The High Court has rejected an attempt to bring a representative action under CPR 19.8 to obtain compensation for delayed or cancelled flights under EU Regulation 261/2004: Smyth v British Airways PLC [2024] EWHC 2173 (KB).
Regulation 261 allows passengers to claim compensation where a flight that falls within its scope is cancelled or delayed by more than three hours. There are various exceptions, including where the airline can show the delay or cancellation was caused by "extraordinary circumstances" which could not have been avoided by taking all reasonable measures.
CPR 19.8 allows a representative action to be brought on an opt-out basis on behalf of all those with the "same interest" in the claim. The Supreme Court's landmark decision in Lloyd v Google [2021] UKSC 50 (considered here) established that (subject to the court's discretion) claims can be brought using the procedure so long as there are issues that are common to the class and whose resolution would benefit the class. If there are also issues that will need to be determined on an individual basis, it may be possible to adopt a "bifurcated process", leaving these to be dealt with subsequently.
In the present case, however, the claimant had failed to identify any common issue. The claims raised various matters that required individualised assessment, including for example as to the “extraordinary circumstances” defence. The claimant proposed that the defendants should have the burden of reviewing each flight and identifying any defences it intended to raise, and the class could then be successively amended to leave only those passengers for whom there was no arguable defence. This proposal, the court said, essentially accepted that, at the outset, the claim was not properly constituted as a representative action, and there was no finding that would be equally beneficial to all. Even at the end of the process there would be no common issues; it would be just a collection of those with undisputed claims. The "same interest" requirement was therefore not met.
In any event, the court would have refused to allow the representative action to proceed, as a matter of discretion, considering that it was motivated by the financial interests of its backers and not the interests of consumers. The details of the funding arrangements had not been disclosed but the claimant had obtained an order from a separate division of the court, on a without notice basis, declaring that she would be entitled to deduct 24% of any compensation recovered on behalf of the class to pay her legal fees and litigation funder. This was disproportionate, particularly when class members could pursue claims for compensation cost-free on the defendant airlines' online portals.
The questions of whether the court can order defendants to pay damages to a representative claimant on behalf of class members, and whether sums can be deducted to pay funders and legal fees, are expected to be considered by the High Court in the Commission Recovery v Marks & Clerk case early next year (see our blog post here). The court in this case described as "problematic" the question of the representative claimant’s "authority to receive money which is not hers and to make deductions from that money", and noted that the jurisdiction under which the deductions had been approved (based on trust principles) was "of uncertain breadth and reach" and it was not obvious that it could be applied here – but the court did not comment further, given that the representative action was struck out on other grounds.
These questions have significant implications, as illustrated in this case. Although the compensation levels under Regulation 261 are modest, at between €250 and €600 (or GBP equivalents) depending on the distance of the flight, if this claim were allowed to proceed as a representative action in respect of the 116,000 flights in question, the court noted that the claims might have an overall value of around £319 million based on reasonable assumptions. On that basis, the potential deduction for legal and funding fees would have been over £75 million. It is therefore perhaps not surprising that claimant lawyers and funders are keen to test the boundaries of the representative action procedure.
Background
The claimant's scheduled BA flight from London Gatwick to Nice in June 2022 was cancelled a few days before departure, giving rise to a right to claim compensation under Regulation 261.
Instead of claiming through BA's online portal, which (in common with other airlines) allows passengers to submit claims free of charge, the claimant brought a High Court claim in January 2023 against both BA and easyJet, in which she purported to represent the passengers on approximately 116,000 delayed and cancelled flights operated by those airlines to UK airports over a six-year period (as listed in a schedule to the claim form). The claimant later sought to amend the claim form to add a second claimant, who had taken an easyJet flight, to represent the passengers on that airline's flights.
The claim was funded by the claimant's employer, but the exact funding arrangements were not disclosed. Although the claim was brought in the King's Bench Division, in May 2024 the claimant obtained, on a without notice basis, an order from Master Pester in the Chancery Division declaring that the claimant would be entitled to deduct “an aggregate sum equivalent to 24% of any compensation recovered by her on behalf of the Represented Persons”, in order to pay the funder and her legal representatives. The order was based on trust law principles permitting remuneration out of trust assets for work done in relation to those assets.
The defendants sought an order striking out the representative action or directing that the claimant may not act as a representative.
Decision
The High Court (Master Davison) struck out the action and directed that the claimant may not act as a representative.
The master noted that the Supreme Court in Lloyd v Google had relaxed the "same interest" requirement under CPR 19.8, finding that a distinction must be drawn between cases where class members' interests conflict and cases where they merely diverge, in that an issue arises in relation to some of the claims but not others. Lord Leggatt held that, so long as advancing the case of class members affected by the issue would not prejudice the position of others, there is no reason in principle why they should not all be represented by the same person.
In the present case, however, Master Davison held that the claimant and the represented parties did not share the same interest, and therefore the court had no jurisdiction to allow the claim to proceed as a representative action. Further, as a matter of discretion, he would not allow the claim to go forward as a representative action because it was motivated by the financial interests of its backers, and not the interests of consumers.
"Same interest" requirement
Master Davison explained that, although the represented class was defined by reference to the schedule of delayed and cancelled flights, the claimant did not in fact intend the claim to proceed on behalf of all individuals who fell within the class definition.
The claimant's position was that the defendants should be required to review the schedule and identify any defences it intended to raise in respect of each claim by each passenger on the 116,000 flights. Claims where there was uncontroversially a defence would be removed. If any defences raised issues of law that could be determined in a "practical and proportionate manner" then, on the claimant's case, "this would be desirable (but not essential)". Ultimately the class would be narrowed down to leave only those passengers for whom there was no arguable defence and, the claimant submitted, an order could be made for the defendants to pay the applicable compensation to the claimant to be distributed to the class (subject to the 24% deduction).
In the Master's judgment, the claims as formulated did not satisfy the same interest test. At the outset of the present case, it was clear that there were many different claims that would require individualised assessments, including for example as to the “extraordinary circumstances” defence which is fact-specific and would require detailed evidence for each affected flight. While Lord Leggatt had distinguished conflicting interests from interests which merely diverge, this is a question of fact and degree – or, as Master Davison said, "there is a point at which interests diverge so widely that the class members cannot be said to have the 'same interest'". In his judgment, this case trespassed a long way beyond that point.
Whether class members share the same interest is tested by asking whether there is a "common issue" whose resolution would benefit them all. In the present case, the claimant's formulation set out no common issue. It was merely a high-level description of the cause of action. The claimant's proposal to successively trim down the represented class by amendment could not solve that difficulty. Indeed, to accept that such amendments would be required was to admit that, at the outset, the claim was not properly constituted as a representative action, and that there was no finding that would be equally beneficial to all.
As established in various cases, including Jalla v Shell [2021] EWCA Civ 1389 (considered here), the analysis of the same interest requirement is undertaken by the court at the time of the application under CPR 19.8. It is not sufficient if the requirement is satisfied at the end of the case. The master acknowledged that in some cases the class of represented parties may fluctuate organically, but that did not mean the class could be successively redefined as a strategy to overcome basic defects in the action.
Master Davison rejected the claimant's submission that the proposed approach represented the modern, flexible use of CPR 19.8 endorsed by Sir Robin Knowles in Commission Recovery (considered here): "…what the claimant proposes would, in truth, be an entirely new remedy lying somewhere on the margins between a representative action, a mandatory injunction to the airlines to pay undisputed claims, and early (or even pre-action) disclosure". That went well beyond a flexible, purposive interpretation of CPR 19.8 and would instead amount to re-writing the rule.
The master noted that the claimant had not proposed to exclude claims which had arguable defences from the class at the outset, as that would fall foul of the rule (established in Emerald Supplies Ltd v British Airways Plc [2010] EWCA Civ 1284, considered here) that the class definition cannot depend on the outcome of the litigation. The master commented that this was a proper concession, and added that such a class would also be objectionable in that the represented parties could not meaningfully be said to share the “same interest”, as there would be no common issues (or any issues). It would be just a collection of those with undisputed claims.
The court's discretion
Master Davison said there had been, and continued to be, a lack of transparency as to the claimant's motivation, funding and suitability. On the material before the court, he did not accept that she was motivated by a desire for consumer redress, and she had not been forthcoming about her links with the funder and there was some inconsistency in statements made about her own lack of financial interest. There were also concerns about certain of the funder's past business dealings, which had led to an investigation by the New Zealand Financial Markets Authority, and the fact that the funder would be in a position to influence the claimant both because of his role in the litigation and his position as her employer.
The master noted that the details of the deductions approved by Master Pester had not been disclosed and so he (Master Davison) was not in a position to make any findings as to whether the funding arrangements were lawful. But his provisional view was that they were disproportionate, particularly when any of the represented parties could pursue their claims cost-free on the defendants' online portals. He rejected the claimant's justification that the class members in question would otherwise get nothing, as they would make no claim, in ignorance of their rights. Parliament had opted for a scheme which provides for passengers to be informed of their right to claim, but in which payment is not automatic. Passengers who wish to claim must be proactive.
In the present case, it was hard to see how allowing a representative action to proceed would promote access to justice, when class members had an alternative remedy which was easily accessed at no cost. It would also impose a significant costs burden on the defendants, who would be required to undertake an analysis of 116,000 flights going back six years, in circumstances where much of that work would be wasted and it would, in practical terms, amount to forcing the airlines to implement the automatic compensation scheme for which Parliament did not provide.
Master Davison noted that the defendants took various other points, the most problematic of which was the question of the claimant’s "authority to receive money which is not hers and to make deductions from that money". As the Court of Appeal had observed in Commission Recovery, it was not immediately obvious how a class representative could obtain a money judgment on claims that did not belong to it and had not been assigned to it. An alternative direction that the defendants make payments directly to the represented parties would place a considerable administrative burden on the airlines and was unlikely to commend itself to a court.
As to the deductions for the funder's fee and legal fees, Master Davison simply observed that the jurisdiction under which Master Pester gave his approval was "one of uncertain breadth and reach and it is not obvious that it can be applied to the present situation". Nor was it obvious that to remove only that aspect of the case to the Chancery Division was correct.
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