I INTRODUCTION TO THE CLASS ACTIONS FRAMEWORK
There is no legislative framework in Ireland to facilitate class actions. However, multiparty or multi-plaintiff litigation does occur and is often brought by way of 'representative actions' and 'test cases'.
The legal basis for representative actions is set out in the Rules of the Superior Courts,2 which provide that where numerous persons have the same interest in a cause or matter, one or more persons may sue or be sued or may be authorised by the court to defend a matter on behalf of or for the benefit of all interested persons. In addition to this legal basis, various statutory provisions allow for a person or persons to sue in a representative capacity. By way of example, the Data Protection Act 2018, which implements Article 80(1) of the EU General Data Protection Regulation (GDPR) into Irish law, enables representative bodies to lodge a complaint or seek a judicial remedy (including compensation) on behalf of data subjects, subject to certain limitations.3
The basis for test cases is the inherent jurisdiction of the court to make directions in respect of the trial of proceedings and the duty of the court to ensure that its resources and the resources of parties to litigation are not inappropriately wasted by unnecessary duplication. Consequently, where a number of cases have similar issues it is possible for one case to be selected as a test case and the subsequent cases to be stayed pending resolution of the test case.
Multiparty litigation commonly arises in financial services litigation, particularly in cases involving the mis-selling of a financial product to a large number of consumers. Other examples of multiparty litigation in Ireland include claims relating to latent defects in buildings caused by the use of pyrite and claims relating to army deafness, contaminated blood products and tobacco-related illnesses.4
As noted above, the GDPR introduced a representative or collective action mechanism whereby data subjects can mandate a representative body to lodge a complaint on their behalf, seek judicial remedy and seek compensation. The GDPR gave Member States the option under Article 80(2) to allow representative bodies to act without the specific mandate of data subjects, or on an opt-out basis. The Irish government decided not to permit representative bodies in Ireland to act in this manner. Since the introduction of the GDPR in 2018, a number of actions arising out of breaches of the GDPR have been brought by representative bodies on behalf of data subjects under Article 80, and we anticipate that this trend will continue.
The Law Reform Commission has previously recommended (as part of its Report on Multi-Party Litigation in 2005), that a formal opt-in procedure be introduced. However, a procedural structure of this kind has not been implemented.
In November 2017, the Multi-Party Actions Bill 2017 was published as a private member's bill,5 containing many of the Law Reform Commission's recommendations. The government considered the Bill and while its intent was not dismissed, the Bill was opposed by the government.6 The proposals in the Bill have been referred for consideration as part of an ongoing Review of Civil Justice Administration, chaired by Mr Justice Peter Kelly, upon the request of the government.
II THE YEAR IN REVIEW
Litigation funding is often considered in the context of multiparty litigation, and this issue has been litigated before the Irish courts in recent years. As the law currently stands in Ireland, professional third-party funding is prohibited on the basis that it offends the rules of maintenance and champerty that exist under the Maintenance and Embracery Act (Ireland) 1634. While professional third-party funding arrangements are unlawful in this jurisdiction, the Irish courts have found that third parties that have a legitimate interest in proceedings, such as shareholders or creditors of a company involved in proceedings, can lawfully fund them, even when such funding may indirectly benefit them. Therefore, funding of representative actions by the class members does not offend the laws of maintenance and champerty, as the class has a pre-existing legitimate interest in the litigation.
The impact of the 1634 Act was considered by the High Court in Ireland in a number of cases between 2013 and 2015 and was considered again in 2016 in the context of the legality of professional third-party litigation funding in the case of Persona Digital Telephony Ltd & Another v. Minister for Public Enterprise & Other. In that case, an application was made to assess the legality of a third-party funding agreement. The plaintiff, Persona Digital Telephony Limited, was unable to fund the proceedings. A professional third-party funder from the United Kingdom was prepared to enter into a litigation funding arrangement. The plaintiff sought a declaration from the High Court that the litigation funding arrangement did not constitute an abuse of process or contravene the rules on maintenance and champerty.
While the High Court had some sympathy for the plaintiff, it affirmed that both maintenance and champerty are part of Irish law and are torts and criminal offences. The High Court found that to permit a litigation funding arrangement by a third party with no legitimate interest in the proceedings would necessitate a change in legislation and this could not be done by the High Court.
Given the issues of public importance raised in the case, the Supreme Court agreed to hear the appeal from this decision, therefore bypassing, or 'leapfrogging', the Court of Appeal. The Supreme Court found that third-party litigation funding was unlawful, Denham CJ stating that 'a person who assists another's proceedings without a bona fide independent interest acts unlawfully', and that it would not be appropriate for the Supreme Court to develop the common law on champerty, pointing out that it is a 'complex multifaceted issue, more suited to a full legislative analysis'. The Chief Justice emphasised that the third-party funder in this case had 'no connection with the plaintiffs, apart from an agreement to fund their proceedings', distinguishing it from the 2011 decision of Thema International Fund v. HSBC Institutional Trust Services (Ireland) Limited, in which the court recognised that it is lawful for a party with a legitimate interest in the litigation to fund the litigation of another party, and a creditor or shareholder may have such a legitimate interest.
The courts have clearly indicated that it is a matter for the legislature rather than the courts to develop the law in this area; and that third-party funding from a third party with no legitimate interest in the litigation to progress a claim in Ireland remains off limits unless and until the legislature addresses this issue.
The decision in SPV Osus Ltd – which further addressed the issue of maintenance and champerty but not in the context of litigation funding – came before the Supreme Court in 2018 for consideration of the related issue of litigation trafficking. In this case a fund, Optimal Strategic US Equity Ltd (SUS), was entitled to make a claim in the US bankruptcy proceedings of Bernard Madoff. In order to allow investors in the fund to trade their share in the bankruptcy claim (which is allowed in the United States), SUS set up a special-purpose vehicle SPV OSUS Ltd (SPV) and assigned the bankruptcy claim to it. The majority of the original investors in SUS swapped their shares for shares in SPV and then traded the shares in SPV to distressed debt hedge funds. SPV then issued proceedings in Ireland against the custodian to the fund claiming an entitlement to the net asset value of the investments of SUS as at 30 November 2008.
The custodian challenged the standing of SPV to bring proceedings on the basis that the assignment was contrary to public policy, and should not be enforced for reasons of maintenance and champerty. Ultimately, the Supreme Court confirmed that, under the rules of champerty, an assignment is unenforceable unless one or more of the exceptional circumstances apply that would grant it legality (for example, an assignment of a bare cause of action that is incidental to the property transferred, or the assignment of a debt), none of which applied in this case. However, the Supreme Court reiterated the sentiment expressed in the Persona Digital case, namely that it is a matter for the legislature to develop the law in the area of right of access to the courts.
As mentioned above, multiparty litigation in Ireland may proceed by way of 'representative action' or 'test case'. There is no formal class action procedure in Ireland. A representative action arises where one claimant or defendant, with the same interest as a group of claimants or defendants in an action, institutes or defends proceedings on behalf of that group of claimants or defendants.
Representative actions will typically arise where the class either has a pre-existing relationship with the main party, or where the class is relatively small. Because of this, the more common approach to multiparty litigation in Ireland is usually the test case.
A test case can arise where numerous separate claims arise out of the same circumstances. By way of example, in 2008 the Commercial Court was faced with more than 50 individual shareholder claims related to the fraudulent investment operations run by Bernard Madoff. The Commercial Court exercised its inherent jurisdiction in deciding to take forward a small number of cases initially, as test cases. In this instance, it was decided that two cases by shareholders and two cases by funds would be heard sequentially as a first step and the Court stayed the other claims pending the resolution of the four test cases.
A similar approach was adopted by the Irish Commercial Court in relation to claims for the mis-selling of financial products that were initiated by over 200 claimants against ACC Bank in 2010. Five claimants' cases were heard as test cases and the remaining claimants agreed that 'the outcome of the litigation will determine the result of their claims, subject to the possibility of a separate trial on particular and unusual facts different to those in issue in these proceedings.'
i Types of action available
In order to bring a representative action there must be 'a common interest, a common grievance and relief in its nature beneficial to all'.7 There is sufficient common interest where the dispute involves joint beneficial entitlement to property, such as customary rights or corporate shareholdings. In contrast, the courts have refused to extend the representative procedure to actions founded in tort, a point emphasised by the Supreme Court in Moore v. Attorney General (No. 2). Notwithstanding this pronouncement, courts have occasionally entertained representative actions founded in tort where the relief sought is injunctive. There is an analogous prohibition on representative actions against individuals for breach of constitutional rights.8
Test cases are not limited to any particular types of action. However, in practice these procedures are typically utilised in tort actions where a negligent act or misrepresentation has affected a number of people who wish to have their rights vindicated. For example, claims for the mis-selling of financial products will often involve an allegation that the financial service provider committed the torts of misrepresentation or negligent misstatement.
The following limitation periods apply to the various causes of action:
- tort claims: six years from the date of accrual of the cause of action;
- contract law: six years from the date of breach;
- claims for liquidated sums: six years from the date the sum became due;
- personal injuries under negligence, nuisance or breach of duty: two years from the date of the cause of action accruing or the date the claimant first had knowledge, if later;
- land recovery: 12 years from accrual of the right of action;
- maritime and airline cases: two years from the date of accrual of the cause of action;
- defamation: one year from the date of accrual of the cause of action; and
- judicial review: the claim must be brought promptly and in any event within three months of the date of the cause of action (the court can extend this period if there is a good reason).
The period during which mediation takes place in a cross-border dispute to which the Mediation Directive applies is excluded from the calculation of the limitation periods.
The Law Reform Commission's Report on Limitation of Actions 2011 discusses the limitation of all actions (although property claims are excluded). The Law Reform Commission recommended the introduction of a limitation period of two years, to run from the date of knowledge of the claimant for 'common law actions' (breach of duty, negligence, contract and nuisance). The 'date of knowledge' is the date from which the claimant knew or ought to have known of the cause of action and 'knowledge' includes both actual and constructive knowledge. Interestingly, an 'ultimate' limitation period of 15 years was also recommended. It was proposed that this would run from the date of the act or omission giving rise to the cause of action and there would be statutory discretion to extend this limitation period. It should be noted, however, that the proposals put forward by the Law Reform Commission are not binding and, to date, none have been implemented.
The Financial Services and Pensions Ombudsman Act 2017, enacted in July 2017, revised the limitation period for bringing complaints to the Financial Services and Pensions Ombudsman (FSPO) in respect of 'long-term financial services'. The definition of a long-term financial service captures products or services where the maturity or term extends beyond six years, and is not subject to annual renewal.
The revised limitation period for complaints in relation to long-term financial services is either: six years from the date of the act or conduct giving rise to the complaint; or, three years from the earlier of the following two dates:
- the date on which the consumer making the complaint first became aware of the said act or conduct; or
- the date on which that consumer ought to have become aware of that act or conduct.
Prior to the commencement of the Act, the Financial Services Ombudsman (the predecessor of the FSPO) had no jurisdiction to investigate complaints where the conduct complained of occurred more than six years before the complaint is made and had no discretion to extend this limitation period. This extension only applies to complaints to the FSPO and not to claims brought before the courts.
For other short-term financial services, the limitation period is six years.
It must be anticipated that multiparty litigation, by way of complaints made to the FSPO, could arise as a result of the change to the limitation period.
ii Commencing proceedings
To litigate the various actions set out above, a person must have sufficient interest in the subject matter of the action. Provided a person has sufficient interest or standing, that person may institute proceedings. Alternatively, in respect of representative actions, where a claimant or defendant has the same interest as a group of claimants or defendants in an action he or she may institute or defend proceedings on behalf of that group of claimants or defendants.
To commence proceedings by way of representative action, an application must be made to the court for an order permitting the claimant or defendant to bring or defend the proceedings on a representative basis. The application for such an order will be grounded by an affidavit that lists each of the interested parties who have agreed to be represented in the proceedings. Each member of a class has to 'opt-in'; that is to say that the court must be satisfied that each individual has authorised the main party to represent them. Where the claimant or defendant sues in a representative capacity, the endorsement of claim is required to show the capacity in which the party is suing or being sued.9 There is a strict requirement that the parties must have the same interests in the same proceedings as opposed to merely similar or 'common' interests. Any judgment or order in the action will usually then bind all claimants or defendants represented.
To commence proceedings by way of a test case, each party must institute its own case and then one party becomes the benchmark by which the remaining cases are resolved. Importantly, however, each case is judged on its own merits (by a judge alone) and the fact that causation is proved in the context of one case does not necessarily guarantee the same outcome in all subsequent cases unless the facts, liability issues and causation are identical. The Irish courts take great pains to ensure that each case is judged on its own merits, and this is seen to benefit defendants, as plaintiffs are put to the expense of having to fully prove their case despite the fact that numerous similar (but not necessarily identical) cases may have already been determined. In reality, however, if there has been a negative finding against a defendant in a test case and liability has been established, where there are numerous similar cases yet to be heard, a defendant (or its insurers) will attempt to settle the outstanding claims unless they can be distinguished in terms of liability, causation or fact from the test case.
iii Procedural rules
The average length of proceedings in the High Court (from issue to disposal) is approximately two years. This can vary, however, depending on the complexity and urgency of the case.
The High Court has a separate commercial division (the Commercial Court). This specialist court has extremely stringent case management procedures in place and judgment is generally delivered quite promptly. There is currently a proposal to create a subdivision of the Commercial Court specifically for intellectual property and technology-related disputes. This reflects the rise in technology-related disputes before the Irish courts.
iv Damages and costs
In most representative actions, the plaintiff is entitled only to declaratory and injunctive relief.10
The test case plaintiff will have their award of damages judged on the merits of their individual case.
Damages can be compensatory or punitive, for example:
- general damages: compensation for loss with no quantifiable value, such as pain and suffering;
- special damages: compensation for precise financial loss, such as damage to property;
- punitive (exemplary) damages: awarded to punish the behaviour of a defendant (rarely awarded); and
- nominal damages: awarded where the claimant has been wronged but has not suffered financial loss.
The level of damages that may be awarded is determined by the court before which the action is brought; claims up to a value of €15,000 are dealt with by the District Court, while the Circuit Court deals with claims with a value between €15,000 and €75,000 (the upper limit is €60,000 for personal injuries cases). Any claim with a value in excess of €75,000 is heard by the High Court, which has an unlimited monetary jurisdiction. Choosing the correct court is a particularly important step for a claimant as one can be penalised as to costs by a court, where they receive an award of damages that does not meet that court's jurisdictional threshold. Provided that court is also of the opinion that the action could have been taken in a lower court, it is permitted to award the typical costs of the lower court action.
As noted previously, subsequent litigation following a test case is often settled on the basis of the test case outcome and, in such circumstances, an award of damages does not fall to be considered by the court.
However, the procedural rules and reliefs available differ when redress is sought for a breach arising out of the Data Protection 2018 and the GDPR. For data protection actions, only the circuit court, concurrently with the High Court, has jurisdiction to hear and determine the case (the district court does not). The court hearing a data protection action has the power to grant to the data subject (on whose behalf the action is being brought) one or more of the following reliefs:
- relief by way of injunction or declaration; or
- compensation for damage suffered by the plaintiff as a result of the infringement of the relevant enactment.
While there are no specific costs rules applicable to multiparty litigation, costs 'follow the event'11 in Ireland (i.e., the successful party is entitled to recover its costs from the unsuccessful party). Costs are ultimately a matter of discretion for the court, however, and although this loser-pays rule is the norm, it is becoming more common for issues-based cost awards to be made. It should also be noted that costs in this jurisdiction are usually awarded on a 'party–party basis'. This means that the successful party is only entitled to recover the costs reasonably incurred by them in prosecuting or defending the litigation. Recoverable costs are usually anywhere between 50 and 75 per cent of the total costs incurred.
Irish lawyers are expressly prohibited from charging fees by reference to a percentage of damages awarded. Litigation lawyers are permitted, however, to enter into arrangements known as 'no foal, no fee' or 'no win, no fee' arrangements. These are conditional arrangements with clients, where any payment made at all by the client to the solicitor is conditional on the success of the case. No foal, no fee arrangements are more common in individual personal injuries claims than in commercial cases.
As mentioned above, multi-plaintiff litigation can also arise in the form of complaints made to the FSPO, a quasi-judicial body tasked with resolving disputes outside litigation. While parties to complaints to the FSPO are permitted to be legally represented at each stage of the complaints process, the FSPO is not empowered to award costs.
There are no rules of court to be followed in multiparty litigation in Ireland. Where multiparty litigation is brought by way of a test case, the test case effectively becomes the benchmark by which the remaining cases are resolved. However, because the subsequent claimants and defendants are not parties to the original litigation, they are not bound by the result of the test case and are not party to any settlement agreement entered into in the test case. Although not bound by the result, the test case has an effect by virtue of the doctrine of precedent. Therefore, the benefits of the original ruling may be extended to cases involving factual situations identical to those of the test case. As a result of this, subsequent litigation is often settled on the basis of the test case outcome.
Where multiparty litigation is brought by way of a representative action, since representation extends to all aspects of the legal proceedings, including settlement, the representative has autonomy over the way in which the litigation is conducted, subject to the expectation that he or she will act in the interests of the class. Generally, any judgment or order in the action will bind all persons represented at the direction of the court. Representative actions, therefore, presuppose a level of confidence between the representative and the members of the class.12
A settlement agreement between parties to litigation is a binding contract and, subject to the ordinary rules of contract law, the parties are free to choose to enter into and agree the terms of a settlement agreement. Court sanction is not required for a settlement save where the case is one in which money or damages are claimed by or on behalf of an infant or a person of unsound mind suing either alone or in conjunction with other parties.13
IV CROSS-BORDER ISSUES
In June 2013, the European Commission recommended that all Member States adopt collective redress schemes, for both injunctive and compensatory relief.14 This Commission Recommendation deals with 'mass harm situations', which are defined as those where two or more natural or legal persons claim to have suffered harm from the same illegal activity carried out by another person (whether natural or legal), in breach of their EU rights.
Other issues discussed in the Recommendation include: funding, legal fees and legal costs, standing to bring a representative action; cross-border disputes; alternative dispute resolution and damages. Although the Recommendation was not binding, its intention was to shape future legislation in the area. The European Commission carried out a review in 2017 on how the Recommendation was implemented and found an absence of a harmonised approach to collective redress.
As a result of this, in April 2018 the European Commission published a draft directive that proposes a new type of European-wide collective redress mechanism for consumers. At the time of writing, the Council and the Parliament have yet to reach an agreement and the directive has not yet been adopted; however, the Council adopted its general approach on the directive on 28 November 2019, and the Commission has stated that its focus is on ensuring the directive is passed in a timely manner so that consumers can enforce their rights in every Member State and obtain compensation when they fall victim to illegal practices.15
As drafted, the directive will allow a 'qualified entity' to take a representative action before a Member State court on behalf of a group of consumers who have been affected by a breach of European law, to seek redress for the affected group. This would increase litigation risk for industry sectors that are subject to EU regulation, in areas such as product liability, data protection, financial services, travel and tourism, energy, telecommunications and environment. We can anticipate that the directive will raise some interesting questions in Ireland about how qualified entities designated to bring representative actions are constituted and funded.
In its original draft, the directive provided for a rebuttable presumption of liability in litigation before the courts of all Member States where liability has already been determined by a court in another Member State in respect of that matter. However, this has been replaced in the most recent draft with a provision that requires Member States to ensure that a final decision of a court or authority establishing an infringement harming collective interests of consumers can be used as evidence for the purposes of any other actions in another Member State.
The Council proposes an implementation period of 30 months from the entry into force of the directive to transpose it into national law, and an additional 12 months to commence application of its provisions, whereas the Commission is recommending that Member States implement the principles of the directive within two years of its publication.
In its current form, the directive provides that Member States shall, for the purpose of representative actions for redress, be free to choose between an opt-in and an opt-out system. The Law Reform Commission,16 in its 2005 report, indicated that Ireland will choose to adopt a mechanism that operates on the opt-in principle, subject to a power of the court to make an order for an action to be joined to an existing multiparty action. The opt-in principle reflects the traditional view of litigation, which requires a litigant to actively initiate proceedings before being considered a fully fledged member of a group. It remains to be seen whether this view has now changed, in light of the changes in the litigation landscape that have taken place in the 15 years since this report was issued. It is interesting to note that when implementing Article 80 of the GDPR, the Irish legislature elected not to implement Article 80(2), which would have allowed an opt-out regime for seeking redress on behalf of data subjects for infringements of the GDPR. The Minister for Justice and Equality at the time explained that to allow for an opt-out regime 'without the permission or agreement of those individuals . . . would amount to an extraordinary change in our law' that 'is not part of our national law or legal system'.
V OUTLOOK AND CONCLUSIONS
Fifteen years have now passed since the Law Reform Commission recommended that a formal procedural structure be put in place to deal with multiparty litigation; however, this recommendation has yet to be implemented and it remains to be seen whether it will form part of the next government's legislative programme. As mentioned in Section I, the Bill, which incorporates the Law Reform Commission's recommendations, progressed to the third stage in the legislative process in early 2018; however, there has been little progress since then and it was made clear earlier in the process that the Bill lacked the support of the government of the day.
Multiparty litigation and litigation funding are issues that go hand in hand as plaintiff lawyers claim that the absence of rules permitting litigation funding restrict their clients' ability to obtain access to justice. The law on litigation funding in Ireland has been subject to considerable clarification in recent years; however, following the 2017 decision in the Persona Digital case, confirming that third-party litigation funding remains unlawful, it is clear that any further development of the law in this area will require legislative reform. The Contempt of Court Bill was published in late 2017 and included provisions to abolish the offences of maintenance and champerty. However, the Bill does not appear on the government's legislative programme, so it remains to be seen whether it will be progressed.
Both the Bill and the issue of litigation funding are two of the issues being considered by Mr Justice Peter Kelly in the Review of Civil Justice Administration. The objective of the review is to identify recommendations that would improve access to civil justice in Ireland. As such, it can be expected that change is on the horizon.
The absence of a formal structure does not seem to have impeded multiparty litigation in this jurisdiction and, in the absence of legislative reform, it can be anticipated that multiparty litigation will continue to proceed on the basis of test cases for the foreseeable future. However, the introduction of a formal structure would certainly be consistent with the recommendations of both the Law Reform Commission and the European Commission. At the time of writing, we understand that the Review of Civil Justice Administration will be concluded and a report published in 2020.
1 April McClements is a partner and Aoife McCluskey is a senior associate at Matheson. The authors would like to thank Rachel Rock for her contribution to this chapter.
2 Rules of the Superior Courts Order 15 Rule 9.
3 These limitations include a requirement that the representative body taking legal action must be 'not-for-profit' and must have 'statutory objectives which are in the public interest' and are 'active in the field of the protection of data subjects' rights and freedoms'.
4 Law Reform Commission Consultation Paper on Multi-Party Litigation (Class Actions) 2003.
5 A private member's bill is a draft law that is proposed by a single member or members (Teachtaí Dála or Senators), rather than by the government.
6 The Bill was opposed on a number of grounds including the fact that many years had elapsed since the publication of the Law Reform Commission's recommendations, many of which had been incorporated into the Bill, and there had been a number of key developments in the intervening period. In addition, the government considered the Bill to be 'technically flawed' as it sought to enact as primary legislation a scheme that was intended by the Law Reform Commission to be in the form of rules of the Superior Courts.
7 Duke of Bedford v. Ellis.
8 Law Reform Commission Consultation Paper on Multi-Party Litigation (Class Actions) 2003.
9 Rules of the Superior Courts Order 4 r 9.
10 Law Reform Commission Consultation Paper on Multi-Party Litigation (Class Actions) 2003.
11 Rules of the Superior Courts Order 99 Rule 1(4).
12 Law Reform Commission Consultation Paper on Multi-Party Litigation (Class Actions) 2003.
13 Rules of the Superior Courts Order 22 Rule 10.
14 Commission Recommendation of 11 June 2013 on common principles for injunctive and compensatory collective redress mechanisms in the Member States concerning violations of rights granted under Union Law (2013/396/EU).
15 Statement of Commissioner for Justice and Consumers, Didier Reynders, on 29 January 2020.
16 The Law Reform Commission's Report on Multi-Party Litigation LRC 76-2005.