CAT refuses certification in Riefa v Apple and Amazon on the basis of suitability of the PCR

On 14 January 2025, the Competition Appeal Tribunal (the “CAT”) handed down judgment refusing to certify the proposed collective proceedings brought by Professor Riefa against Apple and Amazon, on the basis that the proposed class representative (“PCR”) was not suitable to bring the proceedings. This is the first time the CAT has refused to certify collective proceedings outright. To date, the CAT has applied a low threshold for approving certification, although two cases last year were certified only after the PCRs submitted amended/additional evidence and following a second certification hearing. We explore below what led the CAT to deny certification in this case and the key takeaways we can glean for future claims.

Background

Overview of the claim and PCR

The proceedings were brought in the form of an opt-out collective claim before the CAT in July 2023. The PCR was a special purpose vehicle, whose sole member and director is Professor Christine Riefa: a university professor who is also a member of the consultative group advising the class representative in the Coll v Google collective proceedings.

The claim was brought on behalf of persons who had purchased Apple electronic products at retail level in the United Kingdom during the claim period. The PCR alleged that class members had suffered loss as a result of Apple and Amazon entering into and implementing agreements which restricted third parties from reselling Apple and Beats-branded products on Amazon.

Hearings on certification

A first certification hearing was held in July 2024, at which the proposed defendants did not oppose certification but raised certain issues for the CAT’s consideration, including in relation to the funding arrangements entered into by the PCR. During this hearing, the CAT identified concerns in relation to (i) the confidentiality of the funding terms, (ii) the substance of the funding terms agreed, and (iii) the suitability of the PCR to bring the proceedings. It therefore directed the PCR to file further evidence on these points, to be addressed at a second hearing. It also invited the proposed defendants to apply to cross-examine Professor Riefa, which they did, and which application the CAT approved.

The second certification hearing took place in September 2024. In the lead up to the hearing, additional amendments were made to the funding arrangements and further evidence was filed by Professor Riefa (she filed a total of three witness statements), her solicitors, Exton Advisors Limited (a litigation funding broker), and Sir Gerald Barling (a retired judge and former President of the CAT who works alongside Professor Riefa as a member of the consultative panel to the PCR in Coll v Google). During the hearing, Professor Riefa was cross-examined on her suitability by counsel for Apple and Amazon.

The CAT’s concerns: the PCR’s (insufficient) consideration of the funding arrangements

The key issue the CAT was grappling with was whether Professor Riefa met the “authorisation condition” under Rule 77(1)(a) of the CAT’s Rules. This requires the CAT to consider whether the PCR would act fairly and adequately in the interests of the class members, as well as whether the PCR has access to sufficient funding for its claim and any adverse costs order.

While arguments have been raised relating to the authorisation condition at the certification stage before, various facts in this case caused the CAT to focus on scrutinising the PCR’s suitability. Notably, the terms of the litigation funding agreement (the “LFA”) entered into by the PCR appeared contrary to the interests of the proposed class. For example, in its original form, the LFA contained an unqualified obligation on the PCR to apply for the funder to be paid before the class (which was subsequently softened to apply only “where it is appropriate in all the circumstances”), and to be paid a success fee calculated on the basis of an uncapped multiple of the funder’s costs.

While the CAT noted that the terms of the (eventual) LFA themselves were not so extreme as to warrant interference, it did highlight its concern that they seemed to prevent the PCR from acting in the interests of the class. In this vein, the CAT raised a specific objection to certain confidentiality provisions contained in the LFA, which prevented Professor Riefa from disclosing certain terms of the LFA (including the funder’s return). When questioned on whether Professor Riefa would be willing to share that information with the class, counsel for the PCR noted that “she instinctively would not want to take a position contrary to that of her funder”. The CAT concluded that this was clearly contrary to the class’s best interests.

In light of the problematic terms in the LFA, the CAT expressed broader concerns that Professor Riefa did not understand the terms she had signed up to, or her responsibility to protect the interests of the class in doing so. These concerns were borne out in several ways, for example:

• in Professor Riefa’s written and oral evidence, she failed to accurately describe the effect of certain clauses in and amendments to the LFA (for example, her first witness statement incorrectly stated that the LFA provided that the funder would be paid after the class), and the CAT found her responses during cross-examination to be “hesitant and uncertain”;
• there was evidence of a general “lack of attention to detail”, in light of errors in the LFA and ATE policy that had been concluded; and
• it appeared that Professor Riefa was heavily reliant on her solicitors (who were acting on a conditional fee arrangement and who stood to benefit from some of the terms of the LFA) to advise on the appropriateness of the terms of the LFA. Notably, she did not, at least initially, seek any independent advice on the funding arrangements, and did not have a consultative group in place to assist her.

The CAT noted that its concerns were cumulative; it was not that a single issue would have precluded certification, but taken together they cast material doubts as to whether the PCR could be deemed to satisfy the authorisation condition.

The CAT’s conclusion: the PCR was not suitable to act on behalf the class

Overall, the CAT found that Professor Riefa did not demonstrate that she had a sufficient understanding of the consequences of the terms of the LFA to properly consider whether they were in the interests of the class or not. She therefore did not satisfy the authorisation condition, and the proceedings could not be certified.

The CAT noted that while it is expected that a PCR will need to rely “to a considerable extent” on its solicitors, who may be acting under a CFA, and that third party funding is inevitable, a PCR must demonstrate “a clear view of the interests of the class and can engage robustly and independently with advice received”. This would, at the very least, require a solid understanding of (i) the effect of proposed funding terms, and (ii) the overall context in which the PCR is being advised, including the position of its legal advisors, and the risks of any resulting conflicts.

The CAT went on to state that there was nothing wrong per se with PCRs being appointed after funders had been selected for proceedings (which, while at odds with the notion that the PCR is driving the claim, is common in these types of action and indeed is what happened in Riefa). However, it highlighted that the process of identifying suitable PCRs is an important one, as this case makes clear. The judgment stresses that the CAT is not looking to impose any specific conditions on the types of PCR or manner in which funding agreements should be negotiated, nor is it suggesting that a “continual procurement exercise” is necessary with regards to funding. Ultimately, each case will turn on its facts, and the burden is on the PCR to demonstrate that they have paid sufficient regard to the interests of the class which they seek to represent in bringing the proceedings.

Looking forwards: a one-off or a sign of things to come?

Against the backdrop of certification approvals that have so far come thick and fast from the CAT, this is a landmark judgment for the collective proceedings regime and will no doubt be welcome news to prospective defendants (as will the judgment on the merits handed down in BT v Le Patourel at the end of last year – see our update on that here). However, time will tell whether this judgment represents a change in approach at the CAT, and we will likely need to wait until the CAT’s new President is appointed and settled before the answer to that becomes clear.

For now, it’s unlikely that claimant firms or funders will be deterred from bringing claims altogether, although they will no doubt be mindful to take steps to prevent a similar fact pattern from arising. Prospective defendants will continue to carefully scrutinise funding arrangements and raise issues with the CAT, and we expect to see more applications for cross-examination of PCRs in future.