Collective redress in england & wales

This paper is in two parts. The first part outlines the various different legal mechanisms by which collective redress may be claimed or paid. In some of the more interesting cases, the historical background and development is also outlined. The various mechanisms considered here (and there are some others, which are of limited practical relevance) are: the Representative Action, the Group Litigation order and general case management powers of the civil courts, the 2016 class action for competition damages cases, regulatory redress, consumer ombudsmen, and criminal redress powers. The second part sets out a number of case studies of each type of mechanism.

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  There are occasional transport accidents, mass murder, holiday health or service claims.
  
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  1980-90s: medicinal products, tobacco, many of which failed.
  
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  1995-2004: abuse in child care homes, following prosecutions.
  
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  2008 on: financial services
  

This pattern can be associated with the availability of funding to overcome claimants’ and their lawyers’ need for funding, and changes in the costs rules:

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  1957-1995: Legal Aid + one-way cost shift: an increasing number of claims, with decreasing merits
  
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  1995-1999: CFAs with success fee recoverable but two way cost shifts: a fall in the general number of claims
  
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  1999-2012: CFA + ATE insurance, with both success fee and premium recoverable: massive increase in individual claims, Costs Wars: Claims Management scandals, leading to introduction of regulation of claims managers, but collapse of multiple claims
  

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  2005- on: arrival of third party funders (TPF) but selectivity of claims, and no appetite to fund mass claims other than follow-on cartel damages (because liability established)
  
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  2013: regulated contingency fees (confusingly called DBAs) and qualified one-way cost-shifting (QOCS) for personal injury claims – anticipation of a growth in personal injury, medical negligence and product liability claims.
  

The Group Litigation Order (GLO) was introduced under the reformed Civil Procedure Rules of 1998 ((as CPR 19.III).¹⁰ It is an opt-in procedure in which all group members are parties to the proceedings.¹¹ An application is made for the court to order that proceedings should be constituted and managed as a GLO, and the court must be satisfied that the claims of all group members share ‘common or related issues of fact or law’ (the ‘GLO issues’).¹² The GLO provides for the establishment of a ‘group register’, and identifies a particular court to manage all claims that fall within the Order. Case management may stay cases, or select test cases or generic issues to be resolved. A judgment in the GLO case is binding on all claimants in the GLO register at the time of the judgment and when the GLO was issued; the court may direct that judgment is binding on claims entered onto the register subsequent to the granting of the GLO.¹³ Arrangements for funding and costs are usually complex. The normal ‘loser pays costs rule’ applies, but the QOCS rule applies in personal injury actions from 2013, under which claimants who lose pay their own costs and any success fee of their lawyers, but do not pay the winner’s costs, and losing defendants pay the winner’s base costs.¹⁴ The QOCS rule can be altered where the claimant acts unreasonably.¹⁵ The general position is that all parties in the register are responsible for generic costs, and they typically are required to enter into cost-sharing agreements amongst themselves.

The year-on-year reduction is primarily due to the decrease in the number of child abuse actions being brought. There were substantial police investigations in the 1980s and 1990s following the identification of abuse in children’s homes. These police investigations and criminal prosecutions resulted in claims. The peak in these actions has now passed.

Many GLOs collapse or settle. They have been criticised as not delivering access to justice, and involving huge costs.¹⁷ In the miners’ litigation, it took two years to put the compensation scheme in place, to deliver an estimated £4bn compensation and £2.3bn costs.¹⁸ It took 10 years to resolve, and spawned satellite litigation on lawyers’ representation and some solicitors being struck off.

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   a stand-alone claim based on an alleged infringement of competition law, or
   
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   a follow-on claim based on a finding of infringement by the CMA, or the CAT (on appeal from the CMA), or the European Commission (to the extent that although the CAT and EC can make a finding as to the infringement of a breach of competition law and fine businesses, neither can award damages to affected parties). The EU Damages Directive 2014/104 was implemented by the UK in late 2016, and included rules on recognising a final infringement decision of national competition authority or review court of any EU Member State.²⁴
   

The CAT decides, at the stage of considering whether to make a collective proceedings order, whether the proceedings are to be opt-in or opt-out. Under the opt-in procedure, class members notify the class representative of inclusion of their claim. Under the opt-out procedure, claimants domiciled in the UK who fall within the class automatically participate unless they expressly opt out, while claimants not domiciled in the UK must opt in. Businesses, individuals or trade associations (whether class members or not) directly affected by the alleged infringement can bring claims as long as the CAT deems their representation of the class 'just and reasonable' (s. 47B.8 of Competition Act 1998). Funding of the representative is a crucial part of the CAT’s determination. Claims can be considered using the collective procedure if they raise the same, similar or related issues of fact or law (s. 47B.6 of Competition Act). The Act does not allow damages-based fee arrangements (s. 47C.8) nor exemplary damages (s. 47C.1).

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   action to secure that the offence does not continue or recur;
   
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   action to secure that the position is, so far as possible, restored to what it would have been if the offence had not been committed;
   
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   action (including the payment of a sum of money) to benefit any person affected by the offence; or
   
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   action of a prescribed description.
   

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  redress: including (a) measures offering compensation or other redress to consumers who have suffered loss as a result of the conduct which has given rise to the enforcement order or undertaking, (b) offering consumers the option to terminate (but not vary) a contract, and (c) where such consumers cannot be identified, or cannot be identified without disproportionate cost to the subject of the enforcement order or undertaking, measures intended to be in the collective interests of consumers. Such measures are subject to a cost proportionality requirement⁶⁴ and certain safeguards.⁶⁵
  
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  compliance: measures intended to prevent or reduce the risk of the occurrence or repetition of the conduct to which the enforcement order or undertaking relates (including measures with that purpose which may have the effect of improving compliance with consumer law more generally).
  
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  choice: measures intended to enable consumers to choose more effectively between persons supplying or seeking to supply goods or services.
  

It will be noted that these definitions of enhanced consumer measures are deliberately wide and purposive, and allow flexibility for businesses and enforcers in deciding, and negotiating, what actions and undertakings are appropriate in the circumstances in responding to the underlying and future behaviour and in providing redress. However, any enforcement order or undertaking may include only enhanced consumer measures as the court or enforcer considers to be just and reasonable.⁶⁶

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  Where a trader has access to a list of all customers, the trader could write to all customers informing them of their right to a sum of money if they send back tear-off slip within a set time-period. Terms and conditions should not be complex. The trader would reimburse every consumer who responds within 30 days. Enforcers would check that letters had been sent out and all claims answered within 30 days.
  
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  Where a trader has no list of customers but there is likely to be take-up if advertised, the trader could take out adverts in national, regional or specialist press. Advertising would be proportionate, targeted and effective. The advert would operate in a similar way as product recall where if people showed they were affected by the issue they would receive a sum of money. Additionally, the availability of redress could be flagged to consumers complaining to the Citizens Advice consumer helpline. Enforcers would monitor that adverts had been placed and compensation paid to claimants.
  
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  Where individual consumers cannot be identified, however, alternative measures may be effective, such as advertising that consumers (who can prove they were affected by the issue) can claim an agreed sum of money from the company or from an appointed ADR provider or offering discounts to all future consumers for a fixed period of time to mitigate against any financial gain arising from the breach.
  

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   an obligation on firms to carry out proactive reviews of their complaints and sales in the complaints handling rules;⁸⁰
   
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   a requirement that when assessing complaints they take account of decisions of the FOS.⁸¹
   
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   requiring firms to provide the FCA with complaints handling data;
   
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   a requirement for a firm to appoint an 'approved person' with official responsibility for oversight of the firm's compliance with complaints handling rules.⁸²
   

Second, the FCA may apply to the court for a Restitution Order,⁸³ or use its powers to require restitution itself where it is satisfied that an authorised person has contravened a relevant requirement, or been knowingly concerned in the contravention of such a requirement, and either that profits have accrued to him as a result of the contravention, or that one or more persons have suffered loss or been otherwise adversely affected as a result of the contravention.⁸⁴

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  investigate whether, on or after a specific date, it has failed to comply with particular requirements that are applicable to an activity it has been carrying on;
  
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  determine whether the failure has caused (or may cause) loss or damage to consumers;
  
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  determine what the redress should be in respect of the failure; and make the redress to the consumers.⁹¹
  

The result is that, both under a ‘consumer redress scheme’ under section 404(1) or a single firm scheme under section 404F(7), a procedure for handling mass claims is put in place. Under this procedure, the initial complaint handling and spontaneous repayment is to be undertaken by the relevant firm(s), and consumers may then apply to the Ombudsman. In either case, the Ombudsman’s basis of decision has been effectively amended by the regulator to that of applying the terms of the scheme. The Ombudsman may, of course, consider cases which fall outside the scope of the scheme or variation of permission, on the normal basis (applying the criterion of fairness).

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  investigate whether, on or after a specific date, it has failed to comply with particular requirements that are applicable to an activity it has been carrying on;
  
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  determine whether the failure has caused (or may cause) loss or damage to consumers;
  
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  determine what the redress should be in respect of the failure; and make the redress to the consumers.
  

Fourth, it can also be noted that under the FCA’s enforcement action leading to a penalty or public censure, the decision-making process for considering the full circumstances of each case when determining whether or not to take action for a financial penalty or public censure lists, among the factors that will be taken into account, any remedial steps that the person has taken in relation to the breach.⁹³

We will use the following criteria to help inform our decisions about whether or not to effect redress:

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  how quickly and urgently the redress is needed
  
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  the number of consumers affected
  
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  if the activity that led to the harm occurs inside or outside our regulatory perimeter.
  

Noting that the courts deliver redress too slowly, and that cost issues can deter those harmed from claiming, the FCA said:⁹⁶