The year in review
The past 12 months have seen several further significant developments in relation to class and group actions.i Opt-out class action proceedings
The English courts have continued to deal with issues arising from two cases where the opt-out class action procedure for competition cases has sought to be used.Walter Hugh Merricks CBE v. MasterCard Inc and others (MasterCard)
Filed on 8 September 2016 with the Competition Appeal Tribunal (CAT), MasterCard was the second follow-on claim brought under the new opt-out collective proceedings regime (the first being in relation to Dorothy Gibson v Pride Mobility Products Limited (Pride Mobility)). The claim followed on from the European Commission's finding that MasterCard had infringed EU competition law as a result of interchange fees on transactions between 1992 and 2007. The case was brought by the former Chief Ombudsman of the Financial Ombudsman Service and was valued by the claimants' lawyers at £14 billion, making it the largest claim heard in England to date. In 2017, the CAT refused to grant a CPO on the basis that expert evidence adduced at the certification stage failed to demonstrate a commonality of interest owing to the fact it could not be determined how much of the loss had been passed through to each proposed claimant. MasterCard was, therefore, the second of the collective proceedings cases tabled in England that failed to proceed beyond the certification stage. Following the CAT's ruling, the claimant representative sought permission from the CAT to appeal to the Court of Appeal. However, the application was dismissed in September 2017 on the basis that there was no jurisdiction to appeal a decision to approve or refuse a CPO. According to the CAT's reasoning, refusal to grant a CPO was not a decision 'as to the award of damages or other sum', for which an appeal right existed. Rather, it was a decision that the proposed manner of pursuing the claims was not permitted, and if the legislature had intended for a decision by the CAT making or refusing a CPO to be subject to appeal, it would have included an express provision for doing so. The application was therefore dismissed. However, the claimant representative subsequently sought – and obtained – permission to appeal from the Court of Appeal and at the same time filed an application to the Administrative Court of the High Court for a judicial review of the CAT's decision. In a hearing held in October 2018, the issue of whether the Court of Appeal had jurisdiction to hear an appeal against a refusal by the CAT to make a CPO was addressed. This was the first time the point had been considered since the introduction of the collective proceedings regime. In a judgment handed down the following month, the Court of Appeal found it did have such jurisdiction, and that a right of appeal therefore existed – provided the appeal raised a point of law. The joint hearing of the Court of Appeal and the Administrative Court (with the same judges sitting in both courts) to consider the substantive appeal was held on 5 and 6 February 2019, though no judgment had yet been handed down at the time of writing.
Although the challenges experienced in MasterCard (and, before it, Pride Mobility) are in part because of the complexity of issues raised in the claim, the respective judgments do not suggest (at least at a theoretical level) an overly strict stance being adopted by the CAT. In particular, the CAT has indicated that it does not require all significant issues to be deemed common issues for a claim to be suitable for a CPO, something that could be important in future litigation. Nonetheless, how this plays out in practice in future cases is still to be determined. Arguably, the experiences of claims under the collective proceedings regime to date are illustrative of the safeguarding role CPO applications were intended to have in protecting defendants against frivolous and unmeritorious claims, as opposed to setting any more general precedent.
The discussion by the CAT as to funding arrangements also merits consideration. Objections were raised by the defendants as to the third-party litigation funding arrangement in place on the following three grounds:
- it could be terminated by the funder (and so would not force the applicant to pay the defendants' costs, if ordered to do so);
- its liability was limited to £10 million; and
- its terms gave rise to a conflict of interest on the part of the applicant.
The CAT rejected grounds (b) and (c) but accepted ground (a). Therefore, while MasterCard demonstrates the opportunities provided by third-party litigation funding (with over £40 million of funding having been made available to the claimants in an action that would otherwise seem unfeasible without such support), it also highlights the potential challenges such funding arrangements might face.
MasterCard therefore helped elucidate the CAT's approach to opt-out collective proceedings actions in what is a very new area of the law and has also acted as a precedent for the latest collective proceedings cases that have been in the CAT, dealt with below.Road Haulage Association Limited v. MAN SE and others (Road Haulage), and UK Trucks Claim Limited v. Fiat Chrysler Automobiles NV and others (UK Trucks) (together, the Trucks Applications)
The Trucks Applications were the third and fourth follow-on claims that have been brought pursuant to the new collective proceedings regime to date.
The Road Haulage CPO application has been brought under the opt-in collective proceedings regime, while the UK Trucks CPO application has been brought as opt-out collective proceedings in the first instance, but opt-in in the alternative.
Both applications, brought in July 2018 and May 2018 respectively, followed the European Commission's finding in July 2016 that certain European truck manufacturers had engaged in collusive arrangements on pricing and other financial determinations. In light of the similar issues involved, the Trucks Applications are being heard together.
Broadly, the proposed class across the Trucks Applications encompasses those who purchased or leased new or pre-owned medium or heavy trucks during the relevant period, but the claim forms and expert reports of the two applicants take different approaches to defining the classes. As at December 2018, over 5,000 members had signed up to the Road Haulage proceedings, though this number is expected to increase if the CAT grants the CPO. At a case management conference held in December 2018, the CAT directed that both claims should be heard together in a hearing listed for 3 to 7 June 2019, which could result in the first certification under the new regime. The CAT also suggested at the case management conference that there was nothing under the collective proceedings regime that prevented two opt-in proceedings being certified for the same cartel. This raises the possibility that both the UK Trucks and Road Haulage applications could be certified as opt-in proceedings, allowing claimants to choose between the two proceedings. However, the strength of the applications remains in dispute and the funding arrangements of both applicants have so far come under scrutiny, so it is still unclear whether either application, let alone both, will pass the certification stage.Justin Gutmann v. First MTR South Western Trains Limited and another (South Western); and Justin Gutmann v. London & South Eastern Railway Limited (Southeastern) (together, the Trains Applications)
The first stand-alone claims have also now been brought under the opt-out collective proceedings regime, in the Trains Applications.
These applications, brought in February 2019, involve claims against UK rail operators concerning the availability of certain rail fares and involve proposed classes in the millions. Unlike the other claims mentioned above, the Trains Applications will not only need to overcome the hurdles detailed above in order to obtain a CPO, but also demonstrate a breach of the underlying competition law. Other cases to date, being follow-on actions, have been brought where such a breach has already been established. The success or otherwise of this case may well, therefore, have a significant impact on whether further stand-alone claims are brought in the future.ii Significant group litigation order actions
The past year has been relatively subdued in respect of the GLO regime in England.
There have been developments in the claim brought against Volkswagen in relation to the diesel engine emissions scandal. Pursuant to an application, a GLO was granted in May 2018. The period for marketing to potential claimants closed in October 2018, and while the final claimant group is yet to be determined, the class is known to currently consist of at least 60,000 of a potential 1.2 million motorists. On 4 September 2018, the High Court handed down an order for indemnity costs against one of the claimant law firms in the proceedings, on the basis that the firm had prematurely issued a GLO application in order to gain a commercial advantage in the litigation.
Separately, seven claims under a GLO were also made against Lloyds Banking Group and five of its former directors on behalf of nearly 6,000 claimants. The claimant groups argue that a number of omissions and misstatements were made to shareholders regarding Lloyds' acquisition of Halifax Bank of Scotland Plc and its participation in the government's recapitalisation scheme during the course of 2008 and 2009. The trial concluded in March 2018; however, no judgment had yet been handed down at the time of this book going to press.iii Significant environmental actions
There have also been a number of large environmental actions filed this year. BHP Billiton Plc and five other BHP group entities currently face actions in England over the Samarco dam failure, alongside actions against other BHP group entities in a number of jurisdictions including Brazil and Australia. This comes after BHP group entities settled related proceedings in the United States in August 2018. The English proceedings are for a claimed amount of around £5 billion, brought on behalf of over 200,000 claimants, making it one of the largest claims in British legal history, although notably no specific procedural mechanism has been used by the claimants at this stage, instead the claims simply involve a very large number of individual claimants and appear to rely on the English court's ability to manage large and complex claims. The first procedural hearing in the UK is expected to take place in mid-2019. Separately, the group action filed in 2015 by Zambian villagers against Vedanta Resources Plc, relating to the Nchanga copper mine, continues to develop. Vedanta's jurisdiction challenge was dismissed by the Court of Appeal in late 2017, though Vedanta was later granted permission to appeal this decision and a hearing in the Supreme Court to determine jurisdiction was heard on 15 and 16 January 2019. No judgment had yet been handed down at the time of this book going to press. Similarly, the Court of Appeal declined the English court's jurisdiction to hear collective proceedings made against two companies in the Shell group relating to alleged pollution in the Niger Delta in Nigeria in February 2018. The questions of jurisdiction raised in these recent environmental class actions have shed interesting light over the piercing of the corporate veil, namely whether UK parent companies in these situations can be held to have a tortious duty of care to those affected by the actions of their foreign subsidiaries.iv Significant data breach actions
This year has also seen an increase in activity in the data sector, regarding potential breaches of the new Data Protection Act 2018 and the associated EU General Data Protection Regulation 2018. Cathay Pacific Airways Ltd, for example, is potentially facing a group litigation action after announcing a data breach that resulted in the personal data of approximately 9.4 million customers being compromised, in what appears to have been one of the global travel industry's most serious data breaches ever. It also appears that British Airways has been threatened with class action after a data leak of over 380,000 customers' data in September 2018, while Google has recently successfully defended an action relating to its alleged misuse of personal data.v New EU proposal for collective redress
In April 2018, the European Commission (the Commission) adopted a package of proposals entitled 'The New Deal for Consumers' which addresses, among other issues, the need for injunctive and compensatory collective redress mechanisms. Against the backdrop of the proliferation of 'mass damage' situations occurring across the EU, the package aims to bolster consumer rights and harmonise the means of collective redress across Member States, while also maintaining and respecting the legal traditions of each state. The relevant proposal outlined a potential form of collective redress for qualified entities, pursuant to which victims of unfair commercial practice not in compliance with EU law will 'be able to obtain remedies collectively through a representative action' under a proposed new Directive. Such actions could be cross-border and would not be available to law firms to pursue, instead being only available to non-profit entities monitored by a public authority (for example, consumer organisations) that fulfil a strict eligibility criteria. The package has been expressed as a priority for the Commission and finalisation of the proposed Directive has been provisionally set for May 2019. It awaits to be seen how the proposals will pass through the European Parliament and the Council; however, successful implementation of such a collective redress mechanism could have wide-ranging impacts on the effectiveness of compensatory relief available in Member States, particularly in areas such as data-protection and human rights. However, considering the timeline for implementation, it is uncertain what impact these proposals will have in England in light of the UK's current scheduled exit from the EU.