Factual and Procedural Background
The appeal concerns whether the claimant ("Plaintiff") can bring representative proceedings under CPR 19.8 on behalf of institutional and retail investors against the defendants for claims under sections 90 and 90A and Schedule 10A of the Financial Services and Markets Act 2000 ("FSMA") related to alleged fraudulent statements and dishonest omissions. The Plaintiff relied on the Supreme Court decision in Lloyd v Google LLC [2022] AC 1217 to pursue representative proceedings seeking declarations on common issues, excluding individual issues such as standing, reliance, causation, and quantum.
The defendants applied to strike out the representative proceedings, arguing that such claims should be brought as ordinary multi-party proceedings, which had already been issued but stayed pending this appeal. The judge below granted the strike out application, and the Plaintiff now appeals with permission granted due to the wider significance of the case.
The underlying facts involve a decades-long opioid crisis in the United States. The defendants, manufacturers of an anti-addiction medication, are alleged to have engaged in a fraudulent scheme to extend patent protection by switching the product from tablet to film form with misleading safety claims. The scheme became public through a US federal indictment in 2019, leading to substantial settlements and guilty pleas by the defendants and related parties.
The representative claims and parallel multi-party claims were commenced in September 2022. The multi-party claims remain stayed pending the outcome of this appeal.
Legal Issues Presented
- Whether representative proceedings under CPR 19.8 are an appropriate procedure for claims under sections 90 and 90A and Schedule 10A of FSMA regarding alleged fraudulent statements and omissions.
- The scope and exercise of the court's discretion under CPR 19.8 to allow or strike out representative proceedings.
- The impact of the existence of parallel multi-party proceedings on the suitability of representative proceedings.
- The appropriateness of a bifurcated process separating common issues and individual issues such as reliance, causation, and quantum in representative proceedings.
- Whether the representative proceedings would oust the court's case management powers.
- The access to justice implications for retail and institutional investors if representative proceedings are disallowed.
Arguments of the Parties
Appellant's Arguments
- The Plaintiff contends it has a right under CPR 19.8 to commence representative proceedings once the "same interest" threshold is met and that the court's discretion should not be exercised to strike out the claim absent a fundamental flaw.
- The Plaintiff relies on the Supreme Court decision in Lloyd v Google LLC, which endorsed the use of representative proceedings with a bifurcated process addressing common issues first and individual damages later.
- The bifurcated approach is necessary to provide access to justice for retail investors who would otherwise be unable to pursue claims due to cost and procedural burdens.
- The existence of parallel multi-party proceedings should not preclude the use of representative proceedings, especially where retail investors are not funded to participate in multi-party claims.
- The representative procedure reduces front-loading of costs and burdens on represented persons and facilitates quicker resolution of common issues.
- The Plaintiff argues the court's discretion under CPR 19.8 is broad but should be exercised in favor of allowing representative claims where practicable, and that striking out would preclude hundreds of retail investors from access to justice.
- The Plaintiff submits that the defendants' case management objections are procedural preferences, not knock-out blows, and that individual issues such as reliance and causation are appropriate to be determined in a second stage.
Defendants' Arguments
- The defendants argue that representative proceedings are not appropriate for these claims under FSMA and that claims should proceed as multi-party litigation where the court retains full case management control.
- They submit that allowing representative proceedings would deprive the court of its case management powers, particularly over bifurcation and the sequencing of issues.
- The defendants emphasize the importance of addressing individual issues such as standing, reliance, causation, and quantum early in the process to avoid speculative claims and facilitate settlement.
- They contend that institutional investors have not been deterred from multi-party proceedings and that retail investors' exclusion from multi-party proceedings is due to funders' decisions, not procedural barriers.
- The defendants highlight stringent financial requirements for retail investors to participate in representative proceedings, suggesting only substantial investors can join, undermining access to justice claims.
- They rely on recent case law, including Allianz Funds Multi-Strategy Trust v Barclays plc [2024] EWHC 2710, demonstrating the court's ability to manage reliance issues and strike out unmeritorious claims in multi-party proceedings.
- The defendants submit that the representative proceedings appear to be used for "book-building" by funders, which courts have deprecated.
- They argue that the discretion under CPR 19.8 must be exercised in light of the overriding objective, weighing procedural advantages and disadvantages, and that the judge below did so correctly without error of law or fact.
- The defendants emphasize the policy underlying FSMA provisions to avoid speculative litigation and note that representative proceedings in this context could encourage precisely that.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Lloyd v Google LLC [2022] AC 1217 |
Endorsed representative proceedings under CPR 19.8 with bifurcated process; broad interpretation of "same interest" threshold; court discretion guided by overriding objective. |
Central to the analysis; court examined its obiter comments on bifurcation and discretion; distinguished its application given the presence of parallel multi-party proceedings. |
| Prudential Assurance Co Ltd v Newman Industries Ltd [1981] Ch 229 |
Example of bifurcated representative action allowing common issues to be decided first, with individual damages claims pursued separately. |
Considered as an important but unusual case; court noted it did not assist on case management at the outset of proceedings here. |
| Manning & Napier v Tesco plc [2017] EWHC 3296 (Ch) |
Case management in securities claims; caution against joinder by subscription; need for claimant engagement on individual issues early. |
Used to illustrate court's approach to avoiding speculative claims and encouraging early progress on reliance and disclosure. |
| Allianz Global Investors GmbH & Ors v RSA Insurance Group plc [2021] EWHC 570 (Ch) |
Case management of securities claims; split trial with some progress on individual claimant issues in tandem. |
Supported the proposition that courts should manage both common and individual issues together to avoid delay and unfairness. |
| Various Claimants v G4S Limited [2022] EWHC 1742 (Ch) |
Similar approach to split trials and case management in securities claims. |
Reinforced the importance of parallel progress on individual issues to avoid starting from scratch after common issues trial. |
| Commission Recovery Ltd v Marks & Clerk LLP [2023] EWHC 398 (Comm); [2024] 2 All ER (Comm) 949 |
Allowed bifurcated representative action where no alternative proceedings existed; court discretion under CPR 19.8. |
Distinguished due to absence of parallel proceedings; court noted lack of case management detail for second stage. |
| Prismall v Google UK Ltd & Ors [2023] EWHC 1169; [2024] 1 WLR 879 |
Struck out representative action for misuse of private information; rejected "lowest common denominator" damages approach. |
Noted as not assisting present appeal; appeal dismissed by Court of Appeal. |
| Mastercard v Merricks [2020] UKSC 51 |
Warning against speculative class litigation and pressure on defendants to settle without merit. |
Referenced to caution against speculative claims in representative proceedings. |
| Emerald Supplies Ltd v British Airways plc [2011] Ch 345 |
Considered limits of representative actions where damages are ingredient of cause of action. |
Noted that damages do not bar representative claims if bifurcation is used. |
| Moon v Atherton [1972] 2 QB 435 |
Limitation issues in representative actions; limitation clock stops on commencement of representative action. |
Referenced regarding limitation in bifurcated proceedings. |
| Moon v Link Fund Solutions [2022] EWHC 3344 (Ch) |
Book-building and case management in collective proceedings; caution against increasing claimants for procedural advantage. |
Cited to support argument against using representative proceedings for "book-building". |
| Duke of Bedford v Ellis [1901] AC 1 |
Historical correction of restrictive approach to representative proceedings. |
Used to illustrate broad nature of CPR 19.8 representative actions. |
| Temperton v Russell [1893] 1 QB 435 |
Historical case on representative actions. |
Referenced in historical survey of representative procedure. |
Court's Reasoning and Analysis
The court began by acknowledging that the judge below exercised a discretion under CPR 19.8, guided by the overriding objective of dealing with cases justly and at proportionate cost. The court emphasized there is no presumption in favour of representative proceedings simply because the "same interest" threshold is met; rather, the discretion must be exercised in light of the particular circumstances.
The court analyzed the Supreme Court's decision in Lloyd v Google, noting its obiter support for bifurcated representative actions to resolve common issues first and individual damages later, but highlighted that the case did not involve parallel multi-party proceedings or detailed case management considerations now relevant.
The court considered the nature of securities claims under FSMA, which require proof of standing, untrue or misleading statements, reliance, causation, and loss. Reliance is a key controlling element, as confirmed in recent case law, and the court must be able to case manage individual issues early to prevent speculative claims and facilitate settlement.
The court found that the representative proceedings proposed by the Plaintiff would predetermine case management and bifurcation in the claimants' favor, depriving the court of control over procedural structure and timing. The lack of clarity and strategy for the second stage of the proceedings was a significant concern.
The existence of parallel multi-party proceedings, which allow the court to case manage both common and individual issues effectively, weighed heavily against allowing the representative proceedings to continue. The court noted that institutional investors had not been deterred from participating in multi-party claims, and the exclusion of retail investors from those proceedings appeared to be a tactical decision by funders rather than a procedural barrier.
The court scrutinized the funding arrangements for retail investors in the representative proceedings, finding them to be stringent and likely restricting participation to substantial investors, undermining claims of broader access to justice.
The court also considered expert commentary and policy papers emphasizing the need to avoid a US-style speculative securities litigation culture, which the fraud-based liability and reliance requirements in FSMA aim to prevent.
On case management, the court highlighted recent decisions where courts ordered split trials but required early progress on individual claimant issues such as reliance and disclosure, which the representative proceedings sought to avoid.
The court rejected the Plaintiff's argument that the representative proceedings merely provide a different procedural regime and do not oust the court's case management powers. It found that the practical effect of the representative proceedings in this case would be to remove the court's ability to manage the claims from start to finish.
The court concluded that the judge below had correctly exercised his discretion by striking out the representative proceedings in favor of multi-party proceedings, which better serve the overriding objective by allowing effective case management, avoiding speculative claims, and facilitating settlement.
Holding and Implications
The appeal is DISMISSED.
The court upheld the decision to strike out the representative proceedings brought under CPR 19.8 in favor of parallel multi-party proceedings. The ruling reinforces the principle that the court's discretion under CPR 19.8 must be exercised with regard to the overriding objective, including effective case management and prevention of speculative claims.
The judgment clarifies that representative proceedings are not inherently preferable and must be weighed against alternative procedures, especially where multi-party litigation is feasible and provides robust case management tools. The decision underscores the necessity of addressing individual claimant issues such as reliance and causation early in securities claims to avoid injustice and inefficiency.
No new precedent was established beyond affirming the proper exercise of discretion in these circumstances. The ruling signals judicial caution against using representative proceedings to circumvent case management or to facilitate "book-building" by funders, particularly where funding arrangements restrict retail investor participation in multi-party claims.