Balancing Justice and Profit: The Growth of Group Litigation within the UK
Group litigation in the UK refers to the procedure where multiple individuals with similar claims against the same Defendant (or group of Defendants) collectively pursue their action. There are significant benefits to pursuing a claim through this avenue and, most importantly, it allows individuals who have suffered similar harm or loss their opportunity to seek justice.
Group actions are governed by Part 19 of the Civil Procedure Rules (CPR), which stipulates a specific set of procedures for managing actions involving multiple parties. The primary purpose of the rules is to ensure efficiency and structure in what can, at its most extreme, be complex litigation involving thousands of individuals and billions of pounds of potential damages and costs that can span several years.
In the current financial climate, access to justice is becoming an ever-increasing problem, however, one key component of group litigation is that it goes some way to allowing individuals with limited resources the same opportunity as those with more financial clout. This is because, subject to the funding arrangements and agreements in place, the group of individuals can pool their resources together and share the litigation costs between them, therefore, in theory, making litigation more accessible.
An unfortunate reality is that large corporations, usually Defendants in these proceedings, tend to dismiss complaints or downplay the severity of claims until they are considered widespread. Group Litigation not only ensures that companies take note of the potential wrongdoings that have taken place, but can also make them more inclined to change their behavior to avoid further individuals joining the group action.
In practice, participation in a group action can also result in improved levels of representation and expert evidence, as the increased costs typically associated with improved expertise are divided by the number of individuals. Utilising a smaller pool of legal representatives and experts should also result in increased efficiency, whilst also promoting uniformity and consistency in legal arguments – all of which can assist in preventing conflicting judgments and decisions.
Looking at group actions from a costs perspective, consolidating claims into a group action can also reduce duplication as the group register can be progressed at a similar rate, by the same team, and common issues and legal issues can be addressed at the same time.
Often in group litigation, a Group Litigation Order (GLO) is entered into, which, once all individuals have joined the register before the cut off date, will ensure that all decisions apply to all issued claims and parties on the register. It should be noted that not all group actions have to proceed under a GLO, however, even without one, the process tends to be very similar. Within group litigation there are often lead claims which will test key issues relevant to the group, again improving efficiency and reducing the overall costs.
The courts are also active in the management of group litigation and, by attending to their case management duties, set procedural deadlines and resolve issues that arise throughout. Group litigation can also be cost managed, in a similar way to how a matter would be managed under Practice Direction 3D, however, there are some interesting nuances that arise when managing and considering costs in group litigation.
In terms of costs, specific rules apply to a GLO, contained within CPR 46.6, and these rules can apply to group litigation without a GLO in place. Costs tend to fall into two categories, either “individual costs”, which are costs incurred in relation to an individual on the group register or “common costs”, which are costs incurred in relation to GLO issues, individual costs whilst a claim is proceeding as a test claim and costs incurred by a lead legal representative in administering the group litigation (CPR 46.6 (2)).
With regards to costs liability, subject to the court ordering otherwise, any order for common costs against an individual imposes on each litigant in the group a several liability for an equal share of common costs. Therefore, in the event of a win, the paying party will not only be liable for the receiving party’s reasonable individual costs, but will also be liable for the receiving party’s reasonable equal proportion of common costs. The mechanics of settling the costs of individual and common costs are slightly different, with individual costs being agreed or assessed, in the usual manner, at the conclusion of the individual matter, whereas common costs are typically assessed at the conclusion of the entire group action or specific tranche of the action. If the same firm has undertaken individual and common work then it is important that these costs are recorded separately, so to allow for the accurate assessment of costs at the appropriate time. Conversely, if the group are unsuccessful in a claim then they are liable for an equal proportion of the opponent’s common costs (but it is common for ATE to be in place to cover these).
Although each individual’s common costs are usually dealt with on the basis of equal shares, the group can agree otherwise and this would be formalised within a Costs Sharing Agreement. As an example, it might be that the group agrees that, due to vastly differing claim values, each individual’s liability for common cost should differ respectively as it would be unfair for an individual with a significantly lower, or simpler, claim to have a simple pro rata exposure to common costs.
As per CPR 46.6 (6), if common costs have been incurred before an individual joins the register then the court may order that the individual is liable for a proportion of those earlier costs. Similarly, when a claim is removed from the register, the court may make an Order for costs which includes a proportion of common costs incurred up to the date on which the claim is removed (CPR 46.6(7)). There are many aspects to common costs to consider, especially when dealing with the recording and billing of common costs, differing costs liabilities within a Costs Sharing Agreement and, importantly, the recovery of those costs.
Ensuring the correct approach is vitally important and, like all retainers or funding arrangements, ensuring the appropriate advice has been sought and that the group have been fully informed of the position from the outset, and throughout, are of key importance.
In terms of funding, group actions are funded by various models and vary depending on the type of claim. For example, early group actions tended to be funded by way of Conditional Fee Agreements (CFAs), whereas more recently the trend has shifted to be funded by Damages Based Agreements (DBAs), where an agreed percentage of damages is payable in the event of success, or by Third Party Funding, where an external financier (typically a private equity fund) funds the litigation in return for a share of the damages in the event of success. Finally, much like normal litigation, the option of private funding is also available.
Like every case, the most suitable funding arrangement depends on the specific facts of the case, the financial circumstances of the individuals and the risk the legal team and/or funder are willing to take. In recent years, Third Party Funding has been the option typically utilised where individuals might not have the financial means to pursue the action themselves. Not only has Third Party Funding been in the legal news recently, but it also found its way into the mainstream media as a result of the ITV Drama Mr Bates v The Post Office, which highlighted the cost to the Postmasters for pursuing their claims by this method. It was reported that the 555 Postmasters were left with only £11,000,000 (£20,000 each) from their £57,000,000 settlement in 2019, once they had paid their fees and funders. This was met with a level of outrage and luckily, since then, further compensation schemes have been set up and it appears further backing has been given to those Postmasters subjected to the unreasonable conduct of the Post Office.
In May of last year, Seema Kennedy OBE published a report on ConservativeHome, under the heading of Reforming collective action lawsuits is essential for maintaining faith in our justice system, where group litigation within the UK was largely criticised. Amongst the criticisms were the fact that, in the 8 previous years, UK law firms had earned around £1 billion from only 30 of the 130 ongoing group actions in the UK (the financial details for the other 100 claims were unknown). Also, the number of UK funders had quadrupled over the last 8 years and the assets of the 15 largest funders had risen to at least £2.2 billion in 2021 from £198 million in 2010. Financials aside, the regulations around funders were also questioned, and questions were raised around the lengthy delays and substantial backlog currently faced in the civil justice system and whether the growth in collective action lawsuits was a worrying trend.
In contrast, there would be many law firms and individuals, possibly those at the epicenter of the collection action market, who would rebuff the position and would likely believe the delays and backlog are due to the lack of investment in judicial infrastructure and government funding.
Justice is the number one priority and had the Postmasters not had the funder in their corner, it is likely the Post Office would never have been held accountable and hundreds, if not thousands, of lives would have been further ruined. Righting the wrong is no doubt the main goal, but sometimes sharing a slice of the financial compensation with a wealthy financier can also leave a bitter taste. Although it must be noted that the business model of the funder must, reasonably, be geared to allow for losses along the way.
On the other hand, it is said that funders also reject the vast majority of cases, so clearly it is not the case that they are just grabbing at every opportunity available to them in order to have a share of everyone’s misfortune and damages, however, could it be argued that when they do have their slice of the action, that slice is simply too big?
In situations where funding in the judicial system is limited and the routes of justice available to most are inadequate, generating profits for funders and law firms alike might be the trade off for ensuring corporations are actually held to account. Ultimately, whilst there is no ignoring the fact that group litigation does generate substantial revenue for those involved (when successful), in a climate where access to justice is becoming increasingly harder for the everyday person, its vital role in promoting fairness and accountability, particularly in cases involving widespread or systemic wrongdoing, is as important as ever and must continue to be protected.
Benjamin Wilson, Senior Associate within Kain Knight’s commercial team, has expertise in group actions having worked on the Mirror Newspapers Hacking Litigation for over 5 years, primarily focused on various tranches of common costs. As well as Benjamin, other members of the team also have significant experience in advising on various costs issues within group litigation, with Director, Francis Kendall, and Managing Associate, Ben Chowdhury also being involved in various iterations of the Mirror Group and News of the World phone hacking litigation (with Francis Kendall leading the costing team at a stage).
Benjamin Wilson
Senior Associate
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