Will departure from traditionally restrictive approach to ‘same interest test’ in Civil Procedure Rule 19.6 lead to greater access to justice?

The parties and background

Commission Recovery Limited (CRL) commenced proceedings against Marks & Clerks LLP (Marks & Clerks) and Long Acre Renewals (A Firm) (Long Acre Renewals).

Marks & Clerks is an intellectual property law firm. Intellectual property right holders pay renewal fees in the jurisdictions in which the rights are registered.

CRL alleged:

• that Marks and Clerks referred its clients’ intellectual property right renewals to a renewal service provider, CPA Global Limited (CPA); and
• in return for those referrals, CPA would pay Long Acre Renewals (which was a partnership established by former and current partners of the Marks & Clerks) a commission which was not disclosed to Marks & Clerks’ clients (a “secret commission”).

CRL was not a client of Marks & Clerks. CRL brought the claim on two bases:

• as an assignee of claims against the Defendants of one of the former clients of Marks & Clerks, Bambach Saddle Seat (Europe) Limited (Bambach) assigned any and all legal claims and property rights it had in connection with the secret commissions made to Marks & Clerks to CRL; and
• as a representative under CPR 19.6 of all current and former clients of Marks & Clerks who had commission-related claims against the Defendants. CRL pleaded the case based on the circumstances of Bambach, arguing that Bambach’s situation was representative of numerous other companies that had been impacted by Marks & Clerk’s conduct.

CRL alleged that Marks & Clerks hid these commissions from its clients, breaching its fiduciary duty to its clients to act in their best interests.

The Defendants argued that:

• the assignment from Bambach to CRL was unlawful, invalid and champertous;
• CRL should not act as representative pursuant to CPR 19.6(1) because the ‘same interest’ requirement in CPR 19.6(1) had not been satisfied; and/or
• the Court should exercise its discretion to direct that CRL should not act as representative further to CPR 19.6(2).

Decision

Assignment of case

Justice Knowles stated that secret commissions in the hands of an agent constitute the property of the principal and is held by the agent on trust for the principal. The Court held that the assignment from Bambach to CRL included an assignment of property, which is not a champertous assignment (as the law has well established).

The fact that Bambach assigned ancillary or incidental rights of action, did not make it an unlawful champertous assignment of a bare right to litigate. The assignment was considered valid.

‘Same interest test’

CPR 19.6 allows a representative action to be brought by, or against, one or more persons as representatives of any others who have the same interest in the claim.

The one condition that must be satisfied before a representative claim may begin or be allowed to continue is the ‘same interest’ test. The ‘same interest’ test requires the representative to have the ‘same interest’ in the claim as the persons represented.

In order to satisfy the ‘same interest’ test, Justice Knowles stated that what matters is to ascertain whether the differences between individual class members creates a prejudicial conflict between them. So long as the advancing the case does not result in conflict, or prejudice the position of class members, there is no reason in principle why all class members should not be represented by the same person.

The Defendants argued the claims were not sufficiently similar. They maintained that the claims did not arise from the same set of events occurring at the same time. The Defendants submitted that each claim was a separate claim arising from a separate contract entered into with Marks & Clerks at different times. What’s more, they said, the amount paid by CPA was different in each case and ultimately the proposed class size was unclear and uncertain.

Justice Knowles found those differences, complexities and difficulties in the claims did not prejudice the position of other class members, nor the suitability for representative proceedings and ultimately the proposed class could be ascertained. He held the ‘same interest’ test does not require claimants to have identical claims or interests. It was obvious that the proposed class was only intended to comprise those to whom the commission was not disclosed. While it was preferable that the class members represented be clearly defined, the fact there was insufficient information to establish the exact scope of the class would not – without more – prejudice the interest of one class member at the expense of another. The proposed class was sufficiently certain and had the same interests notwithstanding certain differences.

It also did not matter that a range of remedies were available to class members, Justice Knowles held this would not necessarily prejudice the interests of one class member over another. Further, the fact that class members were in different positions on limitation period did not affect the fundamental cause of action, nor did it prejudice the interests of some class members to the detriment of others.

The Court held there was no absence of ‘same interest’ and therefore considered it was appropriate for the claim to proceed on an opt-out basis under CPR 19.6.

Interestingly for litigation funders, Justice Knowles held that claims under CPR 19.6 could see mechanisms put in place to allow reasonable costs of the recovery achieved to be paid before disbursement to the members of the class.

Will this lead to a greater access to justice?

The Court’s decision has removed obstacles that have normally prevented litigants from bringing representative claims.

The decision recognises the practical challenges involved in representative proceedings. Rather than stymie proceedings in the first instance due to (for example) a lack of identifiable class, the flexible use of CPR 19.6 allows litigants to bring representative cases that they might otherwise not have been able to. This ought to lead to greater access to justice for many claimants who have suffered a legal wrong and share that interest with others.

By not trying to resolve every issue in dispute, Justice Knowles has ensured that potential litigants are not precluded at an early stage from bringing a representative claim. He left many decisions to case management later in the proceedings and focused on the broader issues at hand, which going forward should allow potential litigants the opportunity to bring legal proceedings despite differences in claims.

Further, the decision gives effect to the overriding objective of the legislation to enable the courts to deal with cases justly and recognises that CPR 19.6 is likely the only regime that would give redress to Marks & Clerks’ clients. As Justice Knowles concluded: “if it’s this or nothing, then better this”. This ought to give potential claimants confidence that the Courts are open to being flexible in its application of CPR 19.6 and are more inclined to allow representative claims to proceed.