The 'same interest' test for representative claims – a more flexible approach? (Commission Recovery Ltd v Marks & Clerk LLP)
In Commission Recovery Ltd v Marks & Clerk LLP & Anor  EWHC 398 (Comm), the High Court ruled that a claim for secret commission could proceed as an 'opt-out' representative claim under CPR 19.6, despite there being differences in the claims and the remedies sought. This decision is of particular interest as the first major analysis of the 'same interest' test since the Supreme Court's decision in Lloyd v Google  UKSC 50 (see our article here). The judgment emphasises that the 'same interest' test does not require claimants to have identical claims or interests, it simply requires there to be no conflict or prejudice to the claimant class in the claim proceeding via a representative. In this case, the court considered that a claim for secret commission was a 'reasonable example' of a claim in which the entitlement of the claimant class could be calculated on a common basis. Overall, the decision suggests an increasing willingness from the courts to allow representative claims to proceed, and Knowles J observed that the case for further development of the system of collective redress through legislation may now be strong.
What are the practical implications of this case?
This case provides guidance for practitioners seeking to bring claims pursuant to CPR 19.6. In particular, it clarifies the scope of the 'same interest' test and the range of permissible options at the pleading stage to define the scope of the representative claim. Of note:
- the fact there is insufficient information to determine the precise scope or value of each class member's claim will not – without more – prejudice the interests of some clients at the expense of others, and will not be a reason to reject a representative claim;
- where the size of the claimant class is unclear, this may affect the defendant's liability. However, unless there is a specific limit on the defendant's liability (or its ability to meet it), this will not prejudice the interests of one member of the claimant class over another and, again, is not a reason to reject a representative claim;
- where a range of remedies are available (such as recovery of a secret commission and/or damages), this need not necessarily prejudice the interests of one member of the claimant class over another. However, it does require the representative and its lawyers to vigorously pursue lines of argument not directly applicable to the representative's case. The extent to which such an approach is realistic will depend on whether any arguments are likely to involve a conflict of interest;
- where there remain uncertainties over the suitability of proceeding on an 'opt-out' representative basis but the choice is 'this or nothing', the court may conclude (in the exercise of its discretion) to permit a representative claim but authorise a communication from the court to all potential members of the claimant class advising them expressly of their ability to 'opt-out'; and
- on the question of distribution of any monetary remedy by the representative to the claimant class, it may be possible for the court to order that sums awarded to each of those represented be paid into court or to a trustee, or to allow the reasonable costs of recovery to be paid before disbursement to the members of the class. While the court is still in the 'foothills' of modern, flexible use of CPR 19.6, the demand for legal systems to offer collective redress is likely to increase not reduce and the case for further development through legislation may be strong.
What was the background?
The claimant company, Commission Recovery Ltd (CRL), brought proceedings against Marks & Clerk LLP, an IP law firm, and an associate firm, Long Acre Renewals, for breach of fiduciary duties, bribery and knowing receipt. CRL alleged that Marks & Clerk referred its clients' IP renewals (without their knowledge) to an IP management organization, CPA Global, in return for secret commissions. CRL advanced the claims in its capacity as assignee of the claims of current and former clients of Marks & Clerk. The claim was pleaded by CRL on a representative basis by reference to a cause of action assigned by one assignor (Bambach Europe), on the basis that the claim was representative of the claims of all affected current and former clients of Marks & Clerk. Under the assignment, Bambach Europe assigned its rights to any undisclosed commission to CRL outright, in return for a contractual commitment by CRL to pay a proportion of any recovery, subject to CRL retaining 15% of the gross proceeds.
Marks & Clerk applied to strike out the claim. It argued that the assignment was champertous (and therefore unlawful and invalid) because it was an assignment of a bare right to litigate, and that the Particulars of Claim did not contain sufficient information to constitute a cause of action on the part of each member of the proposed claimant class.
Marks & Clerk also sought an order the CRL should not be permitted to act as representative of the other claimants.
What did the court decide?
The court held that the assignment was valid. A secret commission in the hands of an agent constitutes the property of the principal, and is held by the agent on trust for the principal. Consequently, on CRL's case, the assignment included an assignment of property, which is not a champertous assignment. The fact that ancillary rights of action in relation to that property were also assigned did not constitute an unlawful champertous assignment of a bare right to litigate.
Application under CPR 19.6
The court considered the analysis on representative claims and the 'same interest' test in Lloyd v Google  UKSC 50, in particular the guidance given in relation to jurisdiction and discretion.
The court concluded it had jurisdiction to order that the claim proceed as a representative claim. None of the differences, complexities or difficulties in the claims would prejudice the position of other class members. Each was capable of resolution and none was fatal to jurisdiction. For example, if some of the claims were statute barred, individual arrangements outside of CPR 19.6 could be contemplated. Further, any conflict between the claimant class from the focus on recovery of commission instead of damages could be managed through careful stewardship of the litigation by the claimant and its lawyers.
The court considered a range of factors in deciding to exercise its discretion to allow the representative claim to proceed. It held it was not necessary for the proceedings to 'resolve all possible claims' and that CRL had done its best to define the issues on the information currently available. The court also observed that a claim for secret commission was a 'reasonable example' of a claim where an entitlement can be calculated on a common basis, notwithstanding that the commission may have varied between clients.
Taking all the issues in the round, (and bearing in mind the focus on recovery of commission rather than damages requiring individualised assessment) the court considered it was appropriate to allow the claim to proceed on an opt-out basis under CPR 19.6. It would, however, (if requested by the defendants) authorise a form of communication from the court to all material clients advising them expressly of the ability to 'opt out' of the claim.
This article was first published by Lexis®PSL.