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The need of introducing the opt-out class action to England

The current English collective redress system has certain shortcomings, and in particular, a lacuna in providing redress for victims whose claims are not economic viable on their own, which amounts to effectively deprive their rights of access to court. It is necessary to introduce the opt-out class action into the English system due to its unique advantages. The criticisms against the opt-out class action are not features attached to the procedure per se and even if so are not reasons good enough to denounce the procedure in its entirety, as they can be cured by certain mechanism, in particular through a certification process with a preliminary merit screening.

Two types of claimants of the collective redress system

Collective redress system is needed for victims of mass harm mainly for two reasons, which correspond with the fist two fundamental objectives Lord Woolf raised for English multiparty litigation regime in his final report of Access to Justice. The first reason is that some of the claims are too small to be economically viable on their own, but if combined, they could constitute a very large sum. In this regard, the collective redress system is needed because of the fundamental concern of fair trial, inter alia, right of access to court. The second reason is that even if claims are economically viable on their own, to try them individually would consume too much judicial resources, and the collective redress system is needed here for concerns of economy. J.C. Coffee Jr has categorized these two types of claims as Type A claims (economically viable on their own) and Type B claims (not economically viable on their own). To make the distinction here is very important, as the different types of claims would affect the choice of the most appropriate collective redress system. However, it also needs to be noted that in practice, claims in a group litigation are mostly mixture of both types.

Shortcomings and lacuna in the current English collective redress procedure

English system offered two methods for pursuing a multiparty litigation: the representative action under CPR Pt19.3 and the Group litigation order (GLO) under CPR Pt19.

The representative action is closer to an ‘opt-in’ class action in the sense that it does not require each claimant to issue a separate claim in order to benefit from the fruit of the group litigation. However, as the court adopted an extremely narrow interpretation of the ‘same interest’ requirement, even to the extent to establish a ‘separate defence test’, the representative action has been rendered more or less useless, except for claims with the same interest in the strict sense, i.e, claims of joint beneficial entitlement to property.

Comparing to the representative action, the GLO order has a broader scope, as it can be used for claims give rise to ‘common or related issues of facts and law’. However, its requirement that each claimant must issue a claim form in order to enter into the Group Register and benefit from the fruits of the group litigation mean that all claims remained as separate claims, and are merely managed in an co-ordinated fashion under the GLO, which rendered the GLO no more than an case management tool.

In other words, the English multiparty litigation system is either only effective in a very limited scope, or is merely a case management tool for the courts, and thus has a lacuna in providing effective collective redress for mass harm, in particular, for victims whose individual claims are not economically viable on their own (Type B claimants). As concluded by the Civil Justice Council in its Final Report to the Lord Chancellor in 2008, the existing procedure does not provide sufficient and effective access to justice for a wide range of citizens, particularly consumers, small businesses, and employees, who wishing to bring collective or multiparty claims.

Advantages of introducing an opt-out class action

The class action scheme, either based on “opt-in” or “opt-out” model (or both), can provide a more effective redress for victims of mass tort. Many jurisdictions of the world have already adopted the class action scheme, e.g., US, Australia, Canada, and even European counties like Sweden, Spain, Portugal, Denmark and Norway.

But England has not yet adopt a class action scheme. Despite the Civil Justice Council’s recommendation in its Final Report to the Lord Chancellor that subject to court certification, collective claims may be brought on an opt-in or op-out basis, the government insisted that the appropriate model for representative actions should be considered on a sector-by sector basis, rather than adopting a full opt-out model.

Comparing with the GLO procedure and the opt-in model class action, the opt-out model has two unique significant advantages which make it the most suitable mechanism for providing collective redress, in particular, to victims of mass harm whose claims are not economically viable on their own (Type B claimants), and who practically has no access to court under the current English system.

1. Access to court for claimants

Firstly, in terms of access to court, the opt-out class action provides fewest barriers and thus is in alliance with Lord Woolf’s first objective. Under the GLO procedure, the use of group register and the requirement of issuing separate claim forms in order to enter into the register is a huge procedural and financial barrier to access to justice, especially for type B claimants. It was the main reason why in the Emerald v BA case, the claimant sought the representative action, instead of a GLO order, as at least the representative action does not require each represented party to issue own proceeding, although as the judgment in that cases demonstrates, the court is still adhered to the narrow interpretation of ‘same interest’ requirement in the representative action.

The opt-in model class action will not require each member of the class to issue own proceedings, but still contains considerable barriers to court, for example, the need to locate, communicate with the prospective class members. In addition, in an Australian High Court case, Campbells Cash and Carry Pty v Fostif Pty ltd, it was held by the majority that opt-in class action can not be brought for ‘unidentified class members’. This requirement of naming of all members of the class at the certification stage, would entail considerable cost and time in locating and communicating with prospective class members, if it is possible at all.

2. Resolving the full extent of liability for defendants

The opt-out model also offers the defendants with a particular advantage of resolving the full extent of their liability. This will also foster settlement. Under the opt-in model and the GLO, the defendants would potentially face further individual or group litigation from the victims who did not opt-in in the original proceeding.

Arguments against introducing opt-out model in England and rebuttal

Despite the advantages an opt-out procedure could offer, which would complement the current English collective redress system, and its adoption in many jurisdiction of the world, the suggestion of introducing it into the English system has always been met with strong opposition, mainly because of the fear of introducing a US-style litigation and the underlying belief that the entrepreneurial lawyers are the only real winner of an opt-out class action.

The main arguments against an ‘opt-out’ class action are discussed below. However, I think these “shortcomings” are either features attached to the legal system of the particular country, or intrinsic for any collective redress system, rather than attached (only) to the opt-out class action procedure itself.

1. Invasion of litigation autonomy

The most obvious criticism against opt-out model is that it fails to respect people’s autonomy and is a potential breach of the fundamental right to fair trial. In other words, the right of access to court equally contains a right not to go to court.

However, the right to fair trial is only absolute in the sense that, if having made all possible allowance for legitimate and proportionate limitations, the court concludes that the right to fair trial has been infringed, there can be no justification of derogation from the requirements of fairness. It would be a mistake to suppose the right to fair trial are absolute in any other sense, as it always calls for a degree of evaluation. Moreover, the right of access to court is one of the implicit rights of the right to fair trial which is not absolute ad may be subject to limitations that are imposed for a legitimate aim or public interest, for example, to provide redress for victims of mass harm.

Freedom is also never an absolute right. The restriction of individual freedom is necessary for providing legal order and is often essential in any effective collective decision making process. Even democracy is the rule of the majority will, at its very basics. We see the restriction of individual freedom in the corporate management all the time. To have an effective, functioning collective redress system, especially on a large scale, will inevitably involve forsaking some part of party autonomy. Lord Woolf’s third objective for the multiparty litigation procedure, i.e., to balance between party rights to pursue or defend cases individually and the interest of a group of parties to litigation in an effective manner, practically recognized this fact.

Moreover, the restriction of party autonomy is not limited to the opt-out model, the opt-in model and the GLO also affect the party autonomy. Even claimants that were not inside the GLO proceedings may be affected by it in the sense that the court may stay their proceedings until after the completion of the group action and might require the claimants be bound by the generic decisions of the group action (Woolf C.J. in Taylor v Nugent Care Society). And the ‘option’ offered by the ‘opt-in’ system may not be an option at all, if the individual claim are not economical viable on its own – which is precisely why a class action is needed in the first place.

2. Importing US style litigation

The underlying fear of importing US style litigation might be the most important reason for the opposition against introducing an opt-out procedure to England. The criticism against the US style class action are mainly the following: it places unfair pressure on the defendants; it encourages entrepreneurial lawyers to bring trivial legal breaches and even unmeritorious claims designed to extract a blackmail settlement; it has a very high litigation costs; and the recovery by class members is very limited, even if they win.

However, none of the criticisms is a sufficient reason for denying opt-out class action in its entirety.

First of all, some of the problems are not necessary or inevitable problems of class action itself. They are either associated with or exacerbated by the US legal system and as the Civil Justice Council noticed in its final report, there are significant differences between the US and English legal systems, and some factors gave rise to the problems mentioned above simply do not exist in England. For example, the cost-shifting rule will be a significant disincentive for litigants in England to bring unmeritorious claims; the narrower disclosure obligation in England will reduce the litigation costs significantly; the absence of jury trial and restricted availability of punitive damages will reduce the pressure faced by the defendants; the limited availability of contingency fee agreements in England will reduce lawyers’ financial interests in the action; and the broader case management power of the court due to the post-Woolf reforms will ensure a better balance between the interests of all parties involved.

Secondly, even if the problems are associated with the opt-out class action, there are mechanisms we can employ to cure the defects. The fear of potential abuse is never a reason good enough to abolish an otherwise sound procedure in its entirety. To do so is no different than refuse to eat just because there is a chance of being choked. In fact the US has already taken steps to introduce major reforms, e.g., the Fairness in Class Actions Act of 2005. The most important mechanism to prevent abuse of class action is the court certification process. It is a common requirement of all class actions currently in force. By considering if the threshold criteria have been met for issuing a class action and the suitability of a class action, the court can, among other things, have a chance to conduct a preliminary merits review of the claims. This will significantly ‘cure’ or ‘reduce ’ some of the intrinsic disadvantages of an opt-out class action, e.g., unfair pressure imposed on the defendants by aggregating many actions and the bandwagon effect caused by the influx of type B claimants. The sharp comparison between the Chrzanowska v Glaxo Laboratories case and the AB v John Wyeth & Brother Ltd case clearly demonstrates the utility of having a preliminary screening of the merits of the claims.

Thirdly, the limited amount of recovery received by class members is a reflection of a broader problem with the cost rules which is simply exacerbated in class actions due to its sheer scale, and the absence of a traditional layer-client relationship. This problem calls for reforms of the cost rules in a broader scale, and can be improved by giving the court more power in balancing group members’ interests. In view of the post-Woolf reform, this will be easily achieved in England.

3. Public bodies are better placed to achieve collective redress

The objection to the US model of class action is deeply rooted in the ideological belief that it should be the public bodies, rather than private law enforcement, to offer collective redress. But this is an argument with false logic. Collective redress is the remedy for failures of public bodies and regulations. The fact that public bodies and regulations should provide protection against mass wrongdoers does not mean that when they failed – which is very possible – the public should be deprived of a remedy through private law enforcement. This is no different than depriving the public of their right of access to court.

However, it should be noted that should England is to introduce an opt-out model of class action, particular caution needs to be paid to its combined effect with the cost-shifting rule, which means that the lead claimant could be potentially liable for the defendants’ legal costs, should he lose. This will have a major chilling effect for any potential class action.

Underlying policy

All in all, multiparty litigation presents the court and parties with intense difficulties and to have an effective system will inevitably involves compromises between conflicting fundamental principles like access to justice, fairness, right to participation on the one hand and economy and principle of proportionality on the other. The discussion surrounding the advantages and disadvantages of an opt-out class action procedure is really a fundamental policy question, i.e., the purpose of the collective redress. If it is purely for compensation, then the need to provide access to court for type B claimants through the opt-out procedure is not paramount, if not completely unnecessary, due to the limited or nominal recovery for the members; but if we recognize that collective redress also has other alternative ends, like deterrence, then an opt-out procedure is a vital components of the collective redress system and is currently missing in the English collective redress system.


Image source: Flickr

Xin Zhang

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