In June, the Court of Appeal granted Wirral Council permission to appeal the High Court’s earlier decision to strike out representative proceedings in two securities claims. That appeal was heard on 10 and 11 December 2024. Judgment is expected in 2025.

In this article, Lorraine Lanceley, Harry McGowan and Charlie Mercer summarise the key issues that will be considered by the court.

Background

A detailed history of this case is set out in our previous articles from December 2023 and June 2024. As described there, the High Court’s decision was the first and only judgment on whether a representative action under Civil Procedure Rule (“CPR”) 19.8 (previously CPR 19.6) could be used in securities claims brought pursuant to section 90 and section 90A/Schedule 10A (“s90A”) of the Financial Services Market Act 2000 (“FSMA”).

Mr Justice Green struck out the opt-in representative proceedings against Indivior PLC (“Indivior”) and Reckitt Benckiser Group PLC (“RBG”), ordering that Wirral Council (as administering authority of Merseyside Pension Fund – “Wirral”) may not act as a representative claimant. As such, the claims should proceed by way of multi-party actions managed in the usual way.

Mr Justice Green’s decision to exercise his discretion in favour of striking out the representative proceedings appears to have been driven by the concern that the court will be deprived of its case management powers and the perception that investors would be able to control the management of liability issues. The judge’s view was that the courts could be trusted to engage in active, bespoke case management to manage securities claims by way of normal multi-party proceedings, for example, by offering solutions to issues raised by Wirral in support of representative actions, such as split trials.

Wirral’s arguments in the Court of Appeal

These centred on the following:

1. This is the first and only s90A claim where retail investors (totalling 320) form part of the claimant group. If the representative route is held to be unavailable in this case, it will likely make it unavailable for all s90A claims. It will, therefore, deprive retail investors with relatively small claims from pursuing those claims even if, in law, they are strong. The reason for that is that no rational third-party litigation funder will fund retail claims given the risk/reward, as the individual costs incurred in a multi-party claim are too high versus the potential payout. In contrast, because a representative action would only deal with common issues, the costs of that claim are pro-rated across all claimants and, therefore, retail claimants’ share of common costs is tiny.
2. Mr Justice Green misdirected himself as to the significance of the Supreme Court’s decision in Lloyd v Google [2022] A.C. 1217. In that case, the court contemplated a bifurcated structure for claims under CPR 19.8 in which common issues would be dealt with via a representative action, and individual issues would be dealt with separately. Wirral argued that the judge had applied Lloyd wrongly, including because:
   1. He was wrong to proceed on the basis that there is a hierarchy of actions, where multi-party claims are the default position and representative actions are limited to cases where access to justice would not otherwise be available and/or to cases where bifurcation was only in respect of damages. According to Wirral, this is not what Lloyd says and this has been made clear by the Court of Appeal in its recent decision in Commission Recovery Ltd v Marks & Clerk [2024] EWCA Civ 9.
   2. The court’s jurisdiction is not ousted by that structure. It is simply the application of a different procedural regime. Indeed, that complaint could be made of every single case adopting the structure described in Lloyd. Further, the Supreme Court must have been aware that its proposed approach would mean that individual issues would not be subject to advance case management.
   3. The benefits of representative actions cannot reasonably be reproduced by ordinary case management.
   4. The judge minimised the significance of the Supreme Court’s comments in Lloyd. Those comments were detailed and considered, and this is a paradigm case of the type envisaged by those comments.
3. Therefore, the approach adopted by the judge was wrong, and his exercise of discretion was fundamentally flawed.

RBG/Indivior’s arguments

RBG’s position centred on the following:

1. The judge did not misunderstand or misapply Lloyd. Although Lloyd described the bifurcated process as a general principle, it remained a matter for the court’s discretion whether to allow such representative proceedings to proceed. This discretion is to be exercised in accordance with the overriding objective to deal with cases justly and at proportionate cost.
2. The judge was entitled and correct to take into account the considerations he did when exercising his discretion. In particular, he was entitled to take into account that the representative proceedings were being pursued for the express purpose of ensuring bifurcation and removing any possibility of the court making case management directions to progress claimant-side issues until the conclusion of the first trial. Lloyd did not prevent this approach.
3. The judge carefully considered the importance of access to justice. However, he found that Wirral’s position was unsupported by proper evidence and that the inability of retail investors to participate in the parallel multi-party action was down to the decision of the litigation funder, whose approach was not properly explained. In that respect, the point in issue is not whether retail investors should be able to pursue securities claims via representative actions as a general proposition but rather whether the specific retail investors in this claim should be able to do so.
4. Relatedly, the representative action in Lloyd was brought on an open/opt-out basis, whereas the representative action in this case is being brought on an opt-in basis. This aspect also means the claims would more properly be brought on a multi-party basis.
5. Many of the alleged benefits of representative proceedings on which Wirral also relies can be reproduced through case management of the multi-party proceedings. Other alleged benefits (such as an allegedly greater chance of settlement) are illusory and, indeed, may make settlement more difficult.
6. The judge was, therefore, correct to strike out the representative proceedings and the Court of Appeal should not interfere with his exercise of discretion.

Indivior raised an additional point: if (contrary to Indivior’s case) the Court of Appeal were minded to re-exercise the judge’s discretion and to take into account the policy reasons advanced by Wirral in favour of a representative claim, it should also have regard to the policy underlying Schedule 10A of FSMA. Specifically, Indivior argued that Schedule 10A was designed to result in only a modest increase in securities claims; therefore, facilitating the bringing of securities actions as a matter of policy is not a legitimate reason for permitting the representative action to proceed.

Comment

As can be seen from the above, this case will turn on a combination of policy issues (including the extent to which the Court of Appeal considers them relevant), the specific arrangements of this case given the way it has been structured (in particular, the relevance of the opt-in approach), and the interpretation of Lloyd.

Additionally, it is worth noting that on the last day of the hearing (11 December 2024), the Court of Appeal handed down its judgment in Mr Andrew Prismall v Google UK Limited and others [2024] EWCA Civ 1516, which is another representative action relating to breach of data protection (like Lloyd). All parties were given permission to put in writing anything further they would like to draw to the attention of the court on that judgment by Friday 13 December 2024, although all parties indicated they were unlikely to submit further comments.

Whatever the Court of Appeal determines in respect of Indivior and RBG’s appeal, the judgment will have a significant influence on how securities claims are conducted going forward, although it seems likely the issues will ultimately be addressed by the Supreme Court.