Court of Appeal allows Road Haulage Association to continue its UK class action

The Court of Appeal has upheld the Competition Appeal Tribunal’s (CAT) opt-in collective proceedings order (CPO) in a trucks cartel UK class action. The CAT appointed the Road Haulage Association (RHA) as the representative of a class comprising UK buyers of new and used trucks. The RHA is seeking compensation for increased prices that those class members allegedly paid as a result of truck manufacturers’ unlawful price co-ordination.

In its first instance decision, the CAT favoured the RHA’s CPO application over a rival one brought by UK Trucks Claim (UKTC). The key reasons why the CAT chose the RHA were:

• the RHA’s proposed class members included purchasers of used and new trucks;
• the RHA wished to bring proceedings on an opt-in basis. That meant that it would have access to class members’ data, which would strengthen its claim. In contrast, the UKTC proposed that the claim proceed on an opt-out basis; and
• the methodology that the RHA put forward for calculating loss was more conventional and well established than the UKTC’s novel methodology.

Issues on appeal

The main issue on appeal was whether the CAT was wrong to certify the RHA as the representative of both new and used truck buyers. The UKTC and two of the truck manufacturers argued that there was a conflict of interest between those two sub-classes, which meant that the CAT had erred in its appointment.

The Court of Appeal held that while conflict of interest existed, it could be managed through information barriers and separate funders and representation (including solicitors, counsel and experts). Accordingly, the RHA was allowed to continue as the sole class representative.

The Court of Appeal also dealt briefly with three more minor matters.

First, the UKTC sought to challenge the CAT’s preference of the RHA’s opt-in proceedings over its own opt-out CPO application. The court said that all of UKTC’s arguments sought to challenge the CAT’s decisions on matters that were “quintessentially multifactorial assessments by a specialist tribunal with which this Court would not interfere unless there were an error of law”. As such, the UKTC was refused permission to appeal on this point.

The UKTC also wanted to argue that the CAT should have stayed, rather than dismissed, its CPO application, but the court saw this as a case management matter that the UKTC had failed to deal with rather than a matter for appeal.

Two other truck manufacturers challenged the CAT’s alternative conclusions that the UKTC had brought a workable CPO application, arguing that the UKTC had failed to come up with a methodology for modelling truck buyers’ pass-on to their customers. They also submitted that the UKTC’s novel methodology for establishing loss was implausible. These were both moot points because the UKTC’s application had been unsuccessful. Nonetheless, the court confirmed that the CAT had not made any error of law. In particular, the court said that:

• the CAT was entitled to certify an application that had not grappled with downstream pass-on by the class because that was something that the CAT could deal with through case management; and
• that the CAT’s decision about the methodology’s plausibility was not an appropriate matter for appeal.

As a preliminary matter, the court also considered whether the correct route for the challenge was by way of appeal or judicial review. As in Evans, which was handed down at the same time, the court decided that substantially all of the issues could proceed by way of appeal because they concerned the CAT’s refusal to certify the UKTC’s proceedings in whole or in part.

The RHA cannot stay (in) neutral

The conflict of interest between new and used truck purchasers arose because one of the ways that the latter were said to have suffered loss was because new truck purchasers would (on resale) have sought to pass on the inflated costs of their trucks to used truck buyers.

The CAT concluded that this could be managed by the RHA following its economic expert’s advice as to whether the overcharge had in fact been passed on to used truck purchasers. The RHA would also have to communicate to class members that this was what it was going to do. Following that communication, the CAT said that class members that opted in to the claim could be taken to have consented to the RHA acting against their interests if so advised.

The UKTC and truck manufacturers claimed that this conflict of interest meant that the RHA’s appointment did not satisfy the statutory test of being “just and reasonable”. The truck manufacturers also argued that the combined claim did not meet the suitability and common issues requirements for certification as a class action.

The Court of Appeal partially overruled the CAT on this point, holding that case management steps were insufficient to manage conflict between class members’ interests. It said that the CAT’s solution was inappropriate because the expert’s answer would be highly sensitive to assumptions and data input.

However, the court did reject the UKTC’s submission that two class representatives would be needed to manage the conflict. This was a “recipe for confusion and unnecessary expense”, particularly where one class representative was acting on an opt-out basis while the other was acting on an opt-in basis. Instead, the conflict could be managed by the RHA maintaining separate teams, divided by an information barrier, for each sub-class of truck purchasers. In doing so, the court confirmed that a class representative like the RHA did need to act in class members’ best interests where there was an identifiable conflict (although it recognised that there would be some situations where a class representative can act in the majority’s best interest without significantly harming the minority).

The RHA would also need to appoint separate solicitors, counsel and experts for each sub-class. The court also held that different funders would need to finance the sub-classes because, for example, of a funder’s discretion to fund an appeal, which it may be incentivised not to do where one sub-class had won on a point at the other’s expense (since the allocation of damages between the sub-classes may be a zero-sum game from the funder’s perspective).

Analysis

The Court of Appeal’s decision shows that the opt-in regime lives on, despite its parallel decision in Evans to overturn the CAT’s decision (which found the claim should be certified on an opt-in basis only) to certify the FX class on an opt-out basis. The parallel decisions suggest that an opt-in claim will be preferred where the PCR can show it is practicable and viable to proceed on an opt-in basis (17,500 class members had signed up or registered an interest with the RHA before the CAT hearing), whereas an opt-out claim will be preferred where an opt-in claim wouldn’t be viable (the PCRs in FX showed the claims would stall if made on an opt-in basis).

The Court of Appeal’s decision about how the RHA needs to manage its conflict of interests sets out a more formal approach than the CAT’s and makes clear that this was a fundamental issue that needed to be considered at the certification stage. However, the court’s solution, while pragmatic in allowing the RHA to continue its claim, does raise further questions (and further costs). For example, it is unclear how this approach will work for class members that purchased both new and used trucks – will they fall into both sub-classes, or will there need to be an early determination as to which sub-class is most suitable? What will happen in other cases where a PCR seeks to include class members from different levels of the supply chain but is unable to put information barriers in place? Our prediction is that there is more to come with regard to the question of conflicts.

The court’s judgment also showed that it seeks to support the CAT’s authority by emphatically dismissing the parties’ attempts to challenge other discretionary and case management matters. The court emphasised that these were not properly the subject of appeals or judicial review and refused to grant permission for appeals on these points.

This appears to reflect a view that CPO certification jurisprudence is beginning to settle down. In light of its judgments in this case and in Evans, the Court of Appeal has indicated that it hopes that the CAT will be able to hold shorter hearings and produce shorter rulings on such certifications in the future.

The road ahead for the RHA

In the present case, however, the Supreme Court’s recent finding that the RHA’s litigation funding agreement needed to satisfy the statutory requirements of a damages-based agreement means that the class representative will need to restructure or comply with those requirements before the case can move forward. With the possibility of that outcome in mind, as well as the need for the RHA to make arrangements to manage the conflict of interest between new and used truck purchasers, the appellate courts seem to have put the brakes on the proceedings for the time being.