High Court rejects Representative Action Class Action against British Airways and easyJet

Introduction 

The High Court has rejected a “Representative Action” claim brought against British Airways and easyJet, which was seeking an estimated £319 million against easyJet alone on behalf of persons entitled to compensation for cancelled or delayed flights.  This decision, of Smyth v BA and easyJet [2024] EWHC 2173 (KB), is the latest judgment in the important area of developing law: the Representative Action procedure under CPR 19.8.

The High Court rejected the claim both on discretionary grounds, where it expressed scepticism of the motives of the funder and the claimants’ representative, and because the claim did not meet the “same interest” test set out in CPR 19.8.  An important feature was that both airlines had portals which allowed class members to seek compensation direct without having any sum deducted, whereas this claim sought to deduct 24% of all recoveries which, for claims against just one of the two airlines, would have netted an estimated £70 million.

Background

Representative Actions

A Representative Action can be used to determine issues on a class-wide basis.  There are two requirements for the court to permit the use of this procedure: first, the representative and class members must have the “same interest”; second, the court must exercise its discretion in favour of allowing the claim to proceed as a Representative Action.

Like the Collective Proceedings Order mechanism introduced in 2015 for claims in the Competition Appeal Tribunal, Representative Actions can be brought on an “opt-out” basis – which enables class members to be aggregated without electing to join the claim.  This is an immensely powerful tool, which facilitates claims worth £ hundreds of millions or even billions which would simply not be brought on that scale should class members have to choose to join a claim (under an opt-in mechanism).  The Collective Proceedings Order mechanism is only available for competition claims, whereas the Representative Action is available for all causes of action.  Recent development of this mechanism has focussed on the distinction between, on the one hand, Representative Actions that will determine liability with claimants subsequently opting-in to a further stage to seek damages (the so-called “bifurcated approach”) and, on the other, Representative Actions that are framed to seek a class wide award of damages on an opt-out basis.  The Smyth v BA and easyJet claim sought the latter.

The Regulation

Article 7(1) of EU Regulation 261/2004 provides the right for air passengers to claim compensation in certain circumstances of a delayed or cancelled flight.  The Regulation sets out a tariff-based system for the level of compensation.  This is not a strict liability regime where delay or cancellation automatically entitles passengers to compensation.  For example, no compensation is payable if the delay or cancellation is caused by “extraordinary circumstances”.  Furthermore, airlines are not required to automatically issue compensation under the Regulation: rather, passengers must proactively apply.

The claim was rejected

Master Davison rejected the claim both on discretionary grounds and because it did not meet the “same interest” test.

Discretionary grounds

Master Davison identified a number of factors that militated against exercising the court exercising its discretion to permit the claim to continue.  Those factors included:

1. The relationship between the proposed representative of the claimants, Ms Smyth, and the funder, Mr Armour. Ms Smyth was an employee of Mr Armour, and the court found that he was “the person who was really running the litigation.”
    
2. The proposed representative had not, the court determined, been transparent about her funding arrangements and motivations.  As to her motives, the court ruled “I do not accept that her motivation lies in a desire to secure redress from consumers”.
    
3. Ms Smyth had secured an order on an ex parte basis that she would be entitled to 24% of any compensation recovered by the represented class. On of the airline defendants estimated that if the aggregate damages against that airline were (hypothetically) £319 million, this figure would equate to approximately £70 million for that defendant alone.  However, members of the class were able to claim direct – and at no cost through claims systems maintained by the airlines, failing which – for a small court fee – through the Small Claims process of the Country Court, which has special procedures for these kinds of claims.
    
4. The court was not persuaded that this action assisted with access to justice given that the airlines’ compensation scheme was easily accessed and free to use, and the qualities of the County Court alternative route which was available.

Exercising its discretion against permitting the claim to proceed, Master Davison concluded, “I would not allow the claim to go forward as a representative action because the dominant motive for it lies in the financial interest of its backers, principally Mr Armour, and not in the interests of consumers.”

The same interest test

The court observed that Lloyd v Google had “relaxed the “same interest” requirement” and that the Supreme Court had stressed the need for a distinction between cases where there are conflicting interests between class members and cases where there are “merely divergent interests”.  Whilst the court accepted that there is a distinction between divergent interests and a conflict of interests, Master Davison observed that as “a question of fact and degree… there is a point at which interests diverge so widely that the class members cannot be said to have the “same interest”. This case trespasses a long way beyond that point…”.

The proposed representative defined the class as persons who had presented themselves for check-in for any of the flights listed on a schedule appended to a witness statement, save for persons on an what was defined as an Excluded Journey. Excluded Journeys included those where the passenger was travelling free of charge. Importantly – the proposed claimant representative did not intend that the claim would proceed on behalf of all of the class members, rather that the class would as it proceeded be reduced in a series of steps which Master Davison likened to a “game of Russian dolls”. Those steps included pushing the burden of analysis onto the defendants, requiring them to review the schedule of flights and identify delayed flights and if they intended to raise an “extraordinary circumstance” defence for any such passengers, and whether a claim had already been made via their portal, among other matters.  Information from the defendants would then be used to divide the class into cohorts. Those “where there was uncontroversially a defence” would be abandoned. By the end of this process there would be a residual class “in respect of which the defendants have no defence”.

Master Davison said that the “same interest” assessment “is made at the outset of the claim” and, citing Emerald Supplies Ltd v British Airways Plc [2010] EWCA Civ 1284, “at all stage of the proceedings”.  The proposed representative’s approach to refining the class composition by removing cohorts demonstrated that the class members did not have the same interest. Master Davison opined “To accept that successive amendments to the class will be required is to admit that at the outset the claim is not properly constituted as a representative action.”

Master Davison also ruled that the fact that there were no defences in law to the final rump class meant that this cohort did not share the same interest. Rather, it “would be just a collection of represented parties with undisputed or indisputable claims.  It would be a class that was empty of actual issues.” 

The defendants also questioned the suitability of the representative receiving “money which is not hers and to make deductions from that money”, i.e., the proposal that damages or settlement sums due to class members being paid to the representative and her deducting 24%. Master Davison observed that it might have been better if this part of the claim had not been addressed ex parte and in isolation in another division of the court, but rather “in the broader context of the applications before me”. 

Comment

Although this claim was rejected in part for failing to meet the “same interest” test, on the discretionary element it is unusually critical of the motivations of the proposed representative.  Master Davison raised questions on the suitability of the representative’s payment being determined in isolation and in a separate hearing. This is a sensible conclusion; there are unanswered questions on how payments to the representative and funders should be managed in CPR 19.8 actions, and those issues should be addressed transparently and in the broader context of the claim. 

The court was unpersuaded that this claim would improve access to justice for class members. This was particularly so given that the defendants had a navigable compensation system that was cost and risk free to users. Quite correctly, the court did not simplistically conclude that members of a class will necessarily benefit from litigation brought in their name.