Clifford Chance

On 10 and 11 December 2024, the Court of Appeal heard arguments in the case of Wirral Council v Indivior plc. The case considers whether Wirral Council, representing Merseyside Pension Fund, can bring a securities claim against Reckitt Benckiser Group plc as a representative claim under the Civil Procedure Rules (CPR) 19.8.

The hearing saw detailed submissions from both parties and many eagerly await the Court's decision which could provide guidance on the type of cases that should, or should not, be allowed to progress as a representative action.

Background

As detailed in our previous briefing, in December 2023, the High Court struck out a representative action brought by Wirral Council on an 'opt-in' basis against Indivior plc and Reckitt Benckiser Group plc under sections 90 and 90A FSMA 2000.

By way of reminder, a claim can be brought as a representative action under CPR 19.8 if the represented class members have the "same interest" in the proceedings and the Court, using its discretion, decides that the claim can proceed as such. The Courts have generally considered that a representative action is not appropriate for a claim which involves the assessment of individual damages but Lord Legatt opined in Lloyd v Google [2022] A.C. 1217 that, to overcome the issue of individualised assessment of damages, there may be advantages in adopting a bifurcated process whereby common issues of law or fact are decided through a representative claim, leaving any issues which require individual determination to be dealt with at a subsequent stage of the proceedings.

Following Lord Legatt's comments, Wirral Council adopted a bifurcated approach in their representative claim proposing an initial representative trial of "common issues" of liability and of the defendant's knowledge of or recklessness to the publication of misleading information, leaving issues not common to the parties such as standing, reliance, causation and limitation to be heard separately. Indivior plc and Reckitt Benckiser Group plc applied to strike out Wirral Council's representative action on the basis that the claim would prevent the Court from being able to exercise its case management powers and that there were general benefits to the participation of individuals in proceedings from the outset, including sharing the burden of litigation and mitigating the risk of fading memories.

Following a two-day hearing in the High Court, Mr Justice Michael Green concluded that (i) the proposed representative action in respect of Wirral's shareholder claims would have unfairly and unjustly ousted the Court's jurisdiction to manage the claims as it sees fit (including making decisions on whether and how to bifurcate the proceedings), and (ii) the claimants' bifurcated trial proposal was not a sufficient reason to justify a representative action. Mr Justice Green decided that the claims should instead proceed by way of multi-party proceedings (which were already on foot).

In June 2024, the Court of Appeal granted Wirral Council permission to appeal.

Key issues discussed in the Court of Appeal

The key issues discussed during the appeal hearing include:

1. Whether representative actions can be used in securities claims
   Wirral Council characterised the key question on this appeal as "whether an investor in listed shares can bring a claim under ss.90 and 90A of FSMA 2000 as a representative claim under CPR 19.8, within the bifurcated structure described by a unanimous Supreme Court in Lloyd v Google [2022] A.C. 1217".
   Reckitt Benckiser argued that the relevant question on this appeal is not whether an investor can bring a securities claim as a representative claim. Rather the question is whether Wirral Council specifically should be permitted to bring a claim under CPR 19.8 in this particular case.
2. Judicial discretion: representative actions and Lloyd v Google [2022] A.C. 1217
   The premise of Wirral Council's appeal was that Mr Justice Green misunderstood and misapplied Lloyd v Google. Wirral Council criticised Green J for minimising the significance of the Supreme Court's obiter observations on bifurcation and said he was wrong to proceed on the basis that a representative claim would only be appropriate where it provides access to justice that would not otherwise be available. It was Wirral Council's position that many of the considerations specifically included in the CPR's overriding objective are likely to militate in favour of allowing a claim, where practicable, to be continued as a representative action rather than leaving members of the class to pursue claims individually.
   Reckitt Benckiser argued, in a nutshell, that Mr Justice Green at first instance made a sound discretionary decision to strike out Wirral's representative proceedings. They submitted that whilst Lloyd v Google holds that it is in principle possible for representative proceedings to be pursued in relation to common issues with the individual issues bifurcated, it is clear that it is a matter for the Court's discretion whether to allow such representative proceedings to proceed and that Mr Justice Green was right to strike out Wirral Council's representative action. Reckitt Benckiser submitted that a claimant does not have an unfettered right to choose the manner in which its claim advances.
3. The Court's powers of case management
   Wirral Council criticised Mr Justice Green for referring to the fact that the representative procedure would "oust" the Court's usual case management powers. It was Wirral's position that although Lloyd v Google does not say anything about the case-management implications of bifurcated representative proceedings, Lord Leggatt must nevertheless be assumed to have considered this, and to have contemplated and endorsed the use of the representative procedure in a case like this.
   It was Reckitt Benckiser's position that Mr Justice Green's decision focused on ensuring that the Court could manage the case effectively and prevent the manipulation of proceedings by one claimant and its funder. Reckitt Benckiser maintained that the judge’s decision was consistent with the overriding objective of dealing with cases justly and at proportionate cost.
4. Access to justice for retail investors
   Wirral Council argued that if Mr Justice Green's decision was not overturned, it would deprive retail investors with legally "good" but financially modest claims from pursuing those claims because funders would not fund retail claims in a multi-party claim. Wirral Council underlined the absence of retail investors in multi-party proceedings under section 90A FSMA as evidence of the need for representative actions.
   Reckitt Benckiser submitted that Mr Justice Green had given careful consideration to the importance of access to justice however he had expressed concern about the access to justice issues raised by Wirral Council, noting that in this case the funders had decided that they would fund retail investors to be represented in the representative proceedings but would not fund those same retail investors to be parties to the multi-party proceedings. Reckitt Benckiser highlighted that Mr Justice Green noted that (a) there was no coherent explanation from the funders as to their approach in this case, and (b) the RBS Rights Issue litigation and the Lloyds/HBOS group litigation had each involved claims from thousands of retail investors.

Comments

Claimants and litigation funders will look to the judgment with interest to inform their strategy as to what types of claims the English Courts will permit to proceed as representative actions. We will provide a further update when the judgment is issued in the new year.