The Competition Appeal Tribunal (Tribunal) today handed down a landmark judgment as part of the ongoing proposed collective proceedings being brought by the Road Haulage Association (RHA) against the major European truck manufacturers. The judgment is important in the context of the fledgling collective proceedings regime but also has important – and welcome – implications for third-party funding.
The RHA in July 2018 applied for a collective proceedings order (CPO) that would entitle it to bring collective proceedings on behalf of truck operators who were overcharged for their trucks as a result of a 14-year cartel engaged in by European truck manufacturers. There are two main criteria that must be satisfied before the Tribunal will allow collective proceedings to proceed. First, the Tribunal must be satisfied that it is just and reasonable for the applicant to act as class representative – this is the authorisation criterion. Second, the claims must be eligible for inclusion in collective proceedings – this is the eligibility or certification criterion.
Today’s judgment dealt with the authorisation criterion and resoundingly found in favour of the RHA.
The defendant truck manufacturers advanced three main arguments with a view to challenging authorisation of the RHA as class representative.
The first argument was that the funding agreement entered into by the RHA is a damages-based agreement within the meaning of the Damages Based Agreement Regulations 2010 and was unlawful and unenforceable for non-compliance with those Regulations. The argument in essence turned on whether the third-party litigation funder providing funds for the RHA’s claim is carrying out claims management services which are defined in s. 4 of the Compensation Act 2006 to include “in relation to the making of a claim … the provision of financial services or assistance”. The Tribunal nevertheless concluded the provision of financial services or assistance is to be interpreted as applying only in the context of claims management services. The Tribunal recognised that the interpretation submitted by the truck manufacturers would have had stark implications for the litigation funding sector and so the Tribunal’s conclusion will be very much welcomed by that sector.
The second argument was that the RHA did not have sufficient funding to pursue the proposed collective proceedings. The Tribunal emphasised that it seeks to be satisfied that appropriate and adequate arrangements have been made by the proposed class representative to fund the claim it wishes to bring so that class members will have the benefit of effectively conducted proceedings. The Tribunal could not find anything objectionable in the funding arrangements ultimately proposed by the RHA and considered that committed funds of £27 million were sufficient in the circumstances.
The third argument was that the RHA’s after-the-event insurance cover of £20 million was inadequate. The Tribunal considered that the proper approach to a case involving potentially significant adverse costs risk is to determine that the class representative has at the outset the ability to pay a substantial level of adverse costs cover that should be sufficient for at least a significant part of the proceedings and found that the level of cover secured by the RHA satisfied this test. Interestingly, in the face of the truck manufacturers demanding higher levels of adverse costs insurance, the Tribunal took the view that it cannot be right a person should be prevented from being appointed class representative only because the level of adverse cost cover required might be prohibitive particularly when the longer and more extensive a cartel is, the higher the costs are likely to be in bringing a follow-on damages claim.
The RHA has therefore satisfied the Tribunal on the authorisation criterion of its application for a CPO. The Tribunal has postponed hearing argument on the certification criterion pending an appeal to the Supreme Court in another collective proceedings case that will likely provide definitive guidance on the threshold to be applied by the Tribunal when considering the certification criterion.
Overall, today’s judgment appears to point to the Tribunal’s desire to release a collective proceedings case out of the starting blocks – indeed, the Tribunal says that it “seeks to facilitate access to justice for claimants in properly constituted collective proceedings” – and is likely to be viewed as favourable by applicants seeking to bring collective proceedings.
Backhouse Jones is lead law firm to the RHA, supported by Addleshaw Goddard, on its proposed collective proceedings arising out of the European Trucks Cartel. The RHA has over 11,000 truck operators signed up to its collective claim and a further 1,300 have registered interest and are going through the sign-up process. The RHA’s legal action is being funded by Therium Capital Management.
Steven Meyerhoff, Director and Head of the Commercial Litigation and Employment team at Backhouse Jones comments:
“The RHA has now been successful in the first part of its application for a CPO. The second part of the application, which involves confirming that the claims are eligible to be brought in collective proceedings – this is the certification part – will be argued before the Tribunal at some stage during the second half of 2020. The delay in the Tribunal’s hearing the second part is because of the appeal to the Supreme Court in MasterCard v Merricks that may impact on the legal test to be applied by the Tribunal in the RHA’s case. The Supreme Court is hearing MasterCard’s appeal in May 2020 and the judgment is expected a few months afterwards. That would then pave the way for the RHA’s collective claim (and other collective claims now waiting in the wings) to resume.”
For more information, go to www.truckcartellegalaction.com.