Class Actions in the UK: Part Two - So, CATs got the cream?
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Quite possibly.
There’s been steady year-on -year growth in the number of CAT claims filed since 2020 and, with obstacles remaining for class actions in the High Court in many areas, it seems likely this will continue into 2024. With the emergence of novel and complex technology with extremely fast growth rates (such that market dominance can be suggested), as we are currently witnessing in the world of generative AI, there appears to be evermore targets for the claimant bar to go after. One look at the headlines about US class actions involving AI companies makes it clear that their privacy practices, in particular, are going to be claimant fodder for some time yet.
There have also been calls, unsurprisingly from claimant law firms among others, for the CAT’s remit to be widened beyond its current mandate to hear only competition-based claims. The suggestion is that breaches of consumer protection laws should also fall within the CAT’s wheelhouse, so as to provide a route to justice for consumers who’ve suffered low-level harm, en masse, but without necessarily having been the victims of an antitrust violation. Bearing in mind the raft of new consumer protection legislation and rights which are about to come into force in the UK such calls, if answered, would very likely lead to a huge influx of additional claims.
In this regard, the potential impact of the EU’s Representative Actions Directive (“RAD”) should be borne in mind. The RAD has ensured that a minimum level of collective redress is available in each and every Member State in relation to a long list of consumer protection-based laws. Whilst the UK of course has absolutely no obligation to implement any such measures, pressure on the government to do so is likely to increase if the view that the UK public is receiving a lower level of protection and redress than its EU counterpart gains ground.
Before we conclude, though, that all eyes should be on the CAT and the CAT only from now on, some of the hurdles associated with CAT litigation merit a brief examination. As claims in the CAT progress to certification stage, those bringing them are likely to encounter a number of stumbling blocks, both competition-specific and those applicable to class actions more generally, which could slow the gold-rush. These are most likely to pertain to certification, scrutiny of funding and damages calculation and distribution, issues upon which we have already seen some instructive decisions handed down. For example, the above-mentioned Gormsen case ground to a halt earlier this year when the CAT refused certification because Dr Gormsen’s expert methodology for calculation of damages was held to be flawed (in that it did not offer a realistic prospect of establishing loss on a class-wide basis) rendering the case untriable.
In an even more recent decision, litigation funders involved in CAT claims have taken a big hit as a result of the Supreme Court’s decision in the case of R (on the application of PACCAR Inc and others) v Competition Appeal Tribunal and others. This is because the Court ruled that litigation funding agreements under which payment is calculated by reference to a percentage of the sum recovered (or has some direct relationship with such sum) constitute Damages-Based Agreements (“DBA”). Many funding arrangements supporting active CAT claims are structure on this basis; this is highly problematic given that, under the Competition Act 1998, DBAs are prohibited for use in opt-out competition class actions. This decision therefore handed new ammunition to CAT defendants, as well as causing a massive headache for funders as they frantically scramble to renegotiate the terms of their funding agreements. Whilst unlikely to prove fatal to the funding of competition class actions, it is likely to fuel further challenges of funding arrangements, given the lack of certainty as to what is and isn’t a DBA.
If not the CAT, then what?
For those claimants who cannot take advantage of the CAT regime, the challenge remains to design a claim which is deemed triable in the High Court. Whilst one could interpret the recent spate of anti-claimant decisions as a clear message that the English judiciary wants no part in a US-style class action culture, this might be a premature conclusion. The Supreme Court’s decision in Lloyd undoubtedly threw up some serious obstacles, at least from a data protection law perspective. However, it did leave the door open a chink for arguments to be made that the “same interest” test should be interpreted more liberally, and a recent case hints that some judges are prepared to take up that gauntlet.
In Commission Recovery Limited v. Marks & Clerk LLP and Long Acre Renewals (the “CRL” case), a High Court judge permitted a 19.6 representative action to proceed, despite the fact that those in the purported class did not have identical interests, and that there were some parts of the claim which might need to proceed on an individual basis. The deciding principle, according to the judge, was whether or not the differences gave rise to any conflict of interest which, it was decided, in this case they did not. Many have hailed this as a significant departure from previous caselaw, but whether or not this precedent is followed largely remains to be seen. The judgment in another attempted representative action, Andrew Prismall v Google UK Ltd and DeepMind Technologies Ltd, which was decided shortly after, has been cited by some as proof that the CRL case has had no effect. However, the Court’s rationale for rejecting Mr Prismall’s claim hinged upon an analysis of the “lowest common denominator” elements of the claim (i.e. those points which could be said that all represented members of the group would have in common), concluding that the tort in question, misuse of private information, would not be made out based on those elements alone, nor that the claim would pass the “de minimis” threshold to bring such a claim. In other words, the “same interest” was not really addressed and so CRL continues to stand by itself as the High Court’s latest word on that subject.
A further interesting development which could be relevant to some quarters is the emergence of litigation funding outfits prepared to fund cases which they deem are for the public good. These outfits of course still aim to turn a profit from the cases they support, but via careful case management and recovery of costs rather than by limiting the cases in their portfolio to those with the largest potential damages return. Consequently there is an opportunity for claimants, whose primary goal is not financial gain, to launch representative legal actions for declaratory or injunctive relief, as appeared to be envisaged in the Supreme Court’s “bifurcated approach” suggestion in Lloyd (i.e. use the 19.6 representative method to obtain declaratory relief, and then any smaller groups wishing to pursue damages claims could continue to do so, leveraging the first-stage decision).
Conclusion
High Court class actions may not yet be as numerous as some predicted they would be by 2023, but what is clear is that the claimant law firms and litigation funders who have ploughed significant investment into building the UK class action market are not going to be easily deterred. There remains plenty of arguments, on matters of both procedural and substantive law, which claimants are likely to focus upon in their attempt to increase their ability to bring collective actions in this country. As the judge in the CRL case put it “In a complex world, the demand for legal systems to offer means of collective redress will increase not reduce.” In other words, the fight to get a slice of class action pie is not even close to over yet.