Webcast: Reflecting on ten years of the CAT

In a recent webcast with Lexology, “The CAT at ten: Collective actions and the future of competition litigation in the UK,” Charlie Rooke and Craig Arnott examined the evolution of collective proceedings over the last ten years and explore what the future holds for competition litigation in the UK. The discussion featured insights from Belinda Hollway (Partner, Hausfeld) and Patrick Teague (Partner, Geradin Partners).

You can watch the webcast below.

 

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Charlie Rooke:

The topic of today's masterclass is ten years of collective proceedings. What's next? My name is Charlie Rooke. I'm a Director at Burford Capital, and I'm joined today by Belinda Hollway, who's a partner at Hausfeld, Patrick Teague, who's a partner at Geradin Partners, and Craig Arnott, who is the Chief Investment Officer International, also at Burford Capital. So, thank you to the three of you for joining today.

There were three areas I thought we'd talk about today. The first is a bit of an overview and a stock take on where we are with recent cases in the CAT. And the advantage of talking about the CAT is that there are such frequent developments, so there's always something new and interesting to talk about. The second is reviews of the collective regime, focusing in particular on the DBT proposals that were published just over a week ago. And then the third topic is, we will all get our crystal balls out and have a think about and do a prediction for where we think the next 10 years of collective redress might go.

So, kicking off, Belinda, I wonder whether you might be able to give a bit of a stock take of recent CAT judgments and settlements to start us off.

Belinda Hollway:

Thanks, Charlie. Very happy to do that. So I think it's fair to say that 10 years in, we probably don't have as many decided cases as we might all have hoped and expected at the 10-year mark and that is partly because, as we all know, the regime got off to a very slow burn because of the way the limitation rules worked. And also, we had to wait for Merricks to go up to the Supreme Court to give us all guidance on the certification threshold. But I think it is also fair to say that once that was sorted, the regime got off and running. And I think depending on how you count them, we have well in excess of 50 collective actions that have now been brought. So it's great to see that the regime is really up and running and that these cases are being brought.

And with that, we are beginning to get decided cases. So let's have a bit of a look at where we are sitting at this, this 10-year point. By far, the biggest win so far is the Kent v. Apple judgment. Now that is going on appeal to the Court of Appeal, but assuming it survives the appeal as we all hope it will, that could be something in the region of £1.5 billion to be returned to consumers using Apple products in the UK. So that would be a ringing endorsement of the regime's ability to return money to UK consumers when competition law's been breached.The next settlement we have is the McLaren RoRo success and that was an interesting one. Five defendants who are all cartelists. Three of them settled before trial. Two of them settled after trial, but before judgment.

The total settlement pot there is about £93 million. On the one hand, that seems a somewhat modest sum compared to the Kent £1.5 billion, but it's worth remembering that the McLaren claim was originally quantified at £150 million at its highest. So actually, if you look at that as a recovery rate in a settlement, that is much higher than maybe we traditionally would expect to see. So, you know, that's another one I'd call a big success. We've then got two, which are somewhat more controversial, but I would call them qualified successes and that is Merrick's and one of the trains cases. Both cases that settled for considerably less than the damages that were hoped. But nonetheless, in Merrick's case, there was still recovery of £200 million, of which Walter Merricks is hoping to distribute £45 each to up to 2 million people.

Particularly in these tough economic times, that is a really meaningful thing for a lot of families in the UK to get that £45 back. Trains, similarly, there was one settlement, distribution was a challenge, as we'll discuss later. But again, it was a successful settlement. Switching to the less good news we have, some claims that went to trial and failed, two in fact. The Patourel case against British Telecom, BT, won on most of the issues, but failed on one crucial issue, and ultimately the class therefore didn't recover anything. We have the Qualcomm case that went to trial, but then settled after trial with the payment of no damages and a couple of other trains cases that weren't successful. So very much you win some, you lose some picture. We've also got a number of cases that didn't make it through certification, thus proving that certification is a meaningful filter.

Rowntree against the Performing Rights Association didn't survive certification. The Roberts cases against the water companies weren't certified, although that's gonna be before the Supreme Court. And the Evans FX case was not certified by the Supreme Court as opt-out, though the door is open for an opt-in. And then there are other cases that fell away for other reasons, like the the musical instruments collective actions where the value of the claims just weren't big enough for funding to be secured. So I think if we take a step back from that and say, "Well, what do we take from that after 10 years?" What I would take from it is actually there is no one trend. The trend is not all collective actions succeed. The trend is not collective actions are wildly speculative and all fail. I suspect if you did an equivalent survey of 10 years of litigation in the Commercial Court, for example, you would find that actually some big wins, some modest wins, some good settlements, some not great settlements and some losses in almost exactly the spread we see in the CAT.

So actually, I think far from trying to scratch our head and look at that list and say, "The regime is a huge success or a huge failure." I'd look at it and say, "That says it's probably working much the way you would expect. Some cases win, some lose, some settle, and that is actually the way you would expect things to happen in any well-run field of litigation. So I think that is my as it were conclusion from 10 years.

Charlie Rooke:

I wonder whether, Pat, we might dive into the certification issue a little bit more, that Belinda briefly touched on, and what your thoughts were on what the threshold was for certification in light of Evans and the case law following that, and then Waterside on the consumer side.

Patrick Teague:

Yeah, it's a really interesting question. It's an area in the regime that does shift considerably. Certification judgments tend to throw up really interesting issues that do occasionally shift the dial about how to approach certification as an overall question. And it's quite an interesting question to ask whether the CAT has got the balance right overall about letting good claims through and then acting as a proper gatekeeper to keep less good claims out. Pausing very briefly just to reflect on the legal test, which I'm sure most people on the call are familiar with, but it comes from Canadian Supreme Court decision in Pro-Sys and Microsoft. So we tend to refer to the Pro-Sys test which was formally adopted in the Gormsen and Meta case in the CAT.

And so in very plain terms, I'm probably horrifically oversimplifying this but the claimant doesn't have to prove the case at certification, but it needs to have a methodology that's sufficiently credible or plausible to offer a realistic prospect of establishing loss on a class-wide basis. So in Gormsen, there was some quite neat shorthand for this, which is the blueprint to trial. And so effectively the question you asked is not, "are you going to win?" But it's, "do you have a workable plan for how this case is actually going to get to trial and be tried?" And so how has the CAT applied that test? I think there are, as I say, reams of interesting certification judgments, but there's broadly two phases over the 10 years of the CAT. Stage one is what you might call the Merricks era.

So after Merricks went to the Court of Appeal, having been refused certification at first instance in the CAT, the Court of Appeal sort of slapped down the CAT's ruling saying basically the CAT had run a mini trial, which was not what needed to happen at certification. It said that what is actually needed or what is not needed and what it should not become is a test of merits at that stage. And the Supreme Court agreed with that, and that set the tone for certification going forward for a number of years. And Charlie, you mentioned Evans and then Waterside, and those are quite recent judgments. Evans from seven months ago, December last year, and Waterside in April. I think this is stage two, and it's sort of where we are now.

Both of those cases throw up really interesting but quite different issues for certification. So if you start with Evans doesn't overturn the Pro-Sys test. It doesn't reintroduce a merits test or anything like that. It's much more targeted and what it says is effectively where a claim is weak or genuinely weak but where it would be practicable for the class to opt in, those two factors can weigh decisively against certifying the claim on an opt-out basis. So opt-out can't be seen as a default setting, and it has to be justified on the facts of the class that you're dealing with. And that's a bit of a recalibration from where things were before. And I guess the next sort of filter, if you wanna call it that, is from Waterside in April.

This is a case that's about an alleged cartel between salmon farmers and it's on behalf of a very large class of consumers. But the CAT refused certification in that case, not because the claim was weak on its merits or because it thought the opt-in was practicable. Opt-in just clearly wasn't practicaable, but because it felt that the kind of numbers just didn't stack up. So this was a case where individual recoveries might have run to a few quid ahead, basically, maybe up to a tenner. But it was going to be quite expensive litigation to run. And this is also in circumstances where the CAT wasn't clear, or at least it wasn't convinced, that damages were going to be distributed effectively to the class. So there's the Evans practicability filter.

And then there's another filter from Waterside, which is asking a different question, which is even if the claim's good, and even if opt-out is the right mechanism for it, will this actually deliver anything meaningful to the class once all the costs are accounted for? So that's not a Pro-Sys question. It's not an Evans question, but it's almost a freestanding gate. And I think it's gonna matter a lot, and it's already featured in a lot of litigation subsequently. So I think Belinda's gonna talk a little bit more about, so I don't want to steal her thunder, but distribution's now absolutely key in all claims and will continue to be so. Cost-benefit overall is also something that DBT consultation is strongly alighted on, which I think we'll come on to discuss.

So very final sort of reflection overall. I'm not gonna turn this into a claimant grievance therapy session, but I think there is a sort of overarching perception that because the legal threshold, technically speaking, is on the low side, that certification must be some sort of formality. And it's really not. And Belinda, , alluded to this in her comments. So getting a claim certified is a real fight for a number of reasons, and I'll name three very quickly. The first is that defendants have become extremely sophisticated at attacking a claim, not just on its substance, but also indirectly as well. And so this is all important stuff, but what you'll find at certification is that things like funding arrangements gets tires kicked. You might have the independence or the suitability of the PCR challenged.

There may be some push for disclosure of all sorts of information or documents in the name of transparency and understanding the funding. And that does make certification more difficult and certainly more expensive. And it can be quite personally exposing for a PCR as well. Second reason Belinda has already covered, the CAT does show real teeth in applying a test at certification. So there are a number of claims that have been refused certification. Gormsen would be one. It was allowed to come back again. CICC is another. Waterside would be a very recent example. And then third is more of a practical point, which is actually building that blueprint to trial is a difficult thing to do. It's a difficult and expensive thing to do. It's a serious piece of economic work in its own right.

And so that's just an upfront cost of certification. So you put those things together and you get actually the impression that the CAT is, I think it's about one in five certification applications overall that are refused, at least at first attempt. So I do think that there is a real kind of hurdle that's applied to the claims that is quite difficult to get through. Yeah, those would be my reflections on certification.

Charlie Rooke:

And I wonder whether, you know, there's a bit of a tension created between, on the one hand, additional work being required pre-certification, but on the other hand, the CAT, you know, criticizing class reps for having spent too much to get through the certification process. I wonder how you kind of balance both of those when you're thinking about budgets. And Craig, maybe you can also chip in on the funder's perspective on that.

Craig Arnott:

Yes. Happy to. I actually think that the budget and costs aspect of the development of the regime is something that's front and center. It's front and center for the government in its review. The DBT, in fact, has said that. In fact, it's very interesting, the DBT's response. It was almost, "Oh, gosh, really? These things are costing 20 million a pop to run a collective action regime." Like someone had just told them. It's like, yes, that's what they are and they're growing. Now, that's a real issue. There's a sense in which that's the nut at the heart of the justice system in England and elsewhere. When you're looking at meritorious claims and how they're going to be run against, let's face it, what are often the most profitable firms on the planet, the most profitable firms in some cases that have ever existed in history.

Now, that's really setting up, a David and Goliath dynamic that a justice system, a fair system, an efficient system needs to be able to address in some way. I think one of the things that the court is doing, and it's doing it in different ways, you saw it in Waterside, and we'll get to this, it's an important case grappling with, well, what do we do when we're confronted with budgets like this? And we're also dealing with problems about distribution. I think that that's your point, Charlie, about what is the work that needs to be done along the way even to get to certification and what is it costing? Sometimes it's, I mean, rather uncharitably said of courts that there's not a lot of knowledge about the cost impact of things they ask of counsel or claimants.

I think that can be true. It's somewhat uncharitable. I don't think that's what was happening in Waterside. I think what was happening in Waterside was something a bit different. And that is, they said, "Look, we're seeing this budget that we've been told is essential and baked in. We've got to look at what the class is going to get in the end in making a cost benefits analysis that the statute says that we have to undertake." And in fact, the DBT and its analysis have just said, yes, this is going to be very, very important when you get to certification. What they said, it's very interesting, and I actually took this out and I just want to refer to it, because there's been criticism of Waterside. And there's a sense in which Waterside comes from a very particular type of problem that's not going to be the same problem that attaches to all matters.

But they said this. They said, "An astute litigant will have in mind the cost," and they said, "In a non-funded private action." That's what's interesting about this. That in a non-funded private action, an astute litigant will have in mind the cost and benefits of bringing the legal proceedings and will continuously review those factors. So they said, "That's what we're saying here. We're saying in this context where you've got a proposed class representative, it's not private funded, but someone has to be undertaking that role." I think that that's what they were grappling with. And what they were saying is that we're not sure how that role has been grappled with here. And that's not to make any criticism of anyone involved. They're all great counsel. And I think actually the PCR was somewhat unfairly criticized in that matter. And I'll come to that and I'll come to why.

But I think that that's what the tribunal there was grappling with. Who is going to be undertaking that role? Now, I alighted on that quote. It's very interesting because it's something that funders have had in mind for quite some time. And it actually is what the Court of Appeals said in Excalibur all those years ago that funders had to be continuously doing. They had to be continuously reviewing a matter to see that the cost benefits of the litigation made sense. And so it's something that we're very familiar with. What's interesting and what's happened in collective actions is that people have been rather ascance about the role of funders. So funders and all their budget ability, in a sense, has been pushed to the background. Whereas instead, you've had the PCR put up front. And I think somewhat unfairly, this gets to the point of saying, "Okay, well, now you're in control of this multi, multimillion pound budget that's gonna go over years and years and hiring all these barristers and counsel and experts.

You're in control." That is a big undertaking. That's an awfully big undertaking. And I think this is where, if I may so, it has somewhat troubled me, the criticism of the PCR in that case. Because it was said of the PCR that, well, you're undertaking this public service role, and there was almost a sort of a sense in which, well, should you be being paid at all for this? That's unreal. That's unreal when you're asking the PCR to do all this work. And Patrick said this as well, take on what could be personal exposure in terms of adverse costs. I mean, that's not all completely tested, but that's possible. That's not a normal function of a civil servant to take on that type of responsibility. Well, that's what a PCR is potentially taking on.

So I think that has to be taken on board. And I have to say, and Pat and I have seen this in other circumstances as well. It's also particularly unfair then, I think, that very well-paid KCs are acting for, as I say, the largest, most profitable companies in the world that attack PCRs for being overpaid when they're being paid at the rate of a junior associate of one of the many law firms who act for them. So I think that we have to take on board the fact that the PCR has a very important role. Now, that is not to gain, say, any of the very valid comments that the Tribunal made, that if you are in that role, then come to court with the evidence about how you will manage and control this budget. And I think, to be fair to the tribunal, that's what they're grappling with.

They're saying, "We don't have that evidence before us." And of course, that's why, and as Pat said, didn't strike it out. They said, "Actually, this is a good case. And this could be worth quite a lot of money. We don't know how much. It depends on the business case, what the view on pass on is going to be, but it could be worth quite a lot of money. So if it is, we want to understand how that is going to the claimants." Very fairly said, I think. But it does mean that there's a lot of work to be done by PCRs. It is the one thing I will say. Again, from a funder's point of view, we often see when we get a proposal, a budget that, shall we say, looks rather off the shelf.

And sometimes it may be said, I don't wanna be incharitable here myself, that, oh, everyone stands behind. "Well, this costs 20 million and, of course, cost will cost 30 million. And adverse cost is gonna be 25 million." There's a sense in which you don't want these numbers to just run wild. And I think what the tribunals are saying, what funders are saying certainly, is ground this in reality. Show why it's necessary. Show if it is necessary, and let's all try to get control of the costs to the extent we can. It's a hard thing to do, but it will help the regime if we can show that that's being done.

Charlie Rooke:

And, maybe, Belinda, I could pass the baton, or maybe pass the salmon to you to talk a little bit about Waterside, particularly from a distribution perspective, and where you see the CAT's expectations landing around that.

Belinda Hollway:

Yep, absolutely. And I agree with a huge amount of what Craig said, especially about the responsibilities faced by class reps. But, looking at distribution specifically, I think this is really part of the regime that we were maybe all a little bit naive about at the beginning. None of us really turned our minds too hugely. And I think if you look at the US experience, what I think I've come to realize is that what is expected in the United States is very different to here. The United States has a certain list of things it expects to be done once there's money on the table by way of advertising, writing to people, et cetera. But it doesn't seem that the American courts are too fussed about rates of distribution. And I think what's become increasingly clear here, and Waterside is definitely the point where it's really all crystallized, is that the CAT is.

It very, very much matters to the CAT that if there are to be these big awards of damages or settlements, and certainly if there's to be huge litigation costs to reach those, that money get to the class. Now you can take a step back from that, and there is still a something of a policy discussion because deterrence and disgorgement are actually, to my mind, very important policy objectives that would be fulfilled by damages being awarded almost irrespective of where the money goes. And I think if you look back at the original parliamentary materials that led to the regime, those policy goals were recognized. I don't personally believe the regime was ever meant to be just about putting money back in the pockets of the exact people who were harmed. And I think cy-près to charity is also a very interesting thing we need to explore more.

Even if you take a case like Waterside, do you have to get the damages back to me who buys a lot of salmon? Or if you got it to a food bank in my neighborhood, is that actually equally good? Because you tick the deterrence and the disgorgement box, the money does good. It doesn't just wind up with claimant funders and lawyers who are just lining their own pockets, said in bunny ears, the sort of allegations that are made. So there is that public policy level. And I think that is being raised again in the DBT consultation and it requires more though. Nonetheless, let's look at the case law where we are. And I think the great specter that is haunting us all is the Gutmann trains judgment. Where, as I already mentioned, there was a settlement.

As I understand it, the classic steps were taken that would've been acceptable to the US courts in advertising and so on. But the upshot was that only 7,290 class members came forward. And so only a shade over £216,000 was distributed to those class members. And that was less than 1%. And I think the tribunal, and it's fair to say a lot of us in the competition community were very disappointed by that. So we all need to step back, scratch our heads, and say, "Right, how do we do it better?" And that is what really the tribunal has said to the proposed class representative in Waterside. Now, that judgment says, "Look, you've just come to me with basically the same thing that was done in Gutmann. But no reason to say why it's really gonna work better than in Gutmann.

You've got to do better." But in a sense, it does end on a positive note. Craig's already alluded to the fact that Waterside's been told they can go away and have another go. And just to read from the judgment for a second, it says on distribution, "Moreover, we see an opportunity for a more creative mechanism for returning damages to the class. Subject to further consideration, we see no reason why a scheme could not be devised, perhaps with the cooperation of retail outlets, which has the potential to return close to 100% of damages to members of the class with appropriate deductions for unrecoverable costs and funders fee." So I think the CAT's saying, "You can do it. Go away and try." And what this requires of us all is to think really carefully and thoroughly about the markets in which, and the products in which we're bringing these cases.

So if you take salmon, a very high proportion of people in the UK are members of a supermarket loyalty scheme. I think it's over 90%. I think I'm a member of two or three of them myself. It would, for example, a mechanism where you said, "Well, actually, everybody who's got a Tesco club card, a Waitrose card, a Sainsbury's card, they can just go and get a packet of free salmon. Would that do? Could you have something like that?" There was a statement in the judgment I found enormously surprising, which was that, I think they estimate 98% of members of the class won't have any documentation to prove they bought salmon. I know I've got 20 years of Ocado receipts just sitting in my Gmail account, which show me purchasing salmon every week.

And again, a bit of Googling proposed showed that over 60% of UK consumers buy at least some of their groceries online and 16% by most or all. So actually, there's gonna be a huge amount more record keeping about who has bought salmon than I think is out there. I don't wanna sort of dive into how we can do a distribution plan on salmon. But what this shows is the generic advertising, the generic being in the press, sure, tick those boxes, but what we really need to do is think about what is the product that has caused the loss and how do I get to those people? How do I do it creatively and interestingly? And I think we need to completely flip on its head the idea, "Oh, well, there's a established way of doing this in the US. If we follow that, we won't get into trouble." That is exactly what'll get us into trouble.

We need to think about the industry, the market. There's already been a lot of discussion in the platform cases, things like Kent where we've had a successful judgment. Sony, we're waiting to see if that was successful. Coll against Google goes to trial next year. Can the money be repaid by way of a account credit? Or is that a problem because in effect, you've funneled the money back through the same ecosystem as the wrongdoer? So there's a lot of interesting debates to be had, but the key message is creativity. Be creative and thoughtful in your distribution plans is what we have to do in the immediacy. But then bigger picture, I'd like us to be thinking harder about cy-près and whether that is acceptable as well.

Craig Arnott:

Do you mind if I just jump in there and that's all absolutely right, Belinda. So long as that the standard is optionality and looking at that creativity rather than certainty of knowing what will work from the start. And that's the one word of caution, and Pat, I'm sure will have some views about this as well. It's the one word of caution I'd say is to have what degree of certainty does one need at the very start about what will work? And I'll tell you the one thing that I get, get a little bit caught up on, in that quote from the Tribunal and Waterside, and that is the need for the retailer's buy-in. Because what would trouble me is if you had to have a sufficient degree of certainty about work that depended itself upon the cartelists, at least alleged cartelists, actually facilitating the distribution system.

Because then you could have a roadblock set up by the very people who'd caused the harm, potentially. So I think it's absolutely right. And I contrast that, for instance, in another matter, the Spottiswoode matter where the claimants work with, what in that case was the regulator to work out a way in which, again, not absolutely crystal set down in stone, not crystal clear, but the potential way that Ofgem in that case could be involved in a distribution back to electricity customers. So I think that's all absolutely right. And certainly the court is looking for creativity. I think we just have to be careful about what degree of certainty is required from the very start, at least at certification.

Belinda Hollway:

That's absolutely right, Craig. And you've reminded me of something I meant to say, which is, it's one thing to say you should have come with a distribution plan that says, "If I win, I will seek to engage with the big supermarkets." That I think is fine. But to say you can only be certified if you can already get all the general counsel of all the big supermarkets to persuade the board that if hypothetically you win a piece of litigation they know nothing about, then they will do X and Y. That would be to set the bar too high.

Patrick Teague:

I agree with all of that. There's also the question from Waterside about the extent to which, what engaging with likely take-up means in practice. And there's an interpretation of Waterside that is being tested in a few cases that you need to go to the CAT having said in your claim documentation with some degree of precision what you think take-up will be. I don't think Waterside does actually mean that. I think you need to have engaged with take-up, basically getting take-up as high as you can possibly get it through a distribution plan that is properly considered and creative, etc. But if you're starting to talk about doing surveys, etc., then it's just, again, another sort of upfront cost that's just not gonna happen.

It's just gonna be a block to fund.

Craig Arnott:

And a false science, really.

Patrick Teague:

And a false science, I agree.

Charlie Rooke:

So I'm conscious of time. I wonder whether we move on from distribution and Pat, maybe talk a little bit about opt-in versus opt-out.

Patrick Teague:

Yeah, exactly. I mean, distribution is layered underneath the opt-in/opt-out question. On that take-up question, basically, which I think is now gonna be a prominent feature of certification decisions. But I think post-Evans, worth just reiterating, as I said at the beginning, things are still shaking out. Evans is still relatively new. We're seven months on from Evans. And I don't think there are yet any kind of bright lines or set thresholds on claim values, claims, class sizes on exactly where a practicability threshold sits. But we do have some really helpful data points that give at least a preliminary indication of how the CAT is gonna deal with the Evans opt-in, opt-out question.

So Stasi and Microsoft were certified on an opt-out basis immediately after Evans. I think the parties were asked. I think the CPO hearing took place before the Evans judgment was released, but then there were written submissions made to the CAT immediately after the Evans judgment came out. And that judgment's actually very, very helpful, very well articulated the reasons as to why opt-out was appropriate in that case. Slightly different, but the Ennis and Rodger cases faced decertification or variation applications on the back of Evans. Obviously, those claims had already been certified, so the circumstances ever so slightly different. But again, they survived fairly convincingly, those applications. Ennis wasn't de-certified. The Rodger class wasn't varied. But it will continue to be a major point raised in, at least, forthcoming certification hearings.

It was a big point in the Brook CPO hearing that was heard earlier this month, albeit judgment still awaited. So, like I say, starting to get a feel for how the CAT is gonna handle it, but I think it's pretty far probably from being sort of settled doctrine at this point. With all that said, and also, Evans as a judgment has spawned some slightly divergent views and interpretations. It is that there are parts of it which are not, to me at least, 100% crystal clear, but I think there are some broad principles that you can draw from it, even where precise thresholds will be worked out case by case. So if you're to think about, this is probably oversimplistic, but three broad buckets.

First, you've got claims that are potentially low-ish in value, but with a high number of claimants. So you think classic consumer overcharge claims with tens or hundreds of thousands of people in the class, each of whom is owed a airly modest sum. For those people, opt-in's just not realistic, even if you're gonna reach people, which would be incredibly difficult. People are unlikely, just a matter of behavioral economics, to sign up or do anything for a fiver, a tenner, 20 quid. So that's the group that's exposed most really to that Waterside cost benefit problem that we've discussed, because by definition, the sums per head are small and take up is potentially low without a really robust or creative distribution plan in place. There's a medium middle ground where let's say you've got a medium value claim witha medium number.

I don't know whether that's several hundred, a few thousand. And that's where I think the real battleground is gonna be. And it's precisely the zone where Evans really starts to bite, because a defendant might argue that opt-in is eminently practicable because the class members can all be identified, and that the individual stakes are large enough that people will plausibly come forward. A third bucket might be really high value claims, but with a very low number of claimants, sophisticated commercial claimants, let's say for argument's sake, less than 100. And I think, there will be case by case examples, but there, you would probably expect from the outset that you're going to have an Evans issue if you try to make that an opt-out class. That would probably be expected to be seen as an opt-in claim, or even just a sort of a standard group action.

You may not want to use an opt-in mechanism for something like that. And I think we'll probably go on to discuss that a bit more. So it'll be interesting to see whether this leads to a divergence between consumer claims, if you like, being governed by something close to the, the, the Merricks framework, and then business classes being governed by a Evans framework. So far the data points to things remaining relatively stable, even in light of Evans, but I think that all remains to be shaken up, I think.

Charlie Rooke:

So I'm mindful of time, and that was a 40-minute long, very comprehensive stock take on where we are. So unless anyone has any final comments, I wonder whether we move on to a review of the current regime, particularly in light of the DBT consultation that was published on the 17th of July. And I should note that responses are due by the 25th of September, so it's both timely and relevant. And I wonder whether each of our three panelists could pick out key points or two from that consultation and give us a little bit more detail on it. So maybe, Pat, if you wanna start.

Patrick Teague:

Yeah, very happily. And I'll sound like a broken record because I'll probably pick out the certification part of the consultation that I think's really interesting. As Charlie says, responses due by 25th of September would encourage everyone on the call to take a look and if minded to do so then to respond, because I think it's gonna be a really, really interesting time to see what the government does with all of this. Yeah, revisiting certification, the government's own view appears to be that the bar is still low or too low, even after Evans. And so its proposal is to write into statute a merits and proportionality test that moves from what it calls the current relative suitability test to what it terms the absolute suitability test, which gives explicit statutory weight to cost-benefit analysis.

So all of the stuff that we've been discussing this last 40 minutes. That's a really quite big structural move, and I think that it's going to be quite significant and also difficult for the government to do and to do in a way that doesn't upset the ecosystem that's developed. So the absolute suitability and statutory cost-benefit weight sound straightforward in a consultation document, but I think putting them into statutory language without introducing the mini trial element or leaving so much discretion that nothing really changes, I think is gonna be really hard to get right. And I think Craig has already touched on this. I don't really see a way in which this isn't going to make certification a more labor-intensive and expensive process. We obviously need to see what happens and how they do it.

But I think that's in a little bit of tension with the current direction of travel in the CAT, and certainly the mood music in the CAT about costs and how much claimants need to spend going into certification. That might be actually part of the goal rather than unintended consequence. It could be that this is part of the move to making the gatekeeping and certification more robust and effective and making sure that only the very best claims get through. But I think we'll need to wait and see.

Belinda Hollway:

One for me that I find extremely interesting and very, very welcome is the proposal to allow damages-based agreements for opt-out collective actions again. There's both a solicitor and a funder piece from that. From a solicitor point of view, I think it would be great to be able to have the possibility of doing the entire case in a damages based agreement, either way the solicitor's firm's taking all the risk or where we're still more likely, I think, still partnering with a funder, particularly to pay some of those big hard costs like ATE insurance premiums, experts and so on. But I think it's got the real potential by bringing some of the funding budgets down, sharing the risk more fairly with solicitors in exchange for possible upside. And my understanding in the Australian state of Victoria, for example, is that it really allows much smaller cases to be brought in a financially viable way.

And it would be great to see that here, because I think one of the most frustrating things about the regime for all of us involved is the worthy small cases that just cannot be brought because the numbers don't stack up. And then it's not entirely clear from the consultation whether this would also solve the quote unquote PACCAR problem, at least in this particular field. But that would be great because a lot of the concern about funders getting, and again, I say it in bunny ears, "too much money", though they yet to have received any meaningful return. Any funder on any of these collective claims as we shouldn't forget is because multiples look scary, but a percentage looks fair. You know, percentage is sharing the risk, and we can all understand that. So it would be great to see that go through, and I think it really would open up access to justice and unblock a lot of the challenges around funding cases worth less than sort of 500 million£.

Craig Arnott:

I very much endorse it. Very much endorse that. The more you can do to insert creativity in financing options, the better off everyone is going to be. And so the DBA is another tool in which to do that. Will it always be necessary or appropriate? Not necessarily. Might it be? Yes, of course. And it could help provide some of the solutions in exactly the way that Belinda says. The one thing that I'd pick up that I was very heartened by in the DBT proposals, and that is the proposal to provide certainty to funding terms from certification, or as much certainty as possible. The DBT refers to it as an indication of the reasonableness of the terms, given a particular scale and size of the litigation to be expected.

That is so, so important. We've been in quite an extraordinary time, especially since PACCAR. And of course, we still have all that PACCAR uncertainty hanging over our heads despite government after government now saying that they will resolve it. It hasn't been resolved. But with all that uncertainty, and then the uncertainty of the regime itself all through its evolution. It's a sort of extraordinary thing that throughout that time, funders have had to contractually commit to funding. Insurers contractually commit to adverse costs exposure with no certainty at all of any return. And as Belinda said, in the entire time of the regime, there haven't been any returns. So given all that, I think it's very welcome of the government. I really endorse it to say we'll bring that degree of certainty at the end of the day. And the DBT proposals say this, transparency, fairness are going to make the legal system work.

They'll make the justice system work. And finance needs to work with that as well, in order for all those cogs to turn around. So for me, it's extremely welcome. And I applaud the DBT in bringing that forward, and I hope it certainly survives the review. I think given the comments that you see in the summary of evidence, I think that it will. I think it's gonna be very welcome, and it's going to be a way in which the regime will have legs going forward.

Patrick Teague:

I'll just flag one more point, Charlie, from the consultation that I've found really interesting, which is that the proposal, I think tucked into the enforcement chapter about potentially giving full immunity for Type A leniency applicants from civil litigation, as well as from regulatory fines. It's something that's sort of been on the menu for a little while. I think the CMA in particular has been concerned in the decline in leniency applications in the last few years. So it used to be at about 21 applications that it would get a year, between 2014 and 2016. And now it's less than 10. And I think the theory being that immunity from civil damages would provide a huge incentive for a whistleblower to come forward.

That raises some really interesting questions because if it is the case that that is going to lead to more cartel enforcement, then I think from a policy perspective or for all of us who care about competition law, that's a very good thing. At the same time, those of us who care about competition law also care about there being redressed for people who are harmed by breaches of it. And I think, it's going to be interesting to see, if this proposal is taken forward, how the government and CMA handle that and what it would do to civil litigation. I assume that it would be the case that because of joint and several liability, it would be other defendants, non-whistleblower, non-leniency applicants, defendants in any civil litigation who would bear the damages payable by the immunity recipient.

But then just in terms of the nuts and bolts of how any of that litigation would work, it raises interesting questions about what role, if any, the whistleblower defendant - who wouldn't be a defendant - what role they would play, whether you'd be able to get disclosure from them, whether there'd be the availability of factual evidence from them, just how that would work, because that would actually be to the detriment, I think of claimants in circumstances where otherwise you would have access to that information. So again, really interesting to see this. Like I say, it's been something that people have talked about for a while. Really interesting to see it now properly on the menu and to see whether they take it forward.

Charlie Rooke:

One last question on the DBT review, which is related to one of the questions we've had in, is the government in its review said has decided not to broaden the regime beyond competition claims for now, and it's instead passed that over to the Law Commission, which is separately consulting on whether to expand consumer class actions to other areas. The question we've had is, to what extent do you think the UK's collective actions regime is constrained by its grounding in competition law? I wonder whether that's a nice book to talk about the Law Commission's broader process.

Belinda Hollway:

I mean, I would very much like to see the regime widened out. I think there's all kinds of mass consumer harms in so many other spaces, financial services leaps to mind, housing, healthcare, etc.. But I can see the sense in letting the Law Commission do a full, thorough overview, and I would love to see that result in a wide-ranging regime. I can see the point that this review maybe isn't the place for it. So I hope that happens, but I do accept this is probably not the right place for that.

Patrick Teague:

I agree, Belinda. I wonder whether one of the things being focused on in this review about cost benefit and just how to bring these claims more cheaply and effectively will translate or be important for any consideration about the broadening of the regime to more traditional consumer claims. 'Cause you can think of a lot of consumer-type harm, but that would fall in that bracket of cases where the overall quantum of damages potentially available just fall in that window that are just quite difficult to fund because the economics just doesn't quite work. So I think one, there may be some helpful stuff coming out of this review that, that is able to then be leveraged in that. But I agree that overall, it's appropriate for the Law Commission review to be tackling it rather than to be part of this.

Craig Arnott:

It's a very good point, Pat, I think, because it does just raise, and I think that's what Belinda, you're saying as well, a whole host of other issues. So for instance, you could imagine that that type of regime, other types of consumer harms would come with some specific, low cost structure built around that in order to get justice for those people in those circumstances. And as much as I'd love the CAT to be lower cost and we strive every day for it to be lower cost, I think it's very hard when you're dealing with the type of experts, the type of counsel, and what has to be done in the CAT for that to immediately transfer to some of those. So it's a great endeavor. It might have to come with other machinery around it.

Charlie Rooke:

The last topic I wanted to talk about, and consciously probably got five minutes or so to go, is we've looked so far at the last 10 years. I wonder whether everyone can get out their crystal balls and try to predict where the next 10 years might be heading. Pat, I don't know whether we could start with you, some sort of future predictions.

Patrick Teague:

Sure. Well, almost to repeat what I was saying earlier, it'd be interesting, post-Evans in particular, and seeing how things continue to shake out this year with certification judgements particularly focusing on opt-in versus opt-out question. Whether you end up with a split between a kind of consumer track that's always opt-out, but very heavily scrutinized on things like distribution and take-up, and whether there's a sort of commercial track where the battle is really about whether a class should have to be certified on an opt-in basis as opposed to opt-out, but that is scrutinized more on merits and proportionality. So that's just not necessarily that it would turn into kind of two regimes operating under a single umbrella, but there does seem to be quite now the potential for a bit of a dividing line between those types of claims.

And again, to repeat, the DBT consultation. If it goes ahead broadly as drafted, could play a role in, in formalizing to an extent that sort of split. So it would just be interesting to see what sort of claims are brought in the immediate future and how those are dealt with, particularly after DBT consultation is settled and the law has changed.

Belinda Hollway:

I'm always the optimist, and I think that both Walter Merricks and Mark McLaren are gonna do very thoroughly good jobs at distributing the damages available to them. I think Walter Merricks is gonna find ways to get that, you know, 45 quid into the pockets of hundreds of thousands of consumers. And I think Mark McLaren, not so sure about the consumer end of that case, but I think when it comes to returning money to the public sector who bought cars and to SMEs and big businesses, I think that should be very successful. And I think if those both succeed, I think it's going to cause a lot of the skepticism about the regime and the nervousness that we see, even by the CAT itself, to fall away. I think we need some proof in the pudding and the eating, as it were.

And once we get that, once we tick that box, I think then we can really start to move these things forward, recognizing that it took a while to get there, but this regime can get money back to the people who are entitled to that money. Because let's keep in mind, this is not just a fascinating intellectual exercise for lawyers. This is about trying to get money away from the wrongdoer and into ideally the victims of the wrongdoing, or at least a worthy cy-près cause in the space.

Craig Arnott:

Absolutely endorse that. I think there will be proof in the pudding. I will say that the financing structures around that will remain under a very significant pressure. I think that they won't be the same in 10 years time as they are today. I think that there will be evolution. And I think a lot of that is going to be driven by something at the core of all this, and that is the costs of the justice system in England and everywhere around the world, but certainly in England, are too high. And ultimately, governments have to be able to address that, as does the private sector. But the amount of those costs, and what that means in England in particular, is that you don't just have the cost, you've got the adverse cost solutions that you need as well, is going to mean that the finance sector remains under very considerable pressure to provide solutions.

Those solutions will be there, but there's going to be a lot of evolution along the way.

Charlie Rooke:

Well, that's a very positive note on which we might draw stumps. It's been a really interesting discussion, and I hope that it's been interesting to those who've dialed in. I'll just conclude by saying thank you to our panelists, Patrick Teague, Belinda Hollway, and Craig Arnott. And thank you again for everyone for joining. And with that, I think we will end the webinar.