On 10 November 2021, the Supreme Court refused Richard Lloyd’s request for permission to serve out of the jurisdiction proceedings against Google LLC.
Mr. Lloyd alleged that Google had unlawfully processed data causing damage or distress to around 4 million iPhone users. This was said to be contrary to section 13 of the Data Protection Act 1998.
The case related to tracking cookies implanted on UK iPhones by Google Maps between late 2011 and early 2012. Google admitted that it had used tracking cookies without authorisation. In August 2012 it paid a fine of $22.5 million to the U.S. Federal Trade Commission for the same practice in the U.S.A. Later in 2012, Google paid $17 million to settle a class action lawsuit based on the same conduct.
Mr. Lloyd – a former executive of consumer rights organisation Which? – sought to bring a claim as a representative of around 4 million affected U.K. iPhone users. Mr. Lloyd needed permission to serve the proceedings against Google in Delaware.
Mr. Lloyd argued he could bring the claim as a representative under CPR 19.6 because every claimant would receive a minimum flat rate damages payment and therefore each of them had the “same interest” in the claim. On his case, there was therefore an issue common to the proposed claimants that would not require any consideration of their individual loss.
Mr. Lloyd’s argument was that “damage” under section 13 of the Data Protection Act 1998 need not be individually proven if the claimants could show that they had suffered distress or any form of financial loss as a result of the unlawful data processing. Mr. Lloyd argued that the fact that the individual claimants had lost control over their data was enough to count as “damage” for the purposes of section 13.
Contrary to Mr. Lloyd’s case, the Supreme Court held that in order for the case to proceed to a trial, it would be necessary to perform an individual assessment of damages to each of the proposed claimants. The Court held that the approach argued by Mr. Lloyd would under compensate some claimants whilst over compensating others. As such, there was no basis on which the proposed claimants had the “same interest” and therefore the case could not proceed as a representative action.
Accordingly, the Supreme Court refused permission to serve the proceedings out of the jurisdiction on the basis that there was no reasonable prospect of success, thereby bringing the case to an end without trial.
English approach to class actions
There is no general right to bring a class action in England and Wales. Outside of action by a regulator, the only two routes for collective proceedings in England and Wales are either:
- A claim using the representative procedure under Civil Procedure Rule (“CPR”) 19.6 which allows a claim to be brought by, or against, anyone with the same interest and which may be pursued by a representative on behalf of all parties with the same interest; or
- If the case concerns competition law, an opt-in or opt-out collective proceedings order under section 47B of the Competition Act 1998.
Beyond these two options, the only way to bring a case on behalf of a large group of similarly situated claimants is to make each individual claimant a party to the action. CPR 19 and Practice Direction 19B then allow such cases to be managed as “group litigation” via a Group Litigation Order (“GLO”).
Examples of GLOs in England include the case of sub postmasters who claimed damages from the Post Office for wrongful imprisonment as a result of a defective branch management computer system.
Other examples include the ongoing GLO claims against Volkswagen for the alleged falsification of car engine emissions data. In addition, it has been suggested that GLOs may be used to manage potential claims against the investment platform Hargreaves Lansdown and Link Asset Management over the collapse of the Woodford investment funds.
GLOs are not the same as class actions in the U.S.A., Canada and other jurisdictions. Whilst they allow some issues to be decided by trials on specific representative issues, they are significantly less flexible in that the ordinary CPR rules apply to the proceedings. This can make it extremely cumbersome, for example, to add and remove parties, which usually triggers the payment of court fees. Each individual claimant must also sign-up to the funding terms agreed with any third-party funders.
Whilst some of the logistical difficulties in these claims can be overcome by using websites that deal with the sign-up process, the fundamental issue remains that the CPR is not currently designed to cope with representative actions brought on behalf of large groups of claimants.
The route in section 47B of the Competition Act 1998 is a more effective means of pursuing collective redress because it is a bespoke process designed to allow a Class Representative, once certified, to take decisions on behalf of the entire class.
Section 47B claims are, however, only possible in relation to breaches of competition law regarding unlawful agreements that restrict, distort or prevent competition, or abuse of market dominance.
The recent certification of the Merricks v. MasterCard claim as an opt-out collective action has led to further similar claims being certified. It remains to be seen how the Competition Appeal Tribunal, which has first-instance jurisdiction over section 47B claims, will deal with the trial and settlement of these matters.
In rare and specific cases, it is possible for a regulator to step forward to take action on behalf of a class with similar interests. The Competition and Markets Authority, for example, has recently taken action against housebuilders who sold leasehold properties with doubling ground rents.
In 2020, the Financial Conduct Authority successfully brought proceedings against eight insurers who wrote business interruption insurance policies. The aim of the case was to obtain declaratory relief determining whether the policy wordings covered the COVID pandemic that broke out in the U.K. in early 2020.
Does it matter that there is no group litigation in England
The lack of a widespread means of pursuing collective redress can be said to favour large companies over individuals. Often when a large corporation breaches the law it will cause only modest damage to potential claimants on an individual basis. The costs of bringing an action for redress will frequently outweigh any damages that may be recovered. Arguably, this restricts consumer and small business access to justice because there is no viable means of enforcing rights to recover modest damages, or where declarations or injunctions are the form of relief required.
The lack of effective collective redress means that companies can act with a certain degree of impunity because they know that there is unlikely to be any viable means to pursue them.
Collective claims offer a way to aggregate these modest claims together such that a legal team equivalent to that available to a large company can be set to work on enforcing the law. The aggregation of claims allows third party funders to take a view as to whether they wish to finance claims which individuals are unlikely to be able to pursue alone.
In England, there has been an entrenched historical preference against third parties being involved in litigation. Until as recently as 1967 it was a crime to become involved in a claim without having a legitimate interest in proceedings (maintenance), or to pay toward the costs of a claim in exchange for a share of the proceeds (champerty).
Reforms under the Courts and Legal Services Act 1990, Access to Justice Act 1999 and Legal Aid and Sentencing and Punishment of Offenders Act 2012 have gradually reformed the market to allow conditional fees, contingency fees and to open up litigation to commercial third-party funders.
The view that third parties should not become involved in litigation for commercial gain appears to have been a factor in this case.
The judge at first instance refused permission to serve out saying that “it would not be unfair to describe this as officious litigation, embarked upon on behalf of individuals who have not authorised it, and have shown no interest in seeking any remedy for, or even complaining about, the alleged breaches.”
The Court of Appeal was willing to grant permission to serve out because, otherwise, the claimants would have no realistic way of pursuing their claims against Google.
The Supreme Court expressed no view on whether representative claims should be brought for the benefit of commercial litigation funders, or lawyers acting on contingency fees.
In English legal circles, there is often distaste expressed at the thought of anything that would approach the highly litigious class action culture of the U.S.A. The first line of the Supreme Court’s judgment notes that this claim was backed by Therium, a large litigation funder.
However, the section 47B procedure shows that it is possible to devise a system of collective proceedings that balance out third party funders’ desire for a return against the interests of access to justice.
In section 47B proceedings, the funder’s return is only paid from undistributed damages after class members have claimed their share of any award or settlement. The funder therefore takes the risk that they may not be paid at all, even if the case is successful. Damages Based Agreements and success fee uplifts in Conditional Fee Agreements are not enforceable in section 47B proceedings, so it is not possible for law firms to take a contingent stake or an uplift in such a case.
That said, the English section 47B approach is quite different to U.S. class actions where the funder and contingently remunerated lawyers are paid before class members receive their share of the damages.
In November 2008, the Civil Justice Council recommended to the Lord Chancellor that the government should introduce a generic right of collective action in English law. The 10 recommendations made in 2008 look quite similar to the section 47B action introduced in 2015.
In its 2009 response to the Civil Justice Council’s recommendations, the government rejected the idea of a generic right of collective action, saying it would be necessary to proceed on a sector-by-sector basis to assess the potential economic benefit and economic costs that may flow from the introduction of such a system.
To date, the section 47B action is the only new form of collective procedure that has been introduced.
It is increasingly common in a data driven world that people may experience modest harm from data breaches, as was alleged in Lloyd v. Google. Other areas of economic activity involving consumers and small businesses dealing with large companies, such as energy suppliers, insurance and other financial services and fast moving consumer goods, carry the same potential for larger and more powerful actors to potentially cause modest harm to a large class of individuals.
It is unsatisfactory that the law does not allow affected claimants an effective means of redress. The old saying is that justice delayed is justice denied. Perhaps it is time to consider collective actions as a means of addressing the problem of justice being available, but only if you can afford to get through the doors of the court.