Independent Water Company Ltd v Water Services Regulation Authority

Factual and Procedural Background

The case concerns an appeal brought by Independent Water Company Limited ("Plaintiff") against the Water Services Regulation Authority ("Defendant") regarding the admissibility of a decision said to fall within the jurisdiction of the Competition Appeal Tribunal ("Tribunal"). The Tribunal had previously ruled on 26 January 2007 that the appeal was inadmissible because the Defendant had not made a decision within the Tribunal's jurisdiction. It also held that an appeal relating to interim measures was not included in the notice of appeal and refused permission to amend the notice.

Following this, the Plaintiff made applications for pre-emptive and protective costs orders seeking to have the Defendant pay the Plaintiff's costs regardless of the outcome or to be protected from costs awards. The Defendant applied for an order that the Plaintiff pay its reasonable costs of defending the appeal and costs related to the Plaintiff’s unsuccessful costs applications. The Tribunal considered the matter on written submissions.

Legal Issues Presented

1. Whether the Plaintiff should be ordered to pay the Defendant’s costs of defending the appeal and related costs applications.
2. Whether the Plaintiff’s applications for pre-emptive and protective costs orders were reasonably brought and pursued.
3. The appropriate exercise of the Tribunal’s discretion under Rule 55 of the Competition Appeal Tribunal Rules 2003 regarding costs in the context of an inadmissible appeal.
4. Whether the Tribunal should depart from its usual practice of awarding costs to the successful party in admissibility decisions in light of the specific facts of this case.
5. The allocation of costs relating to the appeal on interim measures, distinct from the admissibility issue.

Arguments of the Parties

Defendant's Arguments

• The Defendant incurred significant legal costs defending the appeal, totaling £23,855.88 (including VAT), with a portion attributable to the Plaintiff’s costs applications.
• The Tribunal has a wide discretion to award costs and has developed a practice of awarding costs to the successful party in admissibility decisions, supported by precedent.
• The appeal was wholly unsuccessful and foreseeable as inadmissible at the time it was lodged, given clear correspondence from the Defendant explaining the lack of an appealable decision.
• It is against the public interest to allow appellants, especially private companies with commercial interests, to bring plainly inadmissible appeals risk-free, potentially at public expense.
• The Plaintiff was put on notice early that the appeal was inadmissible and had an opportunity to withdraw or pursue judicial review instead but chose to continue.
• The Plaintiff’s applications for pre-emptive and protective costs orders were not properly supported and were abandoned or unreasonably pursued, causing unnecessary costs to the Defendant.
• The Defendant seeks recovery of its costs related to these applications, citing the Court of Appeal’s decision in Corner House v Secretary of State for Trade and Industry [2005] EWCA Civ 192.
• The Defendant rejects the Plaintiff’s claimed impecuniosity as a reason not to recover costs, emphasizing enforcement issues are separate from entitlement to costs.

Plaintiff's Arguments

• The Plaintiff submits that the Defendant’s application for costs is misconceived and that each party should bear its own costs.
• The outcome was not foreseeable from the outset and required full argument on a complex factual background, involving extensive work by specialist counsel.
• The Plaintiff disputes the Defendant’s assertion that it is settled practice to award costs to the successful party in admissibility decisions, noting that cited precedents involved costs awards against public bodies, not appellants.
• The Plaintiff argues that awarding costs against appellants without resources would deter legitimate appeals by smaller companies and public interest bodies.
• The Plaintiff contends it was encouraged to seek a pre-emptive costs order and thus should not be penalized for pursuing it.
• There is concern that the Defendant’s application for costs is intended to deter other potential market entrants from challenging regulatory decisions.
• The Plaintiff submits that the appropriate order is for each party to bear its own costs.

Table of Precedents Cited

Court's Reasoning and Analysis

The Tribunal exercised its broad discretion under Rule 55 of the Competition Appeal Tribunal Rules 2003 to determine costs. It reviewed the Defendant’s submissions that a practice exists of awarding costs to the successful party in admissibility appeals, supported by prior decisions. However, the Tribunal carefully analyzed those precedents and found that in each, the appellants were awarded costs because it was foreseeable from the outset that there was an appealable decision and the appellants had to come to the Tribunal to establish this fact.

In contrast, the Tribunal found that the present case was not one where the outcome was inevitable or foreseeable from the start. The Tribunal’s judgment was based on a detailed examination of complex facts and documents. The appeal was not unreasonably brought, and the Plaintiff’s arguments had some force, distinguishing this case from the precedent where costs were awarded to the successful party.

Regarding the Plaintiff’s costs applications, the Tribunal found that the Plaintiff acted unreasonably in making and pursuing these applications without sufficient evidence, causing unnecessary costs to the Defendant. Consequently, it was appropriate for the Plaintiff to pay the Defendant’s reasonable costs related to those applications.

On the issue of interim measures, the Tribunal considered the costs separately and concluded that the Defendant should be awarded a proportion of its costs attributable to this aspect of the appeal, estimating this at approximately 8% of total costs.

Balancing these considerations, the Tribunal concluded that the fair and just outcome was for each party to bear its own costs in relation to the main admissibility issue, but for the Plaintiff to pay costs related to the protective costs applications and the interim measures appeal.

Holding and Implications

The Tribunal’s final decision was as follows:

• The Plaintiff shall bear its own costs in relation to the main appeal on admissibility.
• The Plaintiff shall pay the Defendant £1,600 (excluding VAT) for costs related to the interim measures aspect of the appeal.
• The Plaintiff shall pay the Defendant £1,400 (excluding VAT) for costs incurred in defending the Plaintiff’s applications for protective costs orders.

The direct effect of this decision is that the Plaintiff bears some financial responsibility for costs associated with its unsuccessful costs applications and the interim measures appeal, while avoiding a general costs order against it for the main appeal. The Tribunal did not establish a new precedent but applied existing principles, emphasizing the importance of foreseeability and reasonableness in costs awards. This outcome balances the public interest in enabling appeals by smaller or less resourced parties against the need to deter unmeritorious or improperly pursued litigation.