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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Packet Media Ltd v Telefonica UK Ltd [2015] EWHC 2235 (Ch) (20 July 2015) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2015/2235.html Cite as: [2015] EWHC 2235 (Ch)

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		The Rolls Building 7 Rolls Buildings London, EC4A 1NL
		20th July 2015

HIS HONOUR JUDGE HODGE QC:

1. This is my extemporary judgment on an interim application by Packet Media Limited (to which I shall refer as "PML") as claimant against Telefonica UK Limited as defendant, claim number HC-2015-002463. By a claim form issued on 17th June 2013 the claimant seeks relief on the basis that the defendant is in breach of the Chapter II prohibition contained within section 18 of the Competition Act 1998 and/or regulation 7 of the Radio Equipment and Telecommunications Terminal Equipment Regulations 2000.
2. The background to the claim is that PML provides telecommunication services and, in particular, services involving the sale or leasing of global system for mobile telecommunications (or GSM) Gateway equipment and the re-selling of air time so as to enable end customers to engage in what is said to be single-user self-use of GSM Gateways. The defendant is a mobile network operator (or MNO) which functions under the trading name of O2. I shall refer to the defendant by that trading name.
3. On 5th June 2015 O2 sent a letter to PML's present solicitors entitled Notice of Suspension by which it gave the claimant seven days' written notice of the suspension of the services to the SIM cards (or subscriber identity module cards) that PML and its customers are using in gateways on the network which O2 is currently aware of. The Notice of Disconnection identified 2,045 SIM cards which O2 intended to disconnect. It is said that the action which O2 has proposed to take in the Notice of Disconnection would constitute (a) an abuse of a dominant position contrary to section 18 of the 1988 Act and (b) a breach of regulation 7 of the RTTE Regulations. PML therefore brings these proceedings to restrain O2 from taking that action.
4. Particulars of claim were served dated 1st July 2015. Having identified the parties, they identify the nature of the claimant's business. PML is said to offer a range of telecommunications solutions to its customers enabling them to "self-use" GSM Gateways. A GSM Gateway is said to be an item of telecommunications equipment that incorporates one or more SIM cards and is thereby enabled to originate calls, or send Short Message Service (or SMS) text messages, on that MNO's network.
5. A GSM Gateway is not itself a phone but rather is installed as part of the user's switching equipment with the effect that when the user makes a call, or sends an SMS message, from a fixed phone line to a mobile phone number (known for short as "F2M traffic"), that call is diverted from the fixed line through the GSM Gateway connecting with the receiving mobile network via the air interface. The call or SMS then attracts a lower cost than if it had been made as a conventional fixed line communication to be terminated on a mobile network.
6. In the UK any person who wishes to establish, install or use a GSM Gateway to deliver an electronic communications service by way of business to another person is required to obtain an individual wireless telegraphy licence for that purpose from the Office of Communications (or Ofcom).
7. In a judgment in October 2013 in the case of Recall Support Services Limited v Secretary of State for Culture, Media and Sport [2013] EWHC 3091 (Ch), reported at [2014] 2 CMLR 20, Rose J held, in proceedings brought by persons including the claimant, that the licensing regime was contrary to Article 5 of the Authorisation Directive 2002/20 in so far as it prevented GSM Gateways from being used to deliver a commercial service to individual end users.
8. The Court of Appeal upheld this judgment in October 2014: see [2014] EWCA (Civ) 1370, reported at [2015] 1 CMRL 38. However, Ofcom has not yet amended the 2003 Regulations and so the position remains that under domestic United Kingdom law the only lawful use of the GSM Gateway without a licence is "self-use". The claimant's business in GSM Gateways is said to concern such "self-use" of GSM Gateways by PML's customers.
9. PML's service to such customers, insofar as they use the O2 network, has two elements. First, PML leases or sells GSM Gateways to its customers for them to install and use in their premises and maintains that equipment once sold or leased. Secondly, PML also re-sells air time on O2's network to its customers by providing them with SIM cards to use in those GSM Gateways. PML obtains those SIM cards from two of O2's official authorised re-sellers, 2 Circles Communications Limited (referred to as "2 Circles") and Fidelity Group Limited (referred to as "Fidelity").
10. PML's customer base is said to include National Health Service Trusts and substantial private companies. Those customers are said to save significant amounts of public and private money by lawfully self using GSM Gateways in this way.
11. The SIM cards for O2's network which PML supplies to its customers are obtained from 2 Circles and Fidelity. PML has no direct contractual relationship with O2. PML's contracts with 2 Circles and Fidelity both make specific provision for the circumstances in which PML re-sells SIM cards to its customers for those customers to "self-use" a GSM Gateway. Both contracts require the prior written consent of the relevant re-seller. It is said that PML has obtained the consent of both 2 Circles and of Fidelity for PML's customers to install and use SIM cards for the purpose of lawfully "self-using" GSM Gateways.
12. On 5th June 2015 O2 sent a letter to PML's solicitors entitled Notice of Suspension by which it gave PML seven days written notice of the suspension of the services to the SIM cards that it and/or its customers are using in Gateways on the network which O2 is currently aware of. That notice related to connections through both 2 Circles and Fidelity. It identified 2,045 SIM cards, of which 1,065 are said to be currently being used in PML's customers' Gateways, 43 were not connected with O2, 18 were duplicated numbers and 919 were not used.
13. The Notice of Disconnection stated that O2 intended to switch off service to the disputed SIMs because PML and/or its customers had not applied, nor been authorised, to use the Gateways on the network pursuant to O2's Gateway Policy. That is said to be reference to an undated policy which was first supplied by 2 Circles to the claimant on 6th October 2014 and by Fidelity on 7th October. Under the O2 policy, self-use of GSM Gateways (called "private" use in the policy) is stated to be permissible so long as authorised in advance by O2, and subject to various technical requirements.
14. The particulars of claim address the alleged breach of the RTTE Regulations at paragraphs 14 through to 18. O2 is said to be an operator of a public telecommunications network within the meaning of the RTTE Regulations. Regulation 7(1) of those Regulations provides (so far as relevant):

"(1) Operators of public telecommunications networks:

(a) shall connect or permit the connection, at an interface, of any telecommunications terminal equipment which meets the requirements of regulation 4 ...

(b) shall not discontinue such connection lawfully made of any such equipment."

15. Regulation 7 of the RTTE Regulations implements in UK law Articles 7 and 8 of the RTTE Directive. Those articles are said to confer rights on individuals. The GSM Gateways in which the disputed SIMs are installed and used (insofar as they are being used) are CE-certified and comply with the requirements of regulation 4 of the RTTE Regulations. Each of the disputed Gateways has been lawfully connected to the O2 network. In the Notice of Disconnection O2 has proposed to discontinue connection to the disputed Gateways. If enacted, it is said that this proposal will breach regulation 7(1)(b) of the RTTE Regulations.
16. The case of abuse of dominant position is addressed at paragraphs 19 through to 24 of the particulars of claim. By paragraph 19 it is said that O2 enjoys a dominant position on the following markets (which are described as "the Termination Markets"): (a) the market for the termination of mobile telephone calls on the O2 network; and (b) the market for the termination of SMS messages on the O2 network.
17. The purpose of the operation of a GSM Gateway is to obtain access to call termination on an MNO's network and specifically to obtain access to "on network" termination rates. In 2005 Ofcom concluded that by supplying SIM cards to a GSM Gateway operator, an MNO was providing "a wholesale access and origination service" which was "used to access mobile termination at on-net rates"; and that by suspending access to those SIM cards, the MNO was "implicitly declining to provide mobile termination at wholesale on-net rates".
18. The defendant's proposal to disconnect the disputed Gateways by disconnecting service to the disputed SIMs is said to involve, and to further involve if implemented, an abuse of such dominant position contrary to section 18 of the Competition Act 1998. Three particulars of abuse of dominance are given: (a) refusing to continue to supply to an existing customer or customers who have abided by regular commercial practice; (b) refusing to supply an essential facility to PML, that is to say access to the Termination Markets for the purpose of enabling its customers to operate GSM Gateways; and (c) operating a policy - the O2 Policy - which (a) seeks to restrict or prohibit the lawful "self-use" of GSM Gateways and (b) refuses connection to CE-certified equipment. It is said that those constitute unfair trading conditions.
19. It is alleged that those abuses would distort, alternatively have the potential to distort, the competition on the downstream market in the United Kingdom for the retail provision of fixed-to-mobile calls and text messages to end users. It is said that such distortion would favour the defendant's own services in those downstream markets, and disadvantage or exclude PML's. It is said that that distortion of competition would affect, actually or potentially, trade within the UK or part of it. It is said, accordingly, that O2's refusal to continue connection to the disputed SIMs and disputed Gateways is an abuse of dominant position which is (without prejudice to the burden of proof) incapable of objective justification.
20. By reason of the action threatened in the Notice of Disconnection it is said that PML would suffer loss and damage. The particulars allege loss of profits on business with those customers of PML who are operating the disputed Gateways, and management and administration time and cost attending to those customers of PML who are operating the disputed Gateways.
21. It is further said that the cessation of service to the disputed gateways will be contrary to the public interest, those Gateways being used (amongst others) by two NHS trusts for important patient appointment reminders. At this stage, it is said that PML claims only an injunction to prevent O2 from ceasing the supply of services to the disputed SIMs and disputed Gateways. PML reserves its right to seek permission to amend to include a claim for damages and interest in due course. The only relief claimed at present is an injunction restraining O2 from ceasing the supply of services to the disputed SIMs and disputed Gateways, and costs.
22. By an application notice issued on 17th June 2015 PML seeks interim relief in the form of an order that until further order, O2 is not to suspend or discontinue service to any or all of the SIM cards identified in O2's letter to PML of 5th June 2015.
23. The evidence originally filed in support of the interim injunction application is contained within the first witness statement of Mr. Julian Gallimore, the managing director of PML, dated 17th June 2015, together with exhibit JG1. Evidence in answer from O2 has been served in the form of two witness statements. The first is from Mr. Lawrence Peter Wardle dated 13th July 2015, together with exhibit LPW1. He is the Head of Regulatory Affairs for O2. The second witness statement relied on by O2 is that of Sophie Service, also dated 13th July 2015, together with exhibit SS1. She is O2's Solicitor and Legal Counsel,
24. On the morning of the first hearing of this interim application (which was last Friday, 17th July 2015), I received a second witness statement from Mr. Gallimore dated 16th July 2015, together with exhibit JG2. During the course of this hearing, further documents have been handed up to me from time to time which are not formally in evidence. I had received, and pre-read, written skeleton arguments from the two counsel appearing on this interim application. PML is represented by Mr. James Segan (of counsel). O2 is represented by Mr. Brendan McGurk. Both counsel practice in the specialist field of competition law. Both are experienced in this field and have appeared in a number of relevant cases. I have been considerably assisted by their comprehensive, detailed, and helpful submissions, both written and oral.
25. The matter came on before me at about eleven o'clock last Friday, 17th July due to an earlier matter in my list. Mr. Segan addressed me for about two hours and twenty minutes, both sides of the short adjournment. Mr. McGurk addressed me for about two hours and ten minutes, although he was unable to complete his submissions by the time the court rose at 4.30 last Friday. Mr. McGurk addressed me for a further 30 minutes this morning.
26. As I had anticipated, Mr. Segan had produced amended particulars of claim over the weekend. They were apparently received by email at Mr. McGurk's chambers at about 7.30 this morning, although he had only physically received them at about 8.45 this morning. Mr. Segan began his reply by addressing me for about ten minutes this morning on his application to amend the particulars of claim. That was opposed by Mr. McGurk, who addressed me on the subject for about 15 minutes. Mr. Segan then addressed me for about an hour in reply to Mr. McGurk's substantive submissions; and there was a short rejoinder for about ten minutes from Mr. McGurk on a new document produced by Mr. Segan during the course of his reply.
27. The hearing concluded at about 12.35 when I indicated that, in order to avoid interrupting judgment for lunch, I would adjourn then and sit again at 1.40 to deliver my extemporary judgment. That I am now doing.
28. For PML, Mr. Segan contends that, if implemented, O2's threat to disconnect the disputed SIMs would involve O2 in both a breach of regulation 7 of the RTTE Regulations and an abuse of a dominant position contrary to Chapter II of the Competition Act 1998. He submits that if O2's threat to disconnect is implemented, PML and its customers will suffer harm which could not readily be compensated in damages.
29. By contrast, if O2 is compelled to continue service pending trial, then it will not obviously suffer any loss, but will merely be required to engage in what Mr. Segan invites the court to assume must be profitable business. In any event, any loss is purely financial and could be readily compensated in damages.
30. The balance of convenience is said to favour O2 being required to continue service to the disputed SIMs pending trial. On that basis, PML seeks by this application an interim injunction requiring O2 to continue service to the disputed SIMs pending trial.
31. For O2, Mr. McGurk submits that there is no significant dispute of fact in this case. The dispute is said to be whether those undisputed facts raise any serious issue to be tried in relation to PML's claims under section 18 of the Competition Act 1998 or under the RTTE Regulations. He submits that they do not. He submits that O2 is undoubtedly entitled to disconnect the SIM cards without any breach of competition law. He seeks to demonstrate that in three stages.
32. First, he says that they were being operated contrary to O2's Gateway Policy, and contrary to the agreements by which those SIM cards were supplied by O2 to its re-sale partners, and by those re-sellers to PML.
33. Secondly, he says that PML's claim, and its application for interim relief in support of that claim, is fundamentally misconceived insofar as it contends that PML is seeking access to text termination services when in fact it is plain that it is seeking access to text origination services.
34. Thirdly, it is said that O2 has in fact offered PML access to such services, albeit by means of a cabled line connection rather than connection through its air interface by means of its Gateways. He acknowledges that PML complains that the tariff at which such services are being offered by this alternative means is much more expensive than the tariff under which it has been seeking to connect customers to date. However, he says that PML cannot possibly argue, in the light of clear authority, that it is entitled to be given access to O2's network at a tariff that was designed for individual mobile phone users, as opposed to a tariff that is designed for commercial business users.
35. In oral submissions, Mr. McGurk contended that this case is not about access to the GSM network but about the price to be paid for such access. In those circumstances, Mr. McGurk submits that there is no serious issue to be tried as regards the alleged breach of section 18 of the 1998 Act.
36. As to the alleged breach of the RTTE Regulations, that claim is said to be hopeless in the light of Rose J's decision in the Recall Support Services case. That claim is said to raise no serious issue to be tried either. In any event, it is said that damages would plainly be an adequate remedy for PML. That conclusion is said to flow from the evidence originally submitted by Mr. Gallimore of PML himself.
37. It is appropriate for me, first, to consider the applicable principles of procedural law, and the practice on applications for the grant of interim injunctive relief. As to that, happily, but not surprisingly, there is no real dispute between the parties.
38. Mr. McGurk reminds me that the test to be applied is the familiar test set out in American Cyanamid v Ethicon [1975] AC 396, which states that where an application is made for an interim injunction, the court, in considering whether to exercise its discretion, asks the following questions, and - Mr. McGurk emphasises - in the follow order: (1) is there a serious question to be tried? If the answer to that question is "yes", then two further related questions arise. They are: (2) would damages be an adequate remedy for a party injured by the court's grant of, or its failure to grant, an injunction; and (3) if not, where does the balance of convenience lie? See paragraph 15-7 of Volume 2 of the current (2015) Edition of Civil Procedure (at page 3289). Mr. McGurk emphasises that the balance of convenience only falls to be considered if damages would not be an adequate remedy for the applicant.
39. Mr. Segan accepts that the test for the grant of an interim injunction is the familiar one in American Cyanamid, with the same underlying principles applying whether or not the injunction is properly characterised as prohibitory or mandatory. The basic principle is that the court should take whichever course seems likely to cause the least irremediable prejudice to one party or another.
40. Mr. Segan took me to the observations of Lord Hoffmann, delivering the opinion of the Privy Council, in the case of National Commercial Bank Jamaica Ltd v Olint Corp Ltd [2009] UKPC, reported at [2009] 1 WLR 1405, in particular at paragraphs 16 through to 19. He emphasised that the purpose of an interim injunction is to improve the chances of the court being able to do justice after a determination of the merits at trial. At the interlocutory stage, the court must, therefore, assess whether granting, or withholding, an injunction is more likely to produce a just result.
41. The basic principle is that the court should take whichever course seems likely to cause the least irremediable prejudice to one party or the other. Among the matters which the court may take into account are the prejudice which a claimant may suffer if no injunction is granted, or which the defendant may suffer if it is; the likelihood of such prejudice actually occurring; the extent to which it may be compensated by an award of damages, or enforcement of the cross-undertaking; the likelihood of either party being able to satisfy such an award; and the likelihood that the injunction will turn out to have been wrongly granted or withheld, that is to say the court's opinion of the relative strength of each party's case.
42. Those principles apply to mandatory as well as prohibitory injunctions. In both situations, the underlying principle is the same, namely that the court should take whichever course seems likely to cause the least irremediable prejudice to one party or the other.
43. In exercising its discretion whether to grant an interim injunction, Mr. Segan submits (by reference to Associated British Ports v Transport and General Workers Union [1989] 1 WLR 939) that the court should take into account any relevant public interest considerations. Mr. Segan referred me in particular to observations of Stuart-Smith LJ at page 968 just below letter H: the public interest is clearly an important consideration in evaluating the balance of convenience. He also took me to what Stuart-Smith LJ had to say at page 969 at letter C. Referring to an earlier authority, he had said that that case was no authority for the proposition that, when evaluating the balance of convenience on ordinary American Cyanamid principles, the public interest was not to be taken into account unless the consequences were so extreme that the economic life or health of the nation was at risk.
44. Moreover, by reference to the decision of Mr. Robin Knowles QC in Software Cellular Network v. T-Mobile (UK) Ltd [2007] EWHC 1790 (Ch), Mr. Segan submits that the court should take the view that interim measures to enable a new competitor to enter a market will require stronger justification than measures maintaining the establishment of an already existing competitor. He submits that the measures sought by way of the present application would be one maintaining PML's establishment, pending trial, rather than enabling it to enter the market anew.
45. It is appropriate at this point for me to make certain observations upon the evidence. I do so, however, bearing in mind certain observations of Laddie J in the case of Series 5 Software Limited v Clarke [1996] 1 All E R 853 at page 865. Against letter C, Laddie J said that in his view Lord Diplock in American Cyanamid had not intended to exclude consideration of the strength of the case in most applications for interim relief; what had been intended was that the court should not attempt to resolve difficult issues of fact or law on an application for interlocutory relief. Only if the court was able to come to a view as to the strength of the parties' case on credible evidence should it do so. But, as Laddie J emphasised at page 865 between letters F and G, the court should rarely attempt to resolve complex issues of disputed fact or law. I bear that injunction in mind when making these observations on the evidence.
46. First, I consider the classification of the services provided by PML and the lawfulness of the use of GSM Gateways. At paragraph 5 of the particulars of claim it is said that pending any amendment of the 2003 Wireless Telegraphy Exemption Regulations, the only lawful use of a GSM Gateway without a licence under UK statute is "self-use". Mr. Gallimore addresses this at paragraphs 10 and 7 of his first witness statement. At paragraph 10 he says that the operation of a Single-User Self-Use Gateway is lawful in the sense that it is exempt from the need for a wireless telegraphy licence pursuant to regulation 4 of the 2003 Regulations. Commercial Multi-Use Gateways remain unlawful in the sense that they require a specific licence, which Ofcom has said will never be granted under the Wireless Telegraphy Act 2006. Commercial Single-Use Gateways (or COSUGs) should be permissible in the UK under European law but the 2003 Exemption Regulations have not yet been amended to make them so.
47. It is against that regulatory background that, at paragraph 7 of his first witness statement, Mr. Gallimore says that PML has functioned since the latter part of 2003 in the field of Single-User SU Gateways.
48. In her witness statement, Ms. Service (at paragraph 9) states that COSUGs are, and always have been, legal and could be operated without a licence. She acknowledges that SU Gateways never required a licence and businesses could continue to use them without legal restriction.
49. In saying that COSUGs are, and always have been, legal and could be operated without a licence, Ms. Service is clearly adverting to the decision of Rose J in the Recall Support Services case and, in, particular, to her statement at paragraph 160 where she concluded:

"... that the Commercial Use Restriction is and was a failure by the UK to implement Article 5 of the Authorisation Directive in so far as it applied to COSUGs."

50. There is a dispute in the present case as to whether, as a matter of fact, PML's Gateways should fall to be treated as Self-Use GSM Gateways or as Commercial Single-User GSM Gateways. That issue is addressed at paragraphs 14, 56 to 59, and 62 and 63 of Ms. Service's witness statement and at paragraphs 38 to 41 of Mr. Gallimore's second witness statement. Indeed, much of O2's evidence is directed to that issue.
51. I am not in a position on this interim application to resolve that disputed issue of fact. Happily, I do not need to do so since, as I have just indicated, O2 (through paragraph 9.2 of Ms. Service's witness statement) accepts that the use of both types of gateway is lawful.
52. The second factual issue I must address is the issue of re-seller consent and O2 consent. At paragraph 21 of his first witness statement, echoing the terms of the particulars of claim, Mr. Gallimore says that the 2 Circles and Fidelity contracts both permitted the use of SIMs supplied under those contracts in SU Gateways as long as they were used with the prior written consent of the relevant re-seller. Such consent, Mr. Gallimore asserts, has indeed been obtained from both 2 Circles and Fidelity. He says that both of those two companies knew exactly what PML was doing.
53. Ms. Service takes issue with that at paragraphs 28 and 29 of her witness statement. Mr. Gallimore addresses that evidence at paragraphs 5 to 20 of his second witness statement. Mr. Segan for PML accepts that he cannot point to any single document constituting written consent by either 2 Circles or Fidelity to the use of the SIM cards in PML's GSM Gateways; but he says that it is clear on the evidence that the two re-sellers both knew of the use to which those SIM cards were going to be put. I am satisfied that there is a serious dispute of fact over whether re-seller consent was given to such use of PML's SIM cards, or as to whether the need for such prior written consent was in fact waived by each of the two re-sellers. On that issue there is, I am satisfied, a serious issue to be tried.
54. There is, however, no dispute of fact over the lack of consent from O2. This is asserted at paragraph 32 of Ms. Service's witness statement. At paragraph 31 of his second witness statement, Mr. Gallimore acknowledges that there was an omission by PML or its customers to comply with the GSM Gateway Policy of what he describes as a "purely procedural" nature in failing to register the GSM Gateways with O2. He goes on to reiterate that PML had in fact obtained consent directly from O2's official appointed re-sellers, 2 Circles and Fidelity, who had entered into contracts with PML in full and clear knowledge that its customers would be using GSM Gateways in what is described as the "very modest fashion in which they do", which is said to be well within the technical parameters of O2's Gateway Policy. He also reiterates that PML had not seen a Gateway Policy of O2 relating to SMS text messages until it was forwarded copies by 2 Circles and Fidelity in October 2014.
55. Mr. Segan submits, and I accept, that that lack of consent from O2 is not dispositive of this interim application. That is because the claim for abuse of dominant position arises independently of the issue of re-seller and O2 consent. It is part of PML's case that O2's GSM Gateway policy is itself an abuse of dominant position.
56. The third issue of fact, to which I must briefly allude is that of the basis for O2's objection to PML's provision and use of GSM Gateways. That is addressed at paragraphs 59 and 60 of Mr. Wardle's witness statement. At paragraph 59 he says that should O2 allow a gateway operator to take advantage of the arbitrage opportunity, to which he has already made reference, then that is a likely to compromise the commercial basis for the packages offered to customers and other users as well as adversely impacting on the network and the quality of communication services being provided. He says that what PML is seeking to do is to take an element of the retail offering and to use it in a way for which it was never intended. If O2 is required to permit PML to do that, it is said that it will undermine the basis of the consumer offering.
57. In his second witness statement, at paragraphs 21 to 30, Mr. Gallimore addresses the issue of compliance by PML with the technical parameters of O2's GSM Gateway Policy. It is not possible for me to determine, in the context of this present interim application, whether the use being made by PML of GSM Gateways, or its customers' use of those Gateways supported by PML, is in fact causing any congestion to O2's network. I am satisfied that that raises a serious issue of fact which, if it falls to be resolved at all, can only be resolved at trial.
58. The fourth aspect of the evidence to which I must turn is the relevant market. In this connection it is appropriate to begin with the Software Cellular Network case and with what Mr. Robin Knowles QC had to say at paragraph 8 of his judgment. I quote:

"It is a feature of the way in which mobile telephone services work across different networks that several services are involved. These include the services of access, origination and termination. For present purposes the services of access and origination can be treated as providing a person with the ability to access a network and to originate a call from it. The service of termination can be treated as allowing a call to be terminated on another network, namely that used by the person receiving the call."

Or, I would add, the SMS text message.

59. I turn then to Mr. Wardle's evidence. At paragraph 54, under the heading "Competition Law Issues", he says that Mr. Gallimore's evidence does not contain any credible arguments which support the allegations that O2 is allegedly in a dominant position, and allegedly abusing such dominance. In essence, PML are seeking access, not to be able to terminate calls on O2's network, but access to a network through which to send texts in bulk to mobile users on each of the networks. In short, PML is seeking call origination services, not call termination services. It does not matter on which MNO's network PML originates its texts; its concern is that it has a means of doing so. It has such means either through the air interface provided by the MNOs or through any of the alternative means of access provided by each of the MNOs. O2 is not dominant on the market for call origination services.
60. Later, at paragraph 55.2, Mr. Wardle says that what PML is seeking is not a text termination service but a text origination service whereby it can get its texts on to a network through which it can distribute them in bulk to many mobile phones. There is a wholesale failure by PML to provide any evidence which addresses this issue. PML has not stated what attempts it has made to obtain alternative services from any other MNO. Moreover, it is, of course, a matter for other MNOs as to how they regulate the use of Gateways or their respective networks. Whether PML can originate its texts on other networks via gateways or via cabled lines, it is clear that PML is in no way dependent on O2 for text origination services. Further, PML does not explain why it claims that it can only originate its texts on O2's network, and then only via its Gateways. There is no reason why this should be so.
61. At paragraph 78 Mr. Wardle says that access to voice call termination services was necessary to take advantage of the arbitrage opportunity that existed on each network as a result of the difference in price between an on-net and off-net call that formerly existed. As bundles offered by the MNOs longer make that distinction, it is no longer necessary for gateway operators to seek to obtain call or text services from all MNOs. It can access all those networks so long as it can originate calls and texts on a single network, whether through the air interface or by alternative means.
62. At paragraph 80 he says that the only conclusion to reach is that PML appears to be seeking to access and provide call origination services. At paragraph 83 he says that the real issue here is not about access to call termination services; it is instead about access to call origination text messaging services via the unlimited tariffs that O2 and the other MNOs offer at comparative prices. PML is seeking access to call origination services. Its customers are trying to send bulk texts in the first place. Their concern is not the rate at which those texts have been terminated for on other networks. Given that the issue is one of call origination, not termination, it is apparent that there are no MNO specific markets if what a customer is seeking to obtain is a means of sending text messages in bulk to mobile phones registered with any of the MNOs. PML can clearly obtain origination for that purpose through some or all of Telefonica, EE, Vodafone, Three and so on. Getting one's text messages to end users' mobile phones does not require specific access to O2's network. The relevant product is not O2's SIM cards, and nor is that the relevant market. PML could obtain the same result with SIM cards from any MNO. Mr. Wardle, therefore, cannot see how PML has any arguable case of abuse of dominance where the product sought is a call origination product, and where O2 has offered PML alternative means of enabling it to originate its customers' messages on its network. Ms. Service addresses the issue at paragraphs 66 to 69 in similar terms.
63. Mr. Gallimore seeks to meet these points at paragraphs 42 through to 44 of his second witness statement. There he addresses other possible avenues of supply. He deals with each of the potential alleged alternative avenues of supply in turn. He concludes by saying that it is practically impossible to obtain service from the other MNOs. He says that PML facilitated its customers to enter air time contracts with O2 through its authorised re-sellers, and those re-sellers took the business in full knowledge of the intended use. That use is said to be within the technical parameters of O2's Gateway Policy. It is, in Mr. Gallimore's view, unreasonable for O2 to wish to disconnect the disputed SIMs in those circumstances.
64. In my judgment, what Mr. Gallimore has to say is no answer to the points made by O2 in relation to the nature of the relevant market in the context of the present litigation. I will go on to develop that point more fully when I come to address the issue of the dominance in the market.
65. The fifth evidential issue to which I must give attention is that of damages. I am satisfied on the evidence that, in financial terms, damages are readily calculable by each party. I will address this issue further when I come to consider, as a legal matter, the adequacy of damages as a remedy.
66. Against that evidential background, I turn to consider PML's two alleged causes of action. The first is for breach of the RTTE Regulations and the RTTE Directive. Mr. Gallimore addresses this at paragraph 40 of his first witness statement. He makes the following observations as to the way in which the markets work in practice. He states:

"GSM Gateways, including SMS Gateways, are wireless telegraphy apparatus. They are equipment which conforms to an ETSI standard and which is CE-approved. They are therefore equipment which is also caught by the RTTE Regulations and, in particular, regulation 7. This provides a duty on MNOs to connect this apparatus and to keep it connected to its network."

67. He says that for some reason which has never been explained to PML, either properly or at all, O2 do not believe that regulation 7 actually applies to them in respect of Gateways. PML, of course, acknowledges that if it did not pay for the Gateway services provided by means of a SIM card, then that would be reason to switch PML off, because the connection would no longer have been "lawfully made". In the instant case, however, the only reason for switching off is said to relate to the nature of the apparatus itself, which is precisely what the system of CE marking exists to prevent.
68. If the apparatus is an SU Gateway, it is said that there can be no lawful objection to the manner of its use, and it is, therefore, caught by the exemption in the 2003 Regulations. The MNO has no right to impose conditions which effectively discontinue connection with a piece of apparatus when it is in conformity with the RTTE Regulations.
69. In the light of Ms. Service's admission (in subparagraph 9.2 of her witness statement), it seems to me that the same would apply even if this is COSUGs usage. Ms. Service addresses the issue at paragraphs 70 through to 75 of her witness statement. She does not consider that PML has any valid claim pursuant to the RTTE Regulations, nor does it amount to a serious issue to be tried. She states that it appears to be PML's position that absent any harmful interference such as would justify refusal to connect under the RTTE Regulations, there is a statutory duty upon O2 to connect unauthorised gateway apparatus to its network.
70. She says that PML's position is entirely inconsistent with the decision in Recall, which made clear that regulation 7 of the RTTE Directive (which was implemented by the RTTE Regulations) was not to be interpreted in the way alleged by PML. She cites from paragraph 47 of Rose J's decision in the Recall case:

"I agree with DCMS that the RTTE Directive is not relevant to this case. It is inconsistent with the Authorisation Directive to interpret the RTTE Directive as meaning that any person owning a piece of CE-compliant telecoms equipment has a concurrent right of access to whatever spectrum he needs to operate it himself or to provide a commercial service to others using it unless that right can be restricted on grounds set out in Article 7."

71. As a result, Ms. Service does not consider PML's alleged claim to have any merit whatsoever, or that it raises a serious issue to be tried. She says that O2 had put PML, through its former solicitors, on notice of the fact that it did not consider the RTTE Directive to be relevant to PML's position, and referring them to Rose J's comments in Recall, in a letter of 15th January 2015. She says that PML has not, however, provided any reason or explanation as to why it considers the findings in Recall do not apply in the present case.
72. The issue is addressed at paragraphs 44 through to 48 of Mr. McGurk's skeleton argument. He says that Rose J held in the clearest possible terms that the RTTE Directive did not apply in these circumstances. He says that the issue of principle has been determined to the effect that individuals operating CE-compliant telecommunications equipment cannot rely on the RTTE Directive as a basis on which to contend that they are entitled to access an MNO's network and the spectrum granted to that MNO. He says that there is no serious issue to be tried under the RTTE Regulations. The duty to connect is a duty merely to connect, in the sense of "to put into service", equipment that is CE-compliant. It is not a duty to give the operator of that equipment access to a network. By the same token, he says that O2 is not disconnecting equipment; it is disconnecting services that PML have used in its equipment to connect to O2's network. PML's contention that the only reason for switching off relates to the nature of the apparatus itself is entirely wrong. It is not the nature of the apparatus but the harm it is said to do to O2's network; and even then it is only disconnecting those services insofar as they are sought to be used to connect PML to O2's network view the air interface. O2 has actively offered to continue providing those services by an alternative cabled-line option which, if taken, would have maintained the connection that PML is really concerned about.
73. Mr. Segan addressed this submission in his reply. He acknowledged that the RTTE Regulations are all about apparatus (or "kit"), but PML did not agree that they confer no right to connect to the GSM network. He submitted that they were about the right to connect at the air interface. He accepted that there was a right to disconnect if the connection was not "lawfully made", for example on the grounds of non-payment for use, or on the grounds that communications were being used for illegal content. But, he submitted, the regulation prevented disconnection by reason of the nature of the apparatus itself. He submitted that O2 are proposing to disconnect the Gateways; and they are doing so only because they object to the nature of the apparatus itself.
74. Mr. Segan makes the point that the issue in the Recall case was whether the requirement for a spectrum licence was governed by the RTTE Directive. Rose J held that it was not because it was governed by the Authorisation Directive. But, Mr. Segan submits, that is no such issue here. Here the usage, whether Self-Use or COSUGs use, is lawful without any telecommunications licence.
75. On this issue, I prefer the submissions of O2 to those of PML. As Mr. Segan submits, the right conferred by regulation 7 of the RTTE Regulations is the right to connect telecommunications equipment which meets certain standards at an interface. There is also a right not to have such connection disconnected if lawfully made.
76. In my judgment, that has nothing whatsoever to do with the subsequent use of that equipment. It does not, as Rose J held, give any right of access to the network itself. Mr. Segan himself accepts that there is a right to disconnect if the appropriate tariff is not being paid. Mr. Segan explains that on the basis that such use is not "lawful". What Regulation 7.1(b) provides is for a prohibition against disconnection of any connection at an interface of telecommunications equipment meeting certain requirements which is "lawfully made". It does not purport to give a right to discontinue the connection if the use that is being made of the connection is "unlawful". If I were to construe regulation 7 in the way that Mr. Segan invites me to do, then I have difficulty in seeing that disconnection for non-payment for the use of the interface would not itself also fall within the prohibition in regulation 7.1(b) because it would amount to a disconnection of a connection "lawfully made".
77. In my judgment, Rose J was right to say that regulation 7 does not confer a right of access to the GSM network, merely a right to connect to it. What O2 is threatening to do is to suspend the services to the SIM cards that PML and its customers are using in GSM Gateways. In my judgment, looking at the RTTE Regulation in its context, and against the provisions of the RTTE Directive to which it is intended to give effect, and which (in paragraph 32 of the preamble) draws a clear distinction between the putting of apparatus into service and the provision of the relevant service, the present case does not fall within the prohibition in regulation 7.1(b). In my judgment, there is no serious issue to be tried on the alleged breach of that regulation.
78. I then turn to consider the cause of action for alleged abuse of dominant position. Here it is necessary to begin by considering the relevant market for the purposes of the present case. At paragraph 255 of her decision in the Recall case Rose J stated:

"But the supply of the SIM card is not simply a supply of mobile call termination. The SIM card enables call origination (and termination on that and other networks) at the retail level. There is a complex interrelationship between the upstream and downstream markets that would need to be analysed in this case [the case before her] and the arbitrage opportunity for the GGO arises from the anomalous fact that the retail price for on-net minutes in a SIM card is often cheaper than the wholesale price for terminating those minutes. It is not at all straightforward to say that MNOs are dominant in a market that is the relevant market for the supply of SIM cards and SIM card services."

79. Mr. McGurk submits that the present dispute is about origination services. That is said to be evident from the fact that PML complains about the origination rates charged by O2, the network through which it is seeking to originate its customers' texts. He says that what PML is complaining about is the wholesale access and call origination service market. That is a distinct service with its own distinct market.
80. Access and call origination markets are not MNO specific. There is said to be healthy price competition between MNOs for customers, individual and business, seeking to originate calls and texts on those networks. Customers can choose to originate their calls through one MNO rather than another and in so doing they are not barred in any way from being able to terminate calls on any other network.
81. The relevant markets, according to Mr. McGurk, are thus markets for the origination of call and text services, markets that are not MNO specific. O2 is plainly not dominant in that market. There is no price control in respect of the cost of origination of calls and texts precisely because there is healthy competition in the market, one MNO's origination services being substitutable for others.
82. In the light of the evidence in the case to which I have previously made reference, I am satisfied that the relevant market in the present case is the wholesale provision of access to call and SMS text origination on mobile networks operating and serving customers within the UK market. PML's market is the retail provision of fixed-to-mobile calls and SMS text messages to end users.
83. In my judgment the way in which the case was originally pleaded does not disclose an arguable case of relevant market dominance. O2, by definition, enjoys a dominant position on the market for the termination of mobile telephone calls and SMS text messages on its own network; but, in my judgment, that is not the relevant market for the claim for abuse of a dominant position in the present case.
84. In the circumstances of the present case, there must be a coincidence between the market in which O2 are alleged to be dominant and the alleged abuse of that market. In his reply Mr. Segan sought to challenge that proposition. He submitted that, as a matter of law, there is no strict requirement for the abuse to take place in the same market as that in which the dominance is alleged. In support of that submission, he referred me to guidelines on the abuse of a dominant position which had been issued in December 2004 by the Office of Fair Trading, and which had been adopted subsequently by the Competition and Markets Authority. He took me to paragraph 5.7, headed "Abuse in Related Markets". That paragraph states:

".... the Chapter II prohibition implies two tests: whether an undertaking is dominant, and whether it is abusing that dominant position. It is not necessary to show that the abuse was committed in the market which the undertaking dominates. In certain circumstances, Article 82 and the Chapter II prohibition may apply where an undertaking that is dominant in one market commits an abuse in a different but closely associated market. This principle was set out by the European Court in the case of Tetra Pak II."

The marginal note reveals:

"In this case the European Court found that Tetra Pak's activities in relation to the markets in non-aseptic machines and cartons constituted an abuse of its dominant position in the distinct, but closely associated, markets for aseptic machines and cartons intended for the packaging of liquid foods."

85. By analogy, Mr. Segan submits that the origination market is closely associated to the termination market. Mr. Segan also emphasised, as a separate argument, the finding of Ofcom in its investigation of a complaint from Floe Telecom against Vodafone on 28th June 2005 (at paragraph 393) that by suspending SIMs used by Floe, Vodafone was implicitly declining to provide mobile termination at wholesale on-net rates.
86. I am not satisfied that that finding has any relevance for the purpose of ascertaining the relevant market for the purposes of the present case. Here, I am entirely satisfied that O2's necessary dominance in the market for the termination of mobile telephone calls and SMS text messages on its own network has no relevance for the form of abuse which is being alleged in the present case, which is abuse in affording access and call origination services rather than termination services. The Ofcom statement must be read in the context of the facts and issues that fell to be determined on its investigation into the complaint from Floe Telecom against Vodafone. I am entirely satisfied that here the relevant market is not the termination of mobile telephone calls and SMS text messages on the O2 network, but the origination of calls on the GSM network generally. As presently pleaded, I am satisfied that there is no arguable case of market dominance; and thus the issue of abuse of a dominant position does not arise.
87. During the course of his submissions, Mr. Segan sought to identify other possible relevant markets. One was the market restricted to MNOs who permitted Gateways on their network. The first objection to that analysis is that it was not then pleaded. But it seems to me that there is a more fundamental objection to that analysis which is that the whole thrust of the evidence, and the entire thrust of PML's case, is that O2 does not allow Gateways on its network and will seek to disconnect them when it finds them - disconnect in the sense of terminating access to the network. Therefore, it seems to me that that cannot be a relevant market.
88. The other market which was identified, but not then pleaded, was what I have found to be the true relevant market, which is the market for the origination of mobile voice call and SMS text message services in the United Kingdom. As to that, Mr. Segan placed reliance upon what was said by Mr. Knowles in the Software Cellular Network case. There, T-Mobile was alleging that the economically meaningful market was the UK mobile telephone market, or the call origination market in the United Kingdom. At paragraph 21 Mr. Knowles said that if that definition were used, it was, to his mind, seriously arguable that a percentage somewhere between 22% and 30% might be sufficient to create dominance in a market defined so widely and of that nature. He was very reluctant to accept that percentages taken from other cases, being examples confined to the disputes that happened to have been fought, and from varying years, should be treated as a ceiling for what was seriously arguable and what was not. He also noted a passage in one academic authority cited to him that had added a rider that there was no presumption that a market share below 30% offered a safe harbour.
89. Mr. Segan emphasised that statement because during the course of his submissions last Friday, he had produced a document according to which O2 had a market share of 32.72%, and thus in excess of 30%. It is, of course, considerably in excess of the relevant percentage enjoyed by T-Mobile in the Software Cellular Network case which was said by Mr. Knowles to give rise to a seriously arguable case of market dominance. That submission had not been foreshadowed in PML's pleaded case, nor in its evidence.
90. In responding to the application to amend the particulars of claim, to which I will come in a moment, Mr. McGurk took me to a review of competition in the mobile access and call origination services market which had been undertaken by Oftel in 2003. Both in the original consultation document dated 11th April 2003 and in an explanatory statement and notification dated 4th August 2003 Oftel had expressed the view that in then current market conditions no mobile network operator, either by itself or jointly, had "significant market power" in the wholesale mobile phone access and call origination market in the UK.
91. Mr. Segan pointed out that that material had in fact been considered by Mr. Knowles in his judgment in the Software Cellular Network case. His conclusion had been that, having regard to the date and the context of those decisions, and in the light of current circumstances, he was not persuaded that those decisions deprived the applicant in the case before him of a seriously arguable case four years later. The decision was said to address the wholesale market almost six years previously. Mr. Segan therefore submitted that the papers relied upon by Mr. McGurk were of limited assistance in the present case and that the court should follow the approach of Mr. Knowles in the Software Cellular Network case.
92. The difficulty with that submission is that it is not the way in which the dominant market has been pleaded in the particulars of claim. The court should be extremely wary of allowing an applicant for interim injunctive relief to set up an entirely different case in one material aspect of its claim when the respondent has succeeded in resisting the basis upon which the claim has originally been advanced.
93. Mr. Segan sought over the weekend to address the failure to plead what I find to be the relevant market for present purposes, which is the market for the origination of mobile voice call and SMS text message origination services in the United Kingdom, by producing amended particulars of claim. He invited the court, if not to give permission to amend at this stage, at least to take account of that amended pleading in the exercise of the court's discretion to grant interim injunctive relief. Mr. Segan made the point that the amendment was being made at a very early stage in the proceedings, before any defence had been served, and that PML was prepared to extend time for service of the defence to accommodate the proposed amended particulars of claim. He made the point that the amendment was made in response to O2's case. It raised a claim for abuse of a dominant position in a market which was said to be well arguable. Echoing what the court had said last Friday, Mr. Segan submitted that it would be undesirable to dispose of this interim application without reference to the amended paragraph 19A when the court knows that an application will be made to amend to include a paragraph in those terms. The court should, therefore, take the amended pleading into account when deciding whether there was a serious issue to be tried.
94. Mr. McGurk this morning rejected the application to amend, or to treat the amended case as being before the court for the purposes of this interim injunction application. He drew my attention to an exchange of correspondence between O2 and the solicitors then acting for PML, Matthew Arnold & Baldwin, in November 2014. In a letter of 14th November 2014, O2 had noted that PML was asserting that if it suspended the SIM cards, O2 would be abusing its alleged dominant position. It was said still not to be clear as to O2 why PML considered that dominance in the mobile call text termination market was relevant when that market related to receiving calls and texts rather than making them, as PML's customers were said to be doing. Nor did O2 understand PML's arguments concerning any alleged abuse of dominant position in the call origination market. One of the specific questions asked was whether PML considered that O2 would be in abuse of the call termination market, one which was said to relate wholly to the receipt of texts and calls on the network. PML was invited to explain its arguments regarding O2's alleged abuse of dominance in the call origination market, and why PML did not consider that it was able to obtain call origination services from providers other than O2.
95. Matthew Arnold & Baldwin's response of 21st November was in terms that the market in which it was alleged that O2 had dominance was that relating to who was permitted to connect to the O2 network. The allegation was not that O2 had been in a dominant position in respect of a general call origination market and it never had been. There was said to be no argument that O2 was abusing the call origination market; the market in which the abuse was occurring was a different one.
96. Mr. McGurk submitted that the relevance of the call origination market had been canvassed some seven to eight months ago, yet it was only today that the potential relevance of that market was raised for the first time, notwithstanding the particulars of claim that had been served on 1st July which made it clear that the relevant market was said to be the call termination market. Mr. McGurk submitted that there was a disjunction between the market pleaded and the abuse pleaded. He was in no position to deal with the matter today. Had O2 known that the call origination market was the market alleged to be relevant, then it would have wanted to have gathered a lot of further evidence into its alleged dominance in that market and alleged market abuse.
97. The pleading had been directed exclusively to the call and SMS text termination markets. O2 had been deprived of any opportunity to show that there was no market dominance, or arguable market dominance, in the call origination market. It was not possible, with only effectively an hour's notice, for Mr. McGurk to take proper instructions, particularly since the relevant source of Mr. McGurk's instructions, Ms. Service, was presently overseas in Italy. He says that he would have wanted to do a search of Ofcom's archive, and to have discussed the matter with relevant officials at Ofcom. This was absurdly late notice, and it was not fair for O2 to be required to deal with the matter.
98. I have to bear in mind, when considering whether I should have regard to the proposed amended particulars of claim, the overriding objective of enabling the court to deal with cases justly and at proportionate cost. That overriding objective includes, so far as is practicable, ensuring that the parties are on an equal footing, amongst other things. I am required to further the overriding objective by active case management which, by CPR 1.4(2)(i), involves dealing with as many aspects of the case as the court can on the same occasion. It does seem to me that any prejudice to O2 can be addressed in two ways: The first is by the court's exercise of its discretion as to costs. The second is by including express provision in any interim injunction order that O2 should be entitled to apply to discharge any injunction on application, supported by evidence as to there being no seriously arguable issue of alleged abuse of dominant position in the call origination market.
99. It would be undesirable for me to refuse interim injunctive relief, if PML is otherwise entitled to it, simply on the footing that this point has been raised at such a late stage, particularly since it has been addressed in argument, albeit on the evidence presently before the court (which is not directly addressing this issue of alleged abuse of dominant position in the call origination market). However, I am satisfied that I should follow the approach of Mr. Knowles and to treat PML as having raised a seriously arguable case under paragraph 19A(c) of its proposed amended particulars of claim, but not otherwise. I am satisfied on the evidence that PML has raised an arguable case of abuse of dominant position as so understood. In that context, I note that there was no serious challenge to the particulars of alleged abuse of dominant position at paragraphs (a), (b) and (c) of paragraph 21 of the original particulars of claim.
100. At paragraph 35(b) of his skeleton argument, Mr. McGurk submitted that even if O2 were dominant in the relevant market, which at that stage was the text origination market, disconnecting these SIM cards would be objectively justified on three bases. First, that O2 was entitled to protect the capacity and integrity of its network from the harm the Gateways caused. In my review and observations on the evidence, I have already indicated that the issue of the integrity of the network gives rise to triable issues of fact as to which I am satisfied that there is at least an arguable case for the applicant. On this aspect of the case, I accept the submissions of Mr. Segan in reply. There is no sufficient evidence before the court to enable the court to say that a case of objective justification, on the basis of protecting the capacity and integrity of the network, has been made out.
101. The second basis of objective justification is said to be that O2 has offered PML an alternative means of connecting its customers to O2's network, and has offered to migrate its service provision in a phased and transparent way. I accept Mr. Segan's submission that such an alternative service is being offered at a considerably greater cost. There is a serious issue to be tried in relation to this matter.
102. Third, it is said that O2 is entitled to configure its tariffs and to sell its SIM card services at a price that is appropriate to the use that is sought to be made of O2's network. In support of that submission reliance is placed upon paragraph 143 of Rose J' judgment in the Recall case where she said that an MNO was entitled to change the bundles on the SIM cards either to prevent the kind of use that the GGOs were making of the MNO's network or to render that use sufficiently profitable. However, as Mr. Segan pointed out in reply, that statement was subject to the qualification that it was subject to any other regulatory or competition law constraints. What Rose J had to say there must be read in conjunction with what she had to say later (at paragraph 256) that if the GGOs could establish that the MNOs were dominant, they would then need to show that refusal to supply was an abuse. She said that she could see that there would be various interesting legal issues to be resolved on that point, including whether that constituted a cessation of supply to an existing customer or a new customer, whether the obligation of a dominant firm extended to maintaining a price differential on which the downstream customers' business was based, or whether the problems of congestion on the MNOs networks amounted to an objective justification for conduct that would otherwise be abusive or, conversely, whether the MNOs were under some duty to invest to accommodate the extra traffic.
103. It seems to me that Rose J was there recognising that there were triable issues on those points which would fall for investigation at trial in a suitable future case. In my judgment, that is the position in the present case. I am satisfied that provided an arguable case of dominance on the relevant market has been raised, that the issues of abuse and its objective justification raise triable issues of fact and of law that cannot be resolved in the context of an interim injunction application. I am satisfied that a serious issue for trial has been made out, albeit only by reference to PML's amended particulars of claim.
104. I then go on to consider the balance of convenience. On that it seems to me that, in financial terms, the damages to be suffered by either the grant or the refusal of interim injunctive relief are calculable as a matter of arithmetic. However, I am not satisfied that damages would be an adequate remedy for PML, for the reasons advanced by Mr. Segan in the course of his reply. If the SIM cards are discontinued, then on the evidence PML will lose between an eighth and a quarter of its income overnight, or at least as soon as the SIM cards are discontinued. On the evidence of Mr. Gallimore, which in my judgment has been adequately supplemented in his second witness statement, there will be an immediate effect upon PML's business. It will, on the evidence, have to lay off certain of its employees. It will lose customer connection.
105. Mr. McGurk submits that PML has not adequately addressed in its evidence the availability of the alternative solution through a cabled connection that has been offered by O2. He submits that there is no evidence that PML cannot pay the commercial tariff now, or that it will suffer irremediable, or uncompensatable, harm if it is required to do so.
106. I am satisfied that PML's evidence, when read as a whole, does show that its business will suffer in a way that may be incapable of being adequately compensated by an award of damages if use of the SIM cards is immediately turned off. PML will effectively be forced either to suffer a loss of customers or to accept an alternative, and considerably more expensive, commercial solution.
107. Mr. McGurk's most powerful point, it seems to me, is that if irreparable harm will be caused to the structure and profitability of PML's business by the threatened switch off, it is difficult to see how PML will be able to satisfy any claim for damages on its cross-undertaking if O2 eventually succeeds at trial.
108. In my judgment, Mr. Segan in his reply did supply the answers to that point. According to O2's evidence, it will suffer a loss of between £20,000 and £25,000 a month as the difference between the present tariffs and that proposed under its alternative solution: see paragraph 80 of Ms. Service's witness statement. However, to recover damages at this level, Mr. Segan makes the point that O2 will have to satisfy the court that it would have recovered the whole of PML's business if interim injunctive relief were refused. It may be that that business would go to some other MNO.
109. More substantially perhaps, Mr. Segan makes the point that there is a difference between requiring PML to make immediate payment at the considerably higher rates proposed by O2's alternative cabled solution and PML's ability to pay damages if a trial of its claim fails and it is ordered, on an inquiry as to damages, to pay compensation to O2. As Mr. Segan submitted, there is a huge difference between suffering a revenue loss overnight and finding a sum assessed by the court on an enquiry as to damages after due court process.
110. Mr. McGurk pointed to the financial position disclosed by PML's accounts. The accounts in evidence before me are the unaudited accounts for the year ended 31st March 2014. No more up to date management accounts have been produced. The balance sheet discloses shareholders' funds of just over £170,000, although net current liabilities amount to just over £34,000, an increase from £20,600 the previous year. The profit and loss account shows an operating profit of just over £69,700, up from £39,800 the previous year.
111. On instructions, Mr. Segan told me that there is a holding company which owns its own building. There is no evidence as to that, and there is no evidence as to the financial position of the parent company. I am concerned about the financial position of the claimant. It seems to me that if PML is to obtain interim injunctive relief, then its cross-undertaking in damages should be fortified by a similar cross undertaking from Mr. Gallimore, the claimant's managing director and one of the two members of the board with (I assume) his wife.
112. I am satisfied that, looking at the other side of the coin, the only potential damage to O2 will be entirely financial, and capable of quantification in money terms. By reference to the scale of O2's business, the impact of the refusal of interim injunctive relief will be much less substantial than the effect upon PML if interim injunctive relief were to be withheld.
113. Standing back and applying the test identified by Lord Hoffmann in the National Commercial Bank case, what course is likely to cause the least irremediable prejudice to the two parties before the court? It seems to me that the course that is likely to cause the least irremediable prejudice is that which involves maintenance of the present status quo, which is granting an interim injunction to restrain the discontinuation of service to the disputed SIM cards.
114. However, such injunction should issue subject to the express provision that O2 should be entitled to apply to discharge, with evidence relevant to the question of abuse of dominant position in the call and SMS text origination markets; and PML's cross-undertaking in damages should be fortified by a personal cross undertaking from Mr. Gallimore.
115. That is the conclusion of my judgment.
116. (Further discussions ensued)
117. Having delivered a somewhat over lengthy extemporary judgment, I now inevitably have to address the issue of costs. For the successful applicant, Mr. Segan submits that 50% of the costs should be awarded to the claimant, to reflect the fact that it has been successful in obtaining the interim injunctive relief sought, and 50% of the costs should be costs in the case.
118. Mr. McGurk submits that the respondent was successful on the RTTE Regulation issue and, until receipt of the proposed amended particulars of claim at about 7.30 this morning, it would have been successful on the abuse of dominant position claim and would, therefore, have succeeded altogether in resisting the grant of any interim injunctive relief. On that basis, Mr. McGurk submits that the respondent should be entitled to 50% of its costs to reflect its success on the RTTE Regulation issue, and that it should also recover the balance of 50% of the costs and that such latter costs should be assessed on the indemnity basis. He also asked for an interim payment on account.
119. In reply, Mr. Segan submitted that only a small discount should be allowed to reflect the applicant's lack of success on the RTTE regulation point, which did not feature substantially, or at least as substantially as the claim for abuse of dominant position, on this application. He says that the RTTE regulation point was, by comparison, a relatively short one. If the court is not minded to accede to Mr. Segan's original submission on the issue of costs, then the court should order costs in the case.
120. I, of course, have to apply the principles as to costs in CPR 44.2. Normally the successful party is entitled to its costs, but the court may always make some other order. It should also have regard to whether the successful party has succeeded on all aspects of its case, and to matters of conduct.
121. The claimant is fortunate that I have acceded to its claim for interim injunctive relief in the light of the way in which the claim had originally been formulated. I have already referred to correspondence between the parties' solicitors in November of last year in which the respondent had invited the claimant to consider the relevant market, and where the claimant's then solicitors had discounted reliance upon the call origination market, which I have found to be the arguably relevant market, to the exclusion of others.
122. It is only as a result of the amended particulars of claim, sent by email at about 7.30 this morning, that the applicant has succeeded in obtaining interim injunctive relief at all. Had this claim been concluded within the day at which it was estimated last Friday, then the claimant is likely to have been unsuccessful because there were then no amended particulars of claim to put before the court.
123. A respondent to an application is entitled to approach an application on the footing that it is being advanced on the basis of the case then pleaded. If a substantial amendment is made to the case which renders arguable that which was not previously so, then that should be reflected in the court's order as to costs. However, I must bear in mind the extent to which the respondent has succeeded on the adequacy of damages and the balance of convenience. But set against that is the fact that it has failed in demonstrating the arguability of its arguments in reliance on the RTTE Regulations.
124. At the end of the day the matter is essentially one for the discretion of the judge, who has spent almost two full days now hearing an interim application that was estimated at one day. In my judgment, the just outcome to this case is that the respondent should be entitled to half its costs of the application, and that the balance of the costs should be costs in the case generally. It would not be appropriate to order an assessment of any part of the costs on the indemnity basis since there is nothing in the applicant's conduct that takes this case outside the normal run of cases, beyond the fact that it has indicated an intention to apply to amend its case at a very late stage. That is not conduct that justifies an award of indemnity costs; and, in any event, it has been reflected in my award to the respondent of 50% of the costs of the application.
125. The order is that the applicant will pay the respondent 50% of the costs of the application, to be assessed if not agreed on the standard basis, and that the balance of the costs will be costs in the case generally.