Introduction
The last 12 months have been some of the busiest on record for class actions in the UK, heralding a number of significant developments as the regime takes shape. We look below at some key trends from 2023.
Large Number of High-Value Claims
Claimants continue to focus their efforts on seeking high-value, opt-out Collective Proceedings Orders — a regime similar to those permitted in the US, where a class can be certified and individual class members have the right to opt-out of the action — in the Competition Appeal Tribunal (“CAT”). Most of these seek damages valued by the Proposed Class Representatives in the hundreds of millions and sometimes billions. The pace at which new opt-out class actions are being filed has remained steady, with seven new cases filed this year. Further, the Court of Appeal confirmed this year[1] that opt-out claims can be brought on behalf of businesses as well as individual consumers, in appropriate circumstances, potentially opening the door to more claims of this type.
Claimant Creativity
For an opt-out claim to be certified in the CAT, it must be brought as a competition law claim. Some of the claims that are being pursued are seeking to stretch the boundaries of what is truly competition law. In 2023, this trend extended to a mass tort claim relating to environmental, social and governance issues. This is brought against one of the UK’s largest water companies (with plans for parallel claims against 5 others), alleging that it failed properly to report sewage spills to regulators, thereby evading penalties and allowing it to charge higher prices to customers, which is alleged to be an abuse of dominance. [2]
Class representatives — and litigation funders and claimant law firms supporting their claims — have been encouraged to bring creative claims by the relatively low threshold for certification of opt-out claims that has been set by the CAT in recent years, following guidance to this effect from the Supreme Court in 2020[3]. There was some indication early this year that this approach might be changing: following on the heels of a 2022 Court of Appeal decision[4] emphasising the importance of class representatives putting forward a clear blueprint to trial, including as to their proposed methodology for calculating losses, the CAT refused to certify three claims. However, a later Court of Appeal decision[5] has been viewed as rowing-back on the importance of the blueprint test prior to certification, at least for certain types of claims, and the CAT has subsequently certified[6] (and in the process dismissed applications to strike-out) a number of claims, applying a low threshold. Moreover, even where certification has been refused, the CAT has given class representatives the chance to go away and improve their claims, to have a second try at certification.
It is also possible that there will be future legislative changes extending the CAT’s jurisdiction to allow opt-out claims in other areas. In November 2023, an amendment was proposed in the House of Commons to the Digital Markets, Competition and Consumers Bill that would have extended the scope of opt-out claims to claims based on “consumer protection law.” It was unsuccessful, but there may be further such attempts to extend the remit of the regime.
First Opt-Out Class Action Settlement
In December, the CAT approved the first settlement in an opt-out claim, between the Class Representative and twelfth defendant in McLaren[7], an action relating to car delivery charges. It emphasised that its role in deciding whether or not to approve the settlement did not require a mini-trial to reach a view on the merits of the case. An element of “rough-and-readiness” may be required, to reach a view, in a “proportionate and cost-effective manner” of whether a settlement sum is within a reasonable range and whether the proposed split between damages and costs is appropriate.
It is notable that the settlement in McLaren involved a defendant with a small market share (estimated at no more than 1.7%) and a relatively low settlement sum of £1,200,000, and so the CAT was alive to the risk that protracted and expensive proceedings would undermine the purposes of the settlement proceedings and the public policy objective of promoting settlements where possible. It may deal differently with more complex settlements for larger sums and involving defendants with more significant market shares.
Litigation Funding: Uncertainties Remain
The Supreme Court handed down a judgment in July (“PACCAR”)[8] with the effect that litigation funding agreements (“LFAs”) entitling funders to recover a percentage of damages awarded — a common remuneration structure for LFAs for opt-out class actions — are unenforceable for opt-out class actions.
This was a shock to many in the industry and led to some panic. In response, funders have mostly opted to amend their LFAs, typically so that their return is a multiple of their investment. In some cases, in the hope that future legislation reverses PACCAR, funders have retained the provisions providing returns as percentages of damages to the extent enforceable and permitted by applicable law. To date, the CAT has been sympathetic to the view that these changes mean they are no longer unenforceable, albeit there are a number of challenges to LFAs still progressing through the courts on various grounds and appeals may also be likely. The government has also responded, introducing an amendment to the Digital Markets, Competition and Consumers Bill which, if passed, would provide an exception for LFAs in opt-out class actions.
Greater Clarity around Representative Actions and Group Litigation Orders
Outside of the CAT, opt-out claims may only be brought in the High Court as “representative actions” (an alternative, less structured form of class action). This has proved less popular with claimant firms since the 2021 Supreme Court decision in Lloyd v Google[9], which significantly reduced the scope for bringing claims on this basis.
However, it is possible that claimant firms may be reconsidering the merits of such actions, following a High Court decision[10] in February this year that allowed a representative action regarding alleged secret commissions to proceed despite there being differences in the claims and remedies sought. This decision suggests that the “same interest” test could be applied more flexibly in certain circumstances, and may indicate an increased willingness by the courts to allow representative actions to proceed. The judge in that case also noted that “the case for further development [of representative actions] through legislation may also be strong.”
However, in May, the High Court struck out an attempt to bring a representative action in a claim[11] alleging misuse of private information, in large part because the claims were inherently individualistic in nature. Further, in December, the High Court[12] struck out an attempt by investors to bring a representative action against pharmaceutical companies, relating to losses arising from alleged misleading statements or dishonest omissions/delays regarding certain information published about securities in those companies.[13] This was on the basis that a representative action would prevent the court from case-managing the proceedings properly, as compared to the claims proceeding in regular multi-party litigation.
This suggests that claimants will still have to overcome sizeable hurdles to successfully bring representative actions. This is particularly so where the underlying claims are of a type (e.g. relating to data privacy) where necessary components of establishing liability and the remedy sought would typically be assessed on an individual basis.
Finally, there have also been developments regarding group litigation orders. This is a mechanism relied upon by claimant firms for pursuing certain claims which cannot be brought within the CAT regime (e.g. those relating to product liability, or to environmental, social and governance issues). These are purely opt-in mechanisms and unlike true class actions they have tended to place substantial burdens on each claimant, and courts have generally been reluctant to order them (for example, the High Court has authorised only two in 2023). However, a High Court judgment[14] has recently provided guidance on when group litigation orders will be authorised and when an alternative more informal type of case management for some opt-in collective cases may be more appropriate, referred to as “GLO Lite”. It remains to be seen whether these developments increase the number of parties applying for, and approvals of, group litigation orders and whether the new ‘GLO Lite’ regime will gather pace.
Looking ahead to 2024
- 2024 will see the first opt-out action in the CAT proceed to trial[15], which will be a significant milestone.
- It is likely that there will also be legislative changes in response to PACCAR.
- Dust will settle on the CAT’s decision to approve the first settlement in an opt-out claim, and its decision to allow the first consolidation of two rival opt-out claims relating to the same subject matter[16].
We will be monitoring these and other developments relating to the above trends closely.
[1] Evans v Barclays [2023] EWCA Civ 876.
[2] Roberts v Severn Trent Water (1603/7/7/23).
[3] Merricks v Mastercard [2020] UKSC 51.
[4] McLaren v MOL and Ors [2022] EWCA Civ 1701.
[5] Evans v Barclays [2023] EWCA Civ 876.
[6] In some cases subject to the resolution of outstanding funding or class definition issues.
[7] McLaren v MOL and Ors [2023] CAT 75.
[8] PACCAR v CAT [2023] UKSC 28.
[9] Lloyd v Google [2021] UKSC 50.
[10] Commission Recovery Ltd v Marks & Clerk LLP & Anor [2023] EWHC 398 (Comm).
[11] Andrew Prismall -v- Google UK Limited & Ors [2023] EWHC 1169.
[12] Wirral Council v Indivior and Reckitt [2023] EWHC 3114 (Comm).
[13] Under ss.90, 90A and Schedule 10A, Financial Services and Markets Act 2000.
[14] Tongue & Ors v Bayer [2023] EWHC 1792 (KB).
[15] Le Patourel v BT (1381/7/7/21) is scheduled for trial in January to March 2024.
[16] Rival claims brought by Charles Arthur and Claudio Pollack against Alphabet Inc & Ors (1582/7/7/23 and 1572/7/7/23).
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