Mastercard Inc & Ors v Deutsche Bahn AG & Ors [2017] EWCA Civ 272

Case No A3/2016/1212[2017] EWCA Civ 272
IN THE COURT OF APPEAL (CIVIL DIVISION)
[2015] EWHC 3749 (Ch)
ON APPEAL FROM THE HIGH COURT (CHANCERY DIVISION)
THE HONOURABLE MR JUSTICE BARLING
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 12/04/2017
Before
LADY JUSTICE ARDENLADY JUSTICE KINGLORD JUSTICE SALES
Between
Mastercard Inc & OthersAppellantsDeutsche Bahn AG & OthersRespondents
Mark Hoskins QC and Matthew Cook (instructed by Jones Day) for AppellantsKieron Beal QC, Tristan Jones and Eesvan Krishnan (instructed by Hausfeld & Co LLP) for RespondentsHearing Hearing date: 22 March 2017
Judgment
[1]This appeal concerns an interlocutory decision by Barling J in relation to two sets of proceedings by the claimants, who are the respondents to the appeal (in this judgment I will call them the claimants), against the MasterCard defendants, who are the appellants (whom I will call MasterCard), involving claims for damages in relation to complex issues of competition law. The decision under challenge on this appeal is a decision by the judge to give the claimants permission to amend their claim form and particulars of claim to introduce a new claim, which was to be deemed for limitation purposes to have been commenced on the dates when the respective sets of proceedings were commenced by the claimants in December 2012 and February 2013 under the principle of relation back set out in section 35(1)(b) of the Limitation Act 1980. The claimants’ application for permission to amend was made pursuant to CPR Part 17.4. The judge held that the new claim “arises out of the same facts or substantially the same facts” as claims already made by the claimants in the proceedings, within CPR Part 17.4(2), so as to justify the grant of permission for the amendment with the benefit of the doctrine of relation back. MasterCard submit that he was wrong so to hold.[2]At the outset I would like to pay tribute to the clarity with which Barling J described, with exemplary economy, the context in which the claimants’ application to amend arose. I cannot improve upon his account and so gratefully incorporate the substance of the relevant part of his judgment in what follows.[3]It is common ground not just that the proposed amendment constitutes a new cause of action but also that there is at least a prima facie case that if permission to amend is not granted with “relation back”, the defendants would be able to claim the benefit of a limitation defence in respect of the new claim for part of the period to which the existing claims relate. The parties are therefore agreed that the judge was only able to grant permission to amend pursuant to CPR Part 17.4(2), so that the new claim relates back to the date the original claim was brought, if the new claim "arises out of the same facts or substantially the same facts" as a cause of action in respect of which the claimants have already claimed a remedy in the proceedings. MasterCard are content to agree that the amendment may be made to introduce the new cause of action, but only if it is done in such a way that it does not have the benefit of relation back to the time when the original claim was brought in each set of proceedings, so that MasterCard are not deprived of any limitation defence they might have in respect of the new claim by operation of the “relation back” rule.[4]MasterCard have accepted in correspondence that the new claim can be introduced into the existing proceedings as an amendment which relates back to 7 August 2015, when the claimants' application to amend was served. This was the approach adopted by Field J in William Morrison v MasterCard [2013] EWHC 3271 (Comm) to avoid the necessity of the claimants there having to commence a new claim with resultant waste of costs, where he had found that the new claim did not arise out of the same or substantially the same facts. This result can be achieved either by the court refusing permission for an amendment unless the new pleaded claim itself in terms pleads the new cause of action only from that date or by the court making an order stipulating the relevant date for limitation purposes, which is what both sides invited the judge to do and again invite us to do, depending on what date we decide is the proper one. As a fall-back argument, the claimants submit that even if their primary contention that they satisfy the test in CPR Part 17.2(2) is not accepted, the appropriate date for this purpose would be 27 March 2015, when the new cause of action was first pleaded pursuant to a consent order permitting service of amended particulars of claim. Background The parties

Background

[5]The claimants are retailers operating in 18 European countries (17 EEA countries and Switzerland) who contend that MasterCard's interchange fee arrangements were in breach of EU/EEA and domestic competition law, and that as a result they have suffered loss. The defendants are or include the principal legal entities which own and/or operate the worldwide MasterCard credit and Maestro debit card schemes.

The MasterCard scheme

[6]The MasterCard scheme is what is known as a four party payment card scheme. Such a scheme separates the function of dealing with merchants (referred to as "acquiring") from the function of dealing with cardholders (referred to as "issuing"). Each transaction generally involves a merchant, the merchant's bank (referred to as an “acquirer”), a cardholder and the cardholder's bank (referred to as an “issuer”).[7]MasterCard itself does not fulfil the issuing and acquiring functions of the scheme. It owns the MasterCard trademarks and licenses them to thousands of financial institutions around the world. These licensees operate them in accordance with rules established and administered by MasterCard. The licensees will be either acquirers or issuers or both. The scheme rules impose an obligation upon acquirers (and, through them, upon merchants which wish to accept MasterCard cards) to accept all MasterCard branded cards, regardless of the identity of the issuing institution. This is referred to as the "Honour all cards" rule or HACR.[8]Because, by reason of the HACR, a merchant must accept all types of MasterCard issued by any issuer, acquirers have to deal with all issuers and issuers have to deal with all acquirers. Although issuers and acquirers are free to negotiate bilateral arrangements, such arrangements are by no means always put in place. To do so would result in a huge volume of bilateral agreements. The scheme rules, therefore, provide default terms of dealing which apply only where there is no bilateral agreement between an acquirer and an issuer. I am told that, in practice, the majority of transactions are conducted under the default terms.[9]Under the current default rules, issuers are generally liable to pay acquirers (and therefore acquirers to pay merchants) regardless of fraud or cardholder default. Furthermore, issuers are required to pay acquirers shortly after the transaction takes place, whereas the cardholder will not normally pay the issuer for some time. MasterCard state that, at least in part because of these factors, issuers' costs are greater than acquirers' costs, and that for this reason the default rules make provision for the payment of a multilateral interchange fee or "MIF" by acquirers to issuers. It is this MIF which is at the heart of the claimants' claims in these proceedings.[10]The scheme works in the following way. A cardholder uses her MasterCard credit or debit card to buy an item for £100 from a merchant. The issuer must pay the acquirer who then pays the merchant. The issuer deducts the MIF from the £100 before paying the balance to the acquirer. Thus, the MIF represents a cost to the acquirer which is generally deducted, along with the sum representing the acquirer's own charge, from the payment made to the merchant. The total deduction made by the acquirer is called the merchant service charge or "MSC". In return for this, the merchant is protected against fraud, cardholder default and is guaranteed payment, typically on the day following the transaction. The cardholder will generally have a significantly longer period to make the payment of £100 to her card issuer.[11]Different MIFs apply depending on the nature of the transaction. Where a card issued in one EEA state is used at a merchant who is based in a different EEA state, and the relevant issuer and acquirer have not negotiated a bilateral interchange fee, the "EEA MIF" applies. Where a card is used to pay a merchant who is situated in the same country as the issuer of the card, then the relevant "domestic MIF" for that country applies, always assuming that the relevant issuer and acquirer have not negotiated a bilateral interchange fee. There is also a MIF applicable (in the absence of a bilateral arrangement) where the card is used at a merchant situated in a different global region from the issuing bank, for example, where a US tourist uses her card issued in the US to buy goods in London. This is sometimes known as an "international MIF".

The Central Acquiring Rule (“the CAR”)

[12]Relevant to the present application is a MasterCard rule known as the central acquiring rule or "CAR". Under MasterCard's network rules, a bank which offers its services as an acquirer to a merchant based outside the acquirer's country of establishment is called a "central acquirer". The network rules provide that, in the absence of a bilateral arrangement between a central acquirer and the relevant issuing bank, the MIF payable by a central acquirer for an intra-country transaction (i.e. where the issuer and the merchant are in the same country) is the domestic MIF (if there is one) of the state of the transaction. If there is no domestic MIF and no relevant bilateral arrangement, the network rule provides that the EEA MIF will apply. The European Commission's decision.[13]In 1992 a complaint was made to the European Commission by the British Retail Consortium. At about the same time, MasterCard notified its card payment scheme to the Commission under the former Council Regulation 17/62. These steps led to an investigation by the Commission into MasterCard's EEA MIF, which culminated in the Commission's decision dated 19 December 2007 (“the Decision”).[14]The Decision, addressed to the first to third defendants, reached the following conclusions: i) The first, second and third defendants were representatives of an "association of undertakings" and consequently their decisions were capable of falling within Article 81 of the EC Treaty (now Article 101 TFEU). ii) The MasterCard scheme could operate without any MIF. iii) The EEA MIF restricted competition between acquiring banks by setting a floor under the MSC that acquiring banks charge to merchants, thereby inflating the MSC. iv) The first, second and third defendants were therefore in breach of Article 81(1) of the EC Treaty (now Article 101(1) TFEU) by reason of the EEA MIFs in place between 1992 and December 2007. v) The first, second and third defendants had failed to produce satisfactory evidence that the levels of the EEA MIF met the conditions for exemption under what is now Article 101(3) TFEU. vi) MasterCard was entitled to set an EEA MIF at a level which met those conditions for exemption. vii) The Decision required MasterCard to repeal the then current EEA MIF within six months.[15]Thus, in June 2008 MasterCard reduced the EEA MIF to zero. In June 2009, following discussions with the Commission, MasterCard increased the EEA MIF from zero, but to a lower level than those levels which were the subject of the Decision. The Commissioner responsible for competition indicated that the new levels of EEA MIF would not be challenged as (in the language of Article 101(3)) they would improve the efficiency and transparency of the MasterCard scheme and would provide a fair share of the benefits to consumers and retailers.[16]Appeals against the Decision to the General Court and later to the Court of Justice by the first to third defendants were unsuccessful. MasterCard, therefore, accept that the Decision establishes that the EEA MIF in place between 1992 and December 2007 was in breach of Article 81(1), but point out that the Decision left open at what level the EEA MIF would have met the criteria for exemption under Article 81(3).[17]In each of their claims, the claimants rely upon the Decision, either directly where there is a normal follow-on claim in respect of the EEA MIF for the period 1992 to December 2007, or indirectly by analogy in relation to their other claims.[18]In April 2013 the Commission opened a further investigation in respect of which a statement of objections was sent to MasterCard on 9 July 2015. A Commission press release of the same date states that the statement of objections raises concern in two respects: i) that MasterCard's rules prevent retailers in a high MIF country from benefiting from lower MIFs offered by an acquiring bank in another state, thereby limiting competition between acquirers, and leading to higher prices for retailers and consumers. This concern appears to be, at least in part, directed at the CAR; ii) that the high levels of international MIFs are not justified, thereby leading to higher prices for retailers and consumers.

The existing claims

[19]Before turning to the proposed amendment, it is appropriate to outline the nature and extent of the existing claims. They cover MIFs applicable to relevant transactions in Austria, Belgium, the Czech Republic, France, Germany, Greece, Hungary, Ireland, Italy, the Netherlands, Poland, Portugal, Romania, the Slovak Republic, Spain, Sweden, the United Kingdom and Switzerland. The claims can be broken down as follows. First, claims for damages in respect of the EEA MIF. These comprise: i) EEA MIFs paid between May 1992 and December 2007, which the claimants contend were excessive and unlawful, and resulted in them paying higher MSCs than they would otherwise have done. This head is a follow-on claim, based directly on the Decision; ii) EEA MIFs paid since December 2007 which the claimants contend were also excessive and unlawful, and resulted in them paying higher MSCs than they otherwise would have done. This head of claim relies upon the Decision by analogy. The second category relates to claims for damages in respect of MIFs applied domestically: iii) In countries where the EEA MIF was applied in the absence of a domestic MIF or a bilaterally agreed fee. In respect of these claims, the claimants rely principally on findings in the Decision; iv) In countries where the relevant domestic fee was set either bilaterally or in the form of a domestic MIF set by MasterCard licensees. The claimants argue that these fees were inflated by the EEA MIF. These claims, too, rely principally on findings in the Decision. Also, so far as transactions in Hungary are concerned, reliance is placed on the findings of the Hungarian competition authority. v) In countries where the relevant domestic MIF was set by MasterCard. These claims are stand-alone claims, save in respect of transactions in Italy, in respect of which the claimants rely on the findings of the Italian competition authority. Thirdly, and finally, damages are claimed for so-called "on us" payments. These are payments in circumstances where the acquiring bank was the same bank as the issuing bank, so that no MIF was payable. The claimants contend that MSCs relating to such payments were inflated because the defendants' infringements led to a lack of competition in the acquiring market.[20]It is to the second main category, namely claims in respect of fees applied on intra-country transactions for which domestic MIFs or their substitutes are charged, that the proposed new claim based on the CAR relates, albeit that the new complaint, as pleaded in the amended and consolidated particulars of claim (“APOC”), is framed in different terms, as will be seen.[21]The amendments in the APOC are dated 27 March 2015, which is the date on which the APOC were served on the MasterCard defendants. The amendments were made purportedly pursuant to an order dated 14 November 2014 made by Chief Master Marsh by consent in the proceedings (as later varied by consent), in which he ordered that the defendants should respond to certain requests for further information by 21 November 2014 and that, if so advised, the claimants should file and serve amended particulars of claim by 23 January 2015. The date for filing and serving amended particulars of claim was extended by variations of that order by consent until 27 March 2015. Chief Master Marsh did not purport to grant permission for amendments adding any new cause of action for which permission under CPR Part 17.4 would be required.[22]The claimants claim damages in respect of the period from 1992, save in relation to the claim for transactions in the United Kingdom; the claimants accept that these claims are limited to the normal limitation period of six years for a claim for damages for breach of statutory duty, insofar as they are governed by English law.[23]The MasterCard defendants seek to defend the claims on a number of grounds, including that of limitation. In that respect they argue that there are applicable limitation periods which considerably shorten the periods open to the claimants' claims. The defendants' limitation defences are closely related to issues between the parties as to the proper law of the various claims. The court below gave directions, as had been agreed by the parties, with a view to enabling the overall litigation to be resolved in more manageable chunks. The directions provide for a trial of preliminary issues of limitation and proper law in respect of claims for transactions in a limited number of the 18 countries which represents some 75 per cent of the total claim. The hearing to determine these preliminary issues has been scheduled for May 2017. Both parties said it would be helpful if this court could indicate at the close of the hearing before us what the outcome of the appeal would be, which we duly did, with our reasons and formal determination of the appeal to follow.

The proposed amendment

[24]The proposed amendment relating to the CAR is contained, in particular, in paragraphs 56 and 70 of the APOC. Paragraph 56 states:
"56. Under the MasterCard network rules forming part of the MasterCard MIF, a bank which acquires transactions outside of its Member State of establishment (i.e. a bank located in Country A which offers its services to a merchant transacting in Country B) is called a 'Central Acquirer'. The MasterCard network rules provide that, in the absence of bilateral agreement between a Central Acquirer and the relevant issuing bank, the interchange fee payable by a Central Acquirer for an intra-country transaction is the domestic fall-back interchange fee (if there is one) of the Member State of the transaction. Thus, a Central Acquirer is not permitted to choose to acquire intra-country transactions at the potentially lower rate set by the EEA fall-back interchange fee (the 'Central Acquiring Rule')."
[25]Thus, the specific restriction apparently being emphasised is that the "potentially lower" EEA MIF is not applicable in such cases, as the central acquirer must pay the domestic MIF, if there is one. That paragraph does not go on to deal with the position where no domestic MIF exists. In such a case, as I have said, the MasterCard rules provide that the EEA MIF is to apply.[26]Paragraph 70 of the APOC specifies what is alleged to be the anti-competitive object and effect of the CAR restriction. That paragraph of the pleading reads:
"70. Further or alternatively, the object and/or effect of the Central Acquiring Rule was and is to restrict competition in the relevant product and geographic markets: 70.1 Acquirers (including Central Acquirers) may deviate from the domestic fall-back interchange fee of the Member State of the transaction by bilateral agreement. However, issuing banks would have no or little incentive to agree to bilateral rates lower than the applicable fall-back interchange fee; 70.2 Central Acquirers are prevented or hindered from offering their services in other Member States at prices reflecting the applicable EEA interchange fee; 70.3 Absent the Central Acquiring Rule, domestic acquiring banks would have an incentive to establish themselves in other countries in order to be competitive with existing central acquirers offering MSC rates based on lower interchange fees. Merchants engaging a Central Acquirer would pay an MSC based on the EEA fall-back interchange fee, rather than the domestic interchange fee in their country of operation; 70.4 The Central Acquiring Rule thus artificially partitions the EU into separate national markets by limiting the entry and price competition from Central Acquirers; 70.5 The absence of effective competitive constraints from Central Acquirers reduces the competitive constraints on, and thus inflates, domestic interchange fees (whether bilaterally or multilaterally agreed, or set by MasterCard)."
[27]Again, there is emphasis on the fact that central acquirers are prevented from offering their services at the (implicitly lower) EEA MIF rate, and there is no reference to the position where no applicable domestic MIF exists. This inability to offer central acquiring services based on the EEA MIF rate is the restriction on competition alleged in the new claim, together with the consequent partitioning along national lines of markets for "acquiring". The resultant absence of competition from central acquirers is also said to inflate domestic interchange fees, whether set bilaterally or by default.[28]This complaint therefore, at least to some extent, appears to reflect one of the concerns identified by the Commission in the statement of objections recently sent to MasterCard.

The judgment

[29]The judge identified the difference between the claimants’ existing claims and the new claim in the APOC in respect of the anti-competitive effect of the CAR in this way at paras. [40]-[42]: “40. I have already referred to the admitted fact that, as pleaded, the new claim is different from any of the existing ones. To a greater or lesser extent the latter all rely upon the Decision and an allegation that the application or existence of the EEA MIF directly or indirectly constitutes a restriction on competition. Similarly, insofar as the CAR is relied upon in the original claim, it is to underscore the fact that in certain countries the EEA MIF "automatically applied" when central acquirers were seeking transactions outside their member states of establishment, with the result that the EEA MIF constituted a "floor" to the MSCs, which central acquirers could offer to merchants in other countries (see paragraph 54.4.2 of the original particulars of claim). Thus, in the existing claim the CAR is relied upon as the mechanism by means of which the EEA MIF is applied. That MIF is the essential subject of the complaint.41. Contrast the proposed new claim. There, the existing claim is, on the face of it, turned on its head. In paragraph 70 of APOC, the CAR itself is alleged to be a restriction on competition by object and/or effect, not because it applies the EEA MIF, but essentially because it prevents the application of that MIF. Thus, the new claim focuses on a different aspect of the CAR – namely, that part of the rule which deals with the situation of the central acquirer where there is either a relevant bilateral arrangement or a domestic MIF. The existing pleading does not, as far as I can see, expressly complain of the EEA MIF being excluded.42. It seems odd, in one part of a pleading, to complain of the application of a particular MIF and, in another part, to complain of the non-application of that MIF. The explanation may be that the EEA MIF was at one point, namely after the adoption of the Decision, fixed at zero and at some other points in time, it may have been lower than the bilateral or domestic MIFs in one or more of the 18 or so countries involved in these claims. Whether this is the reason for the apparent paradox is speculation, as no explanation has been given in the pleadings. In any event, the reason may not matter. The issue for me is whether the test discussed earlier is satisfied, so that the amendment may be permitted.[30]In line with the submissions of the parties and the guidance given by this court in Ballinger v Mercer Ltd [2014] EWCA Civ 996; [2014] 1 WLR 3597, the judge considered the claimants’ application to amend to include the new claim by asking to what extent allowing the amendment would place the defendants in the position where, after the expiration of the limitation period, they would have to investigate facts and obtain evidence on matters outside the ambit of those which they could reasonably have been expected to investigate for the purpose of defending the unamended claim: para. [45].[31]The judge held that the new claim in relation to the CAR arises out of the same, or substantially the same, facts as the existing claim. This was on two bases:(i) the claimants’ existing case would require investigation and evidence as to the extent to which the EEA MIF, imposed through the CAR, is likely to have increased the bilateral fees agreed between banks and/or the extent to which the EEA MIF has imposed a cost disadvantage on central acquirers, such that had the EEA MIF been lower, the central acquirers could have competed more effectively with the effect of reducing domestic rates ([52]-[53]); and in any event(ii) if and to the extent that the CAR is not already challenged as unlawful, when the defendants rely upon the existence of the CAR as part of their defence to the existing claim, as part of the background context to support the contention that the EEA MIF would not in fact have been set lower even had the MasterCard rules and practices pleaded to be unlawful in the existing claim not been in place, the claimants are entitled to argue by way of reply that the CAR is unlawful and should thus be discounted in the counterfactual analysis required to examine if the claimants’ existing claim is made out, and since they may do this the new claim can be said to arise out of the same, or substantially the same facts as the existing claim ([66]-[72]). For this latter basis of decision, the judge relied in particular on the decision of this court in Coudert Brothers v Normans Bay Limited [2004] EWCA Civ 215.[32]Mr Hoskins QC, who appears for MasterCard on this appeal, submits that neither basis of decision is sustainable and that on proper analysis the new claim does not arise out of the same or substantially the same facts as the existing claim. Mr Beal QC, for the claimants, seeks to uphold the judge’s decision on both the bases relied on by him. He also submits that the judge has directed himself correctly on the law and has made a case management decision with which this court should not interfere.

Legal framework

[33]Section 35 of the Limitation Act 1980 provides in relevant part as follows: "(1) For the purposes of this Act, any new claim made in the course of any action shall be deemed to be a separate action and to have been commenced-(a) in the case of a new claim made in or by way of third party proceedings, on the date on which those proceedings were commenced; and.(b) in the case of any other new claim, on the same date as the original action. (2) In this section a new claim means any claim by way of set-off or counterclaim, and any claim involving either- (a) the addition or substitution of a new cause of action; … (3) Except as provided by section 33 of this Act or by rules of court, neither the High Court nor any county court shall allow a new claim within subsection (1)(b) above, other than an original set-off or counterclaim, to be made in the course of any action after the expiry of any time limit under this Act which would affect a new action to enforce that claim. ….. (4) Rules of court may provide for allowing a new claim to which subsection (3) above applies to be made as there mentioned, but only if the conditions specified in subsection (5) below are satisfied, and subject to any further restrictions the rules may impose. (5) The conditions referred to in subsection (4) above are the following- (a) in the case of a claim involving a new cause of action, if the new cause of action arises out of the same facts or substantially the same facts as are already in issue on any claim previously made in the original action; ...”[34]CPR Part 17.4 provides:
"(1) This rule applies where – (a) a party applies to amend his statement of case in one of the ways mentioned in this rule; and (b) a period of limitation has expired under – (i) the Limitation Act 1980; (ii) the Foreign Limitation Periods Act 1984; or (iii) any other enactment which allows such an amendment, or under which such an amendment is allowed. (2) The court may allow an amendment whose effect will be to add or substitute a new claim, but only if the new claim arises out of the same facts or substantially the same facts as a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings. ..."
[35]It is clear from the structure of CPR Part 17.4(2) that the court only has a discretion to allow an amendment (“may allow …”) to introduce a new claim (i.e. cause of action) into an existing claim where a limitation period defence will be circumvented by operation of the “relation back” rule when a prior condition has been satisfied, namely that the new claim arises out of the same or substantially the same facts as the already existing claim. Although it is sometimes said that this is substantially a matter of impression (see Welsh Development Agency v Redpath Dorman Long Ltd [1994] 1 WLR 1409, at 1418 per Glidewell LJ), it was emphasised by Millett LJ in Paragon Finance plc v DB Thakerar & Co. [1999] 1 All ER 400, CA, at 418, that while in borderline cases this may be so, “In others it must be a question of analysis” (and see Ballinger v Mercer Ltd at [36], set out below). It is clear from Part 17.4(2) itself that the condition must be satisfied before permission to amend can be granted in a case to which it applies. In some cases, that may involve an evaluative judgment by the court in which it is possible to say that there is more than one answer which could rationally be given on the point, and in relation to which it could not be said of any of those answers on appeal that it is “wrong” such that an appeal should be allowed (CPR Part 52.21(3)(a)). In other cases, the issue may be more clear-cut and admit of a single answer which is right, so that if a different answer is given by a judge it can readily be seen on appeal to be wrong. In both sorts of case it is, strictly, a matter of analysis whether the judge has made the proper or an acceptable evaluation on the question whether the condition has been satisfied.[36]This is a substantive question of law, and an important one. Parliament has decided that valuable limitation defences which it has introduced for the benefit of defendants should only be circumvented by operation of the “relation back” rule where the precondition has been satisfied. This is not a matter of discretion for a judge.[37]On this appeal, therefore, I do not accept Mr Beal’s contention that the judge’s decision to allow the introduction of the new claim in the APOC to allege that the CAR is an unlawful restriction on competition is a case management decision with which this court should not interfere. In my judgment, on proper analysis the condition in CPR Part 17.4(2) is not satisfied and the judge erred in his assessment that it was and in granting permission to amend to introduce the new claim with the benefit of the “relation back” rule. This court is therefore in a position to say that the judge was wrong and the appeal should be allowed, for the reasons which follow.

First basis of decision: the claimants’ original pleading in its particulars of claim

[38]In Ballinger v Mercer Ltd,Tomlinson LJ, in a judgment with which Briggs LJ and Lord Dyson MR agreed, explained at para. [25]:
"If a new claim is permitted by way of amendment it is treated as having been made by way of a separate action commenced on the same date as the original action. So where an amendment is permitted to introduce a new claim which was in time at the date of commencement of the action but arguably out of time on the date on which permission to amend is granted, the defendant is thereafter precluded from reliance at trial on the arguable limitation defence."
[39]It is common ground that insofar as the "relation back" rule applies, it applies to the same extent when the relevant limitation period is determined by reference to foreign law. That is the effect of section 1 of the Foreign Limitation Periods Act 1984.[40]In his judgment, Tomlinson LJ helpfully drew together some of the leading authorities on the test of "arising out of the same or substantially the same facts". At paras. [34] to [37] he said this: "34. Helpful guidance as to the proper approach to the resolution of this question was given by Colman J in BP Plc v Aon Ltd [2006] 1 Lloyds Rep 549, 558 where he said: ‘52. At first instance in Goode v Martin [2001] 3 All ER 562 I considered the purpose of section 35(5) in the following passage: 'Whether one factual basis is 'substantially the same' as another factual basis obviously involves a value judgment, but the relevant criteria must clearly have regard to the main purpose for which the qualification to the power to give permission to amend is introduced. That purpose is to avoid placing a defendant in the position where if the amendment is allowed he will be obliged after expiration of the limitation period to investigate facts and obtain evidence of matters which are completely outside the ambit of, and unrelated to those facts which he could reasonably be assumed to have investigated for the purpose of defending the unamended claim. 53. In Lloyds Bank Plc v Rogers [1997] TLR 154 Hobhouse LJ said of section 35: 'The policy of the section was that, if factual issues were in any event going to be litigated between the parties, the parties should be able to rely on any cause of action which substantially arises from those facts.’ 54. The substance of the purpose of the exception in subsection (5) is thus based on the assumption that the party against whom the proposed amendment is directed will not be prejudiced because that party will, for the purposes of the pre-existing matters [in] issue, already have had to investigate the same or substantially the same facts.'35. In the Welsh Development Agency case [1994] 1 WLR 1409 Glidewell LJ said, in an often quoted passage at p 1418, that whether or not a new cause of action arises out of substantially the same facts as those already pleaded is substantially a matter of impression.36. Less well known perhaps is the cautionary note added by Millett LJ in the Paragon Finance case [1999] 1 All ER 400, 418, where he said, after citing the passage from Glidewell LJ to which I have just referred: 'In borderline cases this may be so. In others it must be a question of analysis.37. I would also point out, as did Briggs LJ in the course of the argument, that 'the same or substantially the same' is not synonymous with 'similar'. The word 'similar' is often used in this context, but it should not be regarded as anything more than a convenient shorthand. It may serve to divert attention from the appropriate inquiry." ‘52. At first instance in Goode v Martin [2001] 3 All ER 562 I considered the purpose of section 35(5) in the following passage: 'Whether one factual basis is 'substantially the same' as another factual basis obviously involves a value judgment, but the relevant criteria must clearly have regard to the main purpose for which the qualification to the power to give permission to amend is introduced. That purpose is to avoid placing a defendant in the position where if the amendment is allowed he will be obliged after expiration of the limitation period to investigate facts and obtain evidence of matters which are completely outside the ambit of, and unrelated to those facts which he could reasonably be assumed to have investigated for the purpose of defending the unamended claim.[41]In Goode v Martin [2001] EWCA Civ 1559; [2002] 1 WLR 1828 the claimant suffered injury whilst a guest on the defendant's yacht. She issued a claim for negligence based upon a particular factual account of a witness. The defence pleaded a different factual account of the accident. After the limitation period had expired, the claimant sought to amend her statement of claim to plead an alternative case, based on the defendant's version of the facts. Brooke LJ, in a judgment with which Latham and Kay LJJ agreed, held that the amendment should be allowed. He prayed in aid subsection 3(1) of the Human Rights Act 1998 and the overriding objective in Rule 1 of the CPR, in order to interpret Rule 17.4(2) consistently with the language of subsection 35(5)(a) of the 1980 Act. This meant interpreting the rule as if the words "are already in issue on" in the corresponding passage in subsection 35(5)(a) were also present in the rule (see para. [46]). At para. [42], Brooke LJ said:
"The 1998 Act, however, does in my judgment alter the position. I can detect no sound policy reason why the claimant should not add to her claim, in the present action, the alternative plea which she now proposes. No new facts are being introduced: she merely wants to say that if the defendant succeeds in establishing his version of the facts, she will still win because those facts too show that he was negligent and should pay her compensation."
[42]The important feature of Goode v Martin is that in order to make out her newly formulated claim, the claimant did not need or propose to introduce any additional facts or matters beyond those which the defendant himself had raised in his pleaded defence. In effect, the claimant was allowed to say, “Well, if you are going to defend yourself against my existing claim by reference to those facts you have now pleaded in your defence, I rely on those very facts (if established at trial) to say that you are liable to me”. In such a case, the defendant has chosen to put those facts in issue in relation to the claimant’s existing claim and there is no unfairness and no subversion of the intended effect of the limitation defence introduced by Parliament to allow the claimant to rely on the defendant’s own case as part of her claim against him.[43]This sets the context for examination of whether Barling J was correct in his assessment for the purposes of the first basis for his decision referred to at paragraph [31] above. As I have already indicated, in my view he fell into error on this point.[44]As highlighted in the judge’s helpful analysis of the factual context in this case, there is an important difference between the claimants’ existing claim and their proposed new claim to challenge the lawfulness of the CAR. On their existing claim, the CAR is not alleged to be unlawful. There is a passing reference to it in the claimants’ existing pleading at para. 54.4.2 of the unamended particulars of claim as factual context, but it is not said to be a rule which is anti-competitive in its object or effect (by contrast with the new pleaded claim in paras. 56 and 70 of the APOC). This difference has an important impact in terms of what factual matters the MasterCard defendants could reasonably be expected to investigate in relation to the existing claim, as compared with the new claim.[45]As Mr Hoskins demonstrated by reference to the leading authority of Case T-328/03 O2 (Germany) GmbH & Co OHG v European Commission [2006] 5 CMLR 5, in particular at paras. [68]-[73], a claim under Article 101 TFEU (ex 81 EC) that a particular agreement is anti-competitive in its effect and hence unlawful depends upon comparison of the effects of such agreement in the real world with a counterfactual world in which the putatively unlawful agreement (or the rule or practice which gives expression to it) is eliminated. As the Court of First Instance said at para. [71]:
“The examination required in the light of Article 81(1) EC consists essentially in taking account of the impact of the agreement on existing and potential competition … and the competition situation in the absence of the agreement …”
. Mr Beal did not dispute this.[46]That this is the form of analysis required is critically important in the present case. On the claimants’ existing claim, the court will have to examine whether the relevant market or markets would have been significantly different and more competitive in a counterfactual world in which the MasterCard rules which are in issue on that existing claim were excised, but in which the CAR remained in place. By contrast, on the claimants’ new claim, the court will have to examine whether the relevant market or markets would have been significantly different and more competitive(a) in a counterfactual world in which the MasterCard rules which are in issue on the existing claim were excised and the CAR was excised as well or(b) in a counterfactual world in which the MasterCard rules which are in issue on the existing claim remain in place but the CAR is excised. The factual inquiries which would be required if the new claim is added are thus very different from those required if it is not. This clearly indicates, in my view, that the new claim does not arise out of the same or substantially the same facts as are already in issue on the existing claim.[47]Against this, Mr Beal submits that the expert witnesses who will be instructed to investigate the existing claim will have to know about the CAR and take it into account in their analyses. That is undoubtedly correct, precisely because their analyses for the purposes of the existing claim must seek to construct a counterfactual world in which the CAR is present and has an effect. But this is not enough to satisfy the demanding test in CPR Part 17.4(2). As explained in the previous paragraph, the factual inquiries required for the new claim will have to go well beyond simple knowledge about and application of the CAR in the requisite counterfactual world. In relation to the new claim, they will have to strip out the CAR in constructing the relevant counterfactual world, to see what the commercial environment would have looked like without it.[48]Mr Beal also submitted that the submission now made by Mr Hoskins, who did not appear below, was not made to the judge by Mr Cook, who did. Accordingly, says Mr Beal, MasterCard should not be permitted to raise this point on appeal.[49]In my view, there are two answers to this submission. First, I consider that on a fair reading of Mr Cook’s skeleton argument in the court below the issue was fairly and distinctly raised: see in particular para. 107(b) which identified as a feature of the new claim that it is maintained that “The object and effect of the [CAR] was to restrict or distort competition – there was no such case previously”. Particularly before a judge like Barling J with deep knowledge of and expertise in competition law, this was sufficient to intimate the nature of the argument which MasterCard wished to raise, and it is notable that the judge himself understood that counterfactual analysis would be required in relation to the existing claim and in relation to the new claim (see his heading “Counterfactual analysis/causation”, for the section of his judgment at paras. [63]-[73]).[50]Secondly, and in any event, the point is a pure point of law, since the difference between the two kinds of factual analysis which are required for the purposes of the existing claim, on the one hand, and for the new claim, on the other, is a function of the legal principles which govern unlawful competition claims of this sort. Once those principles are taken into account, it can be seen on a proper analysis of the legal position that the claimants’ new claim does not arise out of the same or substantially the same facts as their existing claim. The point has been taken in good time by MasterCard in advance of this appeal. Accordingly, had it been necessary to do so, I would have given MasterCard permission to argue this point even had it not been raised below.[51]Following on from the analysis above, the present case does not fall within the principle identified in Goode v Martin and the interpretation of CPR Part 17.4(2) set out in that case. In their defence to the existing claim, the MasterCard defendants are not relying on a counterfactual world in which the CAR has to be ignored, as would be the case for the purposes of the claimants’ new claim. Far from it. The defendants positively maintain in their defence that the CAR would be in place in the relevant counterfactual world for the purposes of the claimants’ existing claim.[52]For these reasons, I do not think that the judge’s decision can be supported on the first basis relied on by Mr Beal.

Second basis of decision: reliance on the claimants’ pleaded reply

[53]I will now deal with the claimants’ alternative submission, relying on the second basis of decision given by the judge, namely that the condition in CPR Part 17.4(2) was satisfied in this case because of the way in which the claimants had pleaded their case in their Reply dated 22 October 2013.[54]MasterCard, in their Defence to the original claim, in substance admitted the existence of the CAR (as referred to in the claimants’ original particulars of claim at para. 54.4.2, where it was not alleged that it was an unlawful restriction on competition) and denied that the fact that EEA fallback interchange fees applied as a default to acquiring banks acting as central acquirers in relation to cross-border transactions between EEA Member States had any material effect upon the level of merchant service charges available to local merchants (para. 98); and also pleaded that they would rely on the fact that interchange fees for domestic transactions in the EEA have not reduced following the reduction in the EEA fallback interchange fees to zero on 12 June 2008 and the new (lower) levels of EEA fallback interchange fees introduced on 1 July 2009. In their Reply, at para. 77, the claimants pleaded that it would have been unlawful for MasterCard or the domestic banks to set domestic MIFs at the same or similar level to that which in fact applied, “and such a hypothesis is therefore not an appropriate basis for a counterfactual”, because (among other reasons) such conduct would have been contrary to Article 101 TFEU, as such rate-setting would have constituted decisions by an association of undertakings which would have had the object and/or effect of restricting competition. The particulars of infringement then set out included, at para. 77.2, the repetition of the matter pleaded in para. 54.4.2 of the original particulars of claim. There was no distinct pleading in the Reply that the CAR was unlawfully anti-competitive in its object or effect.[55]Mr Beal, relying on Coudert Brothers v Normans Bay Ltd, submits that the claimants are entitled to succeed in their application under CPR Part 17.4(2) to introduce the new claim in the APOC on the ground that by their own pleading in the Reply they have raised facts and matters in the existing action which allow them to say that their new claim “arises out of the same facts or substantially the same facts as are already in issue on a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings” (i.e. pursuant to Part 17.4(2) as interpreted in Goode v Martin). I do not accept this submission.[56]In Coudert Brothers the claimant (IML) sued the defendant lawyers (Coudert) in respect of advice received in relation to an investment in shares in a Russian company which was lost because it was held to be invalid by the Russian courts, including on appeal, primarily because it was not in conformity with Russian privatisation legislation, with a subsidiary reason at first instance being that the investment had not been cleared with the Russian competition authorities. IML pleaded that the first point could have been circumvented had proper advice been given and that, as regards the second point, the lower instance court decisions were wrong to say that the investment required clearance by the competition authorities, so that this point in fact had no impact on the chain of causation flowing from the alleged negligent advice given in relation to the first. Coudert pleaded that the investment did require such clearance, which was not forthcoming, and that this broke the chain of causation. In its reply, IML pleaded that such clearance was not required, but if it was required the failure to obtain it was also due to Coudert’s negligence. Coudert’s rejoinder stated that even if there had been negligence in this regard, the claim in relation to that negligence was statute barred, so IML could not rely on it.[57]This court held that IML was entitled to rely on the allegation of negligence in relation to the competition clearance point. The ratio of the decision is that this was permissible because IML was not relying on this allegation as a cause of action in itself, but in order to counter Coudert’s argument that there was a break in the chain of causation in respect of the loss of a chance said to flow from Coudert’s alleged negligence in advising on the privatisation law point, which was a cause of action which had been pleaded inside the limitation period. As Waller LJ explained at [46]-[47]:
“46. … IML does not need to rely, and indeed does not seek to rely, on the failure to obtain permission, to establish the chain of causation ofthat loss of a chance. It is Coudert who want to reduce the value of the chance, by asserting they failed to do something which would have lowered the chance. Is there a principle which disallows a defendant from relying on a wrong which he has committed in order to reduce the damages that would otherwise flow from a tort or breach of contract? It seems to me that there should be such a principle, and that is what Lord Brown Wilkinson was recognising. It is quite difficult to say why it should be so, other than that it flows from public policy where it is a principle that a person should not be entitled to rely on their own wrong in order to secure a benefit. It is furthermore not unfair to apply such a principle. Damages would flow from the original act of negligence; why should Coudert be allowed to rely on a further act of negligence to reduce that damage? 47. Furthermore I am not sure it is right to categorise allowing IML to stop Coudert relying on their own negligence, as providing IML with a claim which is statute barred. IML are not seeking to recover damages for the failure to secure anti-monopoly permission, they are simply seeking to prevent Coudert breaking the chain of causation of the damages, which flow directly from the loss of a chance which they should have provided to IML. That is something surely they are entitled to do by way of reply as they have pleaded in this case.”
[58]Laws LJ and Carnwath LJ agreed with this part of Waller LJ’s judgment, at [65] and [69] respectively. This reasoning does not assist the claimants in the present appeal.[59]However, Waller LJ expressed the view, obiter, at [48]-[53], that the interpretation of CPR Part 17.4(2) given by this court in Goode v Martin would have meant that IML could have applied to amend its particulars of claim prior to trial (but outside the limitation period) to incorporate in that pleading what it had pleaded in its reply, and would have been granted permission for that amendment. He said this at [53]:
“ …. if (out of an abundance of caution) IML had sought leave to amend their particulars of claim prior to this trial, limited to asserting simply what they were already asserting in their reply, it seems to me that they should have got leave either on the basis that they were not pleading a new cause of action and thus did not need the assistance of CPR 17.4(2), or on the basis of CPR 17.4(2) as interpreted by Goode v Martin.”
[60]Laws LJ disagreed with this at [65], as follows:
“ … I take issue, with respect, only with what my Lord has said as to the alternative possibility that in order to rely in this context on what is said to be Coudert's own fault as regards the anti-monopoly point, IML might properly be allowed to amend their particulars of claim. In my opinion IML's case on causation in this respect properly arises, and only arises, by way of reply to Coudert's denial of causation: and of course that is exactly how the matter was in fact pleaded. Any amendment to the particulars to rely on Coudert's own fault in relation to the anti-monopoly point, if that were sought, could only have as its proper purpose a broadening of the front on which IML were putting their case as a matter of primary claim, not response to the defence. I would not have allowed any such amendment at this late stage in the proceedings. I acknowledge that my Lord's own view is that such an amendment is in fact unnecessary to raise the point being taken as to causation. But I should add that on the view I take, with respect nothing I think is owed to this court's decision in Goode v Martin [2001] EWCA Civ 1899.”
[61]Carnwath LJ at [69] said that, like Laws LJ, he preferred to dispose of the anti-monopoly point by reference to principles of causation and that he agreed with what Laws LJ said on that issue; and no amendment of the particulars of claim was necessary for IML to be allowed to introduce the allegation of negligence in relation to that point as an answer to Coudert’s defence based on a break in the chain of causation. Rather cryptically he added, “I take some comfort from Goode v Martin [2001] EWCA Civ 1899, in that it provides an answer to any concerns that a time-barred issue is being brought in by the back-door.”[62]In the present appeal, for his alternative submission, Mr Beal relies on these obiter views of Waller LJ and Carnwath LJ to contend that the claimants are entitled to permission under CPR Part 17.4(2) to introduce their new claim in the APOC with the benefit of the “relation back” rule, to defeat MasterCard’s limitation defence.[63]In my judgment, Mr Beal’s submission should be rejected for two reasons. First, with respect, I do not consider that Goode v Martin supports the approach set out by Waller LJ in his obiter comments. I agree with the doubts expressed by Laws LJ on that score. I have already set out above what I consider to be the limited effect of Goode v Martin. It does not cover a case where it is not the defendant who introduces a new factual element into the pleaded issues by his own pleaded case, but rather where it is the claimant who introduces a new factual element by his own pleading in reply to the defence.[64]Moreover, in my view it would be unfair to a defendant and would improperly subvert the intended effect of limitation defences set out in the Limitation Act if a claimant were to be able to introduce new factual averments in its reply (which are not the same as or substantially the same as what is already pleaded in the claim), after the expiry of a relevant limitation period, and then rely on that as a reason why it should be able to amend its claim with the benefit of the “relation back” rule to circumvent that limitation period. A claimant has to sue within time, as defined by the statute. If it fails to do so, it cannot retrieve the position by the simple expedient of introducing new matters in its reply and then making an application to amend pursuant to CPR Part 17.4(2). (If the reply refers to a new claim pleaded by reference to facts set out in the reply which are the same facts or substantially the same facts as already pleaded for the existing claim, one would not need to refer to the reply to justify the amendment of the claim to add that new cause of action, because Part 17.4(2) would be satisfied in any event).[65]Secondly, even if Waller LJ were correct in his approach, he was careful at para. [53] of his judgment to limit the effect of CPR Part 17.4(2) to an amendment of IML’s particulars of claim “limited to asserting simply what they were already asserting in their reply.” By contrast, in the present case, on a fair reading of the claimants’ reply, they did not allege in it that the CAR is itself an unlawful restriction on competition. The reply no more set out the relevant allegations for the claimants’ new claim in respect of the CAR than did their original particulars of claim, the relevant part of which was simply repeated in the reply. The first time MasterCard was put on notice in the pleadings that the claimants wished to raise a distinct new cause of action based on an assertion that the CAR was itself unlawful, which would require new and different factual investigations from those already required in respect of the claimants’ existing claim, was when the claimants amended their particulars of claim in the form of the APOC; and the claimants needed to ask for permission under CPR Part 17.4(2) to introduce that new cause of action. Accordingly, the claimants cannot bring themselves within the scope of the relevant rule, even on Waller LJ’s view about its ambit.[66]For these reasons, I do not consider that the judge’s decision can be upheld on the second basis contended for by Mr Beal any more than on the first. Accordingly, I would allow MasterCard’s appeal.

Relevant time for the purposes of limitation

[67]Finally, I turn to deal with the question of the date which the court should hold is the relevant date for the purposes of the operation of applicable limitation periods. The claimants say it should be 27 March 2015 when they served the APOC in purported compliance with the order made by Chief Master Marsh in November 2014, as extended. The MasterCard defendants say that it should be 7 August 2015, when the claimants’ application to amend pursuant to CPR Part 17.4(2) was served, on the footing that they accept the guidance given in that regard by Field J in William Morrison v MasterCard.[68]In my judgment, MasterCard’s submission must be preferred. The order made by Chief Master Marsh did not purport to give the claimants the permission that they required under CPR Part 17.4(2) to amend their claim to introduce the new cause of action after the expiry of a relevant period of limitation. He had not been asked to grant permission to introduce a new claim outside a relevant limitation period and had not addressed the critical question whether the condition in Part 17.4(2) had been satisfied. Accordingly, on its true construction the permission to amend that the Chief Master granted in his order did not cover the amendment to introduce the new claim in the APOC, for which specific permission under Part 17.4(2) was required.[69]I can see no good reason why the date of compliance with an order which did not address the critical limitation issue should be the relevant date for limitation purposes, rather than the date (7 August 2015) on which the claimants made the application they needed to make under Part 17.4(2) to introduce this new claim into the action. The claimants could, of course, have issued their application under Part 17.4(2) for the permission they needed in order to amend to introduce the new cause of action at the same time as they served the APOC, but at that stage they failed to face up to the fact, as they should have done, that they needed permission under Part 17.4(2) and allowed time to slip by until 7 August 2015. It would be unfair to MasterCard to allow the claimants to avoid the limitation consequences of their own failure to apply to the court in proper time for the proper permission to amend that was required.

Conclusion

[70]For the reasons given above I would allow MasterCard’s appeal. I would order that the relevant date for limitation purposes is 7 August 2015.[71]I agree.[72]I also agree.

Cited in 17 later judgments

and 8 more of the most senior