Royal Mail Group Plc v Consumer Council for Postal Services

Where a regulatory compensation scheme provides that a party is under no obligation to compensate a defaulting customer, the natural meaning may be a complete exclusion rather than a right of set-off. Construction depends on the scheme’s language and objective context. Extrinsic evidence of a party’s subjective understanding is inadmissible. A provision referring to a customer being in default may require the default to be assessed at a particular point in time, even where the scheme does not state that point expressly. The court may identify a workable date from the scheme’s structure and permit the parties to refine it by agreement where necessary.

Postwatch sought judicial review of Postcomm’s refusal to take enforcement proceedings against Royal Mail under section 22 of the Postal Services Act 2000 for alleged breaches of Royal Mail’s licence conditions and the Standards of Service Compensation Scheme. Sullivan J allowed the application on both issues.

Royal Mail was joined to enable it to appeal. The appeal concerned clause 20(b), which excluded compensation where a bulk-services sender was in default of credit terms without reasonable excuse. The central questions were whether the clause excluded compensation altogether or permitted set-off against the sender’s debt, and whether default was assessed by reference to a point or period of time.

1. Appeal partly allowed. Laws LJ gave the leading judgment, with Sedley LJ and Maurice Kay LJ agreeing. Clause 20(b) excluded all compensation in cases within its terms; it did not merely authorise Royal Mail to set off compensation against sums owed by the sender.
2. The natural meaning of the words that Royal Mail was under no obligation to provide compensation, read with the heading “Bulk services – exclusions”, supported a complete exclusion. The purpose of the scheme and the statutory licence did not displace that meaning. The Decision Document was admissible as part of the scheme’s objective matrix, and Royal Mail’s June 2003 representations were admissible only so far as they elucidated the matters addressed in it. Evidence of Mr Sprigge’s subjective views was irrelevant and inadmissible.
3. The Decision Document’s paragraph 5.42 addressed two separate matters. Its first two sentences concerned exclusion for default without reasonable excuse; its third sentence concerned set-off against other indebted customers. On the contrary construction, clause 20(b) would add nothing to the general law and would fail to distinguish between justified and unjustified default.
4. On the time issue, the words “is in default” pointed to assessment at a particular point rather than over a period. The appropriate point was when compensation would otherwise fall due, following the announcement required by clause 17. The 80%/20% approach could be applied to the customer’s credit record for the relevant year, while the customer retained the opportunity to show a reasonable excuse at the identified time of default.
5. The judge below was therefore mistaken on the net-off issue but correct on the time issue. The parties were directed to make submissions on the appropriate orders.

• Court of Appeal (Civil Division): Royal Mail succeeded on the net-off issue but failed on the time issue. The matter was left for submissions on the appropriate orders.
• High Court, Queen’s Bench Division, Administrative Court: Sullivan J, on 19 December 2005, allowed Postwatch’s judicial review application concerning Postcomm’s refusal to take enforcement proceedings.