INCOMING INSIGHT

CLAIM TO FAME – Mass Litigation: what key trends should financial services firms be aware of in 2024?

18/01/2024

As we have explored in our Class Actions series, the popularity of mass claims in the English courts continues to grow. Such claims represent a substantial threat to financial institutions but, at the same time, we are also now seeing increasing numbers of financial institutions participating in mass claims as claimants. In this article we explore some of the key trends that we expect to see in UK mass claims over the next year, with a focus on financial institutions.

Representative Actions

The CPR19.8 representative action procedure is, outside of the competition law sphere, the closest the UK has to a US-style opt-out class action mechanism. Where persons have the ‘same interest’ in a claim, then a claim may be brought by or against any representative of those persons and any judgment is binding on all those represented. In 2021, the decision in Lloyd v Google [2021] UKSC 50 appeared to suggest that the representative action procedure would remain a relatively underused provision of the CPR, with the Supreme Court holding that the ‘same interest’ test was not met where an individualised assessment of damages was required. However, in the same judgment, Lord Leggatt also raised the possibility of future claimants adopting a “bifurcated process”, whereby a representative action is used to consider common issues of law and fact (such as defendants’ liability), leaving any issues requiring individual assessment (such as damages) until a later stage. Claimants took encouragement from this comment and now, nearly three years on, we are seeing an increasing trend for representative actions.

In February 2023, the High Court permitted a representative action to proceed in Commission Recovery Ltd -v- Marks & Clerk LLP & Anor [2023] EWHC 398 (Comm). Whilst the decision is subject to appeal (with an appeal judgment expected imminently), the High Court appeared to adopt a looser approach to the ‘same interest’ test, finding that this does not require claimants to have identical claims but simply that there had to be no conflict of interest between members of the class. Significantly, it also referenced Lord Legatt’s comment about bifurcation in Lloyd v Google. Then, in October 2023, we saw a financial institution successfully making use of the “bifurcated process” against two representatives of a defendant group of 5,000 mortgage holders in Barclays Bank UK Plc v Terry [2023] EWHC 2726 (Ch), demonstrating the potential versatility of this procedure.

In addition, there has been a recent trend for bringing s.90A FSMA shareholder claims as bifurcated representative actions to establish common issues of defendant liability under the statute, with individualised issues of reliance, causation and quantum to follow in later trials. Here the High Court has held the line more firmly and, in December 2023, two representative actions were struck out in Wirral Council v Indivior and others [2023] EWHC 3114 (Comm). There, the availability to the claimants of separate multi-party proceedings (i.e. proceedings with multi-party claim forms) was fatal. The Court suggested that bifurcated representative actions will only be permitted where they provide access to justice for large numbers of claimants whose claims are likely to be too small to bring individually. The Court also strongly objected to the way the pleaded bifurcation effectively sidestepped the case management powers it would have had in multi-party proceedings to decide how, if at all, issues should be split between separate trials.

However, whilst the law in this area is becoming ever more complex to navigate, we still expect the trend for representative actions (particularly in bifurcated form) to continue.

Competition Collective Proceedings

After a slow start, the collective actions regime before the Competition Appeals Tribunal (CAT) continues to develop rapidly with the first substantive trials set to take place in 2024. There has been a trend for claimant lawyers to engineer novel theories of harm and abuse to be able to label their claims as breaches of competition law, so that they can make use of the opt-out mechanism offered by the regime. For financial services firms, one area to watch over the coming year is whether the FCA’s new Consumer Duty acts as a catalyst for the issuance of new competition collective proceedings. Although the Duty is not privately actionable, there is a real risk that breaches could be recast as competition law claims. In particular, if there are findings (or even merely indications) that firms have breached the Duty’s price and fair value outcomes, it is possible that those could, in some circumstances, be viewed as weaknesses of competition in markets, giving rise to claimant theories of abuses of dominant positions in those markets.

Section 90/90A FSMA Shareholder Actions

We are seeing a continued growth of s.90/90A FSMA actions, with financial institutions primarily on the claimant side but also, in some instances, on the defendant side. The recent trend for bringing these claims as representative actions has been discussed above.

We are seeing a continued growth of s.90/90A FSMA actions, with financial institutions primarily on the claimant side but also, in some instances, on the defendant side.

Although the relevant statutory wording governing these claims appears quite straightforward on its face, the law in this area is still developing and there has been limited judicial guidance on it to date. It was expected that the liability trial in Various Claimants v G4S Limited would provide some further guidance, but those proceedings were settled earlier this month shortly before the trial commenced. Nonetheless, further assistance will likely still come from the trial in Various Claimants v Serco Group plc, listed for June 2024, and Mr Justice Hildyard’s quantum judgment in Autonomy and others v Michael Richard Lynch and another, which is expected to be handed down this year following his liability judgment in 2022.

Finally, for financial institutions who have settled shareholder actions and paid a percentage of that settlement to litigation funders pursuant to a litigation funding agreement, the Supreme Court’s decision in R (on the application of PACCAR Inc and others) (Appellants) v Competition Appeal Tribunal and others (Respondents) [2023] UKSC 28 gives rise to the possibility that such agreements, as drafted, are unenforceable. We may, therefore, see claims being brought by financial institutions against funders in relation to these historic settlement pay-outs in the coming months (of course, the PACCAR decision also applies outside the funded shareholder claim context, but this is an area where it is most likely to be used to bring claims of this nature.)

CONCLUSION

The English courts do not have the same broad class-action mechanisms as some other jurisdictions (such as the US) and, consequently, they still do not entertain the same levels of mass litigation as those jurisdictions. However, driven primarily by high levels of litigation funding, which are unlikely to subside despite the PACCAR judgment, the UK’s pre-existing set of piecemeal mechanisms will continue to develop to facilitate a growing demand for mass claims. Without doubt, this will be a substantial area of both risk and opportunity for financial services firms in the coming months and years.

the UK’s pre-existing set of piecemeal mechanisms will continue develop to facilitate a growing demand for mass claims.

MEET THE AUTHORS

4 Articles

Rhys Corbett

Partner, London