With the rise of litigation funding of group actions, there has been an increasing use of representative actions by Claimants in recent years. In turn, Defendants are challenging this and the Courts are scrutinising cases in an attempt to draw a line between the type of cases that should, or should not, be allowed to progress as a representative action. This article explains the tests that the Courts are applying and addresses examples of cases where the Courts have either allowed group claims to progress as a representative action or have struck out such claims. The Courts are seeking to balance principles of access to justice with ensuring their case management powers are not abused.
The representative action, now codified as CPR 19.8, has been available, in some form, in English High Court proceedings for over 150 years. However, it is only in the last few years that its efficacy has been tested by litigation funders, and its application has been scrutinised by the Courts, in real detail.
Put simply, a claim can begin or be continued as a representative action if the representative and those they are representing have the “same interest” in the proceedings, and the Court, using its discretion, decides that the claim can so proceed. Provided the “same interest” requirement is met, as Lord Leggatt noted in Lloyd v Google, the overriding objective is likely to militate in favour of allowing a claim to be continued as a representative action rather than leaving members of the class to pursue claims individually. Specifically, ensuring that the parties are on an equal footing, proportionality, saving expense, and the allocation of the Court’s resources are all factors that would support a decision to allow a representative action to proceed.
A recent spate of cases has exposed a network of complex issues underlying the superficially simple “same interest” requirement and the Court’s discretionary powers of case management. There are three main issues which arise:
- The relationship or tension between the represented class members – whether they share common issues and the same aims;
- The type of relief claimed – whether the relief is common to all of the represented class members or whether there is some individualised element; and
- How the Courts should use their case management powers to either enable or restrict the ambit of representative actions in circumstances where group claims could otherwise be progressed outside of the representative action procedure.
In seeking to draw the line between when a representative actions will or will not be appropriate, the Courts are having to balance issues of access to justice against concerns that claimants are attempting to oust the usual case management powers of the Court. Whilst Robin Knowles J noted in the first instance decision in Commission Recovery v Marks & Clerk “[i]f the choice is this or nothing, then better this”, Mr Justice Green has recently emphasised in Wirral Council v Indivior that “it would be unfair and unjust, and contrary to the overriding objective, to allow the Representative Proceedings to oust the jurisdiction of the Court to case manage the claims from the start”.
Relationship between represented class member
The application of the “same interest” requirement to the relationship between the represented class members is necessarily fact-dependant, but there are a number of common law principles that have developed over the last 100 years.
The overarching principle was emphasised by Lord Leggatt in Lloyd v Google, in which he noted that the purpose of the “same interest” requirement is to ensure that the representative can “be relied on to conduct the litigation in a way which will effectively promote and protect the interests of all members of the represented class”. This lies at the heart of the representative action.
The more specific principles that have developed in more historic cases include the following.
- It does not matter that members of the class and the representative all technically have separate causes of action. The requirement is only for a common interest in one or more issues, rather than a joint claim. For example:
- In Duke of Bedford v Ellis [1901], Mr Ellis was permitted to bring a claim on behalf of himself and “all other growers of fruit, flowers, vegetables, roots or herbs” to enforce their rights to stands in Covent Garden market.
- In David Jones v Cory Bros & Co Ltd [1921] five individual colliery workmen were permitted to bring claims against their employer on behalf of themselves, and on behalf of all other underground and surface workmen, for breaches of statutory safety requirements.
- The “same interest” requirement is not met where there is a conflict of interest between class members: For example:
- In Markt & Co Ltd v Knight Steamship Co Ltf [1910], the Court of Appeal found that the claim for damages arising from the shipping of contraband goods could not proceed as a representative action as formulated because the class of claimants included (i) claimants who had themselves shipped contraband goods, and (ii) claimants who had not. These two different groups were seen to have conflicting interests.
- In Emerald Supplies Ltd and another v British Airways PLC [2010], the High Court found that the claim for damages arising from inflated prices in the supply chain could not proceed as a representative action because the inflated price might have been passed on through the supply chain by some claimants to other claimants, which created an “inevitable conflict” between the claims of different class members.
- However, the “same interest” requirement may still be met where there are divergent interests between class members. For example in Irish Shipping Ltd v Commercial Assurance Co (The Irish Rowan) [1991] the Court of Appeal allowed a defendant representative action to proceed against 77 insurance companies, all subject to separate but identical contracts, even though some of the issues raised did not affect all of the defendants equally.
Type of relief claimed
The Courts have also historically grappled with a number of issues in relation to the type of relief claimed by claimants in a representative action.
As Nugee LJ stated in the Court of Appeal’s judgment in Commission Recovery v Marks & Clerk, “the representative action finds its simplest application in claims for declaratory relief”. This is exemplified by a number of historic cases in which the Court gave permission for a representative action to proceed. For example:
- In David Jones v Cory Bros & Co Ltd [1921] and in Thomas v Great Mountain Collieries Co the claimants were entitled to sue in a representative capacity for declarations that their employers had breached statutory requirements and that the classes were entitled to damages, but were not permitted to sue in a representative capacity for the actual damages on behalf of the classes they were representing.
- In Prudential Assurance Co Lt v Newman Industries Ltd [1981], the claimants were entitled to sue in a representative capacity for a declaration that shareholders who had suffered loss as the result of a conspiracy were entitled to damages.
Where trickier issues arise is in relation to claims where the object of the proceedings is to claim monetary relief, whether in the form of damages or otherwise. Generally, this necessitates an individualised assessment of damages in relation to which there is no common issue, and which requires the participation of the individuals concerned. This will not typically meet the “same interest” test, and the Courts have generally considered that a representative action is not appropriate for a claim which involves the assessment of individual damages.
There are some specific exceptions to that, where a representative action for damages would be likely to be allowed to proceed. These include:
- In the case of insurance underwritten by insurance syndicates, claims for damages brought by a member of the syndicate on behalf of the other members.
- Cases where entitlement to damages can be calculated on the basis that is common to all the members of the class. For example, if every member of the class was wrongly charged a fixed fee, or where all of the class members acquired the same product with the same defect which reduced its value by the same amount.
- In Commission Recovery v Marks & Clerk, where the representative brought claims for damages in relation to “secret commissions”. We explain why a representative action was allowed to proceed in this case in more detail below.
Lord Leggatt suggested in Lloyd v Google that, to overcome the issue of individualised assessment of damages, there may be “advantages in terms of justice and efficiency in adopting a bifurcated process” whereby “common issues of law or fact are decided through a representative claim, leaving any issues which require individual determination… to be dealt with at a subsequent stage of the proceedings”. He did not offer further guidance on what the bifurcated process would look like albeit it is an approach followed in other jurisdiction. It has been the subject of further discussion in subsequent judgments.
Recent judgments on representative actions
Over the last few years, parties and litigation funders have made a spate of attempts to bring representative actions in relation to a number of different types of claim. The principles set out above have been tested and applied by the Courts, and a pathway for how claims might proceed as representative actions and what claims might not appears to be emerging.
Lloyd v Google
This was the landmark Supreme Court judgment on the use of the representative action procedure in a claim for damages arising out of unlawful processing of data under s.13(1) Data Protection Act 1998. The Supreme Court did not permit the claim to proceed as a representative action. The Supreme Court determined that the “same interest” requirement was not satisfied because s. 13 of the Data Protection Act 1998 (as in place) did not confer an automatic right to compensation without the need to prove that the contravention had caused material damage or distress to each individual claimant. The damages claimed could therefore not be assessed on a common basis. Although the representative claimant put forward proposals for the assessment of damages (for example, the “lowest common denominator” or a “uniform per capita” basis) in an attempt to show that damages could be assessed on a common basis, the Supreme Court did not agree.
However, Lord Leggatt did make a number of observations which many have taken as an encouragement for the greater use of the representative action in appropriate claims. In particular, he stated that had the claim been brought as a claim for a declaratory judgment rather than a claim for damages, there would have been no reason to refuse to allow a representative action to proceed, with a bifurcated process perhaps being the appropriate way to assess the damages part of the claim.
Lord Leggatt’s support of the bifurcated process has led to a series of claims being issued in which the claims are expressly framed as first seeking a declaration by a representative party before separately considering the issue of damages. In turn, defendants have sought to strike out those claims with varying degrees of success.
Commission Recovery v Marks & Clerk
In its judgment in January 2024, the Court of Appeal upheld the High Court’s decision and allowed a claim to recover “secret” commission payments to proceed as a representative action. Here, the “same interest” requirement was met because the Court found that there was a common issue applicable to all members of the class, and there was no conflict of issue between members of the class.
The Court of Appeal also found that it was appropriate for the High Court to have exercised its discretion to direct that the claim could proceed as a representative action. Whilst the defendants argued that the claim was “pointless” because no member of the class would be able to recover any damages without individual participation, the Court of Appeal considered that it was for the claimant to decide if its claim was worth pursuing and, in pursuing the claim and obtaining backing from a commercial funder, the claimant had obviously made the assessment that it was worth pursuing. Lord Justice Nugee explained “There may indeed be difficulties ahead for [the claimant], but the Court should not in my judgement seek to second-guess CRL’s decision that it is commercially worth its while to continue with the litigation unless it can clearly see that the exercise is futile”.
At first instance, Mr Justice Knowles relied heavily on Lord Leggatt’s judgment in Lloyd v Google and stated “we are still perhaps in the foothills of the modern, flexible use” of representative actions “alongside the costs, costs risk and funding rules and practice of today and still to come”. He continued “[i]n a complex world, the demand for legal systems to offer means of collective redress will increase not reduce.”
We note that the Supreme Court recently refused Marks & Clerk permission to appeal the Court of Appeal’s decision.
Wirral Council v Indivior and Reckitt
In contrast to the pro-representative action judgments of the High Court and Court of Appeal in Marks & Clerk, the High Court has also recently issued a firm judgment refusing to allow a representative action to progress.
This was an unsuccessful attempt to use the representative action in the context of a claim under section 90 and section 90A of the Financial Services and Markets Act 2000. The High Court refused to allow the claim to proceed as a representative action, because it felt that to do so would force the use of the bifurcated procedure, which would subvert the Court’s case management powers.
In contrast to the approach in Marks & Clerk, Mr Justice Green criticised the approach of the representative claimant for failing to address the difficulties that would arise at the second stage of the proceedings. He stated “I do find it surprising that there is no clear strategy for taking these claims through to a conclusion, by which I mean the investors actually receiving some compensation. The funders must have contemplated funding the investors all the way through to such recovery (there would be no sense in doing otherwise) and yet they apparently have no idea how the proceedings will work save up to the obtaining of the declarations in the Representative Proceedings.”
This decision has exposed a tension between Lord Leggat’s suggested use of the bifurcated procedure in representative actions for damages, and the Court actually allowing that bifurcated procedure at the expense of its flexible case management powers.
One key factor that appears to have been behind Mr Justice Green’s refusal to allow the representative action to proceed in this case was that the claimants had also issued separate multi-party proceedings against the defendants in respect of the same causes of action. The claimants were seeking to progress the representative proceedings claim but had a “fall back” option if the representative proceedings were not allowed to continue. In such circumstances, the judge effectively saw the representative proceedings claim as an attempt to subvert the Court’s case management powers and effectively force upon the Court a particular way of splitting the issues of liability and quantum which the judge found to be inappropriate.
This judgment was handed down in December 2023, after the first instance decision in Marks & Clerk but before the Court of Appeal’s judgment. It remains to be seen whether this decision will be upheld on appeal.
Looking ahead
Claimants and litigation funders are testing the waters to assess what types of claims the English Courts will permit to proceed as representative actions. Lord Leggatt’s judgment in Lloyd v Google has spurred claimants on to issue claims in a bifurcated manner where claims for declarations are first sought through a representative action with subsequent claims for damages to be pursued after a declaration has been obtained. Claimants have had varying success with this. Whilst the Courts appear to be willing to overlook some of the practical difficulties that will ultimately arise at the quantum stage of such claims when first considering whether to allow the representative action to proceed, the Courts are also pushing back on attempts by claimants to use the representative actions procedure in order to subvert the Court’s usual case management powers or the effective progression of cases in the public interest. The development of where the line will be drawn between cases that will be allowed to proceed on a representative basis and those which will be halted will be an interesting area to watch.
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