The Civil Justice Council (CJC) has been looking into the ways
in which class actions (claims brought by multiple claimants) are
handled. Its report, published last month, found "strong support
for the conclusion that citizens in England are not being fairly
served through the provision of sufficient or effective access to
justice by the present procedural mechanisms".
These include test cases, such as the recent, high-profile
action over bank charges, representative actions and group
litigation orders. But the CJC believes that these are only
partially effective and that many potential claimants are deterred
from bringing court actions altogether.
"Access to justice is … still disproportionately weighted
against claimants whether they are groups of consumers, small
businesses, employees, or victims of mass torts," the report
concludes. "This has resulted in few claims being brought and,
significantly, demonstrates that a number of meritorious claims
simply have not seen the light of day.''
Opt-out
The CJC's proposed solution is to add an 'opt-out' class action
to the existing range of procedural options available for all civil
claims.
Under an opt-out system, an action can be brought on behalf of a
class of claimants. Anyone in the class not wishing to be included
would have to take active steps to opt out from it.
Current English procedures are based on an 'opt-in' system,
requiring individual claimants to be identified (and generally to
have issued their own proceedings) before their claims can be
collated. Opt-in systems are identified in the report as creating
significant barriers for potential claimants with low value / high
volume claims.
Class actions in the US are based on an opt-out system, but the
CJC is careful to allay concerns that its proposals would introduce
a flood of US-style class actions into England.
Claimants in the US, it points out, do not run the risk of being
liable for costs if the action is unsuccessful, as they do in
England. US cases are also decided by juries rather than judges and
US courts have the power to award punitive damages, which are very
restricted in English law. And US lawyers are routinely paid
contingency fees based on a percentage of damages awarded.
The report also notes that English courts are more proactive in
managing cases than their US counterparts.
Supervision
This supervisory role would be crucial to the CJC's suggested
reforms. In each case, a rigorous certification procedure would
decide whether an opt-out or opt-in procedure would be the most
appropriate form of collective action. This process is intended
also to filter out spurious or 'blackmail' claims, where a class
action is started purely to force a settlement from a
defendant.
Once certified, cases would be closely supervised by specialist
judges, who would also scrutinise any proposed settlement agreement
to ensure its fairness.
Various other measures are suggested, such as a power to award
damages in the aggregate (rather than to each class member) and for
the limitation period to be suspended for class members once an
opt-out class action has been certified.
Difficult issues remain, including how such actions should be
funded and the extent to which claimants should be let off the
usual 'loser pays' principle on costs in certain circumstances.
The report is the latest in a series of proposals calling for
changes to current class action procedures. Both the UK's Office of
Fair Trading and the European Commission, for instance, have
suggested reforms in relation to competition claims and the UK
Government is considering whether to introduce class actions for
discrimination claims as part of its work on the Equality Bill.
This is the first time, however, that proposals have been put
forward in England for a generic class action system that would
apply to all types of civil claim.
The report invites the Lord Chancellor, who is responsible for
Government policy on the legal system, to make a formal
response.
Colin Read, specialist insurance litigator at Pinsent Masons
said insurers have long feared the introduction of US-style class
action litigation in the UK.
"Insurers can take some comfort from the fact that that CJC has
stepped back from a blanket opt-out procedure and from the robust
supervisory role it is proposing for the court," he said. "But even
the introduction of a limited opt-out regime would be a significant
development for insurers as providers of liability cover or as
defendants at the wrong end of class actions over such things as
unfair standard terms, discrimination, the non-refunding of
premiums or breaches of competition law."
Want more content like this? This story was written by the insurance and reinsurance legal experts at Pinsent Masons, the law firm behind OUT-LAW.COM. We've recently launched a new section, legal info for Insurance and Reinsurance, giving free legal information to anyone working in that sector.
