England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MANCHESTER BUSINESS & PROPERTY COURT

		Manchester Civil Justice Centre 1 Bridge Street West Manchester M60 9DJ
		22nd November 2017

HIS HONOUR JUDGE HODGE QC:

1. This is my extemporary judgment in the case of On Medical Limited (as claimant) and MedCo Registration Solutions Limited (as defendant), claim number D31MA038.
2. This is the hearing of an application by the claimant for interim injunctive relief. The relief sought is an order:

(a) That the defendant shall forthwith restore the claimant to its status as a high volume national medical reporting organisation and provide users of the defendant's IT portal with the same level of access to it as is given to other high volume national medical reporting organisations under its random access model; and

(b) That the defendant shall be restrained from terminating or suspending that status and/or that access until the conclusion of the trial of this action or further order.

3. The order sought also includes provision for the claim to be stayed for a period of 90 days to enable the parties to comply with the escalation procedure set out in clause 10 of the user agreement between them.
4. Although a draft claim form was provided as part of the documentation exhibited to the supporting witness statement for the claimant the claim form has not yet been issued. The reason for that is given at paragraph 61 of the supporting witness statement of Mr Ian Scanlan. He says that given the defendant's thinly veiled threat to suspend the claimant's contract entirely should it issue proceedings, he has thought it best not to issue proceedings prior to an injunction being in place to stop the defendant acting on that threat, even though he asserts that it would amount to a further breach of contract by the defendant. He undertakes to issue the claim form as soon as the injunction is granted. I indicated at the opening of this application that that form of undertaking was unsatisfactory. It is one to issue the claim form only if the injunction is granted. A claimant is not entitled to come along to court and invoke its jurisdiction to grant injunctive relief without undertaking to issue the appropriate claim whatever the outcome of that interim injunction application. Mr Scanlan, on behalf of the claimant, gave an undertaking to issue the claim form and pay the appropriate fee irrespective of the outcome of the application so I need say no more about that.
5. The claim form itself makes it clear that these proceedings are firmly rooted in contract rather than in any public law duties. The claim seeks declarations that on a proper construction of the Medical Reporting Organisation Users Agreement between the claimant and the defendant, that the defendant was not entitled, either in the circumstances or at all, to what is said to be to re-allocate the claimant as a non-high volume national medical reporting organisation and/or that the defendant has not suspended and/or was not entitled in the circumstances to suspend the agreement in accordance with clause 11 thereof. Damages for breach of contract and interest are also sought.
6. The evidence in support of the application is contained within the witness statement of the claimant's commercial director, Mr Ian Scanlan, dated 13^th November 2017. Mr Scanlan exhibits various documents as exhibit IS1. Evidence in opposition to the application is contained within the witness statement of Mr Martin Heskins, the chair of the Board of the defendant company, which is a non-profit making organisation limited by guarantee, dated 21^st November 2017, and exhibiting further documents as exhibit MH1.
7. The claimant is represented by Mr Steven Turner (of counsel) and the defendant by Mr Charles Béar QC. Both counsel have submitted detailed written skeleton arguments which, together with the witness statements, I have had the opportunity of pre-reading before this application came on for hearing.
8. Mr Scanlan explains that the purpose of the application is to restore the claimant from a regional member medical reporting organisation to a high volume national medical reporting organisation for the interim period whilst the substantive dispute as to what is said to be the claimant's proper categorisation is escalated pursuant to the provisions of clause 10 of the user agreement. Mr Scanlan explains that the claimant is a medical reporting organisation which provides medical evidence to solicitors, insurers and some Government bodies for medico-legal purposes. He explains that it acts for around 300 law firms and a number of high profile insurers nationwide. It has recently been shortlisted for medico-legal agency of the year and employs some 61 staff, including about 25 dedicated medical legal staff, at the claimant's site in Newcastle-Upon-Tyne. Its turnover for the financial year 2016/17 is said to be approximately £10 million.
9. The defendant is a non-profit making organisation which is responsible for the running of the MedCo portal. That is a system which solicitors are required to use to source medical reports in soft tissue, or whiplash, injury claims brought under the pre-action protocol for low value personal injury claims in road traffic accidents. It is said that there are approximately 120 medical reporting organisations across the UK who are instructed via the portal, which automatically produces randomly generated lists providing details of medical reporting organisations for solicitors and others who access the portal.
10. It is said that whether a medical reporting organisation is a high volume national or a regional member of the portal is a crucial distinction. In his witness statement Mr Scanlan sets out the background to the portal, the claimant's categorisation within it, and the decision announced, on 30^th October this year by the defendant, to downgrade the claimant's status from a high volume national to a regional member of the portal.
11. The purpose of the injunctions is said to be to restore the claimant's high volume national status on the portal whilst the substantive dispute is being considered in line with the contractual escalation procedure. Mr Scanlan addresses the criteria for the grant of interim injunctive relief as set out by Lord Diplock in his seminal judgment in the American Cyanamid v Ethicon case in 1975 and proceeds to address each of the three requirements for the grant of such relief, namely, whether there is a serious issue to be tried, the adequacy of damages as a remedy, and the balance of convenience.
12. Mr Scanlan's evidence is that there is clearly a serious issue to be tried. He says that the defendant's decision to find that the qualifying criteria were not substantially met in the case of the claimant is wrong on its face. Even if, on a proper application of the defendant's compliance procedure, the claimant had failed substantially to comply with the qualifying criteria by October 2017, it is said that the defendant had no contractual entitlement to downgrade the claimant as a result. It is said that the defendant took the downgrading step without any proper notice, without providing any guidance to the claimant, and without any written warning, and that the defendant is therefore in breach of contract. It is also said that it was unfair, and constituted inconsistent treatment, for the defendant to refuse to provide the claimant with a reasonable opportunity to submit evidence showing substantial compliance with audit recommendations. It was said to be wrong to consider only information gathered in April 2017 when other medical reporting organisations were subsequently permitted to adduce further evidence to the defendant. It is said that this is a breach of the defendant's obligation to act with fairness and with its own compliance procedure. Mr Scanlan proceeds to develop those arguments in his witness statement.
13. Mr Scanlan addresses the adequacy of damages as a remedy. He points to the fact that the financial loss to the claimant whilst the parties have recourse to the escalation procedure will be highly significant. Mr Scanlan expects the existing annual turnover of some £10 million to reduce to around £6 million if the claimant has to remain on the portal only as a regional member due to the large reduction in the volume of work. It is said that that is likely to translate into a loss of profit of approximately £20,000 a week, or £1 million a year. Mr Scanlan points to clause 9.3 of the user agreement which purports to limit any damages that the claimant could recover from the defendant to some £75,000. He comments that any financial loss to the claimant would vastly exceed that figure, suggesting that damages are not adequate. He also points to clause 9.4 of the user agreement, which excludes from any claim consequential losses, including loss of profit, should the defendant be found to be in breach of contract, thereby significantly threatening the claimant's ability to receive any real compensation for the alleged breaches of contract by the defendant. He also raises the question whether the defendant would financially be able to pay a large sum of damages in any event.
14. Mr Scanlan also points to significant reputational damage which has resulted in the loss of key clients. That reputational damage would be significantly minimised if the claimant were to be reinstated to a high volume national medical reporting organisation whilst the substantive dispute is determined. Mr Scanlan submits that if the interim injunction application were to be refused, it would be incredibly difficult to value the reputational damage done to the claimant in the long term; and, even if it could be valued, it would exceed the limitation clause value in the user agreement, and there is no guarantee that the defendant could pay such an amount.
15. All of those factors lead to the conclusion that any damages awarded at trial, if the claimant were to succeed, would be entirely inadequate.
16. Mr Scanlan also asserts that the balance of convenience is in favour of the grant of interim injunctive relief. He relies upon the matters already identified, and points out that, conversely, any prejudice caused to the defendant by the grant of interim injunctive relief would be minor and significantly less than that caused to the claimant. That is said to be because the information that has led to the impugned determination was based on evidence that was obtained in April of this year and circumstances have changed since then.
17. The point is also made that the defendant has apparently been content to let the matter ride between the date of the obtaining of the audit information in April and the date of the defendant's determination in October of this year.
18. Referring to the escalation procedure in clause 10 of the user agreement, it is asserted that this does not prevent the claimant from seeking interim relief pending the outcome of that procedure in the substantive dispute. It is said that clause 10 is silent as to the claimant's status during the dispute resolution procedure and does not say that there should be any continuing suspension whilst that procedure is worked through. Mr Scanlan believes that it would be unfair and unjust if the defendant could unlawfully cause serious damage to a medical reporting organisation over a number of months with that organisation having no mechanism to stop that for the 90 days of the escalation procedure. Alternatively, it is said that clause 10 attempts to oust the jurisdiction of the court to grant interim relief.
19. For all of those reasons Mr Scanlan invites the court to find:

(i) That there is a serious issue to be tried;

(ii) That damages will be wholly inadequate should the claimant prove at a later trial that the defendant's decision was unlawful;

(iii) That the balance of convenience suggests that the prejudice to the claimant in the injunction not being granted would be significantly greater than any prejudice to the defendant if the injunction were to be granted; and

(iv) That there is nothing in clause 10 of the user agreement which prohibits this interim application for interim relief.

20. Much of that is challenged in Mr Heskins's witness statement. He points out that the underlying challenge in this litigation relates to the claimant's access to an online portal administered by the defendant through which personal injury claimants source medical reports in support of low value soft tissue injury claims. The defendant ensures that medical reporting organisations, such as the claimant, are only able to access the portal if they satisfy certain minimum qualifying criteria.
21. It is said that after a detailed decision-making process, the defendant decided to withdraw the claimant's status as a high volume national medical reporting organisation, thereby suspending its access to the services provided to such organisations through the portal, while not suspending access provided to medical reporting organisations generally. It is said that this was because, following a detailed audit in which the claimant was said to have been afforded every opportunity to provide evidence and representations, the claimant was found to have substantially failed to comply with the qualifying criteria applicable to all high volume national medical reporting organisations and to be in partial non-compliance with the minimum qualifying criteria which all medical reporting organisations are obliged to meet. In the circumstances, and having carefully considered the different interests involved, it is said that the defendant decided that the claimant should be immediately downgraded.
22. Mr Heskins says that the application should be refused for the following reasons. First, it is said that the defendant had a clear contractual ability to take the action it has done. The defendant was justified in suspending the claimant for breach of the qualifying criteria, and therefore clause 5.1 of the user agreement, which is a warranty and undertaking by the claimant to the defendant that on the commencement date it has met the qualifying criteria, and that it will maintain compliance with those qualifying criteria for the term of the agreement. It is said to be open to the defendant to partially suspend a medical reporting organisation under the Compliance Procedure, section 6.1, which provides that the committee may decide to suspend access to the MedCo service, or particular services, in accordance with the agreement, for a period of time, to be notified by the committee and decided at the committee's absolute discretion. That compliance procedure is said to be incorporated into the user agreement by clause 11.1, which states that if the medical reporting organisation does not comply with any term of this agreement and/or MedCo is permitted, pursuant to the compliance policies, MedCo may, without liability, suspend the service until such time as the non-compliance has been remedied to MedCo's reasonable satisfaction.
23. Secondly, and as an analysis of the claimant's management responses to the audit report is said to make clear, the claimant does not seek to dispute the breach of the qualifying criteria at the time of the audit itself, nor, in the case of a number of the recommendations made in the audit report, does the claimant even dispute continuing breach at the present time.
24. Thirdly, the application is said to be in breach of the escalation procedure set out in the user agreement. This is a mandatory procedure and it is made clear at clause 10.5 that:

"No party may commence any court proceedings in relation to the whole or part of the dispute until 30 days after service of the ADR notice, provided that the right to issue proceedings is not prejudiced by a delay."

25. Fourthly, the claimant was advised at the point of suspension that after a minimum period of three months it could seek a re-audit. This would be the simplest way forward. If the claimant passes the re-audit it can be reinstated. If it does not pass, that would demonstrate again that it is not compliant with the qualifying criteria, and not eligible to be a high volume national medical reporting organisation.
26. Fifthly, not only is re-audit the simplest way forward but it is also said to treat the agreed mechanism for compliance with due respect rather than undermining the process. The interim injunction would frustrate the implementation of the defendant's decision and thereby lead solicitors acting on behalf of personal injury claimants to continue to instruct a medical reporting organisation believing the claimant to meet the qualifying criteria requirement for a high volume national medical reporting organisation when the defendant has already decided it is not compliant with the relevant qualifying criteria.
27. Sixthly, in this regard Mr Scanlan notes that the claimant continues to hold itself out on its website as a tier one medical reporting organisation, that is to say, as a high volume national organisation. This is said to be thoroughly misleading in circumstances where the claimant has been downgraded to a tier two status by the defendant as administrator of the scheme. It is said that it cannot be justified by the claimant's hope that the court may grant an order requiring it to be treated as a tier one medical reporting organisation pending trial.
28. Mr Heskins goes on to relate the background of the defendant and its development of the portal. At paragraph 21 he highlights what he says are two key points. First, that both the user agreement and the agreement compliance procedure recognise that the defendant has the power to suspend medical reporting organisations immediately from the portal, or from certain services provided through the portal. Secondly, that both parties agreed under the user agreement that they would not commence any court proceedings until completion of the escalation procedure.
29. Mr Heskins then proceeds to address the qualifying criteria and the defendant's audit process. He addresses the revised qualifying criteria, which he said were widely publicised, as were the consequences of non-compliance. He does so particularly at paragraphs 31 and 34 of his witness statement.
30. Mr Heskins then goes on to address the particular decision in this case relating to the audit team's reports, the audit committee's recommendation, and the Board's decision. At paragraph 50 he explains that the basis for the Board's decision at its meeting on 13^th October 2017, and as recorded in his letter of 30^th October 2017, was that as the claimant largely met the minimum qualifying criteria it should stay on the portal; but that since it did not sufficiently meet the additional criteria it should not retain high volume national status. The defendant therefore properly suspended the provision of the high volume national service in accordance with the user agreement and compliance procedure. This recommendation, and the Board's acceptance of it, is said to have been both proportionate and necessary.
31. It is said that the decision to downgrade the claimant was only taken after a thorough audit process, as part of which the claimant was provided with a draft audit report and given the opportunity to comment upon it. A final report was then prepared, and the claimant was afforded an opportunity to provide still further data. Further to this, the matter was fully considered by both the audit committee and the defendant's Board.
32. Mr Heskins goes on to address the detail of the areas where the claimant was considered to have failed the audit. At paragraph 74, Mr Heskins comments that the defendant has not taken any decisions in relation to medical reporting organisations lightly. The audit committee and the Board are both said to be well aware of the significant impact that a decision to suspend will have on an organisation's business.
33. At paragraphs 80 to 82, Mr Heskins points out that the defendant requires medical reporting organisations to meet certain qualifying criteria. Solicitor users of the portal are entitled to expect that all of the organisations shown on each search meet those criteria. If the organisation does not, then it in effect reduces the solicitor's choice of an appropriate organisation, thereby potentially frustrating the system. The defendant is required to provide a platform that generates search results. If they do not suspend or, as in the case of the claimant, part suspend those organisations that are assessed as failing to meet the criteria pending escalation, then the search results are said to be inaccurate and cannot be relied upon. This could seriously undermine confidence in the portal. The decision to suspend is a balancing act between, amongst other matters, the effect of the decision upon the organisation in question and the wider public interest in removing or downgrading non-compliant organisations from the portal. Each case is considered on its own merits. The Board's conclusion in the instant case was that the balancing act came down in favour of ordering immediate suspension.
34. Mr Heskins sets out his conclusions at paragraphs 83 to 88. He expresses his strong belief that the audit process that the defendant had embarked upon was a fair and transparent process. The claimant had had access to the guidance since 8^th November 2016, which set out clearly how the defendant would approach audits, as did a number of other announcements. The defendant had been at pains to make it clear to users, even before the revised qualifying criteria were published, that it would audit and that it would take immediate action to deal with non-compliance. It is said that the claimant has been found to be partially non-compliant in numerous respects. Moreover, even on its own case, it appears to remain non-compliant on a number of these. Mr Heskins considers that, in the light of the various competing interests that the defendant has to consider, it is both reasonable and proportionate to have suspended the claimant's access to high volume national status and then escalate swiftly, as it has sought to do.
35. It is said that the claimant has been offered the opportunity to respond to the suspension in two ways consistent with the defendant's procedures. First, it is permitted to invoke the escalation procedure in clause 10 of the user agreement, and the claimant has in fact done so. A meeting, as required by that procedure, has already been set up for this coming Friday, 24^th November. It is said that the escalation clause was freely agreed to by the claimant and represents the appropriate way to respond to any issues, including a decision to suspend the service.
36. Secondly, it is said that the claimant has been offered the opportunity to have itself re-audited. That can happen at any time after three months from the suspension decision. If the claimant passes that re-audit, it will be permitted to regain its high volume national status; and if it does not pass it, that means that it is not suitable. The defendant firmly believes that the suspension itself pending escalation is necessary to safeguard the integrity of the portal and the wider public interest.
37. As I have already observed, both counsel had submitted detailed written skeleton arguments. In his written skeleton Mr Steven Turner, for the claimant, submitted that the claimant had, at its lowest, a real prospect of demonstrating that the defendant was in both procedural and substantive breach of the user agreement. Mr Turner dealt with the procedural breaches at paragraphs 6 to 10 of his skeleton argument and with the substantive breaches at paragraphs 11 and 12.
38. As to the procedural breaches, it was said to be clear that the defendant had acted in a manner which was procedurally unfair, in breach of its own agreement compliance procedure, and which would also amount to a breach of an implied term that it would treat medical reporting organisations fairly and consistently. That in itself, it is said, is sufficient to satisfy the first limb of the American Cyanamid test. As to substantive breach, it is said that the claimant has equally strong grounds for arguing that the defendant's decision to re-categorise the status of the claimant was substantively wrong at the point it was made on 30^th October 2017.
39. It is also said that the defendant chose to disregard the claimant's management responses when making its re-categorisation decision. It did so on the basis that those responses were not supported by evidence. That decision is said to have been procedurally unfair because it was contrary to what was said in an email of 30^th August, in which a representative of the defendant expressly told the claimant that the defendant's audit team would not accept new evidence accompanying the claimant's management responses to the draft audit report. That is said to be inconsistent with what was said in a later letter from Mr Heskins, in which the claimant was told that its management responses had not been taken into account as they had not been backed up by evidence. That decision was procedurally unfair. Once that procedural unfairness is remedied, it is said that the claimant will have a very strong argument for saying that substantial compliance had been achieved by 30^th October 2017, and that any suspension or re-categorisation of the claimant was unjustified.
40. Relying on the evidence of Mr Scanlan it is said that both in financial and reputational terms, damages are an inadequate remedy for the claimant. On the balance of convenience, it is said that if the claimant is not re-categorised pending completion of the escalation procedure, it will continue to suffer financial and reputational damage. The downturn in business will inevitably place staff at risk of redundancy. By contrast, re-categorisation at this stage will cause no tangible inconvenience or loss to the defendant. It will merely restore the position as it was before 30^th October 2017. If the compliance breaches the defendant identified in April 2017 had been so serious as to cause significant loss or damage to the defendant, then clearly it would not have waited six months before taking action in respect of them. The balance of convenience is accordingly said to lie in favour of restoring the claimant to high volume national status pending completion of the escalation procedure.
41. In his time-limited oral submissions, Mr Turner developed his written arguments. He submitted that the defendant's decision to re-categorise the portal status of the claimant was taken on the basis of an outdated audit report which omitted significant improvements on the part of the claimant which had occurred since the date the draft report was prepared and which could, and would, have been evidenced had the defendant not told the claimant that the defendant would not consider any further evidence.
42. Moreover, the decision taken was not to suspend the claimant but rather to re-categorise it as a regional member rather than a high volume national medical reporting organisation. This is said to have been in breach of implied terms of the user agreement. It is said that suspension must be applied only in accordance with the compliance rules, and that the power to suspend should not be exercised unreasonably. It is said that it was inherently unreasonable to demote the portal status of the claimant.
43. Allowing some medical reporting organisations to put in evidence and not others was said to be patently unfair and unreasonable. A proportionate response to compliance failures was said to be required. That is of the essence of the red, amber, green procedure. Any sanction, and in particular the drastic sanction of suspension, should be proportionate to the relevant breach. Mr Turner said that the claimant accepted that it had not fully complied with all of the qualifying criteria; but the continuing breaches were said to be fewer, and much less severe, than when the audit was carried out in April 2017. It is therefore said that the whole audit exercise, and the re-categorisation of the claimant's status, was carried out on a false basis. Mr Turner emphasised that there had been no written warning under stage one of the procedure. Re-categorisation had been applied with immediate effect.
44. There was said to be a strong case that the defendant had acted unreasonably, and in breach of its own procedures. The balance of convenience favoured the continuation of the status quo that had continued between the conclusion of the audit in April and the decision to re-categorise the claimant's portal status at the end of October 2017. Mr Turner pointed to the fact that the defendant had pointed to no specific complaints addressed to the conduct of the claimant. The point was made that clause 10 says nothing about what is to happen to the portal status of a medical reporting organisation pending completion of the escalation process. The unfairness of the reclassification of the claimant's portal status, when it had been told that no evidence would be received on that issue is patent; and it is said that the court should intervene so as to restore the status quo.
45. For the defendant, Mr Béar submitted, first, that the claimant had failed to demonstrate a case of breach by the defendant of any, let alone sufficient, strength to justify the grant of interim injunctive relief. It is said that that would be so even under ordinary Cyanamid principles; but in view of the nature of the relief that is being sought on this interim application, involving the overturning of a decision of a body entrusted with supervisory powers, the Cyanamid merits threshold was plainly inappropriate.
46. Secondly, it is said that even now the claimant continues not to satisfy the contractual requirements for a tier one, or high volume national, supplier. Given this state of affairs, it is said that the defendant has a complete defence even if it had been in breach. Putting it another way, it is said that the claimant's case is circular. The continuing breach of contractual requirements for a tier one supplier can be shown even on the claimant's own evidence and case.
47. Thirdly, it is said that the entire proceedings are contrary to an ADR clause which expressly prohibits going to court until a stage which has not yet been reached in the internal dispute resolution procedure. That, it is said, requires a stay of any claim.
48. Fourthly, it is said that the balance of convenience is overwhelmingly against the claimant. The courts have made plain, in analogous situations, that the decision of a body entrusted with administering the matter, as the defendant is both by the Ministry of Justice and by the parties' own contract, to remove an operator from a particular register should be respected in the absence of some unusual feature, of which none is present here. The public interest, it is said, cannot possibly require that a provider of litigation services which has been suspended for failure to meet criteria applicable to all such providers should be allowed to present itself as compliant. That is said to be precisely what this application seeks to achieve.
49. Mr Béar addressed the various limbs of Mr Scanlan's complaint, as summarised at paragraph 24 of his witness statement, at paragraphs 16 through to 26 of Mr Béar's written skeleton argument.
50. First, it is said that the audit decision is not wrong on its face. The claimant's own evidence is said to show that the decision to find non-compliance in a number of respects was correct.
51. Secondly, the suggestion that clause 11.1 does not permit partial suspension, that is to say from tier one status only, is a quixotic argument since, if correct, its result would be to compel the defendant to suspend the claimant entirely, which is a result which it does not seek. But, in any event, it is said that partial suspension is clearly permitted because of the terms of clause 6.1 of the agreement compliance procedure.
52. Thirdly, it is said that the allegation of breach of an obligation to act with fairness is based on a legal misconception. A statement of the purposes underlying a procedure does not convert those purposes into contractual obligations any more than it would for the other purposes expressed. It is said that it would be surprising to see a general unspecified obligation of fairness in a commercial contract. It is therefore said that the claimant has no arguable case, and that the application therefore falls away. As to clause 10.5 it is said that the claimant is clearly proceeding in breach of that sub-clause.
53. So far as the balance of convenience is concerned, Mr Béar relies upon:

(i) The lack of a case of sufficient strength;

(ii) Continuing non-compliance with the qualifying criteria by the claimant;

(iii) The public interest in upholding the defendant's decision; and

(iv) The fact that the remedy lies in the claimant's own hands in the manner suggested by Mr Heskins in his witness statement.

54. It is also submitted that the argument that there is no adequate remedy in damages for the claimant because of the limitation of liability clauses is misconceived. If those clauses are unenforceable for any reason, then clearly the claimant will have a remedy in damages which, on the face of it, is an adequate one. It is said that the claimant's loss can readily be measured in financial terms, as evidenced by Mr Scanlan's attempt at quantification of the level of the claimant's financial losses.
55. If, on the other hand, the clauses are enforceable, which is the defendant's position, then they operate to restrict what damages can be claimed by the claimant. The question is whether a reasonable limitation of liability clause makes the resulting remedy in damages inadequate. It is said that that would be a perverse outcome, whereby a contracting party's free agreement to limit its damages claim would somehow increase its ability to obtain injunctive relief.
56. It is said there is no injustice in holding the claimant to the consequences of its bargain. Conversely it would be unfair to allow the claimant to use this agreed restriction as a basis for obtaining an order for interim injunctive relief to which it would not otherwise be entitled.
57. Mr Béar developed those submissions orally, although in his oral submissions he did not focus at any length upon the question whether the claimant had shown a sufficient case on the merits. Orally, Mr Béar submitted that even today, the claimant is in continuing breach of the qualifying criteria in at least some significant respects. On this basis alone, the exercise by the defendant of its power to suspend partially the claimant's portal status is justified; and the claim for interim injunctive relief should fail accordingly.
58. Secondly, Mr Béar submitted that the court should withhold any interim injunctive relief because the claimant is in breach of the escalation procedure clause.
59. Thirdly, the court should withhold the grant of relief on the balance of convenience. Mr Béar began by taking me to the well known observations of Lord Hoffmann, speaking for the Privy Council, in the case of National Commercial Bank of Jamaica v Olint Corporation Limited (Jamaica) [2009] UKPC 16, reported at [2009] 1 WLR 1405, at paragraphs 16 to 20. Mr Béar invited the court to consider what practical consequences would follow from either the grant or the refusal of interim injunctive relief. He invited the court to look at the relevant strengths of each party's case and, in particular, whether there could be said to be a high degree of assurance that at trial it would appear that any injunction had been rightly granted. That, Mr Béar said, was the overarching architecture of this interim injunction application.
60. Mr Béar emphasised that this is a claim in contract and not an application for judicial review. Accordingly, the court had to focus upon, and consider, the contractual obligations which were said to have been breached. The court must distinguish between, and must contrast, contractual obligations from guidelines or policies.
61. Because, even on its own evidence and case, the claimant was in continuing breach of its contractual warranty and undertaking there was no need to consider the claimant's procedural complaints. The continuing breaches of contract meant that there was a continuing power in the defendant to suspend the claimant. The claimant's complaints were said to be wrong in conflating the defendant's actual approach with its contractual obligations. There had been no contractual obligation to consider any late evidence; but even if the later evidence were taken into account, it did not alter the fact that there was still a continuing breach of the qualifying criteria. The audit committee had looked at what the claimant itself had been saying, and there could be said to be nothing unfair about that.
62. Mr Béar criticised the submission that there was no power to re-categorise the defendant's portal status. That was said to be an entirely semantic point. In substance, what the defendant had said was that the claimant was not entitled to use the defendant's services as a tier one supplier. It had suspended it as a tier one service provider. As a result, the only services that the claimant could now provide would be tier two services.
63. Admittedly there was a gap between the volume of business which would be available to a tier one and a tier two service provider; but if a provider failed to satisfy the qualifying criteria for tier one, but did so in relation to tier two, then there was no inhibition upon the defendant suspending the organisation's tier one status, whilst leaving it on the portal's books as a tier two provider. Mr Béar emphasised that the defendant's role was to promote, both overall and to the Government, confidence in the system of medical reporting. That had been pointed out in Mr Heskins's witness statement.
64. It was quite clear that this application had been brought in breach of clause 10.5 of the user agreement. Mr Béar accepted that that did not automatically oust the court's jurisdiction to grant interim injunctive relief; but he submitted that it was a highly relevant factor, and that it would require something pretty exceptional before the court should intervene in what he described as the carefully crafted and structured series of increasing escalations contained within clause 10.5. On this basis alone, the court should refuse injunctive relief and stay the proceedings. That was a freestanding reason for refusing the claimant's application.
65. On the balance of convenience, Mr Béar accepted that the defendant would suffer no financial loss by the grant of interim injunctive relief. The risks following from the grant of interim injunctive relief would not sound in damages for the defendant. What, however, the grant of such relief would do would be to undermine the whole system for users of the defendant's services. It would cause irreparable prejudice to users and the system of regulation of medical reporting.
66. Mr Béar addressed the argument that nothing had happened after the audit until the end of October. That did not mean, as Mr Turner submitted, that the defendant had been content for the claimant to remain as a tier one service provider over those intervening months. Mr Béar pointed out that the defendant had to operate within a budget, and with limited resources. It had underestimated the time and the cost involved in the audit task. The relevant staff and agents of the defendant were over-worked. That was something that the defendant had to live with. It could not justify the inference that the defendant had been content to allow the claimant to remain a tier one provider. The reality was that the Board of the defendant had not been able properly to address the matter until ultimately it did. When they did address the matter, and formed a judgment upon it, they realised the seriousness of the failure to comply with the qualifying criteria and took appropriate action. Even now the claimant was said still to be in breach, and should not be entitled to access the system.
67. Mr Béar also took me to the decision of the Court of Appeal in what was said to be an analogous context in the case of ABC Limited & Anor v The Commissioners for Her Majesty's Revenue and Customs [2017] EWCA Civ 956. In that case a new regulatory scheme had been introduced requiring a wholesaler of duty-paid alcohol to be registered and approved as a fit and proper person for that purpose by HMRC. The issue before the Court of Appeal was as to the powers of the High Court to grant interim relief to enable a wholesaler to continue trading pending an appeal to the first tier tribunal.
68. I was referred to paragraphs 61 and 68 to 72 of the judgment of the Court of Appeal, delivered by Lord Justice Burnett (with the agreement of Lady Justice King and Lord Justice Patten). It was said:

(i) That the High Court had jurisdiction to grant an injunction maintaining registration pending appeal to the first tier tribunal which had been revoked by HMRC when a parallel challenged to that decision was made in judicial review proceedings; but

(ii) That jurisdiction should not be exercised simply on the basis that the person concerned had a pending appeal with a realistic chance of success;

(iii) If the challenge to the decision was on some other ground outside the statutory regime, it was said that the court might entertain judicial review or grant interim relief.

69. At paragraph 71, Lord Justice Burnett referred to an earlier decision where the court had rejected a submission that it had lacked jurisdiction to make an order, but had accepted that the statutory procedure was highly relevant to the exercise of the court's discretion.
70. Relying on those observations, Mr Béar submitted that the defendant had been entrusted by contract to regulate a matter in the public interest. The defendant should be left by the courts to get on with its job. Only in an exceptional case should the court intervene by injunction. In the present case, the claimant had been incorrectly conflating procedural and contractual obligations.
71. In summary, this application should be refused for two principal reasons. First, that the claimant was in continuing breach of contract; and, secondly, that the defendant should be left to get on with its job, and the parties to invoke the contractual escalation procedure.
72. In his brief reply Mr Turner made, so far as material, three short points. First, he pointed to clause 11.1 of the user agreement:

"If MRO does not comply with any term of this agreement and/or MedCo is permitted pursuant to the compliance policies, MedCo may, without liability, suspend the service until such time as the non-compliance has been remedied to MedCo's reasonable satisfaction (either by way of audit or as otherwise agreed by MedCo) or in the case of suspension pursuant to the compliance policies, until such time as determined in accordance with the compliance policies."

73. The latter part of that sub-clause was said to act as a fetter on cases where the defendant considered that there had been non-compliance. Effectively it brought the compliance policies into play, and it also raised the question of whether non-compliance had been remedied. The sub-clause imported the compliance procedures into the contract and imposed a fetter whereby suspension should only be imposed in conformity with the compliance procedures.
74. Secondly, Mr Turner pointed out that it could not be said that the admitted breaches of the qualifying criteria themselves justified suspension. That could not be right because of the graded red, amber, green procedure. The reality was that the audit committee had not taken account of management representations because the claimant had been misled as to its ability to submit evidence, which it then turned out was in fact required. There had therefore been no proper assessment of the severity of the non-compliance with the terms of the user agreement.
75. Thirdly, it was said that the prohibition on court proceedings related only to the substantive claim. The court had a discretion to grant interim injunctive relief pending recourse to the escalation procedure, and that discretion should be exercised in the claimant's favour because the refusal to allow evidence to be submitted by the claimant to the audit committee was a powerful factor in favour of the grant of injunctive relief.
76. So far as the ABC case was concerned, Mr Turner submitted that this was a case where, in accordance with sub-paragraph 61(iv), the challenge to the decision was on some ground outside the statutory regime, where the court could grant interim relief. The court should restore the claimant to its tier one status pending the determination of the escalation procedure.
77. Mr Turner also indicated that whilst he had no knowledge of the details of the case, there had apparently been a case in which an injunction had been granted to another medical reporting organisation, which had been restored to tier one status pending the determination of an application for judicial review. Mr Béar emphasised that that had been in judicial review proceedings, and that the injunction had been granted on a without notice basis. He had no knowledge as to whether the ABC decision had been drawn to the court's attention. Mr Turner's understanding, although he did not have the details, was that the present defendant had attended the without notice hearing.
78. Those were the submissions. I have had naturally close attention to those submissions and have weighed all the arguments in the balance. I am satisfied that even if it can be said that the claimant has an arguable claim in breach of contract, this is an appropriate case to go further than the American Cyanamid assessment of simply whether there is a serious issue to be tried.
79. The court must, particularly given the nature of the relief sought, which involves restoration of the claimant to a particular status within the relevant portal, consider carefully whether granting or withholding an injunction is more or less likely to cause irremediable prejudice, and to what extent, if it turns out that the injunction should not have been granted or withheld as the case may be. The underlying principle is, as Lord Hoffmann observed at paragraph 19 of the Olint case, that the court should take whichever course seems likely to cause the least irremediable prejudice to one party or the other. I must look at the consequences, on the particular facts of this case, of granting or withholding the injunction.
80. I must also bear in mind the terms of clause 10 of the user agreement and the principles in the ABC case. Even if there is, as I say, an arguable claim by the claimant for breach of contract, it does not seem to me that the claim is a particularly strong one, or that its prospects of success are particularly high. The fact is that even on the claimant's own case, there are continuing breaches of the qualifying criteria. In relation to recruitment, at paragraph 11(b) Mr Turner's skeleton argument records that the claimant only expected to achieve full compliance by November of this year. In sub-paragraph 11(f), compliance as to number of medical experts is likely only to be achieved in the first quarter of 2018, although it was commented that the process could be expedited should the committee require it. In sub-paragraph 11(h), full compliance, as distinct from substantial compliance, with qualifying criterion 2.2.5 is only expected by 1^st February 2018.
81. Even if the claimant was misled by the email of 30^th August, stating that the defendant would not accept new evidence, it is a little difficult to see what new evidence could have been produced in the light of those admitted failures to comply.
82. But I do not decide the case simply on that basis. In the present case there are the provisions of clause 10.5. They are clear that no party may commence any court proceedings in relation to the whole or part of the dispute until 30 days after service of the ADR notice. As Mr Béar accepted, that does not oust the court's jurisdiction to grant interim injunctive relief; but it is a highly relevant factor for the court to weigh in the balance.
83. It is not seriously in dispute that the decision to relegate the claimant from tier one to tier two status will have had, and will continue to have, serious financial and reputational consequences adverse to the claimant. As against that, however, the grant of interim injunctive relief would cause serious damage to the defendant, and to the system which it was established to promote and administer. It is necessary to consider the impact upon users of the scheme.
84. At paragraph 16 of the Olint decision, Lord Hoffmann said that the court may order a defendant to do something, or not to do something, else, but such restrictions on the defendant's freedom of action will have consequences for him and then - I would emphasise - for others, which a court has to take into account. The court has to take into account the potential consequences for the integrity of the portal system which the defendant administers if the defendant is effectively enjoined to revoke a decision it has made in good faith and to restore the status of a medical reporting organisation which the defendant, after a proper audit, has decided should be withdrawn. I reject Mr Turner's submission that there was no power to re-categorise the claimant as a tier two provider.
85. I accept Mr Béar's submissions that there is a power partially to suspend and that that power was exercised by suspending the claimant's status as a tier one provider, leaving it with its status as a tier two provider. That has to be right as a matter of commonsense. The qualifying criteria for the two different categories of medical reporting organisation are different; and there must therefore be power to suspend an organisation as a tier one organisation, and relegate it to tier two, if it is no longer found to satisfy the tier one criteria but it does continue to satisfy those applicable to a tier two organisation. So I am satisfied that there was power partially to suspend, as Mr Béar has submitted; and it does not seem to me that, pending the working through of the escalation procedure, the court ought to be interfering with the defendant's decision.
86. I take into account the presence of the escalation clause and also the impact upon users of the portal if the injunction sought were to be granted on an interim basis. I appreciate that, as a result, the claimant will suffer significant financial and reputational damage; but that, it seems to me, is the price that has to be paid by those who seek to be registered as users of the portal.
87. So, for those reasons, and in the exercise of the court's discretion as a matter of the balance of convenience, and having particular reference to the terms of clause 10 of the user agreement to which the claimant signed up, I would refuse the claim for interim injunctive relief.
(For proceedings after judgment: please see separate transcript)
88. Having delivered my substantive extemporary judgment on the merits of the interim injunction application I now inevitably have to address the issue of costs.
89. There is no argument as to the incidence of costs. The defendant is the successful party, and there is no reason why it should not recover its costs, and no submission to the contrary has, quite rightly, been advanced to me.
90. I therefore have then to assess the costs, which I do on the standard basis, which means that I have to have regard to proportionality as well as whether work was reasonably done; and I also have to bear in mind that, in the event of any doubt, that doubt is to be resolved in favour of the claimant as the paying party rather than the defendant as the receiving party.
91. This is a case where a great deal of work had to be done at very short notice, both by solicitors and counsel. It is also a case of importance for both parties. In those circumstances, it does seem to me that what might at first sight appear very high figures are more readily capable of justification.
92. It does, however, seem to me that some reduction should be made both for the solicitors' work done on documents and also for counsel's fees which, as Mr Béar points out, represent not only his work at this hearing but also all his preparatory work. I propose to allow him his travel costs as a separate item and to adjust the brief fee and fee for other work downwards, bearing in mind that travel costs are not going to come out of it.
93. Summary assessment is always a rough and ready process. One has to take the rough with the smooth of getting an immediate order for payment, or almost immediate. It seems to me that the appropriate course, in the exercise of my discretion as to costs, is to apply some reduction, both to solicitors and counsel, but not reductions of the level suggested by Mr Turner for the claimant. What I propose to do is to reduce the solicitors' charges by £4,000 and Mr Béar's fee, which is on the very high side, even bearing in mind all the work he has done over the weekend, by £10,000. That does not mean that his brief fee will be reduced accordingly. I am considering what it is reasonable and proportionate for the paying party to pay.
94. So what I propose to do is to reduce the total claim of £44,391.50 by £14,000, and that means that the costs are summarily assessed in the sum of £30,391.50.

MR BÉAR: My lord, I believe one needs a period of time and I suggest 14 days.

JUDGE HODGE: Under the rules it is 14 days unless I am asked for more.

MR BÉAR: Then I am corrected.

MR TURNER: Fourteen days. Thank you.

JUDGE HODGE: Yes. Then that, I think, takes it to 6^th December. Are there any further matters I need to address?

MR TURNER: My lord, no, thank you.

JUDGE HODGE: Right. Mr Béar, I am afraid that even though I am disallowing part of your brief fee, you are still going to have to do a little more. Could you produce a draft order since it is your client who is going to want to be able to get the costs?

MR BÉAR: Yes, absolutely. Can we email that to the court?

JUDGE HODGE: Yes, you seem to have been able to get documents through to the Manchester Chancery email address, so that is the appropriate place to send it.

MR BÉAR: All right. That is fine. It may come from DAC Beachcroft in the first place but I will obviously draw it up.

JUDGE HODGE: Yes.

MR BÉAR: And it may not be today, I am afraid.

JUDGE HODGE: No, I am not going to complain about that. I am sorry you were a little pushed in terms of your submissions, but we needed to get through it, I am afraid.

MR BÉAR: Thank you, my lord. Thank you for taking longer than the allotted time. We appreciate the time the court has spent.

JUDGE HODGE: Right. Can I return the hearing bundles? That one goes to Mr Béar's solicitors and that one to the claimant's solicitors. I do not know why but I did not, when mentioning your name, describe you as QC because it does not actually appear on your skeleton for some reason.

MR BÉAR: Very odd, but can I thank you for getting the pronunciation and the acute accent right, which puts your lordship in a judicial minority.

JUDGE HODGE: I had regard to the acute accent and acted accordingly. But thank you for the thanks. So I will give carriage to the defendant. I will say DAC Beachcroft. All right. Thank you. Thanks very much. I am sorry, you cannot go on the clocks here. I am told they are going to be fixed in the next month or so after we have had them in this state for about three or four months already.