Claim No. CP-2018-000038 IN THE HIGH COURT OF JUSTICE BUSINESS AND PROPERTY COURTS COMPETITION LIST (ChD) BEFORE: MR JUSTICE ROTH BETWEEN: - PHONES 4U LIMITED (In Administration) Claimant -and- (1) EE LIMITED (2) DEUTSCHE TELEKOM AG (3) ORANGE SA (4) VODAFONE LIMITED (5) VODAFONE GROUP PUBLIC LIMITED COMPANY (6) TELEFONICA UK LIMITED (7) TELEFÓNICA, S.A. (8) TELEFONICA EUROPE PLC Defendants
CLAIMANT’S SKELETON ARGUMENT FOR THE CMC ON 2-3 JULY 2020
References to the electronic bundle on Opus 2 are in the form {Bundle/document/page} and should appear as live links within the system.
Filed with this Skeleton Argument are the following:
1. Agreed Reading List.
2. Agreed Parties and Representation Table.
Phones 4u apologises for the length of this Skeleton Argument. This results from an attempt to capture the key points from the recent disclosure correspondence (in preference to inviting the Court to read that lengthy correspondence). A disclosure letter from Orange, received after 3pm today, has not been taken into account in the finalisation of this Skeleton Argument.
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TABLE OF CONTENTS A. INTRODUCTION ...... 3 Summary of progress in relation to disclosure ...... 3 Applications made by Ds in relation to security for costs and further information ...... 5 B. BACKGROUND ...... 6 Factual background ...... 6 Outline procedural background ...... 8 C. DISCLOSURE BY PHONES 4U ...... 9 Reliance-only disclosure...... 10 Issues for disclosure ...... 11 Disclosure from the Joint Administrators ...... 11 Search terms and connectors ...... 12 Mobile phones ...... 13 Hardcopy documents ...... 13 D. DISCLOSURE BY THE DEFENDANTS GENERALLY ...... 14 Document loss and destruction ...... 14 Custodian (or “participant”) and document hit reports ...... 15 Recipients of document hold notices ...... 18 Staged disclosure ...... 19 Date range for disclosure searches...... 21 Personal devices, email and social media accounts ...... 22 Telephone call records ...... 23 Unfiltered searches ...... 24 E. DISCLOSURE BY EE ...... 24 Disclosure custodians...... 24 Early disclosure of external communications ...... 24 Other outstanding matters ...... 25 F. DISCLOSURE BY DT ...... 26 Disclosure custodians...... 26 Unfiltered searches ...... 30 Other outstanding matters ...... 31 G. DISCLOSURE BY ORANGE ...... 31 Disclosure custodians...... 31 Other outstanding matters ...... 35 H. DISCLOSURE BY THE VODAFONE DS ...... 35 Disclosure custodians...... 35 The Vodafone SMS spreadsheet ...... 36 Unfiltered searches ...... 36 Other outstanding matters ...... 36 I. DISCLOSURE BY THE TELEFONICA DS...... 36 Disclosure custodians...... 37 Other outstanding matters ...... 37 J. SECURITY FOR COSTS ...... 38 Applications by EE, DT and Orange for security at 75% ...... 39 The Telefonica Ds’ application for an order requiring “ring-fencing” ...... 44 K. DIRECTIONS ...... 46 Directions to trial ...... 46 Application by DT for a further RFI Response ...... 50
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A. INTRODUCTION
1. This is the Skeleton Argument for C, “Phones 4u”, for the re-listed CMC on 2-3 July 2020. It is the second CMC and was listed for the purpose of addressing disclosure issues.
2. Until the events at issue in these proceedings, Phones 4u was one of the two major retail intermediaries for mobile telephones in the UK, the other being Carphone Warehouse (“CPW”). Phones 4u alleges that Ds colluded in relation to supplies to these retail intermediaries, coordinating an exit from their trading relationships with Phones 4u and putting it out of business. Phones 4u went into administration in September 2014. This removed the competition between Phones 4u and CPW. Putting Phones 4u out of business also removed competition between Phones 4u and the MNOs’ retail outlets.
3. These proceedings are brought by the Joint Administrators. Phones 4u claims against all Ds for an infringement of Article 101 TFEU and/or section 2 of the Competition Act 1998 and against D1 (“EE”), D2 (“DT”) and D3 (“Orange”) for breach of contract, inducement of breach of contract and conspiracy. The competition claim is the main focus of the parties’ disclosure discussions.
4. The present hearing was ordered at the first CMC (3-4 March 2020) and was listed to come after the exchange of Disclosure Schedules (and comments on those schedules) and for the purpose of making disclosure orders:
“A second Case Management Conference be listed for 2 days on the first date available in June 2020 (with one additional day pre-reading), when the Court will make orders for disclosure on the basis that such disclosure is to be given within 7 months thereafter.” (para.8 of the Directions Order dated 19 March 2020 {A/40/2})
Summary of progress in relation to disclosure
5. Phones 4u raised at the first CMC serious concerns in relation to Ds’ failure to preserve relevant documents, including after being put on notice of the allegations in these proceedings and the intention to bring a competition claim. There remain grave concerns.
6. It is common ground that standard disclosure is appropriate. The parties have made good progress towards reaching agreement on what standard disclosure requires in this case. The exchange of Disclosure Schedules (“DS”) assisted in this regard. The rate of progress
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increased markedly in the immediate run-up to the exchange of Skeleton Arguments on 5 June 2020. There has also been cooperation in the extra time created by the re-listing.
Developments shortly before the exchange of (original) Skeleton Arguments on 5 June 2020
7. Shortly before exchange, some Ds made substantially revised disclosure proposals:
(1) On 3 June 2020, EE sent a 34-page letter in which it provided detailed responses to Phones 4u’s comments on its DS. Amongst other things, EE has now agreed to provide early disclosure of certain key documents relating to board and other important internal meetings in the relevant period,1 and it appears willing to disclose early certain external communications with other Ds.2
(2) On 4 June 2020, the Vodafone Ds sent a 12-page letter3 in which they responded to Phones 4u’s comments on their DS. Many of the responses were constructive, and the proposed changes met many (but not all) of Phones 4u’s concerns. Limited hit reports were provided.
(3) On 5 June 2020, the Telefonica Ds wrote with revisions to their disclosure proposals, also providing some hit reports.
8. For its part, in response to comments on its DS, Phones 4u conducted a substantial reconsideration of its proposals. This required consultation with the e-disclosure provider as to the document hits generated by additional keywords proposed by Ds. It is only with the benefit of hit-reporting that the parties could engage meaningfully on the proportionality of their competing proposals as to date ranges and search terms.
9. The output of this process was a revised DS, accompanied by a series of hit reports setting out the consequences (in terms of changes to the number of responsive documents) of adopting various changes proposed by Ds {B/49.1}. The revised schedule was served on 5 June 2020.
10. On the evening of 4 June 2020, Phones 4u served an Application seeking relief in relation to Ds’ disclosure (most notably as to the provision of hit reports and the staged disclosure of certain key categories of document). By the time of exchange of Skeleton Arguments,
1 See paragraph 55e of the letter dated 3 June 2020 {C/559/17}. 2 Ibid, at paragraphs 58-59 {C/559/18}. 3 {C/562}. 4
much of the relief in relation to hit reports was no longer necessary, and further progress has since been made with some Ds, including in relation to staged disclosure.
Developments since the original listing
11. On 8 June 2020, Phones 4u wrote to Ds to propose that further progress towards agreement be made in advance of the re-listed CMC. It indicated that letters would be sent to each D, identifying the issues in dispute and making further proposals.
12. On 19-23 June 2020, Phones 4u sent detailed letters to each D in relation to both Phones 4u’s disclosure and that D’s disclosure.4 Phones 4u’s revised proposals in relation to Ds’ disclosure were informed, in large part, by the hit reports provided this month. With the benefit of those hit reports, for example, Phones 4u was able to identify senior Orange and DT personnel who had not been put forward as potential custodians despite having corresponded with key personnel at other Ds in the relevant period.
13. Phones 4u also offered pragmatic compromises in relation to its own disclosure. It offered, for example, to extend its searches of documents held by the Joint Administrators to the end of 2014 (as opposed to 31 October 2014 in the revised DS).
14. Lengthy disclosure letters have been received last night and today. It has not been possible to reflect all recent developments in the finalisation of this Skeleton Argument. It is hoped that the issues will be narrowed further before the hearing.
Applications made by Ds in relation to security for costs and further information
15. Ds have taken the opportunity of this CMC to apply for various orders unrelated to disclosure. Phones 4u contends that the Court should prioritise the resolution of disclosure issues and address further applications only to the extent these can be accommodated and require resolution now.
16. The further applications are as follows.
Security for costs
17. Following the provision of security by agreement shortly after the first CMC, Ds all requested security for costs for the current stage of proceedings.
4 EE {C/589}; DT {C/592}; Orange {C/593}; Vodafone Ds {C/591}; Telefonica Ds {C/601}. 5
18. Prior to the original listing, Phones 4u agreed to provide security in the same form as the original tranche of security (payment to its solicitors to be held subject to an undertaking). It has now paid 65% of the amounts claimed by each D to its solicitors. The Vodafone Ds are content with this. The Telefonica Ds are also content, subject to their “ring- fencing” application (see below).
19. There are nonetheless two security for costs applications before the Court, both of which are opposed on the basis that Ds have adequate security:
(1) EE, DT and Orange all seek an order that security be provided at 75% of actual and estimated costs, rather than the 65% provided.
(2) The Telefonica Ds apply for an order as to the “ring-fencing” of money within the administration for the payment of future stages of security. This application was not pursued in full in the Telefonica Ds’ Skeleton Argument served on 5 June 2020 but has not been withdrawn.5
Request for further information
20. DT has applied for an order that, following disclosure (i.e. in 2021), Phones 4u provide further particulars of its case as to DT’s participation in the alleged infringement of Article 101. This application is misconceived and/or premature and is opposed.
B. BACKGROUND
Factual background
21. An agreed Case Summary is at {B/1}. In brief outline:
(1) Phones 4u was an independent retailer whose main business focus was the sale of mobile network connections (“Connections”).6 Sales of Connections by retailers such as Phones 4u are referred to as “indirect sales”, in contrast to sales made by MNOs direct to consumers. Phones 4u was one of two principal indirect retailers in the UK, the other being Carphone Warehouse Limited (“CPW”).
5 The Telefonica Ds sought instead an order that Phones 4u provide information as to “the measures (if any) it has taken to ensure it will be in a position to provide security on a phased basis…” (para.40) {E2/6/13}. 6 POC, paras 5, 7. The precise definition of this term is disputed, but the dispute does not appear to be material. 6
(2) As at late 2013, Phones 4u had long-term supply agreements with each of O2, EE and Vodafone UK: see para. 6 of the Case Summary. In January 2014, O2 allowed its contract with Phones 4u to expire.
(3) Phones 4u contends that Mr Dunne of O2 revealed at a meeting on 27 January 2014 that O2 could not extend its agreement with Phones 4u because this would be contrary to commitments given by senior representatives of the Telefonica Ds to senior representatives of Vodafone Group.
(4) It is common ground that, in the course of 2014, each of Vodafone UK and EE engaged in negotiations to renew, extend or replace their existing agreements with Phones 4u. Phones 4u contends that agreements in principle were reached with the UK commercial teams in mid-2014, subject only to group / shareholder approval.
(5) Unknown to Phones 4u at the time, in mid-2014, each of EE and Vodafone UK in fact reached agreements to contract with CPW to the exclusion of Phones 4u. Despite these agreements, EE and Vodafone UK purported to continue negotiations with Phones 4u until 29 August 2014 (the same time as Orange and DT approved EE’s agreement with CPW).
(6) In August 2014, Vodafone UK gave notice to terminate its contract with Phones 4u. On 12 September 2014, EE informed Phones 4u that it would not extend their agreement (which was not due to expire until 30 September 2015). Phones 4u contends that EE’s conduct in September involved breaches of express and implied contractual duties, and that DT and Orange procured or conspired in these breaches.
(7) This left Phones 4u with no major MNO contracted to it beyond 30 September 2015. Phones 4u formed the view that it could not continue trading and was placed into administration pursuant to an Order of the High Court on 15 September 2014.
22. In the course of these proceedings, Phones 4u has learned of other collusive contacts between Ds, of which it was unaware, and which none of Ds chose to reveal in pre-action correspondence. It relies on these in support of the allegations in the POC and as evidence that there was in the relevant period a culture of encouraging or at least tolerating
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collusive approaches and disclosures.7 The further contacts were revealed by EE in para.74 of its Defence {A/3/26}.
Outline procedural background
23. The Claim Form was filed on 18 December 2018. The POC were served along with the Claim Form (service on Ds outside the jurisdiction followed later).
24. Ds filed Defences in April-May 2019. EE, DT and Orange each filed separate Defences: {A/3}, {A/4}, {A/5}. Vodafone UK filed a Defence together with its parent, D5: {A/6}. O2 filed a Defence with its parent companies, D7 and D8: {A/7}.
25. Phones 4u filed Replies on 18 October 2019: {A/8}, {A/9}, {A/10}, {A/11} and {A/12}.
26. There have been RFIs of Phones 4u’s case (all relating to liability issues):
(1) On 8 July 2019, the Vodafone Ds sought, in essence, information as to Phones 4u’s case on certain contemporaneous documents disclosed voluntarily and said to contain Vodafone UK’s reasons for ceasing to supply Phones 4u: {A/13}. Phones 4u addressed the requests in its Reply: see paras 29-32 and 40-41 {A/11/11}. The Vodafone Ds stated in correspondence that the RFI was not addressed appropriately, but no application was made.
(2) On 22 November 2019, DT made 15 requests: {A/14}. Phones 4u responded on 15 January 2020: {A/16}. The parties then engaged further in relation to the requests. At the first CMC, and without opposition, the Court ordered Phones 4u to answer again (as best it could) one of DT’s requests (relating to particulars of DT’s participation in the alleged collusion). The response was served on 18 March 2020 {A/18}. DT applies for an order that Phones 4u respond again following disclosure.
(3) On 22 November 2019, Orange made an RFI asking, in essence, for clarification of Phones 4u’s case as to whether Orange itself participated in the alleged collusion, as contrasted to being liable (only) as parent of EE: {A/15}. Phones 4u responded on 15 January 2020: {A/17}. Phones 4u confirmed that its case is that Orange is liable both through EE’s participation and as a direct participant.
7 See, for example, the Reply to EE’s Defence at paragraph 31 {A/8/12}. 8
(4) On 9 April 2020, the Vodafone Ds made an RFI relating, in essence, to Phones 4u’s case on causation and quantum {A/19}. Phones 4u responded on 18 May 2020 {A/22}.
(5) On 30 April 2020, the Telefonica Ds made an RFI relating, in essence, to Phones 4u’s case on causation and quantum {A/20}. Phones 4u intends to provide a substantive response within 2 weeks of the present hearing.
27. On 18 May 2020, Phones 4u made an RFI of the Vodafone Ds relating to their case on Phones 4u’s financial position and ability to offer competitive commercial terms in 2014 {A/21}. The Vodafone Ds are yet to respond substantively.
C. DISCLOSURE BY PHONES 4U
28. Phones 4u’s original DS received fairly limited criticism. Ds made various constructive comments, which were taken into account in the preparation of the revised schedule at {B/49.1}. The key changes were as follows:
(1) Phones 4u reduced the date ranges over which it proposes to carry out many searches. This was in response to comments that the scale of its proposed disclosure was disproportionate because of the inclusion of documents from outside the key time period. In particular, Phones 4u now proposes that the default date range for its searches (unless another date range is specified for a particular search) be 1 January 2012 – 31 October 2014 (instead of 1 August 2006 – 31 October 2014).
(2) For Search 1 (external communications between key individuals), Phones 4 added further individuals at BC Partners, Tesco Mobile, Argos and Asda.
(3) For Search 2 (keyword searches of all repositories other than the Group Shares), Phones 4u has added further search terms, including: wider PwC search terms, wider search terms aimed at financial information, and additional project names.
(4) For Search 3 (keyword searches of the Group Shares), Phones 4u added further search terms (and adjusted the connectors used to modify the operation of search terms) aimed at capturing financial information.
(5) For Search 4 (unfiltered searches of key custodians), Phones 4u significantly expanded the date range over which it will carry out these searches, to the period 1
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August 2013 to 31 October 2014 (as opposed to the original proposal to search 20 January 2014 to 28 February 2014 and 1 August 2014 to 31 October 2014).
29. It appears that Phones 4u, as claimant in a collusion case, will conduct the most extensive disclosure searches of any of the parties.8 This reflects in part the necessity of fairly broad disclosure on causation and quantum but also a measure of compromise in agreeing to Ds’ proposals for increased searches. Phones 4u has cooperated where possible.
30. Nonetheless, the line must be drawn somewhere: if Phones 4u were to conduct all the searches proposed by one or more Ds, it would have to seek more than 7 months for standard disclosure. Phones 4u continues to cooperate in refining search terms and date ranges, but opposes any further material expansion of its searches.
31. The Vodafone Ds have criticised Phones 4u for proposing to do too much (although, on some issues, they still propose yet more extensive searches). Some of the proposals made by Vodafone Ds to limit Phones 4u’s searches were constructive and have been accepted. For example, as suggested by the Vodafone Ds, Phones 4u will apply a start date of 1 December 2013 for its searches of communications between its custodians and the Vodafone Ds (reflecting the likelihood that communications before this date will relate to “business as usual” rather than negotiations relating to the Vodafone Agreement).
32. It is unclear to what extent any substantial dispute will remain in relation to Phones 4u’s proposals for its own disclosure. The following paragraphs address certain key points that have been addressed in recent correspondence.
Reliance-only disclosure.
33. The vast bulk of Phones 4u’s disclosure will be given against the test for standard disclosure. As an exception to this, it is common ground that it is appropriate for reliance- only disclosure to be given in relation to publicly available documents.9 Phones 4u has clarified that documents that are publicly available but which were in fact sent to or received by a custodian will be subject to standard disclosure.
8 It is not possible to be sure because Ds have refused to state the total number of documents they will review. 9 As EE identified, there was an error of expression in Phone 4u’s DS. Read literally, it appeared that reliance- only disclosure was proposed in relation to all of the Table 1 documents. That was not the intended meaning. 10
Issues for disclosure
34. Phones 4u has made use of issues for disclosure in framing its own proposals and commenting on Ds’ proposals. Phones 4u emphasised in its DS that these issues for disclosure were not intended to supplant the Statements of Case and List of Issues or provide an exhaustive definition of the scope of standard disclosure: see para. 23 {B/32/8}. The purpose was to assist in identifying any substantial differences of approach between the parties in addressing the pleaded issues and to guide the formulation of appropriate searches, as is the case under the Disclosure Pilot.
35. Ds did not adopt the same approach. EE, for example, declined to comment in detail on the issues for disclosure, noting (fairly) that Phones 4u accepts that it is the Statements of Case that ultimately govern standard disclosure: see paras 15-17 at {B/45/4}.10 DT criticised Phones 4u for using issues for disclosure, 11 but its criticism was based on the mistaken premise that Phones 4u would limit itself to disclosure against those issues (ignoring the full content of the pleadings). That is not a fair characterisation of Phones 4u’s proposals and ignores the clear statement to the contrary at para. 23 of the DS. There is no remaining dispute in this regard.
Disclosure from the Joint Administrators
36. Phones 4u has sought to cooperate with Ds in identifying a reasonable and proportionate approach to disclosure from the Joint Administrators. It has faced some difficulty in this regard because there is of course a vast pool of documents generated in the administration, all of which post-date the events at issue and very few of which are likely to meet the test for standard disclosure. Ds have criticised Phones 4u for “shifting” its position in relation to disclosure from the Joint Administrators in this regard. The criticism is overblown.
37. Nonetheless, Phones 4u reflected on Ds’ criticism and agreed to add the Joint Administrators as custodians: see new Search 5 in the revised DS {B/49.1}. Further:
10 It is right to observe, for example, that the issues for disclosure do not capture fully the causation issues that arise on the pleadings and are identified in the List of Issues: see Orange’s comments at {B/47/13}. 11 See{B/46/9}.
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(1) Phones 4u has since agreed to extend the end date for the searches to 31 December 2014. This is a compromise position in the absence of any clear indication from Ds as to the relevance of documents generated later in the administration.12
(2) It is common ground, however, that the disclosure obligations in relation to quantum (specifically, recoveries made in the administration) do not have that end date. Recoveries made over the course of the administration will require evidence and reasonable and proportionate disclosure.13
(3) Documents held by PwC personnel other than the Joint Administrators are not within Phones 4u’s control. The email account of a PwC employee who has assisted the Joint Administrators may contain emails relating to the administration, but it will also contain emails relating to other clients and workstreams. Phones 4u has no right to gather in the whole inbox and run searches over it. The practical effect of this limitation is, however, fairly limited:
(a) The Joint Administrators are themselves custodians. Important emails will have been sent or received by these custodians.
(b) Documents saved (by any PwC staff) to the Phones 4u electronic workspace will be reviewed. This includes some emails.
(c) Given that almost all the disclosure here post-dates Phones 4u’s administration, it is extremely unlikely that there is much of interest to be found in the emails of a junior staff member who has provided assistance to the Joint Administrators.
Search terms and connectors
38. Phones 4u has endeavoured to agree to all reasonable requests to modify its search terms, including the use of connectors (such as “w/5”) to modify the operation of those terms. There remain further search terms that Ds have asked Phones 4u to apply, especially terms relating to Phones 4u’s financial position. Phones 4u continues to seek agreement
12 The Telefonica Ds proposed an end date of 19 November 2014: see para. 4.2.3 of the letter at {C/596/2}. 13 There is, at present, no pleaded issue in relation to recoveries. Some evidence and disclosure will nonetheless be required to provide an evidential basis for the quantum calculations. Phones 4u proposes, in the first instance, to provide a witness statement exhibiting the documentary evidence of recoveries as part of its standard disclosure. If, which seems unlikely, there is any controversy, Ds can apply for further disclosure. 12
on appropriately focused additional terms and hopes not to trouble the Court with these points of detail. Any further dispute as to search terms should be put in context:
(1) Phones 4u proposes to carry out an unfiltered review of emails between members of its senior management team in the period 1 August 2013 to 31 October 2014: see search 4 in the revised Ds{B/49.1/30}. It is difficult to imagine that relevant communications in relation to Phones 4u’s financial position will somehow slip through this net (which captures around 48,000 documents).
(2) Phones 4u also proposed in the revised DS extensive search terms to capture documents relating to its financial position, including through internal reporting: see, e.g., the terms in rows 29-36 and 41-44 in search 2 {B/49.1/21} and rows 1- 18 in search 3 {B/49.1/26}. Yet further search terms of this nature are anticipated to be agreed in correspondence.
Mobile phones
39. Phones 4u has sought to identify any mobile phones and data from mobile phones that were captured in the process of gathering in the company’s records. This has taken some time, not least due to the Covid crisis. The upshot is that no mobile phones or data have been located. Phones 4u has also made enquiries of its key custodians and, to date, has not located any mobile phones that have been retained.
Hardcopy documents
40. Phones 4u has explained in correspondence the approach that it has taken to hardcopy documents. Hardcopy documents were, at the time of the administration, gathered in and stored in boxes. The boxes were given titles to reflect their content. Boxes with titles that indicated they may contain relevant documents were scanned in full and will be searched. All other boxes were subject to a manual check for potentially relevant documents and, where any such document was found, the whole box was scanned.
41. Phones 4u is willing to conduct a wider manual review of hardcopy boxes reasonably identifiable as linked to any of the P4u custodians (e.g. a box of hard copy documents recorded as coming from a custodians office), recognising that computer searches across scanned documents does not always capture manuscript text.
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D. DISCLOSURE BY THE DEFENDANTS GENERALLY
42. These proceedings and the issues for disclosure are complex. Phones 4u does not criticise Ds for the fact that there has been substantial disagreement as to what standard disclosure requires of each of them. Phones 4u’s principal criticism of Ds has related to refusal to provide objective information that would assist in resolving disagreements as to potential custodians, date ranges and search terms. Most Ds have now provided at least some of this information in the form of hit reports, but there remain points of disagreement.
43. Many of the issues of detail as to search terms and date ranges have been resolved by agreement, and further progress may yet be made before the hearing. Phones 4u concentrates in this Skeleton Argument on the main points of difference.
Document loss and destruction
44. Mr Greeno explains in his statement14 that there are document preservation concerns in relation to all Ds, although the most serious concerns relate to the Telefonica Ds. Phones 4u raised these concerns at the first CMC, and they have since been explored further.
45. At a very early stage, Quinn Emanuel wrote to Ds giving notice of the allegations of collusion and requesting that documents, including electronic documents, be preserved. For example, the letter sent to the solicitors for O2 on 1 December 2014 summarised the allegation of collusion against O2 and requested the preservation of documents including “SMS or other forms of text messages, social media messages, audio recordings and voice-mail messages”: see {B/51/6}, referring back to the letter at {B/51/3}.
46. Although the most acute concerns arise in relation to the Telefonica Ds (who appear to have lost or destroyed various electronic documents of important custodians), there are also instances in which the other Ds have failed to preserve potentially relevant documents. To give a particularly striking example:
(1) EE informs Phones 4u that, in the Autumn of 2012, its then CEO, Mr Swantee made audio recordings of anti-competitive approaches made to him by Mr Dunne of O2. The recordings were apparently made on Mr Swantee’s “personal” iPad: see paras 34 and 36 of the letter dated 4 May 2020{C/442/11}.
14 See paras 12 and following {D1/15/7}. 14
(2) The relevant approaches are described in paragraphs 74(b) and 74(c)(iv) of EE’s Defence {A/3/26}. The first approach appears to have related to precisely the subject matter of the collusion alleged in these proceedings. EE pleads that Mr Dunne “appeared to suggest that O2 was willing to reduce volume from indirect channels and appeared to want to mitigate the risk of EE taking up that volume”. Phones 4u’s pleaded case is that it was economically irrational for any of the MNO Ds to cease supplies to Phones 4u without first obtaining information or assurances as to its competitors’ intentions in relation to such supplies.15 There was apparently an audio recording of Mr Dunne seeking precisely that comfort from Mr Swantee.
(3) The audio recordings are, however, said to have been lost (along with the “personal” iPad containing them): see paras 36-39 of the letter at {C/442/11}.
47. No relief is sought in relation to the loss or destruction of relevant documents at the present CMC, not least because investigations are ongoing. It is not yet clear to what extent some of the lost documents may be recovered. This will remain under review. If it transpires that important document sources for key custodians are irrecoverable, it may be necessary to add further custodians and/or conduct additional searches. It is likely that Phones 4u will ultimately invite the Court to draw adverse inferences, at least in relation to the Telefonica Ds but potentially more broadly.
Custodian (or “participant”) and document hit reports
48. By its Application Notice,16 Phones 4u applied for hit reports from each D. Until shortly before the original listing, none of Ds had provided a comprehensive set of hit reports identifying the numbers of emails passing between internal personnel and external email addresses, i.e. individuals outside the disclosure provider and including officers and employees of other Ds.
49. In recent weeks, certain Ds have provided at least some custodian hit reports:
(1) EE provided hit reports on 3 June 2020 {C/559.1} and {C/559.2}.
15 See, e.g., POC, para. 124 {A/2/45}. 16 {D1/13} and the draft order at {D1/14}. 15
(2) The Vodafone Ds provided (a more limited) set of hit reports on 4 June 2020 {C/562/13}. Further hit reports were provided last night and are being reviewed.
(3) The Telefonica Ds provided hit reports for O2 only on 5 June 2020 {C/566/14}, which reports were then updated on 12 June 2020, providing more detail for external communications {C/578.1}. It has promised further hit reports in time.
50. Phones 4u seeks two types of hit report. A custodian hit report17 can be presented as a table identifying the number of emails passing between identified persons in a given time period. It can identify, for example, how many emails a potential custodian at EE sent to specific officers or employees of the other Ds in the relevant period: see the EE hit reports at {C/559.1}. A document hit report counts the number of documents that respond to a set of proposed search terms and can provide a total number of non-duplicative hits for the whole disclosure review. It enables the parties to engage in informed discussions as to the proportionality of search terms, date ranges and/or further searches.
51. Appropriately detailed custodian hit reports assist in identifying the most appropriate custodians and the type of search and review that is most appropriate for a given category of document. For instance:
(1) The reports may reveal that custodians proposed by one defendant (EE, for example) engaged in substantial email communications with an employee of another defendant (DT, for example) who has not been put forward as a disclosure custodian by that other defendant.
(2) A proposed custodian who had numerous communications with the other Ds in the relevant period may be an appropriate candidate for further searches (e.g. across personal devices), whereas a proposed custodian who had no (or very few) potentially relevant email exchanges may be of less interest.18 It appears from the hit reports provided on 4 June 2020 that some Vodafone Group custodians had no work email contact with executives at the other Ds.
17 Mr Greeno refers to these as “participant hit reports”, which is apparently the term used by e-disclosure providers: paragraph 6.1 {D1/15/4}. It is the same concept as has been deployed in correspondence. 18 If there is good reason to believe that a proposed custodian did communicate with identified recipients in the relevant time period despite having few email hits, it may be appropriate to pursue further searches. 16
(3) The information also assists in addressing questions of proportionality and the nature of review required: where there are very few emails passing between persons of particular interest and these emails cluster around an important date, there is likely to be a particularly strong case for conducting a manual review of those emails. It also increases the prospects of identifying a more focussed approach.
52. For the following reasons, there is in this case particularly acute need for objective information as to the extent of email communications between identified individuals.
53. First, Phones 4u cannot fairly be asked to trust that all potential custodians have provided their solicitors with a full and accurate account of their roles, contacts and communications in the relevant period. If Phones 4u’s allegations are well-founded, some of these persons were involved in (or at least aware of) unlawful collusion. They remain incentivised to stay out of sight and to downplay the extent of their involvement in relevant decisions and/or communications.19 The email data provides an objective guide to who was communicating with whom in the relevant period.
54. Secondly, the key events in question took place between 2012 and 2014. It is unsatisfactory to rely entirely on fading memories as to who was engaged in potentially relevant communications and key work streams as many as 8 years ago. Email hit data provides an objective basis to identify the persons who are most likely to have created and/or received relevant communications.
55. Thirdly, Phones 4u has been able to identify that persons who were not put forward as custodians (at least initially) were in fact engaged in potentially relevant communications in the key period and/or were identified back in 2014/2015 as at least potentially holding relevant documents:
(1) The Vodafone Ds’ DS did not include Mr Guy Laurence as a custodian for unfiltered searches of communications between Vodafone UK and other Ds20 despite the fact that he was CEO of Vodafone UK up to November 2013 and is
19 By way of example only, the Telefonica Defendants deny that Mr Dunne made the alleged incriminating statement to Mr Whiting about commitments given by Telefonica to Vodafone {A/7/45} or that Mr Dunne ‘attempted at any time [emphasis added] to have an inappropriate or unlawful conversation with Mr Swantee regarding cooperation between MNO Defendants in the UK market’ {A/7/45}. This is contradicted by EE’s Defence at paragraph 74 {A/3/26} and would have been evidenced by the recording that Mr Swantee lost. 20 See the table 2.1 at {B/36/1}.
17
implicated by EE in attempted collusion in Autumn 2012: see para.74(c) of EE’s Defence {A/3/26} and paras 37-38 of Phones 4u’s Reply {A/11/13}.21 It is now clear that he did engage in potentially relevant email communications.
(2) As has been set out in recent correspondence,22 both DT and Orange failed to put forward as custodians senior personnel who are now known (from hit reports provided by other Ds) to have corresponded with key individuals at EE in the relevant period.
(3) The Telefonica Ds did not propose Ms Pilar Lopez as a custodian, despite the fact that she was identified much closer to the events as someone who could speak to the allegations of collusion. In a letter dated 14 August 2015, the then solicitors for D7 and D8 stated that Ms Lopez “was involved with the decision by O2 not to renew the P4U Agreement” and had denied any knowledge of the alleged collusion.23 It now appears that Ms Lopez may not have been included as a custodian because all or substantially all of her documents were lost or destroyed in early 2015.24 This is important information.
56. All Ds, including DT and Orange, are making use of sophisticated e-discovery platforms. Phones 4u understands from its e-discovery consultant that custodians and document hit reports are straightforward to produce, and it has provided Ds with extensive hit reports. Ds have generally been unwilling to state the total number of documents that their disclosure exercise would involve (despite regularly taking points on proportionality).
Recipients of document hold notices
57. Phones 4u has sought from all Ds a list of the persons to whom document hold notices were issued in 2014/2015 and since. EE provided this information back at the start of May.25 As to the other Ds:
(1) DT has refused to identify the recipients of hold notices.26
21 Mr Laurence was proposed as a custodian for other searches: see the explanation given at {B/36/40}. 22 See the letters at {C/592/6} (DT) and {C/593/6} (Orange). 23 See paragraph 17 of the letter at {C/335/59}. 24 See Bridge 1, paragraph 18 {B/50/5}, the table at {B/50/24} and the letter dated 28 May 2020 at {C/544/2}. 25 Letter dated 4 May, paras 11-15 {C/442/3}. 26 See para. 57 of its Skeleton Argument dated 5 June 2020 {E2/3/21}.
18
(2) Orange provided the information by letter earlier this month.27
(3) The Vodafone Ds have refused.28
(4) O2 has similarly refused.29 It is accepted that the Seventh and Eight Ds did not send hold notices. No relief is sought against them in this regard.
58. The fact that, much closer to the events in question, a person was considered to be an appropriate recipient of a document hold notice provides at least an indication that he or she may well have created or received relevant documents. The decision to send a hold notice is likely to have been taken on the basis of information no longer available to the parties’ legal teams in 2020, including first-hand knowledge on the part of internal lawyers who sent out the notices.
59. Phones 4u accepts that not every person to whom a document hold notice was sent will necessarily be an appropriate disclosure custodian. The purpose of obtaining the list is to reduce the informational disadvantage faced by Phones 4u in engaging with Ds in relation to their proposed custodians. The list provides an objective point of reference.
Staged disclosure
60. At the first CMC, the Court indicated that it may be appropriate for certain categories of document to be disclosed early.30 Phones 4u intends to provide early disclosure of readily-identifiable categories of document that respond to key issues on the pleadings, as identified in para. 14 of its DS {B/32/5}. Phones 4u requested that each D give disclosure of (1) the documentary records of key internal meetings in the relevant period and (2) external communications with other Ds, on the basis that these are inherently likely to form an important part of the evidence and should be readily identifiable.31
Meeting / Board Documents
61. All Ds plead detailed cases as to the MNOs’ decision-making in the course of 2012-2014. The key meeting documents are likely already to have been located and reviewed. These documents are sufficiently central to Ds’ pleaded cases that they (or many of them) would
27 Letter dated 5 June 2020 {C/567/1}. 28 Letter dated 12 May 2020 {C/467/1}. 29 See para. 107 of its Skeleton Argument dated 5 June 2020 {E2/6/36}. 30 Transcript, Day 1, p. 85-87 {A/43/22}. 31 Mr Greeno explains the rationale further in his statement at paras 82-84 {D1/15/39}. 19
likely fall within “Initial Disclosure” under Practice Direction 51U and so would have been disclosed with the Defences. No good reason has been provided as to why a similar approach should not be adopted in these proceedings.
62. EE has agreed to provide early disclosure of the key documents for various internal meetings.32 The other Ds refuse to do so. This includes the Vodafone Ds,33 who provided certain documents relating to Vodafone UK meetings in the course of pre-action correspondence and who (implicitly) criticise Phones 4u for not accepting that those documents provide a full and accurate account of Vodafone UK’s decision-making.34 It is difficult to understand a refusal to provide the full set of meeting documents that meet the test for standard disclosure.
63. Phones 4u respectfully submits that early disclosure should be given of the key documents prepared for and in relation to board meetings in the relevant period (January 2012 to September 2014), namely the board minutes and board presentations/ board packs that were distributed to participants. This is the relief sought in the Application.
64. DT and Orange have argued that there is no legitimate purpose in seeking this disclosure from them on the basis that the only relevant documents are those relating to EE board and review meetings (which will be disclosed early by EE). This forms part of a more general attempt to downplay the importance of disclosure from DT and Orange, relying on the fact that EE is giving extensive disclosure.35 It is also misconceived because, as Orange pleads, the parent companies formed their own assessments as to what EE should do: “[Orange’s] decision-making in relation EE’s indirect strategy….was at all times motivated by its own assessments, informed by EE’s analysis, reports and recommendations, of its own and EE’s commercial best interests” (Orange’s Defence, para. 60(5) {A/5/38}; emphasis added).36 Phones 4u seeks early disclosure of the Meeting Documents relating to that assessment.
32 See para. 55e of the letter dated 3 June 2020 {C/559/17} 33 See, for example, paras 2.5 to 2.6 of the letter dated 4 June 2020 {C/562/2}. 34 See the RFI dated 8 July 2019 at {A/13}, stating, amongst other things, “The Claimant has been provided with the Documents which are contemporaneous evidence of Vodafone UK’s reasons for deciding to terminate….and which are unconnected to any collusion”. 35 See para. 21 of DT’s Skeleton Argument dated 5 June 2020 {E2/3/9}. 36 DT pleads that it “accepted and approved the preferred option recommended by EE” (DT Defence, para.87(d) {A/4/34} but similarly objects to providing documents evidencing its consideration of the recommendation.
20
65. Phones 4u has agreed in correspondence that Meeting /Board Documents disclosed early can, in the first instance, be the subject of a blanket claim to confidentiality and so enter the Confidentiality Ring.37
Key external communications
66. At the time of preparing the Disclosure Application, because of a lack of information from Ds, Phones 4u was unable to identify a category of communications between Ds that was appropriate for early disclosure. Mr Greeno acknowledged this in his witness statement: see para. 72 of his statement {D1/15/36}.
67. Having provided hit reports revealing the modest number of such communications, EE accepted in its Skeleton Argument dated 5 June 2020 that early disclosure could be given (although it contended it was not appropriate): “EE recognises that external communications between EE and the other Defendants form a relatively discrete category of documents which could, if necessary, be prioritised for review, and potentially disclosed ahead of other documents that fall to be disclosed” {E2/2/21} (original emphasis). That remains EE’s position.
68. With the benefit of the hit reports that have been provided, it is now clear that there was a very small number of communications between key individuals in the period. Phones 4u has made proposals to each D for the early disclosure of narrow and discrete categories of external communications. There are tens or, at most, hundreds of such documents.
69. Ds’ refusal to provide early disclosure has, for the most part, been based on generic assertions that the early disclosure of these documents is unnecessary, inappropriate and/or would not confer a case management benefit. Phones 4u submits that there is a strong case for early disclosure: there is a small number of documents that are central to the key factual issues, and those documents can be easily identified and the subjected to a discrete review and disclosure process.
Date range for disclosure searches
70. It is important that the searches conducted by Ds go sufficiently far back in time to capture communications around the time of O2’s consideration whether or not to continue supplies to Phones 4u and leading up to the anti-competitive approaches
37 See p.7 of the letter to EE dated 19 June 2020 {C/589/1}. 21
admitted by EE at para. 74 of its Defence {A/3/26}, which took place in “Autumn 2012”. At least one of those approaches involved an attempt to collude in relation to supplies to retail intermediaries in the UK, precisely the subject matter of the collusion alleged in the POC.38 O2 is understood to have been considering exiting its relationship with Phones 4u from (at the latest) June 2012, creating an incentive to collude from around that time.39
71. It is important that disclosure searches go back somewhat further in time to capture the background to the approaches admitted by EE, including any prior agreement and/or understanding between the other Ds. By way of compromise, Phones 4u accepts a start date of 1 June 2012 is appropriate for the relevant disclosure searches by EE, DT, Orange and the Vodafone Ds.40
Personal devices, email and social media accounts
72. As the Court indicated at the last CMC, it is appropriate for disclosure searches to go beyond formal channels of communication such as work emails.41 Participants in covert collusion are likely to have (at least sometimes) eschewed formal channels of communication in favour of more discreet contact. All the available indications are that informal channels of communication were used by Ds’ executives at the relevant time:
(1) Executives at Phones 4u sent and received SMS messages from their counterparts at MNO Ds in the relevant period: see, e.g., POC, paras 6542 and 74(b).43
(2) Para.74 of EE’s Defence44 refers to anti-competitive approaches made at a business lunch, in-person and/or over the telephone, rather than through work emails.
(3) The Vodafone Ds have referred to a spreadsheet said to have been prepared in 2015 by internal lawyers and containing records of mobile phone calls and SMS between three Vodafone executives and senior individuals at other MNOs.45 These records
38 The relevant approach is alleged to have been made by Mr Dunne of O2, the source of the matters pleaded against Ds in POC, paras 54-55 {A/2/20}. 39 See the explanation given in correspondence at {C/592/4}. 40 The Telefonica Ds accept an earlier state date, on the basis that the relationship with Phones 4u in fact came under review from 1 September 2011: see p. 9 of the DS {B/37/9}. 41 The Court referred to “personal means of communication, as well as…office communications”: Transcript, Day 1, p. 100 {A/43/25}. 42 {A/2/25}. 43 {A/2/28}. 44 {A/3/26}. 45 See, e.g., the Vodafone Ds’ DS at {B/36/31}. 22
appear to have been selected for retention on the basis that they were at least potentially relevant to the allegations of collusion advanced in correspondence.
73. Ds have, to varying degrees, recognised the potential importance of documents contained on personal devices and, more generally, outside work email accounts and central information management systems. There has been a measure of cooperation. Phones 4u accepts that there may be legitimate concerns as to privacy and proportionality, and it may be the case that many (but not all) documents on personal devices do not fall within the control of the relevant Ds for the purposes of disclosure. Ds should nonetheless identify the sources of potentially relevant electronic documents and ensure that they are properly retained.
74. It is important that Phones 4u is made aware of the sources of potentially relevant documents that are not (yet) within the possession of Ds’ solicitors so that it can decide what, if any, applications may be required to preserve and/or conduct searches across those documents (allowing for the fact that third-party disclosure orders may be required). There has already been some cooperation in this regard.46
75. Phones 4u seeks an Order that all Ds take steps to obtain access to all devices and email accounts of their custodians in the relevant period and report back on the outcome of those steps, including any refusals to provide access. To the extent Ds consider they have already complied in substance (across various pieces of correspondence), they can usefully consolidate the relevant information into a single document.
Telephone call records
76. The Vodafone Ds have agreed to give disclosure of the itemised telephone bills of custodians for whom work mobile phone data is unavailable, showing the telephone numbers called and the duration of calls to key personnel at other Ds.47
77. As Ds have pointed out, this is a poor substitute for a record of the content of the calls. But it is not without utility where no record of the content is available: the fact of a mobile phone conversation between (say) Mr Laurence of Vodafone UK and (say) Mr Swantee
46 The Vodafone Ds, for example, have provided a fairly detailed response in relation to mobile phone and other data: see the letter at {C/543}. 47 See table 3.2 of the DS {B/36/29}
23
of EE on a specific day may itself support or undermine a party’s case. It may, for example, assist in drawing an inference of coordinated decision-making.48
Unfiltered searches
78. It is common ground that some disclosure searches should be conducted manually and without first applying keywords – i.e. “unfiltered” searches. The use of keywords risks excluding from the review pool documents that make use of coded or euphemistic language, as might be expected in (1) collusive communications between Ds and (2) internal communications referring to collusive contacts and/or the collusive agreement or understanding. There remains points of detail in relation to the scope of these searches.
E. DISCLOSURE BY EE
79. EE has adopted a constructive approach in relation to its disclosure.49 There do, however, remain several points on which Phones 4u seeks the Court’s assistance.
Disclosure custodians
80. A review of the hit reports provided by O2 has revealed five individuals at EE who held senior roles and communicated with Ronan Dunne (CEO of O2) and/or Michael Bridget (O2’s Head of Sales and Services with its legal team) in the relevant period.
81. Phones 4u has requested that these individuals be added as custodians for some of EE’s searches (namely, searches of external communications and searches between EE and DT/Orange). From the available information as to external communications, this would appear to add only 112 documents for review: see the letter dated 19 June 2020 {C/589/5}.
82. By letter received today, EE has provided further information on the recently proposed custodians. It has not been possible fully to consider that new information, but it may well allow Phones 4u to make more limited requests for further custodians.
Early disclosure of external communications
83. If not agreed in advance of the hearing, Phones 4u will seek a direction that EE provide early standard disclosure of documents passing between (a) EE’s “Key Custodians” and
48 See POC, para. 146(c)-(e) {A/2/61}. 49 EE has (quite fairly) complained that it has been the subject of blanket criticisms applied to all Ds. 24
(b) the Vodafone Ds and Telefonica Ds recipients identified in the hit report provided by EE. The date range for such disclosure is 1 June 2012 to 31 October 2014.
84. The disclosure review would cover only 82 documents (39 with the Vodafone Ds and 43 with the Telefonica Ds) for the existing custodians.
Other outstanding matters
85. Unfiltered searches: Unfiltered searches of external communications appear to be agreed,50 but any remaining points will be addressed at the hearing. The same is true of searches of communications between EE, DT and Orange. As regards unfiltered searches of internal communications, Phones 4u has proposed a narrower set of searches than initially requested.51 EE raised valid proportionality concerns as to the original request. It is hoped that more focused searches can be agreed.
86. Phone bills: EE has stated that it is taking steps to ascertain the practicality of obtaining itemised mobile phone bills, which are said not to be currently held. EE nonetheless expresses a reluctance to carry out the requested searches. In the interests of proportionality, Phones 4u has proposed that the search be limited to the 9 “Key Custodians”.52
87. Personal devices, email and social media accounts: EE has agreed to make enquiries as to what personal devices, email accounts and social media accounts exist and may, subject to any necessary consent, be gathered in and preserved. Phones 4u does not anticipate an objection to its proposed Order in this regard.
88. Document hit reports: Phones 4u has requested that EE provide document hit reports showing the numbers of de-duplicated documents responsive to the agreed searches or at least the total number across all searches. Without this information, it is difficult to have a meaningful debate as to the proportionality of further searches. Phones 4u has itself provided this information, as well as a consolidated report showing results for all the additional search terms requested by Ds.53
50 See the letter dated 19 June 20202 at{C/589/9}. 51 Ibid, para.37 {C/589/10}. 52 Ibid, para. 43 {C/589/12}. 53 See Appendix A to the second letter to EE dated 19 June 2020 {C/590/8}. 25
F. DISCLOSURE BY DT
89. The contrast between EE’s approach and that of DT is stark. DT’s approach has been to assert that its proposals would capture all disclosable documents and to criticise Phones 4u for seeking to challenge that proposition. If DT’s approach were correct, there would have been no purpose to the order requiring the exchange of DS. DT could simply have self-certified its compliance with standard disclosure.
90. As matters now stand, Phones 4u contends that DT has made plainly inadequate proposals for disclosure and continues to refuse almost all reasonable adjustments.
91. Phones 4u pursues the Application as against DT and does not repeat here it submissions on early disclosure and other matters that apply to Ds generally.
92. Phones 4u’s key concerns with DT’s disclosure proposals (aside from document preservation issues) are as follows:
(1) DT’s proposed custodians.
(2) The extent to which DT will conduct unfiltered searches.
Disclosure custodians
93. DT has proposed only four custodians for its document searches: Mr Timotheus Hottges, Ms Claudia Nemat, Mr Thomas Dannenfledt and Mr Michael Tsamaz.
94. DT proposes these custodians on the basis that they were the DT members of EE’s board during the period 1 September 2012 to 31 October 2014 {B/34/1}. In terms of further justification of its proposed custodians, DT has stated in correspondence that {C/348}:
(1) “any communication of any relevance to [DT’s] participation in its former joint venture, EE, in so far as concerns the issues in dispute in these Proceedings would have been routed though these custodians” and
(2) DT’s members of the EE board “exercised independent judgment… and did not report to anybody within [DT] regarding the First Defendant [EE]”.
26
95. DT’s proposal and the justifications given for it are inadequate.54 Phones 4u alleges that DT (together with Orange) exercised decisive control over EE in practice (not merely through its presence on its board), and that DT itself participated directly in collusive contacts with some or all of the other Ds. This is confirmed in paragraphs 2-3 of the Response to RFI dated 18 March 2020 {A/18/2}.
96. There is no sound basis for a blanket assumption that any and all disclosable documents will have passed through or been created by the DT representatives on the EE board. Such an assumption is inconsistent with the pleaded case against DT. DT’s approach to disclosure assumes what is in issue, namely the extent to which it, DT, did in fact determine or influence EE’s commercial policy in relation to Phones 4u.
97. Phones 4u proposed to DT that it consider for inclusion as disclosure custodians all DT senior executives:
(1) with a hand in strategy in the United Kingdom during 2012 to 2014;
(2) who may have discussed EE’s business with Orange during 2012 to 2014; and/or;
(3) who may have had exchanges with their counterparts at other MNOs in which information relating to the United Kingdom may have been exchanged in 2012 to 2014 {C/433/3}.
98. DT has refused to expand the list of custodians. It has also, despite repeated requests in correspondence, refused to provide Phones 4u with the information regarding its management structures that would allow Phones 4u to assess which individuals might meet the criteria set out in paras 97(1) and 97(2) above and to propose these to DT on an informed basis.
99. The unfortunate position is that DT has not provided any meaningful cooperation aimed at identifying further potential disclosure custodians. Specifically:
(1) DT has declined to provide any management charts and/or organograms, on the basis that there were no such pre-existing documents and it would be disproportionate to create them for the purpose of these proceedings.
54 This was explained in correspondence: see the letter dated 30 April 2020 at paragraphs 5-11 {C/433/2}. 27
(2) DT has refused to identify the recipients of hold notices or to provide custodian hit reports.
(3) DT has also refused to provide early disclosure of board documents that would, in all likelihood, provide some indication as to the roles and information flows within the organization at the relevant time.
100. Phones 4u proposed before the original listing a number of further custodians that it considered, on the limited information it had, should as a minimum also have been included as custodians: see {B/40/14}.
101. On the basis of further information obtained from the EE hit reports and explanations given by DT in correspondence and its Skeleton Argument dated 5 June 2020, Phones 4u has been able to revise its proposals. It accepts that 4 of the 6 custodians that it previously put forward do not need to be added, but it has also identified further custodians (some of whom were unknown to Phones 4u before it reviewed the EE data).
102. DT criticises Phones 4u for adopting a “protean” approach in changing its proposals to reflect its improved knowledge.55 That criticism is unmerited and deeply unattractive. It is DT’s conduct that merits criticism. DT sought to secure tactical benefit by refusing to provide basic information that would have allowed an informed debate as to custodians to have taken place months ago. Now that Phones 4u has obtained useful information indirectly, from other Ds, and is able to make more informed proposals, DT changes tack and accuses Phones 4u of inconsistency. The Court is respectfully invited to consider the custodians on their merits.
103. Phones 4u seeks the following additional custodians:
(1) Fridbert Gerlach. Mr Gerlach was a member of the Area Management Team and appears to have attended certain EE Board and Business Review meetings. He is now known to have corresponded with senior EE personnel (including Olaf Swantee (CEO) and Mr Blendis (the internal lawyer who is alleged to have
55 Letter dated 24 June 2020 at paras 4-5 and 9{C/609/2}.
28
complained to O2 and Vodafone UK in relation to anti-competitive approaches56) in the relevant period.57
(2) Danil Daub, for the same reasons as Mr Gerlach.
(3) Wolfgang Kniese. Mr Kniese appears to have been VP UK Area Management & Chairman of the Board of T-Mobile Holdings Ltd during the period 2013 to 2014, with responsibility for managing the shareholding and financial controlling of EE. EE’s hit reports show that he corresponded with key EE personnel (namely, Marc Allera, James Blendis, Roger Eyre, Noel Hamill, Stephen Harris, Neal Milsom, Olaf Swantee and Nicola Talbot) between September 2012 and October 2014.
(4) Michael Wilkens. Mr Wilkens appears to have been Senior Vice President International Businesses during the period 2009 to 2012 with responsibility for (inter alia) creating international partnerships. EE’s hit reports show that he too corresponded with key EE personnel in that same period.
(5) Joachim Neubauer. Mr Neubauer appears to have been Senior Expert Finance Area Management JV UK during the period 2012 to 2016. EE’s hit reports show that he too corresponded with key EE personnel in the relevant period.
(6) Dr Uli Kühbacher. Dr Kühbacher appears to have been Vice President Legal Affairs during the period 2007 to the present day with responsibility for (inter alia) legal affairs relating to international subsidiaries of DT. EE’s hit reports show that he corresponded with Mr Blendis in the period September 2012 to October 2014.
(7) Volker Stapper. Mr Stapper appears to have been Vice President for Competition Policy during an unknown period with responsibility for all antitrust issues at DT and its subsidiaries. EE’s hit reports show that he corresponded with Mr Blendis in the period September 2012 to October 2014
(8) René Obermann. Mr Obermann was CEO during the period 2006 to 2013. EE’s hit reports show that he corresponded with Mr Swantee in the period September 2012 to October 2014.
104. As to communications with Mr Swantee and/or Mr Blendis specifically, there is on the pleadings an apparent inconsistency between EE and DT’s cases as to whether EE
56 See EE Defence, para. 74(e) {A/3/27}. 57 See para. 26.1 in the letter at {C/592/6}.
29
informed DT of anti-competitive approaches from O2.58 EE pleads that it informed DT of the approaches it pleads at para.74 of its Defence;59 DT pleads that it has, “found no specific knowledge of EE communicating to it any contacts that had been made by O2, and that allegation is (subject to further investigation) therefore not admitted”.60
105. In this context, it is untenable for DT to refuse to include custodians who would likely have been the persons to whom the fact of attempts at collusion would have been communicated, including the internal lawyers identified above. DT now contends (without explanation) that “all or most documents within their possession are highly likely to be privileged”.61 There is no proper basis for that assumption. Any claim to privilege will have to be made and justified.
106. DT has also sought to limit its disclosure obligations by proposing that its searches cover only the period during which each custodian was a director of EE, plus one month before and after that period.62 By letter of yesterday evening, DT proposes to extend this “buffer” to two months. That remains arbitrary.
107. There is no rational basis for an assumption that documents meeting the test for standard disclosure were not received or created by the custodians outside a one or two month window at either end of their directorship. Phones 4u has proposed longer periods for each custodian: see para. 17 of the letter at {C/592/5}. The longest period for any of the custodians is still only 29 months (June 2012 to October 2014).
Unfiltered searches
108. DT proposes certain fairly limited unfiltered searches of its custodians’ emails. It proposes unfiltered searches of emails (i) between its proposed custodians; and (ii) between its proposed custodians and email addresses belonging to certain external domain names (such as @orange.com, @ee.co.uk, @vodafone.com, amongst others) {B/40/22}.
109. If DT’s disclosure custodians are extended as set out above, Phones 4u is content with the unfiltered review of internal DT emails to be limited to those persons (as agreed in
58 Phones 4u pleads that DT was made aware of anti-competitive contact: POC, para. 137(g) {A/2/57} 59 EE Defence, para. 134(g)(ii) {A/3/61}. 60 DT Defence, para. 87(f) {A/4/34}. 61 See para. 11(b) of the letter dated 24 June 2020 {C/609/4}. 62 DT explains this at para. 30 of its 5 June 2020 Skeleton Argument {E2/3/14}. 30
correspondence {C/592/12}). If, by contrast, the pool of custodians were to be as narrow as DT proposes, it would be necessary to conduct an unfiltered review of emails extending to other DT senders and recipients.
Other outstanding matters
110. Personal devices, email and social media accounts: DT flatly refuses any real cooperation in this regard. It says that its custodians have “confirmed” they do not hold any relevant documents in personal devices or accounts. It refuses to request access. It contends that the (unreviewed) documents all fall outside its control. It seems inevitable that further applications will be required. DT should, however, first take the steps set out in paras 5 and 7 of Phones 4u’s draft order (allowing for the fact that the orders should be made against Ds, rather than their solicitors) {D1/14/2}.
111. Hit reports: DT has provided neither custodian hit reports nor document hit reports. There is no proper explanation as to why it, unlike the other Ds, refuses to provide transparency.
112. Hold notices: Unlike EE and Orange, DT still maintains a refusal to provide a list of the recipients of hold notices. Orange provided a list on 5 June 2020.
G. DISCLOSURE BY ORANGE
113. Phones 4u’s key concern with Orange’s disclosure proposals relates to its custodians.
Disclosure custodians
114. Like DT, Orange proposes only four custodians: Mr Gervais Pellisier, Mr Christophe Naulleau, Ms Delphine Ernotte-Cunci and Mr Benoit Scheen. Orange proposes these custodians on the basis that they were the Orange members of the EE board at the relevant time, or (in the case of Mr Naulleau) they regularly attended EE board meetings.63
115. Orange has provided in correspondence64 some information as to why it does not propose any further custodians, namely:
(1) There were no other individuals at Orange in the relevant period who could take decisions regarding EE.
63 {B/35/1}. 64 {C/331}, {C/394} {C/479}. 31
(2) The Orange members of the EE board did not report to anyone else within Orange in respect of any matter involving EE.
(3) Only one further Orange individual attended any EE board meetings in the relevant period (Mr Jerome Berger), but he was not a proposed custodian because he “did not have any voting powers, and did not attend EE Board meetings regularly”;
(4) Ms Olivia Signoret (and occasionally other individuals within Orange) would assist Mr Naulleau in his preparations for EE board meetings, however they were not proposed as custodians. Their roles are said to have involved collating documents sent by EE in advance of the board meetings, checking the documents provided specific detail in relation to each agenda item, and speaking to counterparts at DT and EE “for example to obtain more information or to confirm points of detail”. The supposed justification for not offering these individuals as custodians is that relevant emails received by these persons will have been sent to an existing custodian, or any relevant information from DT and EE counterparts will have been passed to an existing custodian.
(5) Three teams (the Financial Control team, the DFT Treasury team, the Accounting team) “were involved in the financial reporting of Orange’s investment in EE during the Relevant Period” but “their role was limited to monitoring and presenting financial information for the EE board members” and as such it would not be reasonable or proportionate to include members of those teams as custodians.
(6) All “documents and information relating to the issues in dispute would ultimately have been channelled through the individuals we have identified as custodians”.
116. The last of these is a conclusory statement that is not justified by any of the more specific information that has been provided. As with DT, there is no sound basis for a blanket assumption that any and all disclosable documents will have passed through or been created by the Orange representatives on the EE board, so as to make it appropriate to refuse any and all further potential custodians that are identified.
117. Orange also relies in this regard on the fact that the Orange members of the EE board had fiduciary duties to EE in that capacity, contending that they therefore “took decisions
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independently of Orange”.65 This point is difficult to follow. The Orange representatives of course had duties to EE qua directors, but they were appointed to the board as representatives of a shareholder with a 50% interest in a multi-billion pound business. It unrealistic to suggest that communications relating to EE’s operations (including in relation to retail intermediaries) were necessarily limited to or necessarily channelled through only these representatives.
118. As with DT’s proposed custodians, Orange’s proposal ignores the fact that Phones 4u’s pleaded case against Orange is not limited to Orange having members on EE’s board. Phones 4u also alleges that Orange (together with DT) exercised decisive control over EE, and that Orange itself participated directly in collusive contacts with some or all of the other Ds. This was confirmed in a Response to RFI in January 2020 {A/17}.
119. Given the nature of the allegations, a more extensive pool of potential custodians should at least be considered. As has been stated in correspondence,66 the starting point is to identify all persons:
(1) with a hand in strategy in the United Kingdom during 2012 to 2014;
(2) who may have discussed EE’s business with Orange during 2012 to 2014; and/or;
(3) who may have had exchanges with their counterparts at other MNOs in which information relating to the United Kingdom may have been exchanged in 2012 to 2014.
120. Orange has refused to provide Phones 4u with the necessary information in order for Phones 4u to assess which individuals might meet the criteria set out in the preceding paragraph. Like DT, Orange has refused to provide any management charts and/or organograms, on the basis that there were no such pre-existing documents.67
121. In light of further information provided by Orange, Phones 4u has accepted that certain of the disclosure custodians it proposed in its comments on Orange’s DS do not need to be added.68 It has, however, identified further custodians from the recently-provided hold
65 See, e.g., paragraph 6 of the letter dated 13 May 2020 {C/479/2}. 66 {C/436}. 67 {C/394}. 68 {C/593/5} at para. 22.2. 33
notices and EE’s hit reports, as follows (all except Ms Pottier are requested for the purpose of one search only):
(1) Sandra Pottier. Ms Pottier (i) was in the relevant period “Head of the International Legal Department”; (ii) received a hold notice in November 2019 in relation to this dispute; and (iii) is shown by EE hits reports to have corresponded with key senior EE individuals who EE has identified as relevant custodians, namely, Mr Blendis, Neal Milsom (CFO) and Stephen Harris (Chief & Corporate Strategy Officer) in the relevant period.
(2) Didier Chabrerie. Mr Chabrerie appears to have been Orange’s Head of Communities, Performance and Internal Control and its Ethics Advisor and Chief Compliance Officer from December 2006 to the present day. EE’s hit reports show that that he corresponded with EE’s Chief & Corporate Strategy Officer, Stephen Harris, in the period 1 September 2012 to 31 October 2014.
(3) Vanessa Clarke. Ms Clarke appears to have been Orange’s Director of External Communications from 2008 to the present day. EE’s hit reports show that she too corresponded with Mr Harris in that period.
(4) Gilles Deloison. Mr Deloison appears to have been a Country Controller from 2006 to 2016 for Orange Poland, Orange France, and most importantly, for EE (i.e., for the United Kingdom). EE’s hit reports show that he corresponded with: (i) Mr Harris; (ii) EE’s Head of Indirect Sales Finance, Nicola Talbot; (iii) EE’s Chief Financial Officer, Neal Milsom; and (iv) EE’s Head of Sales Finance & Sales Finance Director, Roger Eyre, all in the period 1 September 2012 to 31 October 2014.
(5) Benoît Dussert. Mr Dussert appears to have been Orange’s Director Controlling and Financial Planning from 2009 to 2012, and then its Head of Group Financing & Equity Capital Markets from 2012 to 2018. EE’s hit reports show that he corresponded with: (i) Mr Swantee; (ii) Mr Harris; and (iii) Mr Milsom, all in the period 1 September 2012 to 31 October 2014.
122. A number of further custodians have been identified from EE’s hit reports alone. These are listed at {C/593/7} and include Stéphane Richard, CEO of Orange since 2011. EE’s hit reports show that he corresponded with Mr Swantee in the period 1 September 2012 to 31 October 2014. There are also several internal lawyers who appear to have corresponded with Mr Blendis of EE in the relevant period (see paras 104-105 in relation to the potential importance of such communications). These include the head of the
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Competition and Regulatory Department (Patricia Holman) and Audrey Barthelemy, a senior lawyer said to have been responsible for relations with EE.
Other outstanding matters
123. Personal devices, email and social media accounts: The position here is complex but has been summarised in correspondence: {C/593/15}. In short, Phones 4u contends that Orange has not taken sufficient steps to identify the sources of potentially relevant documents and, where possible, to gather them in for preservation and, if appropriate, searches. Phones 4u seeks the relief in paras 5 and 7 of the Application Notice.
124. Mobile phone bills: Orange has stated that it is taking steps to ascertain the practicality of obtaining itemised mobile phone bills, which are said not to be currently held. If no agreement is reached, Phones 4u will seek a direction in this regard.
125. Hit reports: Orange, like DT, has provided neither custodian hit reports nor document hit reports.
H. DISCLOSURE BY THE VODAFONE DS
126. The Vodafone Ds have engaged constructively in recent correspondence, and substantial progress has been made. Phones 4u welcomes the cooperation provided in the letter dated 4 June 2020, in particular. There are nonetheless several outstanding matters (in addition to staged disclosure and the other matters that apply to Ds generally).
127. A letter received last night, 24 June 2020, has further narrowed the disputes but has not yet been fully considered. It may be that some of the below falls away. With the letter, the Vodafone Ds provided further hit reports, which are under review.
Disclosure custodians
128. Phones 4u has been able to identify further disclosure custodians based on the recently provided hit reports. It has sought agreement for new custodians to be added for the purposes of some searches only, seeking to apply a focussed approach.
129. The relevant custodians are identified at pp.4-8 of the letter at {C/591}. By letter received last night, the Vodafone Ds have agreed to add 6 further Vodafone Group custodians and
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provided reasons for refusing to add the others proposed by Phones 4u. The points made by in the letter are under consideration.
The Vodafone SMS spreadsheet
130. Vodafone Ds have referred to a spreadsheet prepared in 2015 by internal lawyers and containing records of mobile phone calls and SMS between three Vodafone executives and senior individuals at other MNOs. These records appear to have been selected for retention on the basis that they were at least potentially relevant to the allegations of collusion advanced in correspondence. The spreadsheet is said to be “available and will be part of Vodafone’s disclosure search”.69
131. Phones 4u seeks a direction that this spreadsheet, which records communications with other Ds that have otherwise been lost, be included in the early disclosure.
Unfiltered searches
132. The Vodafone Ds have resisted conducting satisfactory unfiltered reviews of external communications and discrete unfiltered review of internal communications. Progress is hoped to be made in this regard (taking into account the very recent letter).
Other outstanding matters
133. There are various points of detail on the formulation and scope of searches, but none of these appears likely to remain controversial.
134. Hold notices: Despite their otherwise cooperative approach, the Vodafone Ds maintain a refusal to provide a list of the persons to whom hold notices were sent.
I. DISCLOSURE BY THE TELEFONICA DS
135. It is important to recall (1) the central and particularly active role played by the Telefonica Ds in the alleged collusion: see POC, paras 54-55 {A/2/20} and para.74 of EE’s Defence {A/3/26} and (2) that there are grave concerns in relation to the Telefonica Ds’ loss or destruction of potentially relevant documents. In this context, there is good reason to extend disclosure searches further than might otherwise be appropriate, in order
69 Vodafone Ds’ Skeleton Argument dated 5 June 2020 at para. 123 {E2/5/34}. 36
to capture documents that would have been located with less extensive searches, had all relevant sources of documents been retained.
136. In addition to the mattes applying to Ds generally, Phones 4u’s key concerns with the Telefonica Ds’ disclosure proposals relate to the selection of disclosure custodians and the extent of unfiltered searches.
Disclosure custodians
137. As with the Vodafone Ds, recent information (including from hit reports) has allowed Phones 4u to revise its proposals for disclosure custodians. It has accepted that several of its previously proposed custodians do not need to be added, but it has identified further custodians who appear to have engaged in communications with other Ds in the relevant period and/or to have participated in key internal meetings.
138. It is right to acknowledge that, to date, the Telefonica Ds have provided detailed explanations of the roles played by proposed custodians, and it may well be that agreement can be reached in relation to the newly identified personnel. Subject to any further information provided by the Telefonica Ds, Phones 4u intends to seek directions for the addition (for some searches only) of the custodians identified in the letter dated 23 June 2020 {C/601/4}.
Other outstanding matters
139. Unfiltered searches: The Telefonica Ds have proposed effectively unfiltered searches for emails between its custodians and certain individuals at each of Phones 4u, EE, DT, Orange, and the Vodafone Ds. There remain disagreements as to the precise scope of these searches, which can (to the extent not agreed) be the subject of oral submissions.
140. Hold notices: It is understood that, of the Telefonica Ds, only O2 issued hold notices. It refuses to provide a list of the recipients.
141. Personal devices, email and social media accounts: The Telefonica Ds have taken some steps in this regard, but it remains appropriate to have a single and complete record of the steps taken and the responses received from the relevant custodians. The relief in the Application Notice is pursued against the Telefonica Ds.
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142. Early disclosure: The recent provision of hit reports allows Phones 4u to identify a small number of external communications of which standard disclosure can be given in short order. Phones 4u seeks a direction that O2 provide early standard disclosure of documents passing between (a) O2’s existing custodians and (b) the Vodafone Ds and EE recipients identified in the hit report provided by O2. The date range for such disclosure is 1 September 2011 to 31 October 2014. The disclosure review would cover only 288 documents (176 with the Vodafone Ds and 112 with EE) for the existing custodians.
J. SECURITY FOR COSTS
143. The Court may recall that, by the time of the first CMC, the parties had agreed that security should be provided in stages and, subject to some minor points, had agreed both the form and amounts of security. All Ds agreed to 65% for the first stage of security.
144. Shortly after the first CMC, the remaining minor points were resolved in correspondence.70 Phones 4u paid the amounts for the first stage into its solicitors’ account. Quinn Emanuel provided an undertaking in conventional form (which was agreed between the parties): see {D2/1/188}.
145. For the second stage, Phones 4u proposed to all Ds to adopt the same approach: paying 65% of each Ds’ costs schedules into its solicitors’ account, to be held subject to an undertaking. The Vodafone Ds agreed to this proposal.71 Phones 4u has now paid amounts representing 65% of all Ds’ costs schedules into its solicitors’ account. The Telefonica Ds are, subject to their “ring-fencing” application, content with the arrangements.72
146. The total amount now held is £9,758,751.57. Despite the fact that grade A staged security has been provided and is accepted by 5 of the 8 Ds, there are two sets of security for costs applications before the Court. It is respectfully submitted that they should be refused.
70 At the first CMC, Ds criticised Phones 4u for not agreeing to an order in the absence of any application for relief. The implication was that Phones 4u was seeking in bad faith to avoid paying the security that it had agreed. Despite the fact that Phones 4u then made payment in short order, Mr Leitch repeats the unjustified criticism in his witness statement: see para. 26 {D1/3/8}. 71 The Vodafone Ds have asked for confirmation that they can seek security for costs incurred between the original listing and the present hearing in the next stage {C/575}. That is agreed. 72 Letter dated 18 June 2020 {C/587}. 38
Applications by EE, DT and Orange for security at 75%
147. EE, DT and Orange have all applied for a higher level of security, 75%. The basis for the applications is a contention that, if successful in these proceedings, they will likely obtain an order for costs on the indemnity basis.
148. It is of course possible that, if the claim were to fail, EE, DT and/or Orange might obtain an order for costs on the indemnity basis, but a mere possibility is not enough to affect the appropriate level of security. Phones 4u respectfully submits that 65% is the appropriate rate for all Ds.
149. In its Skeleton Argument dated 5 June 2020, DT put forward three reasons for which it contends 75% is the appropriate level of security:
(1) It is said that serious allegations are made against DT, allegations “necessarily involving dishonesty and/or impropriety”.73
(2) The case against DT is said to be weak and/or thin.74
(3) It is argued that DT will find it impossible to recover any costs not covered by the security (i.e. the remnant of the costs above 65% or 75%).75
150. None of these points has any merit. The second and third can be taken shortly. The first raises a point of importance to competition litigation generally and is addressed last.
The allegation that the claim is weak and/or thin (DT’s second reason)
151. It is well-established that, in determining questions of security for costs, the Court must not engage with the merits (except in the most obvious of cases): see, e.g., Danilina v Chernukhin [2019]1 WLR 758, [69]-[70] per Hamblen LJ, with whom Sir Stephen Richards and Longmore LJ agreed.76
73 Para. 77 {E2/3/26}. 74 Para.80 {E2/3/27}. 75 Para. 81 {E2/3/28}. 76 Reference was made to the well-known decision of Porzelack v Porzelack [1987] 1 WLR 420 where Sir Nicholas Browne-Wilkinson V.C. deplored attempts to engage with the merits in any but the clearest of cases at 423 C-F.
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152. This principle precludes reliance on the supposed weakness of a claim in seeking security at a higher level. In Stokors SA v IG Markets Ltd [2012] EWCA Civ 1706, the Court of Appeal endorsed Popplewell J’s rejection of an argument that security should be calculated at a higher rate because the claim was “speculative and weak”77:
“…The only basis for seeking 80 per cent of the estimate to which the judge referred in his judgment was the suggestion that the defendant might recover indemnity costs. For what it is worth, I have never heard of security for costs being awarded on a more generous basis for that reason, but in any event the judge here decisively rejected that suggestion at paragraph 31 of his judgment. He concluded that there was no material before him which would justify such an approach. Rightly, as I think, he declined to go into the merits of the case when considering what was the appropriate quantum of an order for security for costs, and in my judgment we should certainly not go down the path which the judge himself declined to tread...” (at [42] per Tomlinson LJ, with whom Lewison and Munby LJJ agreed; emphasis added)
153. It was common ground before Teare J in Danilina v Chernukhin [2018] EWHC 2503 (Comm) that the Court should not consider the merits of the claim when forming a view as to the appropriate level of security: see [8]-[9].
154. The present case is not one of those rare cases in which the Court should entertain an argument over the merits on an application for security. Phones 4u asserts that its claims are strong and likely to succeed; Ds unsurprisingly disagree. The point for present purposes is that it cannot be concluded, at least not without a mini-trial, that the claims against EE, DT and Orange are obviously bad78 in circumstances where:
(1) Phones 4u relies on a contemporaneous email record of an admission from a senior figure in one undertaking (the Telefonica Ds) that it had engaged (or sought to engage) in collusion with the other undertakings: POC, paras 54-55.79
(2) Phones 4u now has the benefit of admissions from EE to the effect that representatives of the other two MNO undertakings sought to collude with it in the relevant period, including in relation to supplies to retail intermediaries: see para. 46(2) above (quoting from EE’s Defence).
77 See the quotation at [31]. 78 By the same token, Phones 4u has not resisted security on the basis that the claims are obviously good. 79 {A/2/21}.
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(3) DT was not itself active in the UK market and has complained about the relatively thin particulars that Phones 4u has been able to provide in relation to its alleged involvement in the collusion.80 Notably, however, DT has rightly decided against making any application for strike out or reverse summary judgment. The same applies to Orange.
(4) EE, DT and Orange also face breach of contract and common law conspiracy claims, relying on express and implied terms as to good faith. The contractual claim is not the subject of any sustained criticism. The criticism of the conspiracy claim is misconceived.81
The prospect of recovering unsecured costs (DT’s third reason)
155. It is always the case that the party applying for security faces a risk of not recovering the unsecured portion of its costs. It is for this reason that security is ordered at roughly the level that might be expected to be recovered on a detailed assessment (i.e. 60-65% on the standard basis and 75% on the indemnity basis).
156. Security for costs is a necessarily approximate process. The Court should not engage with arguments as to the precise level of risk faced by the receiving party. Once the threshold for obtaining security is crossed, the Court should not engage in a fine-grained analysis and seek to tailor the award to the precise risks at issue: see, by analogy, the Court of Appeal’s rejection of the “sliding scale” approach adopted by the Judge in Danilina v Chernukhin [2019]1 WLR 758 (where the risk of non-recovery of costs arose from obstacles to enforcement in a foreign jurisdiction).
157. In any event, it is wrong to contend that Ds will find it impossible to recover in respect of the unsecured costs (assuming here that the costs award exceeds the level of security). The Joint Administrators retain substantial cash reserves, and adverse costs order would have a (very) high priority in any liquidation: see para. 174 below.
80 This point of course does not apply to EE, yet it still applies for security at the higher level. 81 Orange argues that the conspiracy claim is unsustainable because it, Orange, is alleged to have formed part of the same undertaking as its co-conspirators, EE and DT: see para. 17(a) of the Application Notice {D1/6/4}. That is misconceived because each of EE, DT and Orange are separate legal persons, and common law conspiracy does not deploy the concept of an undertaking. The conspiracy claim is not, in event, co-extensive with the allegation of infringement of Article 101 – it is focussed on breach of the EE Agreement: see POC, paras 159-161 {A/2/69}. 41
The supposed allegations of “dishonesty and/or impropriety” (DT’s first point)
158. It is true that Phones 4u makes serious allegations in these proceedings. DT is wrong, however, to contend that Phones 4u’s case “necessarily [involves] dishonesty and/or impropriety” on the part of EE, DT and Orange.
159. The POC do not include any allegation of dishonesty. Specifically:
(1) The allegation of infringement of Article 101 / the Chapter 1 Prohibition is a serious matter,82 but it does not require proof of subjective intention to restrict competition83 or cause loss,84 let alone dishonesty. No allegation of dishonesty is advanced, and none is required by the cause of action.
(2) The contract and economic tort claims also raise serious matters: EE is alleged to have breached terms requiring good faith cooperation85, and EE, DT and Orange are alleged to have conspired to injure Phones 4u through EE’s breach of contract.86 Again, however, there is no allegation of dishonesty, and none is required.
160. This in stark contrast to Rowe v Ingenious Media Holdings [2020] EWHC 235 (Ch), in which Nugee J observed at [93] that the causes of action “at the forefront” of the claim were for fraudulent misrepresentation and deceit and that the conspiracy allegations also turned on the alleged use of fraudulent misrepresentations.
161. In the other case on which DT relies87 Danilina v Chernukin [2018] EWHC 2503 (Comm), it was inherent to the claimant’s factual case that, were the claim to fail, this was likely to be because she had given dishonest evidence: see [9] and [15]-[16]. Although Teare J reasoned by reference to a “reasonable possibility” of an order for indemnity costs, he was in fact satisfied that such an order was more likely than not. There is no analogy with the present case.
82 See, e.g., Sel-Imperial vThe British Standards Asociation [2010] EWHC 854 (Ch) at [17]. 83 Even restrictions by object do not require subjective intention: see, e.g., Competition Authority v Beef Industry Development Society Ltd [2009] 4 C.M.L.R. 6 at [19]-[21]. 84 See, e.g., WH Nelson Holding Ltd v IMI plc [2014] Bus.L.R.156 (holding that a cartel infringement decision did not, by necessary implication, involve a finding of intention to injure the claimant). 85 See POC, paras 155-157. {A/2/66}. There is no allegation that the breach of good faith was dishonest. 86 See POC, paras 159-160 {A/2/69} 87 See para. 78(a) of its Skeleton Argument dated 5 June 2020 {E2/3/27}. 42
162. In both Rowe and Danilina, it was concluded that, if the claim failed, there was a “reasonable possibility” of costs being awarded on the indemnity basis. In this case, there is of course some possibility of costs being awarded on the indemnity basis, but that possibility is no more than speculative:
(1) The competition claim was brought by the Joint Administrators after extensive investigations and pre-action correspondence. It relies, in part, on a contemporaneous record of admitted collusion and is reinforced by economic analysis as to the independent irrationality of the MNO Ds’ conduct. EE has since revealed the fact of collusive communications that were unknown to Phones 4u and which were not revealed by EE, or any of the other Ds, in the course of extensive pre-action correspondence. It is unlikely that the Court, after trial, would conclude that the claim should not have been brought.
(2) If the claim were to fail, this could be for any number of reasons, many of which would not involve any impropriety on the part of Phones 4u and would not justify an award of costs on the indemnity basis. Ds all contend, for example, that even if they did collude, Phones 4u has no claim because it would have gone out of business in any event (i.e. Ds did not cause the claimed loss). The claim does not depend primarily or even substantially on the honesty of Phones 4u’s witnesses (in contrast to Danilina).
163. It appears that neither Teare J (in Danilina) nor Nugee J (in Rowe) was made aware of Tomlinson LJ’s dictum in Stokors, quoted above at para. 152, casting doubt on whether security for costs should be ordered at a higher rate because of the possibility of indemnity costs. At the very least, there is reason to be cautious in extending any such practice beyond cases on strong facts (such as Danilina and Rowe).
164. There is also a point of general importance. If it were to be concluded that the mere fact of alleging infringement of Article 101 created a liability to pay a higher-than-usual rate of security for costs, this would create a disincentive to pursuing competition claims and would risk infringing the principle of equivalence.
165. The Court is respectfully invited to dismiss the applications for security at 75%.
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The Telefonica Ds’ application for an order requiring “ring-fencing”
166. The Telefonica Ds’ application is for an order “ring-fencing” funds within the administration in order to provide for future tranches of security.
167. The Telefonica Ds’ Skeleton Argument of 5 June 2020, however, proposed a lesser form of relief, namely an order that Phones 4u “shall, by 20 August 2020, write to the Telefonica Defendants stating (i) the measures (if any) that it has taken to ensure that it will be in a positon to provide security on a phased basis for the Telefonica Defendants’ Costs; and (ii) whether it is prepared to provide undertakings to the Court in respect of such measures”.
168. Neither the original relief sought in the application or the lesser relief is appropriate.
169. The Application Notice seeks an order that Phones 4u “make provision to ensure that, pending the determination of all costs liabilities in these proceedings, any distribution of its assets do not reduce their total value below the value of the Telefonica Defendants’ Costs” to trial: see para. 2 of the draft order at {D1/10/2}.
170. The Telefonica Ds advance two grounds on which they say the Court should make the “ring-fencing” order (1) Phones 4u itself proposed in correspondence to ring-fence money as a form of security and (2) in the absence of ring-fencing, the Telefonica Ds would rank with unsecured creditors in an insolvent liquidation: see paras 15-20 {D1/9/5}. Neither point has any merit.
171. As to the first point, none of Ds was satisfied by the original ring-fencing proposal made in correspondence. All Ds pressed for a superior form of security, namely money paid to and held on account by Phones 4u’s solicitors. The Telefonica Ds now wish to super- add one form of security to another, despite already having grade A security.
172. The Telefonica Ds have not identified any authority in which the Court has imposed a restriction of the kind that it seeks. It appears to be unprecedented.
173. As noted above, the Joint Administrators are under duties to preserve assets for the purpose of meeting liabilities (including contingent liabilities) that they cause the
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company to incur. They have confirmed that this is being done in respect of Ds’ costs.88 There is no basis for speculation that the Joint Administrators might diminish the company’s assets below the level of the potential liability for costs.
174. The second point is misconceived. There is no prospect of the Telefonica Ds being in the position of an unsecured creditor:
(1) It is agreed that security should be provided in stages. As long as the Telefonica Ds obtain security at appropriate intervals, there will be no amount for which they are unsecured. There will be adequate security held to the order of the Court.
(2) If, for any reason, Phones 4u were in the future unable to pay the next stage of security, the Court would address the consequences of this situation when it arose. Ds would inevitably seek a stay, especially if the inability to pay arose from a decision to pay out from the pool of assets during these proceedings.89
(3) It follows that the Telefonica Ds (and the other Ds) will at all times have the benefit of the segregated amounts held by Quinn Emanuel as security (i.e. subject to order of the Court). They would not have to claim against the pool of company assets in a liquidation.90
(4) Even if, for some unknown reason, the Telefonica Ds were not to have that security in relation to some part of their costs, they would still not be in the position of unsecured creditors. Adverse costs are an expense of the administration.91 As such, Ds’ entitlement to costs would rank above the company’s general creditors in any liquidation, including creditors with floating charges over recoveries.92
88 Most recently, the Eleventh Joint Report (10 February 2020) states that it is “likely that we will need to ring- fence cash for the purposes of funding these costs and providing for potential adverse costs awards against P4U, should the Defendants prevail in the litigation. We have retained significant cash reserves for these purposes…”. 89 As stated above, the Joint Administrators are in fact retaining sufficient cash to pay any adverse cost orders. 90 The Telefonica Ds are wrong to contend that they would rank as unsecured creditors. Adverse cost awards would be an expense of the administration: see the fn. below. 91 Adverse costs are a “necessary disbursement” within the meaning of para. 3.51(2)(g) of the Insolvency Rules 2016: see Lord Neuberger’s remarks in relation to the predecessor of that Rule In re Nortel GmbH (in administration) [2014] A.C. 209. This accords with the position in liquidations: see Re MT Realisations [2003] EWHC 2895 at [9]. The Vodafone Ds have recognised this in correspondence {C/221}. 92 There have been no fixed charge recoveries.
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175. The Telefonica Ds also propose that, in the absence of ring-fencing, “cash security” for their total costs to trial “should be provided in the usual way”: see para. 21 of the Application Notice {D1/9/6}.93
176. There is no proper basis for such an Order. The parties have agreed that security should be provided in stages. The Telefonica Ds cannot realistically argue that the staged security to which they agreed has now become inadequate, irrespective of whether there is ring-fencing. They are protected by the provision of staged security.
177. In circumstances where there is no proper basis for a ring-fencing order, there is also no basis for the lesser relief that the Telefonica Ds propose as a fall-back. Its only purpose would be to set up a future application for ring-fencing, which application would fail for the reasons given above.
K. DIRECTIONS
Directions to trial
178. Phones 4u anticipates that the following elements of the timetable to trial are unlikely to be contentious:
(1) There should be 7 months for standard disclosure (as directed by the Court following the first CMC). No party has yet indicated any intention to seek longer.
(2) The claim should be listed in a long trial window, commencing in 2022. There is disagreement as to trial length (as estimates now vary considerably), but no party estimates less than 12 weeks. There is disagreement as to when in 2022 the trial should commence.
179. Phones 4u contends that directions should be made now for witness evidence and expert reports (with the usual ancillary directions as to meetings between experts, etc.). This is common ground with most Ds.
180. The Vodafone Ds oppose setting directions to trial. They also argue that, even if directions are made now, this should not preclude a later application for a split trial. The Claim Form was served as long ago as December 2018. If the Vodafone Ds wish to argue
93 The Telefonica Ds seek until 23 July 2020 to provide an estimate of those costs: see para. 1 of the draft order {D1/10/2} 46
for a split trial, they should have made such an application by now, rather than seeking to delay making full directions or leaving undue slack in the timetable to allow for a later change of heart. The same applies to DT’s stated preference for a split trial.94
The potential for a split trial
181. At the last CMC, the Court invited the parties to consider whether these proceedings could conveniently be resolved through a split trial. The Court drew attention to the possibility of hiving off quantum issues to a later trial.
182. Phones 4u respectfully agrees that there could, in principle, be some advantage to a split trial, specifically in obtaining a faster resolution of the collusion and breach of contract issues. Phones 4u is motivated to resolve these proceedings in good time. Nonetheless, no party has applied for a split trial.
183. For its part, Phones 4u has considered the issue carefully and would oppose such an application, for three reasons.
184. First, there is a substantial dispute as to causation. All Ds allege that even in the absence of collusion, Phones 4u’s financial position was such that it would still have gone out of business and/or entered into administration. The various causation issues are reflected (at a high level) in paragraphs 18-20 of the Agreed List of Issues {B/2/5}.
185. Second, these causation issues overlap very considerably with quantum. Phones 4u contends that Ds’ collusion caused it to go out of business and, therefore, to lose the difference between its value as a going concern (with the benefit of ongoing supply relationships with the MNO Ds) and its value in insolvent administration. Ds’ answer will be to say that, for all the same reasons as they allege Phones 4u would have gone out of business in any event, the company was worth extremely little. On both causation and quantum, the ultimate factual question is whether and to what extent Phones 4u was in mid-2014 a viable and prospectively profitable business. The overlap between the witness and expert evidence on causation and the evidence going to quantum will be very substantial. Hiving off quantum to a later trial would create little saving in time and
94 See para.91 of DT’s Skeleton Argument dated 5 June 2020 {E2/3/30}. 47
money. Overall, it would be more likely to increase, rather than reduce, the burden of the proceedings on the parties and the Court.
186. Third, an alternative split – leaving both causation and quantum to a later trial - would be unsatisfactory for different reasons. A victory on collusion and breach of contract only, without findings as to causation, would not substantially resolve the proceedings or create a strong prospect of settlement. Ds would, it appears, fall back on the argument that Phones 4u was no longer viable, irrespective of the collusion.
187. The Vodafone Ds have not engaged meaningfully with these points. They refer vaguely to the possibility of an “initial trial on questions of liability and some or all aspects of causation”95 (emphasis added), without identifying those aspects or explaining how it could be appropriate to divide causation issues down the middle (not least given the obvious risk of unfairness and “gaming” the trial).
Expert evidence
188. Consistently with the Court’s indication at the first CMC, Phones 4u will await the end of disclosure before applying (hopefully on an agreed or unopposed basis) for permission for expert evidence as to the economic rationality of the MNO Ds’ cessations of supply.
189. It is common ground that quantum expert evidence will be required. Phones 4u contends that directions for such evidence should be made now, allowing time for the parties to agree the precise formulation of the issues for the experts.
Timetable to trial
190. Phones 4u’s trial estimate is 12 weeks. It considers this to be a realistic estimate. Ds various estimates are as follows:
(1) EE’s trial estimate is 50 sitting days, spread over 15 to 16 weeks.96
(2) DT favours a split trial, with liability and causation issues determined first. 97
95 Hogan Lovell’s letter dated 17 June 2020, 3rd para. on p.2 {C/585/2}. 96 EE’s Skeleton Argument dated 5 June 2020 at para. 108 {E2/2/32}. 97 See para.91 of DT’s Skeleton Argument dated 5 June 2020 {E2/3/30}.
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(3) Orange’s latest position is that it agrees with the Telefonica Ds’ proposal (which is for 16 weeks)98, although it has previously estimated 12-15 weeks.99
(4) The Vodafone Ds contend that the trial estimate should be 80 days.100
(5) The Telefonica Ds estimate 73-78 days (although not all sitting days).101 As they fairly acknowledge, this amounts to 16 weeks, even on a 5-day sitting week.
191. Phones 4u submits that a trial of 16 weeks would be extravagant. Very long trials are rarely justified. Reflecting this, the Commercial Court Guide states, “Save in exceptional circumstances, even the most substantial and complex trial should not exceed 12 weeks. The parties should work together, and with the court, to limit the argument and evidence and organise the trial timetable so as to fit the trial within this limit” ([J7.4]). That approach should apply here also. There are no exceptional circumstances:
(1) There is no great legal or factual complexity or scale. The competition claim is orthodox and covers a short span of time (all the key events being between mid- 2012 and Autumn 2014). The contract claim turns in large part on points of contractual construction and the application of the relevant terms to EE’s conduct in September 2014.
(2) There are 8 Ds, but only 5 defendant legal teams, reflecting the fact that the main focus of the proceedings is on the conduct of EE, Vodafone UK and O2.
192. There is a short but important practical point. A trial of the length proposed by Ds and commencing in Michaelmas Term 2022 (as Ds seek) would necessarily involve the trial (and even witness evidence) going over Christmas and New Year.102 The trial of these proceedings, commenced in late 2018, would not finish until well into 2023.
193. Phones 4u contends that the parties should cooperate to bring these proceedings to trial, and have that trial completed before the summer vacation in 2022. It is well possible for
98 Orange’s Skeleton Argument dated 5 June 2020 at para. 89 {E2/4/41}. 99 {C/149/3}. 100 Letter of 17 June 2020 {C/585/2}. 101 Mishcon de Reya’s letter of 1 June 2020 {C/550}. 102 There are 11.5 sitting weeks in the Michaelmas Term of 2022 (which runs from Monday, 3 October to Wednesday, 21 December).
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a trial to commence in Easter Term 2022 and finish before the summer. There are 13 sitting weeks available.103 An illustrative trial timetable shows this to be adequate:
(1) Pre-reading: 5 days.
(2) Oral opening submissions: 3 days (1.5 days for Phones 4u; 1.5 days for Ds). Oral opening submissions should be “no longer than the circumstances require”.104 The Court will not expect extensive oral openings from each of the six counsel teams.
(3) Witness evidence: 20 days. The parties have identified a total of 30 potential witnesses, but many of them will not require lengthy cross-examination.
(4) Expert evidence: 8 days (assuming expert evidence on economic rationality and on quantum).
(5) Gap for preparation of closing submissions and Judge reading written closings: 6 days. Allowing 4-day sitting weeks during evidence should reduce the time needed to prepare written closings.
(6) Oral closing submissions: Maximum of 8 days (3 days for Phones 4u, including reply; 5 days for Ds). This is likely to be excessive but is included out of caution.
194. This is of course only illustrative, but it gives a total of 50 days. Assuming 4-day sitting weeks during evidence, this runs to less than 12 weeks. The parties should cooperate to bring the trial within these bounds.
Application by DT for a further RFI Response
195. DT applies for an order that Phones 4u respond next year to a request for information to which it has already responded twice – once voluntarily and once in accordance with an (unopposed) Order made by the Court at the first CMC.
196. There is a long background to this application:
(1) The request in question was first made on 22 November 2019 {A/14}. It appeared as Request 6 of 15, as follows: “Does P4U allege that DT itself made anti-
103 Easter term begins on Tuesday, 26 April and ends on Friday, 27 May (24 sitting days). Trinity term begins on Tuesday, 7 June and ends on Friday, 29 July (39 sitting days). 104 Commercial Court Guide, [J8.1]. See also Chancery Guide, [21-90], read with [21.81]. 50
competitive commitments or disclosures? If so, please provide full particulars.” {A/14/3}
(2) Phones 4u responded on 15 January 2020 (“the First Response”) {A/16}, including a substantial response to Request 6.
(3) There followed inter-solicitor correspondence in which DT asked similar and related questions concerning Phones 4u’s case that DT participated in the alleged collusion. Phones 4u responded cooperatively to the further questions. DT was not satisfied.
(4) At the first CMC, DT applied for an order that Phones 4u provide a (further) formal response. Phones 4u did not oppose that application, but it emphasised that its allegations of covert collusion were necessarily made without full knowledge of the steps taken by each of the alleged participants and on the basis of inference.
(5) The Court drew attention to the relevant paragraphs of the POC and stated that it could only order the provision of the “best particulars that [Phones 4u] can provide”.105 If those particulars did not satisfy DT, it could apply for strike-out or reverse summary judgment.106 The Court ordered “the best specific factual particulars….that the Claimant can give”: para. 1 of the Order at {A/39}.
(6) Phones 4u responded as directed on 18 March 2020 (“the Second Response”) {A/18}. The Second Response sets out the extent of Phones 4u’s knowledge and provides the best particulars that it can give of (1) its inferential case that DT participated in the collusion and, more specifically, gave and/or received anti- competitive commitments/disclosures and (2) the timing and content of those commitments/disclosures.
(7) Phones 4u has always made clear that its ability to provide detailed particulars of the covert collusion between Ds is necessarily limited, at least pending disclosure: see POC, paras 2 {A2/1}, 130 {A/2/52} and 139-140 {A/2/57} and para. 1 of the
105 Day 2 transcript, pp. 3-7 {A/44/1} 106 ibid, pp. 7-14 51
Second Response {A/18/1}. It anticipates providing further and better particulars following disclosure and/or evidence.
197. Set against that background, DT’s application should be dismissed, for three reasons:
(1) DT seeks to revisit the relief sought and obtained at the first CMC, without any change of circumstances. At the first CMC, DT applied for an order that Phones 4u respond to Request 6, and the Court granted relief on that application in the terms that it considered appropriate. Phones 4u complied with the Order as made.107 There is no proper basis on which DT can re-make the same application, adjusting the relief after Phones 4u has complied with the Order that it obtained.
(2) Any further application, if it is to be made, should be made following disclosure, rather than anticipating what the position might be now. There is no reason to believe that Phones 4u will not provide such further particulars as it can following disclosure. If Phones 4u fails to do so, DT can make whatever application it considers appropriate at that time, taking into account the extent and content of its disclosure and any criticisms made of it. The Court can determine what, if any, further relief is required in the circumstances that then apply. To seek relief now is premature.
(3) The relief sought is also objectionable on practical case management grounds. If DT were to be granted the relief that it seeks and then it and/or other Ds fail to give satisfactory disclosure, the onus would fall on Phones 4u to apply to vary the Order (as to what particulars must be provided and/or what the trigger should be for providing them). To anticipate the appropriate relief now would be unfair and would likely engender further dispute and application.
KENNETH MacLEAN QC
OWAIN DRAPER
One Essex Court 25 June 2020
107 In the evidence in support of DT’s application, Mr Leitch uses the unfortunate phrase “purported to comply with that order” (para. 13 at {D1/3/4}), but no allegation of breach is in fact advanced. 52