Article originally published inIssue 19 of
Introduction
Since 2015, the
The practical guidance below is derived from the recent case of
Background
For a CPO to be made, the proposed class representative must be "authorised" and the relevant claims must be "eligible" for inclusion in the collective proceedings. The CPO, if granted, will permit the class representative to act as such in the collective proceedings.
For the class representative to be "authorised" it must be just and reasonable for that person to act as a representative. In practice, the main questions that have been raised concern whether the proposed representative would be able to fairly and adequately act in the interests of the class members (Rule 78(3)) and whether the representative will be able to pay the defendant's recoverable costs if ordered to do so (Rule 78(2) (d)). The PCR's funding arrangements will also be considered as part of the authorisation condition. For proposed claims to be "eligible" for inclusion in collective proceedings they must be brought on behalf of an identifiable class, raise the same, similar or related issues of fact or law and be suitable to be brought in collective proceedings (Rule 79(1)).
The Bulk Mail Claim
The Bulk Mail Claim arises out of
- prevented competition for bulk mail delivery services; and
- led to higher prices (an "overcharge") for end-customers of relevant bulk mail services.
The purpose of the claim is to secure compensation for losses suffered by class members who were overcharged for bulk mail delivery services as a result of the infringement. The class is estimated to consist of 290,477 entities, and the value of the claim is estimated to be in the region of Ł1 billion. The Bulk Mail Claim CPO application was heard on
Practical Lessons On "Authorisation"
The main practical lessons from the Bulk Mail CPO hearing concern the "authorisation" condition mentioned above. The key point is that a proposed class representative (PCR) cannot be merely a figurehead for a set of proceedings. The role of the PCR comes with a "heavy responsibility", so it is imperative for the PRC to demonstrate (at the CPO stage) its ability act as an independent advocate and engage robustly with the advice it receives.
PCR suitability
In order to demonstrate its suitability to act as a class representative, the PCR in the Bulk Mail Claim took a number of practical steps. Some of the key practical lessons from the Bulk Mail Claim, as they relate to the "authorisation condition", are set out below.
1. Source of funding. In the Bulk Mail Claim, funding was obtained through an independent broker. The use of an independent broker was highlighted in the PCR's CPO application and helped to demonstrate that proper efforts had been taken to secure the best possible funding terms for the class.
2. Independent advice. In addition to sourcing funds through a broker, the PCR in the Bulk Mail Claim obtained a range of independent advice on the legal and commercial terms of the proposed funding for the claim. This advice consisted of (a) independent advice on the proposed litigation funding agreement (the LFA) from a costs KC (b) advice from a separate funding broker confirming that the LFA was in line with market norms and (c) an independently prepared "scenarios" table showing worked examples of how damages would be split between the funder and the class in different outcomes. This comprehensive approach to seeking and obtaining independent advice ensured that the PCR was able to properly conclude that the funding deal for the claim was in the best interests of class members.
3. Consultative panel. Whilst there was no requirement that a consultative panel be put in place, the PCR in the Bulk Mail Claim engaged senior personnel to provide it with independent advice and support. The PCR's consultative panel in the Bulk Mail Claim, which includes the former Chairman of the
4.
5. Budget. The PCR's plan for proceedings should include an estimate of and details of arrangements as to costs, fees or disbursements (Rule 78(3)(c)(iii)). In order to help meet this requirement, the PCR in the Bulk Mail Claim provided the Tribunal with details of its fully-funded cost budget for the claim. The budget did not include the amount of ATE premium (see below) but it did provide details of the hourly rates for Counsel and solicitors as well as a detailed breakdown of budgeted costs for each stage of the claim. The budget also included cost details for the PCR and its consultative panel. The Tribunal carefully considered the LFA and the accompanying budget for the claim and noted the following:
"The amounts claimed under [the LFA] at any distribution stage will of course be carefully reviewed. The parties and the funder should not assume that because a particular level of return has been agreed by way of LFA, that will be the amount the Tribunal ultimately permits to come out of any settlement or judgment sums. That will depend on a number of factors, including the level of success and the sums recovered."
6. Independent costs advice. During the course of the CPO hearing in Bulk Mail Claim, it was noted that PCRs may need assistance if they are to effectively review and challenge bills for legal costs. The ability of the PCR to subject ongoing costs to proper scrutiny is important because the funder's interests are not identical to those of the class. In particular, if the action results in recovery for the class, the funder's expenditure on costs will be reimbursed out of the sum recovered. In order to obtain certification, the PCR in the Bulk Mail Claim agreed to engage a costs specialist and this was recorded in the Bulk Mail CPO judgment in the following terms:
"As regards the PCR, it is the client and hence any bill must be approved by the PCR, which in practice means
Since the CPO judgment in the Bulk Mail Claim, the Tribunal has indicated that it should be the standard approach in collective proceedings for the PCR to retain an independent costs specialist, who may provide ongoing advice on cost arrangements and fees (
7. Confidentiality. In the Bulk Mail Claim, the PCR published a redacted form of LFA on its claim website in advance of the CPO hearing. The LFA published on the website was, however, redacted to exclude information showing the level of ATE insurance premium for the claim and the extent of the solicitor's deferred fees. Such information was redacted on the basis that it was covered by litigation privilege since it gave an indication of the risk allocated to the case. At the Bulk Mail CPO hearing, the Tribunal raised a question as to whether the PCR could assert privilege or confidentiality against the entities it is representing in the proceedings. In order to address this issue, and following the grant of a CPO in its favour, the CPO added wording to its website making it clear that any class member may, upon request, inspect the following documents at the offices of its solicitors: the unredacted LFA, the budget for the claim and a document setting out estimates of the success fee payable to the funder under different outcomes (ie the "scenarios" document referred to above). This was accepted by the Tribunal as a proper approach and is in line with the trend towards reducing confidentiality protection for LFAs in collective action proceedings.
8. PCR's experience and remuneration. As part of the CPO application, the PCR in the Bulk Mail Claim provided the Tribunal with detailed evidence of his relevant experience as well as his remuneration for taking on the role of the PCR. Evidence of the PCR's relevant experience included, for example, reports from cases in which the PCR had provided expert evidence concerning competition economics. This helped to establish the PCR's credibility and suitability for the proposed role.
In addition to the above matters, the CAT might want to know how the claim originated. At the CPO hearing of the Bulk Mail Claim, the Tribunal Chairman raised the issue in the following way: "I want to know who selected who... you've got the PCR, you've got the lawyers and you've got the funders. So who instructed who? Who approached who originally? Where has [the claim] come from? Is this the lawyers who said, we think this is a good claim and hence we go and find funders? Or is it funders saying we think it's a good claim, we find lawyers? " In the Bulk Mail Claim, the proposed Defendant raised particular queries about whether the PCR's expert witness had originated or marketed the idea for the claim (with the aim of calling into question the expert's independence). In order to address these queries, the PCR's solicitors provided the Tribunal with confirmation that they had originated the claim. Given that this issue was raised in the Bulk Mail Claim, it can fairly be anticipated that it might be raised again. It would therefore be prudent for the PCR to consider addressing the issue of origination when preparing its CPO application.
Adequacy of funding
The PCR must also demonstrate the adequacy of its funding for the claim. In order to address queries about funding for the claim and its ability to meet the proposed defendant's costs, the PCR in the Bulk Mail Claim took the steps set out below.
9. ATE insurance. The PCR in the Bulk Mail Claim obtained a generous ATE policy, sourced through an independent ATE broker, to cover the proposed Defendant's costs. As part of its CPO application the PCR provided the Tribunal with (a) copies of its ATE policy and the relevant anti-avoidance endorsement and (b) evidence from rating agencies confirming the creditworthiness of the relevant insurers. Independent advice was also obtained from a costs KC concerning the insurance policy wording before the relevant documents were signed.
10. Funder due diligence. In order to demonstrate the adequacy of the PCR's funding, the PCR's solicitors reviewed documents relating to the funder's financing arrangements. This ultimately resulted in the PCR's solicitors sending the Tribunal a letter confirming the funder's ability to fund the claim. This was an unusual aspect of the CPO hearing in the Bulk Mail Claim, but it is nevertheless prudent for PCRs to independently assure themselves of a funder's ability to fund a claim before they sign an LFA.
11. Undertakings: During the Bulk Mail CPO hearing the Tribunal requested, and the PCR provided, an undertaking to update the Tribunal as to its expenditure against the budget and to notify the Tribunal if there are any concerns about the funder's ability to pay. This provided the Tribunal with a further assurance as to the adequacy of the PCR's funding and ensures ongoing transparency and accountability. PCRs might wish to consider offering, as part of future CPO applications, similar such undertakings.
Conclusion
The landscape surrounding the certification of competition opt-out claims continues to develop as more claims proceed through the CAT. No doubt further CPO hearings will generate additional guidance, but for the time being the Bulk Mail Claim provides useful examples of the type of issues that a PCR might wish to consider before issuing its claim.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Andrew Wanambwa
Clifford's Inn
EC4A 1BL
Tel: 207074 8000
Fax: 207222 4633
E-mail: siobhan.moriarty@lewissilkin.com
URL: www.lewissilkin.com
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