Out-Law Guide 12 min. read
07 Jan 2022, 11:16 am
There has been a growing impetus in recent years to enable individuals in the UK to come together to bring the same or similar claims against those they believe are responsible for wrongdoing.
These claims are commonly known as 'class actions', a term particularly popular in US litigation, though they are also often referred to as 'group actions' or 'collective actions' too. However, in fact, the various terms describe a range of different procedures. In this guide, which focuses on the position in England and Wales, we use the overarching phrase "mass actions".
In mass actions, claims will usually be brought on the basis of alleged wrongdoing by the defendants said to have caused loss to the claimants in broadly speaking the same, or at least a similar, way. Often, the loss suffered by any single claimant is not large enough to make individual claims economically viable, but pursuing claims on a collective basis brings economies of scale. For defendants, dealing with multiple claims on a collective basis can also offer efficiencies. For either party, however, there are risks and challenges to navigate.
Mass actions are particularly common in relation to certain types of claim, such as competition law, data privacy and breach, financial services, shareholder, environmental, personal injury and product liability claims
To date, the viability of mass actions has been limited in the UK as compared to certain other jurisdictions, such as the US and Australia. However, there has been a push in recent years to facilitate mass actions in the UK. This has been driven by a range of factors, including a focus both in the UK and EU on access to justice, particularly for consumers, as well as the rapid growth of third party litigation funding which makes funding mass actions more viable.
In addition, the evolution of litigation technology, including case portals, workflow tools and electronic signing, has eased some of the practical challenges involved in building, managing and settling large-scale actions.
Mass actions are particularly common in relation to certain types of claim, such as competition law, data privacy and breach, financial services, shareholder, environmental, personal injury and product liability claims.
There are a number of different options which are open to parties and courts for bringing and managing mass actions. This guide gives a brief overview of the main options currently available and the future outlook for mass actions in England and Wales.
Most of the options currently available in England and Wales for mass actions operate on an 'opt-in' basis, meaning that in order to participate, every claimant has to take proactive steps, such as to issue or join proceedings or authorise another to bring the claim on their behalf.
The alternative, an 'opt-out' procedure, allows a party to bring a claim on behalf of an entire class, without the express mandate or even knowledge of each member of that class. If the court allows the claim to proceed then, unless individual members of the class opt out – i.e. take proactive steps not to participate – any remedy awarded will be binding on and available to all members of the class.
Until relatively recently, opt-out mass actions have not been a significant feature of the English regime, in contrast to the position in the US, for example. However, in 2015 an opt-out regime was introduced for infringements of competition law, and there is an ongoing debate about whether the English legal system should make wider use of opt-out procedures. Some recent and current reform proposals are discussed below.
Competition law is the one area in England and Wales in which true opt-out mass actions can currently be brought.
Claimants can bring actions for damages resulting from a breach of EU or UK competition law either in the High Court or in the Competition Appeal Tribunal (CAT). Where the Competition and Markets Authority, or the European Commission before 31 December 2020, has already found a breach of competition law, a claim can be brought as a "follow-on" damages claim, where the claimant can rely on the earlier infringement decision as binding evidence of liability.
This is prime territory for mass actions but these proceedings previously had to be structured as "opt-in" actions. Following changes introduced by the Consumer Rights Act 2015, class actions for breaches of competition law can now also be brought exclusively in the CAT on an "opt-out" basis.
To make use of this procedure, an application for a Collective Proceedings Order (CPO) must be made to the CAT, which will decide at a certification hearing whether the CPO will be made or not. The CAT must be satisfied that it is just and reasonable that the party seeking to act as representative be authorised to do so, and that the claims are eligible for inclusion in collective proceedings. The CAT may revoke a CPO, and so terminate the collective proceedings, at any stage.
The CPO procedure has been relatively little used to date. However, it is expected to be used more often going forward following the Supreme Court's decision in the case of Merricks v Mastercard in 2021 - the first consideration of this new regime by the UK's highest court - and the CAT's subsequent grant in that case of its first CPO.
Partner, Head of Competition, EU & Trade
The Merricks v Mastercard action has paved the way for more collective proceedings in the CAT
The Merricks v Mastercard case involves a claim by a class representative, Walter Merricks, that 46.2 million UK consumers suffered loss as a result of excessive 'interchange fees' charged to merchants on the use of Mastercard debit and credit cards between 1992 and 2008, and allegedly passed on to consumers in the form of higher retail prices.
The CAT originally held that the case was not appropriate for the collective proceedings regime, on the grounds that the claims were not suitable for an aggregate award of damages and there was no way to apportion damages so as to properly compensate affected consumers.
The Supreme Court, however, found that the CAT was wrong to apply such a demanding test when considering whether to grant a CPO. Amongst other things, the Supreme Court found that the CAT placed too much weight on its view that the case was not suitable for aggregate damages, and should have applied a test of "relative" suitability, taking into account whether individual proceedings were a relevant alternative. Difficulty in quantifying individuals' losses and distributing damages was also considered not a good reason to refuse certification.
The application for a CPO was returned for reconsideration to the CAT, which then provisionally granted the CPO. Together, the Supreme Court and the CAT's decisions have paved the way for more collective proceedings in the CAT, including in a number of cases which had been held back from proceeding pending developments in the Mastercard case. CPOs have now been made in three standalone abuse of dominance claims, including two related claims concerning rail “boundary fares”. A number of further claims are awaiting certification.
Beyond the competition sphere, there are a number of procedural mechanisms by which mass actions are brought. One possibility is for all claimants to bring their claims together using one claim form. The Civil Procedure Rules (CPR) allow for several claimants to bring their claims together, using one claim form, against one or more defendants, as long as the claims "can be conveniently disposed of in the same proceedings". Usually the claimants will be represented by a single legal team, and it is important for there to be no conflicts of interest between them.
Parties can also be added to existing proceedings with the court's permission, where either it is desirable to add the new party so that the court can resolve all the matters in dispute in the proceedings, or there is an issue involving the new party and an existing party which is connected to the matters in dispute and it is desirable to add the new party so that the court can resolve that issue.
However, these routes are of limited use. In many mass actions, a claimant or their lawyers will not know all the other potential claimants so as to be able to include or add them as part of a single claim. In addition, claimants in these types of proceedings may face a risk in respect of costs, as if they are unsuccessful in their claim they may be jointly liable for all of the defendant's costs rather than for their proportionate share of those costs.
The CPR also provide that, where different claimants have "the same interest in a claim", the claim may be begun or continued by one or more of the claimants as representatives of other claimants with the same interest. Unless the court orders otherwise, any judgment or order made in a representative action is binding on all persons represented, even if they are not party to the proceedings, although an order may only be enforced by or against someone who is not a party with the permission of the court.
The Supreme Court’s judgment in Lloyd v Google confirms that the representative action route is a challenging one for mass claims
In order to qualify as having the same interest in a claim, the claimants must have a common interest and grievance and the main remedy sought must be beneficial to all of them. This generally precludes representative actions where the fact patterns underlying the various claims are materially different or where the claimants are seeking different remedies. The requirement for claimants to have the same interest in a claim has generally been interpreted strictly by the courts, and as a result the uptake of representative claims has been limited.
The representative claim procedure was in focus in the case of Lloyd v Google, in which the Supreme Court handed down judgment in November 2021. The case concerned a claim brought by Richard Lloyd, a former executive director of consumer magazine Which?, relating to Google's placing of advertising tracking cookies on iPhones using Apple's 'Safari' browser in England and Wales between June 2011 and February 2012.
Lloyd sought to bring the claim on a representative basis on behalf of several million individuals whom he said were affected. The Court of Appeal found in 2019 that Lloyd could advance a claim to damages for their "loss of control" over their data on the basis that each class member should be entitled to a uniform sum on a "lowest common denominator" basis which did not take into account their personal circumstances. The Supreme Court rejected that analysis.
In a unanimous decision, the Supreme Court stressed that damages at common law are designed to compensate claimants for the loss which they have actually suffered, so that in most cases there will need to be an individualised assessment of what has happened to each individual class member. A representative action is usually an unsuitable vehicle for this because individual class members do not participate in such an action. The Supreme Court rejected Lloyd’s attempt to get around this by arguing that damages should be awarded for “loss of control”, finding this inconsistent with the wording of the relevant data protection legislation. Likewise, the court rejected Lloyd’s “lowest common denominator” analysis. It held that it would always be necessary, in order for a claim on behalf of a given individual to meet the threshold for an award of damages, to establish the extent of any unlawful processing in the case of that individual data subject.
The Supreme Court’s judgment confirms that the representative action route is a challenging one for mass claims. The procedure may still be suitable in cases where all class members have clearly suffered the same loss, for example where they have all been overcharged by the same amount.
The court can also use its case management powers to consolidate proceedings which were brought by different claimants or manage them together, often using sample or test cases to decide issues of law or fact which are common across the claims.
This route gives the parties and courts flexibility to design the most appropriate procedure for the particular case. However, it is generally likely to be more appropriate for disputes where the defendant(s) are likely to face only a small number of claimant law firms on the other side or where the common issues of fact or law amongst the claims are not sufficiently material to justify the making of a Group Litigation Order (see below). The outcome of test cases does not automatically resolve other cases, albeit it will influence their resolution. Again, potential joint costs exposures in relation to the common issues may be a drawback for claimants, although the court may be willing to apportion costs liabilities between them.
A similar route can involve the defendants and claimants agreeing a test case procedure contractually – in correspondence, for example. This agreement might include who should be the test claimant(s) and the extent to which a judgment will be binding on those who have made similar claims. Where such an alternative mechanism is used the claimants might also enter into a group funding agreement to govern the cost sharing and decision-making arrangement between them.
As well as using general case management powers mentioned above, the court has available the power to make a "Group Litigation Order" (GLO) to provide for the case management of "claims which give rise to common or related issues of fact or law". The test for this is less demanding than that for commencing a representative action, as the interests of the individuals do not have to be the "same". If a GLO is in place, a particular procedural and costs regime applies. Parties may apply for a GLO, or the court may make such an order of its own initiative.
Where a GLO is made, a "group register" must be established, on which details of all claims to be managed under the order must be entered, and which must specify the "GLO issues" which will identify whether a claim falls under the GLO. The GLO may direct that claims giving rise to these issues must be entered and so effectively no claims can proceed outside the group. The GLO sets out which court will be the management court and may require that all claims not issued in that court are transferred there.
The management court may specify what details need to be provided in a statement of case in order to show that the criteria for entry have been met. It can also make a direction that one or more claimants proceeds as a test case, and appoint "lead solicitors", who in practice will be responsible for managing the register and, if directed by the court, for publicising the existence of the GLO, together with any cut-off date for joining the group register.
This cut-off date does not affect the limitation periods applicable to individual claims: they must still be issued within the relevant limitation period; missing the cut-off just means that the claim will not automatically be entered on the GLO register and would be managed independently of the group. The cut-off can be used to disincentive parties adopting a 'wait and see' approach to see how successful the group action is before issuing their own claim.
In general, any judgment given in the test case on the "GLO issues" binds all the parties to claims on the group register – unless the court orders otherwise. Each claimant has a right of appeal in respect of the issues determined by the judgment – in the same way they would have done had they been direct party to the judgment.
A critical feature of a GLO is that the claimants can be made liable to fund the costs of the test claimant: both their own solicitor costs, including unrecovered costs, and any adverse costs. The usual position is that each claimant will be liable for their proportion of the costs only.
The GLO procedure reduces the risk of multiple different proceedings and outcomes – and is particularly useful where it is clear that the law firms representing two or more groups of claimants are in a "race" to have their claims heard by the court first. The GLO has the effect of ensuring that only one firm can proceed as a test case. This can be an advantage for both claimants and defendants, and may be particularly valuable where the numbers of claimants are very large. The usual costs position is also beneficial for claimants. However, the GLO regime has disadvantages in some cases.
Additional cost is incurred in seeking an order from the court as to the precise issues to be covered by the GLO and managing the register thereafter. Publicising the GLO can be expensive for claimants and reputationally damaging for defendants. The costs position represents a risk for defendants, as if claimants are only liable for their own proportion of costs a defendant may have to take action against a number of claimants in order to recover all its costs.
Despite addressing some of the weaknesses of some of the other mass action options discussed above, only a little over 100 GLOs have been made since their introduction 20 years ago. What is more, according to the list of group actions maintained on the government website, the number of GLOs made has been decreasing year-on-year: after five orders in 2017 and three orders in 2018, only one GLO was made in each of 2019 and 2020. This may indicate a preference for more flexible procedural options in the types of mass action currently being brought.
Aside from the procedures for mass actions in the courts discussed in this guide, businesses may decide, or be required by regulators or statute, to establish collective redress schemes, often referred to as 'compensation schemes'. These offer businesses an alternative means of righting wrongs committed against a particular class of individuals or customers quickly and economically. These schemes are discussed further in our Introduction to Collective Redress Schemes guide.
Providing effective means of collective redress is a hot topic and has been the subject of a number of consultations over recent years. Although the UK, post-Brexit, is unlikely to be required to implement the terms of the recent EU Directive requiring member states to establish compliant procedures for consumer mass actions, there are other proposals for reform under consideration.
In particular, the UK government is currently consulting on whether further routes to collective consumer redress should be opened up as part of its broader consultation on reforming competition and consumer policy.
In the field of data protection, the Department for Digital, Culture, Media and Sport (DCMS) recently consulted on the possibility of allowing non-profits to bring actions for breach of data subjects' rights without specific authorisation from those individuals.
Under the Data Protection Act, individuals can already request non-profit organisations to make complaints to the Information Commissioner's Office (ICO) about a data controller or processor and bring court proceedings on the individuals' behalf. The consultation considered enabling non-profit organisations to take similar action without the express mandate or even knowledge of individual data subjects. This would potentially have enabled such organisations to seek a remedy on behalf of all the individuals affected by a data breach, of whom there may be millions.
However, in DCMS's report to the UK parliament in February 2021, it concluded that the case for introducing an opt-out procedure into law in this area was not strong enough, recognising, amongst other things, the potential for such a procedure to create uncertainty for businesses.
25 Nov 2020
11 Jun 2020