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High Court gives guidance on the selection of test claimants in group litigation

  • United Kingdom
  • Financial services disputes and investigations
  • Litigation and dispute management

17-08-2020

Lancaster and others v Peacock QC [2020] EWHC 1231 (Ch)

Group litigation

  • This concept covers collective legal actions, brought by a group of claimants who allege to have suffered the same or similar loss, arising out of the same or similar facts. In theory, the Civil Procedure Rules enables any number of claimants to collectively pursue their claims. For example, where it is convenient to dispose of them within the same proceedings (CPR r.7.3), representative claims for ‘same interest’ matters (CPR r.19.6) or group litigation orders for ‘common or related issues of fact or law’ (CPR r.19.10-19.15).
  • It is becoming increasingly common for claims to be managed together under CPR r.3.1(2)(h). Each claim will likely overlap to a large extent, both factually and legally. It is considered more desirable from a claimant’s point of view to share the costs, risks and knowledge to pursue their claims, where possible.
  • One crucial part of group litigation is the need to select a pool of ‘test claimants’.

Facts of the case

  • A total of 123 claimants brought claims in negligence against the Defendant barrister, Mr Jonathan Peacock QC, who in 2007 provided tax advice to the promoters of a film finance investment scheme known as Invicta 43. 33 of the claimants also brought claims against an intermediary financial adviser, Canaccord Genuity. The two claims are case managed together under CPR r.3.1(2)(h).
  • At an interim hearing, the Court was required to decide on the appropriate procedure for selecting an initial sample of test claimants.
  • A dispute had arisen because of two competing proposals; one from the claimants, and one from Mr Peacock QC.
  • This claimants’ process would involve: 
    1. Each of the claimants being sent a questionnaire, with agreed questions, asking about their particular circumstances and claims; 
    2. A sample group of claimants would then be chosen by the parties having regard to the answers received; and
    3. Limited disclosure would then be provided by the sample group (and to facilitate final selection of test claimants by the parties).
  • Mr Peacock QC proposed that there should be no two-stage process. Instead, all 123 Claimants should provide responses to the questionnaires and disclosure at the same stage. It was argued that this would not put the claimants to much further effort and would reduce the timetable for selecting the test claimants.

The Decision

  • Mr Justice Fancourt and Master Kaye gave a joint judgment which found in favour of the claimants’ proposal subject to certain counterbalances. In support of their decision the judgment notes:
    • The circumstances surrounding COVID-19. The Court noted that many individuals are experiencing difficulties with accessing information relating to their personal and business affairs. It was a more complex exercise to require all claimants to provide the relevant documentation in the current climate.
    • There were challenges arising from the need to review documents for legal professional privilege in relation to tax advice. The potential need for individual advice on that area made Mr Peacock QC’s suggestion burdensome.
    • The two-stage process would actually result in a broader set of documents being provided to Mr Peacock QC. The Court considered the larger pool of documents made the process fairer for all parties.
  • However, the Court was keen to ensure that the process was fair for Mr Peacock QC. Some “counterbalances” were to be built into the process to achieve that objective, including:
    • A greater number of sample test claimants. This was particularly appropriate because Mr Peacock QC had had no direct relationship with the claimants. The Court considered that it was appropriate to have 36 sample claimants (including 12 from the Canaccord matter) and 12 final test claimants (including 4 from the Canaccord matter).
    • A slightly truncated timetable to ensure that the litigation proceeded swiftly.
    • Some modifications to the questions to be included in the questionnaires.
  • The Court also provided some principled guidance as to the purpose of test claims. It was stated that this is twofold, namely:
    1. “To ensure that issues that are common to all the claimants’ claims can be decided in such a way as to bind them all”; and
    2. “To decide other factual and legal issues where the decision will not necessarily bind other claimants but is likely to give a very clear indication of the way that their cases too will be decided if tried, with the expected consequence that the parties will then be able to settle the remaining claims”.
  • Further, the Court outlined that a broad selection of test claimants, beyond that which is necessary to decide common issues, would “generate sufficiently broad guidance for the likely disposal of all other claims…while at the same time not overcomplicating or encumbering or significantly adding to the cost of the trial”.

Analysis and Practical Advice

  • This judgment offers a rare and useful insight into the Court’s approach to selection of test claimants in group litigation. Selection processes are generally dealt with by the parties in correspondence.
  • Of most interest to those involved in similar processes, is the Court’s view of the purpose of test claims. Test claims should not only determine key common issues but also provide sufficient guidance on the Court’s approach to a range of facts and law to allow the remaining claims to be effectively settled. However, a balance should be applied to avoid an overly complex, burdensome or significantly expensive process.
  • The judgment also demonstrates how the Court will seek to achieve fairness in the test claimant selection process, whether in terms of the numbers, the documents provided or the burden on claimants in providing certain documents. The greater the likelihood of privilege needing to be considered, the smaller the pool of claimants providing such documents will be.
  • When negotiating this process, parties should be encouraged to carefully consider from an early stage:
    1. The questions to be included in test claim selection questionnaires.
    2. What the common issues are likely to be.
    3. Whether the proportion and broadness of test claimants is appropriate given the number and nature of the claims made.
  • Finally, parties should remain mindful of the impact of COVID-19 to any particular issues. This was said to be the principal reason behind the Court’s decision. It remains to be seen whether the Court will require larger pools of potential test claimants to provide documents once the impact of the crisis reduces.