The Court of Appeal dismissed an appeal by the National House Building Council, and allowed a cross-appeal by the Monopolies and Mergers Commission and the Secretary of State for Trade and Industry, from the decision of Mr Justice Auld, in October 1992, refusing the NHBC's application for judicial review of a report by the MMC.
The NHBC had since the 1930s operated a scheme, now known as Buildmark, for the registration of builders, the certification of completed houses and the provision of warranty cover to purchasers. Under rule 12 of the NHBC rules, registered builders or developers in certain circumstances 'must' and in other circumstances 'may' apply to NHBC for inspection of building work, and under rule 14 then became liable to pay inspection and insurance charges.
Until recently, NHBC had been the only provider of structural warranty services in the UK. Following the Building Act 1984, some local authorities approached Municipal Mutual Insurance Ltd to produce another scheme. In 1989, they introduced one called 'Foundation 15', closely modelled on the NHBC's Buildmark scheme.
They complained to the Office of Fair Trading that the effect of rule 12 of the NHBC rules made it difficult for Foundation 15 to establish itself as a competitor to the NHBC on any viable commercial basis. The matter was referred to the MMC, who concluded that, in the supply of structural warranty services, a 'monopoly situation' existed in favour of NHBC, and that, although NHBC did not adopt rule 12 deliberately to exploit or maintain the monopoly situation, nevertheless, in its content and implementation rule 12 constituted an 'action, on NHBC's part, which is attributable to the existence of the monopoly situation'.
Rule 12 operated against the public interest, because builders registered with NHBC were inhibited from using the warranty services of a competitor, 'the rule having the effect of preventing without financial penalty dual sourcing and the sampling of alternative schemes'. The MMC therefore recommended amending rule 12 to allow builders registered with NHBC to source warranties from another 'broadly comparable' scheme, such as Foundation 15.
Anthony Lester QC, Thomas Sharpe and Mark Shaw (NHBC) for the appellant; Michael Beloff QC and Richard McManus (Treasury Solicitor) for the respondents.
LORD JUSTICE NEILL said the primary issue was the meaning of the word 'attributable' in section 48(d) of the Fair Trading Act 1973. The judge held that it meant 'caused by' or 'resulting from' and that 'it seems to me to invite investigation whether, but for the monopoly situation, there would or could have been such conduct' as that under investigation.
His Lordship agreed with the judge that a causal connection had to be established between the action or omission in question and the existence of the monopoly situation before the action or omission could be said to be attributable to the existence of the monopoly situation. It was not enough that the action or omission should be merely 'associated with' the monopoly situation.
On the other hand, the 'but for' test might sometimes be too rigid a test. The words 'attributable to' connoted a causal connection but did not exclude the possibility of other, concurrent causes.
Having then considered the report as a whole, his Lordship rejected the NHBC's argument that the MMC's answer on the section 48(d) issue was irrational or that the MMC failed to state adequate reasons for its conclusions.
LORD JUSTICE FARQUHARSON and LORD JUSTICE HENRY agreed.Reuse content