In December the Court of Appeal issued its third key appeal judgment of 2023 on the developing competition class action regime. The judgment related to a challenge to a case management ruling of the Competition Appeal Tribunal ("CAT") in the context of follow-on collective proceedings seeking damages from major shipping companies on behalf of purchasers of motor vehicles. The judgment is of wider significance beyond those particular proceedings for two important reasons:
- The Court of Appeal held that the appropriate procedural route to challenge the CAT's ruling was by way of an appeal to the Court of Appeal, rather than by way of a claim for judicial review (which had been sought by the parties). Following a detailed review of recent case law on the scope of the statutory right to appeal in purported competition class actions the Court of Appeal set out some clear ground rules on this important aspect of the developing regime, emphasising the desirability of challenges coming directly to the Court of Appeal by way of appeal from the CAT. It held that the statutory requirement for the decision to be appealable to be "as to the award of damages" should be interpreted broadly, so as to encompass decisions on any issue capable of having "some causal effect" on the award of damages that could ultimately affect quantum. It considered that, as a general rule, interlocutory case management decisions can be presumed to meet this requirement and so are subject to the appeal route.
- The Court of Appeal held that there is nothing in the CAT Rules, either express or implied, which prohibits defendants from communicating directly with class members in relation to collective proceedings without permission from the CAT (overturning the CAT's ruling on this issue). The judgment highlights the potential impact any such general prohibition would have on commercial and business-as-usual operations for defendant companies when communicating with class members on matters touching on issues relevant to the claim. However, the Court of Appeal considered that it would be open to the CAT to impose this type of prohibition on case management grounds in an appropriate case.
We expand on each of these aspects of the Court of Appeal's judgment further below.
Background
The CAT ruling challenged before the Court of Appeal was made in the context of a follow-on damages claim brought by Mark McLaren Class Representative Limited as the Class Representative in collective proceedings seeking damages from major shipping companies alleged to have been involved in a cartel which affected the price of deep-sea carriage of certain motor vehicles (the "Shipping Companies"). The claim is based on an earlier infringement decision of the European Commission issued in February 2018. The Class Representative alleges that customers, including both individual consumers and business purchasers, who purchased or financed motor vehicles between 2006-2012, paid an increased delivery charge because car manufacturers overpaid the Shipping Companies to transport new vehicles from their factories to the UK and Europe. The total claim value is estimated to be between £57- £115 million before interest. The claim was certified by the CAT to proceed on an "opt-out" basis for those domiciled in the UK and on an "opt-in" basis for those domiciled outside of the UK by a judgment dated 18 February 2022, and a collective proceedings order ("CPO") was subsequently made on 20 May 2022.
The CPO set a deadline of 12 August 2022 for class members to decide whether to opt-out or opt-in (as applicable). In July 2022, solicitors acting on behalf of certain defendant Shipping Companies wrote to a number of class members (all large business purchasers) concerning their participation in the proceedings. The letters drew attention to the opt-out date and indicated that the Shipping Companies intended to seek disclosure, which, if ordered, might involve substantial work and expense. The potential for seeking disclosure from these companies was a point which had arisen during the certification hearing and was referred to in the CAT's judgment as a possibility.
The Class Representative sought an order from the CAT restraining further communications with class members and seeking disclosure of any other communications. It argued that:
- all communications directly between defendants and class members were prohibited by a rule which was to be implied into the CAT Rules; or
- alternatively, that the Shipping Companies' conduct in writing the letters crossed the line of what was acceptable and the CAT should exercise its discretion to make the order sought pursuant to its case management powers.
The CAT agreed with the Class Representative's primary argument as to the existence of an implied prohibition in the CAT Rules, which it considered "arose inevitably out of the wording of the Rules and is consistent with, even necessary to, the essential purposes and structure of the collective proceedings regime." In considering the CAT Rules overall, the CAT's view was that the restriction could apply prior to the making of the CPO, as well as afterwards. The CAT's permission was required for the defendants to communicate with class members, and those communications would be subject to the CAT's scrutiny. The CAT made a ruling on 18 November 2022 and a subsequent order, which imposed a restriction on all communications from the defendant Shipping Companies with class members concerning the collective proceedings (the "Restriction"). The Shipping Companies challenged the CAT's decision.
The Court of Appeal judgment: judicial review vs appeal
The parties were both of the view that the appropriate course to challenge the CAT's decision was a claim for judicial review. However, Lord Justice Popplewell (with whom Mr Justice Butcher agreed) disagreed that this was the correct route. Following a detailed consideration of recent case law on this point – including Paccar v Road Haulage Association and Evans v Barclays – he concluded that the challenge should in fact be heard as an appeal to the Court of Appeal (which was possible in the hearing due to the judges sitting as both a Divisional Court and a constitution of the Court of Appeal).
Section 49(1A)(a) of the Competition Act 1998 provides a right of appeal from a decision of the CAT in collective proceedings where the decision is "(a) as to the award of damages or other sum (other than a decision on costs or expenses), or (b) as to the grant of an injunction."
In Paccar and a number of earlier cases, the Court of Appeal had approached the requirement that the challenged decision be one "as to the award of damages" as meaning that the decision under challenge needs to have the potential to be an "end of the road decision" as to the award of damages. However, in Evans v Barclays there was a subsequent substantial shift towards a wider interpretation of the "as to" damages test, requiring only that there is "'some' (sufficient) causal link between the decision and damages". Whilst disagreeing with certain aspects of the way in which the Court of Appeal's conclusions in Evans v Barclays were reached, Lord Justice Popplewell agreed in the present case that the expression "as to" damages should be given "as wide a construction as possible because of the desirability of challenges coming directly to the Court of Appeal by way of appeal from the experienced specialist CAT, rather than by an application to the Administrative Court."
The judgment sets out some important ground rules on this important aspect of the developing competition class actions regime, confirming that the appeal route is not confined to "end of the road" and "potential end of the road decisions." Rather, it extends to challenging decisions of the CAT on any issue capable of having "some causal effect" on the quantum of damages (in the sense of there being a real and material risk of it having such an effect).
The Court of Appeal concluded that as a general rule, interlocutory case management decisions – such as decisions concerning the extent of disclosure of documents, or of admissible evidence – can be presumed to meet the requirement that they may affect the final substantive outcome in terms of the level of damages awarded, and so should be challenged by way of appeal to the Court of Appeal, rather than by way of a claim for judicial review.
The Court of Appeal acknowledged that there will be some decisions where the causative link to the quantum of damages will be too remote or non-existent, and the appeal route of challenge will therefore not be available (citing Paccar as an example of this, where it considered that the CAT's substantive decision that the litigation funding arrangements in that case were not unenforceable damages based agreements would have no causative effect on the recovery of damages, due to the availability of alternative sources of funding in any event).
However, it seems clear from the judgment that the appeal route will now be considered the appropriate route of challenge in the majority of cases. In the particular case at issue, the Court of Appeal concluded that the CAT's ruling on communications by defendants was a decision "as to" damages which could be challenged by way of appeal.
The Court of Appeal judgment: communications between defendants and class members
The appeal challenged the CAT's ruling (agreeing with the Class Representative) that all relevant communications directly between defendants and class members were prohibited by a rule which was to be implied into the CAT Rules.
The Court of Appeal disagreed with this conclusion, emphasising that as a matter of statutory construction, a prohibition can only be implied as a matter of necessity, not merely because it is reasonable or desirable. It considered that there is nothing in the express words of any of the CAT Rules which gives rise to a necessary implication of the Restriction, noting that "if [the Restriction] had been intended, it would have been easy enough to say so".
Indeed, the Court of Appeal considered that the wording of Rule 94(2) of the CAT Rules actually indicated that no general prohibition was intended. That rule states: "Any offer to settle by a defendant in the collective proceedings shall be made to the class representative". This was held to be inconsistent with the implication of the Restriction: if a general prohibition on all communication existed, Rule 94(2) would be redundant.
The Court of Appeal also noted that there is no general rule in civil litigation preventing a defendant from communicating directly with a claimant about a case. It referred to other group litigation regimes in the UK, such as the Group Litigation Order (GLO) framework, and observed that those regimes did not impose an equivalent of the Restriction. The Court of Appeal described the availability of opt-out proceedings and the availability of aggregate damages as two distinguishing features of the CAT CPO regime. However, neither of these features meant that the Restriction was required. The Court of Appeal also considered the Canadian group litigation regime on which the UK competition class actions regime is based. Whilst the CAT had treated the Canadian jurisprudence as "of no assistance", the Court of Appeal recognised its "persuasive value as to statutory construction". The Court of Appeal referred to examples in Canadian case law that the Canadian regime did "not expressly or impliedly contain a blanket prohibition on communications between defendants and members of the class, and that any restriction on such communication has to be justified on a fact-sensitive basis".
The Court of Appeal also placed particular weight on the practical consequences of implying a general prohibition into the CAT Rules. It disagreed with the CAT's conclusion that an implied general rule means that communications should take place only between the defendants and the class representative, rather than class members, even prior to the making of a CPO. It noted that this could limit the ability of class members to communicate with defendants who may be in agreement that a proposed class representative is unsuitable. Similar considerations were held to apply after the making of a CPO, where for example defendants and class members may be in agreement that an application should be made to remove or substitute an appointed class representative who no longer met the suitability requirements.
If permission were required from the CAT for communications between defendants and class members as to the litigation, the Court of Appeal recognised that the increased scrutiny from the CAT could have adverse consequences for the conduct of litigation. In this particular case, the Shipping Companies had to disclose to the Class Representative the detail of their communications to class members seeking disclosure of relevant evidence. The Court of Appeal stated that "Tribunal scrutiny of such an approach is an invasion of litigation privilege because it forces the defendants to disclose to their opponents details of their pursuit of evidence for the purposes of defending the claim". It observed that this could cause unfair consequences for defendants if they must choose between waiving privilege or legitimately seeking evidence.
The Court of Appeal also recognised that the Restriction could have potential consequences on the ability of the defendants to communicate with potential experts or legal representatives who happened to form part of the class. This could have the overall effect of interfering with the fair conduct of their defence. It also highlighted that the Restriction may interfere with the ability of defendants to act in the normal course of business, for example where usual communications with class members happen to overlap with the subject matter of the proceedings. Implying the Restriction into the CAT Rules could therefore compromise a defendant's commercial confidentiality or impede its business development.
The Court of Appeal therefore rejected the argument that a general prohibition on communications between defendants and class members should be implied into the CAT Rules. It also rejected the Class Representative's alternative argument that the CAT had imposed the Restriction in exercise of its case management powers, and, on the basis of the material before it, declined to uphold the order on the basis that the CAT should have made it under its case management powers. However, the Court of Appeal did leave it open to the Class Representative to invite the CAT to make an order on a case management basis in light of the decision on the correct interpretation of the CAT Rules.
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