JML Direct Ltd v Freesat UK Ltd [2009] EWHC 616 (Ch)

[2009] EWHC 616 (Ch)Case No HC08CO2940
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 26 March 2009
Before
MR JUSTICE BLACKBURNE
Between
JML Direct LtdClaimantFreesat UK LtdDefendant
Robert Howe QC and Mark Gay (instructed by DLA Piper LLP) for ClaimantTim Ward and Ben Lask (instructed by BBC Commercial & Regulatory/Legal Department) for DefendantHearing Hearing dates: 26 th, 27 th and 30 th January 2009
Judgment

Introduction

[1]The claimant, which I shall refer to simply as JML, provides shopping channels on the digital multi-channel satellite television service that was launched last May in the United Kingdom and is operated by the defendant. The service is called “Freesat”. For convenience I shall also refer to the defendant as Freesat.[2]Freesat has allocated positions to JML’s two shopping channels under the shopping part (or genre) of the screen programme guide provided by the new service which are lower down the list of shopping channels than JML says that they should be. Neither channel appears on the first page (or screen view) of that part of the programme guide when accessed by the viewer. JML contends that under the relevant agreement between itself and Freesat, Freesat was obliged to comply with its (Freesat’s) published policy on the matter - the so-called “Listing Policy” - and with the applicable Ofcom Code. The latter, amongst other things, requires Freesat to “publish and comply with an objectively justifiable method of allocating listings”.[3]This is the expedited trial - the claim form having been issued as recently as last October - of questions of liability, but not quantum, arising out of JML’s complaint. Mr Robert Howe QC and Mr Mark Gay have appeared for JML. Mr Tim Ward and Mr Ben Lask have appeared for Freesat.[4]It is common ground between the parties that channel providers such as JML wish to be as high up the listings of their particular genre - in this case the shopping genre - as possible since, in the view of JML, a shopping channel’s position on the electronic programme listings (known as the “Electronic Programme Guide” or “EPG” for short) is key to its prominence to viewers and hence to the number of people who visit the “shop” and buy articles.[5]JML contends that Freesat failed, in breach of contract, to comply with its contractual obligations in that(a) it failed to use certain of the listing criteria contained in the Listing Policy;(b) it used criteria which it had not published and(c) it allocated the channels irrationally, in a subjective manner, and not in accordance with an objectively justifiable, or published, method. By JML’s amended particulars of claim, and in the events that have happened, the relief claimed is (1) a declaration that Freesat’s listing of JML’s channels was (and is) invalid and (2) a declaration that Freesat is obliged to perform its obligations by re-listing JML’s channels in accordance with the applicable contractual requirements, ie the relevant provisions of the agreement between itself and Freesat, the Listing Policy and the Ofcom Code. A claim for specific performance of Freesat’s applicable contractual requirements is no longer sought.[6]Freesat denies that it has acted in breach of its contractual obligations and denies therefore that JML is entitled to the declaratory relief claimed, or to any relief.

The parties

[7]JML is a business which specialises in the selling of products requiring promotion at the point of sale. It does this by such things as advertising its products in newspapers and magazines and by selling its products through well-known shopping chains, by mail order, over the internet and, relevantly to these proceedings, through its television shopping channels.[8]The JML group was founded by Mr John Mills in 1986. Mr Mills is chairman of JML’s parent company. According to his unchallenged evidence the group has grown into a very successful business with approximately 300 employees and an annual turnover in 2007 of just over £47 million (and with forecast turnover for 2008 at £62 million). It has won numerous business awards. Mr Mills gave evidence before me.[9]Freesat - the new multi-channel digital satellite service (or “platform”) - was launched on 6 May 2008. The service is therefore less than a year old. It is a 50/50 joint venture between the BBC and ITV (each through wholly owned subsidiaries). According to Ms Emma Scott, Freesat’s managing director and, until 29 September 2007, an employee of the BBC, Freesat is run on a not-for-profit “break even” basis with all income spent on managing, developing and promoting the Freesat services to viewers. It has a staff of 22. Ms Scott was the only other witness who attended to give evidence before me.

Digital television in the United Kingdom

[10]A little background to the new Freesat service will explain the context to this dispute. What follows is taken largely from the evidence of Ms Emma Scott, which in this respect was not challenged by JML.[11]Digital television, ie television by digital signal, is one of two ways in which television is currently transmitted in the United Kingdom, the other being traditional analogue television, ie by analogue signal. Analogue television pictures are received by a traditional rooftop aerial and have, historically, been the principal means by which television is transmitted in the UK. Only five television channels are transmitted and can be received by the analogue signal: BBC One, BBC Two, ITV 1, Channel 4 (S4C in Wales) and, for most of the UK, Five. Viewers who have analogue television only are restricted to these channels.[12]The analogue television distribution network is currently being phased out, to be gradually replaced by digital television across the UK. The “digital switchover” began in November 2008 and is due to be completed in 2012, when analogue television broadcasts in the UK will be switched off.[13]Digital television has the potential to allow a very large number of television and radio services to be received by the viewer, and thus offers far greater choice to the viewer. The technology also provides the potential for other benefits such as interactive services (eg digital text) and the ability for consumers to choose to subscribe to additional channels. Another benefit of digital television is that it allows the transmission of so-called “high definition” (or “HD”) television on certain digital television systems. HD, which is said to provide exceptional picture quality and greatly enhanced sound quality, is currently only available through satellite and cable distribution systems.[14]Digital television in the UK is broadcast through three technical distribution systems: digital terrestrial television (via an aerial), cable, and satellite. Access to it in the UK is provided by both commercial and not-for-profit operators. Each operator provides a different television “service” to consumers depending on the technology used. Access is either on a “pay TV” subscription basis, or on a “free-to-air” basis, ie at no cost to the viewer. Operators currently providing subscription-based access to digital television are BSkyB (“Sky”) via a satellite dish, Virgin Media and Tiscali via cable, two others via digital terrestrial (via an aerial) and BT Vision via a combination of cable and digital terrestrial (via an aerial).[15]There are three non-subscription digital television service operators: Freeview and Freesat, both of which are not-for-profit organisations, and FreesatfromSky, offered on a commercial basis by Sky. Freeview was the first free-to-air digital television service in the UK. Freeview is the brand name of DTV Services Ltd. It is owned by BBC Free to View Ltd (a company owed by the BBC), SDN Ltd (a company owned by ITV plc), Channel 4, BSkyB and Arqiva (a transmission provider).[16]Freeview was launched in October 2002 and is now received in approximately 9.3 million homes in the UK (out of a total of 25.5 million homes). Freeview’s aim, according to Ms Scott, is to drive digital take-up in the UK ahead of digital switchover and ensure UK viewers can enjoy the benefits of greater channel choice. It offers approximately 40 television channels as well as radio stations and some interactive services. It operates via the digital terrestrial system and is received via a rooftop aerial together with a digital receiver contained either in a set-top box or in an integrated television set. Freeview, Ms Scott says, has been successful in spreading the benefits of digital television and, as a result, of paving the way for the digital switchover but is subject to technical limitations. These are, she says, that it is limited to a relatively small number of digital channels (as compared with other digital television technologies which permit hundreds of channels to be broadcast) and does not have full coverage in all parts of the UK (approximately 27% of the population cannot receive it, even if they have the necessary equipment, a proportion which rises to 39% in Northern Ireland and 46% in Wales). Currently, Freeview broadcasts no HD television services (and lacks sufficient bandwidth to broadcast more than a limited number of such services) and the interactive services that it is able to offer are relatively limited due to the same technical constraints.[17]In addition to Freeview, Sky’s “FreesatfromSky” is offered via a satellite dish plus a Sky digital receiver. It is only available to consumers via a viewing card. According to Ms Scott, it is believed in the industry that this service is received in not more than a few hundred thousand households and that there is no guarantee that it will continue to exist.[18]The only other free digital television service in the UK is Freesat.

Freesat

[19]As I have mentioned, Freesat provides free access to digital satellite television, including HD television, radio and interactive services, with no contract or subscription. Its customers purchase either a Freesat-approved digital receiver (namely, a set-top box) or a television with Freesat digital tuner built in. This enables free access to all services broadcast over the Freesat platform. Freesat itself - the company - does not produce or sell the receiving equipment. It is, as I have mentioned, a not-for-profit organisation. Its income, currently totalling £9 million, is generated from shareholders and from charging channel and service providers, such as JML, for their presence on the television service.[20]According to its Business Plan, Freesat’s mission is:
“(i) To assist in driving the take up of digital television in UK analogue homes, which are predominantly in out of Freeview coverage areas, by providing a guaranteed non-subscription digital satellite television service; and (ii) To provide a free-to-view digital upgrade path to ensure that the UK public can be offered developments in digital television, including High Definition, guaranteed free from subscription, in perpetuity.”
Other television services are envisaged using programmes delivered by the internet.[21]When it was launched in early May 2008, Freesat offered 85 channels and services. As of 9 January 2009, that number had increased to 175 channels. Currently it has the capacity to provide approximately 400 such services. The channels and other services are provided by broadcasting companies, such as the BBC, ITV and JML, and are delivered via satellite. The actual process of delivering the channels and services from studios to the Freesat-approved receiver in the viewer’s home is provided by third parties contracting with the channels under separate agreements. Freesat itself does not own or control the satellite links by which channels and services are transmitted; neither does it contract with channels to deliver such services.[22]Because Freesat’s essential service is to produce and manage an electronic programme guide - the so-called EPG - Freesat is classed as a “platform” by Ofcom. The EPG is transmitted to the receiver in the viewer’s home alongside the television and other services. It displays the programme information in a way that may be likened to an electronic version of a television listings magazine. It does so by listing on screen the available services (for example, television and radio channels) and programme information for eight days in advance and allows the viewer to navigate and select services via a remote control device. It also provides a brief description of each programme for each channel service listed in the EPG.[23]The television and other services listed in the Freesat EPG are listed in return for an annual EPG listing fee of £30,000. This is a flat rate charge, irrespective, I was told, of the size of the provider. It applies irrespective of the nature of the service, its popularity, or its position in the EPG. There is also an initial one-off registration fee of £1,500 per channel. The EPG listing is provided pursuant to an agreement entered into between Freesat and the entity wishing to become a channel provider on the Freesat platform. I shall come later to the relevant provisions of the agreement.[24]In autumn 2007, following a marketing build-up, Freesat launched its invitation to channel providers to participate in the launch of the new service. The invitation came to JML’s knowledge and on 19 November, after contacting Freesat and obtaining the necessary documentation, it submitted two completed launch application forms (the “LAF”) to Freesat seeking the inclusion of two of its shopping channels on the Freesat platform on its launch in 2008.[25]On 5 February 2008 Freesat e-mailed JML to confirm that Freesat wished JML to be one of the first channels on the new platform allocated to the shopping genre. The e-mail set out the next steps in the process and attached copies of, among other documents, the latest version of Freesat’s Listing Policy and its standard EPG agreement (“the EPG Agreement”) for signature. As regards the latter, the e-mail stated that it was a standard agreement which every channel must sign and return and that Freesat would not be able to complete a channel’s application without the signed agreement. It warned that an amendment to it might be sent within the following week or so “reflecting some process arrangements which are currently being finalised” and recommended waiting until Tuesday 12 February 2008 before reading and signing the agreement. At the same time it emphasised that the EPG Agreement had to be completed and returned by 27 February 2008 at the latest.[26]Aware from the Listing Policy (to which I shall shortly come) that the date of entry by the channel provider into the EPG Agreement was one of the criteria published by Freesat for the allocation of EPG numbers (and therefore of apparent relevance to the position of the channel on the screen view of the shopping genre to which it was seeking to be allocated) JML did not question any of the terms of the agreement. Instead, it signed the EPG Agreement and returned it to Freesat on 12 February 2008. This was the earliest date for doing so according to Freesat’s 5 February e-mail.

The contractual documentation

[27]This brings me to the contractual documentation. Ignoring a subsequent amendment made on 18 March 2008 which is irrelevant to the issues which fall for decision, the EPG Agreement provides, so far as material, as follows:
“3. Provision of EPG Services 3.1 Freesat shall provide the EPG Services set out in Part A of Schedule 2 in respect of the Channel in accordance with the Listing Policy. 3.2 The Channel Provider shall comply with the obligations set out in Part B of Schedule 2 … 3.4 The Channel Provider recognises that it has no right or entitlement to any particular LCN and that LCNs are allocated by Freesat at its discretion in accordance with the Listing Policy.”
LCN is a reference to the channel number and, thus, to the channel’s position on the EPG for that genre. “10.1 Freesat shall provide the EPG Services: 10.1.1 in accordance with all applicable laws and regulations (including, for the avoidance of doubt, the Ofcom Code); … 10.1.3 in accordance with the Listing Policy.” 10.1.1 in accordance with all applicable laws and regulations (including, for the avoidance of doubt, the Ofcom Code); … 10.1.3 in accordance with the Listing Policy.”[28]Part A of Schedule 2 specifies, among other matters, that if satisfied that the channel provider has complied with its pre-launch obligations detailed in section 1 of Part B of the schedule, then Freesat would, no less then two months prior to the channel launch, confirm to the channel provider its LCN and channel genre. It also states that Freesat will “list the channel in the Freesat EPG … in the Channel genre and at the LCN allocated in accordance with the Listing Policy.”[29]The Listing Policy referred to in clauses 3 and 10 of the EPG Agreement was the Listing Policy sent to JML under cover of the e-mail of 5 February 2008. (The Policy was subsequently revised in immaterial respects on 14 March 2008.)[30]The Listing Policy included the following sections:
“1. Introduction 1.1 This document states the policy of…Freesat…for the allocation of…EPG…numbers on the Freesat platform. After any such allocations have been made by Freesat, the EPG number continues to belong to Freesat and to be subject to its discretion and applicable policy. … 2. EPG Listing Policy Objective 2.1 Freesat’s objective is to apply the Policy in such a way as it considers to be for the long-term benefit of the Freesat platform, to fulfil viewer expectations and in the interests of viewer convenience (in each case as determined by Freesat in accordance with this Policy).”
Section 3 dealt with the launch of the Freesat platform. Section 4 listed the available genres, of which there were originally 11 (the number has since increased), and set out a brief description of each. (“Shopping” is defined as:
“Programming relating to shopping. Channels allocated an EPG number in this genre will be licensed to supply a tele-shopping service (a particular form of advertising involving the broadcast of direct offers to viewers with a view to the supply of goods or services in return for payment) and may not contain any conventional programme elements such as news, sport, films, documentaries or drama etc.”) “5. Allocation of EPG Numbers within Genres … 5.2 Unless sections 6 or 7 apply, Freesat will generally allocate the next available channel number at the end of the genre in which it has decided to place the channel. Where a genre becomes full, it may be necessary to create an overspill section for that genre elsewhere on the EPG until Freesat decides to review the Policy and/or the channel listings made in accordance with the Policy. 5.3 Where Freesat is considering the allocation of an EPG number to more than one channel at the same time it will take into account the following; (i) the applicability of sections 6 and 7 below to one or more channels; (ii) the date on which the Launch Application Form was received by Freesat; (iii) the date that the channel provider has entered into an EPG Agreement with Freesat; (iv) the intended launch date of the channel; and (v) viewer convenience and expectations.”
Section 6, headed “Listing of Public Service Channels”, was concerned with public service channels and is not otherwise material to be mentioned. Section 7, headed “Associated Channels and Reserved EPG Numbers”, provided, so far as material, that:
“7.1 Freesat considers that viewer convenience and expectations will be best served if channels which are Associated with another channel or other channels on the Freesat platform are more closely grouped together on the Freesat platform. It is Freesat’s intention that the Policy will operate over time to achieve this.”
Section 7.4 set out a definition of the word “Associated”. JML’s two channels are “Associated” for these purposes. (i) the applicability of sections 6 and 7 below to one or more channels; (ii) the date on which the Launch Application Form was received by Freesat; (iii) the date that the channel provider has entered into an EPG Agreement with Freesat; (iv) the intended launch date of the channel; and (v) viewer convenience and expectations.”[31]The Ofcom Code (“the Code”) referred to in clause 10 of the EPG Agreement is the Ofcom Code of practice on electronic programme guides which Ofcom has published pursuant to sections 310 and 316 of the Communications Act 2003. So far as material, the Code states as follows:
“Introduction 1. This Code sets out the practices to be followed by EPG providers: … c. to secure fair and effective competition. … Fair, reasonable and non-discriminatory treatment 14. Ofcom has concluded that, in order to secure that the providers of EPGs licensed by Ofcom do not enter into or maintain any arrangements or engage in any practice that Ofcom considers would be prejudicial to fair and effective competition in the provision of licensed radio or television services or of connected services as defined in section 316 of the [Communications] Act [2003], EPG providers should comply with the provision set out in this section. 15. In particular, EPG licensees are required: a. to ensure that any agreement with broadcasters for the provision of an EPG service is made on fair, reasonable and non-discriminatory terms; b. to publish and comply with an objectively justifiable method of allocating listings. This does not preclude different methods - for example, objectively justifiable methods could include ‘first-come, first-served’, alphabetical listings, and those based on audience shares; c. to refrain from giving undue prominence in any listing or display to a channel to which they are connected, except as required by the appropriate prominence provisions set out in paragraphs 2 to 4 above; …”
Paragraphs 2 to 4 of the Code are concerned with public service channels and do not need to be mentioned. Fair, reasonable and non-discriminatory treatment a. to ensure that any agreement with broadcasters for the provision of an EPG service is made on fair, reasonable and non-discriminatory terms; b. to publish and comply with an objectively justifiable method of allocating listings. This does not preclude different methods - for example, objectively justifiable methods could include ‘first-come, first-served’, alphabetical listings, and those based on audience shares; c. to refrain from giving undue prominence in any listing or display to a channel to which they are connected, except as required by the appropriate prominence provisions set out in paragraphs 2 to 4 above; …”

The subsequent history

[32]On 2 April 2008, Freesat notified JML that it had allocated channel number 810 to one of its channels. JML was later informed that its second channel had been allocated channel number 809. Subsequent to the launch, JML learned that it had been placed in tenth and eleventh positions in the listing of shopping channels under the shopping genre. This meant that, since only seven channels (or, depending on which brand of set-top box is used, eight channels) are listed per screen page, once all the positions above JML’s channel had been allocated neither of its channels would appear on the first screen page of the shopping genre listing in Freesat’s EPG.[33]JML was dissatisfied with this and sought an explanation from Freesat of how the channels on the shopping genre had been allocated. It was dissatisfied with Freesat’s explanation.[34]Accordingly, on 22 July 2008, JML issued an application for pre-action disclosure. Eventually, in September 2008, Freesat responded to the application by providing a further explanation of how it had allocated the channels. Still dissatisfied with the explanations, JML then commenced the present proceedings on 10 October 2008.

The breaches alleged

[35]JML contends that Freesat acted in breach of contract in the following respects. First (“breach (1)”), Freesat acted in breach of the obligation, imposed on it by the Code, to apply an “objectively justifiable method of allocating listing”. This is because there is no reliable evidence before the court to indicate what reasoning Freesat actually applied to the allocation of EPG numbers and because what evidence there is demonstrates that whatever method Freesat used was at best haphazard, slipshod and highly subjective.[36]Second (“breach (2)”), Freesat disregarded one of the published listing criteria contained in the Listing Policy, namely criterion 5.3(iii) - referred to in argument as “the date of Agreement criterion”. Its claim to have done so for good reason is contrary to the evidence which suggests that Freesat thought that it had taken this criterion into account in some unspecified way but in fact failed to do so, probably as a result of oversight or error but even if, contrary to this evidence, it did consciously decide to pay no attention to the criterion at the material time(a) it was not entitled to do so, but(b) the reasons it has given for doing so are irrational.[37]Third (“breach (3)”), under criterion 5.3(v) - referred to in argument as “the viewer convenience criterion” - Freesat introduced two new sub-criteria (as Mr Howe described them), namely(a) the use of so-called BARB ratings and(b) whether a channel was listed on Freeview. Because such sub-criteria were unpublished they should not have been used but, even if they had been published, they were irrational or otherwise impermissible. The letters BARB stand for Broadcasters’ Audience Research Board Ltd, a non-profit making company funded by the BBC, ITV, Channel 4, Five, BSkyB and the Institute of Practitioners in Advertising which provides estimates of the number of people watching television based on a panel of 5,100 television-owning households.[38]Fourth (“breach (4)”), Freesat misunderstood what its contractual obligation was as regards the application of the Listing Policy criteria set out in section 5.3 in that it treated the viewer convenience criterion - criterion (v) - as an overriding objective which it was entitled to apply in a broad and flexible way. In fact, the Code (to which, by clause 10.1.1 of the EPG Agreement, Freesat was contractually obliged to give effect) required Freesat to “publish and comply with an objectively justifiable method of allocation”. Freesat was in breach of that obligation by watering down or ignoring altogether the other, specific and objective listing criteria, in particular, criterion (ii) - referred to in argument as “the LAF criterion” - and criterion (iii). Moreover, because Freesat failed to publish any specific objective matters that it would take into account under this criterion, its scope for applying the criterion was extremely limited and certainly not “overriding”.

The applicable law

[39]Before considering whether any of the alleged breaches summarised above are established, it is desirable to set out the applicable legal framework.[40]The claim lies in private law for breach of contract. The principal complaint is that Freesat failed to give effect to the Listing Policy which it bound itself in the EPG Agreement to apply. A secondary but no less important complaint is that, even if Freesat did not act contrary to the express requirements of the Listing Policy, it exercised the discretion given to it by the Listing Policy in an irrational or otherwise objectionable manner. To see how these complaints arise necessitates an understanding of the true scope of Freesat’s obligations in respect of the application of the Listing Policy.[41]It was common ground that Freesat was bound to apply the Listing Policy criteria and to conform to the Code. It was also common ground that the relevant section of the Listing Policy was section 5.3 rather than 5.2. Section 5.3 applies where, as here, Freesat is considering the allocation of EPG numbers to more than one channel at the same time since it was concerned with the launch of the new Freesat platform and was proposing that a number of channels should be launched in each genre on the initial launch date. (Section 5.2, by contrast, is concerned with the allocation of a channel number to a channel provider wishing to be added to a genre in circumstances where the genre is likely to have one or more existing channels already.)[42]It was also common ground that, although pursuant to clause 3.4 of the EPG Agreement, listing was to be allocated by Freesat in accordance with the Listing Policy “at its discretion”, this did not confer on Freesat a wholly unfettered contractual discretion. It was required to exercise the discretion by taking into account the criteria set out in section 5.3. It was required to do so in a rational manner: JML alleged by paragraph 8A of its amended particulars of claim, and Freesat did not dispute, that the discretion conferred by clause 3.4 should be exercised in good faith and not either arbitrarily, capriciously or irrationally.[43]“Irrationally” in this connection does not import some objective standard of reasonableness but is used in a sense analogous to Wednesbury unreasonableness. In Socimer International Bank Ltd v Standard Bank London Ltd [2008] EWCA Civ 116, [2008] 1 Lloyd’s Rep 558, Rix LJ summarised the position, in relation to the exercise of a contractual discretion, as follows (at [66]):
“66. It is plain from these authorities that a decision-maker’s discretion will be limited, as a matter of necessary implication, by concepts of honesty, good faith, and genuineness, and the need for the absence of arbitrariness, capriciousness, perversity and irrationality. The concern is that the discretion should not be abused. Reasonableness and unreasonableness are also concepts deployed in this context, but only in a sense analogous to Wednesburyunreasonableness, not in the sense in which that expression is used when speaking of the duty to take reasonable care, or when otherwise deploying entirely objective criteria: as for instance when there might be an implication of a term requiring the fixing of a reasonable price, or a reasonable time. In the latter class of case, the concept of reasonableness is intended to be entirely mutual and thus guided by objective criteria.”
See also Lymington Marina Ltd v MacNamara [2007] EWCA Civ 181, [2007] 2 All ER Comm 825 in which Arden LJ (at [37]) and Pill LJ (at [69]) emphasised the need to approach the matter as one of contractual implication and to avoid importing expressions appropriate to public law challenges into the construction of a commercial contract. The concept of irrationality which is in play is, to my mind, that described by Potter LJ, giving the judgment of the Court of Appeal in Horkulak v Cantor Fitzgerald [2004] EWCA Civ 1287, [2005] ICR 402 (cited by Arden LJ in Lymington Marina at [41]) where, in relation to cases of this kind involving the exercise of a contractual discretion, he observed:
“[30] …While, in any such situation, the parties are likely to have a conflicting interest and the provisions of the contract effectively place the resolution of that conflict in the hands of the party exercising the discretion, it is presumed to be the reasonable expectation and therefore common intention of the parties that there should be a genuine and rational, as opposed to an empty or irrational, exercise of discretion. Thus the courts impose an implied term of the nature and to the extent described.”
[44]So much was common ground. Where they differed, as regards contractual obligation, was over the true scope of criteria (iii) and (v) and what, in the light of the Code, these criteria did or did not permit Freesat to do. (1). the scope of criterion (iii)[45]This concerns the second of the breaches alleged. This is whether it was open to Freesat to attach no weight to criterion (iii). Whether in fact Freesat attached no weight to the criterion and, if it did not, whether its reasons for not doing so are open to legitimate challenge as a breach of its contractual obligations are matters I will deal with later. At this stage I consider merely whether, in principle, it was open to Freesat to attach no weight to the criterion. This issue concerns the scope of Freesat’s contractual discretion when applying the criteria set out in section 5.3.[46]It is to be observed that nothing in the Listing Policy (or in the Code or elsewhere in the EPG Agreement) requires Freesat to rank the criteria or assign particular weight to them. The weight to be attached is left entirely to Freesat’s discretion. It is in contrast to, for example, section 8.4 of the Listing Policy (concerned with vacated EPG numbers) where, subject to affording appropriate prominence to public service channels in accordance with section 6, Freesat is obliged, where there is a vacated EPG number, to:
“…apply the following order of priority in determining which channel (including both those which are already on the Freesat platform and those which have submitted a Launch Application Form in accordance with section 3) it will allocate the vacated EPG number…”
Five matters are then listed.[47]It is also to be observed that the obligation on Freesat, when exercising its discretion under section 5.3 to allocate EPG numbers to more than one channel at the same time, is “to take into account” the listed criteria. “Take into account” in this context means pay attention to, or have in mind, the particular matter in the course of a decision-making process. Properly understood, in my judgment, the obligation gives to the decision-maker a very wide measure of discretion. In the public law context, an obligation to take some factor into account may properly result in the decision-maker attaching no weight at all to that factor. Provided his decision to attach no weight is not reached in a manner open to attack on public law review grounds (for example, it is Wednesbury unreasonable) the decision is not for that reason open to challenge. I see no reason to adopt a different approach where, as here, the question arises in a contractual context. The critical point therefore is whether Freesat, in deciding to attach no weight to a particular criterion, has given consideration to the criterion. If it has (and has not simply overlooked the criterion), and has decided in good faith and otherwise than arbitrarily, capriciously or irrationally, to attach no weight to it(a) there can be no successful challenge to its decision not to do so, and(b) it does not matter whether it says that it has “ignored” the criterion as distinct from saying that it has “attached no weight” to it. (2). the scope of criterion (v)[48]That brings me to the other main disagreement over a correct understanding of the contractual arrangements. There were two linked submissions which Mr Howe advanced concerning criterion (v). The first was that the incorporation of the Code into the contractual arrangements, in particular the requirement imposed by paragraph 15(b) of the Code “to publish and comply with an objectively justifiable method of allocating listings”, meant that the manner in which Freesat could properly exercise any discretion under its Listing Policy was tightly circumscribed. It was not therefore open to Freesat, acting under the guise of criterion (v), to introduce what were in effect unpublished sub-criteria as a means of applying that criterion. This submission therefore underlies breach (3) of the four breaches relied upon. This led to Mr Howe’s linked submission that, having published no objective standards by which to apply criterion (v) but because of the overriding requirement on Freesat (enjoined by paragraph 15(b) of the Code) to publish and use an objectively justifiable method of allocating listings, the scope for Freesat to have regard to criterion (v) was extremely limited and did not permit Freesat to treat it (as it claimed to do) as an overriding objective to be applied in a broad and flexible way. This submission lies at the heart of breach (4) of the breaches alleged.[49]The logic of these submissions was that Freesat’s scope for applying criterion (v) was not merely extremely limited but, as it seems to me and as I think Mr Howe ultimately accepted when I pressed him on the point, for all practical purposes non-existent. Given the criterion’s unspecific terms (“viewer convenience and expectations”) and given the need, if Mr Howe’s argument is correct, for well-defined (and published) criteria, I asked Mr Howe to give any examples of the circumstances in which the criterion would apply. He was unable to do so. He suggested that it served as a “residual” or “long-stop” criterion but could not think of any instances which would not immediately run up against the need, according to his argument, for tightly drawn, pre-published and objectively justifiable criteria for its application. He ventured that there might exist some matter which was so well known and obvious that there would be no need to spell it out in the criterion. But, in that event, the presence of criterion (v) would not seem to add anything.[50]As I have mentioned, paragraph 2.1 of the Listing Policy, under the heading “EPG Listing Policy Objective”, states in terms that Freesat’s objective is to apply the policy in such a way as it considers to be for the long-term benefit of the Freesat platform “to fulfil viewer expectations and in the interests of viewer convenience…”. It is therefore an odd consequence of Mr Howe’s argument, if it is correct, that where this objective is set out as a specific, free-standing criterion - as in criterion (v) - it is for all practical purposes without effect.[51]The fallacy in Mr Howe’s argument, in my judgment, is its assumption that paragraph 15(b) of the Code compels a tightly drawn statement of the circumstances in which criterion (v) may be applied notwithstanding that the contract does not require this, either expressly in criterion (v) itself or by necessary implication having regard to the remainder of the contract. As Mr Ward observed, the Code does not state that the Listing Policy must set out all of the matters that Freesat may take into account in applying the policy. It does not state what evidence (for example, professionally assembled viewer data) Freesat may or may not consider in deciding whether any given criterion is satisfied. It does not state that there must be no element of subjectivity in the application of the criteria. All that paragraph 15(b) of the Code requires is that Freesat must publish and comply with an objectively justifiable method of allocating listings.[52]In my judgment, this is exactly what Freesat’s Listing Policy achieves. At all events, the Policy has not been challenged. In particular, criterion (v) has not been challenged. What is in question is the application of the Policy. In my judgment, it is open to Freesat when applying criterion (v) which, of its nature, requires an element of subjective judgment, to decide what evidence it will examine and what weight it will give to that evidence in assessing viewer convenience and expectations when going about its task under section 5.3 of allocating an EPG number to more than one channel at the same time. This means that the use of viewer data (such as the BARB ratings) or a consideration of what channels were listed on other platforms (such as Freeview) is not objectionable on the ground that the Listing Policy does not in terms allow such evidence to be considered. If those materials are objectionable it must be on other grounds, for example irrationality.[53]That brings me to the allegations of breach. I have summarised what they are.

Breach (1)

[54]The first of the breaches is that there is no reliable evidence before the court to indicate what reasoning Freesat actually applied to the allocation of its EPG numbers - whatever its Listing Policy stated - because, viewed overall, the evidence as to the processes Freesat employed indicates that it approached matters in a haphazard, slipshod and subjective manner. Accordingly, so it is said, the decision reached by Freesat on the listing of the shopping channels is incapable of objective justification.[55]Mr Howe subjected Freesat’s evidence, principally Ms Scott’s original and trial witness statements, to careful analysis with a view to highlighting inconsistencies and pointing to lacunas in the thought processes that led to the shopping channel listing decision.[56]There was force in Mr Howe’s general criticism that Freesat’s evidence in general, and Ms Scott’s in particular, provided a less than coherent picture of how she and her colleagues went about the process. Moreover, Freesat's cause was not assisted by a dearth of documents dating from the period when the decision-making process was underway. It meant that Ms Scott, who alone was tendered as a witness on Freesat’s behalf, had to try to recall how the application of the listing policy criteria had been approached.[57]Despite Mr Howe’s skilful dissection of Freesat’s evidence, I do not consider that it would be right to characterise Freesat’s approach to the matter as haphazard or subjective. Ms Scott’s trial witness statement provided a coherent and, as I find, an honest account of how Freesat went about its task. I do not see why I should not accept it. The fact that, in some respects, it is difficult to reconcile with her original witness statement (prepared in response to a disclosure application) is a matter to be taken into account. It would certainly not be correct to conclude that Freesat’s decision on the listing of the shopping channels is incapable of objective justification. On the contrary, having heard Ms Scott’s evidence and seen the material that was available to Freesat at the time, the decision that it made as to the listing of the shopping channels was objectively justified. Whether, in Freesat’s shoes and given the same Listing Policy, I would have approached the matter in the same manner and come to the same order of listing is beside the point.[58]I am not therefore persuaded that this wholesale allegation of breach is established.

Breach (2)

[59]This breach concerns the application of criterion (iii). Freesat’s position is that, for reasons I will come to shortly, it attached no weight to this criterion. I have already concluded that, provided it gave consideration to the criterion, it was open to Freesat to attach no weight to it. The issues debated before me were whether Freesat did not in fact attach weight to this criterion and, if it did not, whether its decision not to do so is open to challenge.[60]Mr Howe submitted that when in February and March 2008 Freesat was considering how the applicant channels would be listed on the launch of the new Freesat platform, there are indications that, despite what it now says, Freesat attached weight to this criterion. Thus, in a paper for consideration by Freesat’s Board at a meeting on 31 March 2008 it is stated that “Freesat has also applied the following criteria from the EPG Listing Policy… the date on which the service [ie the channel provider] returned their signed EPG Agreement...”. When first challenged over the application of the Listing Policy Freesat indicated, in a document prepared in late June 2008 and intended to explain what Freesat did when going about the task of applying the Policy (the document is headed “Explanation of Freesat Shopping Genre EPG listing allocations”), that criterion (iii) was “less effective” than criterion (ii). Mr Howe submitted that this implied that some weight had been attached to criterion (iii). He drew attention to the fact that in her original witness statement dated 26 August 2008, Ms Scott appeared to reinforce this by stating that criterion (iii) was “less important” than criterion (ii), again implying that the criterion had some importance and therefore that some weight had been attached to it. By contrast, he pointed out that, according to the same summary document, it was stated that criterion (iv) “could not be applied…”. (I pause to say that no point is taken over the non-application of criterion (iv).) In inter-solicitor correspondence when the correct application of the Listing Policy was first raised, there was no indication that no weight had been attached to criterion (iii) or, insofar as this might be different, that the criterion had not been applied. The first assertion that Freesat had taken criterion (iii) into account but had decided, in the circumstances, “not to determine the allocation of EPG numbers by reference to the criterion” was in Freesat’s defence served in early November 2008.[61]Mr Ward submitted that if, as JML seemed concerned to demonstrate, Freesat did in fact attach weight to criterion (iii), notwithstanding Ms Scott’s evidence to the contrary at the trial, this would seem rather to undermine JML’s case for saying that Freesat acted in breach of contract by failing to apply the criterion. But I understood Mr Howe’s point to be that this ambivalence in Freesat’s evidence went to show that Freesat could not provide a coherent explanation of how it went about the task of applying the Listing Policy - a matter relevant to breach (1). The real issue, however, is not whether the apparent inconsistencies between Ms Scott’s witness statement at the trial and her earlier evidence merit criticism but whether notwithstanding suggestions to the contrary in her original witness statement and elsewhere I accept Ms Scott’s evidence before me that in allocating EPG numbers no weight was attached to criterion (iii) and, if I do, whether - given JML’s challenge - Freesat’s reasons for not doing so sufficiently explain what would otherwise be a breach of contract on its part. For I have already held that, in principle, it was open to Freesat to attach no weight to the criterion: the question is whether it did so in circumstances which amount to a breach of contract, ie whether it did so irrationally (in the sense that I have used that expression earlier).[62]I accept Ms Scott’s evidence that a conscious decision was taken at the time that the allocation of the EPG numbers was considered to attach no weight to this criterion. I see nothing inconsistent between that decision and the reference in the paper for Freesat’s Board meeting that Freesat applied, inter alia, criterion (iii). Its obligation was to take the criterion into account and then decide what weight if any to attach to it.[63]The principal reason given for attaching no weight to the criterion was, as I also accept from the evidence, that a significant number of channel providers (13 out of 47 accounting for 22 out of the 85 odd channels on launch) who were seeking allocation of an EPG number for their channels with effect from the initial launch date of the new Freesat platform had difficulties with the EPG Agreement. I accept that, in the face of the difficulties which those providers had raised, Freesat decided that it would be fairer to apply what Ms Scott described as a “wholesale cross-platform approach” and attach no weight to the criterion in the case of any of the applications, whether for the shopping genre or for any of the others.[64]This decision may be criticised as being unfair to those channel providers, such as JML, who had acted promptly by returning their signed EPG Agreements. But the question is whether, in deciding to attach no weight for that reason, Freesat acted irrationally. In my judgment, Freesat’s decision to attach no weight to the criterion across the board cannot be characterised as irrational. As Mr Ward submitted, to have applied the criterion to some of the genres but not to others would have invited a criticism of unequal treatment from channel providers disadvantaged either by attaching weight to the criterion or (as the case might be) not doing so depending on whether the channel provider was prompt in returning the signed EPG Agreement (in the case of those genres where no weight was being attached to the criterion) or slow in returning the Agreement (in the case of those genres where weight was being attached to the criterion). Rather than risk such criticism, Freesat decided to attach no weight to the criterion across the board. I do not consider that that was irrational. Freesat was faced with a difficult choice. In deciding as it did, it acted well within the margin of its discretion in the application of this criterion.[65]I should add that the second reason advanced by Ms Scott for not attaching weight to the criterion, namely Freesat’s difficulty in identifying the date on which many of the Agreements were entered into, was one that I regard as quite irrational. I ventured to suggest to Ms Scott in the course of her cross-examination, and to Mr Ward in the course of argument, that what the criterion plainly meant was the date when the signed Agreement was received by Freesat. The Agreements could not have been entered into (and taken effect) unless and until Freesat had received them back duly signed by the channel providers, when Freesat itself would sign them. In short, it would necessarily have been Freesat’s own act - in signing the Agreements - that would bring them into effect since there has been no suggestion that Freesat had sent them out already signed by it. On the evidence Freesat had no difficulty in determining when the signed Agreements were in fact received back: there was a handwritten list in evidence indicating in each case what that date was. In the circumstances Mr Ward did not press this reason as justification for attaching no weight to the criterion.

Breach (3)

[66]For the reasons set out earlier, I have found that there is no objection in principle to the use by Freesat of information, such as BARB ratings or a channel’s presence on Freeview, to assist it in its application of criterion (v) on the ground that recourse to such evidence has not been spelled out in the Listings Policy. The question which therefore arises in respect of breach (3) is whether Freesat’s recourse to such matters is open to challenge on irrationality or other grounds. (1). BARB ratings[67]Mr Howe was critical of the absence of contemporary policy documents or the like explaining when, where or how Freesat decided to place reliance on BARB ratings (and on a channel’s presence on Freeview). He took me to passages in the cross-examination of Ms Scott where the matter was explored and she was unable to assist. There is force in the criticism.[68]The fact is, however, that Freesat did have recourse to BARB ratings and the question is whether, as Mr Howe submitted, it was irrational for Freesat to have done so. In contending that it was Mr Howe referred to the evidence of a Mr Nicholas James, BSkyB’s former EPG Manager and, as such, responsible for the allocation of EPG numbers for the launch of Sky’s digital platform. In his evidence, which was not challenged, Mr James stated that Sky’s allocation policy for EPG numbers “was based upon objective, transparent and fair allocation, as well as viewer convenience”. He explained that “within the genres, with the exception of shopping, I used viewing share as reported by …BARB… to order the channels.” So Sky itself used BARB ratings, although not for the shopping genre. Mr James continued:
“22. BARB is responsible for providing estimates of the number of people watching television, as well as the actual channels and programmes that have been viewed and the type of viewers at any one time. BARB collects viewing data from a reporting panel of 5,100 television owning private residential households intended to represent the viewing behaviour of all television viewers in the UK, and is collected on a minute by minute basis. BARB does not, however, automatically collect viewing data on every channel. If a channel wishes to be included in the BARB data it must apply to be reported by BARB. In making such an application, channels must provide BARB with a large amount of information as well as paying a significant fee to BARB to be included. Currently BARB charges a minimum of £26,800 annually for each TV channel measured, this amount increasing with viewer share. In addition, a one-off channel set up fee of £4,430 is charged when a channel first applies to be included in BARB’s reporting statistics. 23. The importance of BARB is that it is the main measure which advertisers look at for the purposes of assessing audience share. BARB ratings are therefore important for channels which depend on advertising revenues. However, they are not relevant to shopping channels as most of these channels derive most or all of their revenues from sales of their products, not third party advertisers. Indeed, most of the shopping channels are not members of BARB. BARB is therefore not an appropriate measure to use when assessing the popularity of shopping channels, or viewer expectations about where such channels might appear on an EPG listing.”
[69]He then explained (in paragraph 24) how, where BARB ratings were used by Sky, the channels in the genre in question were allocated numbers in decreasing order of viewer share so that the channel with the highest BARB rating would be allocated the first number in its genre.[70]Mr Mills confirmed what Mr James had to say about the nature and use by channel providers of BARB ratings and commented that “BARB is of little or no importance to pure shopping channels, because they get their revenue from sales of products, not advertising.” In particular he stated:
“63. JML produces teleshopping channels, the purpose of which is to generate revenue for JML through sales. JML does not operate its television channels for the purpose of generating revenue through advertisements, unlike more traditional television channels. It wants sales. BARB ratings are therefore of no importance to JML and this is why we have never applied to be included in the BARB data. I think this position is true of virtually all teleshopping channels, and this is demonstrated by the fact that of the initial 13 teleshopping channels that applied to join Freesat, only 4 of them, being QVC, Price Drop TV, Bid TV and Gems TV, had BARB ratings. BARB ratings are not important to JML because we do not need to attract advertisers. What is important, however, is the amount of sales that are generated from the channels, and this is what we measure our success on. 64. I therefore do not consider that the BARB ratings of a shopping channel could therefore assist Freesat in any way in determining “viewer convenience and expectations” in the placing of shopping channels - and certainly not as a hidden criterion in preference to the specific criteria which Freesat actually published.”
[71]Mr Howe pointed to and was critical of Ms Scott’s admission in the course of cross-examination that she was unaware, at the time Freesat decided to use BARB ratings, that many shopping channels did not, for commercial reasons, include themselves on BARB. Ms Scott was nevertheless insistent that the ratings were a valuable measurement because (as Mr James’ evidence quoted above itself showed) four shopping channels did subscribe to BARB and did so, not for commercial reasons but because “they wanted to know their viewing numbers and it’s useful information within the industry”. Moreover, as she pointed out (without challenge) in her trial witness statement, BARB ratings are regarded by the media industry as the only reliable and universally accepted source of viewing figures and BARB is (as its website puts it) “the organisation responsible for providing the official measurement of UK television audiences”. Ms Scott also stated, likewise without challenge, that at the time Freesat was in course of producing its EPG list for the shopping genre the BARB ratings identified “QVC”, “Price Drop TV” and “Bid TV” as having average daily reach figures (ie viewers) of 506,000, 358,000 and 284,000 respectively. She said that this information confirmed her original understanding that these three channels were likely to be well known.[72]Mr Ward submitted, and I agree, that it would be a remarkable conclusion if Freesat were to be legally precluded from considering such information. JML has not sought to suggest any alternative measure of audience share. The effective question therefore is whether Freesat should not have looked at the BARB ratings at all because not all shopping channels were listed on them. Or, as Mr Ward put it, the contention that Freesat should not have looked at the ratings at all raises the question: how many shopping channels needed to subscribe to BARB before Freesat could lawfully look at the ratings. To this JML did not suggest an answer. Instead, it contended that if Freesat was to have recourse to BARB (or other) figures, it should have given JML the opportunity to put in evidence of viewing figures even if, as was then the case, it did not subscribe to and therefore did not feature in the ratings.[73]Mr Ward advanced three answers to this. First, he said, the EPG Agreement entered into with each channel provider did not oblige Freesat to consult, or offer to consult, JML. Second and in particular, he said, there was nothing in the Code to prevent Freesat having a wide discretion such as criterion (v) for which a wide range of evidence might be relevant and, for that purpose (and as I have held), nothing to require Freesat to identify in advance what that evidence might be. Third, he said, Mr Mills’ own evidence indicated that JML understood criterion (v) to mean “enabling the viewer to access the most popular channels easily” and there was nothing to prevent JML from advancing whatever it wanted to demonstrate the popularity of its two channels. If therefore the popularity of a shopping channel was not to be demonstrated by means of viewing figures (even though the most popular of them, as measured by the available evidence, in fact feature in BARB ratings) it was for JML to explain how its popularity was to be rated. But, said Mr Ward, JML had not begun to show how that would have been achieved. He submitted, and I accept, that such information could only have come from JML but there was nothing publicly available at the time to indicate how many viewers watched its shopping channels. JML’s own turnover figures from its shopping channels (from which some measure of its popularity might have been gauged) were not publicly available, much less were they volunteered by JML to Freesat. Freesat, he said, was not to be criticised for failing to take account of information not put before it at the time. I see much force in each of these points.[74]In my judgment, Freesat’s recourse to BARB ratings for the confirmatory purpose mentioned in Ms Scott’s evidence falls far short of irrationality which is the question I have to decide. I am not therefore persuaded that there is any substance in this aspect of JML’s complaint. (2). Freeview[75]What then of Freesat’s reliance on Freeview?[76]Ms Scott’s evidence on this point, contained in her trial witness statement, was the following:
“113. In giving effect to paragraph 5.3(v), my aim across all genres was to ensure that the best known and most watched services were placed in a prominent position in the EPG list. We considered it was particularly important that familiar and widely watched channels should be immediately apparent and obvious to viewers... 114. Part of Freesat's target market is viewers who remain on analogue television services, whether because they are out of Freeview coverage areas or potentially because they have rejected the Pay TV option. The channels available on analogue television (BBC 1, BBC 2, ITV, Channel 4 and now Channel 5) are listed first on the Freesat EPG, as they are on all other EPGs. 115. The Claimant’s complaint concerns the application of this criterion within the shopping genre. The Claimant accuses Freesat of having relied on “subjective” and “impressionistic” factors in applying it. I totally disagree. “Viewer convenience and expectations” is, and is intended to be, a broad and flexible criterion. In applying it, we relied on objective evidence in seeking to identify the best known and most watched services within each genre and thereby fulfil viewer convenience and expatiations. One such source of information was the Freeview EPG, on which “QVC”, Price Drop TV” and “Bid TV” all appeared. This was not simply arbitrary, or in order to somehow benefit Freeview, as the Claimant has sought to suggest. As I have explained, Freeview viewers formed a core target audience group for Freesat. The expectations of those viewers were accordingly important to Freesat. The other core audience we had identified for Freesat was analogue television viewers - particularly those in areas outside Freeview’s coverage (27% of the UK). For those viewers, all of the channels on Freesat would be “new”, except for the existing analogue channels which we placed at the beginning of the EPG. 116. I do not seek to suggest that the subscribers of Pay TV services were of no interest to Freesat at that time. We anticipated that at least some might wish to change to Freesat, as we believe has been the case. But, in accordance with our mission objectives, our focus was on analogue homes and free-to-air digital upgraders. We did review the Sky and Virgin EPGs but as they reflected the commercial nature of those platforms, we did not rely on them. ... 117. The point of considering Freeview's EPG was not simply to ensure familiarity to Freeview viewers. It was also that a channel featured on Freeview had a potential audience reach of 9.3 million homes. In addition it was, in my view, important that “QVC”, “Price Drop TV” and “Bid TV” appeared across all digital television platforms at that time, meaning that they were available and known to a large proportion of the UK population. By contrast, whilst I understand that “JML” and “JML Lifestyle” have appeared on the Sky platform, to the best on my knowledge they have never been available on any other platform.”
[77]Mr Howe submitted that Freesat’s reliance to any degree on a channel’s listing on Freeview was discriminatory and anti-competitive because it favoured channels which had an existing, albeit indirect, commercial relationship with Freesat’s shareholders. Paragraph 15(c) of the Code was said to be in play here: it requires Freesat “to refrain from giving undue prominence in any listing to a channel to which they are connected…”.[78]As I followed the argument, the contention was that because Freesat had a connection, albeit remote, with Freeview (in that, put shortly, Freesat is controlled by entities which in turn are controlled by the BBC and ITV which also control the entities which in turn control Freeview) and Freeview had an existing commercial relationship with channel providers whose channels are on Freeview (as I understood it because those providers pay to have their channels on the Freeview platform) then, according to paragraph 18.3(3)(i) of JML’s particulars of claim, “Freesat provided an incentive to parties who wish to place their channels on Freesat to list them on Freeview (even if they would not otherwise want to do so) or face being disadvantaged in channel listings as compared with those channel[s] which have a Freeview listing”.[79]A mere reading of this allegation suggests that it has a rather far-fetched quality to it. But in any event there was no evidence that Freesat had any intention to give channel providers an incentive to have their channels listed on Freeview in order to enhance their chances of a favourable listing on Freesat even if it could be shown that being listed on Freeview might enhance those chances. Indeed, there was no challenge to Ms Scott’s evidence that Freesat did not have any such intention.[80]Nor was there any challenge to Ms Scott’s evidence that any attempt to provide such an “incentive” would have been pointless. In her trial witness statement she stated that:
“129. Fourthly, any attempt to provide such an “incentive” would be pointless. Almost all of Freeview’s 40 slots are full. Given its reach of 9.3 million households it is highly attractive to broadcasters. On the rare occasions when a slot becomes available, - only one slot for a television channel became available between June 2007 and June 2008 - it is oversubscribed and, increasingly, auctions take place. I should make clear that I have no information from Freeview itself about this. The last time a slot became available, I learned of it through the press. 130. Finally, in my view it is wholly unrealistic, from a commercial point of view, to suggest that the Freesat EPG Policy would cause a company to be at all influenced in its decision whether or not to compete for one of the Freeview slots that might become available. I have already explained that the Freeview listing was only one of a wide range of considerations taken into account in applying the criteria set out in the EPG Listing Policy. Those criteria are themselves flexible. One of the Claimant’s complaints is that Freesat’s consideration of the Freeview EPG was not published, so it cannot sensibly be said to have influenced any decision made at this time.”
I find that the complaint has no foundation in fact. I need therefore say no more about it.[81]This brings me to the larger point, namely the attention paid by Freesat to whether a channel was listed on Freeview and what it was about that listing to which Freesat attached weight. Mr Howe submitted that, despite Ms Scott’s evidence to the contrary before me, Freesat did give weight to a channel’s listing position on Freeview (and not just to the fact that it was listed) and that to have done so was irrational. Mr Howe also submitted that it was irrational of Freesat to have given weight to a listing on Freeview while ignoring altogether a channel’s listing on Sky which was the only other existing multi-channel satellite digital service in the UK and had millions of subscribers. He submitted that a channel’s listing on Sky is, or should be, an important consideration if one is seeking rationally, in order to give effect to the viewer convenience criterion, to assess how well-known a channel is to viewers generally.[82]Ms Scott accepted that it would have been neither logical nor sensible - in short irrational - for Freesat to have given weight to a channel’s listing position on Freeview and denied that Freesat did so. She maintained that, as stated in paragraph 126 of her trial witness statement, what Freesat was interested in was whether a channel had a listing on the Freeview EPG at all, not on its relative position on the Freeview platform.[83]Ms Scott was cross-examined at some length on this.

(v) had been applied:

“…in two primary ways: using the Freeview listing as a comparator, and reviewing BARB ratings. This reflected both the expectations of and convenience for the type of viewer whom Freesat primarily expects to attract, and the broader expectations of audiences in general. In relation to the shopping channels this resulted in QVC and of the two associated channels Bid TV and Price-Drop TV being prioritised in the EPG list given their prominent Freeview listing and BARB ratings.”
Her use of the expression “prominent” suggested that it was not merely the channel’s presence on the Freeview EPG that was taken into account but the prominence - ie the relative position - of that presence.[84]Also in evidence was the “Explanation of Freesat’s Shopping Genre EPG listing allocation …” (referred to earlier) in which what the document described as “relevant Freeview channel numbers” of shopping channels listed on Freeview were set out (there were six) together with their Freeview listing number. Two pages further on in that Explanation, where Freesat’s final list (as at the end of March 2008) is set out, QVC is shown in first position. In a section explaining changes to the channel’s projected position since an earlier draft list, made on 19 March, had been drawn up, the comment is made:
“No change - top listing on Freeview and highest BARB reach”
. Mr Howe pointed to the reference in that listing to QVC’s “top” position on Freeview.[85]As it happens, among those channels that are on both Freeview and Freesat, there is no coincidence between a shopping channel’s position on Freeview and its position on Freesat. But there is not a great deal of difference. In particular, QVC is in pole position on both.[86]After some hesitation (in view of her far from satisfactory responses to Mr Howe’s questioning on the reason why she had referred to “prominent” in her original witness statement) I accept Ms Scott’s evidence that the relative position of the channel on Freeview was not a relevant factor in Freesat’s decision on how to allocate positions on Freesat. It was Ms Scott’s emphatic evidence before me that the relative position on Freeview did not weigh with her. It was her recommendation to the Freesat board which had counted. Moreover, as Mr Howe pointed out and Ms Scott eventually accepted, it would have been illogical to have attached weight to a channel’s position on Freeview; Freeview did not have special genres for its EPG and it was very much a matter of chance where on that EPG a channel might appear; its position was not, as I understood it, to any degree a reflection of its viewer popularity. To have attached importance to its relative position on Freeview would therefore have made no sense. Although Mr Howe criticised in a number of respects the manner in which Freesat went about this aspect of the allocation process I would have needed rather clearer evidence than was before the court to suggest that Freesat did indeed attach weight to a channel’s position on the Freeview EPG before concluding that it had done so.[87]That leaves Freesat’s decision not to have regard to a channel’s presence on Sky. Freesat’s reason for not doing so goes to the heart of its Listing Policy enshrined in the statement of its EPG Listing Policy Objective - and in criterion (v) - of wanting to fulfil viewer expectations and act in the interests of viewer convenience, and, with that policy objective in mind, why it focused on and set out to appeal to “viewers who remain on analogue television services, whether because they are out of Freeview coverage areas or potentially because they have rejected the Pay TV option” (see paragraph 114 of Ms Scott’s trial witness statement).[88]“Ultimately” said Ms Scott in the course of her cross-examination, “we are appealing to homes who do not want subscription television”. “People” she said, “who want subscription television in this country want to get football and to get films, and that’s not something that Freesat or Freeview offer.” Seeing football and films are, in Ms Scott’s opinion, what viewers buy as part of their Sky subscription.[89]Mr Howe criticised - I consider with some justification - a lack of clarity in Freesat’s evidence and in the earlier inter-solicitor correspondence over what thought if any it had given to the Sky (and Virgin Media) EPGs. The view I have formed is that Freesat did consider but rejected the Sky model. That did not mean that Freesat would not welcome Sky viewers who wanted to make use of Freesat. Freesat’s own marketing plan of April 2007 suggested that out of 1.2 million existing digital households there could be as many as 500,000 Sky homes which might wish to migrate to Freesat and, which already enjoying digital TV reception, could do so with ease. But I do not think that it matters if in fact Freesat simply rejected as inappropriate the Sky model without going into that model in any depth. The fact is, as I accept, that Freesat focused on the target viewer groups that I have mentioned.[90]It is perfectly possible to disagree with that approach by Freesat and argue, and do so with force, that this was an overly narrow view to take of the target audience. But that was pre-eminently a matter for Freesat to decide. It certainly cannot be described as irrational.

Breach (4)

[91]I need only mention briefly the fourth of the breaches relied upon, namely Freesat’s treatment of criterion (v) as an overriding objective to be applied in a broad and flexible way.[92]I have already considered and rejected the argument that, in the absence of specific, published matters to be taken into account under this criterion, the scope for its application was extremely limited, if not effectively non-existent. The complaint that Freesat treated this criterion as “overriding” and that it watered down or ignored altogether other criteria goes, as it seems to me, to the weight that Freesat was entitled to attach to it. Short of some specific matter, over and above those already covered, I regard this generalised allegation of breach as altogether lacking in content. In my judgment, there is nothing in this separate allegation of breach which justifies a finding that Freesat acted beyond the limits of the discretion given to it by the contract.

Result

[93]JML fails to establish that Freesat was in breach of the EPG Agreement and its claim must therefore be dismissed.

Cited in 1 later judgment