Quarmby Construction Co Ltd v Office of Fair Trading

The Competition Appeal Tribunal has a wide discretion under rule 55(2) when determining costs. It need not adopt the general civil litigation rule that costs follow the event. Competition appeals are predominantly regulatory and may differ materially from ordinary civil proceedings.

In deciding costs, the tribunal may assess the parties’ success across liability, penalty and individual issues, together with the work attributable to each. A substantial reduction in a financial penalty does not necessarily make an appellant the overall winner where its challenge to infringement fails. The continuing finding of infringement may be independently important and may outweigh or balance success on penalty.

Quarmby Construction Co Ltd appealed against an order of the Competition Appeal Tribunal making no order for the costs of its substantive competition appeal. The tribunal’s costs decision was reported at [2011] CAT 34.

The company had unsuccessfully challenged findings that it committed three infringements of the Chapter 1 prohibition under the Competition Act 1998. It nevertheless obtained a reduction of its penalty from £881,749 to £213,750. The tribunal concluded that neither party was the overall winner and that the time and work devoted to the unsuccessful liability and penalty arguments justified making no costs order.

The central issues were whether the tribunal should have treated the company as the winner by applying the civil principle that costs follow the event, and whether it properly evaluated success and failure on the individual issues.

1. Appeal dismissed. Rule 55(2) of the Competition Appeal Tribunal Rules 2003 confers a wide and general discretion concerning costs. The tribunal had addressed the relevant considerations and reached a conclusion within the reasonable scope of that discretion.
2. The tribunal was not required to adopt the general rule in CPR 44.3(2), under which costs follow the event, as its primary or formal guide. The Civil Procedure Rules do not apply directly to tribunal proceedings. Such proceedings are predominantly regulatory, take varied forms and are rarely analogous to ordinary civil litigation. The flexible approach described in The GISC Appeal [2002] CAT 2 and The Racecourse Association v OFT [2006] CAT 1 was prudent and sensible.
3. The tribunal was entitled to conclude that neither party was the overall winner. The company achieved a substantial reduction in penalty, but the Office of Fair Trading successfully maintained the findings of infringement. A competition infringement is independently significant because it may affect other potential claims and the undertaking’s business position. The liability issues also consumed more hearing time and were likely to account for a greater proportion of the costs.
4. The tribunal had considered the parties’ success and failure on individual issues in substance. Its unanimous conclusion that no costs order should be made reflected the extensive unsuccessful liability challenge, the failure of several penalty arguments and the work attributable to those matters. It did not need expressly to formulate its reasoning as a reduction of otherwise recoverable costs to nil.
5. A penalty-only appeal producing a comparable reduction would present a materially different costs question. The tribunal could therefore distinguish the costs orders made in Kier Group v OFT [2011] CAT 33, where liability had not been challenged.

1. Court of Appeal (Civil Division): The appeal was dismissed. The tribunal’s decision to make no order for costs was upheld: [2012] EWCA Civ 1552 .
2. Competition Appeal Tribunal: Following the substantive decision at [2011] CAT 11, which upheld the infringement findings but reduced the penalty, the tribunal unanimously made no order for costs at [2011] CAT 34.