JML Direct Ltd v Freesat UK Ltd

A contractual discretion must be exercised honestly, in good faith and rationally. Where a contract requires a decision-maker to take specified criteria into account, the decision-maker may attach no weight to a criterion, provided it has considered it and acted rationally. An objectively justifiable allocation method need not identify every item of evidence that may be considered. A broad criterion such as viewer convenience may permit consideration of relevant evidence, including audience data and comparable listings. The court will not substitute its own view of the preferable decision for that of the contractual decision-maker.

JML Direct Ltd operated two shopping channels on the Freesat digital satellite platform. Freesat allocated the channels positions lower in the shopping genre of its electronic programme guide. JML claimed declarations that the allocations were invalid and that Freesat had breached the parties’ EPG Agreement, the Listing Policy and the applicable Ofcom Code.

The alleged breaches concerned the treatment of published listing criteria, the use of BARB ratings and Freeview listings, and Freesat’s reliance on the criterion of viewer convenience and expectations. The central issues were the scope of Freesat’s contractual discretion and whether its decision-making was irrational or otherwise objectionable.

1. Contractual discretion. The court held that Freesat’s discretion was not unfettered. It had to consider the criteria in section 5.3 of the Listing Policy and exercise its discretion in good faith and rationally. The relevant concept of irrationality was analogous to Wednesbury unreasonableness, rather than an objective standard of reasonableness. The approach in Socimer International Bank Ltd v Standard Bank London Ltd [2008] EWCA Civ 116 and the related guidance in Lymington Marina Ltd v MacNamara [2007] EWCA Civ 181 and Horkulak v Cantor Fitzgerald [2004] EWCA Civ 1287 was applied.
2. Taking a criterion into account. The obligation to take a criterion into account meant paying attention to it or having it in mind during the decision-making process. It did not require Freesat to give the criterion any particular weight. Freesat could decide to attach no weight to criterion 5.3(iii), provided it had considered the criterion and reached that decision in good faith and without arbitrariness, capriciousness or irrationality.
3. Objectively justifiable method. The Ofcom Code did not require the Listing Policy to specify every matter that might be considered, all relevant evidence, or a wholly objective application of criterion 5.3(v). The broad criterion of viewer convenience and expectations could involve subjective judgment. Freesat was entitled to consider BARB ratings and the presence of channels on Freeview. Its decision not to rely on the Sky model and its assessment of the target audience were not irrational.
4. Application and result. Freesat’s decision to attach no weight to criterion 5.3(iii) across all genres, because several providers had encountered difficulties with the EPG Agreement, fell within its discretion. One alternative reason concerning the difficulty of identifying agreement dates was irrational, but it was not the operative basis relied upon. Freesat’s allocation process was objectively justifiable, and JML failed to establish any breach. The claim was dismissed.

First-instance decision. The judgment does not state any prior appellate decision.