British Telecommunications Plc v The Office of Communications

Factual and Procedural Background

The appeal concerns whether the Competition Appeal Tribunal ("CAT") correctly adopted the starting point that costs should follow the event in an appeal under section 192 of the Communications Act 2003. The Office of Communications ("Ofcom") appealed the CAT's Costs Decision dated 25 January 2018, which required Ofcom to pay 50% of the costs incurred by British Telecommunications PLC ("BT") in a successful appeal against Ofcom's 2016 Business Connectivity Market Review ("Market Review").

BT challenged Ofcom's market definitions and certain regulatory decisions made in the Market Review. The CAT quashed parts of Ofcom's determinations on 26 July 2017, rendering a remedies hearing unnecessary. The Costs Decision awarded BT 50% of recoverable costs, with some adjustments, and ordered Ofcom to pay an interim sum. Ofcom was granted permission to appeal the Costs Decision on the correct starting point for costs.

Legal Issues Presented

1. Whether the CAT took inadequate account of the principles established in Regina (Perinpanathan) v. City of Westminster Magistrates' Court and related authorities when determining the costs starting point under section 192 appeals.
2. Whether the CAT took inadequate account of its own previous authorities in reaching its Costs Decision.
3. If errors were made in the Costs Decision, what the legal consequences of those errors should be.

Arguments of the Parties

Ofcom's Arguments

• The CAT erred in adopting a "costs follow the event" starting point for section 192 appeals, which should instead begin with no order for costs against Ofcom absent unreasonableness or bad faith.
• The CAT misunderstood applicable authorities and departed from established practice, including the earlier decision in British Sky Broadcasting Ltd v. Office of Communications ("PayTV").
• A "costs follow the event" approach risks chilling regulatory decision-making, as Ofcom acts in the public interest and under statutory duties.
• Operators in the sector accept Ofcom regulation and fund its costs; thus, it is inappropriate to impose full costs liability on Ofcom following successful appeals.

BT's Arguments

• The starting point adopted by the CAT and in PayTV is correct and appropriate for regulatory appeals, distinguishing them from dispute resolution appeals.
• Regulatory appeals involve Ofcom imposing conditions under sections 45, 47, and 87-91 of the 2003 Act, with a high threshold for appeal success, justifying the "costs follow the event" approach.
• The authorities cited by Ofcom are inapplicable or non-binding in this regulatory context.
• It is fairer that the costs of challenging flawed regulatory decisions be shared by the regulated sector rather than borne solely by individual challengers.
• No evidence exists of a chilling effect since the PayTV decision; costs orders against Ofcom have not been routine.
• A 2013 government consultation considered, but did not implement, changes to the costs rules consistent with Ofcom's position.

Table of Precedents Cited

Court's Reasoning and Analysis

The court undertook a detailed review of the relevant authorities, focusing on the interplay between the CAT's procedural discretion and established principles from the English Court of Appeal regarding costs against public authorities and regulators. It emphasized that the CAT is a specialist tribunal with its own procedural rules, but must still consider binding legal principles.

The court found that the CAT erred in PayTV and the Costs Decision by failing to adequately account for the binding principles established in Bradford, Baxendale-Walker, and Perinpanathan. These authorities establish that, absent unreasonable conduct or bad faith, public authorities acting in the public interest should not face a starting presumption that costs follow the event. The court rejected the CAT's reliance on distinctions between dispute resolution and regulatory appeals as insufficient to displace these principles.

The court further noted that while the CAT has wide discretion, it must apply legal principles consistently and avoid rigid rules that could chill the regulatory functions of Ofcom. The CAT's prior decisions, including Tesco and PayTV, gave inadequate weight to these principles. The court also highlighted the importance of the CAT adopting a consistent and sustainable approach based on applicable legal principles, the specific regulatory context, and its procedural rules.

Consequently, the court concluded that the CAT's Costs Decision could not stand and that the matter should be remitted for reconsideration applying the correct legal principles. The CAT was directed to consider the arguments on the "chilling effect" and to ensure its approach reflects both legal principles and the regulatory context.

Holding and Implications

The court ALLOWED Ofcom's appeal against the CAT's Costs Decision.

The Costs Decision is set aside and remitted to the CAT for reconsideration of the appropriate starting point for costs and the consequent costs order, applying the principles established by the Court of Appeal in Bradford, Baxendale-Walker, and Perinpanathan. The CAT must take into account the regulatory context and the potential chilling effect on Ofcom's statutory functions.

No new precedent was established by this decision beyond clarifying that the CAT must apply established legal principles concerning costs against public authorities acting reasonably and in good faith. The direct effect is that the CAT must reassess costs orders in regulatory appeals under section 192 with these principles in mind.