On 2 September 2024, the High Court struck out an application for a representative proceeding under CPR 19.8 that had been brought against certain airlines for cancelled and delayed flights: Smyth v British Airways Plc & Ors [2024] EWHC 2173 (KB). The Court considered that the “same interest” requirement under CPR 19.8 had not been met and that the claim was motivated by financial recovery for the litigation funder, and not the interests of the would-be class. The case highlights the importance of a well-defined class and a suitable representative claimant in order for representative proceedings to proceed.
Background
Ms Claire Smyth had booked a flight with British Airways (BA) from London to Nice. A week before she was due to depart, the flight was cancelled. Under Article 7(1) of the EU Regulation 261/2004 (retained post-Brexit), Ms Smyth had the right to claim compensation against BA (who manages a portal through which passengers may claim compensation). However, Ms Smyth chose not to use the portal and instead brought a representative proceeding on behalf of her fellow travellers – not just on her flight, but anyone who had booked flights with BA or easyJet scheduled to depart from, or arrive at, an airport in the United Kingdom between 1 December 2016 and 31 August 2022 and who’s flight had been cancelled or delayed by three hours or more.
The claim was (importantly) funded by Ms Smyth’s employer, although (also importantly) the funding arrangements were not disclosed to the Court. The general proposal was that Ms Smyth would be entitled to deduct 24% of any compensation recovered in the claim in order to pay the funder and her legal representatives. The defendants brought an application to strike out the representative proceeding or, in the alternative, for a direction that Ms Smyth could not act as a representative claimant.
Representative proceedings can be brought on an “opt-out” basis under CPR 19.8, provided the representative, and those they purport to represent, have the “same interest” in the claim. The “same interest” requirement has been referred to as an issue that is common to all members of the class, the resolution of which would benefit (and bind) the entire class (see the Supreme Court’s decision in Lloyd v Google [2021] UKSC 50 for the leading decision on representative proceedings). Crucially, the “same interest” requirement will not be met simply by all members of the proposed class having the same cause of action or general claim – there must instead be a common issue to resolve that binds the class.
The High Court struck out Ms Smyth’s representative claim on the basis that it did not satisfy the same interest requirement. In addition, the Court stated it would in any event have used its discretion to refuse to allow the representative proceeding to continue on the basis that it was motivated by the financial interest of its backers and not the interests of consumers.
Same Interest Requirement
A fundamental flaw of the proposed action was that Ms Smyth did not even intend for the claim to proceed on behalf of all of the people that fell within the class definition. The claim envisaged that the defendants would have to review the schedule of proposed class members and identify any defences they intended to raise in respect of each passenger. In this way, the class would be progressively trimmed down until only those individuals who had no arguable defence remained and the Court could order the defendants to pay the required compensation. This posed several insurmountable hurdles for the action:
- First, as is clear from this proposal, the case was inevitably going to involve individualised claims involving different facts, interests and defences. While the Supreme Court in Lloyd v Google clarified that the existence of individual issues was not a bar to representative proceedings (and could be resolved through case management procedures such as a bifurcated process), the individual issues in this case were so widely diverged that there was no “same interest” to unite them.
- Second, the way the claim was proposed to run meant that the membership of the class could not be revealed until the conclusion of the proceeding. It is established law that the same interest requirement is a threshold that must be overcome at the outset of a proceeding, not at the end (see e.g., Jalla v Shell [2021] EWCA Civ 1389). This does not mean that a class cannot fluctuate as certain matters are resolved, but, again, the lack of a common issue in this case made the class fundamentally undefinable.
- Finally, there was no common issue to be resolved across the class. Even after the class had been trimmed down, there would be no binding finding that the class could benefit from. Rather, there would simply be a collection of individual claims. In this way, the same interest requirement was not met.
This case appears to be an example of where a claimant has confused the requirement of a same interest with a same cause of action. Indeed, it is difficult to see what common issue (if any) Ms Smyth was proposing to be resolved by this proceeding on behalf of the proposed class. Rather, it appears that the proceeding was brought on the basis that all proposed class members shared a general cause of action (having experienced cancelled or delayed flights). This was not sufficient to satisfy the same interest requirement.
Court’s Discretion – Litigation Funding
Master Davison also held that, even if the same interest requirement had been met, he would have exercised his discretion to not allow the claim to proceed because of his concerns surrounding the litigation funder and funding arrangements. The Court found there was much left to be desired regarding the funding arrangements in the case.
First, there was a general lack of transparency about the funding arrangements. Ms Smyth had not been transparent about her own financial interests in the proceeding, the funder had been involved in a previous investigation by the New Zealand Financial Markets Authority, and the funder was actually Ms Smyth’s employer, raising serious concerns about his ability to influence and control the litigation. Overall, the court did not consider Ms Smyth to be a “consumer champion”. Fundamentally, the funding agreement had not been disclosed to the parties or to the Court, which could have provided the Court with some comfort about the proposed arrangement and controls in place. Second, the Court’s provisional view was that the funder’s entitlement to compensation was disproportionate (despite not being able to see the precise funding arrangements in the funding agreement).
Litigation funding is generally seen as a desirable method by which to promote access to justice. The previous government introduced a Bill to Parliament earlier this year which proposed to clarify the position on litigation funding agreements. While this Bill has now been discarded in the change of government, it was described as having the principle of access to justice at its core. On 4 March, Lord Chancellor, Alex Chalk KC, said “It’s crucial victims can access justice – but it can feel like a David and Goliath battle when they’re facing powerful corporations with deep pockets”, “This important change will mean more victims can secure vital third party funding to level the playing field and support their fight for justice”. For a fuller discussion of this Bill, see our previous article here.
However, in this case, the Court found that the funding arrangements would not promote access to justice. Importantly, other remedies were available to the passengers who could use the airlines’ portal to claim compensation for delayed or cancelled flights. These alternatives were cost free, involved no deductions by any funders, and could be achieved relatively quickly (unlike funded litigation).
