Class actions are an increasingly prominent feature of the English legal landscape.
The huge growth in the amount of personal data that is processed on a daily basis, and the scope for that data to be misused, is one source of such claims, but we also continue to see significant numbers of investors and consumers bringing misselling claims on a group basis. Potential claimants will need to consider at an early stage how their claims fit within the existing legal framework.
So what are the options?
Where there is an element of anti-competitive behaviour on the part of the defendants, then a collective action in the Competition Appeals Tribunal ("CAT") may be the best route, and we are certainly seeing claimants being more creative in terms of the types of claim commenced in the CAT.
Where claims give rise to common or related issues of fact or law, then a Group Litigation Order ("GLO") is likely to be the appropriate route, with claimants "opting in" to the litigation by signing up to a claimant register and test claimants being selected to represent the wider group.
In this article, however, we are going to look more closely at the third option available to a group of claimants, that is, to bring a representative action pursuant to Part 19.8 of the Civil Procedure Rules.
What is a Representative Action?
As the name suggests, a representative action involves a single claimant bringing a claim as the representative for a much larger group. In order to be in a position to do so, the representative must satisfy the court that they have the "same interest" as all of their co-claimants. This is a much narrower test than the requirement for there to be "common or related" issues of fact or law in order for a GLO to be contemplated. Indeed, the GLO was introduced specifically to allow for greater flexibility in the case management of group claims.
If, however, a claimant can meet the same interest test, then there are potentially very significant costs savings associated with pursuing a single claim to trial rather than a number of test claims, as is typically the case with a GLO. We have previously considered the costs issues that arise in group litigation in some detail. In addition, findings made in a representative action will bind the entire representative class, which is not necessarily the case with the more flexible GLO regime.
To date, the courts have granted a total of 112 GLOs (a public list is maintained by HM Courts & Tribunals Service). Although there is no public register of representative actions, we are aware of far fewer claims involving large groups of claimants being brought via this route and where claimants do choose it, they are likely to face immediate challenge from their opponent.
The first line of defence for a defendant faced with a representative action is often to assert that the claimant fails the "same interest" test and that, therefore, the claim cannot proceed as a representative action and should be struck out. This was precisely the line taken in three recent decisions, namely Lloyd v Google, Commission Recovery Ltd v Marks and Clerk LLP and Prismall v Google. A further strike out application is due to be heard in the Commercial Court Financial List in November 2023, in the case of Wirral Council as administering authority of Merseyside Pension Fund v Indivior plc; Reckitt Benckiser Group plc.
All three of the decided cases were "opt out" claims. As such, it fell to the representative claimant to define the entire class of claimants whom he or she represented. Any person who fell within that definition would automatically become a claimant, but they would have the ability to opt out of the claim if they chose to do so.
Lloyd and Prismall were both cases concerning the alleged misuse of data. In Lloyd, the claimants sought damages under the Data Protection Act 1998, whereas in Prismall the claimants (in recognition of the outcome in Lloyd) sought damages for the tort of misuse of private information. Both claims were struck out, however, on the basis that the claimants' damages could not properly be quantified without carrying out an individualised assessment of each claimant's loss, by reference to their particular circumstances, including the extent to which the misuse of their data had caused them distress. This being the case, they failed the "same interest" test and the idea that damage could be calculated either on a "uniform, per capita basis" or, alternatively, on a "minimum harm" basis was rejected.
That said, Lord Leggatt made clear in Lloyd that: “there is no reason why damages or other monetary remedies cannot be claimed in a representative action if the entitlement can be calculated on a basis that is common to all members of the class”. He went on to provide examples, such as where every member of the claimant class had been wrongly charged a fixed fee, or had all bought the same product with the same defect which reduced its value by the same amount. This reasoning would suggest that a representative action is unlikely to be the appropriate route for cases involving environmental damage on a mass scale, where an individualised assessment of causation and damage will be necessary. This was certainly the case in Jalla v Shell, in which the court held that two individuals who had allegedly suffered damage to their land as a result of an oil spill off the coast of Nigeria could not properly be representative of 28,000 other such claimants.
Marks, however, proved to be a case in which a claim for damages was permitted to proceed by way of representative action. Here, the claimants alleged breach of contract, whereby the defendant had failed to disclose to the claimants (their former clients) secret commissions relating to the renewal of intellectual property rights. The damages comprised the said undisclosed commissions. Thus, although the compensation due to each claimant would differ, depending on the terms of their contract with the defendant, no individual assessment of their damages was necessary and the claimants therefore had the "same interest". The defendant's strike out application failed.
In both Lloyd and Prismall, the court discussed the possibility of bifurcation as a means to remedy the difficulties associated with assessing damage on an individual basis. In a (theoretical) bifurcated claim, claimants would seek a ruling on liability by way of representative action, where the same interest test could be met, and would then have a separate assessment of damages, in which damages could be assessed on an individual basis; essentially a split trial.
This was precisely what happened in Prudential Assurance Co Ltd v Newman Industries Ltd (1981), where the claimant representative class were all shareholders in the same company and sought a declaration from the court as to the conduct of two of the company's directors. A consequential hearing as to the losses that flowed from the declaration was determined separately.
In Lloyd, Lord Leggatt questioned whether the way in which representative actions are typically funded may be a barrier to bifurcation. That is, a litigation funder will need to be satisfied that there is a potential return on its investment before it agrees to provide funding, but a finding on liability will not, in itself, provide any such return. In both Lloyd and Prismall, a bifurcated approach was described as being "uneconomic".
The way forward?
Claimants contemplating a representative action must therefore look to tread a careful path through this line of developing caselaw and it is against this backdrop that the strike out application in Wirral Council will be heard in November 2023.
Like Marks, Wirral Council is not a data case. The claimants (represented by this Firm) are existing or former shareholders in Indivior Plc, a pharmaceutical manufacturer and producer of Suboxone, an opioid addiction treatment, and/or Indivior's former group company Reckitt Benckiser Group Plc. Following an investigation by the US Department of Justice relating to the allegedly fraudulent marketing of Suboxone and an indictment issued by a United States grand jury in the Western District of Virginia against Indivior plc, their collective shareholding in both companies decreased in value.
Unlike Lloyd, Marks or Prismall, Wirral Council is an "opt in" representative action, in which the claimant class is defined as shareholders in Indivior or Reckitt, between particular dates, who have signed up to terms as to cost-sharing and governance of the proceedings.
Also unlike the preceding cases, the Wirral Council Claimants have adopted a bifurcated approach and have limited their claim to seeking declaratory relief on essentially a single issue: Did Indivior and Reckitt knowingly or recklessly publish misleading promotional material? Any determination as to the claimants' standing, reliance on the promotional material, causation of loss and/or assessment of damages will be heard separately, although it is possible that should the court grant the declarations sought, the parties will find it easier to reach an agreed settlement that provides fair compensation to the claimants who have suffered loss.
Whether the claimants have the same interest is not in dispute in Wirral. Rather, the debate is as to the court's discretion to allow bifurcation, in which the first part of the claim proceeds as a representative action, when it has other case management powers available to it. Also of interest is the fact that bifurcation of the claim in this way has not prevented the claimants from securing litigation funding.
So what are the key takeaways for representative actions?
- For now, it looks like bringing data-related claims as representative actions is difficult, unless they can be bifurcated.
- Even in non-data cases, bifurcation may assist claimant groups to narrow the issues in dispute and thereby satisfy the same interest test.
- Bifurcation need not be a barrier to litigation funding.
- Given the costs of other group claim procedures such as GLOs, representative actions may play an important role in increasing access to justice by enabling claimants who have suffered loss but do not have large resources to seek redress.