The Topline
“In recent years we’ve seen a marked trend towards group litigation in areas as diverse as data protection/privacy, competition, environmental/sustainability, product liability, financial services, technology; the list goes on, and it’s growing all the time. A recent push in secret commission claims is just one example.” – Nick McQueen
In this briefing, Walker Morris Commercial Dispute Resolution Partner Nick McQueen explains what's required to bring group litigation in England and Wales in light of recent case law; and offers practical advice for businesses faced with such claims.
Group litigation: The options
We often hear the words 'class action' when we think of group litigation/mass claims, typically brought by consumers as they become increasingly aware of their rights and the ability to join together to launch court proceedings. They're often fuelled by the availability of third-party funding and an active contingent of claimant law firms and, in some cases, consumer 'champions', willing to take on this type of litigation.
We don't actually have a US-style 'class action' system here in England and Wales. Instead, there are a number of procedural mechanisms in our court rules (the Civil Procedure Rules or CPR) and in consumer and competition law which allow group litigation to be brought, providing certain conditions are met. The main ones are:
- Representative claims: This is where one or more claimants represent other claimants with the "same interest".
- Group Litigation Orders (or GLOs): A GLO is an order under which the court manages multiple claims that have "common or related issues of fact or law".
- Multiple joint claims: This is where multiple claimants use a single claim form and their claims can be "conveniently disposed of in the same proceedings".
- Collective proceedings before the Competition Appeal Tribunal (the CAT): This is where proceedings are brought for alleged breaches of competition law on behalf of a defined class of claimants by a representative (who may but doesn't need to be a class member).
There are also provisions for company shareholders to bring derivative claims on the company's behalf. These are outside the scope of this briefing, but please contact Nick if you need advice or assistance in this area.
As a general point, outside of the specific procedures listed above, the court has a variety of case management powers that can be used to co-ordinate joint claims. This inherent flexibility is one advantage, for both claimants and defendants, of litigating in the English courts.
Turning then to consider each of the main group litigation options in more detail...
Representative claims
Representative claims under CPR 19.8 attract a lot of interest because they're an 'opt-out' mechanism, meaning that one claimant can bring the claim on behalf of an entire class of claimants, without requiring their consent or even awareness. A resulting judgment or order will bind them all unless they opt out (or the court orders otherwise). This is significant, because it avoids the administrative difficulties of having to seek individuals' positive opt-in, opening up the litigation to a potentially huge class of claimants. Even where the amount of compensation awarded might be low, the financial exposure for defendants could run into £billions.
Claimants first need to get past the required "same interest" test. They must have a common interest and common grievance, and the remedy must be beneficial to them all.
In the landmark case of Lloyd v Google 1, consumer champion Richard Lloyd failed to meet this test when attempting to bring a representative claim on behalf of an estimated class of 4.4 million Apple iPhone users for alleged unlawful processing of their data. Lloyd claimed a uniform amount of damages on behalf of each person within the defined class without seeking to allege or prove any distinctive facts affecting any of them, save that they didn't consent to the abstraction of their data. No financial loss or distress was alleged.
The court unanimously ruled in Google's favour, restoring the original High Court judgment. Firstly, "damage" in the relevant data protection legislation referred to material damage or mental distress caused by unlawful processing, not to the actual processing itself. Secondly, to recover compensation under that provision it was necessary to prove what unlawful processing occurred relating to a given individual.
The court noted that it's not a bar to a representative claim that each claimant has a separate cause of action, or that the relief claimed consists of or includes damages. Damages may be claimed if they can be calculated on a basis which is common to all of the represented claimants. Interestingly, the court also flagged that common issues of law or fact (such as liability) could be decided in a representative claim, which would then form the basis for subsequent individual compensation claims. It was suggested that such a two-stage procedure wasn't proposed in this case because it wouldn't be economic to prove loss on an individual basis.
While the Supreme Court's decision came as welcome relief for businesses concerned about an opening of the group litigation floodgates, case law since Lloyd v Google has been mixed, and the outlook is uncertain.
In Commission Recovery v Marks & Clerk 2, about alleged secret commissions in relation to referrals for IP rights renewals, the High Court held that the same interest test had been met and allowed the representative claim to proceed. So long as there was no conflict of interest between, or prejudice to, class members, there was no reason in principle why they shouldn't all be represented by the same person. Here, there was nothing in the points raised by the defendants that would involve class members affected by an issue prejudicing the interests of others.
The court pointed out that there's no requirement for the proceedings to resolve all possible claims. If some claimants could be assisted to access the court, then that was "better than none".
The court noted that a claim for undisclosed or secret commission was perhaps a reasonable example of a claim where an entitlement could be calculated on a basis common to all members of the class. Importantly, the fact that the commission appeared to vary between individuals didn't deflect from that point. Quoting from Lloyd v Google the court said that, in any event, there were still present at least some of the "advantages in terms of justice and efficiency" if "common issues of law or fact are decided through a representative claim, leaving [over] issues which require individual determination".
The fact that the claim was focussed on the recovery of undisclosed or secret commission rather than damages requiring individualised assessment was a relevant factor in the exercise of the court's discretion in this case.
An appeal of this decision is due to be heard by the Court of Appeal in November 2023 and we'll be watching the outcome closely.
By contrast, in Prismall v Google 3 the court struck out a representative claim alleging misuse of private information because the same interest test was not met. It was thought that such claims might have a chance of succeeding where Lloyd v Google failed, because mere 'loss of control' damages are capable of being awarded for misuse of private information.
To get around the issue with individualised assessment of damages, the claim was confined to seeking lowest common denominator damages for each class member. The court concluded that this wasn't a situation in which every class member, or indeed any given class member, had a realistic prospect of establishing a reasonable expectation of privacy or of crossing the required minimum threshold in relation to such an expectation. Equally, departing from the lowest common denominator scenario and bringing into account individualised factors for the purposes of showing that a reasonable expectation of privacy existed in particular situations would mean that the same interest test wasn't met.
While it wasn't then necessary to go on and decide the point, neither could it be said that any class member had a viable claim for more than trivial damages for loss of control of their information.
GLOs
GLOs are designed to be a cost-effective and efficient way of case managing multiple similar claims and can assist the parties to share costs and litigation risk. The GLO procedure (under CPR 19.21 to 19.26 and CPR Practice Direction 19B) is opt-in, meaning that each claimant must actively choose to join the litigation by issuing an individual claim form. GLOs need to be applied for, but the court also has the power to make them of its own initiative. Once a GLO is made, there's a cut-off date by which claimants must be added to a 'group register'. The court may direct that one or more claims on the register proceed as test claims and may appoint lead solicitors for the claimants or defendants. Using the GLO procedure can help minimise the risk of multiple proceedings and potentially inconsistent outcomes.
The test is not as narrow as for representative claims, because the GLO provides for the case management of claims that give rise to common or related issues of fact or law. The issues need to be precisely identified because a judgment or order is binding on all parties unless the court orders otherwise. It's important to make sure this is done before any test claims proceed, to avoid uncertainty and possible disputes later down the line; an issue highlighted in the recent case of Axa Sun Life v Commissioners of Inland Revenue 4.
Multiple joint claims
CPR 19.1 provides that any number of claimants or defendants may be joined as parties to a claim, while CPR 7.3 provides that a claimant may use a single claim form to start all claims which can be conveniently disposed of in the same proceedings.
The recent case of Abbott and others v Ministry of Defence 5 was a successful appeal against a decision requiring 3,559 individuals to bring their claims for noise-induced hearing loss by each paying for and issuing a separate claim form, rather than using one single claim form for everyone. Such was the appeal's importance that it was heard by two judges, including the Vice President of the High Court's King's Bench Division.
The court confirmed that the governing principle is not whether there's a large number of claimants and/or causes of action. It's the convenience of disposing of the issues arising between the parties in a single set of proceedings. The degree of commonality between the causes of action, including as part of that the significance for each individual claim of any common issues of fact or law, will generally be the most important factor in determining whether it would, or would not, be convenient to dispose of them all in a single set of proceedings.
The claimants must act together to present a joint case throughout the proceedings and also at trial unless the court specially orders otherwise.
The CPR provides no absolute limit on the number of claimants on a single claim form. Weight of numbers alone is not relevant to whether it's proper to use a single claim form.
There's no definition of the word 'proceedings' in the CPR and its meaning depends on context. One set of proceedings may involve more than one method of dispute resolution, including the possibility of more than one trial.
Regarding the test of convenience: "disposed of" means finally determined and is not the same as case managed; the test is only that common disposal be convenient; and convenience is an ordinary word conveying usefulness or helpfulness in respect of a possible course of action.
Collective proceedings before the CAT
Brought in under the Consumer Rights Act 2015, collective proceedings before the CAT are filed in accordance with section 47B of the Competition Act 1998 and are governed by rules 75 to 93 of the CAT Rules 2015. They can be opt-out or opt-in and have four main stages: the making of a collective proceedings order (CPO); trial of the common issues; determination of any individual issues; and distribution of any damages.
The CAT may certify claims as eligible for inclusion in collective proceedings where, having regard to all the circumstances, it's satisfied that the claims: are brought on behalf of an identifiable class of persons; raise common issues; and are suitable to be brought in collective proceedings. In determining this last point, the CAT considers whether the claims are suitable for an aggregate award of damages (made without undertaking an assessment of the amount of damages recoverable in respect of each represented person).
The number of opt-out actions has grown steadily since the Supreme Court's 2020 landmark judgment in Merricks v Mastercard 6, after which the CAT made its first CPO on an opt-out basis. Notably, we're already seeing indications that claimants and/or representatives will seek to use this available route to bring innovative, novel claims by framing them as alleged infringements of competition law, for example data and environmental claims 7. It will be interesting to see how this trend develops, given the failed attempts to date at bringing data class actions using the other group litigation routes; and the ever-increasing focus on sustainability.
Group litigation: Practical advice and how we can help
Group litigation has the potential to cause both significant financial and reputational damage. To reduce the risk of being on the receiving end of a group litigation claim, it's essential that businesses take compliance seriously; making sure that robust policies, procedures, systems, safeguards, and organisation-wide training are in place, across all risk areas. Contractual arrangements should also be regularly reviewed to make sure they address clearly and unambiguously the parties' respective obligations and liabilities. Having appropriate insurance cover in place may help to limit the damage.
If the business finds itself facing a group litigation claim, it's essential to seek early advice on strategy, options, and next steps. Depending on the circumstances, there may be cost advantages and efficiencies associated with using a particular court or other procedure (for example a defendant can, and may want to, apply for a GLO).
Dealing with any breaches promptly and effectively is key, and so having an action plan ready – before an event occurs – is essential. In conjunction with your advisers, communicate clearly to the affected individuals so that they can take any necessary steps to minimise loss. There may also be requirements to report to a relevant regulator or other body. It may also be appropriate to consider collective redress schemes to help rebuild customer trust and shore up any reputational damage.
Footnotes
1. Lloyd v Google LLC [2021] UKSC 50 and see our briefing on this case
2. Commission Recovery Limited v Marks & Clerk LLP and another [2023] EWHC 398 (Comm)
3. Prismall v Google UK Limited and another [2023] EWHC 1169 (KB)
4. Axa Sun Life plc and others v Commissioners of Inland Revenue and another [2023] EWHC 944 (Ch)
5. David Abbott and others v Ministry of Defence [2023] EWHC 1475 (KB)
6. Mastercard Incorporated and others v Walter Hugh Merricks CBE [2020] UKSC 51
Originally Published by 27 July 2023
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
