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WM Fotheringham & Son v. The British Limousin Cattle Society Ltd [2004] ScotCS 93 (08 April 2004)
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EXTRA DIVISION, INNER HOUSE, COURT OF SESSION |
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Lord Marnoch Lord Abernethy Lord Eassie
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A2295/00 OPINION OF THE COURT delivered by LORD EASSIE in RECLAIMING MOTION in the cause W M FOTHERINGHAM & SON Pursuers and Respondents; against THE BRITISH LIMOUSIN CATTLE SOCIETY LTD Defenders and Reclaimers: _______ |
Act: Ferguson; Campbell Smith WS, Edinburgh (Pursuers and Respondents)
Alt: Sandison; Boyds, Glasgow (Defenders and Reclaimers)
8 April 2004
[1] Section 18(1) of the Competition Act 1998 provides that, subject to certain excluded cases,
" ... any conduct on the part of one or more undertakings which amounts to the abuse of a dominant position in a market is prohibited if it may affect trade within the United Kingdom".
In this action the pursuers aver that the defenders are an undertaking which has a dominant position in a market and that the defenders have abused that dominant position to the pursuers' economic detriment. The pursuers seek payment of a sum of money by way of reparation for the financial loss which they aver they have suffered. The action is defended on various grounds and one of the defences advanced by the defenders is a challenge to the competency of the action.
[2] The defenders' plea to the competency of the action was debated before the Temporary Lord Ordinary. In very brief summary the argument for the defenders was that the action was incompetent because, it was said, the proceedings truly involved an application to the supervisory jurisdiction of the Court of Session and such an application could only be brought by petition for judicial review. Following the debate the Temporary Lord Ordinary repelled the defenders' plea to the competency and allowed a proof before answer, it being agreed that the defenders' other preliminary plea - to the relevancy of the action - could not be disposed of in advance of inquiry. This reclaiming motion is now brought by the defenders against the Temporary Lord Ordinary's interlocutor repelling the plea to competency and allowing a proof before answer.[3] The pursuers are an incorporated company with unlimited liability. They aver that they have extensive farming and livestock interests in Perthshire, where they own one farm and have a lease of another. They aver that the livestock which they own includes a herd of pedigree Limousin cattle, of which a portion consists of black, polled Limousin cattle.
[4] The defenders are a company incorporated under the Companies Act in England and Wales. Their liability is limited by guarantee. The objects for which the defenders were incorporated include, among others, the following:-
"(i) To encourage, promote and improve the breeding of Limousin cattle in
the United Kingdom of Great Britain and Northern Ireland, or elsewhere, and with a view thereto if and insofar as may be thought fit, to purchase, import, breed, hire or otherwise acquire and hold, re-sell, let out on hire or otherwise deal in Limousin cattle whether of British or foreign origin.
(ii) To compile, keep, maintain, edit, issue and publish a Herd Book of
recognised and pure-bred Limousin cattle and a register or registers supplementary thereto of other recognised and qualified cattle for breeding purposes.
(iii) To prepare and issue by way of sale or otherwise and on such terms or
conditions as may be thought fit to members and others, certificates of entries made in the Society's Herd Book and Supplementary Registers and also records [and] statistics relating to Limousin cattle or other cattle based on any records or statistics or other information obtained or compiled by the Society". (Closed record p7)
Although not a matter of express averment, we understand it not to be in dispute that the defenders effectively function as an association or society of breeders of Limousin cattle although the membership may also include those who, while not breeders, have an interest in the breed. We were informed that the defenders offer membership of the Society on payment of an annual membership fee. Only members of the Society may procure the making of entries in the Herd Book and Supplementary Registers. However, we were told that in order to procure such registration it was not necessary that the member be the owner of the animal in question. The pursuers are not members of the Society organised by the defenders. However, as an individual, one of their directors, Mr Alan Fotheringham, is a member of the Society and it is averred by the pursuers that he is thereby entitled to procure the registration in the defenders' Herd Book and Supplementary Registers of Limousin cattle owned by the pursuers on payment of the fees charged by the defenders.
[5] Although the precise terms of the defenders' articles of association were not before the court, it appears that these confide responsibility for the management of the defenders' affairs to a Council of Management whose members are elected by those having subscribed to membership of the Society. The articles provide for the Council's making "byelaws" regulating inter alia the terms on which entries may be made in the Herd Book and Supplementary Registers.[6] It is averred that the great majority of pedigree Limousin cattle registered with the defenders are red Limousin beasts. In addition to the usual red Limousin cattle, there also exists a version of the breed which is black in colour and polled. It is averred that polling involves the removal of horns by genetic Breeding techniques. It appears that issues arose respecting the registration by the defenders of black polled Limousin cattle. At a meeting of the defenders' Council of Management on 3 November 1997 the council discussed and adopted rules for the entry into the Society's register of black Limousin cattle. It appears that the rules took the form of byelaws. The byelaws respecting the registration of black animals made different, and more arduous, provision both as respects the fees payable and the supporting evidential requirements than existed in the case of registration of the traditional red Limousin cattle. The precise nature of the differences between the registration fees and evidential requirements for black, as opposed to red, animals has undergone various changes since black animals were first admitted to the records maintained by the defenders, but details of these changes are not material to the argument presented to us, or to the Temporary Lord Ordinary. It may however be noted in passing that section 18(2) of the Competition Act 1998 sets out a non-exhaustive list of practices which may constitute an abuse of a dominant position and in their pleadings the pursuers refer in particular to heads (a) and (c) of the list, which are in these terms:-
"(a) directly or indirectly imposing unfair purchase or selling prices or
other unfair trading conditions;
...
(c) applying dissimilar conditions to equivalent transactions with other
trading parties, thereby placing them at a competitive disadvantage;".
[8] The pleadings do not elaborate on the nature of that recognition. On one view the pursuers' averments may be read as simply emphasising the de facto UK monopoly held by the defenders in the registration of Limousin cattle and the provision of the essential documents, flowing from their records, necessary for trade in pedigree animals. However, irrespective of its consequence for the defenders' dominance in terms of competition law, the concept of recognition assumed an important rôle in the argument by counsel for the defenders and reclaimers that the Temporary Lord Ordinary had erred in repelling the defenders' plea to the competency of the action and following our request for explanation of the concept we were referred to certain EC legislative texts.
[9] So far as the pleadings are concerned, the only reference made by the defenders to any European Community law is in Answer 3 where they aver that establishing and maintaining pedigree records is a "service which all member states of the EU must provide, and which is carried out in the UK, so far as Limousin cattle are concerned, by the defenders under the general supervision of DEFRA". The pleadings for the pursuers contain only a brief reference to "an obligation imposed on the UK by EC" which, it is said, makes Ministry approval necessary for the setting up of any other society for the registration of black Limousin cattle. No specification of any relevant EC legislation is given in the pleadings and we do not understand that any reference to European legislation was made before the Temporary Lord Ordinary. However, as already indicated, in the course of the argument before us we were referred to certain EEC texts, to which we now turn.
[10] The EEC text with which to start is Council Directive (77/504/EEC) of 25 July 1977 on pure-bred breeding animals of the bovine species (OJ 1977 No L206, p 8). As appears from the recitals in its preamble, the principal objective of this directive was the liberalisation of intra-Community trade in pedigree animals. The Directive has been amended on a number of occasions but nothing material turns on the content or timing of these amendments. Article 2 requires that Member States shall ensure that certain matters listed in the article "shall not be prohibited, restricted or impeded on zootechnical grounds". The matters listed include "the establishment of herd-books, provided they comply with the requirements laid down pursuant to Article 6" and "the recognition of organizations or associations which maintain herd-books in accordance with Article 6". The term "herd-book" is defined in article 1 of the Directive as follows:-
"any book, register, file or data medium
- which is maintained by a breeders' organization or association officially recognized by a Member State in which the breeders' organization or association was constituted, or by an official department of the Member State concerned, and
- in which pure-bred breeding animals of a given breed of the bovine species are entered or registered with mention of their ancestors.".
Article 4 of the Directive provides:-
"Breeders' organizations or associations officially recognized by a Member State may not oppose entry in their herd-books of pure-bred breeding animals of the bovine species from other Member States provided that they satisfy the requirements laid down in accordance with Article 6.".
Article 5 of the Directive provides:-
"Member States may require that pure-bred breeding animals of the bovine species and the semen or ova and embryos from such animals shall be accompanied, in intra-Community trade, by a pedigree certificate which complies with a specimen drawn up in accordance with the procedure laid down in Article 8, particularly with regard to zootechnical performance.".
The first paragraph of Article 6 of the Directive is in these terms:-
"The following shall be determined in accordance with the procedure laid down in Article 8:
- performance monitoring methods and methods for assessing cattle's genetic value,
- the criteria governing the recognition of breeders' organizations and associations,
- the criteria governing the establishment of herd-books,
- the criteria governing entry in herd-books,
- the particulars to be shown on the pedigree certificate."
The procedure laid down in Article 8 (in its original form) may be briefly described as involving the obtaining from an existing Standing Committee on Zootechnics of an opinion on draft measures proposed by the Commission respecting the matters catalogued in the article.
[11] A number of Commission decisions, addressed to the Member States , were then issued, the procedure under Article 8 having been followed. For present purposes, the principal decision is Commission Decision No 84/247/EEC of 27 April 1984 laying down the criteria for the recognition of breeders' organizations and associations which maintain or establish herd-books for pure-bred breeding animals of the bovine species (OJ 1984 No L125, p58). The Decision provides firstly, in Article 1, that in order to obtain official recognition a breeders' organization or association must submit an application to the authorities of the Member State on whose territory its headquarters are situated. Secondly, the Decision obliges those authorities to grant recognition to any breeders' organization or association which maintains or establishes herd-books if the latter meet the conditions laid down in the Annex to the Decision. Thirdly, the Decision directs the authorities to withdraw official recognition from any breeders' organization or association which maintains herd-books if the conditions laid down in the Annex are no longer being fulfilled by the organization in question. The Annex to the Decision sets forth certain standards or conditions which are to be met in order to obtain recognition. By another decision, namely Commission Decision No 86/404/EEC of 29 July 1986 laying down the specimen and the particulars to be shown on the pedigree certificate of pure-bred breeding animals of the bovine species (OJ 1986 No L233 p19), the Commission laid down the terms of a specimen pedigree certificate to accompany pure-bred breeding animals entering into intra-Community trade.[12] No mention was made by counsel for either party of the UK legislative provisions implementing the Directive or the Decisions - which appear to be The Zootechnical Standards Regulations 1992 [SI 1992/2370]. We assume that the omission of any such mention proceeded on the view that the implementing domestic regulations effected only a mechanical transposition of the EC provisions: and thus did not advance matters from the standpoint of either party.
[13] In moving the reclaiming motion the argument advanced by Mr Sandison, who appeared for the defenders and reclaimers, followed broadly similar lines to the argument on competency presented to the Temporary Lord Ordinary. In essence the defenders contend that the action is incompetent because, they submit, while it is framed as an action of reparation for economic loss said to have been suffered by the pursuers as a result of a breach of section 18 of the Competition Act 1998, the action is truly concerned with the lawfulness of the decisions taken by the defenders in resolving upon the byelaws governing the registration of black Limousin cattle; hence the action is truly an invocation of the supervisory jurisdiction of the Court of Session. By virtue of Rule of Court 58.3 any application to that supervisory jurisdiction requires to proceed by way of petition for judicial review. If the ultimate determination of a cause requires an exercise of the supervisory jurisdiction of the Court of Session, proceedings may not competently be brought in the form of an ordinary action but require to be brought as a petition for judicial review. Counsel referred to McDonald v Secretary of State for Scotland (No 2) 1996 SLT 575.
[14] Before turning to the argument in greater detail it may be noted that in the particular circumstances of the present case the question of competency is not simply a matter of the proper mode of proceeding within the Court of Session. Behind it lies a question of jurisdiction in the substantive sense of jurisdiction over persons. The ground of jurisdiction invoked by the pursuers in this action is that set out in Article 5(3) of Schedule 4 to the Civil Jurisdiction and Judgements Act 1982 (the schedule dealing with intra-UK jurisdiction) namely - "in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred or may occur". That ground of special jurisdiction would not be available in a petition for judicial review challenging the lawfulness of the bye-laws respecting the registration of black, polled Limousin cattle. The defenders, an English company, have their seat in England and are not domiciled in Scotland.
[15] The nature of the supervisory jurisdiction of the Court of Session was discussed and defined in the well known case of West v Secretary of State for Scotland 1992 SC 385 to which counsel for each of the parties naturally referred. In its summary and conclusion the Court, at p 412, enunciated three propositions intended to define the principles by reference to which the competency of all applications to the supervisory jurisdiction should be determined. These are:-
"1. the Court of Session has power, in the exercise of its supervisory
jurisdiction, to regulate the process by which decisions are taken by any person or body to whom a jurisdiction, power or authority has been delegated or entrusted by statute, agreement or any other instrument.
2. The sole purpose for which the supervisory jurisdiction may be
exercised is to ensure that the person or body does not exceed or abuse that jurisdiction, power or authority or fail to do what the jurisdiction, power or authority requires.
3. The competency of the application does not depend upon any
distinction between public law and private law, nor is it confined to those cases which English law has accepted as amenable to judicial review, nor is it correct in regard to issues about competency to describe judicial review under Rule of Court 260B as a public law remedy.".
Those three propositions were supplemented by an explanation, at p. 413, emphasising certain points, of which the following are those more pertinent to the issues in the present case:-
"(b) The word 'jurisdiction' best describes the nature of the power, duty or
authority committed to the person or body which is amenable to the supervisory jurisdiction of the court. It is used here as meaning simply 'power to decide', and it can be applied to the acts or decisions of any administrative bodies and persons with similar functions as well as to those of inferior tribunals....
(d) Contractual rights and obligations, such as those between employer
and employee, are not as such amenable to judicial review. The cases in which the exercise of the supervisory jurisdiction is appropriate involve a tri-partite relationship, between the person or body to whom the jurisdiction, power or authority has been delegated or entrusted, the person or body by whom it has been delegated or entrusted and the person or persons in respect of or for whose benefit that jurisdiction, power or authority is to be exercised.".
[17] Counsel for the defenders accepted that, in the absence of official DEFRA recognition, there could be no tri-partite relationship conferring a jurisdiction susceptible to judicial review as part of the superintendent function of the Court of Session. But, said counsel, obtaining official recognition from DEFRA had the result of altering the legal status of the pedigree certificate which the defenders issued. The certificate then had the status of a certificate which, pursuant to Article 4 of the Directive, was entitled to acceptance by officially recognised breeders' organizations and associations in other Member States. Further, the defenders had to make an application for recognition; to have their application accepted they required to meet the specified standards; and they were liable to have recognition withdrawn if they failed to maintain those standards. In those respects, said counsel, the defenders were entrusted by DEFRA with the maintenance of the United Kingdom herd-book for Limousin cattle and the issue in the United Kingdom of pedigree certificates for Limousin cattle which would also be recognised by equivalent officially recognised associations and organisations elsewhere in the European Union. There was thus conferred upon the defenders, by DEFRA, the power to decide which animals would enter the UK herd-book and on which terms and conditions. Accordingly the defenders were exercising a jurisdiction meeting the tri-partite test set out by the Court in West.
[18] In our opinion the argument thus advanced by counsel for the defenders is not well-founded. As counsel for the defenders recognised and accepted, if one leaves aside, for the moment, the official recognition, it is clear that in deciding which animals they may register, upon whose application, and upon which terms, financial and evidential, the defenders do not exercise any jurisdiction or authority conferred on them by the State or any other body. The defenders were, of course, not established by any legislative or administrative measure but simply by a decision of their incorporators. While they have a power to decide whom to admit to membership and the terms, financial or otherwise, upon which they register animals, that power of decision is autonomous, flowing from their own corporate existence and is not conferred upon them by some other party, for the benefit of a third party. Accordingly the issue is whether "official recognition" gives the defenders a different status bringing its decisions on the fees charged and the evidential requirements for entry to its registers within a tri-partite arrangement, rendering those decisions susceptible to judicial review. As already indicated, in endeavouring to supply a positive answer, Mr Sandison pointed to the fact that in order to obtain official recognition the defenders had to apply to the Ministry; required to meet certain standards; and were under an obligation to maintain those standards (otherwise they might have recognition withdrawn). In our view, however, Mr Ferguson for the pursuers was correct in submitting that the fact that the defenders may have applied for and been given recognition by DEFRA as meeting certain EEC standards, and are under an obligation to maintain those standards if they wish to retain that recognition, does not change their legal position as a breeders' association. Counsel for the defenders at one point sought support from the fact that the defenders are the only officially recognised holder of a herd-book for Limousin cattle in the United Kingdom. However, he accepted that there was no legal restraint upon other people's forming another Limousin breeders' association which might also seek and obtain official recognition in the United Kingdom. In that situation it is difficult to see the public at large as forming a part of the tri-partite relationship for which Mr. Sandison contended. The absence of the existence of a jurisdiction or power of decision susceptible to judicial review is, in our view, further demonstrated by Mr Sandison's acceptance that the defenders' decision as to whom to allow into membership of the defenders was not subject to any legal restraint or compulsitor; that the defenders could, if they wished, set a limit to the number of members; and that there was no obligation to register an animal except on application from a member.
[19] As we have said, emphasis was placed by counsel for the defenders on what he termed the alteration in the legal status of the pedigree certificate issued by the defenders following their obtaining official recognition. As we understood it, the alteration relied upon was the fact that the authorities of other Member States were required, pursuant to the Directive, to give recognition to a pedigree certificate issued by the defenders in the Community form. No doubt, prior to the advent of official recognition, a pedigree certificate issued by a breeders' Society such as the defenders had commercial value since it would be recognised de facto by many cattle breeders within the United Kingdom and perhaps elsewhere. The fact that, with official recognition of the issuing organization or association, a pedigree certificate issued in the appropriate form by a breeders' association such as the defenders is required under Community law to be accepted by other officially recognised breeders' associations in the EU as vouching the animal's pedigree may give the certificate, and hence the animal to which it relates, greater value by reason of its intra-Community currency. But whatever its commercial consequences we do not consider that the legal incidents flowing from the fact that a pedigree certificate is issued by the defenders as a recognised breeders' association alters their status as a body in such a way as to create a tri-partite relationship subjecting them to the supervisory jurisdiction as respects matters to which the present action relates.
[20] Counsel for the pursuers also submitted that in any event the present action did not involve any indirect invocation of the supervisory jurisdiction. He made reference to a number of passages in chapter 8 of Clyde and Edwards on Judicial Review in which the nature and scope of the supervisory jurisdiction was discussed and in which the supervisory jurisdiction was described as being particularly concerned with the process or procedure whereby a decision-taking power or authority was exercised. Counsel pointed out that the pursuers did not contend that the "byelaws" in question were invalid; it was not suggested that the byelaws should be quashed or reduced, let alone that they be quashed or reduced on a procedural or jurisdictional ground. The action was in his words a "classic" case of a claim for damages for economic loss and it was clear that in its form the action was an action for reparation. It was founded on section 18 of the Competition Act 1998, which was not a procedural or jurisdictional fetter on any decision-taking power enjoyed by the defenders.
[21] We should also record that Mr Ferguson further submitted that a collateral attack impugning a decision which might otherwise be subject to the supervisory jurisdiction could properly be raised in an ordinary action for damages. He referred in particular to the discussion in Clyde and Edwards at paragraphs 8.14, 8.15 and 8.16, particularly at pp. 331 (foot) to 332. We were also referred to the Report of the Working Party on Procedure for Judicial Review of Administrative Action appointed on 27 April 1993 (the Dunpark Working Party), particularly paragraph 5 and the commentary on the Working Party's proposed rule 1, from which counsel submitted that the terms of the Report indicated that the new procedure was intended solely for those cases which truly constituted an application to the supervisory jurisdiction. Counsel pointed out moreover that the present action involved a number of disputed issues which would not ordinarily form part of a petition for judicial review and were only properly suited to inquiry by way of ordinary action. Those matters included the dispute between the parties over whether the defenders were an undertaking; whether they enjoyed a dominant position in a market; whether their conduct had an appreciable effect on competition; whether the discrimination between black and red beasts was justified: whether they provided a service of general economic benefit; and, of course, there were disputed issues in relation to quantum.
[22] In our view there is force in the submission that, in any event, the present action does not truly constitute an indirectly invocation of the supervisory jurisdiction. In McDonald v Secretary of State for Scotland Lord Clyde, at p. 577, indicated that the question whether proceedings indirect involved the supervisory jurisdiction of Court of Session required to be answered by identifying the issue raised in the case. He went on to say: "The form of action and the remedies sought may be of assistance towards solving that problem but the final answer is to be found in a proper understanding of what the action is truly about. That requires a consideration of the pleadings.". The present action is, of course, plainly a petitory one seeking reparation for loss. There is no challenge made to the validity of the byelaws, nor is reduction of the byelaws sought. Thus, if successful, the action would not have any retrospective, or indeed future, effect erga omnes. But moreover, and importantly, the whole basis of the pursuers' claim is an alleged breach of section 18 of the Competition Act 1998. It is difficult to see how the provisions of that section can be seen as a provision defining or delimiting a West-type jurisdiction or decision-taking power. Section 18 applies to any undertaking having a dominant position in a market. This provision, arising solely by virtue of statutory competition law, has no relationship to any constitutional limitation on the defenders' powers as compared with any other undertaking in a dominant position. While within the defenders' Society reference is made to "byelaws", from an external point of view one is simply concerned with a decision by the defenders as to the fees which they charge and the other conditions for registration. In the result, we are content to proceed on the view that the present action does not even involve an indirect invocation of the supervisory jurisdiction. This, of course, is consistent with the view that in deciding on the amount of the registration fee and other requirements the defenders were not exercising any jurisdiction or power of decision which would be susceptible to judicial review. In these circumstances it is not necessary to consider the submission to the effect that, even where a body is exercising a decision-taking power susceptible of judicial review proceedings, an action of damages may be competent as being only a collateral challenge.
[23] For the reasons indicated we consider that there was no error in the decision of the Temporary Lord Ordinary to repel the defenders' plea to competency. We shall therefore refuse the reclaiming motion and adhere to the Temporary Lord Ordinary's allowance of a proof before answer.