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Splitting bills: costs issues in group litigation

Posted on 27 June 2022

costs-issues-in-group-litigation

From claims arising out of data breaches, environmental damage affecting whole communities or a corporate abusing its dominant position within the market, group litigation in the English courts is undoubtedly on the rise. However, these actions can raise complicated issues when it comes to costs which parties should ensure they consider from the outset.

How to bring a claim

There are a number of ways in which a group of individuals may choose to pursue their claims.

If all of the claimants have been identified, then they may simply issue a single claim form upon which they are all named. Alternatively, it may be that separate claims raise similar issues, in which case they may be consolidated and determined together. In certain circumstances, a formal Group Litigation Order may be sought. The Civil Procedure Rules also make provision for representative actions to be brought, where one or more claimants represent the interests of others. And if your claim is before the Competition Appeals Tribunal, then you may seek a collective proceedings order in which, again, a claimant acts as representative for a larger, underlying class of individuals.

The issues

Where a group of potential claimants wish to bring their claims together, they will need to determine:

  • How will they fund the claims?
  • How will they divide their own legal costs between them?
  • How will liability for adverse costs be apportioned?

Strength in numbers

The benefit of a group action is that it enables meritorious claims to be brought in circumstances where the costs of doing so may otherwise be disproportionate and therefore prohibitive for an individual claimant. An individual claim may not, in itself, be of sufficient value to pursue but, collectively, economies of scale can make a group claim cost effective.

However, the value of each individual claim within a group may vary very significantly. Some claimants may have significant means with which to fund a case, while others do not. How then, do the claimants divide their share of both costs and potential liabilities?

To GLO or not to GLO

Where there are multiple claimants on a single claim form, or where several, similar claims have been consolidated, there are no prescribed rules relating to costs and claimants are generally free to apportion their costs liability amongst themselves as they see fit. Ideally, agreement should be reached at an early stage of proceedings as it may well determine a claimant's appetite to get involved with the claim at all.

However, if the claimants can identify common issues of fact or law for the court to determine, they may apply to the Court for a Group Litigation Order, or "GLO". If granted, then certain costs consequences will flow from the GLO. In particular, claimants will need to identify "individual costs"  (those incurred in relation to an individual claim), as distinct from "common costs" (costs incurred in relation to GLO issues, the costs of any test claim and the costs of administering the group litigation).

Unless otherwise ordered, liability for common costs will be divided equally among the claimants, each of whom shall be severally liable.

Certainly, no individual claimant would want to find themselves jointly liable for the costs of their co-claimants but will it always be fair to divide costs equally among them if the value of their claims varies? In this scenario, claimants may well want to tailor their costs apportionment to fairly reflect their particular circumstances, in which case the wording of any order or agreement will need to be drafted with care.

If a GLO is not appropriate because, for example, there is insufficient commonality amongst the claimants, then the automatic costs consequences described above will not apply and the defendants may well seek an order for joint and several costs liability if it serves their purpose. Where a group of claimants includes one or more individuals who are particularly wealthy, it is a far easier prospect for a defendant to enforce any costs order against a small number of deep pocketed claimants rather than against a larger group.

Representative actions and Collective proceedings

The GLO regime is described as being "Opt In". That is, a claimant must positively assert their claim, engage with lawyers and agree to be included on a register of claims. However, where the number of potential claimants runs to the thousands, or hundreds of thousands, it may be impractical and disproportionately expensive to expect every claimant to opt in in this way.     

Both the representative actions regime under the Civil Procedure Rules and the collective proceedings regime in the Competition Appeals Tribunal ("CAT") enable "Opt Out" claims to be brought. That is, claimants may be automatically enrolled in a claim unless they specifically say that they don't want to be. Recent examples in the CAT include claims by customers of Mastercard and BT.

In cases of this nature, the representative claimant is, in principle, liable for the costs of the action, including the costs of their opponent if they lose. In practice, however, these costs and liabilities are usually met through Litigation Funding arrangements, as to which see below. It is also possible for the court to make an order requiring a represented party to contribute towards costs, although such orders are unusual.

Whilst both regimes remain in their infancy, it would certainly appear that "Opt Out" group actions are here to stay and are, in fact, on the increase.

Costs capping

Either party to group litigation may seek to control and limit their opponent's legal spend by applying for a costs capping order, the effect of which would be to cap recoverable legal fees at a specified amount. Any spend over the cap is irrecoverable from the other side, even in the event of success.

However, the English courts have considered the potential for costs capping within group litigation and have ruled that such orders should only be made in exceptional circumstances. In particular, the court will have in mind the need to deal with cases justly, which includes ensuring that parties are on an equal footing and can participate fully in proceedings. Rather than stifling claims via costs capping, the courts prefer to use their costs budgeting powers to ensure that both sides incur fees in a proportionate manner, and may well be prepared to apply costs budgeting to claims worth more than the usual £10 million threshold.

Litigation funding

Whether a GLO, representative action, collective proceedings or none of the above, where the combined value of a group action is substantial and the prospects of enforcing any judgment against the defendant is good, then a litigation funder may be prepared to fund the case.

Typically, a litigation funder will not only provide the claimants' legal fees, but will also obtain or arrange insurance cover against the risk of an adverse costs order. With joint and several liability for adverse costs a possibility, it is crucial for individual claimants to manage and limit their personal exposure as best they can, and most funders will be well placed to source insurance at a competitive price.

Again, economies of scale mean that an individual claimant whose claim would not ordinarily be of interest to a funder may nevertheless become an attractive proposition when combined with similar claims as part of a group action.

Conclusion

Notwithstanding the complexities of the various regimes, where costs issues are well-defined and well-managed from the outset, funded group litigation can provide vital access to justice for claims that may otherwise not get off the ground.

For more information about group litigation and litigation funding, please contact Hazel Chambers or your usual Mishcon de Reya contact.

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