England and Wales

Introduction

Collective redress mechanisms in England & Wales, other than for certain competition claims, are primarily of the “opt in” type rather than “opt out” as with a US-style class action. The Civil Procedure Rules (CPR) permit a variety of multi-party actions in the civil courts, including a representative action and litigation under a Group Litigation Order (GLO), but also impose conditions which seek to control when and to whom such collective redress mechanisms will be available.

We anticipate an increase in the volume and size of collective actions brought in England. We consider this in more detail in Recent developments, trends and predictions. The factors contributing to this trend include:

  • an increase in regulatory oversight and enforcement action against regulated entities in the UK
  • the availability of “opt out” collective actions to be commenced against corporates for anti-competitive behaviour improvement in the coordination, management and funding of collective actions in the UK
  • increased awareness of and engagement in collective actions by corporate entities and the public, and
  • legislative changes (such as the Financial Services and Markets Act 2000 (FSMA), which contains a number of provisions which would allow an aggrieved consumer or customer to claim damages against an authorised firm and/or the persons responsible for the breach or the misleading or dishonest disclosure, depending on the circumstances).
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General features
    • There is no direct equivalent in England and Wales to US-style class actions, other than under the Consumer Rights Act 2015 (CAR) for anti-competitive behaviour. Since 01 October 2015 the CAR has permitted “opt out” class actions in competition law claims before the Competition Appeal Tribunal (CAT). The CAT will decide whether an action will be on an opt-in or opt-out basis.
    • However, the Civil Procedure Rules allow for a various “opt in” procedures which enable several similar claims against a defendant to be dealt with together in the courts, such as multiple joint claimants, a Group Litigation Order (GLO) or a representative action.
    • There is no established mechanism for distribution of settlements for any of the above collective redress procedures. Damages in England & Wales are largely compensatory, and punitive damages are available only in very limited circumstances. Given the difficulties in assessing damages in group litigation the court may take a high level view and award damages on a percentage or other easily calculable basis. In Anslow & Ors v Norton Aluminium the court held that for low value claims covered by GLOs, claimants could not expect the same attention to detail as they would in high value claims. Alternatively, the court may give a decision solely on liability, with quantum subsequently to be proved by individual claimants, as was seen, for example, in NRAM plc v McAdam, where NRAM was representing 41,000 other borrowers.
Types of collective redress
  • Multiple joint claimants

    The Civil Procedure Rules (CPR) permit multiple parties to join forces and issue a joint claim, as long as those claims can be "conveniently" disposed of in the same proceeding. Claims brought separately might also, subsequently, be consolidated, if the court considers that to be appropriate.

    Same interest representative action

    The Civil Procedure Rules (CPR) allow one or more representative person(s) to bring a claim on behalf of others who have the "same interest". This can be a fairly restrictive test to satisfy; representative claims will only be allowed where the group represented is clearly identifiable by factors unrelated to the claim in question. This procedure has, however, been used in a variety of different circumstances, such as a tenant suing a landlord on behalf of other tenants in the same block.

    The representative does not have to obtain the permission of the represented persons in order to bring the claim and the representative can conduct the litigation as he chooses. A person who objects to being represented can, however, apply to be excluded from the representative proceedings.

    Any decision in a representative action will be binding on those represented. However, the decision can only be enforced by a named party, unless the court orders otherwise.

    As above, before the Court will allow a representative action the strict CPR conditions must be satisfied. In November 2010, in Emerald Supplies Ltd v British Airways plc, the Court of Appeal considered an attempt to use the representative action mechanism to bring an action on behalf of anyone who had suffered loss, directly or indirectly, as a result of a cartel amongst air freight carriers. It upheld a decision to strike out the representative element of the claim, on the ground that the conditions of CPR r.19.6 could not be satisfied; the group was insufficiently defined and the nature of their losses differed too greatly, particularly as in respect of some claims the defendants could argue that the loss had been passed on to others in the form of higher prices for imported goods. The claimant and those it sought to represent did not have "the same interest" required.

    The Emerald decision was then applied in Millharbour Management Ltd v Weston Homes Ltd, in which the Technology & Construction Court considered that two individuals did have the same interest and could represent other leaseholders in respect of a claim alleging defects in the construction of a large block of flats. The claimants could all be identified, and the claims of the representatives and those being represented all derived from the same defects, the same causes of action and the same loss, and there was no evidence that the defendant would deploy anything other than generic defences.

    Representative action by a specified body or member of the class

    A form of statutory representative action was introduced into the Competition Act by the Enterprise Act 2002, to enable a "specified body" to bring representative claims in the Competition Appeal Tribunal (CAT) on an opt-in basis. A claim could be brought on behalf of named individual consumers (but not businesses) for damages against companies previously found by the EC or UK authorities to be guilty of infringing competition law. Once the authorities find the company guilty, liability is established and any "follow on" civil actions for compensation need only establish causation and the quantum of damage.

    A consumer organisation, Which?, became the first "specified body" under the Competition Act; it brought a follow on action on behalf of consumers who had bought replica football shirts. JJB Sports had been found to have infringed the competition rules and was fined by the Office of Fair Trading (OFT) in 2003 for price fixing in relation to sales of the shirts. The individual consumers were identified through advertisements in the regional press and through the campaign pages of the Which? website. Although an estimated two million consumers were affected, only about 500 finally opted in to the action. The matter culminated in an out of court settlement, and JJB Sports announced that it would also compensate all other eligible buyers of the shirts, though at a lesser rate, even if they had not registered as claimants in the representative action before the settlement was reached. Overall, however, the action was not regarded as a success for Which?, which said publicly that it would not bring any further representative cases under these statutory provisions.

    Schedule 8 of the Consumer Rights Act 2015 amends the Competition Act 1998 to allow standalone (not just “follow on”) damages claims to be brought by a wider set of representatives, including a member of the class harmed, on either an opt-out or an opt-in basis at the CAT’s discretion. “Opt out collective proceedings” do away with the need for named individuals to give consent to joining the action. Instead, the collective action is brought on behalf of every class member except those that have expressly opted out (or those that are domiciled outside the UK and have not opted in). Collective proceedings must be authorised by the CAT and commenced by a representative authorised by the CAT, which will ask whether it is just and reasonable for that person or body to bring the proceedings. Claims are eligible for inclusion in collective proceedings only if the CAT considers that they raise the same, similar or related issues of fact or law and are suitable to be brought in collective proceedings. The CAT is expected only to authorise a representative that is able to pay the defendant’s recoverable costs if ordered to do so, and is able to satisfy any undertaking as to damages if an interim injunction is imposed.

    In July 2017, the CAT rejected an application for a Collective Proceedings Order (CPO) in a claim on behalf of 46.2m individuals against Mastercard for increased credit card fees that had been held to infringe competition law and had been passed on to them through retail prices. The CPO would have enabled the largest legal action ever commenced in England to proceed. The Tribunal found that the claims were not suitable to be brought in collective proceedings, though this decision is to be appealed in the Court of Appeal in the autumn of 2018. Our elexica article on this can be found here. In May 2018 an application for an opt-out class certification was made to the CAT in relation to the cartel between truck manufacturers that the European Commission found operated between 1997 and 2011. This is the first occasion on which an SPV has been established to bring an opt-out claim. For more on this development, see our article.

    The limitation period that will apply for collective actions is the same as that in the other types of tort claim - namely six years from the date on which the claimant has enough information about the claim to bring an action that will not be struck out for lack of specificity. A collective action will be heard by a panel of judges in the CAT. Collective proceedings will be heard by a three member Tribunal. No punitive damages can be awarded in collective proceedings. Damages may be paid to the representative, or to any other person, other than one of the class members, as the Tribunal sees fit. The Tribunal will give directions for assessing the amount that any individual member of the class is entitled to receive, either a method for quantifying the amount, or that an independent third party should determine the amount (or resolve any disputes as to the amount, or that the Tribunal is to approve the apportionment of the award. Any funds that remain unclaimed may either be paid to a specified charity, or, at the Tribunal’s discretion, to the representative to help defray the costs of bringing the proceedings.

    The course of collective actions can be tracked using the CAT’s website.

    The Consumer Rights Act 2015 also introduced two other collective measures: a collective settlement mechanism and a system of voluntary redress, where the infringer offers to compensate those harmed without recourse to litigation.

    Since 01 October 2015, there has been a pilot of a test case scheme in a specialist court dealing with financial markets claims (the Financial List). The Financial List will deal with claims worth over £50m (or of “general importance” if lesser value) which involve issues relating to the financial markets. A “qualifying claim” for the test case scheme is one which “raises issues of general importance to the financial markets in relation to which immediately relevant authoritative English law guidance is needed”; there need not be an actual dispute or present cause of action between the parties, and trade bodies or associations may join as parties. Parties with opposing interests who are or were actively in business in the relevant market can, by mutual agreement, issue a claim.

    Group litigation orders

    Whilst the representative procedure under the CPR is suitable for certain types of multi-party action, it is not suitable for dealing with large numbers of claims brought in relation to similar or related facts. An application can be made to the court for claims involving multiple parties giving rise to "common or related issues of fact or law" to be dealt with by way of a Group Litigation Order (GLO), enabling the court to manage the claims covered in a coordinated way. In considering an application for a GLO in Arif & Ors v Berkeley Burke Sipp Administration Limited [2017] EWHC 3108, the court balanced various factors, including the respective number and weight of claimant-specific issues and common issues, taking the view that where individual claimants’ cases would be far advanced by a determination of the common issues (even where claimant-specific issues may still fall to be determined)  the making of a GLO would save time and cost, in furtherance of the overriding objective. 

    There is no restriction on the remedies available.

    The GLO procedure provides the court with a wide range of case management powers, enabling the court to manage the cases in an efficient and therefore more cost effective manner. In relation to costs, a distinction is made between individual costs and common costs. A litigant will, broadly, be liable for a specific proportion (but no more) of the costs relating to issues common to all members of the group, as well as all the costs relevant to issues unique to his claim. One advantage for claimants is that the costs of the lead solicitor are split between the claimants on the register. This can encourage actions to be brought which might otherwise not have been pursued because they would not have been cost effective.

    Despite the fact that this is a wider test than the requirement for the "same interest" in representative actions as described above, as at December 2017 there had only been 101 GLOs made since the introduction of the regime in May 2000.

    A current list of all GLOs made is available here.

    Competition claims

    Since 01 October 2015, the Competition Appeal Tribunal (CAT) has permitted “opt out” class actions in competition law claims before the CAT. To date, so far as we are aware, only two applications have been made to the CAT for a collective proceedings order (CPO). The CAT rules set out the procedures for collective proceedings; the CAT has a discretion to make a CPO (and associated directions) if it considers that the claims sought to be included in the collective proceedings are brought on behalf of an identifiable class of persons, raise common issues, and are suitable to be brought in collective proceedings.

    Financial list

    The Financial List is a “specialist cross-jurisdictional list set up to address the particular business needs of parties litigating on financial matters”. Whilst not strictly a collective redress mechanism, it is of interest that the Financial List allows parties with “opposing interests” and/or trade associations or bodies (even where there are no actual proceedings or even a cause of action) to ask the Court to resolve “…market issues in relation to which immediately relevant authoritative English law guidance is needed."

Funding and costs
  • The losing party usually pays the successful party’s costs in an action in England and Wales, although the court has a wide discretion as to how to award costs. Full recovery of costs even by a successful party is rare, however, meaning that the successful party usually still has to pay the irrecoverable portion of his costs. Cost sharing agreements are usual in multi-party litigation, setting out how individual costs, and a share of any common costs, will be allocated between the claimants.

    Solicitors are permitted to operate under a conditional fee agreement (CFA) and may charge an "uplift" on their usual fee in the event of success, under a "no win, no fee arrangement". In addition, claimants can take out "after the event" (ATE) insurance which provides cover against an adverse costs order should the claim be unsuccessful. Success fees under a Conditional Fee Agreement, and the premium for an After the Event Legal Expenses Insurance policy, are no longer recoverable from the other side (unless the funding arrangement/policy was put in place before 01 April 2013, or in certain excepted cases).

    Damages based agreements (DBAs), or contingency fees, became possible on 01 April 2013 for the first time in litigation in England and Wales. Under these arrangements, lawyers are paid no fee while the case is underway, but are paid a percentage of the amounts recovered in the event of the claim succeeding or settling. Costs can be claimed from a losing defendant on the basis of hourly rates and this is deducted from the amount payable to the lawyers, though the amount recovered from the defendant cannot exceed what is owed to the lawyers under the DBA. DBAs were supposed to present a new funding option, but very few have been entered into. The regulations that introduced DBAs are very restrictive in several material respects; they prohibit “hybrid” DBAs, under which a reduced fee would be payable while the case was underway, with a percentage of damages recovered to top this up in the event of success.

    DBAs are prohibited in relation to opt-out collective proceedings in any event. This is intended to safeguard against unmeritorious claims being brought. However, it may also have the effect of stifling potential claims, as there are no guarantees that any damages will remain undistributed, and if they are, that they will be awarded to the representative as a contribution to costs rather than being paid to charity.

    Other forms of funding are becoming available to claimants. There are a growing number of third party litigation funders active in England, who commonly fund litigation in return for a proportion of any damages recovered by the litigant. Several large and well-publicised actions have been funded by litigation funders in recent years, such as the claims against Tesco plc (in England) and Volkswagen AG (in Germany), which are funded by Bentham Ventures AV.

    “Crowdfunding” has also entered the arena of litigation funding. A funding platform called CrowdJustice has been set up by a team of lawyers and volunteers, aimed at enabling communities to join together to fund legal action in cases where a public interest is involved.

Recent developments, trends and predictions
  • Since 01 October 2015, the Competition Appeal Tribunal (CAT) has permitted “opt out” class actions in competition law claims before the CAT. To date, so far as we are aware, only two applications have been made to the CAT for a collective proceedings order (CPO) under the new regime. An attempt to bring a collective action against Mastercard, in a claim worth around £14bn on behalf of over £46m UK consumers, was rejected in 2017, but this is being appealed in Autumn 2018. The CAT did not, however, wholly reject the second application; this is a follow-on claim seeking damages on an opt-out basis on behalf of consumer purchasers of mobility scooters between 2010 and 2012, after Pride was found by the OFT to have infringed competition law. The CAT refused the application but expressly allowed the claimants to reformulate their claim on a narrower basis. The claimants have since confirmed that they will not be continuing the claim. A third application for an opt-out class certification was made to the CAT in May 2018 in relation to the cartel between truck manufacturers that the European Commission found operated between 1997 and 2011. This is the first occasion on which an SPV has been established to bring an opt-out claim. For more on this development, see our article.

    Additionally, a new court scheme known as the Financial List has been running since 01 October 2015 (initially for a two year pilot). The Financial List deals with claims worth over £50m (or of “general importance” if lesser value) which involve issues relating to the financial markets. Parties with “opposing interests” and/or trade associations or bodies (even where there are no actual proceedings or even a cause of action) can ask the Court to resolve “…market issues in relation to which immediately relevant authoritative English law guidance is needed." As at September 2017, there were 38 cases being heard in the Financial List.

    A number of factors suggest that there is likely to be an increase in the volume and size of collective actions brought in England. The key factors informing that prediction are as follows:

    • Legislation: The Financial Services and Markets Act 2000 (FSMA) contains a number of provisions which would allow an aggrieved consumer or customer to claim damages against the authorised firm and/or the persons responsible for the breach or the misleading or dishonest disclosure, depending on the circumstances. Although many of these remain largely untested, the basis on which those claims may be brought seems relatively clear, and the hurdles to overcome in order to succeed with such claims are lower than an equivalent claim in tort (eg in some circumstances there is no need to prove reliance on the statements in question). Accordingly, they may well provide an effective route for claimants. For example:
      • Section 138D of FSMA allows private individuals who have suffered loss as the result of breaches of the FCA and PRA rules to claim against the authorised firm
      • Section 90 FSMA provides those who have suffered loss as result of a misleading statement in a prospectus or offering document with a right of action against those responsible - this is the basis of the claim in the Group Litigation action against Lloyds, and
      • Section 90A FSMA provides a right of action against the issuers of securities to those who have suffered loss as a result of a misleading statement or dishonest omission in certain published information relating to securities (other than in a prospectus), or dishonest delay in publication of that information. It has been suggested in the media that this provision will form the basis of a collective action against Tesco for its publication of overstated profits. 
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      Regulatory action: The general increase in regulatory enforcement action against regulated entities in the UK means that a great deal of the underlying factual material required to establish a claim as a shareholder (which would usually be revealed during the disclosure process) has already been uncovered as part of a regulatory investigation. Furthermore, a renewed focus on corporate transparency with regulators, investors, consumers and the market more generally, means that instances of corporate wrongdoing are becoming more widely known and at an earlier stage.

       

    • “Opt-out” actions: US-style opt out collective actions were introduced in England & Wales following the enactment of the Consumer Rights Act 2015 (CAR) (which came into force on 01 October 2015). The CAR permits “opt out” collective actions to be commenced against corporates for anti-competitive behaviour.
    • Coordination, management and funding: In recent years there has also been a relatively rapid improvement in the coordination, management and funding of collective actions in the UK, resulting in a more compelling proposition for potential participants. For example:

     

    - Funding: There are now a large number of reputable litigation funders and insurers in the market supporting collective actions. By way of example, Bentham Europe (a subsidiary of IMF Bentham Ltd in Australia) entered the UK market in 2014 and in 2017 it is funding large shareholder actions against Volkswagen AG in Germany and Tesco plc in England. It has stated that it is considering funding similar actions against BT Group plc, Petrofac Ltd and Banca Moonte dei Paschi di Siena. Funders and coordinators of such actions now issue comprehensive packs of information in relation to, among other things, the nature of the proposed claim, the funding arrangements, and the relevant risks. There has been an increase in the funding options available (eg, there are now a number of crowd funded collective actions).

    - Management and Coordination: A number of reputable law firms are at the forefront of trying to coordinate the largest collective actions currently being formed in the UK.

    Coordinators of collective actions have started to use social media as an effective tool to identify and engage with individuals who may be eligible to participate in those actions.

    • Increased institutional engagement: Our understanding is that, historically, financial institutions (including asset managers acting on behalf of their investors) have tended not to participate in collective actions against corporations. That position appears to be changing as becomes easier and more cost efficient to undertake the relevant risk-reward analysis of participation. If the trend of increased participation by large financial institutions continues, not only will that increase the size of the claims (given the comparable size of the shareholdings that those institutions hold), but it will most likely encourage participation from others who feel more comfortable participating in action which is backed by a well-known institution. Bentham Europe announced in October 2016 that over 125 institutional funds were participating in a claim against Tesco PLC for well in excess of £100m over alleged breaches of the Financial Services & Markets Act.

      It seems only a matter of time before one of the high profile actions is successful. Once that happens, there will be a clearer track record of success for collective actions in the UK. Further, it may prompt shareholders who did not participate in the successful collective action as a result of their investment management deciding not to participate, to question the process followed by their investment management when deciding against participation
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    • Public awareness: As we see increasing numbers of actions against companies which are regarded as household names (eg Tesco and Volkswagen), with significant attendant press coverage, there is likely to be an increased interest in the formation, participation in, and result of, such actions. In some instances, it is conceivable that a combination of different collective actions may arise from the same event. For example, it has been suggested that there may be separate collective actions brought against Volkswagen by consumers, shareholders and bondholders.

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.