofcom's action it had no alternative but to appeal to the Tribunal, and therefore to incur further costs over and above the irrecoverable costs of regulatory compliance generally and of participation in the Pay TV investigation itself. In addition, as we have already explained, the scope of Ofcom's discretion as to precisely how to respond to the joint complaint which led to Ofcom's investigation was not as circumscribed as suggested, nor was an appeal on this scale inevitable no matter how Ofcom had dealt with the matter, as has been argued (see paragraph 11 above). 58. In our view to deprive Sky of any costs award in these circumstances would not meet the justice of the case, and would not be justified by any of the factors in question, including the risk of a chilling effect on Ofcom's future regulatory action in accordance with its statutory obligations. Although, as we have said, this risk cannot be entirely excluded, we do not believe that it is of such a magnitude that we should make no order here. This is the first time in ten years or so that Ofcom has found it appropriate to use section 316. It is therefore not a frequently trodden route of regulatory action. Also, this case may be seen as somewhat unusual in regulatory terms. As distinct from, for example, many ex post infringement cases where factual disputes are commonplace, in an ex ante context it is perhaps less common for the fundamental factual basis for Ofcom's action to be disputed in so many respects. Even if such a case arose again in the future, Ofcom has no reason to suppose that the grounds for action would be undermined on appeal if its assessment of the facts was sufficiently rigorous in all respects. 59. We are therefore of the view that an order for costs in favour of Sky is appropriate in the main appeal. We therefore turn to consider the terms of that award. 60. Given the scale of this case, a just and proportionate result can best be achieved by reference to the issues in the appeal, represented by the separate grounds relied upon. On this basis Sky should have the costs of ground 2 on which it succeeded. In that regard Ofcom has noted in its written submissions in reply that the Tribunal found it unnecessary to resolve the difference of expert opinion on the sub-issue relating to the so-called strategic incentives. Nevertheless, we have concluded that the costs of that sub-issue should be included. Although ultimately we did not need to resolve this, the strategic incentives were hares which Ofcom prodded into action and then pursued in the Statement itself: see paragraphs 164 to169 of the Judgment, and in particular the reference there to paragraphs 7.198 to 7.200 of the Statement. In view of the prominence given to the strategic incentives in the Statement, we can see why Sky might well have felt uneasy if it did not deal with them in its appeal, notwithstanding Ofcom's later assurances (including at, and in the lead-up to, the main hearing) that they were non-essential to its core competition concerns. We should add that we see little if any merit in Ofcom's suggestion that its own findings on the subject-matter of ground 2 were based on less substantial oral and written evidence than that put before the Tribunal. By far the most significant material in relation to the various bilateral negotiations with which we were concerned in examing ground 2 were the contemporaneous correspondence and documents. These were available to Ofcom at the time the Decision was made and were annexed to Dr Unger's witness statement. 61. Although Sky is the overall winner, it should not recover the costs of the jurisdiction arguments comprised in ground 1, on which it did not succeed. The fact that Ofcom itself lost on its alternative argument that even if the services in question were not "licensed services" they constituted "connected services", does not justify any partial recovery of Sky's costs, given that Ofcom succeeded on its primary point. Furthermore, Ofcom's success on these jurisdictional grounds could be said to require some credit in its favour to reflect Ofcom's own expenditure in meeting those arguments. However, looking at the matter broadly this element, which on any view would be likely to be a relatively minor amount, can fairly be seen as well covered by our approach to the costs of grounds 3 and 4, comprising Sky's challenges to the WMO remedy (see below). 62. In the light of the Tribunal's findings in respect of ground 2, we did not need to form any concluded view as to the respective merits of the parties' arguments on grounds 3 and 4. Equally, we have not formed a view about whether Sky's approach to them was disproportionate or unreasonable in light of the nature and number of detailed criticisms made by Sky, as alleged by Ofcom. Nevertheless, and despite Sky's overall success in the appeal, we believe that in all the circumstances it would not be appropriate to require Ofcom to bear any of Sky's costs of these undecided issues. We are therefore of the view that the costs of grounds 3 and 4 should lie where they fall. 63. For the avoidance of doubt we consider that there should also be no order in respect of the costs incurred following the Judgment on issues relating to consequential orders and relief, including the costs of Sky's application for costs. As to the latter, neither Ofcom nor Sky has obtained the order it sought, and it is appropriate for these cost to lie where they fall. 64. The approach which we have adopted means that in respect of the main appeal there will be an award in Sky's favour of its costs relating to ground 2 alone, such costs to be subject to detailed assessment on the standard basis by a costs judge, if not agreed. This will no doubt still be a substantial amount, but we do not consider that it will carry a significant risk of a "chilling" effect on Ofcom's regulatory action in the future such as to justify depriving Sky of this more limited costs award. Costs of the interim relief application 65. Sky has also claimed the costs of its application for interim relief made in May 2010 before the lodging of Sky's main appeal. That application was resolved when Ofcom, Sky and the other interested parties who were then represented before the Tribunal, thrashed out an agreement which ultimately took the form of the Interim Relief Order. In very general terms, Sky was to offer to make wholesale supply of the premium channels in question to specified interested parties (BT, VM, TUTV and (later by amendment) REAL Digital EPG Services Limited), at the regulated WMO price. The purchasers were to pay the difference between the regulated price and Sky's normal wholesale price into escrow pending the outcome of Sky's main appeal. Apart from this, the Decision was suspended. In effect Ofcom's measure remained in force for the benefit of those who particularly desired wholesale supply, but such supply was not open to the world at large - without further amendment of the Interim Relief Order. Sky also obtained the protection of the escrow arrangements. Costs of the interim relief application did not form any part of the agreement between the interested parties, and were not mentioned at all. 66. In these circumstances, and given in particular that the application was resolved by a multi-partite agreement which did not mention costs, and which left the substance of the WMO in place so far as the main beneficiaries were concerned, we do not consider it would be just or appropriate to order Ofcom to pay Sky's costs of the application. Those costs should therefore lie where they fall. Costs of the STB and CAM appeals 67. It was accepted by all concerned, including Ofcom, that the effect of the Judgment is that the STB and CAM appeals must be allowed and that the decisions of Ofcom at issue in those appeals should be withdrawn, subject only to the stay granted by the Tribunal pending a possible appeal (see paragraphs 7 and 8 of the Tribunal's subsequent ruling to which we refer at paragraph 1 above). 68. Sky's costs of the STB and CAM appeals are likely to be relatively very small, as no oral argument or oral evidence was addressed to these appeals, which were conducted entirely on paper. No specific argument has been put to us as to why an order for costs should not be made in respect of them. In all the circumstances we consider that it is appropriate that Sky should have its costs of each of these appeals, such costs to be subject to detailed assessment on the standard basis by a costs judge, if not agreed. FAPL'S APPEAL 69. In our ruling of 27 February 2013 we stood over the disputed question whether FAPL's appeal should be allowed or dismissed in the light of the Judgment. 70. FAPL submits that, having succeeded in obtaining the primary relief which it had sought in its appeal, namely that Ofcom's WMO should be withdrawn, its appeal should be allowed with costs. FAPL emphasises that the motivation for its appeal was the extreme concern about the adverse impact of the WMO on FAPL, its member clubs, grass roots sports, consumers and many others by reason of a significant reduction in the value of broadcasting rights. These factors were distinct from Sky's own interests in appealing, and FAPL considered they had not been taken into account by Ofcom. Due to the chronological order in which the Tribunal considered the issues raised by the parties, it did not need to consider the impact of the Statement on sports rights. Nevertheless, FAPL submits that it still obtained the outcome that it sought. Accordingly its appeal should be allowed, and an award for costs made in FAPL's favour, with a 10% discount to reflect FAPL's unsuccessful first ground of challenge. 71. We agree that FAPL's appeal was brought in support of legitimate interests which were distinct from those of Sky, and that the FAPL legal team conducted the appeal skilfully and reasonably, and in such a way as to avoid duplication with the submissions of Sky wherever practicable. However the fact remains that, of the six grounds of appeal advanced by FAPL, only one was determined by the Tribunal in the Judgment, and on that ground FAPL was unsuccessful. The other grounds, which related to the WMO remedy, did not need to be decided by the Tribunal and it is not known whether FAPL would have succeeded on any of them. The fact that the Judgment produced the outcome which FAPL desired in bringing its own appeal is therefore entirely the result of Sky's appeal. In those circumstances we do not consider that it could be right to allow FAPL's appeal, or to order Ofcom to make a contribution to FAPL's costs. Therefore the appropriate order is that FAPL's appeal should be dismissed. In any event there should be no order in respect of the costs thereof. 72. FAPL has submitted that if the Tribunal concluded that FAPL's appeal should be dismissed, the Tribunal's order should provide that such dismissal, and any provision to the effect that there should be no order as to FAPL's costs, should only take effect in the event that (1) any application for permission to appeal by BT has been finally rejected or (2) if permission to appeal is granted, BT's appeal is finally dismissed in its entirety. At the hearing on 6 February 2013 none of the parties signalled any objection to FAPL's proposal. Accordingly we will so order. CONCLUDING OBSERVATIONS 73. The Tribunal invites the parties to supply an agreed draft order reflecting the Tribunal's conclusions in this ruling as soon as possible and in any event within seven days from today's date. The Honourable Mr. Justice Barling Professor John Beath Michael Blair QC ( Hon ) Charles Dhanowa OBE, QC ( Hon ) Registrar Date: 9 May 2013 [1] See paragraph 7 of the Judgment. [2] See paragraph 6 of the Judgment. [3] The appeals in question were brought pursuant to subsection 317(6) of the 2003 Act. The provisions of subsections 192(3) to (8) are applied by virtue of subsection 317(7).

Cited in 5 later judgments