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Session 2007 - 08 Publications on the Internet Judgments PDF Print Version 
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| Norris (Appellant)
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Judgments - Government of the United States of America and others (Respondent) (Criminal Appeal from Her Majesty’s High Court of Justice)
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HOUSE OF LORDS SESSION 2007-08 REPORT [2008] UKHL 16 on appeal from:[2007] EWHC 71 (Admin)
APPELLATE COMMITTEE Norris (Appellant) v Government of the United States of America and others (Respondent) (Criminal Appeal from Her Majesty’s High Court of Justice) REPORT Counsel Appellant: Jonathan Sumption QC Richard Gordon QC Martin Chamberlain (Instructed by White & Case LLP) Respondent: David Perry QC Adina Ezekiel Louis Mably (Instructed by Crown Prosecution Service) Interveners Counsel Tim Owen QC Duncan Penny Kieron Beal (Instructed by Dechert LLP) Hearing date: 24, 28 & 29 JANUARY 2008 ON WEDNESDAY 12 MARCH 2008 REPORT from the Appellate Committee 12 MARCH 2008 Norris v Government of the United States of America and others ORDERED TO REPORT The Committee (Lord Bingham of Cornhill, Lord Rodger of Earlsferry, Lord Carswell, Lord Brown of Eaton-under-Heywood and Lord Neuberger of Abbotsbury) have met and considered the cause Norris v Government of the United States of America and others. We have heard counsel on behalf of the appellant and respondent, and received submissions on behalf of JUSTICE. 1. This is the composite opinion of the committee. 2. The appellant, Mr Ian Norris, is a national of the United Kingdom. The Government of the United States, the respondent, seeks to extradite him to the United States to stand trial in the Eastern District of Pennsylvania on an indictment containing four counts. On 1 June 2005 Evans DJ sent the case to the Home Secretary for his decision whether Mr Norris should be extradited ([2005] UKCLR 1205), and on 29 September 2005 the Home Secretary ordered that he should. The district judge’s decision was upheld by the Queen’s Bench Divisional Court (Auld LJ and Field J, [2007] EWHC 71 (Admin), [2007] 1 WLR 1730) in the decision subject to this appeal to the House. 3. Mr Norris worked in the carbon division of the Morgan Crucible group of companies for 29 years, retiring on grounds of ill-health in 2002 after four years as chief executive officer of the group. The parent company of the group is an English company, based in Windsor. Subsidiary companies of the group were based in North Carolina and Pennsylvania. In 1999 the respondent began to investigate allegations of price-fixing in the carbon industry in the United States. In due course the two American Morgan subsidiaries paid substantial fines. Most of Morgan’s directors, officers and employees were granted immunity from prosecution as part of a plea bargain arrangement, but Mr Norris and some others were not. In September 2004 a grand jury sitting in the Eastern District of Pennsylvania returned the indictment on which it is now sought to extradite Mr Norris. 4. This indictment contains four counts. The first count alleges that Mr Norris conspired with certain other European producers of carbon products used in the transport, industrial and consumer product markets to operate a price-fixing agreement or cartel in a number of countries, including the United States. The agreements are said to have been made outside the United States, in Europe, Mexico and Canada, but to have been given effect in the United States. The cartel is said to have operated from at least 1989 to 2000. The charge is laid under 15 USC §1, familiarly known as the Sherman Act, which provides: “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony…". This is a statutory offence of strict liability. It does not require proof of fraud, deception or dishonesty, and count 1 of the indictment contains no such allegation. Among the extradition papers served on Mr Norris was an affidavit of Lucy McClain, a prosecutor in the Anti-Trust Division of the United States Department of Justice, who deposed that the conspirators including Mr Norris “[i]n effect … defrauded their customers by requiring that they pay higher prices than they might otherwise have paid had there been no conspiracy.” This allegation formed no part of the indictment. In the charges sheet prepared by the Crown Prosecution Service on behalf of the respondent, to translate the charges in the indictment into particulars of English offences, it was alleged that Mr Norris conspired to “defraud buyers of carbon products by dishonestly entering into an agreement to fix, maintain and co-ordinate the price for the supply of carbon products in the United States of America.” 5. Counts 2, 3 and 4 of the indictment allege conspiracy to obstruct justice, witness tampering and causing a person to alter, destroy, mutilate or conceal an object with the intent to impair the object’s availability for use in an official proceeding, in violation of 18 USC §§371, 1512(b)(1) and 1512(b)(2)(B). The English charges sheet asserted that Mr Norris conspired “to pervert the course of public justice namely the process of a criminal investigation being conducted by a federal grand jury in the Eastern District of Pennsylvania into price-fixing in the carbon products industry". A. COUNT 1 6. In resisting extradition on count 1 Mr Norris contends that participation in a cartel, in the absence of aggravating conduct, was not at the material time (1989-2000) a criminal offence at common law or under the statute law of this country. Accordingly, it is submitted, the conduct of which he is accused in the United States would not, at the time, have been criminally punishable here, with the result that the requirement of the Extradition Act 2003 that conduct should be criminal in both the requesting and requested states is not satisfied, and Mr Norris cannot be extradited under the Act. This submission raises a number of issues which call for separate consideration. (1) The common law 7. In earlier days, as recounted by Sir William Holdsworth (A History of English Law, vol 4, 3rd ed (1945), pp 340-362, vol 8, 2nd ed (1937), pp 56-62), the prevention of abusive practices in the course of trade was the subject of parliamentary intervention and judicial decision. But the Repeal of Certain Laws Act 1772 (13 Geo 3, c.71) and the Forestalling, Regrating etc Act 1844 (7 & 8 Vict, c 24) repealed earlier statutes, leaving the way open for development of the law by the courts. 8. By the end of the 19th century it was established that as between master and servant, principal and agent and the buyer and seller of a business covenants in restraint of trade were, in general, void and so unenforceable, unless the restrictions they contained were shown to be reasonable in the interests of the parties themselves and reasonable in the interests of the public. The House so ruled in Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] AC 535, and that ruling continues to represent the law today. 9. In the field of restrictive trade agreements more generally, the law was developed in a series of decisions of which five in particular were relied on in argument. It was pointed out, quite correctly, that some of these cases arose on facts different from those of the present case. 10. In the first of the cases, Jones v North (1875) LR 19 Eq 426, four parties were invited to tender for the supply of stone to a public authority. They made a collusive agreement by which one party was to buy stone from the other three and submit the lowest tender, two parties were to submit a higher tender and the fourth party was to submit no tender. There is nothing in the report to suggest that the public authority knew of this agreement, and every reason to suppose that it did not. The matter came before the court when the defendants, in breach of the agreement, submitted a tender, which was accepted, and the party which was to supply under the agreement brought proceedings to restrain performance by the party which had broken ranks. The action succeeded. Bacon V-C considered the plaintiff’s case (p 429) as “very honest". It was submitted (p 428) that the plaintiff could not obtain equitable relief since the arrangement was a device to compel the authority, under the fiction of a public competition, to accept tenders not representing the real market price of the commodity, but this submission the vice-chancellor rejected, finding the agreement (p 430) to be “perfectly lawful", to contain “nothing illegal", and not deserving to be characterised as a conspiracy. 11. The case of Mogul Steamship Co Ltd v McGregor, Gow & Co (1888) 21 QBD 544 was tried at first instance by Lord Coleridge CJ without a jury. The plaintiff company claimed damages for a conspiracy to prevent it carrying on its trade between China and Europe. Its complaint was made against a group of shipowners who banded together in order to keep the trade between China and London in their own hands for their own commercial benefit and to that end offered a very low rate and an agreed rebate to shippers who shipped tea on their vessels but not, in the relevant year, on the plaintiff’s, the object being to exclude the plaintiff from the trade. The efficacy of the defendants’ agreement depended on its being known in the market, so there was no element of secrecy or non-disclosure, but the plaintiff attacked the agreement as wrongful and malicious, supported by bribery, coercion and inducement. The chief justice (pp 552-553) found no evidence of bribery, coercion or (in the relevant sense) inducement, and held (p 554) that the agreement was not unlawful, wrongful or malicious. 12. In the Court of Appeal ((1889) 23 QBD 598) Lord Esher MR, dissenting, held the agreement to be an indictable conspiracy (p 610). But a majority of the court agreed with Lord Coleridge. Bowen LJ, in a justly-celebrated judgment, held that in the absence of aggravating features such as (pp 614, 615, 618) fraud, intimidation obstruction, violence or interference with contractual or other rights, there was nothing in the defendants’ agreement or conduct to make it unlawful or actionable, and even if it were held to be a restraint of trade (pp 619-620) the agreement would be void and unenforceable, not actionable or criminal. Fry LJ gave a reasoned judgment, upholding the judgment of the chief justice (p 632). 13. A further appeal to the House was unanimously dismissed by a seven-member bench: [1892] AC 25. It was accepted that the defendants had acted to advance their own commercial interests, and with no malicious or wrongful object of injuring the plaintiff company, although their gain was inevitably its loss. In the absence of any aggravating feature such as misrepresentation, compulsion, intimidation, violence, molestation or inducement of breach of contract, the defendants’ conduct would not have been unlawful if done by a single independent party and was not rendered unlawful by their combination. Even if a restraint of trade, the defendants’ agreement was at most void and unenforceable, not actionable or indictable. 14. The decision of the Privy Council in Attorney General of the Commonwealth of Australia v Adelaide Steamship Co Ltd [1913] AC 781 concerned an agreement between a group of colliery owners and a group of shipowners which was ancillary to an agreement between the colliery owners themselves. No more need be said of these agreements than that, as the Board held (pp 806, 808), both were very obviously in restraint of trade. The appeal turned on the Australian Industries Preservation Act 1906 which, analogously with the Sherman Act which featured in the argument and the judgment, criminalised certain anti-competitive acts done with (sections 4 and 7) the intention or (section 10) the effect that such act should be to the detriment of the public. The judgment of the Board was given by Lord Parker of Waddington, who took the opportunity to conduct a detailed review of the relevant common law principles. He summarised their effect at p 797: “It is only necessary to add that no contract was ever an offence at common law merely because it was in restraint of trade. The parties to such a contract, even if unenforceable, were always at liberty to act on it in the manner agreed. Similarly combinations, not amounting to contracts, in restraint of trade were never unlawful at common law. To make any such contract or combination unlawful it must amount to a criminal conspiracy, and the essence of a criminal conspiracy is a contract or combination to do something unlawful, or something lawful by unlawful means. The right of the individual to carry on his trade or business in the manner he considers best in his own interests involves the right of combining with others in a common course of action, provided such common course of action is undertaken with a single view to the interests of the combining parties and not with a view to injure others (the Mogul Steamship Case 23 QBD 598; [1892] AC 25).” The attorney-general’s appeal failed because the Board found (p 816) no satisfactory evidence of an intention to act to the detriment of the public and no sufficient evidence of injury to the public. 15. In North Western Salt Co Ltd v Electrolytic Alkali Co Ltd [1913] 3 KB 422 an obviously restrictive agreement came before the Court of Appeal and Farwell LJ said ([1914] AC 461, 465, although this does not appear in the incomplete Court of Appeal report): “In the present case, no circumstances in my opinion could justify such a contract made for the mere purpose of raising prices, with the inseparable incident of depriving the members of the public of the choice of manufacturers, while hoodwinking them into the belief that such choice is open to them …” The Court of Appeal accordingly held, by a majority, that the agreement was in restraint of trade, and so unenforceable, despite the defendants’ failure to plead this defence. An appeal to the House succeeded. Clearly the combination in question was one the purpose of which was to regulate supply and keep up prices (p 469) but the public interest had not necessarily or even probably been damaged (p 471) and the Court of Appeal had no material before it to decide whether it had been damaged or not (pp 469, 470). The agreement had not been shown to be in unreasonable restraint of trade and was therefore enforceable. 16. Rawlings v General Trading Co [1921] 1 KB 635 concerned an agreement made between prospective bidders at an auction of military surplus stores. They agreed that in order to avoid competition only one of them should bid. Thus the defendant was to bid on their joint account, and the goods purchased were to be shared equally, each paying half the purchase price. The goods were duly knocked down to the defendant, but he reneged on the agreement, which the plaintiff then sued to enforce. At first instance ([1920] 3 KB 30, 35) the judge held that, at any rate where goods were the property of the public, it was against public policy that people should combine at an auction to procure that goods were sold at a price considerably below their fair value, with the necessary result that the public were defrauded. It was the equivalent (p 34) of secretly using a puffer to drive the price up. He dismissed the action. In the Court of Appeal ([1921] 1 KB 635), Scrutton LJ agreed with the judge. He thought it clear that the agreement was neither criminal nor actionable at the suit of the vendors (p 643), but considered that the restrictions accepted in the agreement, although reasonable in the plaintiff’s interest, were contrary to the interest of the public and thus an unjustified and unenforceable restraint of trade (pp 643, 644, 647). A majority of the court held otherwise. Bankes LJ regarded the judge’s conclusion as contrary to settled authority (pp 640-641). Atkin LJ shared that view (p 652), but also held that the agreement was one the parties were free, in the absence of express or implied misrepresentations intended to deceive, to make and enforce (p 648), and there was nothing in this agreement which was ex facie illegal (p 652). 17. The effect of these authorities may be succinctly summarised. The common law recognised that an agreement in restraint of trade might be unreasonable in the public interest, and in such cases the agreement would be held to be void and unenforceable. But unless there were aggravating features such as fraud, misrepresentation, violence, intimidation or inducement of a breach of contract, such agreements were not actionable or indictable. In the course of the authorities a number of different reasons were given for this conclusion. They included the following: (1) While commercial parties could not lawfully act with the wrongful and malicious object of injuring another party, they were free to promote their own business as they thought fit, “however severe and egotistical” such means might be, even though this might inflict loss on others. See Mogul: Lord Coleridge CJ (pp 552-553); Bowen LJ, p 614, 620; Fry LJ, pp 622, 624, 625; Lord Halsbury, pp 36, 40; Lord Hannen, pp 58-59. (2) While agreements in restraint of trade might be injurious to the public interest, they might also confer benefits on the public, as by preventing cut-throat competition, loss of supplies or services or production facilities, lowering of wages or unemployment. See Mogul: Lord Coleridge CJ, p 548; Bowen LJ, p 619; Fry LJ, pp 626-627; Lord Bramwell, p 46; Adelaide Steamship, Lord Parker, pp 809-810; 813, 816; North Western Salt, Lord Haldane LC, pp 469-471; Lord Parker, p 480; Lord Sumner, p 481. (3) Other than in very clear cases the courts were not well-fitted to assess whether restraints of trade were injurious to the public or not, and it was not “the province of judges to mould and stretch the law of conspiracy in order to keep pace with the calculations of political economy". See Mogul: Bowen LJ, pp 615, 620; Fry LJ, pp 625-626; Lord Watson, p 43; Lord Bramwell, pp 45, 49; Lord Morris, pp 50-51. (4) To limit the bounds of competition would be contrary to what modern legislation had shown to be the present policy of the state. See Mogul: Fry LJ, p 626. (5) The victim of an anti-competitive practice could show no legal right which had been infringed. See Mogul: Lord Halsbury LC, p 38. (6) There was no authority for the proposition that it was actionable for one party to compete against another for the purpose of gain and not out of actual malice, even though the object was to drive that party away from his place of business and did so. See Mogul: Fry LJ, pp 630-632; Lord Bramwell, p 46; Lord Field, p 57. 18. The contemporary relevance of these common law principles was affirmed by the House relatively recently in British Airways Board v Laker Airways Ltd [1985] AC 58, 79. Laker had brought proceedings in the United States District Court for the District of Columbia claiming large damages under the Sherman and Clayton Acts against a number of airlines, including British Airways and British Caledonian Airways. The text of Laker’s Complaint was annexed to the judgment of the Court of Appeal ([1984] QB 142, 203-209). It alleged that the defendants had conspired to drive Laker out of business on the North Atlantic route by (among other things) carrying passengers at loss-making fares, supplying free in-flight services to low-fare passengers, seeking to discourage potential participants in a scheme to rescue Laker from the financial straits to which it had been reduced and paying very high secret commissions to travel agents to divert potential Laker passengers. British Airways and British Caledonian brought counter-proceedings in the English court, seeking to restrain Laker from proceeding in the US District Court. This action was not, however, based on the contention that England was a more convenient forum for pursuit of Laker’s claim, although plainly Laker would have had no difficulty serving those airlines here. It was accepted before Parker J at first instance ([1984] QB 142, 150) and before the Court of Appeal (p 186) that neither Laker’s claim nor substantially the same claim could be pursued in the English court. In an opinion with which the other members of the House agreed, Lord Diplock fastened on two propositions which were decisive of the civil appeals before the House. The second, alone relevant for present purposes, was stated in these terms ([1985] AC 58, 79): “The second proposition, that of English law, was understood by your Lordships to have been common ground between the parties, at any rate throughout the lengthy hearing of the appeal; no argument casting any doubt upon it was advanced. The proposition is that, even if the allegations against B.A. and B.C. in the complaint in the American action can be proved, they disclose no cause of action on the part of Laker against B.A. or B.C. that is justiciable in an English court. The Clayton Act which creates the civil remedy with threefold damages for criminal offences under the Sherman Act is, under English rules of conflict of laws, purely territorial in its application, while because the predominant purpose of acts of B.A. and B.C. that are complained of was the defence of their own business interests as providers of scheduled airline services on routes on which Laker was seeking to attract customers from them by operating its Skytrain policy, any English cause of action for conspiracy would be ruled out under the now well-established principle of English (as well as Scots) law laid down in a series of cases in this House spanning 50 years of which it suffices to refer only to Mogul Steamship Co Ltd v McGregor, Gow & Co [1892] AC 25 and Crofter Hand Woven Harris Tweed Co Ltd v Veitch [1942] AC 435.” 19. In cases where aggravating elements, notably misrepresentation and deception, have been found, defendants have been successfully prosecuted for conspiracy to defraud. Thus in R v De Berenger (1814) 3 M&S 67 the defendants were successfully prosecuted for conspiring by false rumours to raise the price of the public funds, causing loss to those who bought during this temporary rise. In R v Lewis (1869) 11 Cox CC 404 the defendants were convicted of conspiring to obtain money by divers false pretences and deceptive practices. In Scott v Brown, Doering, McNab & Co [1892] 2 QB 724, a civil case, the plaintiff was found to have created a false market in shares by false and fictitious acts. All these cases fall very clearly on the wrong side of the line drawn in the authorities summarised above. 20. In his judgment in the present case, with which Field J agreed, Auld LJ reviewed most of these authorities. He was sympathetic to submissions that the decision in Jones v North turned on the Vice-Chancellor’s questionable view that there was no dishonesty, and that such an agreement would, certainly since the Second World War, have been regarded not only as unenforceable but also criminal (para 50). Either way, the decision was hardly a firm foundation for the broad proposition that the common law had never recognised dishonest price fixing as a common law conspiracy to defraud. Of the Mogul case, Auld LJ observed that there was no complaint or finding of dishonesty or of other unlawful conduct, and the judgments of the Court of Appeal majority and the House of Lords showed that the result would have been different if there had (para 51). It was moreover accepted that the purpose of the arrangement was to advance the trade interests of the defendants and not to harm others. The Adelaide Steamship judgment was discounted on the ground that there was no finding of dishonesty or of intention to injure others, elements which, if present, would have led to a different result (para 52). Auld LJ pointed out that in Rawlings there was no convincing evidence that the price paid was below the fair value and observed that “the court, as a whole, did not regard the conduct as criminal, no doubt because, as Scrutton LJ indicated, at pp 643, 647, and Atkin LJ at pp 647, 648, there was no allegation or evidence of misrepresentation or fraud on the vendor …” (para 53). Auld LJ regarded R v De Berenger, R v Lewis and Scott v Brown, Doering, McNab & Co, as useful examples of what was lacking in the civil cases on which Mr Norris relied, plain dishonesty. They showed, he said (para 55), that the critical point is not one of law as to the applicability or otherwise of the common law offence of conspiracy to defraud to price-fixing agreements, but one of fact or evaluation on a case by case basis as to the presence of dishonesty. Laker was not cited to the Divisional Court. |
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