Abuse of dominant position - Claimant company operating bus services on certain routes
2 Travel Group plc (in liquidation) v Cardiff City Transport Services Ltd: Competition Appeal Tribunal (Lord Carlile of Berriew CBE, QC, Peter Freeman CBE, QC and Marcus Smith QC (Sitting as a Tribunal in England and Wales)): 5 July 2012
From 19 April 2004 until mid-December 2004, the claimant company operated a no-frills bus service on certain routes within Cardiff (the 2 Travel In-Fill Service or the In-Fill Service). On the same date (19th April), the defendant company started operating so-called 'white services' on the same routes. On 17 December 2004, the claimant ceased operations in, inter alia, Cardiff. The defendant's white services continued until 18 February. On 20 May 2005, a winding-up petition was presented against the claimant and it went into liquidation on the same date. On 18 November 2008, the Office of Fair Trading (OFT) published its decision in relation to the previous complaint by the claimant against the defendant. The OFT decided that the defendant had committed an infringement of the Chapter II prohibition contained in section 18 of the Competition Act 1998 (the 1998 act) (the OFT decision).
In arriving at its decision, the OFT found that between 19 April 2004 and 18 February 2005, the defendant had abused the dominant position it held in the market for the provision of no-frills and normal bus services as part of the Cardiff Bus network, together with urban bus services, and also interurban bus services and urban rail services (to the extent that those served the same flows) into and out of Cardiff city centre. That abuse of a dominant position had affected trade within the UK. Following the OFT decision, the claimant brought a claim for damages before the Competition Appeal Tribunal (the tribunal) pursuant to section 47A of the 1998 act. Pursuant to section 47A(6)(a) of that act, the tribunal was bound by 'any decision which... establishes that the prohibition in question has been infringed'.
It was clear that the OFT decision fell within that sub-section. The claimant sought damages in respect of, first, loss of profit. Secondly, loss of a capital asset. In support of that claim, the claimant submitted that but for the infringement, its business would have expanded and grown. Thirdly, loss of the value of a commercial opportunity. In support of that claim, the claimant submitted that the infringement had caused it to mortgage and divest itself of its interest in a valuable piece of land. Fourthly, expended wasted staff and management time during period when the business was operating. Fifthly, liquidation costs.
Sixthly, exemplary damages. In respect of the latter, consideration was given to the three categories of case where an award of damages might be exemplary as set out in Rookes v Barnard  1 All ER 367, namely (i) oppressive, arbitrary or unconstitutional conduct by 'servants of the government'; (ii) conduct calculated to make a profit which might well exceed the compensation payable to the claimant; and (iii) cases authorised by statute (see  of the judgment). The claimant contended that it was entitled to exemplary damages under the first two of those heads.
The court ruled: (1) In respect of loss of profit, in the period April to December 2004, the infringement had cost the claimant 41,255 passengers. Translating those numbers into revenue, those additional 41,255 passengers would have generated revenue to the claimant of £33,818.79. On the basis that there were no costs to be set against the claimant's lost revenue, that entire sum represented a loss of profit (see , ,  of the judgment). Damages would be awarded to the claimant in respect of loss of profits in the sum of £33,818.79 (see  of the judgment).
(2) The claimant had failed because it had been a badly run company, with enormous financial difficulties, even before it commenced the In-Fill Services, and had been providing poor transport services. But for extremely large injections of cash, the company would have gone under long before May 2005. Although the infringement would have resulted in additional revenue to the claimant of £33,818.79. That had been a drop in the ocean, and could not have saved the company. Accordingly, the infringement was causally irrelevant to the claimant's demise.(see - of the judgment). The claim for loss of a capital asset would fail (see  of the judgment).
(3) Given the findings made in relation to the causal effect of the infringement, that claim would inevitably fail. The claimant's need to use that land to raise funds had nothing to do with the infringement (see  of the judgment). The claim for loss of a commercial opportunity would be rejected (see  of the judgment).
(4) On the evidence, the infringement had not caused any abnormal waste of staff or management time with the result that the claimant could not recover anything in respect of that head of loss (see  of the judgment). (5) On the basis that the claimant would have ended up in liquidation at the same time as it in fact had, it followed that, even if the infringement had never occurred, the liquidation costs would have been incurred exactly as they had been incurred (see  of the judgment).
The claimant could not recover anything in respect of that head of loss (see  of the judgment).
(6) It was settled law that where an award of damages was to compensate a claimant's loss, the object of exemplary damages was 'to punish and deter'; such damages were a 'remedy of last resort', not to be encouraged; and that the court's inherent jurisdiction to award exemplary damages should be 'cautiously exercised'. Further, it was well established that exemplary damages should only be awarded if compensatory damages were insufficient alone to punish the defendant (see ,  of the judgment).
The instant case was a case which clearly fell within the second category of case where it was appropriate to award exemplary damages. The defendant's conduct had been outrageous and, absent an award of exemplary damages, a compensatory award would be insufficient. Its behaviour was only consistent with that of an organisation that had deliberately decided to disregard the law, and that that conduct had been done in cynical disregard of the claimant's rights. Further, there were no pro-competitive effects to defendant's conduct, serious anti-competitive effects, and there had been an exclusionary intent. The defendant had acted in knowing disregard of an appreciated and unacceptable risk that the Chapter II prohibition had either probably been or was clearly being breached or it had deliberately closed its mind to that risk (see - of the judgment). An award of £60,000 would be made to the claimant in respect of exemplary damages (see  of the judgment).
Rookes v Barnard  1 All ER 367 applied; Kuddus v Chief Constable of Leicestershire Constabulary  3 All ER 193 applied; Watkins v Secretary of State for the Home Department  2 All ER 353 applied; Devenish Nutrition Ltd v Sanofi-Aventis SA (France)  3 All ER 27 applied.
Michael Bowsher QC and Anneliese Blackwood (instructed by Addleshaw Goddard LLP) appeared for the claimant. James Flynn QC and Colin West (instructed by Burges Salmon LLP) appeared for the defendant.
- Criminal law
- Libel and slander
- Contempt of court
- Judicial review
- Employment tribunal
- Police services
- Human rights
- Contempt of court
- Human rights