Competition breach sees council-owned bus company pay exemplary damages A bus company wholly owned by a local authority has been ordered to pay exemplary damages as well as compensation after breaching competition law.
This is the first time in English case law that exemplary damages have been awarded for such a breach.
However, the sums awarded by the Competition Appeal Tribunal against Cardiff Bus, which is owned by Cardiff Council, were considerably lower than the amounts sought by the claimants, 2 Travel.
The case of 2 Travel Group Plc (In Liquidation) v Cardiff City Transport Services Limited (the "CAT") was the first ‘follow-on damages’ claim to be brought before the CAT under Section 47A of the Competition Act 1998.
The claimants were seeking damages against Cardiff Bus after the Office of Fair Trading concluded that it had breached its dominant position by engaging in predatory conduct.
At issue was the company’s launch of its so-called White Service, which the OFT concluded in 2008 had been operated to put 2 Travel out of business.
Cardiff Bus set up the White Service – without first taking advice about its legality – and ran it at a loss between April 2004 and February 2005. It withdrew the service after 2 Travel exited the market.
The CAT has now awarded 2 Travel nearly £34,000 in compensatory damages plus interest for loss of profits and £60,000 in exemplary damages.
However, multi-million pound claims for the loss of a capital asset and loss of a commercial opportunity were rejected.
In its judgment, the CAT said: "We find that Cardiff Bus' behaviour is only consistent with that of an organisation that had deliberately decided to disregard the law, and that this conduct was done in cynical disregard of 2 Travel's rights."
The Tribunal said there were no pro-competitive effects to Cardiff Bus’s conduct, serious anti-competitive effects, and there was an exclusionary intent.
“We find that Cardiff Bus acted in knowing disregard of an appreciated and unacceptable risk that the Chapter II prohibition [contained in s. 18 of the Competition Act 1998] was either probably or clearly being breached or it deliberately closed its mind to that risk.”
David Brown, managing director of Cardiff Bus, resigned last week. The company has appointed its finance and administration director, Cynthia Ogbonna, as its interim Managing Director.
A spokeswoman for Cardiff Bus said it welcomed the CAT decision, describing the amount of damages awarded as “modest” for an initial claim of more than £50m.
She added: “The decision reflects Cardiff Bus’ own assessment of the merits of the claim brought against it by 2 Travel and the position it has maintained both before and throughout the proceedings.
“The events relating to this decision took place some eight years ago. Those events were fully investigated by the Office of Fair Trading at the time, and the company accepted the judgement of the OFT in November 2008.”
The spokeswoman said the company fully recognised, and had previously apologised for, the infringements that took place in 2004, and as soon as it became aware of the infringement decision in 2008 put in place measures to ensure such events could never happen again.
Responding to the judgment, Cardiff Council Leader Heather Joyce said: "I was very concerned when the Chief Executive, Jon House, briefed me and my cabinet on this matter and I asked him to meet with the relevant people from Cardiff Bus as a matter of urgency to convey the council’s concerns as shareholder of the company.
"I am pleased to see that the Board has listened to the council’s concerns and have taken appropriate action. I now believe the company can move on and concentrate on the delivery of a bus service which is vitally important to me."
Law firm Burges Salmon, which acted for Cardiff Bus in the case, hailed the ruling as a “successful defence”.
Partners Laura Claydon and Peter Morris said: “This was a very difficult case. We successfully maintained the position that Cardiff Bus had taken both before and throughout the proceedings and the Tribunal endorsed our approach.”
“Notably, this is only the second follow-on damages claim to reach trial and we are pleased to see the Competition Appeal Tribunal uphold its application of the ‘but for’ test of causation from its previous decision in Enron [Enron Coal Services Ltd (in liquidation) v EWS Railway Ltd]. The Decision will be scrutinised closely by practitioners in the field as the reasoning is likely to have a significant influence on the approach to future claims brought under Section 47A of the Competition Act."
Michael Bowsher QC and Annaliese Blackwood of Monckton Chambers, instructed by Addleshaw Goddard, represented 2 Travel.
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