Civil Justice Council recommends expansion of collective action regime

On 5 August 2008, the Civil Justice Council (CJC), the advisory body responsible for co-ordinating the modernisation of the civil justice system, made 11 recommendations to the Lord Chancellor to expand the basis upon which collective actions can be brought. The recommendations fall well short of proposing US-style class actions, but would, if implemented, be likely to increase the risk of collective actions for large businesses. The timescale for any reform is likely to be years rather than months.

Currently, there are four mechanisms under which generic multi-party litigation can be managed: (i) test cases; (ii) consolidated proceedings and a single trial of multiple actions; (iii) Group Litigation Orders; and (iv) representative actions. The CJC believes that these mechanisms do not provide sufficient and effective access to justice where a number of individuals have collectively suffered similar losses. In the context of the global market and increased mass production of goods and performance of services, the CJC has proposed 11 reforms to supplement the existing mechanisms.

1. Introduction of collective actions: a generic collective action should be introduced, as well as individual and discrete collective action regimes in other specialist tribunals, such as the Competition Appeals Tribunal or the Employment Tribunal.
2. Suitable class representatives only: collective claims should be brought by individual litigants in the dispute, or proper representative bodies (such as trade unions or public interest bodies). Any representative bodies could be designated by the Lord Chancellor or the court provided they are capable of sufficiently, properly and fairly representing the interests of the representative class.
3. Opt-out claims, where appropriate: collective claims should be brought on an opt-in or opt-out basis depending on which mechanism the court assesses to be superior at the certification stage. Currently, multi-party litigation is generally conducted on an opt-in basis, which means individual claimants must elect to take part in the litigation. "Opt-out" presumes class membership: unless affected individuals elect not to take part in the action, they are automatically a member of the class. This allows claims to be made where there are potential but unidentified claimants. The court should certify whether the claim, or issues within the claim, should proceed on an opt-in or opt-out basis, having regard to the full range of procedural mechanisms available; the nature and type of the action; fairness to the parties; efficiency of disposal; and, the public interest. The CJC also recommends that the limitation period should be suspended when a party issues a claim seeking certification as an opt-out collective action (though the suspension should be lifted again where certification is refused or later withdrawn, or where members opt out or cease to be members of the class).
4. Mandatory court certification to make a collective claim: no collective claim should proceed without certification from the court. Any certification procedure should be rigorous and take into account matters including the overriding objective; the number of identifiable claimants; the merits of the case; the common issues; the prospects of achieving an acceptable level of recovery; and the most appropriate vehicle to resolve the issues (i.e. instead of a collective claim, a Group Litigation Order or having the matter dealt with by a specialist tribunal or regulatory body).
5. Ordinary rules of appeal: appeals from certification decisions should be governed by the rules for appeals from case management decisions. All other appeals should be subject to the normal appeal rules. Class members should be allowed to appeal final decisions.
6. Tailored and enhanced case management: collective claims should be subject to enhanced case management by specialist judges, similar to the complex cases pilot currently being run in the Commercial Court. Such case management would include alternative dispute resolution post-certification.
7. Aggregation of damages: the court should have power in claims made on an opt-out basis to aggregate damages (i.e. quantification and proof of loss occurs by reference to the class, rather than the individual claimant).
8. Settlements to be approved by the court: any settlement of collective claims should be subject to a "fairness hearing" by the court before it becomes binding to ensure the settlement is fair, just and reasonable. Any fairness hearing could take into account a number of factors, such as the circumstances of the case and objections to the settlement by the represented class. The court should also determine administrative matters regarding affected class members' claims for a share of the settlement, such as how absent claimants could be notified of the settlement and how they could opt-in to the settlement, what evidence would be required to claim a share of the settlement, the time window for claiming a share, and who would administer the settlement.
9. Costs payable by the unsuccessful party: collective claims should be subject to the usual rules as to costs, although parties could apply during the certification procedure for protective costs orders, costs budgets or a cap if the claim met public interest criteria.
10. Unclaimed settlement funds to be distributed: unallocated damages from an aggregate award should be distributed according to general trust law principles, and, where appropriate, distributions should be made to a foundation or a trust.
11. Implementation via legislation: collective claim reforms should be implemented through primary legislation (as opposed to modifying the Civil Procedure Rules and limited primary legislation where necessary) in order to allow proper consultation and legislative scrutiny and to produce a single, coherent regime.

In making these recommendations, the CJC took into account issues which it identified would be of concern to defendants, including unmeritorious claims (particularly those brought solely to extract a settlement) and encouraging a "compensation culture".