On 8 April 2009 the Chancellor of the High Court gave judgment in an interim application in Emerald Supplies Ltd and Another v British Airways plc  EWHC 471, holding that two victims of a cartel could not bring a representative action on behalf of all other victims of the cartel, as well as for their own loss. Instead, the various victims of a cartel must bring separate claims - although these actions might well be dealt with together by the court under a Group Litigation Order.
In this case, the court held as follows:
- The fact that the relevant class advanced by the claimants was both numerous and geographically widely spread was not in itself a bar to a representative action.
- However, it was necessary for the class members to all have the same interest in the claim at the time the proceedings were commenced – not at the time when judgment was given.
- In determining whether the class members had the “same interest”, the court held that it was fatal that in this case inclusion in the class depended on the outcome of the action itself. This was because the class was defined not by reference to criteria that could be defined at the time the action was brought, but instead included only those purchasers that could succeed in showing that they had paid for services at prices which were inflated by the alleged cartel.
- Also, the relief sought by the claimants was not equally beneficial for all members of the class. This is because it covered both direct and indirect purchasers at various stages of the supply chain, and there would be an inevitable conflict between these different members of the class.
The judgment runs counter to the latest attempts by the European Commission (which issued a green paper on Consumer Collective Redress in November 2008) and the Civil Justice Council (which recommended in December 2008 that the group litigation model in England be reformed) to make it easier to bring group actions.
The judgment does not rule out the prospect that a representative action might be appropriate in some cartel cases, for example where the class consists of a more tightly defined group of customers at the same stage of the supply chain that purchased goods or services in a particular period. However, it signals that the courts of England and Wales are not prepared to embrace a move towards a more US style class action process for cartel claims.
In this respect, it is significant that the claim in this case has been brought by a specialist class action law practice from the US. That the court has declined to allow the claims of all potential victims of a cartel to be dealt with in one representative action is likely to make it more difficult for a single claimant law firm to represent all potential claimants. It is likely that the judgment will be appealed.
The claimants import cut flowers from Columbia and Kenya and use the air freight services of BA and other international airlines. In the light of the conviction of BA and other airlines in the US for participating in a world-wide cartel to fix prices at which air freight services are supplied, which has since been followed by similar proceedings in Australia and New Zealand and an investigation by the European Commission, the claimants brought a claim in September 2008 seeking damages from BA for infringing Article 81(1) EC Treaty, Article 53 EEA Agreement and s.2 Competition Act 1998.
In addition, the claimants also asserted that they were representatives of all other direct or indirect purchasers of air freight services, the prices for which were so inflated. By CPR Rule 19.6, a claim may be begun or continued by (or against) one or more persons who have the same interest, as representatives of any other persons who have that interest. This is subject to the power of the court to direct that a person may not act as a representative.
On 31 October 2008, BA issued an application for the representative element of the claim to be struck out on two grounds, as follows:
- the “other persons” whom the claimants sought to represent do not have the “same interest” so as to fall within CPR Rule 19.6(1); and
- that, even if those persons do have the “same interest”, the court should direct that the claimants may not act as their representative under CPR Rule 19.6(2).
The legal issues
The pre-conditions that must be satisfied before a representative action can be brought under CPR Rule 19.6 were held to be as follows:
- First, that there should be more than one person who satisfies the remaining conditions. There is no limit to the number of persons in the class to be represented nor is there a limit on how geographically widely spread the relevant class should be - although the more extensive the class, the more clearly the other conditions must be satisfied.
- Second, those persons must share the same interest at the time when the claim is begun. The claimants’ argument that the identity of interest need only exist at the time that judgment is given was rejected.
The court then considered the “essential question” of whether the class that the claimants were seeking to represent had the same interest as the claimants when the claim was issued.
It was held that the problem for the class in this case - which distinguished it from classes that had been accepted in previous cases - was that the criteria for inclusion in the class depended on the outcome of the action itself. The class was described as “direct or indirect purchasers of air freight services the prices for which were inflated by one or more of the agreements or concerted practices”, meaning that membership of the class was dependent on first establishing that the purchaser had paid an inflated price.
This contrasts with previous cases where the criteria for inclusion in the class did not depend on the outcome of the action. For example:
- In the leading case of Duke of Bedford v Ellis  AC 1, the class was comprised of “growers” within the meaning of the term defined in the Covent Garden Market Act 1828;
- In John v Rees  Ch 345, the class consisted of all members of the local Labour party other than the defendants. The relief sought was for the benefit of all members, to determine the validity of certain resolutions; and
- In Prudential Assurance Co Ltd v Newman Industries Ltd  Ch 229, where the class was defined by reference to those on the register of members at the time the resolution in issue was passed, and was not limited to those who had suffered consequential damage.
In addition, the court concluded that the relief sought in the action was not equally beneficial to all members of the class. Establishing that a member of the class has suffered the necessary damage will depend on where they came in the chain of distribution and if anyone in that chain absorbed or passed on the alleged inflated price. There would be an inevitable conflict between the claims of the different members of the class.
A suggested amendment to the class to exclude claimants for damage which had been passed on was dismissed as not solving the problems, but rather potentially increasing them. This is because it would make it impossible to ascertain the members of the class even after judgment, as it would be necessary to determine where in the chain of distribution the loss had fallen in whole or in part.
Finally, the court considered the overriding objective, in conjunction with the intention of CPR Rule 19.6 to provide a convenient means to avoid a large number of substantially similar actions. It was held that it was not convenient or conducive to justice that actions should be pursued on behalf of persons who cannot be identified before (or perhaps even after) judgment in the action. Rather, the objective of avoiding multiple claims on the same or similar facts could be achieved by a Group Litigation Order under CPR Rule 19.11.