A recently issued judgment on a procedural point in a construction case has much more general application. The point concerns the scope of actions brought by or against representatives under Part 19.6 of the Civil Procedures Rules and the possible defences, including the defence of limitation.
In Millharbour Management v Weston Homes(1) Ms Hills and Ms Truchan wished to represent tenants who had brought claims arising from defects in the construction of their homes. The block of 350 flats had been built between 2002 and 2005. Some flats had been sold as social housing to an intermediary - Swan, one of the claimants - and had been sub-let to individual tenants. The remaining properties had been sold separately to private individuals on 999-year leases. The complaints about the flats concerned excessive heat, inadequate temperature control, rotting timber balconies, noise and high humidity in the basement plant room. It was unclear at the time of the hearing whether the problems affected all flats (and therefore all claimants or potential claimants) equally.
The original proceedings, which were issued in September 2010, involved 42 private leaseholders; however, an amendment in December 2010 added a further 36 individuals and Truchan as a representative of some of them. In January 2011 a further application to amend was made, this time to the effect that Hills should represent the private leaseholders who had purchased directly from the developer and Truchan should represent the leaseholders who had subsequently purchased leases. The defendants opposed the application.
The judge cited and analysed a string of authorities(2) on the issue of whether the applicants should be representatives, thereby potentially streamlining the proceedings and saving costs. He began with the 1901 case of The Duke of Bedford v Ellis,(3) in which the rights of fruit growers were considered in an action by stallholders in Covent Garden. Many of these authorities went against allowing representatives to pursue proceedings on behalf of others. However, in the present case the judge found for the claimants and set out a number of principles underpinning the rule, which will prove helpful for practitioners and parties in future.
The "threshold point", the judge held, is that the would-be representative must have the same interest in the claim as those who are to be represented. The court must try to determine this question by reference to the facts that are known at the time of the application, even if this is early in the proceedings. It is unnecessary to identify all members of the class existing at the date of the application or to show that membership of the group has remained constant and closed; however, at any given time it must be possible to establish whether a person "qualifies for membership of the represented class".
The court then has discretion to decide whether to allow the representative to act or continue to act, and should consider the overriding objective in exercising its discretion. Limitation defences (which applied in this case) should also be considered. Significantly, this discretion continues until enforcement of the judgment, which enables the court to direct that judgment is not to be enforced in favour of or against represented persons if it later finds that such persons do not have the same interest.
Hills and Truchan were held to have the same interest as the leaseholders whom they purported to represent. The contracts for sale and leases were the same for each purchaser and, at the time of the hearing, no distinction was raised as to whether some possible defences would apply only to some of the flats. In any event, these potential defences were all generic defences. The representative action was being sought only in relation to the cost of remedial works that Millharbour, the management company, was to undertake to the flats and would seek to pass on to leaseholders (probably all leaseholders) through an increased service charge.
The threshold having been established, the judge examined the factors to consider in exercising his discretion. The likely cost saving appeared to be a weighty factor and he discounted the argument that leaseholders might die or move away. The judge also noted two factors which meant that the defendants could not argue that they were at risk on costs: the claimants had taken out after-the-event insurance and there was considerable equity in the properties that they owned. He particularly rejected the defence that there "must be some individuals who do not want to become involved in this litigation as named claimant[s]" and considered that this might be a good reason for allowing, rather than prohibiting, representative actions.
The judge felt that a possible limitation defence could be dealt with by choosing a nominal starting date for the representative proceedings. In this case, rather than taking the original date on which proceedings were issued, he took December 7 2010 - the date on which Truchan first claimed to be a representative.
For further information on this topic please contact Abigail Silver at Reynolds Porter Chamberlain LLP by telephone (+44 20 3060 6000), fax (+44 20 3060 7000) or email ([email protected]).
(2) EMI Records Ltd v Riley  IWLR 923, Emerald Supplies v British Airways plc  Ch48, Aberconway v Whetnall  87 LJ Ch 524, Smith v Cardiff Corporation (No 1)  1 QB 210, Prudential Assurance Co Ltd v Newham Industries Ltd  Ch 229, Irish Shipping Ltd v Commercial Union Assurance  Z QB 206, Independiente Ltd v Music Trading On-Line (HK) Ltd  EWHC 470 and National Bank of Greece v RM Outhwaite  All ER (D) 59.