Mark McLaren v MOL & Others: CAT (provisionally) approves fourth CPO

The collective proceedings arise out of a 2018 decision by the European Commission which found that the Defendants had breached Article 101 TFEU by operating a cartel⁴ in relation to the provision of deep-sea carriage of new motor vehicles on various routes to and from the EEA. The Commission found that the infringement lasted from 18 October 2006 to 6 September 2012.

In February 2020, Mr McLaren incorporated a company (Mark McLaren Class Representative Limited) and issued follow-on proceedings against the Defendants, with the special claims vehicle (“SCV”) acting on behalf of UK-domiciled consumers and businesses who “Purchased or Financed, in the United Kingdom”, a “New Vehicle” or a “New Lease Vehicle”,⁵  except for certain “Excluded Brands”⁶ during the period 18 October 2006 to 6 September 2015 (the “Relevant Period”).⁷  Mr McLaren claims that class members paid unlawfully inflated delivery charges due to the cartel behaviour, which were passed-on down the supply chain, resulting in alleged (estimated) damages of £71 million to £143 million (including simple interest).

⁴Involving the coordination of prices and allocation of customers.
⁵“New Vehicles” are cars and light and medium weight commercial vehicles first registered in the name of the purchaser or a related party. “New Lease Vehicles” are such vehicles first registered in the name of a contract hire lessor.
⁶i.e., those brands not shipped intercontinentally into the EEA during the Relevant Period.
⁷The alleged infringement period therefore covers the period found by the European Commission in its decision, plus a three-year “run-off period” where prices are said to have continued to be affected by the cartel behaviour.

Authorisation

The CAT must be satisfied that it is “just and reasonable”⁸ for the proposed class representative (“PCR”) to act as such. The Defendants argued that this could not be satisfied as: (i) no service contract existed between Mr McLaren and his SCV such that class members were afforded insufficient protection in the event that he ceased to be a director, and (ii) the SCV meant that undue influence could be exerted on Mr McLaren by the funder, Woodsford Litigation Funding (“Woodsford”).⁹

The CAT rejected both arguments, giving short shrift to the notion that a service contract was required between Mr McLaren and a company solely owned by him, and of which he is the sole director. The CAT’s power to revoke or vary the CPO on the basis that the class representative no longer meets the eligibility criteria provided sufficient protection in the event Mr McLaren or his SCV ceased to exist.

In relation to Woodsford, the Defendants argued that a deed of adherence between Mr McLaren and Woodsford raised questions as to Mr McLaren’s ability to act fairly and adequately in the interests of the class, because Woodsford’s own interests might conflict with those of the class members. Again, the CAT rejected this, reasoning that the deed “does not permit Woodsford to interfere in the conduct of the litigation”.¹⁰  As such, the suitability criteria was met. The CAT’s approach gives interesting insight into its cognisance of the funding realities behind most collective proceedings claims, and its desire not to interfere unless genuine questions as to the promotion of the funders’ interests over the class members’ interests are said to arise.

Eligibility condition

The CAT considered whether the claims were: (i) brought on behalf of an identifiable class of persons; (ii) raised common issues; and (iii) were suitable to be brought in collective proceedings, such that the eligibility condition for granting a CPO could be satisfied.

The Respondents raised three key arguments against certification, namely:

(a) the proposed methodology for awarding damages did not match the class definition: it included a significant number of transactions that the PCR knew had no sustainable cause of action because no loss arose;

(b) pass-on could not be certified as a common issue because the methodology put forward by the PCR’s economic experts was premised on “extreme factual assertions”¹¹ and was incapable of dealing with any factual variations; and

(c) the absence of a workable methodology meant that the claims were not suitable to be brought as collective proceedings nor lead to an aggregate award of damages. To proceed would not result in a fair or efficient resolution of the issues, would not significantly advance the claims, and would involve costs outweighing the aggregate damages.

(i) Identifiable class of persons

In order for a CPO to proceed it must be brought on behalf of an identifiable class of persons such that it is “possible to determine in respect of any person whether that person is or is not a member of the class”.¹²

The Defendants contended that this was not the case because the effect of the PCR’s proposed methodology was to treat loss as arising only where a car has been acquired after both: (i) the first affected shipping contract was entered into by the original equipment manufacturer after 18 October 2006; and (ii) the national sales company having then increased its delivery charge. The Defendants argued that because the class definition relates to all acquisitions of vehicles of non-Excluded Brands during the Relevant Period, this would necessarily result in the inclusion of a number of transactions on behalf of class members for whom no loss arose (e.g. because the relevant service contract for a particular car manufacturer was after 18 October 2006).

The CAT dismissed these claims noting that at the pre-disclosure stage “the precise methodology can only be provisional” and that “further, and importantly, it would simply not be possible for the Applicant to narrow the class definition at this stage to exclude categories of persons as [the Defendants] says it should have done, and to do so in a way which would allow persons to determine whether they are or are not members of the class as the CAT Rules require”.¹³ The CAT held that the risk that the proposed methodology may result in certain members of the class being found to have suffered no quantifiable loss could be addressed in “communications to class members”¹⁴ who could be told that any award of damages would be subject to the outcome of the trial, as well as decisions about the method of distribution.

The CAT’s reasoning is a striking example of its pragmatism (following Merricks) in refusing to allow evidentiary issues, and particularly a lack of sales or other data, to defeat claims at the CPO stage.

(ii) Commonality

As to the need for collective claims to raise “common issues”, the central dispute was whether the question of pass-on could be certified as a common issue. The Defendants argued that it could not, on the basis that the methodology put forward by the PCR’s economic expert was insufficiently capable of determining whether class members had suffered loss. Interestingly, in determining the issue, the CAT emphasised that the question whether pass-on could be treated as a common issue is “fundamental to establishing liability to class members, as well as the quantum of any award”¹⁵ and that “if the issue of pass-on…could not be treated as a common issue, then the existence of other common issues would not be sufficient to justify certification”.¹⁶

Building on its findings in Gutmann v First MTR South Western Trains Limited¹⁷ the CAT went on to set out clear and detailed guidance as to the legal test to be applied in assessing damages methodologies at the CPO stage. In particular:

1. The appropriate test is the “Microsoft” test¹⁸ which requires an expert methodology to be “sufficiently credible or plausible to establish some basis in fact for the commonality requirement” and offer “a realistic prospect of establishing loss on a class-wide basis”. “The methodology cannot be purely theoretical or hypothetical, but must be grounded in the facts of the particular case in question”^19.
2. There is no bright line distinction between methodology and data. While the issue before the Supreme Court in Merricks was about the availability of data (and the methodology was not in dispute), it “does not follow that the guidance given by the Supreme Court is not of broader significance”²⁰ and forensic difficulties which would not prevent an individual claim proceeding should equally not operate to defeat a collective claim.
3. The use of an alternative methodology capable of being applied in practice should not be prevented simply because “a better one might be available in economic theory”. Rather, the CAT’s role at the certification stage is “to do the best it can with the evidence”.²¹
4. In determining whether a proposed methodology offers a “realistic prospect of assessing loss on a class-wide basis”²² the CAT need not satisfy itself that the methodology is bound to work or that it will work on the balance of probabilities, whatever the evidential challenges. The CAT is specifically not conducting “a mini trial”.²³
5. The object of the methodology is to establish loss on a class-wide basis. It is relevant to bear in mind that the power to award damages on an aggregate basis removes the need to assess loss individually, and it is also not fatal that some class members may ultimately not be proved to have suffered loss.

In light of the above, the CAT found that the PCR’s proposed methodology met the Microsoft test.

(iii) Suitability

A CPO may only be granted if claims are “suitable” to be brought in collective proceedings. The Defendants argued that issues as to the proposed methodology for awarding damages are relevant when assessing suitability. The CAT agreed, holding that if a proposed methodology is not workable, it is unlikely that a CPO would be an appropriate means to a fair and efficient resolution of the issues; it would have an impact on costs vs. benefits and the suitability of the proceedings for an aggregate damages award.

However, given that the CAT had already concluded that the PCR’s proposed methodology met the Microsoft test, these issues did not arise, and the “size and nature of the class, and the relatively low potential claim per vehicle, clearly weighed in favour of collective rather than individual proceedings”.²⁴

Strike out/summary judgment application

The Defendants sought strike out or summary judgment on the basis that the methodology proposed to demonstrate loss by class members was so flawed that it had no real prospect of success at trial. Despite (i) agreeing with the Defendants’ proposition that the question of certification (including consideration of the proposed methodology) is separate from the power to strike out or grant summary judgment, and (ii) recognising that a decision in respect of strike out/summary judgment necessitates consideration of the strength of the claims, the CAT’s decision does not contain much detail about its decision to dismiss the applications for strike out/summary judgment, relying instead on its conclusion that the proposed methodology was sufficiently plausible to meet the common issues requirement for eligibility (which does not require a merits assessment). This is the third CPO action in which the Defendants’ applications for strike out/summary judgment have been given short shrift, and puts defendants in a difficult position if suggesting that no real consideration of the merits is required beyond the assessment conducted for eligibility.

Opt-In or Opt-Out

While the CAT was ultimately not required to reach a final conclusion on the point, the case also contains interesting commentary on whether it is permissible for the CAT to conclude that proposed collective proceedings should be bifurcated between opt-in and opt-out proceedings. Mr McLaren challenged the Defendants’ argument that “Large Business Purchasers” should only be permitted to claim on an opt-in basis as misconceived, and not contemplated by the legislation or CAT Rules, which only envisage a choice between opt-in or opt-out for the collective proceedings as a whole. The CAT saw “real force”²⁵ in Mr McLaren’s submissions and considered that any potential for abuse (for example, by manipulation of a class whose claims are otherwise suitable to be certified on an opt-out basis to include additional claimants) could readily be addressed through the CAT’s more general powers to determine whether claims should or should not be certified at the CPO stage.

Deceased Persons

The description of the class in this case extended to any person or business who had acquired or leased a vehicle (other than excluded brands) during the Relevant Period. As such, it could, on its face, include both deceased individuals and dissolved corporate entities. Mr McLaren accepted he needed to amend the class to exclude dissolved entities but argued that claims vested in the estates of deceased persons should nevertheless be included.

The CAT reaffirmed the basic principle that proceedings in the name of a deceased person are a nullity, and indicated it makes no difference that acquisitions by deceased persons may have been taken into account in provisional calculations. On its face, the class definition did not extend to personal representatives of the deceased and as such, any amendment to the class definition was not simply clarificatory but amounted to the addition of new class members, the limitation period in relation to which had expired. Consequently, the CAT invited the claimant to apply to amend the class definition to exclude individuals who died before issue of the CPO application on 20 February 2020, but include the personal representatives of those who died thereafter.

The CAT further invited the claimant to submit a revised methodology to deal with the exclusion of losses attributed to deceased individuals, before it would grant a CPO, so that it could satisfy itself that a plausible methodology exists.

Compound interest

The Defendants argued that compound interest should not be certified as a common issue given disparities in the funding and external financing arrangements (including the proportion of the car (if any) which was financed, interest rates and capital repayment profiles) amongst the class members. The CAT was not persuaded that these issues should prevent certification of compound interest as a common issue but invited the parties to make brief submissions on this point before granting the CPO.

⁸Competition Act 1998, Section 47B(8)(b).
⁹Woodsford are providing funding of up to £14.85m, together with adverse cost cover of up to £15m.
¹⁰Mark McLaren Class Representative Limited v MOL (Europe Africa) Ltd [2022] CAT 10, para 50.
¹¹Mark McLaren Class Representative Limited v MOL (Europe Africa) Ltd [2022] CAT 10, para 95.
¹²CAT Rules 2015, Rule 79(2)(e).
¹³[2022] CAT 10, para 60.
¹⁴[2022] CAT 10, para 62.
¹⁵[2022] CAT 10, para 68.
¹⁶[2022] CAT 10, para 68.
¹⁷[2021] CAT 31.
¹⁸As established in Pro-Sys Consultants Ltd v Microsoft Corporation, [2013] SCC 57.
¹⁹Pro-Sys Consultants Ltd v Microsoft Corporation, 2013 SCC 57, para 118.
²⁰[2022] CAT 10, para 73.
²¹[2022] CAT 10, para 75.
²²[2020] UKSC 51, para 158
²³[2022] CAT 10, para 107.
²⁴[2022] CAT 10, para 144.
²⁵[2022] CAT 10, para 157.

A CPO will be granted, subject to the need to address the issues on deceased persons, dissolved companies and compound interest. The CAT’s willingness to allow the claimant to correct deficiencies in its methodology, and hear further submissions on certain issues, demonstrates that it is generally willing to go out of its way to facilitate the certification of claims which, on their face, might otherwise fail.

The judgment is striking in terms of demonstrating the CAT’s endorsement of a lower threshold for certification of CPOs following the Supreme Court’s judgment in Merricks. The CAT’s acknowledgement that when considering proposed methodologies for distributing damages, its role is to “to do the best it can with the evidence” is welcome news for claimants and funders who can be assured that evidential deficiencies, whether those affecting the nature and structure of a proposed methodology itself, or the data available to populate such methodology, will not operate to defeat a CPO if the CAT can see a workable way through.

This is also the first CPO judgment in which the CAT has considered the position of larger companies within an opt-out class, rejecting the Defendants’ arguments that such claimants should be split out and progressed on an ‘opt-in’ basis. While this is no doubt of interest to those awaiting judgment in the FX and Trucks claims, it appears that an important factor to the CAT was that these companies formed part of a larger class for which opt-in would not be appropriate. There is therefore still hope for the defendants to the FX action, where we would expect a large number of the class members to be in the “larger company” category.