The High Court has struck out the representative element of a claim purportedly brought on behalf of large numbers of claimant individuals and communities seeking remediation for damages. In doing so, the court has emphasised the strict limits to the representative action procedure under CPR 19.6, which effectively acts as a ‘opt-out’ class action regime given that representative claimants can bring proceedings on behalf of a broader body of claimants who need not be joined or even identified: Jalla v Shell International Trading and Shipping Company Ltd [2020] EWHC 2211 (TCC).

Representative actions are clearly a potentially powerful tool in the class action armoury. However, for the representative action procedure to be deployed, it must be shown that the claimants have the “same interest”. To satisfy that requirement, it is not sufficient to point to some common issues of fact or law, such as the existence of a duty and a breach of that duty. It is also necessary to show that there is commonality in the claimants’ claims that any such breach caused them loss. If that cannot be shown, the representative action procedure is not the appropriate vehicle and instead claimants must use alternative procedures, such as a group litigation order (GLO) or an order to case manage actions on a consolidated basis. However, the disadvantage of this for claimants (and the promoters of these types of claim, such as litigation funders) is the need to identify and bring proceedings on behalf of each claimant (i.e. these are ‘opt-in’ procedures). This is commonly seen in the securities class actions context through a book-build process.

This decision is a comforting one for firms who may be exposed to the risk of class actions from a large number of claimant investors, such as securities class actions or mis-selling claims for financial products. The decision confirms that such claims will be unlikely to be capable of being brought as representative actions given that such claims invariably raise individual questions of reliance, causation and loss.

For a more detailed discussion of the decision, please see our litigation blog post.

Harry Edwards
Harry Edwards
Partner
+61 3 9288 1821