Have the "Litigation Leviathans" been tamed or unleashed? The Court of Appeal's judgments in Trucks and Forex

On 25 July 2023, the Court of Appeal handed down two seminal collective proceedings judgments in the Trucks and Forex proceedings:

• UK Trucks Claim Limited v Stellantis NV (formerly Fiat Chrylser Automobiles NV) & Others and Traton SE & Others v Road Haulage Association Limited [2023] EWCA Civ 875 (Trucks); and
• Mr Phillip Gwyn James Evans v Barclays Bank Plc & Ors and Michael O'Higgins FX Class Representative Limited v Barclays Bank PLC & Ors [2023] EWCA Civ 876 (Forex).

In the Forex judgment, Lord Justice Green noted that in the collective proceedings regime the CAT has the task of "bringing order and control to what otherwise risks the unleashing of litigation leviathans". A question to be debated in future cases will be whether the guidance from the Court of Appeal in these two cases helps or hinders that task.

Both cases involved appeals from certification judgments of the Competition Appeal Tribunal (CAT), both involved multiple Proposed Class Representatives (PCRs) seeking to take "carriage" of the same or similar claims and both were handed down by identically constituted Courts (the Chancellor of the High Court (Sir Julian Flaux), Green LJ, and Snowden LJ). The Court of Appeal judgments are likely to have a significant impact on the collective proceedings regime in a number of ways. In particular, the judgments assist in clarifying: (i) the test for determining whether collective proceedings should be certified on an opt-in or opt-out basis; (ii) the test for determining carriage and how the carriage process should be conducted; and (iii) how to resolve potential conflicts of interest within the class. The judgments also contain a number of other important statements (some of which are obiter) which may have implications for the collective proceedings regime.

By way of brief background on the appeals:

• In Trucks, which concerns follow-on claims from a European Commission finding of infringement relating to anti-competitive exchanges between truck manufacturers, the CAT had held at certification that the Road Haulage Association's (RHA) application for an opt-in Collective Proceedings Order (CPO) should be certified, and that, whilst UK Trucks Claim Limited's (UKTC) application for an opt-out CPO did meet the certification criteria, it would be preferable to only certify one claim and that the RHA's application was preferred. This judgment was appealed on several grounds by UKTC and two of the respondents to the RHA's application.
• In Forex, which concerns follow-on claims from a European Commission finding of infringement relating to anti-competitive exchanges between foreign exchange traders at certain banks, the CAT had held at certification that neither the application of Mr Phillip Evans (Evans) nor the application of Michael O'Higgins FX Class Representative Limited (O'Higgins) should be certified on an opt-out basis, but that it would be willing to certify an application on an opt-in basis. The CAT also held that, if it did have to certify one application, it would have preferred the Evans application. This judgment was appealed by both PCRs.

Jurisdiction to appeal / judicial review

In both Trucks and Forex, the Court of Appeal grappled with the question of whether the issues in dispute should be dealt with by way of appeal, or judicial review. This is because the scope to appeal decisions of the CAT under section 49(1A) of the Competition Act 1998 is unclear (it states that decisions "as to the award of damages" are appealable), and therefore the appellants in both proceedings had brought parallel appeals and judicial review applications, with the court sitting as both the Court of Appeal and a Divisional Court of the High Court.

The Court of Appeal held in both cases that the right of appeal should be construed broadly in order to minimise the scope of judicial review, partly for reasons of judicial efficiency and to avoid the unnecessary resource and cost of judicial review applications in future.

In both Trucks and Forex, the Court of Appeal therefore heard all of the issues as appeals, rather than as part of a judicial review application, including significantly hearing the carriage issue as an appeal (although in Trucks the Court of Appeal ultimately refused permission to appeal on the carriage issue). In Forex the Court of Appeal held that a choice as to "who" is best suited to advance a claim for damages is also 'as to' damages. The Court of Appeal noted that it wanted to avoid a result whereby the issue of the scope of claim went to an appeal but the pure carriage issue went to judicial review.

These judgments therefore provide further clarity on when CAT decisions should be challenged by way of appeal, rather than judicial review, and may serve to limit the practice of protective judicial review applications being issued in future.

Carriage

The carriage decision

In Forex, the CAT had initially held that it would have certified Evans over O'Higgins if it had to choose between the two PCRs on an opt-out basis. O'Higgins appealed this carriage decision. The Court of Appeal rejected this appeal, holding that as the CAT's choice was a quintessential multifactorial decision, the threshold for interfering with such a decision on carriage was commensurately high. The Court of Appeal could see no basis for doing so.

In particular, the Court of Appeal rejected the following arguments by O'Higgins:

• that the CAT should have favoured O'Higgins because it had a more broadly framed claim. The Court of Appeal said that there may be many good reasons why a better articulated and thought through claim would be narrower. If a broader claim meant a claim must be preferable, all class representatives would be incentivised to draft claims as widely as possible.
• that the CAT should have favoured O'Higgins because it had a more extensive funding package. The Court of Appeal agreed with the CAT that even if one PCR's funding package was superficially superior to the other's at the date of the certification stage, it might be artificial to take a snapshot evaluation at that stage and therefore it might be better to also consider the ability and preparedness of each PCR to increase its funding over time, and the resilience of that facility.
• that the CAT should have favoured O'Higgins because it was first to file. The Court of Appeal agreed with the CAT that this was a largely irrelevant factor, and if it were systematically accorded weight, it would risk encouraging premature and ill-thought through claims.

In Trucks, the CAT held that it preferred the RHA’s application over the application brought by UKTC. The CAT weighed up various factors relating to each application in reaching that conclusion. This was appealed by UKTC, however the Court of Appeal refused to grant permission to appeal on the issue, noting that the CAT had carried out a multifactorial assessment with which the Court of Appeal would not interfere unless an error of law was identified. The Court of Appeal concluded that there was no error of law as the conclusion reached by the CAT was a matter for its discretion and case management.

The carriage processes

While not an issue before it on appeal, the Court of Appeal also took the opportunity to opine in Forex on the procedural issue of when carriage should be determined. The Court of Appeal said that the timing of a carriage decision is a matter for the CAT; however, it could see that in some cases it might be suitable for carriage to be determined early, pre-certification (in contrast to the approach taken by the CAT in Forex where carriage was determined at the same time as certification).

In doing so, the Court of Appeal appears to be endorsing the approach adopted by the CAT recently in Pollack/Arthur (concerning two CPO applications brought against Google in respect of its 'ad tech' services) and Hunter/Hammond (concerning two CPO applications brought against Amazon in respect of its 'Featured Offer' selection process), where the CAT decided to determine carriage as a preliminary issue, in advance of certification, and listed separate carriage hearings accordingly.

The Court of Appeal also said that in such circumstances, there might be a degree of rough and readiness about the exercise, but if the CAT gave concise reasons for its carriage choice, it would be most unlikely that any appeal would succeed or even that the Court of Appeal would grant permission to appeal.

Considering Forex and Trucks together it appears clear that the Court of Appeal will defer to the CAT when it comes to issues of carriage unless there are exceptional circumstances. This suggests that there will be a higher burden for obtaining permission to appeal in future cases, and it is perhaps notable that in both of these cases permission to appeal had been granted by the CAT (in part in view of the novelty of certain of the issues raised), such that the Court of Appeal did not need to address the permission question except as regards some grounds in Trucks where permission was then not granted.

Opt-in / opt-out

In Forex, the CAT had held at first instance that opt-in proceedings were more appropriate than opt-out proceedings, considering two key factors: (1) the strength of the claims (i.e., the claims were weak – so weak in fact that the CAT said it could have struck the claims out, but declined to do so at that stage); and (2) practicability (i.e., that it was practicable for opt-in proceedings to be brought). In reaching this conclusion, that CAT had expressly acknowledged that the practical impact of its ruling would be that no proceedings took place, given the stance taken by the PCRs that funding would not be available for opt in proceedings.

The Court of Appeal confirmed that the CAT had the jurisdiction to choose between opt-in and opt-out in this manner even where both PCRs are only seeking opt-out, as was the case in Forex. However, the Court of Appeal held that the CAT had erred in its consideration and conclusion on both of these two key factors, and therefore that opt-out proceedings should have been certified.

Strength of the claims

On the strength of the claims factor, of particular note in Forex is the Court of Appeal's criticism that the CAT did not link its conclusion on the strength of the claims to why opt-in proceedings were preferable. The Court of Appeal noted that there is no predisposition for or against opt-in or opt-out and in most cases the merits will be a neutral factor. It is wrong to treat strength as a sliding scale with a weaker case going to opt-in and a stronger case to opt-out. The Court of Appeal also agreed with the appellants that the CAT erred by treating what was effectively a provisional determination on the merits (as it chose not to strike-out the claims) as determinative in the opt-in vs opt-out context.

Practicability

In relation to the practicability factor, the CAT in Forex had held that the class members were large and sophisticated entities that could afford to bring proceedings and that if they did not do so this was a deliberate decision on their part that they did not want to litigate (and therefore there was no access to justice deficit). The Court of Appeal disagreed with this interpretation of the PCRs' evidence. The Court of Appeal referenced the largely unchallenged evidence of the PCRs which explained the possibility that certain class members would be reluctant to litigate, and the costs of opting in to litigate. The Court of Appeal also noted that (according to the PCR's data) although the average claim value was c. £133k, the typical claim for most class members would be c.£16k, and that a large portion of the class would be SMEs.

The Court of Appeal emphasised that where there would be no proceedings save on opt-out terms, that is a powerful factor in favour of opt-out.

Finally, the Court of Appeal also noted that access to justice is not the only consideration in relation to this issue and two other relevant purposes of the regime were to facilitate rather than impede the vindication of rights, and to act as a deterrent to anti-competitive conduct, both of which pointed in favour of opt-out proceedings.

Application of the 'Microsoft test' and the role of pass-on

When assessing a PCR's proposed aggregate damages methodology, the CAT will apply the so called 'Microsoft test' (named for the Canadian case in which it was first formulated: Pro-Sys Consultants Ltd v Microsoft Corporation). The scope and application of this test has been commented on in a number of CAT and Court of Appeal judgments, in particular the Court of Appeal's judgments in Gutmann and McLaren.

In Trucks, the Chancellor of the High Court (Sir Julian Flaux) noted that the Microsoft test does not require a PCR to produce an expert methodology which addresses every conceivable issue or defence which the defendants say they will or may run. The Court of Appeal did note that it is for the CAT to decide what level of detail it requires from the experts in each case, and that the CAT has wide discretion in this regard.  The Court of Appeal then went on to note that it considers the Microsoft test to set a fairly low threshold under which the PCR does not need to anticipate and address every possible issue that may be raised as a defence in the proceedings.

The Court of Appeal also noted that, in deciding whether an expert methodology meets the Microsoft test, the CAT is an expert tribunal carrying out a multifactorial assessment, and it is not one with which the Court of Appeal should interfere unless the CAT was plainly wrong. This further demonstrates the margin of appreciability the Court of Appeal will afford the CAT at the certification stage.

Conflict of interest within a class

The key issue on appeal in Trucks was whether there is a conflict of interest in the RHA class in circumstances where their class definition covers both new truck purchasers and used truck purchasers. (This is because new truck purchasers would want to argue that they absorbed all of any overcharge, whereas used truck purchasers have to show that at least part of the overcharge on new trucks was passed on to them when they purchased used trucks.)

The CAT had held that there was the potential for a conflict of interest to arise in due course, however it had not yet arisen and if such a conflict did arise it could be dealt with through case management. The Court of Appeal disagreed, holding that an actual conflict of interest had already arisen. The Court of Appeal considered that this conflict of interest needs to be addressed at the outset of the proceedings.

The Court of Appeal considered that it was possible for the RHA to address the conflict of interest now by:

• having sub-classes within the CPO for new and used trucks purchasers;
• setting up a Chinese wall within the RHA with a separate team acting for each of the new truck purchasers and the used truck purchasers sub-classes;
• the RHA instructing separate solicitors, counsel and expert(s) for the new and used truck purchaser sub-classes;
• having separate funders for each of the new and used truck purchaser sub-classes; and
• setting out in the notice to be issued under Rule 81 of the CAT Rules the nature and extent of the conflict of interest within the class and how the RHA proposes to resolve the conflict, to obtain informed consent.

UKTC had argued that the only way the conflict of interest could be dealt with was by having separate class representatives for the new and used truck purchasers. The Court of Appeal considered this would be undesirable and the CAT had been right to reject it as a possible solution as it would create confusion and unnecessary expense. However, the Court of Appeal does appear to accept that it is easier for the RHA, as a corporate entity, to resolve the issue of the conflict of interest (by setting up a Chinese wall within the organisation) than it would be for an individual acting as PCR and so it remains to be seen whether it is possible for individual PCRs (or special purpose vehicles with a sole director) to resolve conflicts of interest within a class.

Admissibility and evidential value of other judgments / decisions

In Forex, the Court of Appeal considered the extent to which an ordinary European Commission decision (i.e., a lengthy and detailed decision which is the product of a full, contested investigation) which is not addressed to any of the parties to the case, could be admissible as evidence against the respondents who had settled with the Commission and therefore were subject only to a short-form settlement decision.

The CAT's certification judgment came prior to the Commission publishing the "Sterling Lads" ordinary decision (in in Case AT.40135-FOREX). That decision, addressed only to Credit Suisse (not a respondent in Forex), concerns a separate infringement to the "Three Way Banana Split" and "Essex Express" decisions which are the subject of the follow-on claims in Forex, but concerns similar conduct. Moreover, the Sterling Lads infringement also produced a settlement decision addressed to some, but not all, of the respondents in Forex (who unlike Credit Suisse did not contest the findings of the Commission). The Court of Appeal suggested that the additional detail in the Sterling Lads ordinary decision explains why and how the conduct in question in Forex caused benefit to the cartelists and harmed competitors and counterparties and that the CAT is entitled to have regard to this.

The respondent banks argued that the Sterling Lads ordinary decision was inadmissible, by virtue of the rule in Hollington v Hewthorn which was effectively adopted by the CAT (whilst not technically binding on it) in Consumers' Association v Qualcomm where the CAT concluded that a decision of the Korean competition authority could not be relied upon at trial as proof of the evaluative findings made by that foreign authority. However, the Court of Appeal disagreed with the respondent banks' position. It held that the Sterling Lads ordinary decision will be admissible before the CAT in the remitted Forex proceedings, with the evidential weight to be placed upon it being a matter for the CAT. According to the Court of Appeal, relevant factors suggesting it has probative value include the overlapping facts between Sterling Lads and Three Way Banana Split and Essex Express (the settlement decisions in each case following a very similar structure and concerning conduct of a similar nature), the fact that the Commission was a specialist fact finder and the standard of proof which it had to overcome before its findings could be made; and the factual relevance of points made in the Sterling Lads ordinary decision to issues in dispute in Forex.

The Court of Appeal's comments on this issue are obiter. It remains to be seen to what extent the CAT follows the approach suggested by the Court of Appeal in Forex, and indeed how the CAT approaches this issue in other cases. The status and weight afforded to foreign and/or non-binding judgments and decisions in collective proceedings is an issue that comes up frequently given the nature of collective proceedings where there are often parallel regulatory investigations or parallel litigation.

Depriving wrongdoers of unlawful gains

In Forex, Green LJ appeared to put forward a further policy objective behind the collective proceedings regime: the public interest in wrongdoers not retaining their unlawful gains.

He noted that, on this basis an account of profits or other gains-based remedy might be available in collective proceedings (i.e. in competition claims), stating “[f]or instance, in a case where there is evidence that defendants have gained from their unlawful conduct but it is difficult to determine to what extent this caused loss to the class, it might be possible for the Court to adapt less standard remedies for instance by ordering disgorgement of profits. One purpose behind the collective damages regime is the public interest in wrongdoers not retaining their unlawful gains. The use of an account of profits, or some equivalent remedy, is by no means unknown in tort claims.”

This obiter statement appears to be inconsistent with Court of Appeal authority on this issue, most notably Devenish v Sanofi-Aventis [2008] EWCA Civ 1086 which holds that an account of profits is not available for any non-proprietary tort (including in competition law claims).

Constitution of the Tribunal upon remittal

In Forex, the Court of Appeal rejected an argument advanced by O'Higgins that if/when the proceedings were remitted to the CAT, they should be to a differently constituted CAT, given the strong and adverse view formed by the majority on the merits. The Court of Appeal noted that the case was difficult and complex, and there was nothing to suggest the same CAT Panel would not act with complete objectivity upon remittal, noting also that the CAT itself had granted permission to appeal demonstrating its impartial and open-minded approach.

Approach to future certification hearings

In Trucks the Court of Appeal noted that the first instance certification hearing in both Trucks and Forex took place before the Court of Appeal had handed down its judgments in BT Group plc v Le Patourel [2022] EWCA Civ 593 and London & South Eastern Railway Limited v Gutmann [2022] EWCA Civ 1077. The Court of Appeal noted that the CAT judgments in Trucks and Forex are lengthy (at 112 and 255 pages respectively), which the Court of Appeal considered is in part due to the CAT not having the benefit of previous guidance from the Court of Appeal. The Court of Appeal expressed the hope that, in light of the guidance now provided the Court of Appeal in several cases, it will now be possible for the CAT to deal with certification at shorter hearings and in shorter judgments. The Court of Appeal noted that the CAT now has considerable experience in dealing with applications for CPOs, and appeals to the Court of Appeal should be limited to genuine issues of law as opposed to challenges to the broad discretion and case management powers of the CAT.

Conclusion

In conclusion, the two judgments demonstrate the Court of Appeal's deference to the CAT's wide discretion when it comes to certification, in particular as regards carriage disputes, and that the Court of Appeal will not interfere unless there is a clear error of law.

Moreover the Court of Appeal's judgment on the opt-in / opt-out issue in Forex also makes clear that while respondents can proactively raise an opt-in argument in future even where claimants bring opt-out claims, the circumstances in which that argument will succeed look increasingly limited, even if the prospective class is comprised of businesses (and particularly if the choice is between opt-out proceedings or no proceedings at all).

Meanwhile, the Court of Appeal's judgment in Trucks provides a blueprint for how and when to deal with conflicts of interest when a prospective class includes purchasers at different levels of the supply chain.

Lastly, both judgments provide further guidance for the CAT to assist it in considering certification, with a clear indication that the Court of Appeal considers the process can be done more efficiently, and it appears likely that the Court of Appeal will hear fewer appeals of CAT certification and carriage decisions moving forward.

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