For the first time, the Competition Appeal Tribunal ("CAT") has applied the rules governing applications for the Fast Track Procedure ("FTP"), setting out helpful guidance as to the way in which it will approach such applications in future.
In a judgment published on 16 June 2016, the CAT rejected an application to allocate a follow-on damages claim brought by Breasley Pillows Limited and others against Vita Cellular Foams (UK) Limited and others to the FTP. A few days later, the CAT made its first cost capping order in a fast-track case in Socrates Training Limited v The Law Society of England and Wales.
The Fast-Track Procedure
The FTP was introduced as part of the new regime for private actions under the Consumer Rights Act 2015. Broadly, the FTP is designed to enable the CAT to deal with less complex cases more quickly and cheaply, increasing the ability of small and medium sized enterprises ("SMEs") to challenge behaviour that is restricting their ability to grow.
The detailed provisions governing the FTP are contained in rule 58 of the Competition Appeal Tribunal Rules 2015 ("the Rules") (available here). Cases allocated to the FTP must be:
- heard within six months of a claim being made subject to that procedure; and
- subject to a cap on recoverable costs.
Rule 58(3) of the Rules establishes that the CAT shall, in deciding whether or not to make particular proceedings subject to the FTP, take into account all matters it thinks fit. These factors include whether one or more of the parties is an SME, whether the time estimate for the main hearing is three days or less, the extent of any disclosure or evidence required, the remedy sought and the complexity and novelty of the issues.
CAT's dismissal of FTP application in Breasley Pillows v Vita Cellular Foams
On 7 June 2016, the CAT dismissed the Claimants' application for fast-track designation in their claim for damages following on from certain foam producers' cartel settlement with the European Commission. This was the first time a claim for damages alone, rather than for an injunction, sought to use the FTP.
In its judgment, the CAT dismissed the application for fast-track designation on the basis that the case could not be dealt with at a trial of three days or less. Rather, Mr Justice Roth considered that a two week trial was more likely. The Claimants had argued that the three day guideline set out in Rule 58(3)(b) applied per claimant, such that a six person claim had a threshold of 18 days. Mr Justice Roth stated that this approach was 'fundamentally misconceived'and emphasized that although three days is not an absolute limit, a"case of such longer duration is simply not suitable for the FTP."
Mr Justice Roth also referred to the following matters, although they were not decisive:
- Scope of disclosure: the scale and scope of disclosure exceeded the scope of rule 58(3) given that: (i) the Claimants sought considerable disclosure for a period of over ten years; (ii) the Defendants would seek disclosure or information relating to, for example, pass-through; and (iii) each party was likely to press the other side for documents not immediately available. This contrasts with the Socrates case where the CAT did not anticipate a great amount of disclosure from either party and noted that the required expert evidence was limited in scope.
- Complexity: the case raised numerous complex issues of fact, including whether there was an overcharge, the extent of any pass-through, and the existence of an umbrella or volume effect. These issues would require considerable witness and expert evidence.
- Nature of the remedy: while damages cases are not ineligible for the FTP, cartel claims - particularly those of several years duration - are unlikely to satisfy the criteria for the FTP. Mr Justice Roth indicated that the following factors might make it more likely that a follow-on damages claim is eligible for the FTP: there are no pass-through issues; quantification is at least partly addressed by the competition authority; or the claim is carefully circumscribed to overcharge during the cartel period itself. Indeed, the CAT's Guide to Proceedings suggests that claims for injunctive relief (as in Socrates), rather than damages, are more suitable for the FTP.
- Urgency: although urgency was not the most relevant factor in determining an FTP application, the CAT emphasised that this claim was not urgent and that the FTP was designed to be faster than ordinary litigation.
- Cost cap: recognizing the Claimant's desire for a costs cap and their concerns about costs running to several million pounds, the CAT noted that the FTP was not designed to be the remedy for all concerns about costs. In a case of this complexity, the CAT suggested that alternative funding mechanisms could be pursued, such as conditional fees, damages-based agreements or ATE insurance.
Capping of Legal Expenses in Socrates Training v The Law Society
The CAT set a costs cap in the FTP for the first time in theSocrates proceedings. Mr Justice Roth capped the legal expenses that the Claimant and Defendant could recover at £200,000 and £350,000 respectively.
The Defendant's budgeted costs of £640,000 were deemed to be disproportionate in the circumstances of the case. In particular, the CAT considered the trial estimate, the "unreasonable" amount of work conducted to date and the time estimates for working on witness statements and expert reports. In setting the cap of £350,000 for the Defendant, the CAT also considered the fact that the Claimant was willing to spend £200,000 on its own costs, the importance of the issues for the Defendant and the need to strike a fair balance between enabling access to justice and providing a measure of protection for the Defendant.
Mr Justice Roth emphasised that the caps only applied to recoverable costs; they did not set a maximum spend for each party. Further, the caps did not mean that one side "will, in fact, recover that sum" because costs will be considered, as usual, only after a winner is established in the trial.
By these recent rulings, the CAT has indicated that:
- Save for the simplest cases, follow-on damages claims will rarely be suitable for the FTP - the new procedure therefore looks likely to be used mainly for injunctions in future.
- The CAT will closely scrutinise costs budgets when determining a costs cap - consequently, claimants may need to be conservative in their estimates, or might do better to address their cost risk through funding arrangements and insurance, rather than relying on obtaining a cost cap.