City council fails in bid to obtain security for costs against firm claiming £1m in Competition Appeal Tribunal battle

The Competition Appeal Tribunal has dismissed Leeds City Council's pursuit of an order for security for costs in a case brought by an advertising firm which claims its alleged exclusion from participating in the market for environmentally friendly roadside advertising space cost it more than £1m in lost profits.

In Instaplanta (Yorkshire) Ltd v Leeds City Council [2023] CAT 37 Ben Tidswell, sitting as a tribunal judge, considered that the council should take the risk as an order for security for costs "would in effect lead to the end of the claim".

The claimant, Instaplanta, which provides roadside advertising space using timber floral planters, alleges that the council excluded it from participating in the advertising market in Leeds, resulting in £1.16m in lost profits.

It argues that the council misused its regulatory powers to exclude unfairly a competitor from the market, which amounted to an abuse under Chapter II of the Competition Act 1998.

It also asserts that the council used its licensing powers under the Highways Act 1980 to prefer, and to protect, the economic activities of its own Parks and Countryside department.

The council submits that it is, for the most part, unable to grant the necessary permissions under the Highways Act 1980. It also argues that, in any event, it changed its internal processes in 2017 to facilitate applications by the firm and to remove any suggestion that the council was excluding the firm from opportunities in order to prefer the Parks and Countryside department's activities.

The council sought security for costs from the claimant in the sum of £922,000. But the tribunal judge found that imposing any security beyond the nominal could stifle the claim, stating that: "It is plain from the evidence that the claimant does not itself (or from its shareholders) have the financial resources to meet anything but a nominal order for security for costs."

Commenting on the merits of the firm's case, the judge noted that evidence presented by the firm in the form of internal council emails "supports on its face, a plausible theory of exclusionary conduct".

He added: "However, it is clear that this question will be hotly contested by the defendant at trial and I express no view on the likely outcome here. I therefore consider it largely to be neutral."

In concluding, he said: "The balancing process I have to undertake requires consideration of two unsatisfactory outcomes. On the one hand, the defendant may be exposed to an unsatisfied costs order if it succeeds at trial, with unhelpful impact on the defendant's budget for providing other public services.

"On the other hand, the claimant, a micro-business which has sought but failed to get financial assistance from various other sources, will be unable to pursue its claim for damages which it says were caused by the defendants."

He continued: "Taking all the relevant factors into account, I consider that the defendant should bear the risk, because an order for security for costs would in effect lead to the end of the claim. While I recognise the difficulties this creates for the defendant, I am also conscious of the importance of facilitating recourse by small businesses to the Tribunal under section 47A of the Competition Act 1998, including in cases where there is no prior infringement decision on which to base a follow-on claim."

Adam Carey