Over the last few years, parties and litigation funders have made a spate of attempts to bring representative actions in relation to a number of different types of claim. The principles set out above have been tested and applied by the Courts, and a pathway for how claims might proceed as representative actions and what claims might not appears to be emerging.
Lloyd v Google
This was the landmark Supreme Court judgment on the use of the representative action procedure in a claim for damages arising out of unlawful processing of data under s.13(1) Data Protection Act 1998. The Supreme Court did not permit the claim to proceed as a representative action. The Supreme Court determined that the “same interest” requirement was not satisfied because s. 13 of the Data Protection Act 1998 (as in place) did not confer an automatic right to compensation without the need to prove that the contravention had caused material damage or distress to each individual claimant. The damages claimed could therefore not be assessed on a common basis. Although the representative claimant put forward proposals for the assessment of damages (for example, the “lowest common denominator” or a “uniform per capita” basis) in an attempt to show that damages could be assessed on a common basis, the Supreme Court did not agree.
However, Lord Leggatt did make a number of observations which many have taken as an encouragement for the greater use of the representative action in appropriate claims. In particular, he stated that had the claim been brought as a claim for a declaratory judgment rather than a claim for damages, there would have been no reason to refuse to allow a representative action to proceed, with a bifurcated process perhaps being the appropriate way to assess the damages part of the claim.
Lord Leggatt’s support of the bifurcated process has led to a series of claims being issued in which the claims are expressly framed as first seeking a declaration by a representative party before separately considering the issue of damages. In turn, defendants have sought to strike out those claims with varying degrees of success.
Commission Recovery v Marks & Clerk
In its judgment in January 2024, the Court of Appeal upheld the High Court’s decision and allowed a claim to recover “secret” commission payments to proceed as a representative action. Here, the “same interest” requirement was met because the Court found that there was a common issue applicable to all members of the class, and there was no conflict of issue between members of the class.
The Court of Appeal also found that it was appropriate for the High Court to have exercised its discretion to direct that the claim could proceed as a representative action. Whilst the defendants argued that the claim was “pointless” because no member of the class would be able to recover any damages without individual participation, the Court of Appeal considered that it was for the claimant to decide if its claim was worth pursuing and, in pursuing the claim and obtaining backing from a commercial funder, the claimant had obviously made the assessment that it was worth pursuing. Lord Justice Nugee explained “There may indeed be difficulties ahead for [the claimant], but the Court should not in my judgement seek to second-guess CRL’s decision that it is commercially worth its while to continue with the litigation unless it can clearly see that the exercise is futile”.
At first instance, Mr Justice Knowles relied heavily on Lord Leggatt’s judgment in Lloyd v Google and stated “we are still perhaps in the foothills of the modern, flexible use” of representative actions “alongside the costs, costs risk and funding rules and practice of today and still to come”. He continued “[i]n a complex world, the demand for legal systems to offer means of collective redress will increase not reduce.”
We note that the Supreme Court recently refused Marks & Clerk permission to appeal the Court of Appeal’s decision.
Wirral Council v Indivior and Reckitt
In contrast to the pro-representative action judgments of the High Court and Court of Appeal in Marks & Clerk, the High Court has also recently issued a firm judgment refusing to allow a representative action to progress.
This was an unsuccessful attempt to use the representative action in the context of a claim under section 90 and section 90A of the Financial Services and Markets Act 2000. The High Court refused to allow the claim to proceed as a representative action, because it felt that to do so would force the use of the bifurcated procedure, which would subvert the Court’s case management powers.
In contrast to the approach in Marks & Clerk, Mr Justice Green criticised the approach of the representative claimant for failing to address the difficulties that would arise at the second stage of the proceedings. He stated “I do find it surprising that there is no clear strategy for taking these claims through to a conclusion, by which I mean the investors actually receiving some compensation. The funders must have contemplated funding the investors all the way through to such recovery (there would be no sense in doing otherwise) and yet they apparently have no idea how the proceedings will work save up to the obtaining of the declarations in the Representative Proceedings.”
This decision has exposed a tension between Lord Leggat’s suggested use of the bifurcated procedure in representative actions for damages, and the Court actually allowing that bifurcated procedure at the expense of its flexible case management powers.
One key factor that appears to have been behind Mr Justice Green’s refusal to allow the representative action to proceed in this case was that the claimants had also issued separate multi-party proceedings against the defendants in respect of the same causes of action. The claimants were seeking to progress the representative proceedings claim but had a “fall back” option if the representative proceedings were not allowed to continue. In such circumstances, the judge effectively saw the representative proceedings claim as an attempt to subvert the Court’s case management powers and effectively force upon the Court a particular way of splitting the issues of liability and quantum which the judge found to be inappropriate.
This judgment was handed down in December 2023, after the first instance decision in Marks & Clerk but before the Court of Appeal’s judgment. It remains to be seen whether this decision will be upheld on appeal.