Group therapy

There has been much talk over the last few years about collective actions. This month there have been developments in three areas.

First, in the Financial Services Bill 2009, which is currently at committee stage in the House of Lords, we see the first proposal for an opt-out collective procedure under English law. The Bill provides that: 'The court may, on the application of a person [the representative] by order authorise the representative to bring collective proceedings before the court in respect of financial services claims of a kind specified in the order.'

It is for the court to then determine whether such actions are 'opt-in' '“ where claimants within the represented group have to actively decide to join the litigation '“ or 'opt-out' '“ where everyone is within the represented group unless they choose to leave the group. It is for the court to determine whether any judgment or order should bind the represented group or not.

The provisions in the Bill are broad and vague in scope and leave much to be prescribed by statutory instrument, including matters as to damages and to limitation. It is expected that, even if passed into law, any subsequent SI and court interpretation are likely to be very restrictive and conservative in nature but, on its face, the Bill does offer up the prospect of ordinary people being able for the first time to have an effective route to compensation in financial services cases much as mortgage miss-selling, PPI and bank charges.

The advantages of GLOs

Second, there have been developments in the field of group litigation orders (GLOs) in Tew and others v BoS (Shared Appreciation Mortgages) No 1 plc and others [2010] EWHC 203 (Ch). In England, one way in which multi-party litigation is permitted and controlled by the court is under a GLO made under CPR 19. Under CPR 19.11, the court may make a GLO where there are, or are likely to be, a number of claims which give rise to the GLO issues '“ so it is a method of managing a number of claims brought together. Tew concerned, among other matters, the methodology employed by the court for defining GLO issues.

The court considered, on an appeal from a GLO, the methodology which it should employ for defining GLO issues (common or related issues of fact or law). The court also considered whether a GLO was the appropriate procedure for managing the litigation, in which over 100 claims had been brought against two banks, challenging the fairness of a certain type of mortgage under the Unfair Terms in Consumer Contracts Regulations 1994 and the Consumer Credit Act 1974.

In October 2009, the court had made a GLO which identified various issues as the group litigation issues for the purposes of the order and made various administrative provisions. This was appealed. On appeal, the court rejected the proposed GLO issues and the exclusion of individual circumstances from the scope of the litigation which, it considered, would amount to a form of pre-judgment of some issues. The court also held that the proposed GLO issues were too detailed to constitute GLO issues and betrayed confusion with issues arising in the course of litigation. In addition, the court rejected the attempt to manage the case by seeing if it could be decided on the basis of common issues, without reference to individual cases.

In determining on appeal in Tew that a GLO was the best way for the court to manage the large number of claims involved, the decision provides support for the GLO procedure. Despite rejecting both GLO issues, the court in Tew concluded that the advantages offered by a GLO, together with using test cases, made it the appropriate method for managing the litigation.

Representative claims

Third, the scope of the representative action procedure under CPR19.6 is to be tested this month in the Court of Appeal in the Emerald v British Airways case. Under rule 19.6 of the CPR, a representative claim may be brought by or against one or more persons as representatives of any others who have the 'same interest' in the claim.

The represented class are bound by any judgment or order in the action, but the court's permission is needed to enforce a judgment or order against any member of the class who is not a party to the action. The case concerns the cartel in air cargo freight that was operated by the leading global airlines between 2000 and 2006 which affected all those who purchased freight during the period, as they all paid an overcharge through surcharges for the freight provided. The two claimants seek to represent all purchasers of freight who purchased during the cartel, an attempt that was rejected by the vice chancellor last year ([2009] EWHC 741 (Ch)) '“ but which the Court of Appeal is now reconsidering.

All three developments show the struggle to reconcile court rules with collective actions arising out of mass harms '“ a struggle which is likely to continue for the foreseeable future, whether the Financial Services Bill becomes law or not.