In Edward Moon and Ors v Link Fund Solutions [2022] EWHC 3344 (Ch), Mr Justice Trower dismissed an application by two claimant groups for a Group Litigation Order (“GLO”) pursuant to CPR 19.11 in relation to their claims against Link Fund Solutions (“LFS”). This briefing explores the factors considered by the Judge in deciding not to exercise the discretion to grant a GLO.
Several thousand claimants alleged that LFS mismanaged a fund, causing them loss. As authorised corporate director, LFS was responsible for the management and operation of the Woodford Equity Income Fund, the “Fund”, along with Woodford Investment Management (“WIM”) as its delegated investment manager. LFS suspended dealings in the Fund in June 2019 because it believed that the Fund was unable to meet redemption requests by investors. Subsequently, LFS began the winding-up of the Fund in January 2020, with a significant realisation shortfall for investors expected at the end of the winding-up process. The claimants seek damages under s.138D of the Financial Services and Markets Act 2000 for losses sustained as a result of alleged breaches of the rules applicable to the Fund in the FCA’s Collective Investment Scheme Sourcebook (“COLL”), including those relating to the liquidity of the Fund’s portfolio, the spread of risk in the Fund, its valuation and in respect of untrue and misleading statements in the prospectus. The claimants allege that had the breaches not been committed by LFS, their investments in the Fund would have been worth much more than is now the case.
The claimants argued that this was a paradigm case for a GLO. The claimants pointed to common issues of fact and law that pertained to all of the claims against LFS. They submitted that their claims would be most conveniently managed by the dedicated case management procedures provided for by the GLO regime, including by establishing a group register, giving directions binding on all parties on the register; assignment of a managing judge to oversee the litigation; the ability to give directions which are binding on all parties on the group register, including those who may be added in due course; the appointment of joint lead solicitors for the two claims, and a division of liability for the common costs of the litigation between claimants. They also submitted that, in the absence of a GLO, cost sharing would be more difficult to achieve in respect of any future claimants who may join.
LFS argued that a GLO would bring no additional benefit to the proceedings. LFS argued that although a GLO is an available mechanism for managing group litigation, it is no more than that. LFS submitted that other forms of case management powers are available to manage the proceedings, including directions for service of generic pleadings and the trial of test cases, and that the claimants had not shown that a GLO would generate any efficiencies beyond those. It was also noted that in Manning & Napier Fund v Tesco [2017] EWHC 2203, where a GLO was granted, the judge had referred to the guidance on GLO applications and emphasised that before the parties and the Court are committed to the allocation of substantial resource involved, it is necessary to consider whether there are other means of achieving the case management advantages that a GLO would offer. LFS also argued that this is not a case where there are numerous claimant firms that would call for a proper management structure through a GLO, but that there are only a few claimant firms involved who were already working closely together.
The Judge declined to exercise his discretion to grant a GLO. He accepted that the claims gave rise to common or related issues of fact or law capable of being GLO issues under CPR 19.10 and went on to address whether the Court should exercise its discretion. The Judge said: “the most significant distinguishing characteristic between the position where a GLO is made and the position where one is not is, in summary, the establishment of the group register, with the consequential directions for publicity, the appointment of lead solicitors and a steering group of solicitors. In my view, a necessary question for the court to determine is whether, all other things being equal, that is or is not a structure that is required in furtherance of the overriding objective, having particular regard to the other procedural means for achieving a similar or essentially similar result.” He concluded that it was not; the advantages of a GLO could be achieved through the Court’s general case management powers. Generic statements of case could equally be used outside of a GLO to help determine common issues. The binding effect of a trial of these claims would still be achieved without a GLO.
The Court also noted that the GLO regime is not intended to be used to encourage potential claimants to come forward and bring claims, adding that: “the likelihood is that those investors who wish to sue have already instructed solicitors, and if they have not done so, the reason is likely to be that they do not wish to participate.”
The courts will likely continue to consider carefully whether the benefits of a GLO can be achieved without the additional costs and administration associated with a GLO. Only a relatively limited number of GLOs have been granted by the courts to date (112).1 This decision suggests that GLOs must be demonstrably useful and appropriate in the context of the claims brought in a manner beyond what is achievable by way of general existing case management powers.
For further information, please contact:
Christa Band, Partner, Linklaters
christa.band@linklaters.com
