Court of Appeal upholds the CAT's opt-out certification in Le Patourel v BT
Last week, the Court of Appeal delivered its judgment in Le Patourel v BT Group. BT's appeal against the Competition Appeal Tribunal's decision to grant a collective proceedings order (CPO) on an opt-out* basis was unsuccessful.
In a claimant-friendly ruling, the Court of Appeal held that the CAT's opt-out determination was correct and that direct account crediting at distribution stage would be permissible.
Justin Le Patourel (the Proposed Class Representative) is a telecoms consultant who previously held policy roles at Ofcom. He has brought a collective action against BT arising out of a 2017 Ofcom review into BT's charges for residential landline telephone services. Le Patourel claims that BT abused its dominant position by imposing unfair and excessive prices. The standalone claim is brought on behalf of approximately 2.3 million BT customers for aggregate damages estimated at circa £589 million.
Last September, the CAT certified Le Patourel's claim on an opt-out basis. In March, BT's appeal against the CAT's certification decision was heard in the Court of Appeal before Sir Julian Flaux, Lord Justice Green and Lord Justice Phillips.
In its ruling, the Court of Appeal dismissed BT's three grounds of appeal relating to the CAT's opt-out determination and its findings on the method of distribution:
1. The CAT's discretion to order opt-in/opt-out
The Court of Appeal clarified that there is no general presumption in favour of either opt-in or opt-out. The CAT makes the determination of opt-in or opt-out on the basis of all the circumstances of the case and has an unfettered discretion. The starting point is one of neutrality.
BT had argued that exceptionally in this case class members can be identified and contacted using BT's customer records which weighed in favour of opt-in. However, the Court of Appeal held that the CAT was entitled to conclude that if an opt-in were ordered, the take-up could be very limited. It noted the ability of a claimant to convert identifiable contacts into litigants goes well beyond issues of identifiability and contactability. The CAT had examined a wide range of relevant factors such as size of the class in addition to more subjective class characteristics (such as age profile, social class and technical ability). The Court of Appeal did not consider there was a basis in law on which it could interfere with the CAT's specialist conclusions which 'lay squarely within its broad margin of judgment'. Neither was there an error of law in the CAT's findings about the financial viability of the claim absent an opt-out order which it was entitled to make as an exercise of its judgment.
In relation to whether the CAT had erred in its understanding of the concept of 'practicability', it was stated that 'practicability' is simply a matter the CAT is entitled to take into account as part of its overall discretion. The opt-out/opt-in test is 'multifactorial'. This flows from the expressly open-ended nature of the CAT's discretion under Rule 79(3) and the additional matters referred to in that rule are all matters the CAT 'may' (not 'must') take into account.
The Court of Appeal found there was no error of law in the balancing exercise which was well within the CAT's margin of discretion, and dismissed this ground of appeal.
2. The CAT's power to order an account credit
BT had further argued there was an error of law in the CAT taking into account the benefits of an account credit. It was argued the CAT had exceeded its jurisdiction in referring to the possibility of distribution of damages by way of an account credit by BT. BT considered the CAT had no lawful power to order an account credit or make any order other than a traditional award of damages.
The Court of Appeal also dismissed this ground of appeal and found that the CAT was correct to conclude that it had the power to order an account credit. At the appropriate time in the future, the CAT can permit an account credit in the exercise of its case management powers and it is within its power to ensure that funders and representatives are paid (given its broad costs discretion). In any event, the CAT's decision would have been the same even had the CAT concluded there was no power to order an account credit. Going further, and citing Lord Briggs in Merricks, the Court of Appeal commented that ADR could play a part in the resolution of parts of collective proceedings. Proposals as to how best to achieve an informal, mediated, method of distributing the award could include any creative award which the CAT could then approve as part of a Collective Settlement Order (CSO).
3. The assessment of merits in relation to opt-in/opt-out
BT submitted that the CAT had erred in referring to merits in relation to the opt-in/opt-out determination. In particular, BT argued the CAT had erred in concluding the strength of the claims was only relevant to the opt-in/opt-out decision if the claim was 'very weak', even if it could surmount the summary judgment/strike-out threshold. BT considered the CAT had created a test not reflected in the statutory scheme.
In dismissing BT's third appeal ground, the Court of Appeal did not consider that the CAT had intended to invent a new test. Standing back and notwithstanding the ambiguities, the Court of Appeal did not consider that merits played any further role in the CAT's opt-in/opt-out decision after having addressed the merits in determining the claim had a realistic prospect of success. Determining the summary proceedings but then concluding that the merits added nothing additional to the opt-out determination was a course of action open to the CAT. Therefore, that aspect was set aside as irrelevant to the CAT's analysis. The Court of Appeal found the CAT's decision on opt-out was motivated by different conclusions which were all matters within its power to arrive at.
The significance of the ruling
The Court of Appeal's judgment clarifies important questions of principle regarding the CAT's approach to the certification of collective proceedings as either opt-in or opt-out. The ruling marks the first time the opt-in/opt-out determination has been specifically considered at the appellate level. It cements the wide discretion available to the CAT relating to opt-in/opt-out and confirms there is flexibility in the CAT's case management powers regarding distribution.
In what will be seen as a further claimant-friendly ruling, citing Merricks the Court of Appeal reiterated that the principal object of the collective action regime is to facilitate access to justice for those (in particular consumers) who would otherwise not be able to access legal redress. The ruling aligns with the recent trend in favour of certification of consumer claims on an opt-out basis.
Developments in the new area of collective proceedings for competition law damages are continuing apace. Next month, the Court of Appeal will be called upon again to hear an appeal against another collective proceedings order, this time in the case of Gutmann.
In a postscript, the Court of Appeal has invited the CAT to reconsider various points made concerning collective proceedings set out in the Guide, as the CAT's experience of such claims continues to develop. Last month the Government announced it has decided to carry out a further technical review of the CAT Rules, working with the CAT and other interested parties. Revision of the Guide to reflect the CAT's recent experience in collective proceedings - in addition to any specific rule changes - is therefore likely to take place soon.
*An opt-out claim is brought on behalf of all of the members of a defined class except those that choose to opt-out. By contrast, in an opt-in claim each person wishing to benefit is required to join the claim at the outset.