The Court of Appeal dealt a blow to class actions today. It rejected an appeal against the High Court's decision in April 2009 which had struck out an audacious attempt by claimants to bring a US-style "opt-out" class action on behalf of an undefined class of potential claimants, seeking damages against British Airways (BA) for its participation in an alleged cartel in the market for the provision of air freight services (Emerald Supplies Limited, Southern Glass House Produce Limited v British Airways Plc, [2010] EWCA Civ 1284).

The Court of Appeal's judgment is timely, following last week's decision by the European Commission to fine 11 airlines a combined total of €799 million for fixing prices in the market for the provision of air freight services. It also comes at a time when the European Commission, the UK's Office of Fair Trading and the Civil Justice Council are all closely considering the availability of remedies for groups of claimants (referred to as "collective redress"), particularly for breaches of the competition rules.

Background

The damages claims in the English Court were brought by Emerald Supplies Ltd and Southern Glass House Produce Ltd (the "Claimants") in September 2008. The Claimants alleged that they had suffered losses as a result of the inflated prices charged by BA as a consequence of its participation in the cartel.

The Claimants had attempted to use Rule 19.6 of the Civil Procedure Rules to bring an action not only on their own behalf but also on behalf of all other direct and indirect purchasers of air freight services from BA and any other member of the alleged cartel. This would be akin to an 'opt-out' class action (which can be brought in the US) where individual claims can be aggregated and brought by one or more persons on behalf of the class of claimants, even without the prior knowledge and consent of all members of the class.

Rule 19.6 does permit 'representative actions' to be brought by one or more person on behalf of themselves and others. However, this is only in closely defined circumstances. Specifically, a person may only bring a representative action where each person represented has precisely the "same interest" in the claim. It would be a significant departure from previous practice to allow the Rule to be used in the way proposed by the Claimants in this case.

The Court of Appeal's judgment

The Claimants' representative action was struck out at first instance by the High Court in April 2009 (see our previous Insight Article, "British Airways – High Court Dismisses novel class action"). The High Court refused to accept that the class of claimants on whose behalf the representative action was purportedly brought, possessed a sufficient identity of interests at the time the claim was brought. The Claimants were, however, granted permission to appeal.

In its judgment on that appeal, the Court of Appeal has confirmed that the claim fails to comply with the requirements of Rule 19.6. Lord Justice Mummery (with whose judgment the other two Lord Justices agreed) described the appeal as a "bold attempt at keeping a procedural novelty alive," and, unsurprisingly, concluded that the Claimants' case for a representative action was "fatally flawed."

The fatal flaw was that the class of claimants, purportedly represented by Emerald and Southern Glass, did not possess the "same interest" required by Rule 19.6. Since the class of claimants, as defined, could include entities at different levels of the supply chain, the proceedings would not be equally beneficial to all those to be represented in the action.

Further, Mummery LJ anticipated that BA would wish to raise the "passing-on" defence with respect to direct purchasers, i.e. to argue that those parties had not absorbed any anti-competitive overcharge, but passed it on to their own customers. There is, therefore, an inherent conflict between how direct and indirect purchasers would respond to that defence. Direct purchasers would seek to argue they had not passed on the overcharge (so as to maximise their claim for damages). This, however, would lead to a reduction in the damage which indirect purchasers could claim they had suffered.

The Court of Appeal also noted that, for the purposes of Rule 19.6, it must be possible to determine whether or not a person is a member of the represented class at the time the claim is brought: "it cannot be right in principle that the case on liability has to be tried and decided before it can be known who is bound by the judgment" (paragraph 65). The lack of certainty as to the identity of the members of the proposed class, together with the Claimants' failure to demonstrate sufficient identity of interests between the class members, led to the dismissal of the appeal.

Permission to challenge the ruling refused

The Court of Appeal refused the Claimants permission to appeal to the Supreme Court. The only avenue remaining, therefore, is for the Claimants to seek permission to appeal direct from the Supreme Court. Whether or not the Claimants choose to do so remains to be seen. However, given the unanimous Court of Appeal decision, and the terms in which it was expressed, it seems unlikely that leave to appeal would be granted.

Does the Court of Appeal's judgment close the door to class actions in England?

The Court of Appeal's judgment confirms that the English courts will not bend the Civil Procedure Rules in order to facilitate the bringing of class action-type claims in England and Wales.

However, this is unlikely to be the last word on this issue. There is a real possibility that there will be legislative reform in the field of collective redress in the near future. In October of this year, the Vice President of the European Commission with responsibility for competition policy, Joaquín Almunia, announced the imminent launch of a public consultation on collective redress across all policy areas, including in relation to the private enforcement of competition rules. Following the consultation, it is envisaged that a specific proposal on antitrust damages actions will be presented to the Commission in the second half of 2011. That proposal is likely to include minimum requirements for national systems as far as antitrust damages actions are concerned including, it is to be expected, as to the collective redress mechanisms to be made available to potential claimants.

As a result, and although the Court of Appeal has confirmed that it will not facilitate US-style class action claims in the absence of a prescribed procedure for bringing such claims, it may not be long before developments at EU level in the area of collective redress lead to the introduction of such procedures into national laws across the EU, including in England and Wales