Latest news relating to UK collective actions
Over the last few months we have written about the increased chance of class actions relating to data breaches. You can read this in GDPR - one year on and GDPR - waiting for the flood. But how likely is this in a wider technology (and, in particular, FinTech) marketplace extending beyond just GDPR? We look at some of the latest developments in collective actions.
It has been four years since the statutory reforms of the Consumer Rights Act 2015 revitalised the UK’s processes for collective actions. As a result we are at last beginning to see some clarification around the first stage of the process - the application for a Collective Proceedings Order (CPO). The trends and general climate of litigation at this stage, during which the Competition Appeals Tribunal (CAT) decides whether a proposed class representative may bring a claim on behalf of a class, are only now beginning to become defined with the benefit of the number of cases tested since 2015.
There have been some surprises. In 2017 the CAT refused, for example, to allow Walter Merricks to bring a class action against MasterCard that would have been the largest in UK history. Intended as a follow-on from the interchange fees investigation, this would have seen around 46 million UK customers seeking £14 billion. Importantly, this would have been on an opt-out basis (i.e. people would be automatically included as claimants unless they chose to opt out). The CAT ruled that the sheer size of the class, given this opt-out approach, made the estimation of loss, and the calculation and distribution of any payout impractical.
On 16th April 2019 the Court of Appeal granted Walter Merricks leave to appeal. The CPO requires only that it be possible to assess the level of damage caused to the class and that at the full hearing there is likely to be supporting data for the methodology used. At the application stage of the process the object should be only to establish whether the claim does indeed involve the same, or closely related, issues of law.
As yet we cannot know whether the CPO will be granted at the second attempt, but the Court of Appeal’s ruling establishes firstly that large class actions cannot be thrown out at this stage merely because they appear hugely complex, and secondly that at this stage it is necessary only to demonstrate an arguable basis for action. This should make it easier for many such claims to follow on from competition authority decisions, and may well lead to a rise in applications, but how significant a rise there will be is doubtful when the prospect of a significant legal costs order against unsuccessful applicants is still such a threat.
Any trial in this matter will provide some useful indications of evidentiary requirements in collective actions. Furthermore, Merricks’ proposal that class members awards be proportionate to the amount of time they spent in the UK between 1992 and 2008, up to £300, runs contrary to established practice in similar cases and may be rejected by the CAT. The matter is still a long way from any definitive resolution.
Elsewhere, the first opt-in class action, where claimants are required to actively register with the class representative, is shortly to come before the CAT. Over 7,800 truck operators have registered to be represented by the Road Haulage Association, following European Commission investigations into an allegation of 14 years of collusion by truck manufacturers to inflate their prices. Four manufacturers were fined a record €2.93 billion (about £2.5 billion) in July 2016, but the estimate on the current class action is £5 billion. The Merricks decision should make the CPO relatively easy to obtain.
The supermarket chain Morrisons is facing the possibility of having to pay compensation to 5,518 employees who brought a class action following a data breach in 2014. A former employee, Andrew Skelton, is presently in jail for leaking their personal data, but the Court of Appeal has upheld a High Court ruling of vicarious liability against Morrisons. The supermarket’s argument that Skelton was a disgruntled employee who had acted with the deliberate intent of causing damage to his employer was held to be insufficient defence against vicarious liability, especially since they had, in effect, made the breach possible by the access to data given to Mr. Skelton as part of his job. The Supreme Court has now given Morrisons further leave to appeal, so we await the outcome with interest.
And finally, with the role of third-party litigation funders now established as an important and necessary one, without which many class actions would be impossible to finance, a recent ruling by the High Court has effectively removed the so-called Arkin cap protecting funders by declaring that the Court of Appeal had not intended it to apply in every case and could, therefore, choose not to apply it. Clearly funders will now need to consider the full extent of their liability in the event of an adverse costs order, and after the event insurance will be of ever greater importance. Smaller funders may struggle with this, and defenders of actions will be emboldened by the prospect of the entirety of the costs of a successful defence now being recoverable.