Court of Appeal allows secret commissions claim to proceed as representative action on "opt out" basis

The Court of Appeal has upheld the High Court’s decision that a claim in respect of secret commissions can proceed as an “opt-out” representative action under CPR 19.8: Commission Recovery Ltd v Marks & Clerk LLP [2024] EWCA Civ 9. It seems, however, that the case may proceed on a more orthodox basis than the High Court’s decision (considered here) had appeared to suggest.

CPR 19.8 allows a claim to be brought by (or against) a party as representative of any other persons with the “same interest” in the claim on an “opt-out” basis, as there is no requirement to identify the represented parties or join them to the action but any judgment will be binding on them. Understanding the risks of this procedural mechanism is important for financial institutions, both as a natural target defendant for class actions, and where they have claims against a class of individuals (for example, see our blog post).

In the present case, there will be a “bifurcated” approach to the claim, of the sort envisaged by Lord Leggatt in the Supreme Court’s landmark decision in Lloyd v Google [2021] UKSC 50 (considered here), with common issues addressed at an initial trial and individual issues left to be determined at a later stage. The Court of Appeal decided that the only truly common issue in the present case, so as to justify the CPR 19.8 procedure, is whether the claimant is correct that class members will establish liability if they prove merely that they contracted with the defendant on standard terms and the defendant received relevant renewal commissions (subject to potential defences of disclosure/informed consent and limitation) – or whether, as the defendant contends, the scope and content of its duty depends on the particular circumstances of its retainer with each client.

This is a narrow issue, and even if the claimant succeeds in obtaining a declaration to that effect it will not amount to a decision on liability in any individual case. The Court of Appeal’s decision does not address a number of issues, including the obvious difficulty for funders looking to back cases of this type: a declaration on common issues will not in itself result in a pot of damages for the funder to share in, and there is no guarantee that class members will contract with that funder for the later stage of the case and therefore share their damages with them.

At first instance, the court suggested (somewhat tentatively) that there might be a way to allow a funder to be paid out of recoveries before distribution to class members, without the need for their consent, similar to the court’s jurisdiction to allow an insolvency practitioner to be paid out of assets recovered. The Court of Appeal does not comment directly on this point, but does say it is “not immediately obvious” how the claimant could obtain a money judgment on claims that do not belong to it (as they belong to each individual class member). That may be seen as an obvious distinction with the position of an insolvency practitioner recovering assets for an insolvent estate. We will have to wait and see how these issues play out, but the decision does not suggest a simple solution for claimants and funders seeking to run such claims.

For a more detailed analysis, please see our Litigation Notes blog post.

Note: In May 2024, the Supreme Court refused permission to appeal.