UK Lord Chancellor's consultation paper on proposed new procedures for Representative Claims

February 2001

At present, private law cases may only be brought by claimants who have personal rights to take action. In public law, however, anyone with a sufficient interest may apply for a judicial review and the courts have generally taken an increasingly liberal view as to what constitutes sufficient interest, permitting cases to be brought by Greenpeace and the Consumers' Association.

Existing or new mechanisms on access to justice

Various other procedural mechanisms and funding facilitate bringing multiple claims. Since 1 April 2000, the Legal Services Commission has power to fund a claim on the grounds that it has a wider public interest.(footnote 1) Existing rules allow one or more persons to bring proceedings on behalf of numerous other persons but only where they all have the same interest.(footnote 2) Also from April 2000, individual claims may be co-ordinated as a group action under a new rule within the revolutionary Civil Procedure Rules.(footnote 3) Regulations implementing Directive 98/27/EC will be made in early 2001 to permit public enforcement authorities and named private consumer bodies who meet objective criteria the power to seek injunctions in the United Kingdom to stop traders infringing the collective interests of consumers under 11 consumer protection directives. Further, Directive 2000/35/EC on combating late payment in commercial transactions allows organisations that are officially recognised as having a legitimate interest in representing small and medium-sized enterprises the right to take action before the courts or competent administrative bodies to prevent the continued use of grossly unfair terms.

The new proposal provides a new way for cases to be handled. Organisations would be able to bring proceedings on behalf of persons whose collective interests they support, and it would not be necessary for those acting in a representative capacity to have a direct interest in the proceedings.

The perceived problem

The Government believes that individuals are unable to make claims on their own behalf because of barriers to access to justice, such as financial constraints. It states that faulty goods and services are the most common legal problem experienced by the public and quotes 1,146,093 (or 19 percent of the total) inquiries to Citizens Advice Bureaux in 1998/99 and research showing that a large number of complaints are not resolved.(footnote 4) Organisations including the Consumers' Association, Scotch Whisky Association, Equal Opportunities Commission, Disability Rights Commission and the Committee for Racial Equality have indicated to the government that the introduction of representative claims would be useful.

The proposed mechanisms

The Consultation Paper defines Representative Claims as:

"Claims made by, or defended by, a representative or representative organisation on behalf of a group of individuals who may, or may not, be individually named in a situation where an individual would have a direct cause of action."

The main aspects of the proposal are:-

1. A person who wishes to act in a representative capacity would require permission from the court to issue proceedings, so as to act as a filter mechanism. The application should be in writing, and served on the defendant. If permission is refused, an application may be renewed orally by the applicant; if it is allowed, the defendant may apply for the decision to be reconsidered at an oral hearing. (It is possible that defendants who respond immediately on receipt of the initial notification may be able to apply to the court immediately for an oral hearing before permission is granted on the applicant's written application.)

• 2. In considering an application, the court should take into account:-
• pre-action behaviour, including compliance with a pre-action protocol to be drafted.
• identifying the group to be represented: it is proposed that representatives' claims could be made on behalf of a group whose individuals may or may not be named but where a situation exists in which an individual would have a direct cause of action. The Lord Chancellor is seeking views on whether the area of Representative Claims could be expanded in future to include making a claim on behalf of a group where an individual would have a direct cause of action but not necessarily against that defendant. It is proposed that where practicable the applicant should provide the court with the names of persons represented and demonstrate that they consent to being represented by the applicant. Alternatively, where they can be easily notified, individuals could be given the opportunity to opt out if they do not wish to be represented by the applicant, for example where a newsletter could be circulated to all members of a union. Where it is not possible to name the individuals, they should be identified as clearly as possible. Industry representatives consider that the possibility of bringing claims by unnamed individuals is likely to give rise to extensive difficulty and abuse.
• The applicant should satisfy the court that it is an appropriate body or person to represent the interests of the individuals concerned and that it has a sufficient interest in the matter, including by demonstrating an awareness of the issues involved.
• Applicants would be expected to assist the court to determine whether they are the best body or person to represent the interests of the individuals concerned by identifying other interested parties. The Lord Chancellor requests comments on whether the court's decision should be publicised.
• Applicants should have a duty to establish that the representative claim is an appropriate way to proceed and the range of claims and remedies available for representative claims on behalf of named individuals should be the same as if they had brought the claim themselves. For the present, it is not possible to distribute a monetary award to a wholly unidentified group of individuals, but the Lord Chancellor requests comments on whether this should be changed.
• Comments are requested on whether organisations should be able to apply to the judge for a determination at an early stage if the proceedings are in the public interest against government or a public limited company, then the case should be conducted on a no-costs basis, or on the basis that if the action fails, the body is not liable for costs.

The Government believes that no primary legislation is necessary in order to implement its proposals.

Comments on the proposals

In its draft Regulatory Impact Assessment, the Lord Chancellor admits that quantification and valuation of the benefits in question from this proposal would be very difficult. He says that it is hard to say how many representative claims would be made, but believes that the number would be small and that it is unlikely that businesses will be inundated with representative claims. However, he asserts that the payment of additional damages as the result of unlawful behaviour should not be seen as an undesirable regulatory burden, and accepts that increased insurance premiums will result as the potential pool of litigants will increase. The Consultation Paper states:

"Whilst the proposals discussed do not create any new causes of action, they do increase the potential pool of litigants. Against that, it should be cheaper to deal with a single representative claim than a larger number of individual claims. Legitimate businesses have nothing to fear from this incentive - its purpose is to widen access to justice for individuals by permitting their representatives to bring claims on their behalf, for example against businesses which breach existing legislation.

Access to justice may suffer if people cannot rely on representative claims to enforce their rights. Litigation is sometimes desirable and representative claims offer a more efficient means than individual litigation, reducing costs to both sides. Representative claims may lead to increased litigation, but proposed case management and filter mechanisms are designed to ensure litigation is proportionate and meritorious. It is unlikely that representatives would bring frivolous or vexatious claims and the proposed permission stage would prevent such claims from proceeding".

Industry believes that these proposals have signally failed to understand or take into account existing evidence on the causes of litigation in the UK and USA. It is widely known that representative claims brought through the US class action mechanism produce a large number of frivolous, unjustified or disproportionate claims which impose huge costs on industry. Similarly, insufficient scrutiny of the validity of individual claims was a major factor in permitting a predominant number of weak or hopeless claims to be brought as product liability group actions in England and Wales during the 1980s and 1990s, resulting in the waste of tens of millions of pounds in legal aid. Clearly, the filtering mechanism by the court will be of major importance. Industry does not consider that the current proposals provide an adequate filtering mechanism or criteria for the court to apply satisfactorily.

If you would like further information, please contact Christopher Hodges by e-mail at [email protected] or by telephone on +44 (0)20 7367 2738.

Footnotes

(footnote 1) Legal Services Commission, The Funding Code: A New Approach to Funding Civil Case (2000).

(footnote 2) Civil Procedure Rules, Part 19.V.

(footnote 3) Civil Procedure Rules, Rule 19.III.

(footnote 4) H Genn, Paths to Justice (Hart Publishing, 1999)