Representative proceedings: Court of Appeal upholds rejection of bifurcated approach in securities claims

In a decision that has significant implications for securities litigation in the UK, the Court of Appeal has dismissed Wirral Council's appeal in Wirral Council (As Administering Authority of Merseyside Pension Fund) v Indivior PLC [2025] EWCA Civ 40, upholding the High Court's decision to strike out the representative proceedings brought under CPR 19.8. This decision provides important clarification on the proper application of the representative action mechanism in securities claims and emphasises the importance of case management powers in multi-party litigation.

Background: Representative Proceedings in Context

Representative proceedings are a potentially powerful class action mechanism that operate on an "opt-out" basis and are available for all causes of action where more than one person has the same interest in a claim. This contrasts with the Collective Proceedings Order procedure introduced in 2015, which is also an "opt-out" mechanism but is only available for claimants alleging breach of competition law (albeit it is not necessary for the claimants to have the same interest, provided there are same, similar or related issues of fact or law).

Although the representative proceedings mechanism has existed in English procedural law for hundreds of years, it gained significant attention following the Supreme Court's landmark decision in Lloyd v Google [2021] UKSC 50. That case clarified the circumstances in which representative proceedings are suitable, though it was generally viewed as limiting the application of this mechanism for mass claims seeking monetary compensation where an individualised assessment of damages is required.

The Wirral v Indivior Case

As set out in our previous Law-Now on this case, the representative proceedings were brought by Wirral Council (as administrator of the Merseyside Pension Fund) on behalf of investors in Indivior PLC and Reckitt Benckiser Group PLC. The claim alleged liability under s.90A and Schedule 10A of the Financial Services and Markets Act 2000 (FSMA) for alleged misleading statements and dishonest omissions in the defendants' published information related to their opioid addiction drug 'Suboxone'.

The claimant sought to adopt a "bifurcated process" as envisaged in Lloyd v Google, whereby the representative proceedings would determine common issues relating to liability, leaving individual issues such as reliance, causation, and quantum to be determined subsequently. This approach had potential tactical advantages for the claimants: the defendants would bear the burden of defending common issues in the representative proceedings, while Wirral and other investors would incur minimal costs until after any declarations were made.

Justice Green exercised the court's discretion under CPR 19.8(2) to strike out the representative proceedings, finding that they would improperly circumvent the court's case management powers, characterising such an outcome as 'quite extraordinary'.

Court of Appeal Decision

The Court of Appeal, in a unanimous decision led by Sir Julian Flaux (Chancellor), upheld the High Court's ruling, confirming that the claims should proceed as ordinary multi-party proceedings rather than through the representative action mechanism.

The Chancellor emphasised that while the Supreme Court in Lloyd v Google had endorsed the potential use of bifurcated proceedings in certain circumstances, the court retains unfettered discretion under CPR 19.8 as to whether to allow representative proceedings to continue. This discretion must be exercised in accordance with the overriding objective to deal with cases justly and at proportionate cost.

Key aspects of the Court of Appeal's reasoning included:

1. Case Management Powers: The Court was particularly concerned that Wirral's proposed use of representative proceedings would circumvent normal case management powers. In securities claims under s.90A FSMA, courts invariably require progress on claimant-side issues (such as reliance) in parallel with defendant-side issues, even when bifurcating trials.
2. No Procedural Hierarchy: The Court rejected Wirral's argument that there exists a hierarchy of procedures where representative actions should be permitted absent structural deficiencies. Each case must be assessed on its merits, with courts weighing the advantages and disadvantages of available procedures.
3. Tactical Considerations: The Court was critical of Wirral's approach in the draft pleading for the multi-party proceedings, where it had declined to identify which category of reliance (direct reliance, indirect reliance, or price/market reliance) each investor's claim fell into, on the basis that such information was irrelevant to the representative proceedings.
4. Access to Justice: The Court dismissed Wirral's argument that retail investors with small claims would be unable to access justice without the representative mechanism. The Chancellor found this argument unpersuasive, concluding that the situation appeared to be engineered by the litigation funders and that nothing prevented retail investors from obtaining funding to join the multi-party proceedings.
5. Settlement Prospects: The Court was not persuaded by Wirral's arguments regarding settlement prospects, accepting the defendants' position that the representative action procedure would not necessarily enhance settlement prospects and might actually make settlement more difficult due to lack of information about individual claims.

Comparison with Other Bifurcated Representative Actions

This decision highlights the fact that courts will carefully scrutinise attempts to use the representative action mechanism based on the specific circumstances of each case. While representative proceedings have been permitted in other contexts, the Court of Appeal in this case was particularly concerned with preserving judicial case management powers in securities claims where individual issues such as reliance, causation, and quantum are central to liability.

Courts have occasionally allowed representative proceedings to determine common issues before addressing individual matters in other types of litigation where different considerations apply.  However, the divergent approaches taken by courts across various cases demonstrate that the appropriateness of representative actions depends heavily on whether the procedure enhances judicial efficiency without undermining the court's ability to effectively manage the specific litigation process at hand.

Impact on Securities Litigation

The Court of Appeal's decision has several significant implications:

1. Higher Threshold for Representative Actions: The ruling makes it substantially harder for claimants to use representative proceedings to bifurcate trials in a way that delays consideration of individual issues, particularly in fraud-based claims under FSMA where reliance is an essential element.
2. Emphasis on Case Management: The decision reinforces the importance of the court's inherent case management powers and signals that attempts to circumvent these powers through procedural mechanisms will not be tolerated.
3. Implications for Litigation Funding: The judgment may cause litigation funders to reconsider their approach to funding securities claims, as they will likely need to commit to financing both common issues and individual claimant issues from the outset of proceedings.
4. Multi-party Proceedings Remain Viable: The Court of Appeal emphasised that traditional multi-party proceedings with appropriate case management directions can effectively handle securities claims, potentially including bifurcation where appropriate.

Conclusion

The Wirral v Indivior decision represents a significant development in the evolving landscape of group litigation in the UK. While not closing the door entirely on the use of representative proceedings in securities claims, the judgment establishes important guardrails that will prevent tactical use of the mechanism in ways that undermine judicial case management.

For securities litigators, the decision underscores the need to consider carefully how group actions are structured and to be prepared to address individual claimant issues, such as reliance, causation, and quantum, alongside common issues from the outset of proceedings.

This judgment brings welcome clarity to an area of increasing importance in UK financial services litigation and will likely influence how future securities class actions are framed and pursued.