Collective action against BT gets the go ahead again

On 6 May 2022, the Court of Appeal unanimously rejected BT's appeal against the Competition Appeal Tribunal's (CAT) decision to certify collective proceedings brought by Justin Le Patourel against the telecommunications company on behalf of approximately 2.3 million customers on an opt-out basis (read our previous article on the CAT's certification of these proceedings here). 

The BT appeal

BT's appeal focused solely on the CAT's decision to certify the collective claim on an opt-out basis (it did not appeal the certification itself). The Court had to determine three issues: 

1. the criteria which the CAT should apply when choosing between opt-in and opt-out proceedings;
2. the role that an assessment of merits plays in the choice of opt-in or opt-out proceedings; and
3. the powers available to the CAT, once it has ordered that damages be paid, to direct that those damages are to be distributed by way of an account credit.

Emphasising both the broad discretion conferred upon the CAT to consider "all matters it thinks fit" in determining how a claim should proceed (following Merricks) and the general aim of the legislation to promote access to justice, the Court rejected BT's arguments in respect of all three issues. 

Notably, the Court also confirmed that decisions of the CAT which flow from a weighing up of relevant factors in any certification or opt-in/opt-out assessment will not generally be appealable as points of law. The Court observed that this was "essentially an exercise of judgment over facts and evidence by an expert, specialist, body, that will over time accrue an increasing well of experience in how to handle these complex cases" and held that "[t]his Court should not interfere simply because it might, for the sake of argument, have drawn a different conclusion from the weighing exercise". 

The opt-in/opt-out issue

BT submitted that the system was designed with an inherent presumption in favour of opt-in proceedings. In support, it referred to paragraphs 6.38 and 6.39 of the CAT Guide to Proceedings which, in BT's view, explicitly declare a "general preference" for opt-in proceedings and impose a burden on claimants seeking opt-out proceedings to make submissions as to why these would be "more appropriate" than opt-in proceedings. 

The Court disagreed. There was no such presumption in the Competition Act 1998 or the CAT Rules 2015. It also noted that since the underlying legislation proceeded on the basis of neutrality, it would not be open to the President of the CAT, by way of issuing practice directions such as the Guide, to establish a general presumption in favour of opt-in proceedings. 

As to paragraphs 6.38 and 6.39 of the Guide, the Court observed that these constituted "a tentative view as to how, in 2015, before the CAT had acquired hands-on experience, the President, quite reasonably, considered that the exercise of discretion might pan out" which had been refined in subsequent judicial analysis. The Court went so far as to suggest in a postscript to the judgment that the Guide be revised to remove this uncertainty now that the Tribunal has acquired hands-on experience of the collective proceedings regime. 

BT further submitted that the CAT had erred in considering the potential take-up by eligible class members at the outset of a claim as against the likelihood of claimants simply opting in to distribution of damages at its conclusion as a relevant factor in its opt-in/opt-out assessment. This, BT argued, showed a fundamental misunderstanding on the CAT's part of the meaning of the concept of "practicability" of the claim. Instead, BT submitted, only the "identifiability and contactability" of class members should be considered. 

Following Lloyd and Merricks, however, the Court held that the CAT was entitled to consider take-up as an issue of practicability of the claim. 

Additionally, in what is likely to be seen by the litigation funding market as a helpful indication of the Court's attitude towards the funding economics which lie behind getting these sorts of collective proceedings off the ground, the Court held that it was open to the CAT to consider the preference of Le Patourel's litigation funder (albeit in conjunction with other factors) in the name of proper access to justice. In particular, the Court held that "it is self-evident that in many large-scale consumer based collective actions the availability or non-availability of third party funding might be dispositive of whether the claim ever gets off the ground" and that the lack of funding would thwart access to justice, a "seminal principle lying at the epicentre of the jurisdiction".

Finally, the Court rejected BT's submission that the CAT had erred in law by suggesting that the strength of a claim was only relevant to an order for opt-out proceedings where it could be shown that the claim was "very weak". BT argued that requiring defendants to meet such a high hurdle would introduce a "systemic slant" against opt-in proceedings. The Court clarified that, in circumstances in which BT had already failed in its application for summary judgment, the CAT had simply meant to explain that merits had no further part to play in its opt-in/opt-out assessment. 

The Court reiterated that a merits assessment as to the strength of the claim should only be conducted at the opt-in/opt-out stage, and not at the initial certification stage. 

Distribution of damages

The question of distribution of damages in opt-out proceedings is an inherently difficult one and, in the nascent collective proceedings regime in the CAT, one which has understandably not been given as much attention as other threshold issues.  In a class of millions, how should the CAT direct a defendant held liable for a sum of damages to distribute those damages?

In the present case, the CAT had treated as a fact relevant to the benefits of opt-out over opt-in that in opt-out proceedings distribution could be achieved by means of an account credit without active involvement of relevant customers, thereby sidestepping potentially difficult practical issues of distribution.

BT objected on the basis that the CAT did not have jurisdiction to award damages in this way – an argument which the CAT rejected. The argument was raised again on appeal and dismissed by the Court. In essence, BT's position was that the CAT could only award damages by way of a fixed and fungible sum of money. 

The Court again pointed in its response to the overriding maxim of access to justice, and to the CAT's wide discretion to distribute damages "in a form which maximises recovery and compensation for the class".  In this respect, the Court noted the challenging implications of BT's counterfactual –  namely a third party approved by the CAT contacting 2 million people and trying to persuade them to give them their bank details to receive an award of damages as opposed to a prelude to fraud.

Furthermore, whilst the Court likened an account credit to a traditional 'set-off', the Court signalled its openness to consider a wide range of other, non-traditional forms of damages given the collective proceedings legislation's "philosophy…to create a new and innovative regime unshackled from…mainstream tradition". Going further, it considered it would be a "retrograde step" to restrict the concept of damages to any formal definition, particularly given the legislation's "radical departure from traditional common law principles of compensation" in permitting the award of aggregated damages. 

Full steam ahead?

As we have written previously, the number of collective actions certified to proceed on an opt-out basis continues to grow and the Court of Appeal's judgment in Le Patourel is no exception to that trend.

In particular, the Court's reliance on policy considerations and its deference to the CAT's expertise on this subject is likely to weigh on the prospects of success of future appeals of a similar nature to BT's. It will be interesting to see where the line is drawn between 'weighing up' and the application of the law in future cases.

Notably, the Court's judgment was handed down on the same day as the CAT certified a £1.5 billion standalone opt-out collective claim against Apple ex tempore, reserving judgment on Apple's strike-out argument. 

Viewed against the background of the Supreme Court's judgment in Merricks and its favourable comments in respect of the CAT regime in Lloyd, these developments are yet further evidence of the prevailing judicial attitudes towards collective proceedings in the CAT.

Read the Court of Appeal's judgment in BT Group Plc v Le Patourel [2022] EWCA Civ 593 here. 

Authors: Imogen Chitty (Solicitor), Max Strasberg (Senior Associate) and Tim West (Partner)