Residual Funds from Collective Action cases
The Consumer Rights Act 2015 (“the CRA”) came into force on 1 October 2015. The CRA introduced collective actions in the competition law arena, permitting opt-out litigation taken on behalf of a whole class of affected individuals, with the ability for damages to be awarded reflecting the entire loss of that class and so the full extent of the defendant’s wrongful acts.
If/when such an opt-out case is successful but not all the individuals in the class can be contacted or otherwise do not claim their damages, there may be leftover damages that need to be dealt with. Potentially these could be large sums, although only arising on an ad-hoc basis. The CRA provides that these sums be paid to the Access to Justice Foundation for distribution to legal charities across the UK, in order to support further access to justice.
Background and Legislation
The relevant provisions in respect to collective actions are in Section 81 and Schedule 8, which amend the Competition Act 1998 (“the 1998 Act”) and the Enterprise Act 2002 and the Rules of the Competition Appeal Tribunal. Some of the main points to note in the legislation are:
- Collective proceedings will be brought in the Competition Appeal Tribunal (CAT) (Schedule 8, paragraph 4 inserting section 47A(1) into the 1998 Act). The CAT will be required to certify whether a collective action brought in the new regime is suitable for collective action and whether it should proceed under an opt-in or an opt-out basis (Schedule 8, paragraph 5 inserting section 47B(4)).
- The CAT can award damages without assessing the amount of damages recoverable in respect of each person i.e. award aggregate damages (Schedule 8, paragraph 6 inserting section 47C(2)).
- The CRA provides that these sums be paid to the Access to Justice Foundation for distribution to legal charities across the UK, in order to support further access to justice (CRA Schedule 8, paragraph 6 inserting section 47C(5)). That is implemented by Rule 93(6) which provides: “where only part of the undistributed damages is paid to the class representative, the Tribunal will direct that the remainder is paid to the Access to Justice Foundation”.
- The provisions for residue funds only apply to damages awards and not to settlements reached between parties and approved by the CAT (Collective Settlements) (Schedule 8, paragraph 10 inserting section 49A).
- The legislation also allows residue funds to be used to pay the costs of legal representatives (Schedule 8, paragraph 6 inserting section 47C(6)).
- There is provision for the CAT to make rules regarding the introduction of pro bono costs in the CAT (Schedule 8, paragraph 32).
Current situation and cases in progress
There are a number of collective actions now making their way through the Competition Appeal Tribunal.
This is obviously potentially hugely significant for access to justice. However, there are a couple of potential issues we need to be mindful of. We do not know as yet what the mechanism for the distribution will be, how much will be available as a total amount or the impact of the litigation funders’ costs. When the CAT comes to decide on distribution, the Access to Justice Foundation will be notified and will be given an opportunity to make submissions (section 6.90 of the Guide to CAT Proceedings).
Given the potential significant benefits though and the interest of a range of stakeholders, we are looking to develop a strategic framework to inform our approach. We are in the process of setting up a small expert group to help advise and we will share progress on this as our thinking develops.
If you are interested in being kept up to date about our work in this area, please get in touch with us at enquiries@atjf.org.uk.
