Justice review backs class actions in English courts

Out-Law News | 13 Aug 2008 | 9:38 am | 3 min. read

More class actions in English courts would benefit consumers, small businesses and employees, according to a new report by the advisory body charged with overseeing the modernisation of the civil justice system.

The Civil Justice Council (CJC) has been looking into the ways in which class actions (claims brought by multiple claimants) are handled. Its report, published last month, found "strong support for the conclusion that citizens in England are not being fairly served through the provision of sufficient or effective access to justice by the present procedural mechanisms".

These include test cases, such as the recent, high-profile action over bank charges, representative actions and group litigation orders. But the CJC believes that these are only partially effective and that many potential claimants are deterred from bringing court actions altogether.

"Access to justice is … still disproportionately weighted against claimants whether they are groups of consumers, small businesses, employees, or victims of mass torts," the report concludes. "This has resulted in few claims being brought and, significantly, demonstrates that a number of meritorious claims simply have not seen the light of day.''  

Opt-out

The CJC's proposed solution is to add an 'opt-out' class action to the existing range of procedural options available for all civil claims.

Under an opt-out system, an action can be brought on behalf of a class of claimants. Anyone in the class not wishing to be included would have to take active steps to opt out from it.

Current English procedures are based on an 'opt-in' system, requiring individual claimants to be identified (and generally to have issued their own proceedings) before their claims can be collated. Opt-in systems are identified in the report as creating significant barriers for potential claimants with low value / high volume claims.

Class actions in the US are based on an opt-out system, but the CJC is careful to allay concerns that its proposals would introduce a flood of US-style class actions into England.

Claimants in the US, it points out, do not run the risk of being liable for costs if the action is unsuccessful, as they do in England. US cases are also decided by juries rather than judges and US courts have the power to award punitive damages, which are very restricted in English law. And US lawyers are routinely paid contingency fees based on a percentage of damages awarded.

The report also notes that English courts are more proactive in managing cases than their US counterparts. 

Supervision

This supervisory role would be crucial to the CJC's suggested reforms. In each case, a rigorous certification procedure would decide whether an opt-out or opt-in procedure would be the most appropriate form of collective action. This process is intended also to filter out spurious or 'blackmail' claims, where a class action is started purely to force a settlement from a defendant.

Once certified, cases would be closely supervised by specialist judges, who would also scrutinise any proposed settlement agreement to ensure its fairness.

Various other measures are suggested, such as a power to award damages in the aggregate (rather than to each class member) and for the limitation period to be suspended for class members once an opt-out class action has been certified.

Difficult issues remain, including how such actions should be funded and the extent to which claimants should be let off the usual 'loser pays' principle on costs in certain circumstances.

The report is the latest in a series of proposals calling for changes to current class action procedures. Both the UK's Office of Fair Trading and the European Commission, for instance, have suggested reforms in relation to competition claims and the UK Government is considering whether to introduce class actions for discrimination claims as part of its work on the Equality Bill.

This is the first time, however, that proposals have been put forward in England for a generic class action system that would apply to all types of civil claim.

The report invites the Lord Chancellor, who is responsible for Government policy on the legal system, to make a formal response.

Colin Read, specialist insurance litigator at Pinsent Masons said insurers have long feared the introduction of US-style class action litigation in the UK.

"Insurers can take some comfort from the fact that that CJC has stepped back from a blanket opt-out procedure and from the robust supervisory role it is proposing for the court," he said. "But even the introduction of a limited opt-out regime would be a significant development for insurers as providers of liability cover or as defendants at the wrong end of class actions over such things as unfair standard terms, discrimination, the non-refunding of premiums or breaches of competition law."

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