Carriages at midnight? Court of Appeal allows FX collective claim to proceed on opt-out basis and gives guidance on the determination of carriage disputes
In Evans v Barclays Bank PLC & Ors [2023] EWCA Civ 876 the Court of Appeal overturned the Competition Appeal Tribunal’s decision to reject two competing applications for a collective proceedings order (CPO) on an opt-out basis in respect of follow-on claims arising from infringement decisions of the European Commission in 2019.
In its judgment, the Court of Appeal found that the CAT had erred in its assessment of whether the proceedings should be certified on an opt-in or an opt-out basis. It also provided useful guidance on the right to appeal under s.49(1A) Competition Act 1998 and the courts’ jurisdiction in the determination of carriage disputes.
The Court of Appeal’s decision revives the £2.7 billion class action and, more generally, demonstrates a willingness to certify opt-out claims even where the class members might be well-resourced entities capable of bringing proceedings independently.
Background
The case concerns rival collective actions brought by two proposed class representatives (PCRs), Michael O’Higgins and Phillip Evans. Both applied to the CAT for certification of a CPO on an opt-out basis in pursuit of follow-on claims arising from the European Commission’s 2019 decisions finding that the Respondents[1] had breached Article 101 TFEU by operating cartels in relation to foreign exchange spot trading.
A full background to the CAT judgment can be found in our previous note. In summary, the opt-out applications gave rise to a “carriage dispute” i.e. the question of who was best placed to proceed with the claim. The CAT refused to determine this point as a preliminary issue so it fell to be determined simultaneously with the CAT’s consideration of whether to certify either action. Additionally, of its own motion, the CAT considered whether the claims could survive a strike out application.
In a majority decision, the CAT determined that: (i) it has the power to strike out claims, even where there is no application for strike out from the Respondents; (ii) both claims were weak enough to be capable of strike out but the CAT stopped short of doing so in light of the novel and difficult issues arising from the applications; and (iii) the claims would not be certified on an opt-out basis because of a lack of clarity in the proceedings, amongst other reasons. The CAT also said it mattered that the class members were most likely “sophisticated potential litigants” that could join on an opt-in basis. Finally, although the CAT did not certify either application and so did not need to decide the question of carriage, it indicated that if it had have been required to do so, it would have decided in favour of Mr Evans as PCR.
The CAT stayed both proceedings to allow the PCRs three months in which to refile their claims on an opt-in basis. The PCRs promptly stated their intention to appeal. They also brought protective applications for judicial review to guard against the possibility that there was no jurisdiction to appeal under s.49(1A) Competition Act 1998.
Grounds of appeal
The key issues in the appeal were (1) the law governing the difference between statutory appeal and judicial review; (2) whether the CAT has an independent power to strike out a claim and whether it exercised its power correctly (3) the criteria for determining opt-in versus opt-out, including the relative importance of the strength of a claim; and (4) the criteria to apply in selecting between rival class representatives.
Court of Appeal decision
The Court held that the CPO should be set aside to the extent that it made an order for opt-in proceedings and amended so that the proceedings are certified on an opt-out basis. On each of the issues of appeal, the Court’s findings are set out below.
Appeal or judicial review
The Court was clear that the statutory right of appeal should be construed broadly in order to minimise the scope of judicial review. Judges on the CAT panel acquire specialist skills and receive specialist training and to utilise judicial review would insert an unnecessary non-specialist step in the progress of a CAT decision to appeal. Additionally, as is evident from the judicial review pre-action protocol, judicial review should only be used where no adequate alternative remedy, such as a right of appeal, is available. The Court concluded that “the occasions when the only issue is one of judicial review should be rare.” [59]
CAT’s power to strike out a claim of its own motion and its exercise of that power
The Court confirmed that the CAT does have the power to determine, of its own motion, whether a claim is viable. The Court called this power “an important tool in the CAT’s gatekeeper armoury” [64]. It was also of the view that the CAT exercised this power correctly and was within its broad case management discretion to defer the decision of strike out in the way that it did.
Opt-in versus Opt-out considerations
The Court clarified that the CAT was correct to hold that it had jurisdiction to choose between opt-in or opt-out, even where the applicants had applied only for opt-out.
However, it found the CAT had erred in its analysis both in terms of the strength of the claims and practicability (those being two of the matters to be taken into account as provided by CAT Rule 79(2) and (3)). The Court said it was not logical for the CAT, having concluded that it would form no final view on the merits until the applicants had submitted their reformulated cases, to have treated its provisional view of the merits as legally definitive when it came to deciding on the issue of opt-in or opt-out, particularly when knowing that to do so would bring the claims to an end. The Court also agreed with the applicants that the CAT should have shown how its assessment of the strength of the claims made opt-in preferable to opt-out. In most cases, the merits of the claims will be a neutral factor but where it is not, there needs to be a relevant connection with the choice between opt-in or opt-out. The Court agreed with the CAT’s dissenting member, Paul Lomas, that “It is wrong to treat strength as a sliding scale with a weaker case going to opt-in and a stronger case to opt-out.” [133]
On practicability, the Court found the CAT was wrong to infer that, because class members were large, sophisticated entities that could afford to bring proceedings on an opt-in basis, if they did not opt-in this was a conscious decision on their part that they did not “want” to litigate. The evidence, most of which was undisputed, indicated that an opt-in action would not be practicable. Where a claim would not be viable other than on an opt-out basis, that is a powerful reason to select opt-out.
Carriage
Perhaps unsurprisingly (because consistent with previous authority that the CAT’s discretion on this issue is wide), absent an error of law the Court declined to interfere with the CAT’s decision on issues of carriage, finding that the CAT had considered a variety of factors relevant to who could best conduct the proceedings and was vastly better placed than the Court to form a view on the point [145]. The Court did however endorse the view of the CAT that the decision should not be made on the basis of (i) who was first to file, (ii) who has the largest amount of funding, nor (iii) which claim covers the broadest class.
Analysis
Whilst the Court of Appeal found the CAT erred in several areas of analysis in its consideration of the CPO application, it has cemented the CAT’s wide discretion on certification and carriage issues. Its finding that carriage is essentially a discretionary evaluation by the CAT which will be difficult to overturn on appeal gives welcome clarification to the market that should avoid further satellite litigation at the appellate level. Its endorsement of the CAT’s approach that the merits of the case should determine carriage is also a welcome development that should discourage weaker claims from being filed just so they can be first in the door.
The judgment also provides guidance on the question of whether grounds of challenge to a CAT decision should be brought by way of appeal or judicial review. The practical effect of this is likely to be that parties save costs and effort in not feeling compelled to bring parallel proceedings to protect their position.
Additionally, the judgment provides clarification on the factors - and relative weighting – the CAT should apply to the opt-in/opt-out decision. It makes clear that the class action regime is not just for the benefit of consumers – it is also for the benefit of businesses where the individual claim value means that those businesses would be unlikely to bring claims on an individual basis.
This article was published on the GCR Class Actions hub on 30 August 2023.
