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England and Wales High Court (Administrative Court) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> Royal Mail Group Plc v The Postal Services Commission [2007] EWHC 1205 (Admin) (25 May 2007) URL: http://www.bailii.org/ew/cases/EWHC/Admin/2007/1205.html Cite as: [2007] EWHC 1205 (Admin) |
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QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Strand, London, WC2A 2LL |
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B e f o r e :
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Royal Mail Group Plc |
Appellants |
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- and - |
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The Postal Services Commission |
Respondent |
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WordWave International Ltd
A Merrill Communications Company
190 Fleet Street, London EC4A 2AG
Tel No: 020 7421 4040 Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Mr Stephen Morris, Q.C. & Ms Susannah Jones (instructed by Denton Wilde Sapte) for the Respondent
Hearing dates: 3 & 4 May 2007
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Crown Copyright ©
Mr Justice COLLINS :
"(1) This section applies if a licence holder on whom a penalty is imposed under section 30 is aggrieved by –
(a) the imposition of the penalty,
(b) the amount of the penalty …
(2) The licence holder may apply to the court.
(5) On an application under this section, the court may –
(a) quash the penalty,
(b) substitute a penalty of such lesser amount as the court considers appropriate …
if it considers it appropriate to do so and is satisfied of one or more of the grounds mentioned in subsection (6).
(6) The grounds are –
(a) that the imposition of the penalty was not within the powers of the Commission under section 30,
(b) [that the various procedural requirements set out in the Act have not been complied with]
(c) that it was unreasonable of the Commission to require the penalty to be paid by the date concerned or … to require portions of it to be paid by the dates concerned."
I have not set out s.36(1)(c) or (5)(c) since, as s.36(6)(c) indicates, they are concerned with times imposed for payment of the whole penalty or of instalments. S.36(2) and (5) refer to an application albeit the section is headed 'Appeals'. The only material matter arising from this is whether an appeal to the Court of Appeal must be regarded as a second appeal so that leave must be sought from the Court of Appeal. I am satisfied that this should be regarded as an appeal and so an appeal to the Court of Appeal must be regarded as a second appeal. I did not understand counsel for either party to dispute this.
"30(1) If the Commission is satisfied that a licence holder –
(a) has contravened any condition of his licence, or
(b) is contravening any such condition,
The Commission may impose on the licence holder a penalty of such amount as is reasonable.
(2) No such penalty shall exceed 10 per cent of the turnover of the licence holder …
(3) The Commission may impose a penalty … irrespective of whether it has made or may make [an enforcement order].
31(1) the Commission shall prepare and publish a statement of policy in relation to the imposition of penalties and the determination of their amount
(2) In deciding whether to impose a penalty, and in determining the amount of any penalty, the Commission shall have regard to the statement of policy which was most recently published at the time when the contravention concerned occurred.
(3) The Commission may revise its statement of policy and, where it does so, it shall publish the revised statement …
(5) The Commission shall consult [the Consumer Council for Postal Services] and such other persons as it considers appropriate when preparing or revising its statement of policy."
I should note that the power to impose an enforcement order depends upon an existing or likely future contravention whereas a financial penalty may be imposed in relation to a past or existing contravention of a condition. Thus an enforcement order relates to present or future whereas a financial penalty relates to past or present. There are time limits applicable to the power to impose a financial penalty in relation to contraventions which it is not necessary to detail. They are contained in s.34 of the 2000 Act.
"Postcomm's duties
11. The imposition of financial penalties is a function that Postcomm is required to exercise in accordance with its statutory duties. These duties may be summarised as: to exercise its functions –
- in the manner which it considers is best calculated –
- to ensure the provision of a universal postal service,
- subject to that to further the interests of users of postal services wherever appropriate by promoting competition and having regard to the interests of specified vulnerable customer groups, and
- subject to the above to promote efficiency and economy on the part of postal operators, and
- with regard to the need to ensure that licence holders are able to finance the activities authorised or required by their licences.
The imposition of a penalty
12. In order to decide whether it should impose a penalty Postcomm first will satisfy itself either –
- that there has been a contravention of a licence condition, or
- that there is a contravention of a licence condition
13. Postcomm then will consider whether it is appropriate to make a penalty, having regard to –
- whether or not the contravention is or was serious,
- whether the imposition of a penalty will further Postcomm's statutory duties,
- whether the nature of the contravention is such that it is particularly appropriate to impose a penalty, including that the contravention was intentional or negligent, and
- whether the nature of the contravention or the circumstances of its occurrence are such that it is not appropriate to impose a penalty, for example where the contravention arose from circumstances entirely beyond the control of the licence holder.
The amount of a penalty
14. In deciding the amount of a financial penalty, Postcomm will first consider the financial benefit obtained by the licence holder and the burden imposed on others as a result of the contravention of the licence condition. A consideration of these estimates will be Postcomm's starting point for deciding the amount of any penalty with a view to ensuring that –
- infringement of licence conditions confers no benefit on the infringing licence holder in terms either of profits made by it or of costs imposed on competitors, and
- the incentive to continuing compliance provided by the possibility of a financial penalty is realistic, reasonable and proportional in relation to the gains that may arise, directly or indirectly, from non-compliance
15. Postcomm will increase its starting figure for aggravating factors such as –
- clear knowledge within the licence holder of the fact or likelihood of contravention of the licence,
- failure to heed any warnings received by the licence holder that it was contravening its licence,
- failure to co-operate with Postcomm's investigation,
- persistence with the contravention even after the start of Postcomm's investigation,
- similar contraventions having occurred previously.
16. Postcomm would decrease the starting figure for mitigating factors such as –
- the contravention being clearly unintentional,
- the contravention occurring for reasons substantially beyond the control of the licence holder,
- a speedy positive response to warnings of possible contravention,
- co-operation with Postcomm's investigation,
- any genuine lack of clarity as to whether a contravention was occurring or likely to occur,
- reliance by the licence holder on advice given by an authority having a role in the regulation of postal services,
- the licence holder having taken steps to compensate persons affected by the contravention.
17. Postcomm may have regard to the need to deter similar breaches of licence by other postal operators.
18. Postcomm then will –
- review the resulting figure generally with a view to considering whether it is reasonable and proportional in the circumstances of the case,
- ensure that the penalty is within the 10% of turnover limit,
- consider whether the penalty should be paid by instalments, and
- reconsider whether its decision overall as to the imposition of a penalty and its amount and the manner of its payment will further its statutory duties."
"… Postcomm's approach is to use turnover as a check on penalties, with the starting point being an assessment of the financial benefits obtained by the licence holder and the burden imposed on others as a result of the contravention of the licence condition. Postcomm does not see insuperable practical difficulties in assessing the extent of the burden imposed on others."
"Prohibition of obtaining unfair commercial advantage
1. This condition shall apply if the Licensee is required pursuant to a condition of this Licence to provide access to its postal facilities to other persons.
2. The Licensee shall conduct its business as a postal operator in the manner best calculated to secure that neither –
(a) the Licensee, nor
(b) any related person of the Licensee, nor
(c) any other person,
obtains any unfair commercial advantage in connection with the provision by the Licensee of access to its postal facilities as described in Paragraph 1.
3. Subject to Paragraph 4, the Licensee shall use all reasonable endeavours to secure that no information in the possession of the Licensee as a result of giving access to its postal facilities to other persons –
(a) is disclosed for the benefit of or used for the purpose of any trading business conducted by the Licensee, or
(b) is disclosed for the benefit of or used for the purpose of any trading business conducted by any related person of the Licensee.
4. Paragraph 3 shall not apply in so far as –
(a) Postcomm may consent in writing,
(b) every person to whom the information relates has consented in writing to its disclosure or use as mentioned in Paragraph 3 ,
(c) the disclosure is to, or the use by, a person who -
(i) is acting as an agent of the Licensee for the provision of postal services,
(ii) is engaged by the Licensee for the purpose of the Licensee's business as a postal operator and has access to the information only for that purpose, and
(iii) is restricted by contract with the Licensee from making any further disclosure or use of the information, or
(d) the information has been published or is required to be disclosed as mentioned in Paragraph 3 in pursuance of any other condition of this Licence, or
(e) the information is in the public domain otherwise than in consequence of a contravention of any condition of this Licence.
5. The terms on which the Licensee and any related person of the Licensee have access to the Licensee's postal facilities shall be no more and no less favourable than the terms on which those facilities may be made available to other persons in accordance with Condition 9 of this Licence. "
"the ability of operators and potential new entrants to gain market share is likely to have been hampered; fewer bulk mailers will have switched … [to DSA]. Therefore, operators are likely to have carried lower volumes of mail than they would have if the contravention had not occurred and Royal Mail is likely to have retained more customers on a Mailsort tariff rather than on an access tariff. (Paragraph 6.33)"
It sought to calculate the benefit to the appellants by assuming that there would have been an additional 10% take up of DSA services over that which had actually occurred, that that would have meant some 82.5 million items each of which would have produced a net benefit to the appellants of 2.9 pence. After taking account of aggravating and mitigating factors, the proposed financial penalty was £2.16 million.
"The starting point element of Postcomm's policy on financial penalties is so difficult to apply in a rational and consistent manner in this case that, having had very serious regard to it, Postcomm thinks that this aspect of the penalty policy should not be applied. However, Postcomm does not accept that, having concluded that it is appropriate to impose a financial penalty, it must abandon this decision because of the difficulties in applying the starting point element of this policy." (Paragraph 6.42).
"5.24 However, Postcomm now accepts, in light of Royal Mail's representations, that the method used by Postcomm in February 2006 to put a value on the benefit obtained by Royal Mail and to use that value as the starting point for a financial penalty is insufficiently consistent with the observed facts and insufficiently robust to be relied upon. Royal Mail's representations added weight to the argument that even rough values of the benefit and burden resulting from Royal Mail's contraventions are difficult to quantify and attempts to calculate their values are problematic. Paragraph 14 of the penalties policy is so difficult to apply in a rational and consistent manner in this case that, having had very serious regard to it, Postcomm thinks that it should not be applied. However, Postcomm does not accept that, having concluded that it is appropriate to impose a financial penalty, it must abandon this decision because of the difficulties in applying paragraph 14 of its policy.
5.25 In Postcomm's judgment, a better approach in this case is to return to the fundamental purposes of the Act and to seek to give effect to them, and to depart from paragraph 14 of the penalties policy because to follow it would frustrate those aims. The key purpose of the Act that is relevant to this matter appears to Postcomm to be the purpose of "furthering the interests of users wherever appropriate by the promotion of effective competition". Postcomm believes that to achieve that purpose (and other purposes), there must be the administration of a system of regulation which involves penalties, where necessary, to publicly and critically mark the occurrence of a serious contravention of a regulation intended to further such purpose and to penalise, and thereby deter, behaviour which is contrary to the purpose. The question Postcomm has to address is what level of penalty is necessary and proportionate to publicly and critically mark the occurrence of the contraventions that have occurred and to penalise Royal Mail for these contraventions and thereby deter other contraventions."
In Paragraph 5.29, Postcomm says :-
"Whatever calculation methodology that it adopts, Postcomm must ultimately assess the penalty figure for its reasonableness and proportionality as set out in the provisions of its policy."
"namely that [Respondents to a government circular giving guidance in accordance with a statutory provision] must (a) take it into account and (b) if they decide to depart from it, give clear reasons for doing so. If [the decision of Dyson J in R v North Derbyshire Health Authority ex p Fisher (1997) 10 Admin LR 27] is thought to support a proposition which would bind public authorities more tightly to a duty of obedience to guidance to which by statute they are obliged (no more, no less) to have regard, then I would respectfully question its correctness."
"It is in my view plain that the Code does not have the binding effect which a statutory provision or a statutory instrument would have. It is what it purports to be, guidance and not instruction. But the matters relied on by Mr Munjaz show that the guidance should be given great weight. It is not instruction, but it is much more than mere advice which an addressee is free to follow or not as it chooses. It is guidance which any hospital should consider with great care, and from which it should depart only if it has cogent reasons for doing so. Where, which is not this case, the guidance addressee a matter covered by section 118(2), any departure would call for even stronger reasons. In reviewing any challenge to a departure from the Code, the court should scrutinise the reasons given by the hospital for departure with the intensity which the importance and sensitivity of the subject matter requires."
The final sentence is of considerable importance since it recognises that the context of and circumstances in which the guidance is applied are highly material. Since in Munjaz's case, the liberty of the individual was in issue, it was the more necessary to have and to give cogent reasons for not following guidance designed to give protection to the detainee. The statute did not use the words 'have regard to' and so it may also have been easier to conclude that Parliament had intended that the Code should be followed unless cogent reasons for not doing so could be established: see per Lord Hope of Craighead at p.204 in paragraphs 68 and 69.
"The language of section 38(8) is general in nature. It does not bind the OFT to follow the Guidance in all respects in every case. However, in accordance with general principle, the OFT must give reasons for any significant departure from the Guidance: compare the judgment of the CFI in Tokai Carbon v Commission, Case T-236/01, decided on 29 April 2004, at paragraph 231:
As the Commission decided to apply in this particular case the differentiation method laid down in the Guidelines, it was required to adhere to them, and, where it departs from them it must set out expressly the reasons for justifying such a departure."