Collective settlement of mass claims

An opportunity for innovation


The question of how to resolve mass torts is one that occupies the minds of all modern commercial litigators. Whether those mass torts involve personal injury or the mis-selling of financial products, resolution is a subject that crosses many legal specialisms, intersecting virtually every business sector, and appears in both the UK and US legal landscapes.

This resolution can take place at any stage in proceedings: before claims have been issued, during the conduct of proceedings, or after a finding of liability by a court, tribunal or regulator. They are as much part of the life cycle of a systemic financial services dispute as they are a more traditional mass tort (whether personal injury or data protection). Effective settlement of collective actions offers attractions for both claimants and defendants. Claimants are able to access compensation, potentially without the delay or expense of proceedings, by reference to a clear procedure and set of principles. Defendants are able to forestall reputational and regulatory risk, and save the time and cost of full-blown litigation.

Developing procedures

In the US, which has more advanced and established processes for resolving mass torts, procedural rules require parties to obtain court approval of a class actions settlement before a dispute is resolved via settlement. The court’s role in approving the settlement is not to design the settlement, to enforce policy or to punish the tortfeasor, but rather to assess whether the settlement is “fair, reasonable, and adequate”.

English lawyers, in contrast, have three main developing procedures by which to effect settlement of mass torts.

  • In the Competition Appeals Tribunal, the resolution or settlement of opt-out proceedings require a collective settlement approval order. In making such an order, the CAT must be satisfied that the terms of the collective settlement are “just and reasonable”. There has yet to be a collective settlement approval order in the CAT, but we are likely to see a rapid development in the principles governing collective redress following the substantive hearing of the CAT’s first opt-out claim in 2024.
  • The FCA has wide-ranging and significant powers to impose redress schemes on firms. To date, the FCA’s use of these powers has been relatively sparing. However, in the light of the new Consumer Duty we can expect the FCA to be increasingly willing to use these powers and test them to their limits.
  • In High Court proceedings, there are no specific rules and no set procedure governing collective settlement of claims. Parties can either enter into ad-hoc or private redress schemes, or ask the court for assistance in designing those redress schemes where the creativity of the lawyers and courts make that a reality, such as in the use of trust law and insolvency processes.

Our other insights in this edition offer further detail and our views on the development of collective redress in the CAT and by the FCA, and below we consider in more detail the opportunities for collective settlement in the High Court.

Court-approved redress schemes

In 1996, Lord Woolf set out the main reasons for implementing a High Court procedure that facilitates collective redress for mass claims. He highlighted that the difficulties in case managing group claims, the polarised position of claimants and defendants, and the different interests of group members, all give rise to difficulties in establishing generic issues applicable to a whole group, in maintaining overall progress of a case, and in achieving settlement for the whole group. He concluded that there was a “strong case for court approval of all multi-party settlements”, even where the case is “before the court solely for settlement purposes”. In this sense, his approach mirrored that which exists in the US.

Despite Lord Woolf’s 1996 assessment and recommendations, English law procedure in the High Court on the implementation of mass settlements has not developed any further, albeit procedures for managing and determining collective actions by way of Group Litigation Orders and under “representative actions” were included in the CPR. There is no requirement that a multi-party settlement needs to be approved by the court. Parties can therefore choose whether to involve the court in the design and implementation of a redress scheme, or effect their own ad-hoc redress scheme. The court’s assistance in approving designing the scheme offers the benefit of oversight from an independent body whose aim is, put very simply, to do what is fair for the parties. The process of court approval can iron out issues of independence, legal principles of assessment, burden of proof, quantum, and provide for an appeal process, all of which will contribute to the smooth running of a compensation scheme.

Ad-hoc redress schemes

By contrast, a number of ad-hoc redress schemes have suffered from perennial issues with design, facilitation and implementation, which cause inefficiencies, unfairness and in some cases negate the very purpose of the scheme. For example:

  • The Horizon Shortfall Compensation Scheme, set up by the Post Office in response to the Post Office Horizon scandal, has been criticised as “exceptionally slow”, with Sir Wyn Williams, who chairs the ongoing public inquiry in the Post Office Horizon scandal, noting that that “there are a significant number of applications unresolved more than 2 years after the applications were made”. He remains unconvinced that “complex applications within the HSS are being processed with sufficient vigour” even given that “a balance has to be struck between speed of decision making and ensuring that offers in settlement are full and fair.”
  • A Compensation Scheme established by a large financial institution to compensate business owners who had suffered loss as a result of “inappropriate treatment”. In this scheme, more than 1 in 3 complainants appealed on one or more aspects of their outcome, and which took 10 years to deliver final outcomes.
  • The Lloyd’s Banking Group Customer Review was established to compensate small and medium sized business owners who had suffered serious harm as the result of a fraud. Its implementation was assessed by Sir Ross Cranston, who found that “the methodology and process of the Customer Review did not achieve the purpose of delivering fair and reasonable offers of compensation”. Following the Cranston Review, this scheme was re-designed and re-administered.
  • The Windrush Scheme has received significant publicity, particularly the complexity of the claim process and the length of time it takes for claimants to receive compensation, with many claimants dying before receiving payment.

Conversely, recent examples of court-assisted compensation schemes, such as the Jimmy Savile Scheme, have not faced the same level of criticism. Whilst ad-hoc private redress schemes may be the appropriate method of settlement in some cases, in other cases, for example where liability has been established, the best outcome for all the parties could be a mass settlement through a court-approved compensation scheme.

Opportunity for innovation

Claimants in High Court class actions are increasingly innovative, continuously testing and pushing the legal boundaries in finding new ways to bring group claims. Focus has been very much on how to launch class actions. However, there has been little discussion on the means by which to end these claims, and there is equal opportunity for innovation and creativity in pushing the boundaries on methods of collective settlement. The lack of High Court procedure governing collective settlement of claims offers a natural opening for parties to collective actions to be at the forefront of legal innovation, in terms of the law itself, procedure, and the use of technology. Parties can assist the court by offering innovative suggestions, which the court can then approve, creating workable precedents for future redress schemes. This is as important for hedge funds, backing litigation, as it is for institutions who are defendants to mass torts.

Our team at BCLP has unrivalled experience across designing and implementing redress schemes, with Partner Ravi Nayer submitting written evidence to the Home Affairs Committee in December 2020 on the Windrush Compensation Scheme.

Meet the authors


5 Articles

Ravi Nayer

Partner, London
4 Articles

Georgia Henderson-Cleland

Senior Associate, London