Court of Appeal allows secret commissions claim to proceed as a representative action
The Court of Appeal in Commission Recovery Ltd v Marks & Clerk LLP & Another [2024] EWCA Civ 9 has upheld a High Court’s decision permitting a secret commission claim to proceed as a representative action under CPR 19.8 in an important decision for the “opt out” collective action regime in England and Wales.
Representative actions
Rule 19.8 (formerly Rule 19.6) of the Civil Procedure Rules (CPR) allows one individual to represent other individuals with the “same interest” in a claim against a defendant with any judgment binding the other individuals who have the same interest even though they have not themselves brought claims. A representative action is therefore a form of “opt out” claim as compared with an “opt in” claim where each individual brings their own claim (which may be managed together with other claims for example under a Group Litigation Order).
It was generally considered that a representative action could not be brought if the remedy claimed included damages because each class member’s losses would likely be different. However, in Lloyd v Google [2021] UKSC 50, Lord Leggatt suggested a “bifurcated process” for claims for damages which would involve the representative action procedure being used to determine common issues (such as breach of duty) with individual issues (such as loss) being dealt with at a later date.
The facts
The case concerns claims against Marks & Clerk LLP (M&C) (a firm of patent and trademark attorneys) and Long Acre Renewals (a partnership associated with it) for allegedly referring clients to an external service provider in return for secret commissions.
The claimant is the assignee of a client of M&C’s, Bambach Saddle Seat (Europe) Ltd (Bambach Europe).
Although the sum that M&C received as a secret commission in relation to Bambach Europe was relatively small, it was estimated to have received secret commissions for thousands of clients worth many millions of pounds.
The High Court decision
The defendants attempted to strike out the claim, including on the basis that the claimant did not plead the facts and matters that would constitute a cause of action on the part of each class member. It also sought a direction that the claimant could not act as a representative because the “same interest” requirement was not met, or alternatively the court should refuse to exercise its discretion to allow the claimant to act in that capacity.
Mr Justice Robin Knowles dismissed the application because neither differences between claims (like whether class members knew about the payments), nor differences between amounts of commission received per client, prevented them from sharing a common ground of complaint – it was sufficient to show that each proposed class member had contracted with M&C using their standard terms of conditions.
The defendants appealed the decision.
The Court of Appeal decision
The Court of Appeal dismissed the appeals. Lord Justice Nugee, with whom Lord Justice Snowden and Sir Geoffrey Vos, Master of the Rolls, agreed, decided that there was a common issue in which all class members have the same interest – namely whether, subject to two potential defences (relating to disclosure and informed consent, and limitation) all that a client of M&C needs to prove in order to establish liability in bribery and/or breach of fiduciary duty is the fact that it contracted with M&C on its standard terms of business and the fact that commission was paid. In doing so he said there is nothing wrong in principle with resolving common issues on a representative basis even if they do not lead to a conclusion on liability.
Comment
This is the first appellate decision in relation to representative actions since Lloyd v Google.
It follows a recent decision of the High Court in Wirral Council v Indivior plc [2023] EWHC 3114 (Comm) in which the use of the representative action procedure to bring securities claims under sections 90 and 90A of the Financial Services and Markets Act 2000 was rejected.
The Commission Recovery decision will be welcomed by prospective claimants, particularly where, as in this case, individual claims themselves might be too low in value to pursue.
The Court of Appeal said that it is for the representative under CPR 19.8 to decide if the claim it advances is worth pursuing. Although the Court has a discretion to prevent its resources being wasted, save in clear cases it should be slow to prevent a claimant with an arguable case from taking it forward. The court noted that the claimant in this case had the benefit of advice from solicitors and counsel and the backing of a commercial funder.
It remains to be seen how this case will play out and the Court of Appeal did say there may be difficulties ahead for the claimant, but its decision to allow the claim to proceed is a positive one for the developing collective action regime.
