[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Synstar Computer Services (UK) Ltd v ICL (SORBUS) Ltd [2001] EWHC 569 (Ch) (30 March 2001) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2001/569.html Cite as: [2002] ICR 112, [2001] CP Rep 98, [2001] UKCLR 585, [2001] EWHC 569 (Ch)

[New search] [Printable RTF version] [Help]

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		30th March 2001

Mr Justice Lightman:

INTRODUCTION

1. At the case management conference in this case, a novel and important question arose for determination. In these present proceedings commenced by the claimant Synstar Computer Services (UK) Ltd ("the claimant") against ICL Sorbus Ltd and International Computers Limited ("ICL") the claimant contends that certain ties maintained by ICL are unlawful under Article 81 and 82 of the EC Treaty ("Article 81" and "Article 82") and under sections 18 and 2 of the Competition Act 1998 ("the Act") and seeks relief in respect of the loss alleged to have been occasioned. At the same time, the claimant has complained to the Director General of Fair Trading ("the Director") about those same ties, and the decision of the Director (which the parties agree is certain be adverse to the claimant) is imminent. From the decision an appeal is highly likely to the an appeal tribunal of the Competition Commission ("the Tribunal") constituted by the Act. In both sets of proceedings the same critical preliminary issue will arise, namely the definition of the relevant market for the purposes of the competition law analysis which must be undertaken. Both parties agree the obvious fact that the expertise of the Tribunal uniquely equips the Tribunal to decide the preliminary issue and the competition issues raised before the Tribunal and that at an appropriate stage the proceedings before me should be stayed pending the conclusion of the proceedings before the Tribunal. The issue has however arisen between the parties as to when that stage should be. ICL say that the stay should be immediate. The claimant says that it should be delayed until after the conclusion of disclosure of documents and exchange of witness statements and expert reports, because the rules of procedure governing the appeal to the Tribunal are such that, unless previously furnished with this material in this way, the claimant will be at a disadvantage on the appeal.

FACTS

2. I shall first set out the claimant's case on the facts. ICL supply powerful computers ("main frames") and the operating software ("VME"). They tie in the provision of hardware maintenance to the provision of software maintenance and support services for VME. ICL are the only computer manufacturer that ties software and hardware in this way. The claimant is in the business of hardware maintenance. The tie causes the claimant loss because it forecloses a substantial amount of business. The claimant is effectively prevented from maintaining any of ICL's hardware despite being able to do so more cheaply than its competitors and is restricted in its ability to tender for hardware maintenance at mufti-vendor sites i.e. those customers which require one person to maintain all the different types of computers at its premises.
3. It is the claimant's case that the conduct of ICL is unlawful in four regards and has given rise to four causes of action. The first two causes of action (arising under Article 82 and section 18 of the Act) relate to abuse of a dominant position. The question raised is whether ICL are dominant in the "market" for software support services for VME. The claimant argues that, though it is unusual for a producer of a product in a market in which it is not dominant to be dominant in the "after market" or post sales market for another product, the switching costs from one mainframe to another are so high that ICL's customers are essentially locked in by the tie with the result that ICL have sufficient market power to exploit them by tying two unrelated services. On this basis the claimant claims in the High Court action damages for breach of Article 82 and section 18, which prohibit an abuse of a dominant position respectively in a substantial part of the Common Market and the United Kingdom.
4. The second two causes of action (arising under Article 81 and section 2 of the Act) relate to the prohibition of restrictive agreements. These claims raise first a factual question, namely whether (even if dominance in an after market cannot be shown) the tie could still appreciably distort competition either in the market for maintaining mainframes and/or in the multi-vendor market. They also raise a legal issue concerning the application of the exemption for vertical restraints. Such exemption was granted from Article 81 (provided that certain conditions are fulfilled and the market share does not exceed 30%); and an exemption of most vertical constraints from the application of section 2 was granted by the Competition Act (Land and Vertical Agreements Exclusion) Order 2000.

STATUTORY PROVISIONS RELATING TO INVESTIGATIONS BY THE DI.RECTOR

5. Before I turn to the history of the litigation, it is helpful to set out the relevant provisions of the Act relating to an investigation by the Director:

" 25. Director's power to investigate.

The Director may conduct an investigation if there are reasonable grounds for suspecting-

(a) that the Chapter I prohibition [i.e. the prohibition imposed by section 2(1)] has been infringed

or

(b) that the Chapter II prohibition [i.e. the prohibition imposed by section 18(1)] has been infringed

58 Findings of fact by the Director

(i) Unless the court directs otherwise ... a Director's finding which is relevant to an issue arising in Part I proceedings [i.e. a prohibition under section 2(1) and section 18(1)] is binding on the parties if-

(a) the time for bringing an appeal in respect of the finding has expired and the relevant party has not brought such an appeal; or

(b) the decision of the appeal tribunal on such an appeal has confirmed the finding

(2) In this section-

a Director's finding means a finding of fact made by the Director in the course of-

(b) conducting an investigation under section 25."

6. Provision is made in section 47 of the Act for a complainant to the Director, whose complaint is rejected, to apply to the Director for the rejection to take the form of a decision appealable by him to the Tribunal under sections 46 and 47 of the Act.

7. In the light of the submissions made to me the following comments are called for on sections 25 and 58 of the Act:

i) the power of the Director to conduct an investigation only arises if there are reasonable grounds for suspecting one or other of the specified infringements;

ii) a finding of fact by the Director is only made binding by section 58 if (so far as is material) made in the course of conducting an investigation under section 25; and accordingly

iii) a decision by the Director (whether or not confirmed on appeal) that there are not reasonable grounds for suspecting one or other infringement (whatever other force it may have) will not bring into play section 58 and make the decision statutorily binding on the parties;

iv) but the decision on the appeal may have the same effect and bind the parties to the appeal. Since the proceedings before the Tribunal are judicial and not (like proceedings before the European Commission) administrative only, the decision of the Tribunal may give rise to an issue estoppel and not merely bring into play the doctrine of abuse of process: consider Iberian UK Ltd v. BPB Industries Plc [1996] 2 CMLR 601.

HISTORY OF LITIGATION

6. On the 25th July 1996 the claimant wrote to ICL threatening legal proceedings in respect of ICUs failure to provide adequate software support to customers who took hardware maintenance otherwise than from ICL. On the 12th February 1997 the claimant wrote again to ICL threatening a complaint to the European Commission. On the 7th November 1997 the claimant made a complaint about ICL's conduct to the Director under the UK legislation then in force, namely the Fair Trading Act 1973 and the Competition Act 1980. Between 1997 and 2000 the Director investigated the complaint. On the 1st March 2000 the Act came into force. On the 2nd March 2000, the Director wrote to ICL describing his inquiry as "lengthy and complex ... raising difficult issues which we have examined in depth". He concluded that, on the basis of certain agreements by ICL as to its conduct, there did not exist a significant competition problem that would give him the ground to take further action against ICL under the earlier competition legislation. In April/May 2000 the claimant complained to the Director about ICL's conduct as breaching sections 18 and 2 of the Act. On the 28th April 2000 the claimant issued the present High Court proceedings. The Claim Form and Particulars of Claim were served on the 2nd May 2000 and the Defence was served on the 13th July 2000. The parties served Allocation Questionnaires on the 27th October 2000. The claimant's position was that the parties should forthwith proceed with disclosure of documents and exchange of witness statements and experts reports, but ICL contended that none of these steps should be taken until after the decision of the Director was known. On the 11th January 2001, with the agreement of both parties Master Bowman ordered that the case management conference be listed for a judge for hearing.
7. On the 16th January 2001, the Director wrote to the parties dismissing the claimant's complaint on the basis that there were no reasonable grounds for suspecting that ICL's activities infringed either section of the Act. In January/February 2001 the claimant asked the Director that his rejection of the complaint should take the form of a decision appealable by the claimant to the Tribunal. On the 31st January 2001 ICL proposed to the claimant that the definition of the relevant market be determined as a preliminary issue in the action. The claimant replied on the 15th February 2001 agreeing in principle to this proposal.
8. The current position is as follows:

i) an appealable decision of the Director on the claimant's complaint is to be expected on or before the 2nd April 2001;

ii) the claimant will then go through the formalities required by section 47 of the Act by way of application to the Director to give the claimant standing to appeal. The claimant has up to one month in which to apply to the Director under section 47 [the authority for this is rule 28 of the Director's Rules SI 2000/293], and the Director's (essentially formal) decision under section 47 can be expected shortly thereafter;

iii) the claimant then has two months to appeal to the Tribunal. The claimant's counsel has told me that it is highly likely (though not certain) that the claimant will appeal;

iv) ICL's counsel has told me that, if the claimant does not appeal, ICL will apply to the High Court to dismiss the action relying on section 58 of the Act. I have indicated my view as to the ambit of section 58, but the question should prove academic in view of the prospects of an appeal.

9. In the course of the hearing before me, the parties' counsel: (i) offered undertakings to the court that, if there is an appeal, they will both prosecute the appeal with all due diligence; and (ii) agreed that the High Court proceedings should at an appropriate moment be stayed so that the appeal (if it proceeds) should be heard and decided before the High Court action and that the preliminary issue to which I have referred should (subject to any contrary direction of the Tribunal) be tried first on the appeal. The only issue between the parties is whether the proceedings in the High Court should be stayed now pending the outcome of the appeal to the Tribunal (as sought by ICL) or whether the action should be allowed to proceed to the stage before trial when full disclosure has been completed and all expert and other witness statements have been exchanged (as sought by the claimant). The claimant maintains that these further stages in the action should be completed, so that by this means the claimant will be properly placed to prosecute its appeal before the Tribunal. To understand this contention it is necessary to examine the procedural rules applicable to proceedings before the Tribunal. Before I do so I should say that I have real doubts whether the likely timetable to be adopted if the claimant is correct in its contentions could realistically enable the claimant to be armed as it wishes when finally settling the application to the Tribunal and supporting documents, but it is not appropriate to decide the question raised on this ground.

THE COMPETITION COMMISSION APPEAL TRIBUNAL RULES 2000 ("THE RULES")

10. The Rules (so far as material) provide as follows:

"COMMENCING PROCEEDINGS

Time and manner of commencing proceedings

6. - (1) In these rules the notice of appeal referred to in Schedule 8 to the Act is referred to as `the application' and `the applicant' means the person making the appeal.

(2) An appeal to the [Tribunal] under sections 46 and 47 of the Act must be made by sending an application to the Registrar so that it is received not later than two months after the date upon which the applicant was notified of the disputed decision.

(3) The tribunal may not extend the time limit provided under paragraph (2) unless satisfied that the circumstances are exceptional.

(5) The application shall contain:

(a) a brief statement of the facts;

(b) a summary of the principal grounds for contesting the decision, which shall include the information required by paragraph 2(2) of Schedule 8 to the Act;

(c) a succinct presentation of the arguments supporting each of those grounds;

(d) the relief sought by the applicant, and any directions sought pursuant to rule 17 below; and

(e) a schedule listing all the documents annexed to the application.

(6) There shall be annexed to the application:

(a) a copy of the disputed decision; and

(b) as far as practicable, a copy of every document on which the applicant relies including the written statements of all witnesses of fact, or expert witnesses, if any.

Amendment of application

9. - (1) The applicant may amend the application only with the permission of the tribunal.

(2) Where the tribunal grants permission under paragraph (1) it may do so on such terms as it thinks fit, and shall give such further or consequential directions as may be necessary.

(3) The tribunal shall not grant permission to amend in order to add a new ground for contesting the decision unless:

(a) such ground is based on matters of law or fact which have come to light since the application was made; or

(b) it was not practicable to include that ground in the application; or

(c) the circumstances are exceptional.

PREPARATION FOR DECIDING THE APPLICATION

Directions

17. - (1) The tribunal may at any time, on the request of a party or of its own motion, at the pre-hearing review or otherwise, give such directions as are provided for in paragraph (2) below or such other directions as it thinks fit to secure the just, expeditious and economical conduct of the proceedings.

(2) The tribunal may give directions-

(d) requiring persons to attend and give evidence or to produce documents;

(k) for the disclosure between, or the production by, the parties of documents or classes of documents ....;

(1) for the appointment and instruction of experts, whether by the tribunal or by the parties and the manner in which expert evidence is to be given;

11. The Tribunal Guide to Appeals ("the Guide") issued by the Tribunal helpfully explains the approach adopted:

" 2. THE GENERAL APPROACH OF THE RULES

2.1 The Rules are based on the same general philosophy as the Civil Procedure Rules 1998 (`CPR') and pursue the same overriding objective of enabling the appeal tribunals to deal with cases justly, in particular by ensuring that the parties are on an equal footing, that expense is saved, and that appeals are dealt with expeditiously and fairly

2.2 To achieve this objective in the particular context of the Act, the Rules are modelled partly on the CPR and partly on the Rules of Procedure of the Court of First Instance of the European Communities (`CFI'), which deal with appeals in competition cases arising under Articles 81 and 82 (formerly Articles 85 and 86) of the EC Treaty. A central feature of both the CPR and the rules of the CFI is case management by the court.

2.3 The five main principles of the Rules are as follows.

Early disclosure in writing

2.4 Each party's case must be fully set out in writing as early as possible, with supporting documents produced at the outset.

Active case management

2.5 The proceedings will be actively case managed by the appeal tribunal, the objective being to identify and concentrate on the main issues at as early a stage as possible, to avoid undue prolixity or delay, and to ensure that evidence is presented in an efficient manner.

Strict timetables

2.6 The tribunal will indicate, as early as possible, a target date by which the tribunal's decision on the appeal is to be given, together with the date for the main hearing. The main stages of the case, and the internal planning of the tribunal's work, will be geared to meeting this timetable. In general the tribunal will aim to complete straightforward cases in less than six months. this target will be reviewed in the light of experience.

Substantive requirement

5.4 In accordance with Rule 6(5), the application should contain not only the grounds relied on for the appeal, but a succinct presentation of each of the arguments supporting those grounds. It should not therefore resemble a `notice of appeal' of the traditional kind, which by its nature is designed to be supplemented later in the proceedings by skeleton argument and oral debate. On the contrary, the application initiating the appeal to the tribunal should already contain a written development of each of the factual, legal or other grounds of appeal relied on, so that the tribunal is seized in writing, from the outset, with the substance of the case advanced on the appeal.

5.5 In this respect, the role of the application is essentially the same as the role of the application in appeals to the CFI from decisions of the European Commission under articles 81 and 82 of the EC Treaty. The two-month period allowed to appealing to the tribunal is significantly more than the period allowed for appeals to some other appellate tribunals or the Court of Appeal, precisely so as to give the applicant sufficient time to prepare a detailed written argument, and to assemble any evidence not already presented during the procedure before the Director.

5.6 Two important consequences flow from this approach. The first is that applicants are expected to develop all the grounds of appeal relied on, together with any supporting documents, in the initial application, and not to add wholly new grounds of appeal in the course of the proceedings. Rule 9(3) provides that the tribunal may not give permission to amend the application to add a new ground of appeal unless the new ground is based on matters of law or fact which have come to light since the application was made; or it was not practicable to include the new ground in the original application; or the circumstances are exceptional.

5.7 The second consequence of this approach is that it will seldom be necessary for the arguments set out in the application to be the subject of lengthy oral development at the hearing. Oral submissions before the tribunal can therefore be kept short, within time limits set by the tribunal, and structured so as to focus on the main points of the written argument.

The documents to be annexed

5.18 It is essential that every application includes a schedule listing the documents annexed in a numbered sequence. Under Rule 6(6) the documents to be annexed to the appeal include the contested decision (which should normally be at annexed to the application), and `so far as practicable, a copy of every document on which the applicant relies, including the written statements of all witnesses of fact, or expert witnesses, if any'.

5.19 The documents to be considered include: (i) documents relating to the administrative procedure prior to the adoption of the contested decision; (ii) documents relating to primary facts; (iii) witness statements relating to primary facts; (iv) documents related to market and other economic issues; and (v) expert opinion and other evidence directed to economic or technical issues. Documents of only peripheral relevance to the case should not be annexed. Extracts from voluminous documents are acceptable provided that the extract is not taken out of context. Files of documents should be presented in a user-friendly way, if necessary after prior consultation with the Registry."

APPROACH TO APPLICATION FOR STAY

12. There is authority on the approach to be adopted in cases where questions of the application of EU Competition law arise in parallel proceedings before domestic courts and the EU regulatory body (that it is so say the European Commission). The guidance provided is that: (a) a stay should be granted of the proceedings in the domestic court to avoid the risk of inconsistent decisions; (b) the stay need not prevent the proceedings in the domestic court continuing to a point short of decision. The court should decide for itself whether to allow the processes of disclosure and preparation for trial to be completed up to this point: see MTV Europe v BMG Record (UK) Ltd [1997] EuLR 100; and (c) to better enable the regulatory body and the court to reach the same conclusions, it is important that the evidential material which is before the court is available before the regulatory body. Accordingly (and most particularly in a case where the procedural rules of the regulatory body and the court regarding disclosure are different) the court will release cross-undertakings given by parties on disclosure to enable this object to be achieved: see Apple Corps v. Apple Computers [1992] 1 CMLR 969. The claimant submits that similar principles should apply in a case such as the present where there are parallel proceedings before the Tribunal and the court. In my view the same considerations apply in regard to the need for a stay to obviate the risk of inconsistent decisions and to the desirability of making available to the Tribunal all relevant documents disclosed in any parallel proceedings before the court. Likewise the court may defer the stay of the proceedings to a point short of decision and allow the processes of disclosure and exchange of statements of witnesses of fact and expert witnesses to be completed. But it will only do so if this procedure accords with the overriding objectives of the CPR; this is unlikely to be so in most cases where such a course would duplicate cost and effort in both sets of proceedings; and most particularly, since both the court and the Tribunal have the same case management powers, and the Tribunal is the master of its own procedure, it is not proper for the court to exercise its powers in order to anticipate or supplement the exercise of its powers by the Tribunal.
13. The Act has established specialist administrative bodies charged with the enforcement of UK Competition Law (of which the Director is one) and a specialist judicial body to determine appeals from such bodies, namely the Tribunal. The same "competition" issue may arise in court proceedings and in proceedings before the specialist body. Where it does, the question will arise whether the court in its discretion should stay the proceedings before the court pending the determination by the Director or the Tribunal. In the ordinary case, such a stay may be expected for a number of reasons which include: (1) the need to avoid the risk that inconsistent decisions are reached by the court and the Director or Tribunal; (2) the specialist expertise of the Director and Tribunal; and (3) the indication to this effect implicit in section 58 of the Act that decisions of fact arrived at after investigations by the Director, if not appealed or if confirmed on appeal, shall (unless the court otherwise directs) be binding on the parties as there provided.
14. The Rules adopted in respect of the Tribunal expect much more of an appellant in terms of details and the evidential support for his case than is expected of a litigant commencing proceedings in the High Court. The application is to be more than a pleading of a case to be made or a notice of appeal setting out the grounds of appeal. It is to contain a succinct presentation of each of the arguments supporting the grounds of appeal relied on; to it should be annexed all documents (and that includes witness statements of fact and expert opinion) relied on; and permission to amend the application or supplement the annexures is not to be assumed to be readily available. It is to be noted in this regard that the proceedings before the Tribunal are an appeal and the ground may be expected (to a greater or lesser degree) to have been already covered in the course of the processes leading to the decision under appeal; and the Tribunal have adopted a target period of less than 6 months to complete straightforward cases.
15. The claimant complains that in this case the decision appealed from is that there should be no investigation; that if an adverse decision have been reached on its complaint after an investigation, it would have had available the product of that investigation to go on in preparing the application, compiling the list of documents to be annexed and the witness statements of witnesses of fact and expert witnesses. But in default of such investigation, the claimant lacks all of the foregoing and says that it is entitled to make good this deficiency by using these proceedings to extract the necessary information and documents.
16. It is tempting to say, in answer to this complaint, that the claimant is the author of its own discomfiture, for it has been and continues to be its choice to prosecute its complaints by way of appeal to the Tribunal as well as in the High Court proceedings well knowing the provisions of the Rules and it is free not to proceed with the appeal without incurring any penalty in the form of a binding finding of fact under section 58 of the Act. But I do not think that is a sufficient answer. The answer, as it seems to me, is rather this, that the Tribunal is the master of the procedure to be adopted in all proceedings before it. It is not for this court to arrogate to itself the jurisdiction to make good any perceived shortcomings in the Rules. The claimant does not suggest that the powers of the Tribunal in regard to disclosure and exchange of witness statements is in any respect less full than that of the court. The Tribunal has quite deliberately adopted the Rules as best fitted to achieve the overriding objective of dealing with appeals justly and this includes the Rules regulating the content of, the annexures to, and the amendment of the application. That does not mean that the Tribunal may not recognise exceptional cases where more leeway may be given. It is accordingly for the claimant to make its case to the Tribunal if it requires leeway in this or in any other respect. It is not for this court to make trial management decisions in the proceedings before the court for the collateral purpose of affecting the course of proceedings before the Tribunal or to pre-empt case management decision by the Tribunal which the Tribunal is perfectly competent to make on its own.
17. The claimant argued that in a case such as the present, where the court and the Tribunal have overlapping jurisdictions to resolve issues and a decision by the Tribunal will or is likely to be final and binding on the parties, it is an important consideration that the evidential material which would be available in the proceedings before the court should be available to the Tribunal. That is a very relevant consideration. For this reason the court would be inclined to give permission for documents and information revealed on disclosure in proceedings before the court to be used in parallel proceedings before the Tribunal: consider Apple Corps Ltd v. Apple Computer Inc [1992] 1 CMLR 969. I have no doubt that it is a consideration to which the Tribunal will give due weight, though no doubt it will confine disclosure to what it sees (with its more expert eye) as relevant to the issues it has to decide. In short, whilst the court may be expected to release material disclosed in proceedings before it for use in proceedings before the Tribunal, I do not think that it would be proper for the court to use its powers to bring such material into existence for subsequent use before the Tribunal or put the parties to the costs of this expensive exercise. It should be left to the Tribunal to decide what is needed for this purpose. If I had any doubts on this score (which I do not have), those doubts would be allayed by the assurance given by ICL that their approach before the Tribunal will be that the Tribunal should direct disclosure of all that the court would have required to be disclosed in these proceedings on a trial of the same issue.

CONCLUSION

18. Accordingly in my view, there should be an immediate stay on these proceedings pending a decision by the claimant whether to appeal and thereafter (if it does appeal) until further order. It is not for the court to anticipate, subvert or in anyway interfere with the exercise of the jurisdiction conferred on the Tribunal. The Tribunal alone has jurisdiction over its own procedure (subject to any appeal) and it has the expertise to make decisions as to what does or does not enable it to do justice between the parties before it.
*****