Expansion of ‘same interest’ requirement for representative claims

In Commission Recovery v Marks & Clerk LLP [2023] EWHC 398 (Comm), the first high-profile assessment of the ‘same interest’ test for representative actions under the Civil Procedure Rules (CPR) since the Supreme Court’s ruling in Lloyd v Google [2021] UKSC 50, the High Court held that a dispute relating to secret commissions could proceed as a CPR 19.6 ‘opt out claim’. The High Court determined that, although there were differences between the claims, there was no conflict of interests between the claimant class, i.e. information and arguments advanced by one class member would not prejudice the interests of another. This lack of conflict was a crucial factor in the Court’s decision to permit the representative action to proceed. The decision suggests a change in approach from previous cases, with the Court taking a wider view of the ‘same interest’ requirement.

Background

The claimant, Commission Recovery Limited (CRL), brought a claim against Marks & Clerk LLP (Marks & Clerk), an IP (intellectual property) law firm, and a company associated with it, named Long Acre Renewals. The claim was brought in relation to an arrangement whereby Marks & Clerk referred its clients’ IP renewals to CPA Global, an IP renewal service provider, in exchange for an undisclosed commission to be paid to Long Acre Renewals.

CRL was never a client of Marks & Clerk. Rather, it was assigned claims against the defendants by one of the first defendant’s clients (Bambach Europe), subsequently dissolved. The defendants applied to strike out the claims on the primary ground that the assignment from Bambach to CRL was an unlawful champertous assignment of a bare right to litigate. The defendants also applied to disallow the claim to proceed as a representative action for failing to meet the “same interest” test set by CPR 19.6.

A champertous assignment?

The Court considered whether the assignment of the right to seek recovery of any undisclosed commissions was champertous (i.e. improperly permitted an otherwise unaffected party to prosecute the claim in exchange for a share of any ultimate proceeds). The judge held that secret commissions are, in the hands of a defendant as agent, and as between the agent and the client, property (i.e. the client is entitled to say to the agent, ‘that commission is mine not yours’). An assignment of property was not champertous. Incidental rights of action could validly accompany an assignment of property. These included a claim for money received and for restitution, and such rights could be used to recover the purportedly unlawful commission. Accordingly, the assignment was not a ‘bare right to litigate’ and there was no requirement to engage the test of a “genuine commercial interest” introduced in previous case law.

Representative claims under CPR 19.6 and the ‘same interest test’

Under CPR 19.6(1), where more than one person has the “same interest” in a claim, that claim may be brought by or against one or more other persons who have those same interests. Satisfying CPR 19.6 is therefore a key step in commencing representative group litigation before the English courts.

In what was the first high-profile judgment considering this issue since Lloyd v Google [2021] UKSC 50, the Court referred to Lord Leggatt’s comments in needing to interpret the ‘same interest’ test purposively in light of the overriding objective and the rationale for the representative procedure. We previously considered Lloyd here.

In Lloyd, Lord Leggatt held that this test is the key consideration when assessing whether a representative claim may proceed, satisfaction of which ensures that the litigation is effectively promoting and protecting the interests of the underlying represented class.

The defendants argued on three bases that the “same interest test” was not met:

1. that whilst giving rise to common issues, the claims were not sufficiently similar, owing to different relevant timings and contracts;
2. that there were conflicts of interest between the claimant and members of the class and as between the members of the class; and
3. that the class was defined by reference to matters that were in issue and was conceptually and practically uncertain.

The Court rejected the defendants’ arguments. Whilst conceding that the circumstances and relevant contracts underlying each individual claim inevitably differed, the Court held that none of these differences, complexities and difficulties gave rise to the prospect of the representative claimant pursuing a given point in such a way as to prejudice the position of other claimants.

On the class definition, and the defendants’ contention that it was nebulously defined, the Court repeated Lord Leggatt’s comment in Lloyd that “the adequacy of the definition is a matter which goes to the court’s discretion” and stressed that each putative representative action should be judged on its own merits. In exercising its discretion to permit the claim to proceed, the High Court held that it was not necessary for proceedings to “resolve all possible claims”, and that in the case before it, the claimant had sought to define the class as best as it was able in the circumstances known to it. In particular, the Court determined that the claimant could rely on the common thread of secret commission between each individual claim, and that this would be sufficient to group them together, notwithstanding that the value of the secret commission differed between claims.

Key takeaways

• The courts may be adopting a wider view of ‘same interest’ claims eligible for representative actions. By permitting a representative action to proceed on the basis of a claim that conceptually overlapped with, but was not identical to other claims as they were not based upon the same contracts or factual matrix, the Court signalled that it may grant more leeway to the ‘same interest’ requirement. Ultimately, the Court will look to whether the pursuit of the representative action will give rise to a conflict of interest between members of the claimant class in that it would prejudice one claimant against any other.
• A representative action under CPR 19.6 need not “necessarily resolve all possible claims” under it. Rather, a common interest between the parties would be sufficient provided that the class of claimants is defined as well as possible in the circumstances known to the claimant bringing the action.
• Whether a case is suitable for a representative action is a question that the courts will revisit through case management, as the matter unfolds. As the Court in Commission Recovery held, CPR 19.6 addresses a “question of continuing relevance”, which a defendant may look to pose again at an appropriate juncture. Indeed, the Court expressly contemplated that if individual responses to communications to ‘opt out’ of the proceeding materially informed the overall picture of the action, the defendants were at liberty to ask the court to revisit the CPR 19.6 threshold.

With thanks to Mark Lightbown for his assistance in preparing this post.