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Sir Gerald Barling, former President of the Competition Appeal Tribunal, addresses CORLA’s AGM attendees

April 27, 2023 by CORLA

Thank you for affording me the honour of addressing you on 23/03/2023. Surely an auspicious date, or at any rate not the Ides of March. A word of warning – a few weeks ago I was persuaded by my daughters to buy this iPad. This is the first time I have entrusted notes for a speech to digital technology rather than the reassuring presence of a paper text. My assumption is that at some point everything will go wrong. So as and when I press the delete button or something called auto-scroll goes into overdrive, you may be starting the drinks sooner than you expected. Of course, if I do make it through to the end you may think that the delete button would have been no bad thing. It’s a win/win for you.

Lucy Rigby, to whom I am very grateful for much logistical support, tells me that, although today is technically not the first AGM, it is the first all-singing/all-dancing substantive one held by the Collective Redress Lawyers Association. You probably know that you are a very recently founded Association of lawyers whose website says it is “dedicated to safeguarding and enhancing access to justice for claimants who have been harmed by wrongful conduct, and who are seeking to vindicate their rights on a collective basis.”

That, if I may say so, is a noble mission statement. Equally laudable, in smaller lettering on the website, but inextricably linked to the overall aim, one finds that “the current regime and practice is in need of improvement and reform” and that CORLA provides a forum of specialist lawyers in order to advocate for this reform, to facilitate dialogue, and the sharing of best practice among the broad range of those involved in claimant–side group litigation, including consumer rights groups, academics and funders. Consistently with that, membership is targeted at corporate and individual lawyers, who “derive a significant proportion of their business from acting for claimants in group actions or collective proceedings“. However, the membership of experts and academics is not made subject to that criterion. I suppose some barristers may derive significant business from both sides of the divide, given the cab rank rule. You will know better than I whether that is more difficult for solicitors.

To me, a geriatric lawyer who spent 35 years practising at the bar from the early 1970s, and who can hark back to the days when most practitioners were arguably much less specialised than they have inevitably now become, the idea of a lawyers association focusing wholly or mainly on those who act for claimants seems, at first sight, a little curious. But I would not criticise it in the current circumstances.

In the UK, we are only really at the embarkation stage of a voyage into the hitherto uncharted seas of opt-out collective redress. Those involved in bringing, supporting, funding and adjudicating such claims in this jurisdiction are still (to mix the sea – going metaphor with a land-based one) feeling their way along a path with many hurdles, some of them unfamiliar to us. For example, and in no particular order, the total dependence on third-party funding, the concept of a class representative, the need for prior or early judicial approval of many elements, including the pursuit of collective relief, the class representative, the suitability of aggregate damages, the upfront identification of a plausible, fact-based methodology for the claim for inter alia damages assessment, including where appropriate the choice of a counterfactual (as to which see last week’s CAT decision in Merricks), the likely availability of data to populate the methodology, and ultimately, an approved method of distribution of any award of aggregate damages. On the interstices of these steps, many other, often unforeseen, questions, are now arising for resolution, such as the permissibility or otherwise of communications between defendants and class members, the nature of funding and its relationship, if any, with proscribed or regulated damages-based remuneration, the nature of the CAT’s role as gatekeeper, the interrelationship between public enforcement of the competition rules and private collective enforcement, and the problem of achieving consistency of outcome between related cases.

More about some of these issues in a moment, but none of them can, I think, be said to be wholly resolved at this stage. All of them and other equally important questions are likely in the fullness of time to have a significant impact on the realisation or otherwise of the UK collective redress regime as an effective means of obtaining justice for multiple victims of wrongdoing, in circumstances, where no other source of relief would be available. And so, in the meantime, and while the regime is resolving such issues and generally maturing, it seems to me understandable that a body such as CORLA should focus its lawyer membership upon those with a genuine interest in the claimant-side of this work.

That is a very long-winded way of saying “well done” to your founders and members for getting CORLA off the ground. A year ago almost to the day I spoke to a similar audience at a symposium on collective actions, and expressed the hope that such events might become at least annual. It is clear that this will now happen and that CORLA will play a major role.

For the remainder of this short talk I will say a few words on the following:
(1) The current state of collective litigation in the CAT
(2) Funding
(3) Issues arising before, at, or after certification, and the gatekeeper role of the CAT
(4) Finally I will flag up some policy questions. I have few if any answers. That will be the CAT’s unenviable task, aided by your members and others.

The current state of play
Among my favourite last words are those of an actress, who I think rose to fame in the 1920s. On her deathbed she said “It’s all been most interesting”, and that certainly applies to the current state of play in this field.

When I spoke at that symposium a year ago, there were about 15 collective claims lodged in the CAT. As I speak there are about 30, of which 17 are standalone claims, 8 follow-on and 5 hybrid. About 10 have been certified, and the remainder are under appeal or awaiting the next procedural step. A couple have been withdrawn. A significant number of these 30 are opt-out claims. Very few have so far reached the point of trial, and none has been subject to the collective settlement procedure so far as I am aware.A couple of points to note:
(1) There has been no let up in the inception of these claims: the fact that there are twice as many new collective claims as were in existence in the CAT this time last year suggests that there is no lessening of the appetite for them on the part of consumer bodies and others with similar motivations, funders and of course lawyers. I very much doubt that the CAT feels matters are coming before it at too slow a pace – the tribunal currently has no fewer than 200 private enforcement claims on its books, including the 30 collective actions, together with many other hugely complex matters such as the Trucks litigation. Later I touch on whether this is likely to have an impact on the CAT’s resources and personnel.
(2) The duration of collective proceedings here has sometimes been unfavourably contrasted with the speed of resolution in other jurisdictions, for example, Canada, Australia, and the US. However, there is no clearly equivalent comparator system. The UK sought to choose best practice from several, and did so adopting the precautionary principle designed to exclude frivolous cases, and to ensure fairness to defendants as well as class claimants. It is also surely premature and unfair to make a criticism about speed at this stage. These are still early days. As I have just said, we are getting to grips with a (to us) unfamiliar procedure, in the context of cases dealing with probably the most complex area of fact, law and economics known to litigation. An element of delay in earlier cases resulted, too, from the need to wait for the seminal decision of the Supreme Court in Merricks.

One big question mark hanging over the viability of our collective redress regime is, of course, the issue currently before the Supreme Court in the PACCAR appeal. This was heard on the 16th February and judgment is awaited. I do not propose to go into the detail save to say that the point in issue is the whether LFAs such as those typically used by funders and claimants to fund collective actions in this jurisdiction are “damages-based agreements“ within the meaning of the relevant legislation. This in turn depends on whether the provision of funding under these LFAs, where the funders play no part in the conduct of the litigation, but their remuneration is fixed by reference to a share of the damages recovered, amounts to “claim management services”, whose definition is extended to “advice or other services in relation to the making of a claim”, which in turn includes “the provision of financial services or assistance”.

In its unanimous decision, the Court of Appeal held that LFAs of the kind referred to are not “damages–based agreements“ within that extended meaning. One of the reasons which the Court of Appeal found persuasive in dismissing the appeal is that Parliament had in 1999 enacted, but not yet brought into force, a statutory provision still, on the statute book, whose purpose would be to regulate LFAs of this nature. Parliament could hardly have intended to enact dual, and arguably inconsistent, channels of regulation for agreements of the same kind.

If that decision were to be reversed, the current funding arrangements for collective actions and therefore the regime which is largely dependent upon those arrangements, would clearly be holed below the waterline. Survival would depend then on early legislative action.

Issues arising before, at, or after certification the gatekeeper role of the CAT
Unlike in some other jurisdictions, notably the US, certification of a class action by the CAT does not signal a decisive victory for claimants, leading to early settlement negotiations. Anyway, that has not yet been the trend and it is difficult to see why it should become so.That said, certification is a crucial procedural step, and in the light of recent case-law in the Court of Appeal and the CAT, it is one which is likely to play a very significant part in shaping the conduct and progress of the proceedings up to and including trial.

For the sake of brevity, and to get you to your refreshments in a timely way, I will not comment on the interesting issues which can arise even pre-CPO, such as early disclosure. There are cases going both ways and the principles, though still being explored, are very case-specific. For similar reasons of time, I will refrain from addressing case-law developments relating to communications between defendants and class members.

Standard for certification
Given the influential role the Canadian class action systems played in the formation of our own, it is perhaps unsurprising that the Canadian Supreme Court’s Pro-Sys v Microsoft test for the commonality requirement took early root here, where it has now established itself as a measure of wider scope than just commonality. If memories need jogging about the admirably succinct way the test was explained by Rothstein J, it was as follows: the expert methodology proposed by a representative claimant must be sufficiently credible or plausible to establish some basis in fact for the commonality requirement; in other words it must offer a realistic prospect of establishing loss on a class – wide basis. The methodology cannot be purely theoretical or hypothetical, but must be grounded in the facts of the particular case. There must be some evidence of the availability of the data to which the methodology is to be applied.

Application of the Pro-Sys test
So far so simple – but as usual, the devil is in the application. When it comes to the application of that standard by the CAT and the approach of the Court of Appeal, I venture to suggest that there is some evidence of pendulum activity since the inception of the collective redress regime.

Looking at the matter in historical terms, three phases are perhaps discernible:

Phase 1 – The CAT’s refusal to certify Merricks first time around
It is worth recalling that the introduction of an opt-out class action procedure was not just not a foregone conclusion back in the first decade of this century, but was a very long shot indeed. Reformers who pointed to the glaring lacuna in our process, both in the court system generally and in the CAT’s own inadequate collective procedure, were generally met with a barrage of references to perceived abuses in other jurisdictions, to greedy, ambulance-chasing lawyers, to mercenary funders, and to the existence of alternative means of obtaining collective redress, such as GLOs. Industry lobbied hard against change. So, when the change came, albeit limited to competition claims heard in the CAT, a very heavy responsibility was placed on that tribunal, where it still rests, to show that the excesses and abuses perceived elsewhere could be avoided by stringent judicial oversight and case-management, and that the system could work fairly and effectively for both claimants and defendants. That careful approach to its responsibility was exemplified from the outset in Merricks (1).

Leaving aside the issues relating to the commonality of pass-on in that case and distribution of damages (the latter going to the CAT’s view that the compensatory principle must re-enter the analysis at that stage), the main reason why the certification application failed was because the CAT considered that there was insufficient data likely to be available at trial to enable the expert’s methodology to generate a sufficiently reliable calculation of aggregate damages.

So this was an application of the Pro-Sys test by the statutorily appointed gatekeeper using its wide discretion to approve and manage novel litigation.

Phase 2 – The majority decision of the Supreme Court
In a majority ruling the Supreme Court overruled the CAT on several points. The core of the decision was that the CAT had misunderstood its function under the statute by treating the elements of what was a multifactorial approach as if they were individual hurdles to be overcome in order to achieve certification. The tribunal had also failed to appreciate that the undefined statutory concept of “suitability”, both for collective redress and for aggregate damages, was a relative rather than an absolute criterion. In this respect the majority judgment elided “suitability” with the word “preferable” used in the Canadian legislation. Finally, the tribunal had, in the majority’s opinion, afforded insufficient weight to the well-established need to wield a “broad axe” in order to fill gaps in the data and evidence required for quantification of an otherwise viable claim.

In a powerful dissenting judgment, Lords Leggatt and Sales disagreed with the majority‘s approach on those issues, and would have upheld the CAT‘s decision as revealing no error of law in this respect, and as falling squarely within the scope of its broad statutory discretion as gatekeeper.

There is little doubt that the Supreme Court’s majority ruling caused a collective sigh of relief on the part of those whom CORLA now represents, and a corresponding sharp intake of breath from those with actual or potential interests on the other side of collective redress. The pendulum had apparently swung in favour of opt-out collective claimants.

Phase 3 – A swing back?
Finally, on this question, one might ask whether we now seeing hints of a swing back of the pendulum to a somewhat more stringent approach, albeit ostensibly via the process of case- management?

In McLaren, the Court of Appeal held that the gatekeeper role does not end with certification – the CAT may well have to impose heavy case-management burdens on the parties at an early stage to ensure that the case proceeds efficiently to trial, and that defendants are not confronted by baseless claims or “sprawling” litigation. In the context of a pass-on issue, the Court of Appeal tied this back to the certification stage and to the CAT‘s assessment of the methodology put forward by the class representative at that point. Such methodology provides a “blueprint“ for the parties and for the CAT of the road to trial. On the facts of that case the Court of Appeal held that the CAT had not done enough to tie down the methodology. Even prior to disclosure it should not have stopped at simply identifying where the battle lines between the parties had been drawn on what were radically different pricing methodologies – it should at the CPO stage have required one or both parties to provide further elucidation of their pricing methodology.

In its very recent decision in Gormsen v Meta, the CAT has prayed in aid McLaren in determining whether to grant a CPO in an unfair pricing case. The CAT stated that the purpose of the Pro-Sys test is to minimise the risk of
1. The parties throwing away costs unnecessarily.
2. The tribunal’s time being wasted.
3. A matter coming to trial in an unmanageable form.

The CAT stated that, although the CPO stage was mandatory in collective redress, it was not so different from what a court should be doing in every case by way of early case-management. Whilst an arguable case ought not to be killed off before trial, the CAT needed to be satisfied that the class representative knows how it is proposed to make the claim good. This includes issues of quantum but also other questions.

Its ruling, which did not refuse a CPO but adjourned that decision for several months in order to provide the representative claimant with an opportunity to fill the gaps identified in the judgment, explained in a little more detail, what its approach would be in such cases.

The CAT referred to the famous prayer of Saint Augustine “Lord make me chaste, but not just yet” (sensitively recorded by the tribunal as “good” rather than “chaste”, but Saint Augustine, in his youth, was said to be something of a philanderer). In that respect the tribunal condemned the kicking of an issue down the road, and also what it termed the “not my problem“ fallacy. The latter would equate to claimants asserting that it was not for them to deal with points that would be part of the defendant’s defence if the case proceeded. Such an approach would rarely pass muster, even where the burden of proof at trial was on the defendant. At the CPO stage the claimants must show how, methodologically speaking, the point could be addressed.

However, the tribunal also warned defendants that if a defence point was not flagged up at the certification stage, the claimant may not be penalised for failing to explain what methodology would deal with the point.

A question which did not arise in this case was whether it would be incumbent on the CAT, by reason of its pro-active gatekeeper role, to flag up such a point for early discussion where the parties had not raised it.

The overall aim, as the Court of Appeal emphasised in McLaren, is for there to be a reasonably developed judicially-approved pathway to the preparation for trial itself. Issues arising in that context can, in the light of the case-law, be examined/resolved/case managed either before or after certification has been granted. However, in Gormsen the CAT has expressed a preference for pre-certification resolution.

Although this approach is variously said not to be a reason for refusing certification, or for any assessment of the merits at the CPO stage, it may be asked whether that is realistic. We know in the light of the Court of Appeal decision in BT v Le Patourel that there is no general presumption in favour of opt-in actions. The choice in that respect is a multi-factorial, balancing exercise, taking account of all circumstances, including that the size of the class may be limited and fail to attract funding if opt-in is chosen, that although the strength of the claim is relevant it should not be treated as an additional hurdle to justify opt-out, that “practicability“ is relevant and means more than just “doable“ – reasonableness, efficiency, expediency, proportionality, and cost- effectiveness, are also part of it.

In examining such factors in relation to the opt-in/opt-out decision at the CPO stage, together with the rather more demanding approach to methodology and blueprint now discernible, the CAT is surely faced with a formidable challenge in seeking to keep these factors entirely separate from an examination of the merits. I feel an analogy coming on: I am reminded of the task facing Shylock of extracting a pound of flesh without removing a drop of blood.

Policy questions
Finally, I will mention just three areas of the many where important policy questions are coming to light.

1. What is the ideal relationship between public and private enforcement, and to what extent should one take account of the other? In particular, is the current scale of private enforcement compatible with effective public enforcement. For example, is there an undesirable, knock-on effect on whistleblowing and leniency applications? Where parallel public and private proceedings exist, to what extent should there be cross–pollination between the two? Is it desirable for regulators to intervene in private enforcement litigation, as the CMA did in the Epic Games v Alphabet case? The CAT has said it will accept such interventions but will want to know the reasons. Should regulators even be allowed to be class representatives? To what extent should an ongoing or intended public investigation be affected by existing collective proceedings? Conversely, should certification of collective proceedings be affected by the attitude of a regulator? One bears in mind that in standalone cases the CAT and the courts are making hard law which the regulators must apply.

2. A particularly knotty and growing problem for the CAT in particular is how to achieve consistency in circumstances where (as now happens), individual and collective claims arise out of the same alleged infringement. The umbrella proceedings regime, which aims to provide a way through this question, would justify a full conference on its own. Case management and selection of common issues as between the two sets of proceedings is by no means as simple as it sounds. A desired result may often be that a first trial should deal with the infringement issue, and a second trial with any pass–on issue arising between a direct purchaser and an indirect purchaser, with the defendant playing no part in the second trial. But to achieve such a result is clearly much easier said than done, not least in view of frequent lag in the timing of cases brought.

3. Is the current level of private enforcement in the CAT sustainable with the tribunal’s current structures and resources? Since it was created the CAT has punched well above its weight thanks to a small but hugely dedicated and efficient permanent staff, one full-time senior judge as President, a superb Registrar, and a highly-skilled and experienced pool of part-time legal chairmen (judges) and (far from) ordinary members, who agree to sit as and when required. In budgetary and personnel terms the CAT is a minnow compared with other competition agencies. Will it be possible to maintain its historic and current impressive level of achievement in the face of an ever-increasing workload, including what has been aptly described as a torrent of immensely complicated and time-consuming private enforcement litigation, including many cases of collective redress? The answer may depend at least in part on the extent of the CAT’s case-management, and on the eventual scale of settlements, either under the public, CAT-approved, settlement procedure or private resolution. But it is difficult to see that further resources, judicial, logistical and financial, will not be needed in due course.

Last word
I end as I began, by reverting to CORLA’s mission statement. I would like to highlight one aspect in particular.

It is clearly not fair or sensible for the UK to have a collective regime, including opt-out, actions, for competition cases alone. One of CORLA’s express aims is to look at routes to expand the specific opt-out regime, currently applicable only to competition cases in the CAT, to additional areas. There are many other types of case where multiple victims of wrongful conduct are deprived of an effective system of redress because the claims are individually too small and/or the costs of maintaining the litigation too large to be brought by any individual claimant.

However, it has always been clear that the present regime is a test bed for opt-out cases in particular. There is probably little chance of extension into other areas, let alone the introduction of a generic procedure, if the present regime is seen as falling short. This places a very heavy responsibility not just on the CAT but also on those who litigate collective cases in that forum, together with their advisors, experts and funders.

With that in mind, it is particularly heartening to read in CORLA’s Code of Conduct that law firm members expressly agree “not to pursue any frivolous and spurious claims, issues or positions”. The importance of this core principle can hardly be exaggerated. Upon compliance with its letter and its spirit depends the perception of the current regime for competition cases, and also many of the other aims of CORLA, including its extension to other areas where an opt-out procedure is needed.

The distinction and experience of the law firms which have founded this Association provide ground for optimism that these principles will be fully honoured.

On that happy note I will let you go to your well-earned glass of fizzy water.

Thank you for listening.

Gerald Barling

Published on April 27, 2023 by CORLA

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