Court strikes out securities class action brought as a representative action under CPR 19.8

In Wirral Council v Indivior PLC [2023] EWHC 3114 (Comm), the High Court struck out a securities class action which had been commenced as a representative action under CPR 19.8, and provided that the claims should be brought in the usual way by ordinary multi-party proceedings. The judgment highlights some of the factors that the Court will consider when deciding whether to exercise its discretion in favour of allowing representative proceedings to continue.

Background

The Claimant used the representative action procedure under CPR 19.8 to bring claims on behalf of various individuals (“Represented Persons”) pursuant to sections 90 and 90A and Schedule 10A of the Financial Services and Markets Act 2000 (“FSMA”) (“Representative Proceedings”). Under CPR 19.8, a claim may be brought by or against a party as a representative of others with the “same interest” in the claim. A party can initiate proceedings under CPR 19.8 “as of right” but the Court has discretion whether to allow the proceedings to continue by reference to the overriding objective.

Although this was the first time that CPR 19.8 had been used to bring securities claims under sections 90, 90A and Schedule 10A of FSMA, the Claimant maintained that it was entitled to proceed in this way and that the Supreme Court decision in Lloyd v Google LLC  [2021] UKSC 50 (see our article here) effectively endorsed such an approach.

The Claimant considered that bringing a representative action under CPR 19.8 would be less risky, costly and burdensome than using ordinary multi-party proceedings and would provide access to justice for a number of the Represented Persons who would not otherwise be able to bring claims in their own names due to funding issues. These advantages stemmed from the Claimant’s adoption of a “bifurcated process”. This would enable “defendant-side” issues that were common to the Represented Persons to be decided at an initial stage, leaving individual “claimant-side” issues (such as standing to sue, reliance, causation and quantum) to be dealt with later on. Accordingly, the Represented Persons would get the benefit of the findings on the common issues without having been required to plead their case, provide disclosure or other evidence beforehand. The Claimant was open about the fact that bifurcation was “the sole purpose and stated advantage” of the Representative Proceedings.

The Defendants applied for the claims to be struck out on the basis that representative proceedings were not the appropriate procedure for such claims under FSMA. The Defendants argued that the claims should be brought in the usual way by ordinary multi-party proceedings with each Represented Person being a Claimant. The Defendants' principal argument was that if the proceedings were allowed to continue as a representative action, they would prevent the Court from case-managing the proceedings in the manner it had done in similar cases brought by way of ordinary proceedings. A representative action would allow the Claimant to dictate the structure of the proceedings, in particular as to what issues were to be tried at the bifurcated first stage trial.

Decision

The Court exercised its discretion by deciding not to allow the claims to continue as representative actions and struck them out. The Court concluded that it would be unfair and unjust, and contrary to the overriding objective, to allow the Representative Proceedings to oust the jurisdiction of the Court to case manage the claims from the start.

Key takeaways

The judgment highlights some key factors that the Court will or will not take into account when considering whether to allow the continuation of representative proceedings:

1. Policy reasons: The Court made it clear that it was not deciding the strike-out applications on policy grounds or to say how securities claims in general should be brought. Instead, the Court will decide how to exercise its discretion in the particular case before it.
2. Access to justice: The Court noted that it was important to ensure that there was appropriate access to justice for individuals who would not be able to bring claims save by way of a representative action. However, where there are perfectly feasible non-representative proceedings available, the Court should be able to weigh whether those are preferable to representative proceedings both from the parties' and the Court's point of view.
3. The Court’s case management powers and discretion: The judgment emphasises the importance of the Court’s discretion to decide case management issues. Parties should not fear putting case management into the hands of the Court. The Court will weigh the arguments on both sides and decide what is in the best interests of the parties, the Court and the administration of justice. The Court considered that the availability of a bifurcated process in representative actions should not be the principal reason for using representative actions.
4. Risk/Costs: The Represented Persons and their funders did not want to take on the risk and costs of pursuing proceedings in circumstances where the Judge managing the case might require them to provide disclosure and witness evidence before a first trial had taken place on common “defendant-side” issues. While the Court understood that desire, it did not consider that it was a legitimate basis for removing the Court’s power to case manage the claims.
5. Overriding objective: The Court reinforced the fact that it would have regard to the overriding objective when deciding whether to allow the continuation of representative proceedings. In this case, the Court held that it would be unfair and unjust, and contrary to the overriding objective, to allow the Representative Proceedings to oust the jurisdiction of the Court to case manage the claims from the start.

Defendants should take comfort from this decision which reinforces the importance of the Court’s role as an active case-manager of claims. The clear message is that Claimants should not be able, unilaterally and without any input from the Defendants or the Court, to use CPR 19.8 to structure proceedings in the way that they choose.

With thanks to Ellen Lennox for her assistance in preparing this post.