Commission Recovery: Court of Appeal allows representative class action to continue despite “difficulties ahead”

The Court of Appeal has upheld a decision made by Robin Knowles J in 2023, permitting a representative action relating to alleged undisclosed commissions to proceed. It’s the first Court of Appeal decision on representative actions since Lord Leggatt’s warm remarks in Lloyd v Google on the flexibility of CPR 19.8 actions, although it’s unlikely to be the last – not least as an appeal from Prismall v Google is now expected later this year. 

CPR 19.8: “the representative rule”

CPR 19.8 enables in effect “opt out” claims to be pursued by a representative claimant on behalf of an identified class, provided the claimant and the class have the “same interest” in the claim. That requirement effectively prohibits most damages claims from being pursued as representative actions because damages usually require an individualised assessment.  

In Lloyd v Google [2021] UKSC 50, Lord Leggatt spoke warmly about the flexibility of representative actions, suggesting that the historically strictly-interpreted “same interest” requirement should be interpreted purposively with a view to dealing with cases justly and efficiently, and that a bifurcated approach could be appropriate in some cases. Here, Leggatt suggested that common issues of law or fact could be decided through a representative action, leaving any issues requiring individual determination to be bifurcated and dealt with at a subsequent stage. 

Commission Recovery v Marks & Clerk and Anor [2024] EWCA Civ 9 is one of a number of representative actions issued in the wake of Lloyd v Google and is now the first Court of Appeal decision on a representative action since that Supreme Court judgment. 

Background to the claim

The defendants are a firm of patent and trademark attorneys and a related partnership (M&C). M&C provided intellectual property (IP) registration services and would share their clients’ details with a renewal service provider (CPA). If the client chose to instruct CPA for IP renewal services, M&C received a commission which until early 2018 was undisclosed to the client unless they enquired.

An “opt-out” CPR 19.8 representative claim was commenced by the representative (CRL) in April 2021. CRL claims to represent “all current and former clients” of M&C, in respect of which M&C had received undisclosed commission during the claim period and the claim is based on breach of fiduciary duty and/or the tort of bribery. 

The defendants applied to strike out the representative action, primarily arguing that the persons CRL sought to represent did not share the same interest in the declaratory relief sought on liability. 

First Instance: “In the foothills of the modern, flexible use of CPR [19.8]”

At first instance, Knowles J rejected this application. He determined that the represented clients did have the “same interest” despite individual issues, such as limitation, potentially arising for some of the class. In his view, these issues did not amount to a conflict of interest between represented persons, nor did they necessitate an individualised assessment of each person’s claim. 

He was similarly not persuaded that this was a case in which he should exercise the Court’s discretionary power to prevent the claim from proceeding as a representative action. Noting that each case turns on its own facts and circumstances, he chose to exercise his discretion to permit this one to proceed, commenting: “If the choice is this or nothing, then better this”. In his closing remarks, he remarked that: “we are still perhaps in the foothills of the modern, flexible use of CPR [19.8]”. The strike out application was accordingly dismissed. 

Court of Appeal: “Difficulties ahead”

M&C appealed Knowles J’s judgment to the Court of Appeal. On 18 January 2024, in a unanimous judgment delivered by Lord Justice Nugee, the Court of Appeal dismissed the appeal, upholding Knowles’ decision to allow the representative action to proceed.

Like the High Court, the Court of Appeal adopted the broader “same interest” interpretation described in Lloyd v Google, distinguishing between “a conflict of interest” which was not permitted (for example, where the proceedings would advance the claim for some members but prejudice the position of others) and “divergent interests” (for example, where an issue only impacts some of the class but advancing the case does not prejudice others in the class), which the Court considered did not pose an impediment to a representative action. The represented clients had a common interest in obtaining a declaration that M&C had breached its fiduciary duty to its clients in receiving the secret commissions; it did not matter that some claims may involve other individual issues, such as the specific terms of engagement they had agreed to with M&C, limitation and individual defences.

Those issues, where they arose, could be dealt with separately, with the Court noting that it was clear from Lloyd v Google that it was not an impediment to the use of a representative action that not all issues can be resolved on a class basis and some would need to be bifurcated. Notably, the Court noted that on the facts of this case, there were likely to be “very many cases of the sort described in argument as “plain vanilla”” – i.e. not requiring determination of individualised issues going to liability. 

On discretion, M&C argued that no money judgment could be entered until after individual claimants had come forward and there was no guarantee that would happen or that anything worthwhile would be achieved by the representative action. Whilst observing there may indeed be difficulties ahead for CRL, Nugee LJ noted it was not for the Court to second-guess CRL’s decision that it was commercially worth its while to continue with the litigation unless it was clear that the litigation was futile. The Court accordingly upheld Knowles J’s decision and allowed the claim to proceed as a representative action.

Comment

The case is clearly of interest as the first Court of Appeal authority on representative actions since Lord Leggatt’s obiter comments on them in Lloyd v Google. It remains to be seen, however, to what extent, if at all, it provides a basis for other, in particular bifurcated representative actions to proceed, given the need for such cases each to be assessed on their own facts. It will be interesting to see what further guidance on representative actions is given by the Court in Prismall v Google later this year.  

Click here for the judgment.