In Commission Recovery Ltd v Marks & Clerk LLP & Anor [2024] EWCA Civ 9, the Court of Appeal handed down one of its first decisions concerning representative proceedings following the landmark Supreme Court decision in Lloyd v Google. The Court of Appeal upheld the High Court’s decision at first instance and allowed a representative proceeding under CPR 19.8(2) to proceed, but also identified several issues that it noted will require careful case management in the future.
The underlying proceedings concern current and former clients of the two defendant firms, Marks & Clerk LLP (M&C), and its associated firm, Long Acre Renewals (LAC), alleging that those firms received secret commissions for referring clients of M&C to a third party. They allege that M&C and LAC are liable to account for the amount of those commissions. A special purpose vehicle, Commission Recovery Ltd (CRL), was incorporated for the purposes of bringing the proceedings and took an assignment of a claim from one of M&C’s clients, Bambach Europe. CRL is the representative claimant in the action.
Representative Actions under English Law
Under CPR 19.8, a Claimant can bring a claim on behalf of other persons where they have the “same interest” in the issue (or issues) to be determined as those that they seek to represent. In the present case, the Court of Appeal clarified that the test is not so narrow that it requires the representative and the other Claimants to have the same cause of action. Instead, a common interest in one or more of the issues of fact or law to be determined may be sufficient. If the same interest requirement is met, the Court then has a discretion as to whether to allow the claim to proceed as a representative action.
The Present Case
In the present case, the Court of Appeal found that the claims against M&C and LAC could proceed as a representative action under CPR 19.8 in circumstances where the only common issue in which all of the Claimant class had the same interest concerned liability and, specifically, CRL’s “core proposition” that all that was needed for each member of the class to establish liability was to show that: (i) they had contracted on M&C’s standard terms of business; and (2) the Defendants (or one of them) had received commission. If liability could be established on this basis, then the Court of Appeal observed that a declaration could be made to that effect.
Accordingly, it held that the case would proceed as a “bifurcated” representative action (of the type envisaged by Lord Leggatt in Lloyd v Google), with the first “stage” dealing with the issue of liability and then individual issues being dealt with thereafter. This is consistent with how representative proceedings and class actions are frequently dealt with in other common law jurisdictions, including Australia and New Zealand.
In giving its judgment, the Court of Appeal succinctly set out the main advantage of representative proceedings as follows:
If a question arises which affects a large number of people, it is obviously convenient that it should be capable of being resolved definitely once and for all. The rule enables this to be done without individually joining all the interest parties, but in such a way that the answer is prima facie binding on all of them.
Particular Points of Interest from the Decision
There are two particularly interesting points to highlight from the Court of Appeal’s decision:
- First, the Court of Appeal recognised that CRL’s “core proposition” might not, necessarily, conclusively determine the issue of liability, but did not consider this to be a good reason not to try and resolve the common issue on a representative basis. As such, this suggests a relatively low bar to representative proceedings being granted under CPR 19.8.
- Second, while the Court of Appeal encouraged the parties and the High Court to continue to refine the issues or decide that other common issues could be tried at stage one, it did not set any plan for how the case will proceed if the Claimant class is successful in establishing liability at stage one. The Court was not, however, convinced by the Defendants’ argument that it should not permit the representative action to proceed on the basis that it could not grant monetary relief unless the represented Claimants opted in at stage two. Although, the Court also did not provide any conclusive guidance as to how this second stage of the proceeding would work.
Comment
Overall, the Court of Appeal’s decision suggests a real willingness on the part of the judiciary to grant representative orders where possible and, in particular, highlights that the Courts are very cognisant of the benefits that CPR 19.8 can bring in appropriate circumstances.
While the Court of Appeal’s decision suggests a relatively low bar to the same interest requirement, learnings from other jurisdictions with similar representative proceeding rules suggest that there is still a long road ahead for representative proceedings before they become an established part of the legal framework in England and Wales. Many unknowns remain which may deter future Claimants. These include:
- How representative proceedings will interact with the availability (or lack thereof) of litigation funding. This is particularly relevant in light of the recent decision of the Supreme Court in R (on the application of PACCAR Inc and others) v Competition Appeal Tribunal and others, where the Supreme Court held that litigation funding agreements (which entitle funders to be paid a proportion of any damages recovered) are unenforceable and cannot be used to fund opt-out collective proceedings before the Competition Appeal Tribunal. Click here to read our previous article on this case
- The Court of Appeal did not spend a significant amount of time on the risk posed by representative proceedings having the potential to confer a right of action on a Claimant (by way of a conflict of interest) or otherwise deprive a Defendant of a defence that it otherwise would have (such as limitation). This is a threshold issue that can impact whether the same interest requirement is met. While these issues simply did not come to the fore in the present case, they are inevitably issues that will need to be determined in future representative proceedings (see, for example, the discussion in Emerald Supplies Ltd v British Airways plc [2010] EWCA Civ 1284).
- The Court of Appeal, when discussing its ultimate discretion to grant the application for representative proceedings considered: (i) whether the Court’s resources would be wasted on pointless litigation or, as they put it, “where the game is simply not worth the candle”; (ii) whether the representative Claimant is suitable to their role; and (iii) the fact that there was no evidence that the individual represented class members would be motivated to ultimately come through and claim their money if the representative claimant was successful. While the Court did not consider any of these issues to be significant barriers to the present claims proceeding as a representative action, they will all be issues that require consideration in the future – including whether or not they become separate requirements to a representative application being granted (as they are in other jurisdictions) or whether they simply remain part of the Court’s ultimate discretion.
