I INTRODUCTION TO CLASS ACTIONS FRAMEWORK
Group litigation has been available in the English2 courts for over a century and is an established part of modern English civil procedure, with several significant cases passing through the courts each year.3 However, it is only in the past three years that true 'opt-out' class actions,4 as lawyers from the United States (US) would recognise them, have become available; and only then in the context of certain competition law claims. Nonetheless, while the English system is not as developed as certain jurisdictions, the variety of procedural mechanisms available is significant, particularly as against many European jurisdictions. Future advances both in terms of civil procedure and the class action market more generally (e.g., third-party funding, development of the claimant bar) are also likely to result in further development.
II OVERVIEW OF PROCEDURAL OPTIONS
The regimes available for English class or group actions broadly fall into two categories: the older 'opt-in' procedures, and the more recent opt-out procedure.5 As prescribed by these older procedures, the English courts have traditionally only heard opt-in actions, either by representative actions or group litigation. These regimes have become, and continue to be, an established and integral part of modern English civil procedure. However, there have been major recent innovations in the form of amendments to the Competition Act 1998 (CA) provided by the Consumer Rights Act 2015 (CRA). This introduced a new opt-out procedure, which established a 'US-style' class action regime in English law for the first time, currently though only for private competition litigation.6 Under such an action, a collective proceedings order (CPO) is obtained from the court, which then determines the scope of the class that will be bound by any subsequent judgment.
With regards to the older regimes, the Civil Procedure Rules7 (CPR) set out both representative actions8 and proceedings where group litigation orders (GLOs) are sought.9 Representative actions and proceedings where GLOs are sought share a number of similarities. For instance, they are both opt-in regimes, require a representative or lead claimant, and unlike collective proceedings, can be utilised for any type of action. Proceedings for GLOs, introduced more recently in 2000, have, however, become the more favourable of the two, due to the simpler procedure and lower standard of commonality required between the class members.
In contrast, the opt-out regime currently applies solely to the competition sphere. Prior to this, there had been a specific opt-in procedure for private competition law claims, though this was deemed to have been too restrictive in scope.10 Given the nature of competition law claims, namely where the loss to the individual is small but over a very wide class, the regime seeks to provide the collective redress that is considered imperative for effective remediation. Efforts have been made to introduce similar collective redress mechanisms to other sectors. For example, an amendment to the Data Protection Bill sought to apply the opt-out class action regime to data breaches but was rejected during the passage of the bill and is not contained in the enacted statute, the Data Protection Act 2018, although group litigation in this sphere does, as explained below, appear to be taking off. Despite its limited current application, and the lack of headway made in extending the scope of the regime, the new CRA regime remains of particular interest as it may possibly be a harbinger of future broader, or sector-specific, class actions in England.
In all class or group actions, regardless of the procedural form they take, the court must seek to ensure that each case is dealt with justly and at proportionate cost. This is known as the overriding objective.11
IIi THE YEAR IN REVIEW
The past 12 months have seen several further significant developments in relation to class and group actions.
i Opt-out class action proceedings
The English courts have continued to deal with issues arising from two cases where the opt-out class action procedure for competition cases has sought to be used.
Walter Hugh Merricks CBE v. MasterCard Inc and others (MasterCard)12
Filed on 8 September 2016 with the Competition Appeal Tribunal (CAT), MasterCard was the second follow-on claim brought under the new opt-out collective proceedings regime (the first being in relation to Dorothy Gibson v Pride Mobility Products Limited (Pride Mobility)).13 The claim followed on from the European Commission's finding that MasterCard had infringed EU competition law as a result of interchange fees on transactions between 1992 and 2007. The case was brought by the former Chief Ombudsman of the Financial Ombudsman Service and was valued by the claimants' lawyers at £14 billion, making it the largest claim heard in England to date. In 2017, the CAT refused to grant a CPO on the basis that expert evidence adduced at the certification stage failed to demonstrate a commonality of interest owing to the fact it could not be determined how much of the loss had been passed through to each proposed claimant. MasterCard was, therefore, the second of the collective proceedings cases tabled in England that failed to proceed beyond the certification stage. Following the CAT's ruling, the claimant representative sought permission from the CAT to appeal to the Court of Appeal. However, the application was dismissed in September 2017 on the basis that there was no jurisdiction to appeal a decision to approve or refuse a CPO. According to the CAT's reasoning, refusal to grant a CPO was not a decision 'as to the award of damages or other sum', for which an appeal right existed.14 Rather, it was a decision that the proposed manner of pursuing the claims was not permitted, and if the legislature had intended for a decision by the CAT making or refusing a CPO to be subject to appeal, it would have included an express provision for doing so. The application was therefore dismissed. However, the claimant representative subsequently sought – and obtained – permission to appeal from the Court of Appeal and at the same time filed an application to the Administrative Court of the High Court for a judicial review of the CAT's decision. In a hearing held in October 2018, the issue of whether the Court of Appeal had jurisdiction to hear an appeal against a refusal by the CAT to make a CPO was addressed. This was the first time the point had been considered since the introduction of the collective proceedings regime. In a judgment handed down the following month, the Court of Appeal found it did have such jurisdiction, and that a right of appeal therefore existed – provided the appeal raised a point of law. The joint hearing of the Court of Appeal and the Administrative Court (with the same judges sitting in both courts) to consider the substantive appeal was held on 5 and 6 February 2019, though no judgment had yet been handed down at the time of writing.
Although the challenges experienced in MasterCard (and, before it, Pride Mobility) are in part because of the complexity of issues raised in the claim, the respective judgments do not suggest (at least at a theoretical level) an overly strict stance being adopted by the CAT. In particular, the CAT has indicated that it does not require all significant issues to be deemed common issues for a claim to be suitable for a CPO, something that could be important in future litigation. Nonetheless, how this plays out in practice in future cases is still to be determined. Arguably, the experiences of claims under the collective proceedings regime to date are illustrative of the safeguarding role CPO applications were intended to have in protecting defendants against frivolous and unmeritorious claims, as opposed to setting any more general precedent.
The discussion by the CAT as to funding arrangements also merits consideration. Objections were raised by the defendants as to the third-party litigation funding arrangement in place on the following three grounds:
- it could be terminated by the funder (and so would not force the applicant to pay the defendants' costs, if ordered to do so);
- its liability was limited to £10 million; and
- its terms gave rise to a conflict of interest on the part of the applicant.
The CAT rejected grounds (b) and (c) but accepted ground (a). Therefore, while MasterCard demonstrates the opportunities provided by third-party litigation funding (with over £40 million of funding having been made available to the claimants in an action that would otherwise seem unfeasible without such support), it also highlights the potential challenges such funding arrangements might face.
MasterCard therefore helped elucidate the CAT's approach to opt-out collective proceedings actions in what is a very new area of the law and has also acted as a precedent for the latest collective proceedings cases that have been in the CAT, dealt with below.
Road Haulage Association Limited v. MAN SE and others (Road Haulage),15 and UK Trucks Claim Limited v. Fiat Chrysler Automobiles NV and others (UK Trucks)16 (together, the Trucks Applications)
The Trucks Applications were the third and fourth follow-on claims that have been brought pursuant to the new collective proceedings regime to date.
The Road Haulage CPO application has been brought under the opt-in collective proceedings regime, while the UK Trucks CPO application has been brought as opt-out collective proceedings in the first instance, but opt-in in the alternative.
Both applications, brought in July 2018 and May 2018 respectively, followed the European Commission's finding in July 2016 that certain European truck manufacturers had engaged in collusive arrangements on pricing and other financial determinations. In light of the similar issues involved, the Trucks Applications are being heard together.
Broadly, the proposed class across the Trucks Applications encompasses those who purchased or leased new or pre-owned medium or heavy trucks during the relevant period, but the claim forms and expert reports of the two applicants take different approaches to defining the classes. As at December 2018, over 5,000 members had signed up to the Road Haulage proceedings, though this number is expected to increase if the CAT grants the CPO. At a case management conference held in December 2018, the CAT directed that both claims should be heard together in a hearing listed for 3 to 7 June 2019, which could result in the first certification under the new regime. The CAT also suggested at the case management conference that there was nothing under the collective proceedings regime that prevented two opt-in proceedings being certified for the same cartel. This raises the possibility that both the UK Trucks and Road Haulage applications could be certified as opt-in proceedings, allowing claimants to choose between the two proceedings. However, the strength of the applications remains in dispute and the funding arrangements of both applicants have so far come under scrutiny, so it is still unclear whether either application, let alone both, will pass the certification stage.
Justin Gutmann v. First MTR South Western Trains Limited and another (South Western);17 and Justin Gutmann v. London & South Eastern Railway Limited (Southeastern)18 (together, the Trains Applications)
The first stand-alone claims have also now been brought under the opt-out collective proceedings regime, in the Trains Applications.
These applications, brought in February 2019, involve claims against UK rail operators concerning the availability of certain rail fares and involve proposed classes in the millions. Unlike the other claims mentioned above, the Trains Applications will not only need to overcome the hurdles detailed above in order to obtain a CPO, but also demonstrate a breach of the underlying competition law. Other cases to date, being follow-on actions, have been brought where such a breach has already been established. The success or otherwise of this case may well, therefore, have a significant impact on whether further stand-alone claims are brought in the future.
ii Significant group litigation order actions
The past year has been relatively subdued in respect of the GLO regime in England.
There have been developments in the claim brought against Volkswagen in relation to the diesel engine emissions scandal. Pursuant to an application, a GLO was granted in May 2018. The period for marketing to potential claimants closed in October 2018, and while the final claimant group is yet to be determined, the class is known to currently consist of at least 60,000 of a potential 1.2 million motorists.19 On 4 September 2018, the High Court handed down an order for indemnity costs against one of the claimant law firms in the proceedings, on the basis that the firm had prematurely issued a GLO application in order to gain a commercial advantage in the litigation.
Separately, seven claims under a GLO were also made against Lloyds Banking Group and five of its former directors on behalf of nearly 6,000 claimants.20 The claimant groups argue that a number of omissions and misstatements were made to shareholders regarding Lloyds' acquisition of Halifax Bank of Scotland Plc and its participation in the government's recapitalisation scheme during the course of 2008 and 2009. The trial concluded in March 2018; however, no judgment had yet been handed down at the time of this book going to press.
iii Significant environmental actions
There have also been a number of large environmental actions filed this year. BHP Billiton Plc and five other BHP group entities currently face actions in England over the Samarco dam failure, alongside actions against other BHP group entities in a number of jurisdictions including Brazil and Australia. This comes after BHP group entities settled related proceedings in the United States in August 2018.21 The English proceedings are for a claimed amount of around £5 billion, brought on behalf of over 200,000 claimants, making it one of the largest claims in British legal history, although notably no specific procedural mechanism has been used by the claimants at this stage, instead the claims simply involve a very large number of individual claimants and appear to rely on the English court's ability to manage large and complex claims. The first procedural hearing in the UK is expected to take place in mid-2019. Separately, the group action filed in 2015 by Zambian villagers against Vedanta Resources Plc, relating to the Nchanga copper mine, continues to develop. Vedanta's jurisdiction challenge was dismissed by the Court of Appeal in late 2017, though Vedanta was later granted permission to appeal this decision and a hearing in the Supreme Court to determine jurisdiction was heard on 15 and 16 January 2019. No judgment had yet been handed down at the time of this book going to press. Similarly, the Court of Appeal declined the English court's jurisdiction to hear collective proceedings made against two companies in the Shell group relating to alleged pollution in the Niger Delta in Nigeria in February 2018.22 The questions of jurisdiction raised in these recent environmental class actions have shed interesting light over the piercing of the corporate veil, namely whether UK parent companies in these situations can be held to have a tortious duty of care to those affected by the actions of their foreign subsidiaries.
iv Significant data breach actions
This year has also seen an increase in activity in the data sector, regarding potential breaches of the new Data Protection Act 2018 and the associated EU General Data Protection Regulation 2018. Cathay Pacific Airways Ltd, for example, is potentially facing a group litigation action after announcing a data breach that resulted in the personal data of approximately 9.4 million customers being compromised, in what appears to have been one of the global travel industry's most serious data breaches ever.23 It also appears that British Airways has been threatened with class action after a data leak of over 380,000 customers' data in September 2018, while Google has recently successfully defended an action relating to its alleged misuse of personal data.24
v New EU proposal for collective redress
In April 2018, the European Commission (the Commission) adopted a package of proposals entitled 'The New Deal for Consumers' which addresses, among other issues, the need for injunctive and compensatory collective redress mechanisms. Against the backdrop of the proliferation of 'mass damage' situations occurring across the EU, the package aims to bolster consumer rights and harmonise the means of collective redress across Member States, while also maintaining and respecting the legal traditions of each state. The relevant proposal outlined a potential form of collective redress for qualified entities, pursuant to which victims of unfair commercial practice not in compliance with EU law will 'be able to obtain remedies collectively through a representative action' under a proposed new Directive.25 Such actions could be cross-border and would not be available to law firms to pursue, instead being only available to non-profit entities monitored by a public authority (for example, consumer organisations) that fulfil a strict eligibility criteria. The package has been expressed as a priority for the Commission and finalisation of the proposed Directive has been provisionally set for May 2019. It awaits to be seen how the proposals will pass through the European Parliament and the Council; however, successful implementation of such a collective redress mechanism could have wide-ranging impacts on the effectiveness of compensatory relief available in Member States, particularly in areas such as data-protection and human rights. However, considering the timeline for implementation, it is uncertain what impact these proposals will have in England in light of the UK's current scheduled exit from the EU.
i Types of action available
As noted at Section II, the regimes available for English class or group actions broadly fall into two categories: the older opt-in procedures, and the more recent opt-out procedure.
ii Commencing proceedings
As noted above, not only can representative actions be utilised for any type of claim, there are also no requirements pertaining to the number of representees, be they claimants or defendants. The principal requirements for a representative action are:
- the representative is a party to the proceedings; and
- the representative and the represented parties all have 'the same interest' in a claim.
If a court orders that a representative action may be continued, the court's judgment will bind everyone the representative party purports to represent.26 However, it may only be enforced by or against a non-party with the court's permission. Importantly though, the representee need not authorise being represented27 so long as the same interest requirement is met.28
Whether the parties are deemed to have 'the same interest' in a claim might appear to be a narrow and restrictive concept. However, over time the boundaries of the interpretation of the requirement have been tested. Emerald Supplies Ltd v. British Airways plc  EWCA Civ 1284 provided a detailed analysis of the requirements for a representative action.29 It was noted that the class must have a common interest or grievance and seek relief that is beneficial to all. It did not matter whether the class fluctuated, so long as at all points it was possible to determine class membership qualification. However, the attempt in this case to use the representative action as a proxy for an opt-out class action failed because of the inevitable conflicts within the claimant 'class' sought to be represented, which was drawn so widely that it was described by the court as fatally flawed. In particular, the court found that the same interest could not be said to be present as the sheer breadth of the class meant it was impossible to identify which members had the same interest. Furthermore, the overriding objective is important too in shaping its application. Concepts similar to proportionality can be distilled from the case law. Although the CPR appears to require an identical interest,30 Megarry J stated that 'the rule is to be treated as being not a rigid matter of principle but a flexible tool of convenience in the administration of justice'.31 In light of the requirements for the court to consider the overriding objective, particularly that the dispute is dealt with 'expeditiously and fairly',32 the representative action regime continues to provide significant potential for effectively bringing a group action.
GLOs are an opt-in mechanism that require an individual to have brought his or her own claim first to be entered upon the group register.33 They are similarly premised on the notion that where there are similar facts and issues to be resolved, it is more efficient that these are dealt with collectively. Given the costs inherent in litigation, such efficiencies have enabled claimants to recover losses previously unobtainable. It is important to distinguish, however, between instances where the determination of a single issue is common to all the claims, and instances where a defendant is liable to numerous claimants but each is separate as to liability and quantum. Where there are no generic issues, 'nor generic issues of such materiality as to save costs in their determination',34 a GLO will not be granted and the individual must litigate separately.
Court consent is required for a GLO, which may be obtained if the claimant can show that there are 'common or related issues of fact or law'.35 Nonetheless, the court has discretion in granting the order.36 There is no guidance as to how this discretion is to be exercised,37 though the overriding objective would still be applicable. Similarly, consideration must also be given to whether a representative action would be more appropriate,38 namely when the interests and issues of the parties are the same. It must be noted, however, that broadly the requirements of a GLO have not proven difficult to meet.39 This is in part because the standard of commonality is lower.
There are no special requirements for a GLO application,40 though the applicant should both consider the preliminary steps41 and ensure that his or her application contains the prescribed general information.42 As part of this information, the applicant must provide details relating to the 'GLO issues' in the litigation. It is important that these GLO issues are defined carefully, given that the judgments made in relation to the GLO issues will bind the parties on the claim's group register.43 Nevertheless, the court may give directions44 as to the extent to which that judgment is binding on the parties that were subsequently added to the group register. Once a GLO is granted, a deadline is set by which time the other claimants must have been added to the group register. However, GLOs have not proved especially popular to date. Since the introduction of the GLO procedure in 2000, there have so far been fewer than 100 GLOs ordered. Whether the increased availability of funding for these types of claims will lead to an increase remains to be seen.
The most significant recent change to the English class action regime resulted from the CRA which came into effect in October 2015. Schedule 8 introduced changes to the competition law class actions regime under Section 47A of the CA. Collective proceedings are proceedings that are brought by multiple claimants or by a specified body on behalf of claimants, sharing certain characteristics (i.e., a class action as ordinarily understood). While collective proceedings are limited solely to competition actions before the CAT, it is notable for two reasons. First, it is currently the only opt-out class action regime in England, and second, it is a possible indicator of changes to come more broadly to English class actions. While claimants already have the right to bring collective actions,45 as detailed above, these were perceived as insufficient to address the harm caused to both direct and indirect purchasers.
There are three sources that set out the procedure for obtaining CPOs: these are the CRA Schedule 8, the Competition Appeal Tribunal Rules 2015 (the CAT Rules) and the CAT Guide to Proceedings 2015. Notwithstanding the fact that CPOs were introduced under the CRA, both individuals and businesses can apply for a CPO. The reforms also widened the types of claims that the CAT could hear. The CAT had previously been restricted to hearing follow-on claims, while collective proceedings can be either follow-on or stand-alone. A follow-on claim is one where a breach of competition law has already been determined by a court or authority such as the OFT or the Commission. With breach already having been established, the claimants are only required to show that the breach caused them loss. In contrast, a stand-alone claim is one where there is no prior decision by either body upon which the claimant can rely and the claimant must therefore prove breach before the CAT as well.
Similar to proceedings for a GLO, collective proceedings require certification to proceed, in this instance from the CAT. This mechanism works to remove frivolous or unmeritorious claims and enables the CAT to determine the class representative, class definitions and whether the proceedings should be opt-in or opt-out. Section 47B CA and Rule 79 of the CAT Rules detail the requirements that must be met for the CAT to make a CPO. Principally, the CAT must determine that 'the claims raise the same, similar or related issues of fact or law',46 and that a collective proceeding would be appropriate based upon a preliminary assessment of the merits and available alternative regimes.47 How the CAT determines the representatives, the classes (and sub-classes), and whether it is to be an opt-out action, will be fundamental to the collective proceedings' operation, reach and success.48 The limited case law under the new regime fails to give definitive guidance on how the CAT will exercise its discretion. Nonetheless (as noted above) the judgments in the Pride Mobility and MasterCard hearings indicate, at least in principle, that the CAT may be willing to adopt a relatively flexible approach to the eligibility and representative criterion, particularly regarding the delineation of classes (and sub-classes). However, this must be set against the fact that both of these cases failed to satisfy the hurdles identified by the CAT.
Upon certifying the class in an opt-out action, all members falling within the definition will automatically become part of the action unless they opt out before the end of the designated time period. However, this will only apply automatically to members domiciled within the UK. Non-UK domiciled claimants can still be a member of the class, though they will have to actively opt in before the end of the specified time period.
iii Procedural rules
Given the differing group and class action procedures that can be used under English law, the process of determining the class differs between them too. With representative actions, the court can order that an individual is, or is not, a representative of a particular person. While the representee need not authorise the representative to bring an action (or even be aware that it is being brought), a representative claimant cannot assume an unfettered right to control the litigation because any party to the proceeding can apply for such an order. For a GLO, the court may give directions stipulating the date by which further claims cannot be added to the group register without the court's permission.49 However, failure to meet the deadline does not automatically mean that the claim cannot be added to the group.50
In contrast, with the collective proceedings regime the CAT has a broad discretion in the certification process to outline how a CPO is to be conducted given that it may take into account 'all matters it thinks fit'.51 Furthermore, in considering the suitability of bringing the claim in collective proceedings, the CAT may limit the CPO to just some of the issues to which the claim relates.52 In certifying a claim as eligible for inclusion in collective proceedings, the CPO must describe the class and any sub-classes along with the provisions for opting in and out of the proceedings.53 The CAT also has the full remit to vary the order, including altering the description or identification of class members, at any time on its own initiative or following an application by the class representative, defendant or any represented person.54
Given the breadth of the class or group action mechanisms in England, generalities regarding the process of such actions are difficult to discern. For example, liability and quantum may be split depending on the type of claim that is brought, though in other instances, such as in follow-on claims, breach need not even be assessed. The same can be said for assessing the speed at which class actions progress. As regards collective proceedings, it is impossible at present to determine the rate at which these are to progress given how recently they have become available and the preliminary stages that cases under the new CRA regime have reached.55 Proceedings for GLOs and representative actions will also by their nature be context specific. Since GLOs have recently been used for notable, complex securities claims, some of which have already seen significant settlements,56 they may not provide a good benchmark from which to assess the speed and potential efficiencies of such a group action mechanism.
The disclosure provisions do, however, vary between the different class or group action regimes. Taking for instance representative claims, because the representees are not parties to the claim, they are not subject to the ordinary disclosure standards. Instead, they must only meet the requirements that a non-party is held to. In contrast with collective proceedings, the CAT holds comprehensive disclosure powers based on those more generally applicable in litigation in the English courts. The CAT can, therefore, order the disclosure of documents that are likely to support the case of the applicant, or adversely affect one of the other parties' case, from any person irrespective of whether they are a party to the proceeding, as long as it is necessary to save costs or dispose of the claim fairly.57
iv Damages and costs
The general rules on costs are detailed at CPR 44. This provides discretion as to the award, amount and timing of payment for costs. Given that the unsuccessful party will ordinarily be ordered to pay the other side's costs, unmeritorious class actions have traditionally been restrained. This is particularly in light of the significant costs inherent in class actions, given their size and complexity.
However, as demonstrated by BritNed Developments Ltd v. ABB AB,58 parties and their advisers should be mindful of the fact that the judiciary has recently shown its willingness to depart from the typical 'loser pays' costs order. In this case (in October 2018), the High Court ordered both parties to pay their own multimillion-pound costs, in light of the fact that the claimant was awarded damages significantly lower than that claimed.59 Although the case was not brought as a group claim or class action, it is notable as it demonstrates the willingness of the English Court to exercise its discretion to limit the extent of recoverable of costs. In the context of group claims – which are often subject to third-party funding – the likelihood of recoverability of costs can be a key factor in deciding to pursue a claim. The potential for a winning party to be barred from recovering their costs could act as a deterrent to litigation funders and law firms normally interested in pursuing large-scale class actions.
There is also the added complication of how costs are to be split between the constituent members of the class. For representative actions, as the represented individuals are not parties to the action, they are not individually liable for costs. The court may nevertheless accept an application for costs to be paid by the representees.60 There are also specific costs rules in the CPR for proceedings governed by GLOs. The default position is that group litigants are severally, and not jointly, liable for an equal proportion of the common costs.61 In RBS, however, the court decided at a case management conference in December 2013 that adverse costs should be shared on a several basis in proportion to the size of the individual's subscription cost in the rights issue relative to the total subscription cost for all the claimants on the group register.
With the growth in after-the-event (ATE) insurance and third-party litigation funding, the costs risk may, however, become less pronounced. Nevertheless, as addressed above, the risk is still a considerable factor in determining whether and how a class action is brought. Indeed, the arrangement of ATE insurance is often considered alongside, and of equal importance to, the litigation funding arrangements.62 Unlike proceedings governed by GLOs or representative actions, damages-based agreements are prohibited in respect of opt-out collective proceedings.63 Therefore, for opt-out collective proceedings to be successful, it is increasingly likely that they will be dependent upon third-party funding being obtained.
One of the notable differences between civil actions in England and certain other jurisdictions, particularly the US, is that there are no jury trials in English civil actions. This difference becomes apparent with quantum as English class action damages are typically much lower than in the US.
With regard to damages for representative actions, the historic position was that the 'same interest' requirement excluded damages from being recoverable for the class.64 However, there has been an incremental liberalisation such that it is established that damages can be claimed in a representative action.65 The damages awarded, however, in proceedings governed by a GLO or representative action will be dependent on the type of claim that is brought, though under English law, damages are generally compensatory (e.g., breach of contract, tort).66
The provisions for damages in collective proceedings claims are, however, more detailed. Damages are ordinarily compensatory; exemplary (i.e., punitive) damages for collective proceedings have been statutorily excluded.67 Punitive damages may still be sought in relation to a competition law breach; however, to seek them, the individual would need to opt out from the collective proceedings action and bring an individual claim. The CAT will calculate damages aggregately for the class or sub-class and will not undertake an assessment as to the amount of damages recoverable by each represented person. Rules 92–93 of the CAT Rules stipulate that the CAT may give directions for the assessment of damages, for instance a formula to quantify damages. Damages are ordinarily to be paid to the class representative for distribution.68 If all of the damages are not claimed within the CAT's specified period, the CAT may order that undistributed damages are paid to the representative 'in respect of all or part of the costs or expenses incurred by the representative in connection with the proceedings'.69 Any other remaining unpaid damages are to be paid to charity.70
The CPO applications that have so far been brought, in particular MasterCard (the claim value of which is £14 billion), indicate that significant damages may be sought through the collective proceedings regime. The sums that are potentially at stake will also be likely to provide a useful bargaining tool for claimants seeking to settle their claims instead of pursuing protracted litigation.
In common with other jurisdictions, there is often a significant and mutual impetus for claimants and defendants to settle class actions out of court. In some instances, such as in securities litigation under Section 90 FSMA, where the cause of action has not been frequently litigated, the absence of clear precedent may encourage the parties to settle to avoid uncertainty. With regard specifically to follow-on actions, since breach will have already been determined, the dispute will likely focus on the issues of causation and quantum. Given that the determination of causation and quantum can still be a complex and expensive process and defendants may therefore consider it more economical to settle out of court.
As noted, it is increasingly likely that third-party litigation funding will take a larger role in English class and group action litigation. The consequences could be significant, opening up new claimants, types and scales of litigation to class and group actions not previously seen before. Third-party litigation funding also introduces a new dynamic when considering and negotiating settlement: although professional funders are legally prohibited from exercising control over the litigation they fund, the manner in which many funding packages are structured (with the cost of funds effectively increasing the longer a case progresses) may incentivise claimants to give fuller consideration to settling actions pretrial. Unlike in some other jurisdictions (notably the US), settlements in GLO and representative actions do not require court approval, though admissible settlement attempts may still have an impact upon the court's allocation of costs as between the parties if a settlement is not reached. The CPR do not, however, contain any explicit guidance on how any settlement negotiations or agreements are to be managed.
In contrast, the CA contains provisions, implemented by the CRA, for a collective settlement scheme.71 Once a CPO has been made and proceedings are authorised to continue on an opt-out basis, claims may only be settled by way of a collective settlement approved by the CAT. The proposed settlement must be presented to the CAT by the representative and the defendant of the collective proceedings. The settlement need not apply to all of the defendants in the proceedings, merely those that intend to be bound by it. The CAT, however, may only make an order approving the settlement where it deems the terms to be 'just and reasonable'.72 If the time frame specified in the collective settlement approval order given by the CAT has expired, the collective settlement will be binding upon all those domiciled in the UK who fell within the CPO's defined class and did not opt-out, and those domiciled outside the UK who otherwise fell within the defined class and opted-in.73 Opt-in collective proceedings are not subject to such requirements, although they cannot be settled without the CAT's permission before the expiry of the time given in the collective proceedings for a class member to opt in to the proceedings.
The potential success of the collective settlement scheme will, however, be closely tied to a claimant's ability to use the collective action scheme. If the opt-out certification process proves to be unduly restrictive, the defendant will no longer be induced to settle. The residency provisions in the CRA may also present issues to the success of the collective settlement scheme.74 Defendants could be reluctant to pursue a collective settlement scheme since it does not automatically provide the 'global' settlement that they might be seeking, given non-UK domiciled individuals will need to opt in to any settlement.75 Nonetheless, certain other provisions may further promote settlement, for instance that any remaining unpaid damages are to be paid to charity.76 It, therefore, awaits to be seen how the collective settlement scheme is adopted.
IV CROSS-BORDER ISSUES
England is a popular forum for the resolution of disputes both domestic and international. The reasons for this include the sophistication and probity of English judges, the availability of lawyers and specialists in a range of fields, and perhaps above all, the pre-eminent place of English law in international commercial relations. While many claimants have traditionally (although unnecessarily) looked to the US to pursue relief through class actions, the Supreme Court's decision in Morrison v. National Australia Bank,77 which effectively barred securities actions without a US nexus,78 has caused potential claimants, including institutional investors, to reappraise the situation. The advent of opt-in actions under the CA, which are open to claimants domiciled outside the UK, and the increasing availability of third-party litigation funding, in combination with the pre-existing attractions of England as a forum, is likely to continue to drive an increase in this kind of work in the English courts.
The impact of the June 2016 Brexit referendum result remains at the forefront of practitioners' minds. EU law has a significant role with regards to class actions: the Recast Brussels Regulation contains a framework for the allocation of intra-EU jurisdiction as well as provisions for the reciprocal enforcement of Member State court judgments; and a multitude of statutory claims, particularly in the area of securities law and financial regulation, are based on EU law.79 The European Union (Withdrawal) Act 2018, passed on 20 June 2018 and given royal assent six days later, repealed the European Communities Act 1972 and provided for the transposition of existing directly applicable EU law into UK law, subject to a restricted parliamentary power to adapt and remove laws it considers necessary. However, at the time of publication, it remains to be seen whether the withdrawal agreement – which has been negotiated and agreed with the other EU Member States but rejected by the UK Parliament on 15 January 2019, on 12 March 2019 and again on 29 March 2019 – will be approved and will govern the UK's departure from the EU in April 2019. Nevertheless, the avowed aim is for continuity and stability, and it may be a number of years before any change in this area materialises. By way of practical example, even after the UK's exit from the EU, key tenets of the EU competition regime will remain in effect because they are contained within the CA, a freestanding UK statute. Breaches of EU competition law in remaining EU Member States will remain actionable in England where an English court is willing to accept jurisdiction over a defendant. The law applicable to such disputes would be determined either according to rules analogous to the current regime80 or by reference to the formerly applicable, and substantively similar, UK rules.81 Thus, the outlook for the class action market in England remains positive, though it will still be an area to monitor as exit negotiations continue.
V OUTLOOK AND CONCLUSIONS
As discussed above, any Brexit deal is something that will be of particular interest to English class action litigators. However, there are also a number of other forecasted developments to track in 2019 and onwards.
Beginning with collective proceedings, the outcome of the first CPO applications, which have failed to proceed beyond the certification stage, have done little to shed light on the willingness of the CAT to adopt a flexible approach to approve opt-out proceedings and how the CAT will shape the future of the collective proceedings regime. Going forward, attention will be focussed on whether the UK Trucks applications and the Trains Applications will be the first opt-out proceedings to proceed past the certification stage and, if so, whether this will shed any further light on the effectiveness of the CRA regime in obtaining collective redress.
It also seems likely that the considerable fervour regarding the growth of third-party litigation funding will continue to develop. Although the home of such funding has been traditionally regarded as the US, the growth of the UK litigation funding market has been notable. The past years have shown continued expansion of law-focused finance firms in London. Whether this continues, and how UK finance firms' acquisitions fare, will be particularly important for an uptake in class actions.
Time will tell whether the CRA reforms will continue to foster a liberalisation of the class action market, although commentators are generally of the view that the outlook for England to be an increasingly favourable jurisdiction is positive.
1 Camilla Sanger is a partner and Peter Wickham is an associate at Slaughter and May. The authors would like to thank Isabelle Whitaker for her assistance in producing this chapter.
2 For convenience, 'England' and 'England and Wales' will be used interchangeably.
3 Representative actions can be traced back to the practice of the Court of Chancery. It was a requirement that all interested parties were to be present to end a dispute, though for the sake of convenience certain individuals of those who held similar interests would be selected to represent the group. See London Commissioners of Sewers v. Gellatly (1876) 3 Ch. D. 610, at 615 per Jessel M R.
4 An opt-out claim being a claim that can be brought on behalf of a defined group, irrespective of whether the exact members are known, excluding parties that opt-out. In contrast, an opt-in action requires claimants to explicitly join the group to participate. As explained in greater detail below, it is also important to consider that opt-out proceedings are only available to a UK-domiciled claimant, in contrast to opt-in proceedings, which are available to all.
5 This chapter shall only address the formal mechanisms that are available. Claimants sometimes consolidate individual claims on an ad hoc basis: these shall not be considered further.
6 Consumer Rights Act 2015, Schedule 8, Part 1.
7 English Civil Procedure is governed by the Civil Procedure Rules and supplementary Practice Directions (PD). These can be found, with commentaries and interim updates, in The White Book published by Sweet & Maxwell.
8 CPR 19.6.
9 CPR 19.10.
10 Department for Business, Innovation and Skills (BIS), Private Actions in Competition Law: A consultation on options for reform: Government Response, (January 2013), paragraph 5.12. Note also that under the previous regime there had only been one collective action: Consumers' Association v. JJB Sports (1078/7/9/07).
11 It is set out in the Civil Procedure Rules (which provide for and apply to representative actions and group litigation orders) at CPR 1.1, and in the Competition Appeal Tribunal Rules 2015 (which apply to collective proceedings) at Rule 4.
12 Walter Hugh Merricks CBE v. MasterCard Inc. and others (Case No. 1266/7/7/16).
13 Dorothy Gibson v. Pride Mobility Products Limited (Case No. 1257/7/7/16). Pride Mobility is a distributor of mobility scooters that was found by the Office of Fair Trading (OFT) to have infringed the CA, following an agreement between several retailers that they would not advertise particular scooters online at a price below Pride Mobility's recommended retail price. The OFT's decision did not impose a penalty on Pride Mobility. A follow-on claim was brought by the National Pensioners' Convention on behalf of a class of approximately 30,000 people and was England's first opt-out collective action. At the end of 2017, the CAT determined that proceedings should be adjourned on the grounds that the proposed class could only comprise those directly affected by the scope of the OFT's original decision. The claimants declined to attempt to reformulate the proposed class, which would have been insufficiently large for the costs incurred to be met by the potential damages to be awarded, let alone compensate the class members, and the claim was withdrawn.
14 Section 49 CA provides that: '(1A) An appeal lies to the appropriate court on a point of law arising from a decision of the Tribunal in proceedings under section 47A or in collective proceedings – (a) as to the award of damages or other sum (other than a decision on costs or expenses), or (b) as to the grant of an injunction. (1B) An appeal lies to the appropriate court from a decision of the Tribunal in proceedings under section 47A or in collective proceedings as to the amount of an award of damages or other sum (other than the amount of costs or expenses).'
15 Road Haulage Association Limited v Man SE and others (Case No. 1289/7/7/18), (Road Haulage).
16 UK Trucks Claim Limited v Fiat Chrysler Automobiles N.V. and others (Case No. 1282/7/7/18) (UK Trucks).
17 Justin Gutmann v. London & South Eastern Railway Limited (Case No. 1305/7/7/19).
18 Justin Gutmann v. First MTR South Western Trains Limited and Another (Case No. 1304/7/7/18).
19 According to an article published by Leigh Day (one of the law firms co-leading the claim) on 25 May 2018.
20 According to a judgment issued by the Chancery Division of the High Court on 21 December 2017  EWHC 3390 (Ch).
22 Finally, although not strictly relating to an environmental issue, jurisdiction of the English courts was also dismissed upon appeal in the case of AAA and others v. Unilever Plc, which related to ethnic violence carried out in Kenya.
24 In relation to the British Airways action see: https://www.badatabreach.com. In relation to the Google action see the judgment issued by the Queen's Bench Division of the High Court on 8 October 2018  EWHC 2599 (QB).
25 Proposal for a Directive of the European Parliament and of the Council on representative actions for the protection of the collective interests of consumers, and repealing Directive 2009/22/EC (COM/2018/0184 final – 2018/089 (COD)).
26 CPR 19.6(4)(a). See too Howells v. Dominion Insurance Co Ltd  EWHC 552 (Admin).
27 Independiente Ltd v. Music Trading On-Line (HK) Ltd  EWHC 470 (Ch.): the defendant's application for a direction under CPR 19.6(2) to prevent the claimant acting as a representative was dismissed in part on the grounds that a representative may act without the representee's authority as long as CPR 19.6(1) was fulfilled.
28 CPR 19.6(1).
29 The claimants were unsuccessful in obtaining a representative action as the class was so wide that it was impossible to identify members before and possibly after the judgment, too.
30 CPR 19.6.
31 John v. Rees and others  Ch. 345 at 370, per Megarry J.
32 CPR 1.1(2)(d).
33 CPR 19.11, PD 19B, Paragraph 6.1A.
34 R v. The Number 8 Area Committee of the Legal Aid Board  P.I.Q.R. 476 at p. 480, per Popplewell J.
35 CPR 19.10.
36 CPR 19.11(1).
37 There is no guidance contained within CPR 19, nor the accompanying PDs.
38 PD 19B Paragraph 2.3(2).
39 This can be seen particularly in the recent actions brought under Section 90, FSMA.
40 The normal application procedure under CPR 23 should be used according to PD 19B Paragraph 3.1.
41 The preliminary steps are detailed at PD 19B Paragraph 2.
42 This information is contained at PD 19B Paragraph 3.2.
43 CPR 19.12(1)(a).
44 Pursuant to CPR 19.12(1)(b).
45 Under CPRs 19.6 and 19.11.
46 Section 47B(6), CA.
47 Rule 79(2), CAT Rules 2015.
48 Lawne, 'Private enforcement and collective redress: A claimant perspective on the proposed BIS reforms'  Comp. Law 171.
49 CPR 19.13(e) and PD 19B.13.
50 Taylor v. Nugent Care Society  EWCA Civ 51.
51 Rule 79(2), CAT Rules. Rules 79(2)(a)–(g) give some guidance on the types of consideration that the CAT should have.
52 Rule 74(6), CAT Rules and paragraph 6.37, CAT Guide to Proceedings 2015.
53 Rules 80(1)(c) and 82, CAT Rules.
54 Rule 85(4), CAT Rules.
55 In relation to the timing of CPOs, the CRA implemented changes to the limitation period, extending it from two to six years so as to be on a par with the High Court.
56 In Re RBS (Rights Issue Litigation) in claims entered In the Group Register (HC 2013 000484) (RBS), the trial was delayed for four months until April 2017 owing to the complexity of the disclosure process. Significant settlements were also reached in December 2016, January 2017 and June 2017.
57 Rule 63, CAT Rules.
58 Britned Development Ltd v. ABB AB  EWHC 2616 (Ch).
59 BritNed was awarded only €11.7 million (plus interest) of the €180 million claimed.
60 Howells v. Dominion Insurance Company Ltd  EWHC 552 (Admin).
61 CPR 46.6(3). Common costs are the costs incurred in relation to GLO issues, or individual costs in relation to a test claim. The individual will be liable for all of their other individual costs in the claim.
62 Examples, such as RBS, have demonstrated either the difficulties in obtaining ATE insurance, or the influence that it has on the handling of the case. Securities class actions by way of an example are ordinarily relatively cheap for the claimant to bring in the early stages of the claim. However, during later stages of the litigation, particularly if other claimant groups have already settled, the adverse liability risks can be hugely important in determining the ongoing strategy.
63 While there was a concern to limit the number of claims on the introduction of the opt-out scheme, there have been suggestions that the prohibition of damages-based agreements would stifle the incentive to litigate given the significant costs involved in class actions (Bolster, The structure and funding of competition claims post-Jackson – 'All change' or 'Status Quo'  Comp. Law 202). Moreover, there appears to be an unexplained inconsistency given that the DBA restriction does not apply to opt-in actions (Simor, Gibson et al. (2015) UK Competition Law – The New Framework, Oxford University Press p. 205).
64 Markt & Co Ltd v. Knight Steamship Co Ltd  2 KB 1021.
65 Independiente Ltd v. Music Trading On-Line (HK) Ltd  EWHC 470 (Ch.).
66 With regards to the measure of damages for claims brought under Section 90 FSMA, a claimant is entitled to compensation for damages to cover loss suffered as a result of the misstatement or omission. FSMA, however, does not detail the measure of damages, nor is this subject to any direct authority.
67 Section 47C(1), CA.
68 Rule 93(1)(a), CAT Rules 2015.
69 Section 47C(6), CA. Criticisms have been levied at such a system that does not require all victims to exercise their rights to ensure the funder's effective repayment: A. Higgins and A. Zuckerman, 'Class actions come to England – more access to justice and more of a compensation culture, but they are superior to the alternatives'  CJQ 1. In turn, questions have been raised regarding the potential for conflict between funders and representatives on the one hand, and claimants on the other. The government was concerned about this and initially considered not allowing law firms or third parties to act as representatives. While this provision was removed from the final draft, the CAT Guide to Proceedings 2015 Paragraph 6.30 states that 'conflict between the interests of a law firm or third-party funder and the interests of the class member may mean that such a body is unsuitable to act as a class representative'. Given the potential conflict of interest in a conceivably large proportion of claims, it awaits to be seen what influence this guidance has on the CAT's determinations in certification hearings.
70 Section 47C(5), CA.
71 Section 49A, CA.
72 Section 49A(5), CA.
73 However, the likelihood that this covers all potential claimants is still limited.
74 Lawne, 'Private enforcement and collective redress: a claimant perspective on the proposed BIS reforms'  Comp Law 171.
75 Section 49A(10)(b), CA.
76 Section 47C(5), CA.
77 561 U.S. 247 (2010).
78 'Foreign-cubed' claims, at issue in Morrison, were those made by non-US investors against non-US issuers to recover losses from purchases on non-US securities exchanges.
79 For instance, Section 90A FSMA implemented EU Directive 2004/109/EC.
80 For instance, a domestication of the Rome II Regulation (Regulation (EC) No. 864/2007).
81 For instance, Section 15A, Private International Law (Miscellaneous Provisions) Act 1995.