Kington SARL v Thames Water Utilities Holdings Limited

The court dismissed an application by Kington S.a.r.l. for permission to adduce expert evidence from a competition economist in relation to a term in a restructuring plan under Part 26A of the Companies Act 2006. The judge applied the CPR 35.1 requirement that expert evidence be reasonably required to resolve the proceedings and concluded that the draft expert report was tentative, insufficiently focussed on the facts of this case and lacked an adequate market definition and dominance assessment. The application was also refused on case management and fairness grounds: the application was late, would have prejudiced the tightly constrained timetable for the sanction hearing and risked jeopardising the statutory liquidity timetable. The judge therefore concluded the evidence was not reasonably required and would be an inappropriate distraction.

This was a first-instance application in the Part 26A restructuring plan proceedings of Thames Water Utilities Holdings Limited. Kington (a member of the junior creditor ad hoc group) sought permission to rely on expert evidence from a competition economist (the draft Murgatroyd Report) to support an objection that the Plan’s June Release Condition (JRC) infringed the Competition Act 1998: both the Chapter I prohibition (section 2) and a Chapter II abuse/collective dominance argument (section 18).

Nature of the application: permission to adduce expert competition-economics evidence to support Objection 4 to the Plan (alleged anti-competitive object and/or effect of the JRC and alleged collective dominance/abuse).

Issues framed by the court:

• Whether the expert evidence was reasonably required to resolve the proceedings under CPR 35.1 (necessity and/or assistance to the court);
• whether the draft report provided the focused factual-economic market analysis required to establish by-object or by-effect infringement under CA 1998 s.2 or to establish collective dominance/abuse under s.18;
• case-management and fairness considerations, including prejudice to the Plan Company and the practicability of replying within the urgent timetable for the sanction hearing.

Court’s reasoning and conclusions: the judge accepted that competition economics evidence is often helpful in competition litigation but emphasised that the CPR 35.1 test is the same in any commercial context. The application was late: the draft report was served only after a period in which it was uncertain the competition point would be pursued, leaving inadequate time for a proper response. Substantively, the draft report was expressed in tentative and qualified terms, did not provide a sufficiently firm market definition, and lacked the factual underpinning to support conclusions on market power and likely effects. The judge regarded much of the material as legal analysis dressed as economic commentary or as speculative about events that had not occurred. Given the urgency of the sanction hearing and the risk that admitting the evidence would prejudice the fair and proportionate resolution of core valuation and relevant-alternative issues under CA 2006 s.901G, permission was refused. The judge considered and rejected alternatives (adjournment or separate hearing) as impractical or prejudicial in the circumstances.

The application for permission to adduce expert competition-economics evidence is refused. The judge refused permission because (i) the application was late and would prejudice the tightly constrained timetable for the sanction hearing, (ii) the draft expert report was tentative, caveated and lacked the focused market-definition and dominance analysis necessary to assist the court, and (iii) on proportionality and fairness grounds the evidence was not reasonably required under CPR 35.1.