Representing claimants: the rise of the class action

There are four principal procedural mechanisms via which collective redress may be pursued before the English court on behalf of a claimant class:

1. separate claims which are collectively case managed under a group litigation order pursuant to CPR 19.10 – 19.15 and PD19B (“GLOs”);
2. representative actions pursuant to CPR 19.6 or 19.7 ("representative claims");
3. opt-out and opt-in actions for breaches of competition law pursuant to s47A of the Competition Act 1998; and
4. test cases (primarily under the Financial Markets Test Case Scheme pursuant to paragraph 6 of PD63AA).

GLOs: Lungowe v Vedanta Resources Plc⁴

GLOs are becoming increasingly popular and over a hundred GLOs have now been granted in relation to a diverse range of claims including product liability, financial services, shareholder actions, data breach and ESG-related issues.

Under a GLO, each claimant commences a claim in their own right (known as "opting in"). However, to be brought under the remit of a GLO, claims must give rise to “common or related” issues of fact or law. This test permits some differences in the claims pursued by different members of the group (by contrast to the stricter criteria for representative claims, as to which see below). While a trial will determine collectively the contested issues of fact or law, damages are assessed for each individual claimant (or category of claimant) separately. Either claimant or defendant can apply for a GLO at any time and if it is opposed by either party, the court will hear submissions on the application.

The Nchanga Copper Mine GLO gave rise to a number of significant judgments, including the Supreme Court's decision establishing jurisdiction in Vedanta v Lungowe⁵. Following that decision, the High Court ruled on the application by Vedanta (the anchor defendant to the claim) to have the claims against it heard under a GLO. The resulting judgment provides a useful analysis of the principles by which claims can be joined under GLOs and the role of the lead solicitor.

The claim related to environmental damage from a copper mine in Zambia brought by some 2000 claimants. More than one firm of solicitors acted for different claimant groups and the claims were issued several years apart. Vedanta applied for a GLO because it argued (and the court agreed) that the issues in the separate sets of proceedings were "classic GLO issues". Although different communities were involved, the pollution all resulted from the same mine and the same type of damage was alleged in each claim. The court observed that while there were inevitably some "claimant-specific issues", this did not prevent the making of a GLO.

In imposing a GLO, the court acknowledged there is "limited authority" on the interaction between solicitors for different claimant groups in a GLO. However, it identified the following principles:

• Parties are generally entitled to choose their own representatives but in group litigation, that right is qualified and takes second place to the rights of the group as a whole. This is achieved by the role of the lead solicitor.
• The relationship between the lead solicitor and other firms must be carefully defined in writing. Where it is not, the court will become involved.
• In group litigation, claimants represented by a lead solicitor are only entitled to instruct one counsel team. Different groups of claimants are not entitled to instruct different groups of counsel.

The judgment in this case illustrates the necessity for careful planning in group litigation. Where parties are represented by multiple sets of solicitors (as is frequently the case due to the size and scope of group litigation actions), documentation of the respective roles is key. As to the nature of the claim, a group litigation order permits some variation in the individual claimants' cases, in contrast to other forms of collective redress.

Representative claims – Lloyd v Google LLC⁶ and Jalla v Shell

By contrast to a GLO, a representative claim is pursued on an opt-out basis; one or more claimants represent the other members of class, who must all have “the same interest in a claim”. This means the test is considerably higher than for a GLO. Further, claimants in a representative claim must all seek the same remedies pursued on a 'lowest common denominator basis'. This means the claim is brought at the most basic level, i.e. without relying on any specific circumstances which might increase an individual's damages award. Claims with materially different factual backgrounds cannot therefore be brought.

A number of representative claims are currently being pursued through the courts⁷. However, the extent to which the procedure can be adopted in data breach claims is currently uncertain pending the Supreme Court's decision in Lloyd v Google LLC. In this case, Mr Lloyd (the representative claimant) is trying to pursue a claim on behalf of several million affected data subjects in relation to the so-called “Safari Workaround” (by which Google obtained, without consent, browser generated information of Apple iPhone users)⁸. In the context of an application to serve out of the jurisdiction, the Court of Appeal considered that the claim was appropriate to be pursued as a representative claim because the class of claimants all had the “same interest”, having all suffered the same type of damage over the same period of time. If the Supreme Court upholds the Court of Appeal’s decision, this is very likely to lead to the increased use of representative claims in this area.

The "same interest" test

More recently, in Jalla v Shell, the Court of Appeal gave further guidance on the "same interest" test, concluding that in this instance, it was not met.

The claim against Shell is procedurally complex and based on alleged environmental damage to some 28,000 claimants as a result of an oil spill off the coast of Nigeria. Unlike the claimant class in Lloyd v Google, here the court found that there was no commonality of interest. On issues ranging from limitation to causation and damage, the court found the class of claimants was so diverse that the proceedings would have to be case-managed and tried as if they were 28,000 separate claims. Although the claimants argued that their claim was "materially indistinguishable" from Lloyd v Google, the Court of Appeal disagreed:

• In Lloyd v Google the relief claimed was damages for the loss of control of data which the Court of Appeal found could be awarded without the need to prove financial loss or distress. The relief claimed was therefore common to every claimant.
• In Jalla v Shell, by contrast, the claim was for remediation relief. This required each claimant to prove sufficient damage either to warrant injuncting the defendants to carry out the clean-up or to award compensation sufficient for the claimants to carry it out themselves.
• There were also complex issues of limitation which would have caused difficulties for some but not all claimants, making it difficult to proceed on a representative basis. In short, the court found that none of the purposes of a representative action (to save time and costs) would be met.

In rejecting the appeal, the court noted that representative actions remain relatively uncommon and that in cases where there are significant numbers of claimants with similarities in their claim but also not insignificant differences, the parties and/or the courts will usually choose to proceed under a GLO or via a representative sample of claimants.

Competition law claims

The Supreme Court has recently considered collective action in competition law cases. Its decision in Mastercard v Merricks [2020] UKSC 51⁹, confirming that an opt-out collective action could go forward (likely to encompass some 46 million individuals), has signalled support for collective redress procedures where it would not otherwise be economically viable for individual members of a significant class to otherwise pursue claims.

The Competition Appeal Tribunal (CAT) had originally found that the claim was not suitable for the collective procedure order (CPO) regime. However, the Supreme Court overturned that decision, ruling that the difficulty identified by the CAT in analysing and distributing damages across the claimant class was not a sufficient reason to refuse certification.

Since the Supreme Court's decision, the Competition Appeal Tribunal has certified most aspects of the collective proceedings in Merricks as an opt-out CPO. However, the tribunal addressed three issues which may have a bearing on future CPOs:

• The authorisation of Mr Merricks to act as the class representative was subject to two challenges. First, Mastercard alleged he was unsuitable on account of his handling of a historic dispute with a proposed class member, which argument the tribunal dismissed.
• Secondly, the tribunal itself determined that it was necessary (even without challenge by Mastercard) for it to scrutinise the new litigation funding agreement (LFA) put in place by Mr Merricks following a change in funder. The tribunal noted it had a responsibility to protect the interests of the members of the proposed class and expressed concern that the funder had too broad a discretion to terminate. The LFA was therefore amended to provide that termination by the funder had to be based on independent legal and expert advice. Following an objection by Mastercard that it had no means of enforcing the new LFA, the funder also provided an undertaking that it would discharge any adverse costs award that might be made against Mr Merricks.
• In relation to the claim for compound interest, the CAT held that Mr Merricks had failed to put forward a credible or plausible methodology to calculate the costs incurred in financing additional borrowing or to cover the lost interest that would otherwise have been earned but for the overcharge. It therefore refused to certify the compound interest element of the claim.

While the Supreme Court concluded there should be only a limited examination of the merits in the certification process, this decision shows that the CAT retains a role in scrutinising the scope of the claim.

Following this decision, the CAT also recently granted a second opt-out CPO in Le Patourel v BT Group¹⁰. These decisions mark a significant expansion of the class action mechanism in competition law (and a number of other CPO applications are currently awaiting judgment). However, to obtain a CPO it remains necessary to establish not only that a CPO is more suitable than an individual claim but that the claim itself can survive an application for strike out/summary judgment and that, where an opt-out is sought – that this is a more appropriate mechanism than an opt-in claim. Both tests were satisfied in Le Patourel.

The future for class actions

The appropriate procedural mechanism for a class action will always depend on the facts of the case. In general, the two key issues for claimant lawyers to consider are the economic viability of the claim and the similarities in the claims. The practical and economic difficulties inherent in GLOs mean that often, if viable, a representative claim is considerably more attractive. However, the type of claim for which this procedure can be used is limited. Where a GLO is used, it is crucial that the role of the lead solicitor and any other representatives are clearly defined.

Even where a claim does not fit within the specific procedural mechanisms available, group litigation is still possible. In Jalla, the court observed that while the claim could not proceed on a representative basis, it remained the subject of "perfectly workable litigation". Further, in Município de Mariana and others v BHP Group PLC¹¹, the Court of Appeal recently granted permission to appeal a decision striking out a claim by over 200,000 Brazilian claimants, concluding that despite concerns regarding the "inherent unmanageability" of the claim, the litigation retained a "real prospect of success".