The Court of Appeal has upheld the Competition Appeal Tribunal’s (“CAT”) opt-in Collective Proceedings Order (“CPO”) in the trucks cartel UK class action. The CAT appointed the Road Haulage Association (“RHA”) as the representative of a class comprising UK buyers of new and used trucks. The RHA is seeking compensation for increased prices which those class members allegedly paid as a result of truck manufacturers’ unlawful price co-ordination.
In its first instance decision, the CAT had favoured the RHA’s CPO application over a rival application brought by an SPV, UK Trucks Claim Limited (“UKTC”). Our previous blog post discusses that decision in detail, but the key reasons why the CAT chose the RHA were:
- The RHA’s proposed class members included purchasers of used, as well as new, trucks.
- The RHA wished to bring proceedings on an opt-in basis. That meant that it would have access to class members’ data, which would strengthen its claim. By contrast, the UKTC’s proposed that the claim proceed on an opt-out basis.
- The methodology for calculating loss put forward by the RHA was more conventional and well-established than the novel methodology proposed by UKTC.
Issues on appeal
The main issue on appeal was whether the CAT was wrong to certify the RHA as the representative of both new and used truck buyers. UKTC, the rival class-representative, and two of the truck manufacturers (MAN and DAF) argued that there was a conflict of interest between those two sub-classes which meant that the CAT had erred in its appointment of the RHA.
The Court of Appeal agreed that the conflict of interest existed but decided that it could be managed through information barriers, separate funders and separate representation (including solicitors, counsel and experts). Accordingly, the RHA was allowed to continue as the sole class representative. We look under the bonnet at the detail of the conflict of interest decision below.
The Court of Appeal also dealt briefly with three more minor matters:
- The UKTC had sought to challenge the CAT’s preference of the RHA’s opt-in proceedings over its own opt-out CPO application. The Court said that all of UKTC’s arguments on this point sought to challenge the decisions of the CAT on matters which were “quintessentially multifactorial assessments by a specialist tribunal with which this Court would not interfere unless there were an error of law”. As such, UKTC was refused permission to appeal on this point.
- UKTC also sought to argue that the CAT should have stayed, rather than dismissed, its CPO application, but the Court saw this as a case management matter which the UKTC had failed to deal with, rather than a matter for appeal.
- Two other truck manufacturers (Iveco and Daimler) challenged the CAT’s alternative conclusions that UKTC had brought a workable CPO application. The manufacturers argued that UKTC had failed to come up with a methodology for modelling truck buyers’ pass-on to their customers. They also submitted that UKTC’s novel methodology for establishing loss was implausible. These were both moot points because UKTC’s application had been unsuccessful but the Court, nonetheless, confirmed that the CAT had not made any error of law. In particular, the Court of Appeal said:
(i) The CAT was entitled to certify an application which had not grappled with downstream pass-on by the class because that was something the CAT could deal with through case management.
(ii) The CAT’s decision about the plausibility of the methodology was not an appropriate matter for an appeal.
As a preliminary matter, the Court of Appeal also considered whether the correct route for the challenge to the CAT’s decision was by way of appeal or judicial review. As it had done in the Evans judgment, handed down at the same time as this judgment, the Court of Appeal decided that substantially all the issues could proceed by way of appeal because they concerned the CAT’s refusal to certify the UKTC’s proceedings in whole or in part (see our other blog post on the Court of Appeal judgment in Evans).
RHA can’t stay (in) neutral
The conflict of interest between new and used truck purchasers arose because one of the ways that used truck purchasers were said to have suffered loss was because new truck purchasers would (on resale) have sought to pass-on the inflated costs of their trucks to used truck buyers1. In short, to the extent that was the case, new truck buyers’ damages would be reduced and used truck buyers’ damages would be increased.
The CAT had considered this conflict of interest but concluded that it could be managed by the RHA following its economic expert’s advice as to whether the overcharge had, in fact, been passed-on to used truck purchasers. The RHA would also have to communicate clearly to class members that this was what it was going to do. Following that communication, the CAT said that class members who opted-in to the claim could be taken to have consented to the RHA acting against their interests if so advised.
The rival class representative and truck manufacturers argued that this conflict of interest meant that the RHA’s appointment did not satisfy the statutory test of being “just and reasonable”. The truck manufacturers also argued that the conflict meant that the combined claim did not meet the suitability and common issues requirements for certification as a class action.
The Court of Appeal partially overruled the CAT on this point, holding that case management steps were not sufficient to manage the conflict between class members’ interests. It said that the CAT’s solution, that the RHA would simply follow its expert’s advice, was not appropriate because the answer which the expert arrived at would be highly sensitive to assumptions and data input.
However, the Court did reject the UKTC’s submission that two class representatives would be needed to manage the conflict. This, it said, was a “recipe for confusion and unnecessary expense”, particularly where one class representative was acting on an opt-out basis and the other was acting on an opt-in basis. Instead, the conflict could be managed by the RHA maintaining separate teams, divided by an information barrier, for each sub-class of truck purchasers (one team for new and the other team for used). In doing so, the Court of Appeal confirmed that a class representative such as the RHA did need to act in the best interests of class members where there was an identifiable conflict such as this (although it recognised that there would be some situations where a class representative can act in the majority’s best interest without significantly harming the minority).
The RHA would also need to appoint separate solicitors, counsel and experts for each sub-class. The Court also held that different funders would need to finance the sub-classes because, for example, of a funder’s discretion to fund an appeal, which it may be incentivised not to do where one sub-class had won on a point at the other’s expense (since the allocation of damages between the sub-classes may be a zero-sum game from the funder’s perspective).
Analysis
The Court of Appeal’s decision shows that the opt-in regime lives on despite its parallel decision in Evans to overturn the CAT’s decision (which found the claim should be certified on an opt-in basis only) to certify the FX class on an opt-out basis (see our other blog post on Evans). The parallel decisions suggest that an opt-in claim will be preferred where the PCR can show it is practicable and viable to proceed on an opt-in basis (17,500 class members had signed up or registered an interest with the RHA before the CAT hearing), whereas an opt-out claim will be preferred where an opt-in claim wouldn’t be viable (the PCRs in FX showed the claims would stall if made on an opt-in basis).
The Court of Appeal’s decision about how the RHA needs to manage its conflict of interests set out a more formal approach than the one taken by the CAT and made clear that this was a fundamental issue that needed to be considered at the certification stage. The solution from the Court of Appeal, while pragmatic in allowing the RHA to continue its claim, does however raise further questions (not to mention further costs). For example, it is unclear how this approach will work for class members who purchased both new and used trucks – will they fall into both sub-classes or will there need to be an early determination as to which sub-class is most suitable for them? What will happen in other cases where a PCR seeks to include class members from different levels of the supply chain but is not able to put information barriers in place (because the PCR is an individual or an SPV with only one director)? Our prediction is that this isn’t the last we have heard on the question of conflicts.
The Court’s judgment also showed it seeking to support the CAT’s authority by emphatically dismissing the parties’ attempts to challenge other discretionary and case management matters. The Court emphasised that these were not properly the subject of appeals or judicial review and refused to grant permission for appeals on these points to proceed.
This appears to reflect a view from the Court of Appeal that the CPO certification jurisprudence is beginning to settle down. In light of its judgments in this case and in Evans, the Court of Appeal has indicated that it hopes that that the CAT will be able to hold shorter hearings and produce shorter rulings on CPO certifications in future.
In the present case, however, the Supreme Court’s recent finding that the RHA’s Litigation Funding Agreement needed to satisfy the statutory requirements of a Damages Based Agreement means that the class representative will need to restructure or comply with those requirements before the case can move forward (see our other blog post on the Supreme Court decision). With the possibility of that outcome in mind, as well as the need for the RHA to make arrangements to manage the conflict of interest between new and used truck purchasers, the appellate courts seem to have put the brakes on the proceedings for the time being.
1 The other way was through the umbrella effect, where the increase in new truck prices caused by the overcharge would have increased demand for used trucks.
For further information, please contact:
Sarina Williams, Partner, Linklaters
sarina.williams@linklaters.com
