Chugging along: The Court of Appeal continues to endorse a low bar for certification in collective actions

The Court of Appeal has confirmed in the “Boundary Fares” cases that the Competition Appeal Tribunal’s (CAT) ability to award aggregate damages in collective proceedings impacts not only issues of quantum but also issues of liability (i.e. causation and proof of some loss). It also reinforced the low bar for the certification of collective proceedings set by the Supreme Court in Merricks v Mastercard.

Background 

The proposed class representative, Justin Gutmann, alleges that certain train operators abused their dominant positions by failing to ensure that customers were able to purchase, and were made sufficiently aware of the availability of, so-called "Boundary Fares" (a form of extension ticket enabling customers who hold a Transport for London (TfL) Travelcard and take a journey beyond the outer zone covered by their Travelcard just to purchase a fare covering the additional element of their full journey). On 19 October 2021, the CAT granted two applications for an opt-out Collective Proceedings Order (CPO) in these cases.

Permission was granted for the defendants to appeal the CAT’s judgment on a number of issues that were subsequently considered by the Court of Appeal. One of those issues was described as the “aggregation of liability” issue: whether section 47C(2) of the Competition Act 1998 permits issues relating to liability to be determined upon an aggregate, top-down basis or whether each class member must be assessed individually. The other issues related to the sufficiency of the class representative’s methodology, the CAT’s cost/benefit assessment in relation to the proceedings, and the CAT’s refusal to dismiss as unarguable certain parts of the claims.

Court of Appeal’s judgment

On the aggregation of liability issue, the Court of Appeal agreed with the CAT in ruling that section 47C(2) does permit the CAT to determine issues of liability (as well as quantum) on an aggregate, top-down basis.

In reaching this view, the Court of Appeal referred to a “substantial body of case law treating section 47C(2) as applying to liability as well as to quantum” including Merricks v Mastercard and Lloyd v Google. It also considered that if issues of liability needed to be determined on an individual basis then this would be contrary to the very raison d’etre of the collective action regime and practically would result in a trial in a case like Gutmann, where allowance would need to be made for each individual class member to prove their own loss, taking decades. It considered the appellants’ arguments that the Canadian class action system functioned well without a system of aggregate liability, impossible to objectively determine.

The appeals were also unsuccessful in relation to the other issues. On the related issue of the class representative’s expert methodology, the Court of Appeal acknowledged that the methodology proposed at certification is “necessarily provisional” as disclosure would not have taken place, that it is the “issues not answers” that the methodology must identify for certification purposes, and that the methodology would almost inevitably be amended and adjusted in the run up to trial.

Comment 

This case provides a clear statement that claimants that suffered no loss can be included in a CPO class definition, and a further example of another aspect of the regime being developed through case-law. The Court of Appeal did note that a class representative’s expert methodology “must, at some point, include a device for winnowing out no-loss members of the class”, but the Court is clear that it is “a defining feature of opt-out litigation the class representative does not have to engage with individual class members until the distribution stage”. This suggests that an opt-out class may well include individuals who ultimately do not receive compensation, but such individuals can be part of the action until distribution takes place. Alternatively, if it is difficult to identify the no-loss claimants, the Court of Appeal has suggested that there may be other methods of dealing with the risk of unfair overcompensation, such as reducing the overall aggregate damages pot by a sum that reflects the percentage of the class that suffered no loss. As with other aspects of this developing regime, how either of these mechanisms will work in practice remains to be seen.

See our previous article on the Gutmann CPO.