A more flexible approach to representative actions

A recent decision of the High Court offers renewed hope for claimants looking to bring group representative actions under CPR 19.6, following the Supreme Court's important 2021 judgment in Lloyd -v- Google.

In Commission Recovery Ltd -v- Marks & Clerk LLP & Anor [2023] EWHC 398 (Comm), the High Court was required to consider the 'same interest' test prescribed by CPR 19.6. The Court found that, while some elements of each claim may differ between individual class members, this should not in principle preclude representative proceedings where the "essential pattern" of the claims remains the same and there is no conflict of interest between members of the class. Recalling Lord Leggatt's invitation to future claimants to consider a "bifurcated process" in Lloyd -v- Google, the Court concluded that, following a liability assessment, any individual differences and considerations as to limitation and remedy may be dealt with at a later stage.

In a noteworthy "Endnote" to his judgment, Mr Justice Knowles also took the opportunity to comment on the role of the legal system in offering a means of collective redress and how this should develop in the future, noting that "in a complex world, the demand for legal systems to offer means of collective redress will increase not reduce". In this context, the judge also pointed to the pressing need for legislative reform to govern cases of this kind.

Background

The representative action was brought by Commission Recovery Limited (the Claimant) as assignee of an individual claim and as class representative for clients of patent and trademark attorney firm Marks & Clerk LLP (the First Defendant). An associated defendant Longacre Renewals (the Second Defendant) received commissions paid by a third party who provided IP rights renewals to clients of the First Defendant.

The harm alleged by the Claimant relates to the 'secret' or 'undisclosed' commissions arrangement between the First Defendant, the Second Defendant and the third party renewals provider, with an estimated claim value of tens of millions of pounds.

The Defendants had made applications to the Court for (i) strike-out and (ii) a direction that the Claimant may not act as class representative. In support of the strike-out application, the Defendants sought to argue that:

1. the assignment of an individual claim from Bambach Europe to the Claimant was an "unlawful champertous assignment of a bare right to litigate"; and

2. the "Particulars of Claim do not purport to plead facts and matters that would constitute a cause of action on the part of each member of the purported class" (i.e., the claim did not meet the 'same interest' requirement under CPR 19.6).

Assignment of the claim

The Court disagreed that Bambach Europe's assignment of its claim to the proposed class representative amounted to "unlawful champertous assignment of a bare right to litigate". Following FHR European Ventures LLP, the Court considered undisclosed or secret commissions to be property, and that a lawful assignment of property had been made. Consequently, it found that "ancillary or incidental rights of action may validly accompany an assignment of property. These include a claim for money had and received and for restitution, which may be used to recover the commission".

Mr Justice Knowles' observation that no purpose would be served if the law were to treat an assignment of this kind as unlawful arguably suggests a willingness on the Court's part to facilitate the process by which representative actions are brought, including where claimant SPVs are formed for the purpose of acting as class representative. According to Justice Knowles, such assignments would allow claims to proceed in an "organised, dignified way".

'Same interest' test

The Court's consideration of the 'same interest' test in CPR 19.6 was particularly noteworthy given it is the first judgment on this provision following the Supreme Court's decision in Lloyd -v- Google. Unsurprisingly, the Defendants in these proceedings sought to emphasise in their submissions the extent of potential difference between the individual claims, including in respect of limitation and possible remedies sought, and the resultant conflicts of interest between class members and between the class representative and other members of the class.

Mr Justice Knowles found, however, that the same interest requirement had been met despite possible differences between the class members. Following extensive examination of the "representative rule" as elucidated by the Supreme Court in Lloyd -v- Google, he concluded that "entitlement can be calculated on a basis that is common to all the members of the class". On this basis, the Court would be amenable to a dedicated remedies stage at a later date, but at this stage it was "clear" that "a declaration of entitlement to one or more remedies, and especially to commission, is likely to assist all".

Given that Marks & Clerk LLP has confirmed its intention to appeal, it remains to be seen whether this judgment represents a shift away from a stricter interpretation of the 'same interest' test, with the Court more focused on whether there exists any conflict of interest between class members. In this respect, the Defendants pointed to the difficulties facing the Claimant group and the differences in claims across the class. Mr Justice Knowles confirmed that "[w]hat matters is…in particular whether the points involve class members affected by an issue prejudicing the position of others". Where the Court was satisfied that no conflict of interest arose, it was content to allow the representative action to proceed.

Mr Justice Knowles placed particular emphasis on the need to interpret the representative rule in the light of the overriding objective and its rationale for binding a number of people who raise a common issue. In doing so, the judge drew upon Lord Leggatt's comment in Lloyd -v- Google that the representative rule should be used as "a flexible tool of convenience in the administration of justice". Ultimately, he reached the conclusion that "if some [claimants] can be assisted to access the court to establish whether the Defendants have their property or have not fulfilled their obligations to them then that is better than none".

In contrast to the position taken in collective actions in the Competition Appeal Tribunal (see Mark McLaren Class Representative Limited -v- MOL (Europe Africa) Ltd and Others [2022] CAT 53 at [14] to [24]), the judge also said he would authorise a letter from the Defendants' solicitors to all material clients advising them that they may opt out. If those letters result in limited participation in the action, Mr Justice Knowles confirmed that it would be open to the Court to reconsider the position under CPR 19.6(2) in future, the rule not being "a once and for all time" provision.

The foothills of the modern, flexible use of CPR 19.6

Notably, in a brief "Endnote" to his judgment, Mr Justice Knowles was moved to consider the role of the legal system in offering a means of collective redress and how this should develop in the future. Commenting on the importance of further legislative consideration in the face of ever increasing potential for mass consumer harm (in particular, in areas such as digital technology), he noted that "[t]he Courts, the common law and equity all have their part to play. The case for further development through legislation may also be strong, in this area and areas connected with it. If legislative policy is to take this in steps then it may be time for next steps".

Authors: Tim West and Imogen Chitty