The English High Court offers limited routes to bring “opt-out” group claims but, in recent years, funded claimants have attempted to bring representative actions under CPR 19.8 at a notable rate. The rule has been available, in some form, for use in English court proceedings for over 100 years, but its efficacy as a method for bringing group litigation is now the subject of more frequent judicial scrutiny.

The “same interest” test & bifurcation

Under CPR 19.8, courts can permit proceedings to continue on a representative basis provided that the representative party and those it seeks to represent have the “same interest” in the litigation. However, the ”same interest” test has proven difficult to meet, particularly in relation to the degree of uniformity of class members’ losses that is required in claims for damages.

Following the Supreme Court’s decision in Google v Lloyd, claimants bringing CPR 19.8 representative actions have sought to bifurcate issues between trials to meet this test. As the Supreme Court held, “common issues of law or fact [can be] decided through a representative claim, leaving any issues which require individual determination… to be dealt with at a subsequent stage of the proceedings”.

Using this approach, claimants have suggested a split of trials between liability and quantification of losses (referred to as bifurcation), pushing for defendant-side liability to be decided via the representative action (and so to be subject to the “same interest” test), while claimant-side issues such as loss would be determined later, on an individualised basis (avoiding the test for those aspects of the claim). The perception is that this works to increase settlement pressure on defendants, by heightening the risk of a potentially damaging early judgment on their liability. The model would therefore appear ideal for funders who would, in theory, avoid incurring significant costs on claimant-side issues before settlement.

In spite of this, recent High Court decisions have shown that there remains a high bar for claims to proceed on a representative basis. Google v Lloyd itself called into question the suitability of representative actions for breaches of data protection rights and, in the context of securities litigation, the High Court in Wirral Council v Indivior and Reckitt refused to allow a representative action to proceed where it considered that the claim was being used strategically to force bifurcation and thereby subvert the court’s case management powers.

Class certification

While there is no formal class certification stage for CPR 19.8 representative actions, the consistent approach from defendants facing such claims is to issue a strike-out application challenging the appropriateness of claims being brought in this way. The result is that actions brought under CPR 19.8 are, in effect, subject to a preliminary stage where the strike-out standard is applied.

In this sense, a comparison can be drawn to the procedure for bringing collective proceedings in the CAT. As explained in a previous blog, a proposed class representative (“PCR”) with a claim must first obtain certification by the CAT, which will grant a collective proceedings order, before the claim can proceed to trial.

The strategic decision – which procedure to use to bring a claim?

Although, taken at face value, the CPR 19.8 representative action and CAT collective action appear similar, in reality the bar to achieve certification of claims in the CAT is set much lower. The CAT, Court of Appeal and Supreme Court have each been far more willing to certify competition law collective proceedings than the courts have been to allow claims to proceed under CPR 19.8. Indeed, in the three and a half years that have passed since the Supreme Court’s decision in Mastercard Incorporated and others v Walter Hugh Merricks CBE, every competition law collective action to proceed to a certification hearing has been certified, while only a single CPR 19.8 action brought by a representative claimant has survived a strike-out challenge. The CAT has even been willing to give PCRs an opportunity to improve their claims if they failed to meet the, already low, certification standard on their first attempt. In contrast, the High Court has been markedly less accommodating to claimants seeking to bring representative actions.

Added to this has been the CAT’s willingness to certify collective actions despite these claims having, often, less than immediate connections  to competition law. This has resulted from claimants reconceptualising claims within competition law causes of action to take advantage of the collective actions regime. One example is the CAT’s willingness to certify Gormsen v Meta, a case which concerns data protection issues not dissimilar to those in issue in Google v Lloyd.  Another is the Gutmann v First MTR South Western Trains claim, which appears more closely linked to consumer protection rather than competition law, and therefore more suited to a representative action in the High Court, were it not for the higher threshold applied to such claims.

Despite the CAT collective actions regime still being in its first ten years, the CAT has approved two collective settlements, and a further case has now gone through the first collective actions trial (for which, at the time of writing, judgment is awaited). As such, we will soon have greater clarity on the CAT’s approach to distribution of funds and whether, in practice, it is willing to exercise its discretion to apply the terms agreed in litigation funding agreements – and approved by the CAT at certification –to grant funders the return on their investments which they envisaged, even where the distribution to the class may then be relatively small.  The CAT’s comments in Meta, in which the Tribunal indicated that a 3.8 times multiple on investment is a defensible return whilst an 8.3 times return perhaps was not, points to the CAT potentially exercising its discretion to depart from the terms of the funding agreements where it deems it appropriate to do so, when it comes to awarding the funder its return at the conclusion of the proceedings.

Conclusion

Taken together, these factors suggest that, historically, collective actions in the CAT have presented a materially lower-risk investment for funders in the early stages of a claim, as compared to damages claims brought under CPR 19.8. All things being equal, the returns in both types of action would also appear commensurately significant, as both provide for claims to be brought on behalf of “opt-out” classes. It is therefore not clear that there would be inherently higher rewards in representative actions, to offset the greater risks in seeking to use this, more challenging procedure.

The strategic decision for funders and claimants will therefore be whether their claims can plausibly be formulated as competition law causes of action, so they can benefit from the more lenient collective actions regime in the CAT. As above, once claims are certified to proceed to trial (or otherwise pass the initial strike-out threshold) the pressure on defendants to settle can dramatically increase, improving funders’ prospects of achieving their desired returns.

The authors would like to thank Calum Paton (trainee) for his assistance with this article.

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