Procedurei Types of action available
As noted in Section I, the regimes available for English class or group actions broadly fall into two categories: opt-in procedures and opt-out procedures.ii Commencing proceedingsRepresentative actions
As noted above, not only can representative actions be utilised for any type of claim, but there are also no requirements pertaining to the number of representees, be they claimants or defendants. The principal requirements for a representative action are that the representative is a party to the proceedings, and the representative and the represented parties all have the same interest in a claim.
If a court orders that a representative action may be continued, the court's judgment will bind everyone the representative party purports to represent.45 However, it may only be enforced by or against a non-party with the court's permission. Importantly, though, the representee need not authorise being represented46 so long as the same-interest requirement is met.47
Whether the parties are deemed to have the same interest in a claim might appear to be a narrow and restrictive concept. However, over time the boundaries of the interpretation of the requirement have been tested. Emerald Supplies Ltd v. British Airways plc (Emerald) provided a detailed analysis of the requirements for a representative action.48 It was noted that the class must have a common interest or grievance and seek relief that is beneficial to all. It did not matter whether the class fluctuated, so long as at all points it was possible to determine class membership qualification. However, the attempt in this case to use the representative action as a proxy for an opt-out class action failed because of the inevitable conflicts within the claimant class that sought to be represented, which was drawn so widely that it was described by the court as 'fatally flawed'.49 In particular, the court found that the same interest could not be said to be present as the sheer breadth of the class meant it was impossible to identify which members had the same interest.50 Where core issues such as limitation, causation or damages vary between claimants it will be more difficult to prove that the requirements for a representative action have been met. Furthermore, the overriding objective is important too in shaping its application. Concepts similar to proportionality can be distilled from the case law. Although the CPR appears to require an identical interest,51 Megarry J stated that 'the rule is to be treated as being not a rigid matter of principle but a flexible tool of convenience in the administration of justice'.52
This decision can be contrasted with the decision in Lloyd, described above, in which the Court of Appeal found that roughly four million iPhone users did have the same interest as they were victims of the same alleged wrongdoing and had all sustained the same loss: loss of control of their browser-generated information. Sir Geoffrey Vos found that the applicable test is whether it is possible to identify whether a particular person qualifies for membership of the particular class. Crucially, the claimants were not relying on facts specific to individuals (such as breaches regarding special category data), making it possible to find a same interest across the whole class. However, as also discussed above, the Supreme Court ultimately dismissed Lloyd on the basis that the facts that Mr Lloyd sought to prove in each individual case were insufficient to overcome any threshold of seriousness.
In light of the requirements for the courts to consider the overriding objective, particularly that the dispute is dealt with 'expeditiously and fairly',53 the representative action regime continues to provide significant potential for effectively bringing a group action.GLOs
GLOs are an opt-in mechanism that require an individual to have brought his or her own claim first to be entered upon the group register.54 They are similarly premised on the notion that where there are similar facts and issues to be resolved, it is more efficient that these are dealt with collectively. Given the costs inherent in litigation, these efficiencies have enabled claimants to recover losses previously unobtainable. It is important to distinguish, however, between instances where the determination of a single issue is common to all the claims, and instances where a defendant is liable to numerous claimants but each is separate as to liability and quantum. Where there are no generic issues, 'nor generic issues of such materiality as to save costs in their determination',55 a GLO will not be granted and the individual must litigate separately.
Court consent is required for a GLO, which may be obtained if the claimant can show that there are 'common or related issues of fact or law'.56 Nonetheless, the court has discretion in granting the order.57 There is no guidance as to how this discretion is to be exercised,58 though the overriding objective would still be applicable.59 This was illustrated in the High Court judgment in Lungowe v. Vedanta Resources Plc and others (Vedanta).60 The first defendant sought a GLO in respect of three separate sets of proceedings, two represented by one firm and the third by another. The two claimant firms submitted that, if a GLO were made, the High Court should keep the two 'strands' separate. The judge, however, noted that the claims shared common facts and issues and were, therefore, ideally suited to the making of a GLO. He observed that the submissions were underpinned by the commercial advantage to the two firms in keeping the proceedings separate. This was not deemed a good reason and was contrary to the ethos of group litigation and the parties' express duty to assist the court in furthering the overriding objective. Similarly, consideration must also be given to whether a representative action would be more appropriate,61 namely when the interests and issues of the parties are the same. It must be noted, however, that broadly the requirements of a GLO have not proven difficult to meet.62 This is in part because the standard of commonality is lower.
There are no special requirements for a GLO application,63 although the applicant should both consider the preliminary steps64 and ensure that his or her application contains the prescribed general information.65 As part of this information, the applicant must provide details relating to the 'GLO issues' in the litigation. It is important that these GLO issues are defined carefully, given that the judgments made in relation to the GLO issues will bind the parties on the claim's group register.66 Nevertheless, the court may give directions67 as to the extent to which that judgment is binding on the parties that were subsequently added to the group register. The High Court judgment in Vedanta also set out a number of principles that apply in respect of the representation of different groups of claimants. Generally, parties to litigation are entitled to be represented by solicitors of their choice. In GLOs, however, this basic right is secondary to the advancement of the rights of the cohort. This is achieved through the role of the lead solicitor, who should apply for the GLO, act as a point of contact for the court and the other parties, and whose relationship with the other firms must be carefully defined in writing. In addition, claimants are only entitled to instruct one counsel team.
Once a GLO is granted, a deadline is set by which time the other claimants must have been added to the group register. While there have been some notable GLOs granted, in particular in respect of the mass data breach claim against Morrisons and the unsuccessful claim brought by 5,800 shareholders against Lloyds Banking Group and its former directors concerning alleged breaches of duty in acquiring HBOS plc in 2008, it is notable that, since the introduction of the GLO procedure in 2000, there have only been 111 GLOs ordered to date. Whether the increased availability of funding for these types of claims will lead to an increase in GLO applications remains to be seen.Joint case management
The courts are able to use ordinary case management powers under the CPRs to manage claims brought by multiple claimants. CPR 3.1(2)(g) and (h) allow courts to consolidate or jointly try claims. These powers afford judges significant control and flexibility over the management of claims, and the decision to use this mechanism in BHP indicates that this flexibility can also be attractive to claimants. The experience of the English courts in managing multiple claims is another attraction; claimants have previously pointed to the experience, resources and expertise of the English courts in managing large claims as one of the reasons for seeking to have their claims heard in England. The readiness of the courts to utilise these powers to manage such large cases is another indicator of growing judicial enthusiasm for facilitating class actions.CPOs
The most significant recent change to the English class action regime resulted from the CRA, which came into effect in full in October 2015. Schedule 8 introduced changes to the competition law class actions regime under Section 47A of the CA. Collective proceedings are proceedings that are brought by multiple claimants or by a specified body on behalf of claimants, sharing certain characteristics (i.e., a class action as ordinarily understood). While collective proceedings are limited solely to competition actions before the CAT, this change is notable for two reasons. First, it is currently the only true opt-out class action regime in England, and second, it is a possible indicator of changes to come more broadly to English class actions. While claimants already have the right to bring collective actions,68 as detailed above, these were perceived as insufficient to address the harm caused to both direct and indirect purchasers.
There are three sources that set out the procedure for obtaining CPOs: these are the CRA Schedule 8, the Competition Appeal Tribunal Rules 2015 (the CAT Rules) and the CAT Guide to Proceedings 2015 (the CAT Guide). Notwithstanding the fact that CPOs were introduced under the CRA, both individuals and businesses can apply for a CPO. The reforms also widened the types of claims that the CAT could hear. The CAT had previously been restricted to hearing follow-on claims, while collective proceedings can be either follow-on or stand-alone. A follow-on claim is one where a breach of competition law has already been determined by a court or relevant authority such as the Office of Fair Trading or the European Commission. With the breach already having been established, the claimants are only required to show that the breach caused them loss. In contrast, a stand-alone claim is one where there is no prior decision by either body upon which the claimant can rely and the claimant must, therefore, prove the breach before the CAT as well.
Similarly to proceedings for a GLO, collective proceedings require certification to proceed, in this instance from the CAT. This mechanism works to remove frivolous or unmeritorious claims and enables the CAT to determine the class representative, class definitions, and whether the proceedings should be opt-in or opt-out. Section 47B CA and Rule 79 of the CAT Rules detail the requirements that must be met for the CAT to make a CPO. Principally, the CAT must determine that the claims 'raise the same, similar or related issues of fact or law'69 and that a collective proceeding would be appropriate based upon a preliminary assessment of the merits and available alternative regimes.70
Upon certifying the class in an opt-out action, all members falling within the definition will automatically become part of the action unless they opt out before the end of the designated period. However, this will only apply automatically to members domiciled within the United Kingdom. Non-UK-domiciled claimants can still be a member of the class, though they will have to actively opt in before the end of the specified period.iii Procedural rulesManagement
Given the differing group and class action procedures that can be used under English law, the process of determining the class differs between them too. With representative actions, the court can order that an individual is, or is not, a representative of a particular person. While the representee need not authorise the representative to bring an action (or even be aware that it is being brought), a representative claimant cannot assume an unfettered right to control the litigation because any party to the proceeding can apply for such an order. For a GLO, the court may give directions stipulating the date by which further claims cannot be added to the group register without the court's permission.71 However, failure to meet the deadline does not automatically mean that the claim cannot be added to the group.72
In contrast, with the collective proceedings regime, the CAT has a broad discretion in the certification process to outline how a CPO is to be conducted given that it may take into account 'all matters it thinks fit'.73 Furthermore, in considering the suitability of bringing the claim in collective proceedings, the CAT may limit the CPO to just some of the issues to which the claim relates.74 In certifying a claim as eligible for inclusion in collective proceedings, the CPO must describe the class and any subclasses along with the provisions for opting in and out of the proceedings.75 The CAT also has the full remit to vary the order, including altering the description or identification of class members, at any time on its own initiative or following an application by the class representative, defendant or any represented person.76Process
Given the breadth of the class or group action mechanisms in England, generalities regarding the process of such actions are difficult to discern. For example, liability and quantum may be split depending on the type of claim that is brought, though in other instances, such as in follow-on claims, breach need not even be assessed. The same can be said for assessing the speed at which class actions progress. As regards collective proceedings, despite the recent increase in activity in the CAT, it is still difficult at present to draw any firm conclusions as to the rate at which these cases are to progress given how recently they have become available and the preliminary stages that cases under the new CRA regime have reached.77 Nonetheless, it is notable that Le Patrouel was rushed through and certified in less than a year; this proactive approach might suggest that the CAT wants to ensure that these claims are progressed. Proceedings for GLOs and representative actions will also by their nature be context specific. Since GLOs have recently been used for notable, complex securities claims, some of which have already seen significant settlements,78 they may not provide a good benchmark from which to assess the speed and potential efficiencies of such a group action mechanism.Disclosure
Disclosure in group litigation often presents various logistical challenges, because of the existence of a large volume of parties, issues and documents. The significant amount of time often required for disclosure is one of the reasons why a trial of GLO issues may take place a considerable time after the GLO order is made.79 Furthermore, the disclosure provisions vary between the different class or group action regimes. Taking, for instance, representative claims, because the representees are not parties to the claim, they are not subject to the ordinary disclosure standards. Instead, they must only meet the requirements that a non-party is held to. In contrast, with collective proceedings, the CAT holds comprehensive disclosure powers based on those more generally applicable in litigation in the English courts. The CAT can, therefore, order the disclosure of documents that are likely to support the case of the applicant, or adversely affect one of the other parties' case, from any person irrespective of whether they are a party to the proceeding, as long as it is necessary to save costs or dispose of the claim fairly.80 However, it remains to be seen how such disclosure orders will be made in the context of opt-out claims where there are no identifiable claimants.iv Damages and costsCosts
The general rules on costs are detailed at CPR 44, and provide discretion as to the award, amount and timing of payment for costs. Given that the unsuccessful party will ordinarily be ordered to pay the other side's costs, unmeritorious class actions have traditionally been restrained. This is particularly in light of the significant costs inherent to class actions, given their size and complexity.
However, as demonstrated by BritNed Developments Ltd v. ABB AB, parties and their advisers should be mindful of the fact that the judiciary has shown willingness to depart from the typical loser-pays costs order.81 In this October 2018 decision, the High Court ordered both parties to pay their own multimillion-pound costs, in light of the fact that the claimant was awarded damages significantly lower than those claimed.82 Although the case was not brought as a group claim or class action, it is notable as it demonstrates the willingness of the English courts to exercise their discretion to limit the extent of recoverable costs. In Greenwood and others v. Goodwin and others83 the wide costs discretion of the court was noted again and it was asserted that the rules in CPR 46.6 are just the starting point. Hildyard J noted that, in light of this degree of unpredictability, there was an 'overriding need' for potential claimants to understand their costs position should they opt to join the litigation.
In the context of group claims, which are often subject to third-party funding, the likelihood of recoverability of costs can be a key factor in deciding to pursue a claim. The potential for a winning party to be barred from recovering their costs could act as a deterrent to litigation funders and law firms normally interested in pursuing large-scale class actions. However, the courts have also made clear that there must be cogent grounds to justify departure from the general rule. Following the claim in BHP being struck out for abuse of process in November 2020, although this is now subject to an appeal, the High Court considered, and then rejected, the claimants' argument for a 50 per cent reduction in the defendants' costs on the basis that they had not been successful on every issue and had not ultimately pursued certain issues.84 The judge noted that, especially in claims of this size and complexity, the winning party is unlikely to succeed on all the issues and that the issues conceded did not fall to be decided in the primary judgment or were not ultimately relevant and, therefore, ordered that no overall reduction be made. The decision serves as a timely warning (particularly in the context of the growth in mass tort claims) of the potentially very significant sums at stake in unsuccessful claims.
There is also the added complication of how costs are to be split between the constituent members of the class. The general costs position where the court has made a GLO is set out at CPR 46.6, and distinguishes between common and individual costs. For representative actions, as the represented individuals are not parties to the action, they are not individually liable for costs. The court may nevertheless accept an application for costs to be paid by the representees.85 There are also specific costs rules in the CPRs for proceedings governed by GLOs. The default position is that group litigants are severally, and not jointly, liable for an equal proportion of the common costs.86 This is irrespective of when the claimants joined the group register, and means that claimants do not bear differing costs burdens based on when they joined the litigation; this is considered to be an important feature of GLO claims.
In Re RBS (Rights Issue Litigation) In Claims entered in the Group Register,87 however, the court decided at a case management conference in December 2013 that adverse costs should be shared on a several basis in proportion to the size of the individual's subscription cost in the rights issue relative to the total subscription cost for all the claimants on the group register. More recently, following the dismissal of the shareholder claim against Lloyds, the High Court ruled that the claimants' third-party litigation funder was jointly and severally liable for the defendants' costs, rejecting the funder's submission that it should be liable only to the extent that the claimants did not satisfy the adverse costs order.88 The funder's submission that its liability should be limited to the extent of funding it had actually provided (in accordance with the 'Arkin cap') was also rejected. The Court noted the recent Court of Appeal judgment in Chapelgate Credit Opportunity Master Fund Ltd v. Money & Others, which had clarified that the Arkin cap is intended as guidance for judges, rather than as a binding rule.89 Altogether, the combined cover the claimants and the funder had the benefit of fell substantially short of the defendants' costs. Therefore, while the growth in after-the-event (ATE) insurance and third-party litigation funding may mean that the costs risk is less pronounced, the risk remains a considerable factor in determining whether and how a class action is brought and, as cautioned by the High Court judge in the case against Lloyds, claimants should not assume that they are litigating risk-free, even when, as in that case, funded by third-party litigation funders and with ATE insurance in place.
In respect of opt-out collective proceedings, however, given that (unlike proceedings governed by GLOs or representative actions) damages-based agreements are prohibited, it is likely that these will depend on third-party funding in order to be commenced. In the Trucks Applications, the CAT considered the PCR's third-party litigation funding arrangements. In a judgment published on 28 October 2019, the CAT held that the funding arrangements entered into by the applicants in both applications did not provide grounds for refusing to authorise the PCR. Crucially, the CAT found that the funding arrangements, pursuant to which the funder is paid by reference to the amount of damages recovered, were not damages-based agreements and so not subject to the Damages-Based Agreements Regulations 2013, and, therefore, were not unlawful. The CAT also rejected the respondents' concerns regarding the level of adverse costs cover, finding that it was adequate that the PCR had a level of adverse costs cover sufficient for at least a significant part of the proceedings.
In the Trains Applications, the CAT took the view that the PCR was entitled to recover the costs he had incurred fighting the defendants' opposition to his certification application, except for deductions for costs that had been incurred in any event and additional issues justified deductions (such as re-pleading following Merricks and amendments to the class definition).Damages
One of the notable differences between civil actions in England and certain other jurisdictions, particularly the United States, is that there are no jury trials in English civil actions. This difference becomes apparent with quantum as English class action damages are typically much lower than in the United States.
With regard to damages for representative actions, the historic position was that the same-interest requirement excluded damages from being recoverable for the class.90 However, there has been an incremental liberalisation such that it is established that damages can be claimed in a representative action.91 The damages awarded, however, in proceedings governed by a GLO or representative action will be dependent on the type of claim that is brought, although under English law damages are generally compensatory (e.g., breach of contract, tort).92
The provisions for damages in collective proceedings claims are, however, more detailed. Damages are ordinarily compensatory; exemplary (i.e., punitive) damages for collective proceedings have been statutorily excluded.93 Punitive damages may still be sought in relation to a competition law breach; however, to seek them, the individual would need to opt out from the collective proceedings action and bring an individual claim. The CAT will calculate damages aggregately for the class or subclass and will not undertake an assessment as to the amount of damages recoverable by each represented person. Rules 92 and 93 of the CAT Rules stipulate that the CAT may give directions for the assessment and distribution of damages respectively; for instance, a formula to quantify damages. Damages are ordinarily to be paid to the class representative for distribution.94 If all the damages are not claimed within the CAT's specified period, the CAT may order that undistributed damages are paid to the representative 'in respect of all or part of the costs or expenses incurred by the representative in connection with the proceedings'.95 Any other remaining unpaid damages are to be paid to charity.96
The CPO applications that have so far been brought, in particular Merricks (the claim value of which is £14 billion), indicate that significant damages may be sought through the collective proceedings regime. The sums that are potentially at stake will also be likely to provide a useful bargaining tool for claimants seeking to settle their claims instead of pursuing protracted litigation.v Settlement
In common with other jurisdictions, given the cost of group litigation with its attendant significant disclosure, requirement for expert evidence, and multiple trials, there is often a significant and mutual impetus for claimants and defendants to settle class actions out of court. In some instances, such as in securities litigation under Section 90A FSMA (discussed above), where the cause of action has not been frequently litigated, the absence of a clear precedent may encourage the parties to settle to avoid uncertainty. With regard specifically to follow-on actions, since the breach will have already been determined, the dispute is likely to focus on the issues of causation and quantum. Given that the determination of causation and quantum can still be a complex and expensive process, defendants may consider it more economical to settle out of court.
As previously noted, it is increasingly likely that third-party litigation funding will continue to grow in English class and group action litigation. The consequences of this could be significant in opening up new claimants, types and scales of litigation to class and group actions not previously seen before. Third-party litigation funding also introduces a new dynamic when considering and negotiating settlement: although professional funders are legally prohibited from exercising control over the litigation they fund, the manner in which many funding packages are structured (with the cost of funds effectively increasing the longer a case progresses) may incentivise claimants to give fuller consideration to settling actions before trial. Unlike in some other jurisdictions (notably the United States), settlements in GLO and representative actions do not require court approval, though admissible settlement attempts may still have an impact upon the court's allocation of costs as between the parties if a settlement is not reached. The CPRs do not, however, contain any explicit guidance on how any settlement negotiations or agreements are to be managed.
In contrast, the CA contains provisions, implemented by the CRA, for a collective settlement scheme.97 Once a CPO has been made and proceedings are authorised to continue on an opt-out basis, claims may only be settled by way of a collective settlement approved by the CAT. The proposed settlement must be presented to the CAT by the representative and the defendant of the collective proceedings. The settlement need not apply to all the defendants in the proceedings, merely those who intend to be bound by it. The CAT, however, may only make an order approving the settlement where it deems the terms to be 'just and reasonable'.98 If the time frame specified in the collective settlement approval order given by the CAT has expired, the collective settlement will be binding upon all those domiciled in the United Kingdom who fall within the CPO's defined class and did not opt out, and those domiciled outside the United Kingdom who otherwise fell within the defined class and opted in.99 Opt-in collective proceedings are not subject to these requirements, although they cannot be settled without the CAT's permission before the expiry of the time given in the collective proceedings for a class member to opt in to the proceedings.
The potential success of the collective settlement scheme will, however, be closely tied to a claimant's ability to use the collective action scheme. If the opt-out certification process proves to be unduly restrictive, the defendant will no longer be induced to settle. The residency provisions in the CRA may also present issues to the success of the collective settlement scheme.100 Defendants could be reluctant to pursue a collective settlement scheme since it does not automatically provide the global settlement that they might be seeking, given non-UK-domiciled individuals will need to opt in to any settlement.101 It should also be remembered that unless the settlement is on a universal basis and will comprise the entirety of the contested issues then aspects of the litigation will continue regardless. Nonetheless, certain other provisions may further promote settlement, for instance that any remaining unpaid damages are to be paid to charity.102 It awaits to be seen, therefore, how the collective settlement scheme is adopted.