Court of Appeal confirms that collective proceedings regime allows issues of liability to be determined at the aggregate level, dismissing train operating companies’ appeals in the ‘Boundary Fares’ claims

28 Jul 2022

Today, the Court of Appeal has dismissed the appeals brought by the train operating companies responsible for the South Eastern and South Western rail franchises (the “TOCs”) against the CAT’s judgment in Gutmann v First MTR South Western Trains Limited and Ors [2021] CAT 31.

In its judgment, the CAT certified two applications for opt-out collective proceedings against the TOCs in relation to alleged abuses of their dominant positions in connection with the sale of “Boundary Fares”, a type of extension ticket for use in conjunction with a TfL Travelcard.

The class representative, Mr Justin Gutmann, alleges that the TOCs abused their dominant position by failing to make Boundary Fares sufficiently available, or to use their best endeavours to ensure a general awareness among their customers of Boundary Fares, with the result that many Travelcard holders paid twice for part of their rail journeys. The class consists of an estimated 3 million London rail passengers. The claims have an estimated total value of £93 million across the two claims.

The TOCs had appealed the CAT’s judgment principally on the basis that many and varied individual issues of causation and therefore liability made the claims unsuitable for inclusion in collective proceedings. They argued that the CAT’s approach of allowing issues of liability to be considered in aggregate undermined the TOCs’ right of defence. Further grounds of appeal concerned the level of scrutiny the CAT should apply to the expert methodology (and the test in Pro-Sys v Microsoft), the CAT’s assessment of the costs and benefits of continuing the claims, and a rejected application for summary dismissal.

In an important judgment for the development of the collective proceedings regime, the Court of Appeal rejected the TOCs’ appeals. It held that:

  • Section 47C(2) of the Competition Act 1998 permits issues relating to liability to be determined upon an aggregate top-down basis, and does not require the position of each class member to be assessed individually. The Supreme Court’s judgments in Merricks and Lloyd were dispositive of this issue, and in any event, the purposive interpretation of s47C(2) led to that conclusion. The Court approved the CAT’s broad propositions that: (i) the existence of some no-loss claimants in a class was not an obstacle to certification, and (ii), the interests of defendants could be catered for at trial by aggregate adjustments using sensible estimations and assumptions;
  • The CAT had not erred in approving the methodology proposed by the class representative. The CAT had exercised a vigilant gatekeeper role and gone to proper lengths to satisfy itself as to the robustness of the class representative’s methodology. The Defendants’ criticisms of the methodology either did not raise an arguable issue of law or could appropriately be dealt with by the CAT making use of its ‘broad axe’;
  • The TOCs’ criticisms of the CAT’s cost-benefit analysis did not raise any issue of law;
  • Questions as to the TOCs’ liability for the conduct of third-party ticket sellers and their failure to offer Boundary Fares for all ticket types were issues for trial, and the CAT had not erred in declining to summarily dismiss them. In this context, the Court of Appeal reviewed the law on abuse of dominance by the imposition of unfair prices or other unfair trading conditions.

A copy of the judgment can be found here.

Philip Moser QC, Stefan Kuppen and Alexandra Littlewood (instructed by Hausfeld & Co LLP and Charles Lyndon Ltd) represent Mr Gutmann.

Fiona Banks (instructed by Slaughter and May) represents First MTR South Western Trains Limited. Tim Ward QC and James Bourke represented First MTR before the CAT.

Paul Harris QC, Anneliese Blackwood, Michael Armitage and Clíodhna Kelleher (instructed by Freshfields Bruckhaus Deringer LLP) represent London & South Eastern Railway Limited.