Commission Recovery Ltd v Marks & Clerk LLP & Anor [2023] EWHC 398
The decision in this case is illustrative of the Court’s approach in relation to innovative attempts to progress collective redress claims. In this case, the attempt was to bring a representative action by a claimant who had the benefit of various assignments of the underlying cause of action. It therefore combined two challenging aspects – the law in relation to the assignment of claims and the law in respect of the potential breadth of the representative action. The latter issue had recently been analysed by the Supreme Court in Lloyd v Google where the Court determined that the claim could not be pursued as it was framed, primarily because the claimants could not show damage. In that respect, the case was arguably not about the representative action concept at all.
In this particular case, the ability to show damage was not the issue – the case concerned the allegedly secret profits that had been gained by the defendant at the expense of its underlying client base in relation to the registration of intellectual property rights, and specifically renewal fees in respect of those rights. The Court was prepared to assume that the cause of action was viable – and because the application was in relation to the defendant’s attempt to strike out the proceedings the Court did not need to go into great detail.
However, the defendant’s challenge raised two points – the first being that the assignment model was simply flawed as being champertous because bare rights to litigate where being assigned. This challenge necessitated that the Court review the detail of the assignment which was in fact of “any and all legal claims and property rights” in respect of the commission payments. The assignment provided in comprehensive terms for control of the litigation to rest with the claimant and for a distribution of proceeds upon success whereby the claimant would receive 15% of any recovery. The decision to assign the property rights proved crucial here, because the Court said that there was nothing objectionable about the assignment of property rights that may also carry with them legal claims. The Court held that the authorities also show that the fact that there is a dispute as to whether a claimant (acting bona fide) is correct (ie if there is a dispute that the client does have the property that is being assigned) does not affect the validity of the assignment in this context. It is only if the legal claim is assigned on its own, unaccompanied with the property rights, that a claimant would then have to go on and demonstrate a genuine commercial interest. It can quickly be seen that in many cases of assignment of claims, it should also be possible to draft the assignment in sufficiently broad language to encompass property rights. As the Court observed “There is no material risk in the present context to the reputation of justice. If the law treated an assignment of this type as lawful there is no reason why the claim could not proceed in an organised, dignified, way.”
The defendant’s second line of attack was concerning the nature of the representative action. This was a case, like Lloyd v Google, where the “class” that the claimant was to represent was made up of parties who did not know that they had a claim. It is well known that there is only one central condition that needs to be fulfilled in respect of allowing a representative claim to proceed – that being that the representative has the “same interest” as those that he represents. The obvious mischief which is being prevented here is when there may in fact be a conflict of interest between class members. The defendant therefore put forward a host of reasons that sought to demonstrate that there was not the same interest between all parties. However, the Court’s analysis was directed to whether the points involved class members affected by an issue prejudicing the position of others. The Court found that none did. On that basis, there was no systemic problem that could not be addressed by future case management, although the Court did appreciate that management would be necessary because of some differences between class members. As the Court summarised “Standing back, the points include those that will require care but each is capable of resolution and none is fatal on jurisdiction. They will inform discretion, as will other material circumstances, but there is no absence of ‘same interest’”.
A worrying sting in the tail for the defendant was that the Court did appreciate that there may be some clients of the defendant who would not wish to pursue a claim. The Court also recognised that the defendant would know the identities of its clients rather than the claimant. On this basis, the Court held that it “would consider, at the Defendants' request, authorising a suitable form of communication from the Court (sent by the Defendants' solicitors as the court's officers) to all material clients advising them expressly that they may "opt out".” Whilst the Court may have felt that it was assisting the defendant here, it could be seen to be a concerning development that a defendant has to write to all potential claimants and tell them about a potential claim against them, but suggest that they may nonetheless wish to opt out of it.
The Court’s approach was that “we are still perhaps in the foothills of the modern, flexible use of CPR 19.6, alongside the costs, costs risk and funding rules and practice of today and still to come. In a complex world, the demand for legal systems to offer means of collective redress will increase not reduce.” This case certainly signals an intent to seek to apply the rules in a purposive manner to allow claims to proceed that appear, on their face, to show properly arguable damage to a defined class of people. It is a case that will trouble potential defendants to such claims and it will be interesting to see if an appeal is lodged.