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England and Wales Court of Appeal (Civil Division) Decisions
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Cite as:  CP Rep 26,  EWCA Civ 272
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ON APPEAL FROM THE HIGH COURT (CHANCERY DIVISION)
THE HONOURABLE MR JUSTICE BARLING
Strand, London, WC2A 2LL
B e f o r e :
LADY JUSTICE KING
LORD JUSTICE SALES
| Mastercard Inc & Others
|- and -
|Deutsche Bahn AG & Others
Kieron Beal QC, Tristan Jones and Eesvan Krishnan (instructed by Hausfeld & Co LLP) for the Respondents
Hearing date: 22 March 2017
Crown Copyright ©
Lord Justice Sales:
The MasterCard scheme
The Central Acquiring Rule ("the CAR")
The European Commission's decision.
i) The first, second and third defendants were representatives of an "association of undertakings" and consequently their decisions were capable of falling within Article 81 of the EC Treaty (now Article 101 TFEU).
ii) The MasterCard scheme could operate without any MIF.
iii) The EEA MIF restricted competition between acquiring banks by setting a floor under the MSC that acquiring banks charge to merchants, thereby inflating the MSC.
iv) The first, second and third defendants were therefore in breach of Article 81(1) of the EC Treaty (now Article 101(1) TFEU) by reason of the EEA MIFs in place between 1992 and December 2007.
v) The first, second and third defendants had failed to produce satisfactory evidence that the levels of the EEA MIF met the conditions for exemption under what is now Article 101(3) TFEU.
vi) MasterCard was entitled to set an EEA MIF at a level which met those conditions for exemption.
vii) The Decision required MasterCard to repeal the then current EEA MIF within six months.
i) that MasterCard's rules prevent retailers in a high MIF country from benefiting from lower MIFs offered by an acquiring bank in another state, thereby limiting competition between acquirers, and leading to higher prices for retailers and consumers. This concern appears to be, at least in part, directed at the CAR;
ii) that the high levels of international MIFs are not justified, thereby leading to higher prices for retailers and consumers.
The existing claims
First, claims for damages in respect of the EEA MIF. These comprise:
i) EEA MIFs paid between May 1992 and December 2007, which the claimants contend were excessive and unlawful, and resulted in them paying higher MSCs than they would otherwise have done. This head is a follow-on claim, based directly on the Decision;
ii) EEA MIFs paid since December 2007 which the claimants contend were also excessive and unlawful, and resulted in them paying higher MSCs than they otherwise would have done. This head of claim relies upon the Decision by analogy.
The second category relates to claims for damages in respect of MIFs applied domestically:
iii) In countries where the EEA MIF was applied in the absence of a domestic MIF or a bilaterally agreed fee. In respect of these claims, the claimants rely principally on findings in the Decision;
iv) In countries where the relevant domestic fee was set either bilaterally or in the form of a domestic MIF set by MasterCard licensees. The claimants argue that these fees were inflated by the EEA MIF. These claims, too, rely principally on findings in the Decision. Also, so far as transactions in Hungary are concerned, reliance is placed on the findings of the Hungarian competition authority.
v) In countries where the relevant domestic MIF was set by MasterCard. These claims are stand-alone claims, save in respect of transactions in Italy, in respect of which the claimants rely on the findings of the Italian competition authority.
Thirdly, and finally, damages are claimed for so-called "on us" payments. These are payments in circumstances where the acquiring bank was the same bank as the issuing bank, so that no MIF was payable. The claimants contend that MSCs relating to such payments were inflated because the defendants' infringements led to a lack of competition in the acquiring market.
The proposed amendment
"56. Under the MasterCard network rules forming part of the MasterCard MIF, a bank which acquires transactions outside of its Member State of establishment (i.e. a bank located in Country A which offers its services to a merchant transacting in Country B) is called a 'Central Acquirer'. The MasterCard network rules provide that, in the absence of bilateral agreement between a Central Acquirer and the relevant issuing bank, the interchange fee payable by a Central Acquirer for an intra-country transaction is the domestic fall-back interchange fee (if there is one) of the Member State of the transaction. Thus, a Central Acquirer is not permitted to choose to acquire intra-country transactions at the potentially lower rate set by the EEA fall-back interchange fee (the 'Central Acquiring Rule')."
"70. Further or alternatively, the object and/or effect of the Central Acquiring Rule was and is to restrict competition in the relevant product and geographic markets:
70.1 Acquirers (including Central Acquirers) may deviate from the domestic fall-back interchange fee of the Member State of the transaction by bilateral agreement. However, issuing banks would have no or little incentive to agree to bilateral rates lower than the applicable fall-back interchange fee;
70.2 Central Acquirers are prevented or hindered from offering their services in other Member States at prices reflecting the applicable EEA interchange fee;
70.3 Absent the Central Acquiring Rule, domestic acquiring banks would have an incentive to establish themselves in other countries in order to be competitive with existing central acquirers offering MSC rates based on lower interchange fees. Merchants engaging a Central Acquirer would pay an MSC based on the EEA fall-back interchange fee, rather than the domestic interchange fee in their country of operation;
70.4 The Central Acquiring Rule thus artificially partitions the EU into separate national markets by limiting the entry and price competition from Central Acquirers;
70.5 The absence of effective competitive constraints from Central Acquirers reduces the competitive constraints on, and thus inflates, domestic interchange fees (whether bilaterally or multilaterally agreed, or set by MasterCard)."
"40. I have already referred to the admitted fact that, as pleaded, the new claim is different from any of the existing ones. To a greater or lesser extent the latter all rely upon the Decision and an allegation that the application or existence of the EEA MIF directly or indirectly constitutes a restriction on competition. Similarly, insofar as the CAR is relied upon in the original claim, it is to underscore the fact that in certain countries the EEA MIF "automatically applied" when central acquirers were seeking transactions outside their member states of establishment, with the result that the EEA MIF constituted a "floor" to the MSCs, which central acquirers could offer to merchants in other countries (see paragraph 54.4.2 of the original particulars of claim). Thus, in the existing claim the CAR is relied upon as the mechanism by means of which the EEA MIF is applied. That MIF is the essential subject of the complaint.
41. Contrast the proposed new claim. There, the existing claim is, on the face of it, turned on its head. In paragraph 70 of APOC, the CAR itself is alleged to be a restriction on competition by object and/or effect, not because it applies the EEA MIF, but essentially because it prevents the application of that MIF. Thus, the new claim focuses on a different aspect of the CAR – namely, that part of the rule which deals with the situation of the central acquirer where there is either a relevant bilateral arrangement or a domestic MIF. The existing pleading does not, as far as I can see, expressly complain of the EEA MIF being excluded.
42. It seems odd, in one part of a pleading, to complain of the application of a particular MIF and, in another part, to complain of the non-application of that MIF. The explanation may be that the EEA MIF was at one point, namely after the adoption of the Decision, fixed at zero and at some other points in time, it may have been lower than the bilateral or domestic MIFs in one or more of the 18 or so countries involved in these claims. Whether this is the reason for the apparent paradox is speculation, as no explanation has been given in the pleadings. In any event, the reason may not matter. The issue for me is whether the test discussed earlier is satisfied, so that the amendment may be permitted.
"(1) For the purposes of this Act, any new claim made in the course of any action shall be deemed to be a separate action and to have been commenced-
(a) in the case of a new claim made in or by way of third party proceedings, on the date on which those proceedings were commenced; and.
(b) in the case of any other new claim, on the same date as the original action.
(2) In this section a new claim means any claim by way of set-off or counterclaim, and any claim involving either-
(a) the addition or substitution of a new cause of action; …
(3) Except as provided by section 33 of this Act or by rules of court, neither the High Court nor any county court shall allow a new claim within subsection (1)(b) above, other than an original set-off or counterclaim, to be made in the course of any action after the expiry of any time limit under this Act which would affect a new action to enforce that claim.
(4) Rules of court may provide for allowing a new claim to which subsection (3) above applies to be made as there mentioned, but only if the conditions specified in subsection (5) below are satisfied, and subject to any further restrictions the rules may impose.
(5) The conditions referred to in subsection (4) above are the following-
(a) in the case of a claim involving a new cause of action, if the new cause of action arises out of the same facts or substantially the same facts as are already in issue on any claim previously made in the original action; ..."
"(1) This rule applies where –
(a) a party applies to amend his statement of case in one of the ways mentioned in this rule; and
(b) a period of limitation has expired under –
(i) the Limitation Act 1980;
(ii) the Foreign Limitation Periods Act 1984; or
(iii) any other enactment which allows such an amendment, or under which such an amendment is allowed.
(2) The court may allow an amendment whose effect will be to add or substitute a new claim, but only if the new claim arises out of the same facts or substantially the same facts as a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings.
First basis of decision: the claimants' original pleading in its particulars of claim
"If a new claim is permitted by way of amendment it is treated as having been made by way of a separate action commenced on the same date as the original action. So where an amendment is permitted to introduce a new claim which was in time at the date of commencement of the action but arguably out of time on the date on which permission to amend is granted, the defendant is thereafter precluded from reliance at trial on the arguable limitation defence."
"34. Helpful guidance as to the proper approach to the resolution of this question was given by Colman J in BP Plc v Aon Ltd  1 Lloyds Rep 549, 558 where he said:
'52. At first instance in Goode v Martin  3 All ER 562 I considered the purpose of section 35(5) in the following passage: 'Whether one factual basis is 'substantially the same' as another factual basis obviously involves a value judgment, but the relevant criteria must clearly have regard to the main purpose for which the qualification to the power to give permission to amend is introduced. That purpose is to avoid placing a defendant in the position where if the amendment is allowed he will be obliged after expiration of the limitation period to investigate facts and obtain evidence of matters which are completely outside the ambit of, and unrelated to those facts which he could reasonably be assumed to have investigated for the purpose of defending the unamended claim.
53. In Lloyds Bank Plc v Rogers  TLR 154 Hobhouse LJ said of section 35: 'The policy of the section was that, if factual issues were in any event going to be litigated between the parties, the parties should be able to rely on any cause of action which substantially arises from those facts.'
54. The substance of the purpose of the exception in subsection (5) is thus based on the assumption that the party against whom the proposed amendment is directed will not be prejudiced because that party will, for the purposes of the pre-existing matters [in] issue, already have had to investigate the same or substantially the same facts.'
35. In the Welsh Development Agency case  1 WLR 1409 Glidewell LJ said, in an often quoted passage at p 1418, that whether or not a new cause of action arises out of substantially the same facts as those already pleaded is substantially a matter of impression.
36. Less well known perhaps is the cautionary note added by Millett LJ in the Paragon Finance case  1 All ER 400, 418, where he said, after citing the passage from Glidewell LJ to which I have just referred: 'In borderline cases this may be so. In others it must be a question of analysis.
37. I would also point out, as did Briggs LJ in the course of the argument, that 'the same or substantially the same' is not synonymous with 'similar'. The word 'similar' is often used in this context, but it should not be regarded as anything more than a convenient shorthand. It may serve to divert attention from the appropriate inquiry."
"The 1998 Act, however, does in my judgment alter the position. I can detect no sound policy reason why the claimant should not add to her claim, in the present action, the alternative plea which she now proposes. No new facts are being introduced: she merely wants to say that if the defendant succeeds in establishing his version of the facts, she will still win because those facts too show that he was negligent and should pay her compensation."
Second basis of decision: reliance on the claimants' pleaded reply
"46. … IML does not need to rely, and indeed does not seek to rely, on the failure to obtain permission, to establish the chain of causation of that loss of a chance. It is Coudert who want to reduce the value of the chance, by asserting they failed to do something which would have lowered the chance. Is there a principle which disallows a defendant from relying on a wrong which he has committed in order to reduce the damages that would otherwise flow from a tort or breach of contract? It seems to me that there should be such a principle, and that is what Lord Brown Wilkinson was recognising. It is quite difficult to say why it should be so, other than that it flows from public policy where it is a principle that a person should not be entitled to rely on their own wrong in order to secure a benefit. It is furthermore not unfair to apply such a principle. Damages would flow from the original act of negligence; why should Coudert be allowed to rely on a further act of negligence to reduce that damage?
47. Furthermore I am not sure it is right to categorise allowing IML to stop Coudert relying on their own negligence, as providing IML with a claim which is statute barred. IML are not seeking to recover damages for the failure to secure anti-monopoly permission, they are simply seeking to prevent Coudert breaking the chain of causation of the damages, which flow directly from the loss of a chance which they should have provided to IML. That is something surely they are entitled to do by way of reply as they have pleaded in this case."
" …. if (out of an abundance of caution) IML had sought leave to amend their particulars of claim prior to this trial, limited to asserting simply what they were already asserting in their reply, it seems to me that they should have got leave either on the basis that they were not pleading a new cause of action and thus did not need the assistance of CPR 17.4(2), or on the basis of CPR 17.4(2) as interpreted by Goode v Martin."
" … I take issue, with respect, only with what my Lord has said as to the alternative possibility that in order to rely in this context on what is said to be Coudert's own fault as regards the anti-monopoly point, IML might properly be allowed to amend their particulars of claim. In my opinion IML's case on causation in this respect properly arises, and only arises, by way of reply to Coudert's denial of causation: and of course that is exactly how the matter was in fact pleaded. Any amendment to the particulars to rely on Coudert's own fault in relation to the anti-monopoly point, if that were sought, could only have as its proper purpose a broadening of the front on which IML were putting their case as a matter of primary claim, not response to the defence. I would not have allowed any such amendment at this late stage in the proceedings. I acknowledge that my Lord's own view is that such an amendment is in fact unnecessary to raise the point being taken as to causation. But I should add that on the view I take, with respect nothing I think is owed to this court's decision in Goode v Martin  EWCA Civ 1899."
Relevant time for the purposes of limitation
Lady Justice King:
Lady Justice Arden: