High Court approves first CPR 19.6 representative action since Lloyd v Google
The High Court has approved the use of the CPR 19.6 representative action mechanism in an “opt-out” class action brought by Commission Recovery (Commission Recovery Ltd v Marks & Clerk LLP and Long Acre Renewals [2023] EWHC 398). This is an important judgment, as it is the first examination of the CPR 19.6 mechanism since the Supreme Court’s ruling in Llovd v Google [2021] UKSC 50 and it indicates that the courts are willing to take a flexible and pro-claimant approach.
Summary
As explained in our Law-Now (available here), the Supreme Court judgment in Lloyd v Google lowered the risk for data protection class actions seeking damages for “loss of control” of data, but it also increased the risk for other categories of class actions.
In a judgment dated 24 February 2023, the High Court arguably took an even more permissive approach than the Supreme Court in approving an opt-out representative class action.
Three key themes arise from the High Court’s approach:
- the “same interest” test has a low threshold, and rather than examining commonality of interest, the court is in fact assessing whether there are prejudicial conflicts between class members’ claims – if there is no prejudicial conflict, the “same interest” test is met;
- to the extent that the High Court identified areas where there might be issues requiring individualised evidence from class members, the court did not rule that the representative action mechanism was inappropriate – rather it allowed the claim to continue in order that solutions might be identified;
- related to the first two themes, the court took a fairly permissive, and therefore pro-claimant, approach.
Factual background
The decision arises from an application made by the defendants for the claimant's claim to be struck out on the bases that the present ‘lead’ secret commission claim had been ineffectively assigned and the pleadings were deficient, and an order pursuant to CPR 19.6(2) that the claimant may not act as a representative pursuant to CPR 19.6(1). This Law-Now focusses on the latter issue.
The claimant, Commission Recovery Ltd, was incorporated for the purposes of bringing the present claim. Its position is that it is an assignee of both the property in secret commissions, or common law bribes, and claims relating to them. One such secret commission was assigned from a now liquidated company which had engaged the first defendant to provide it with intellectual property rights advice – work such as making first applications for novel patents.
The claimant alleges that when the renewal of clients’ intellectual property rights were due, the first defendant’s practice was to refer that work to a third party renewals service and that, prior to 2018, it failed to disclose to its clients that the second defendant received commission from the third party for doing so. It is alleged that those secret commissions totalled “some tens of millions of pounds”.
The claimant seeks to bring a CPR 19.6, i.e., an “opt out”, representative action on behalf of a large cohort of the first defendant’s clients seeking repayment of the commissions.
Lloyd v Google – a recap
The High Court’s decision is best understood in the context of two of the key elements of the Supreme Court’s judgment in Lloyd v Google where:
- the court relaxed the “same interest” test requirement for the representative action mechanism, which historically had been applied stringently; and
- the court observed that what limits the scope of using the representative action mechanism for claims seeking damages is that calculating those damages would typically necessitate “an individualised assessment which raises no common issues and [which] cannot fairly or effectively be carried out without the participation in the proceedings of the individuals concerned.”
Following Lloyd v Google, it was clear that the representative action mechanism could be used in two ways. First, to establish liability or determine other common issues. This might facilitate a “bifurcated approach” where claimant law firms could use the representative action mechanism to establish liability and then run a book building exercise to bring opt-in claims seeking damages. However, a funder that supported that first stage of the litigation had no clear ability to be paid for that investment, and the finding of liability could create free riders, i.e., other funders and claimant law firms running competing book builds in reliance on the liability judgment. Second, to achieve a class-wide award of damages. This second use is far more attractive for funders, but it will only be available for limited types of cases where damages can be “calculated on a basis that is common to all the members of the class” and where no individualised evidence is required from class members.
The High Court’s judgment in Commission Recovery
The present claim was issued before Lloyd v Google was handed down and seeks to address both liability and damage. That might explain why the defendants deployed what the court described as a “comprehensive attempt on the part of the Defendants to identify issues facing clients of the First Defendant, including differences, complexities and difficulties.”
Turning to the three key themes in the judgment:
1. It is not so much “same interest”, as it is lack of prejudice to those interests
The defendants argued that the “same interest” test was not met in a variety of respects. Some of the criticisms of the claimant’s approach developed in oral argument were:
- the need for an inquiry into the state of knowledge of each individual client as to whether they were aware of the commission;
- whether as a matter of fact any given client instructed the third party as a result of the first defendant’s referral;
- the potential for conflicts of interest between class members;
- temporal differences between each claim, and the possibility that claims may straddle the date-limits that the claimant sought to impose on the definition of the class;
- the possibility of claims falling within the class definition, but also being time-barred;
- the potential for conflict of interest between the claimant as against other members of the class; and
- difficulties in applying a singular remedy to all class members who may otherwise have opted for a different remedy.
The way that Knowles J addressed these was, consistent with paras. 69 and 72 of Lloyd v Google, to approach the “same interest” test with a view to ascertaining whether the differences between individual class members created a prejudicial conflict between them, rather than ascertaining that they were all uniformly aligned:
“what matters is whether the "same interest" requirement is met, and in particular whether the points involve class members affected by an issue prejudicing the position of others. None do.”
Knowles J explained that there was no conflict between class members including on two key points:
- The fact that one class member’s claim may on evidence or disclosure turn out to be out of scope or time-barred would not prejudice the other class members.
- The claim was not formulated in a way that capped the defendants’ overall liability, and therefore the success or recovery of one class member would not prejudice the interests of another.
In light of the Supreme Court’s ruling and the present ruling, the “same interest” test might be better labelled the “absence of prejudicial conflict” test.
2. Class-wide damages, or individualised evidence?
The defendants also argued that for some issues – in particular limitation and knowledge – individualised evidence could be required to make good the claims. For example, some class members may have been informed of and consented to the commission arrangement.
Knowles J did not see a need for the court to be completely satisfied at an early stage of proceedings that common evidence will be available, or that there would never be a requirement for individualised evidence as a prerequisite for a party to be granted permission to act as a representative pursuant to CPR 19.1(1). Rather, and in circumstances where the allegations in issue were serious and set against the risk that the claim would otherwise not proceed, he preferred to allow the claim to continue to provide the opportunity for solutions be identified and for careful case management to assist in resolving difficult issues. A key consideration was born out of an impression that the defendant likely held information that may resolve certain of the concerns it was relying upon at the hearing.
The defendants also contended that if allowed to progress, the claim would result in proceedings that would not resolve all possible secret commission claims against them (exposing them, they said, to a form of abuse of process). On this point the Court held that:
“it is not a requirement of the CPR 19.6 jurisdiction that these proceedings will "necessarily resolve all possible claims". In the present case the Claimant has sought to draw the definition as best as it is able in the circumstances known to it.”
Knowles J noted that ultimately, evidence might not become available and “clients might be unresponsive” or that the “litigation could break down”. Consistent both with this observation and with his approach in permitting the claim to proceed even though solutions of common evidence had not been identified for all issues, he stated: “If appropriate the Defendants may ask the Court to look at the position under CPR 19.6(2) again.” He also said that CPR 19.6 “is not a “once and for all time” provision; it is dealing with a question that may be of continuing relevant, and that question may be re-examined where appropriate.”
3. The High Court adopted a fairly permissive approach
Having determined that he had the jurisdiction to permit use of the CPR 19.6 mechanism, Knowles J then had to exercise his discretion. Noting the potential challenges with common proof on limitation and knowledge yet permitting the claim to proceed itself indicates a permissive approach, but perhaps most telling is Knowles J’s statement:
“If the choice is this or nothing, then better this.” This suggests a weighing exercise between permitting potentially imperfect claims to proceed further as against leaving claimants with no remedy whatsoever.
Implications
The representative action has been part of English procedural law for hundreds of years, although it has rarely been used to seek damages. Lloyd v Google represented a new approach to assessing the suitability of the mechanism – including through relaxing the “same interest” test.
The decision in Commission Recovery is the first deployment of the new approach, and – this time, unlike in Lloyd v Google – the court permitted the claim to proceed, at least for now.
This application of the new approach suggests that a degree of latitude may be given to the practical challenges of common proof. On this Knowles J provided some closing thoughts in an endnote to his judgment:
“…we are still perhaps in the foothills of the modern, flexible use of CPR 19.6, alongside the costs, costs risk and funding rules and practice of today and still to come. In a complex world, the demand for legal systems to offer means of collective redress will increase not reduce.”
A further important practical point is that, unlike the Collective Proceedings Order mechanism available for competition damages claims, CPR 19.6 does not have any overt mechanism to enable funders to recover their costs. Knowles J suggested, obiter, that the courts may use existing procedures and mechanisms to address this issue:
“subject to fuller argument, in my view the situation is one that the common law and equity can be expected to be able to resolve where necessary…The Court might…allow reasonable costs of the recovery achieved to be paid before disbursement to the members of the class. Other approaches and techniques may fall for consideration at the appropriate time.”
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