A landmark judgment from the Court of Appeal has clarified when representative proceedings may be issued on a bifurcated basis and the application of the regime to securities claims.
By Oliver Middleton and Duncan Graves
The English Court of Appeal has confirmed the strike out of a bifurcated representative action under CPR 19.8 for claims under Section 90A FSMA,1 a statutory regime that has formed the basis of a large number of group actions in recent years. Section 90A FSMA entitles investors in listed entities to seek damages where the entity’s published information contained material misstatements or omissions, which were relied upon by the investor and caused them a loss, through a drop in the share price, when the true information became known.
CPR 19.8 provides that when persons have the “same interest” in a claim, a representative of those persons may bring a claim on behalf of the group, subject to the Court’s discretion. Any subsequent judgment binds on all persons represented in the claim.
The Supreme Court comprehensively reviewed the representative action regime in England in the well-known case of Lloyd v. Google LLC.2 Commentators widely considered its decision a setback for litigators and funders intending to rely on this mechanism for mass claims, particularly those seeking monetary compensation for alleged breaches of statutory rights. Nonetheless, Lord Leggatt in Lloyd v. Google appeared to have left the door open for such claims to be pursued on a representative basis using a “bifurcated” process. Under this approach, common issues of fact or law are decided initially on a representative basis, while issues requiring individual determination (such as the quantification of damages) are decided at a subsequent stage of the proceedings.
The recent Court of Appeal ruling clarifies the English courts’ position on the suitability of a bifurcated representative procedure for mass securities claims brought under FSMA.
Background
In September 2022, Wirral Council (Wirral) initiated representative proceedings against Indivior PLC and Reckitt Benckiser Group PLC (the Defendants), alleging liability under Sections 90 and 90A FSMA for misleading statements and dishonest omissions in the Defendants’ published information between 2006 and 2013. Notwithstanding the representative claim, due to the opt-in basis of the regime, institutional and retail investors who acquired, held, and/or disposed of securities in the Defendants during the relevant time and sought to bring a claim were included in the representative claim on an opt-in basis. The institutional investor claimants concurrently initiated multi-party proceedings, which are currently stayed.
In its application under CPR 19.8, Wirral sought to decide defendant-sided issues only (such as whether the statements were materially untrue, and culpable knowledge) through the representative action. It proposed to determine claimant-sided issues, such as standing to sue, reliance, causation, and quantum of damages outside the representative proceedings, if successful on proving liability. The Defendants successfully applied to have the representative action struck out in favour of multi-party proceedings on the basis that a bifurcated approach would deprive the Court of its case management powers. Wirral was granted permission to appeal, which was heard in December 2024.
Judgment
Delivering the sole judgment, the Chancellor, Sir Julian Flaux (with whom Lord Justice Nugee and Lady Justice Falk agreed) dismissed the appeal. He held that in striking out the representative claim, the judge at first instance (the Judge) had exercised his discretion under CPR 19.8 correctly — namely, in accordance with the overriding objective.
In its appeal, Wirral maintained its unqualified right to bring a representative claim upon satisfaction of the “same interest” requirement in CPR 19.8. It suggested that absent a “structural deficiency” in its claim, the Judge should have permitted the action to continue. Wirral further contended that the Judge had misapplied Lord Leggatt’s obiter dicta in Lloyd v. Google by (1) creating a hierarchy of actions between multi-party proceedings and representative proceedings; (2) characterising bifurcated representative actions as ousting the Court’s case management powers; and (3) minimising evidence that a representative action remained the only avenue for justice for the retail investors represented in the claim.
The Court of Appeal found these arguments unconvincing. It concurred with the Defendants that the Judge had unfettered discretion to decide if the representative proceedings should continue. In fact, the Court of Appeal held that the Judge was correct both to (1) consider the case management decisions in other Section 90A FSMA cases and (2) conclude that multi-party proceedings, in this case, would strike a fairer balance between the parties and better promote the overriding objective.
Citing Various Claimants v Barclays plc,3 in which Latham acted for Barclays, the Court of Appeal confirmed the merits of preserving a court’s case management powers where issues of reliance by each claimant are foundational to the existence of a claim, as is the case in Section 90A claims. In such cases, it held that “[t]o allow the representative proceedings to continue without the Court being able to require the claimants to identify how many of them [cannot establish reliance] would be to encourage precisely the sort of speculative litigation which … the fraud-based and reliance requirements of section 90A and Schedule 10A of FSMA are designed to avoid”.4 Accordingly, the Court of Appeal found that Wirral initiated bifurcated representative proceedings specifically “to avoid the Court using its case management powers to order Wirral and the represented claimants to advance some of the claimant-sided issues in parallel with the defendant-sided common issues”.5
Finally, the Court of Appeal rejected Wirral’s argument that the retail investors’ only redress was through a representative action. It remained unconvinced as to why the retail investors could obtain funding solely for their participation in the representative proceedings, as Wirral submitted. The Court of Appeal concluded that this situation was engineered by the funders and that nothing suggested that the retail investors could not obtain funding to join the multi-party claim.
Takeaways
In light of recent claims by large claimant groups in which some claims have been either discontinued when claimants were required to evidence their position, or struck out for disclosing no arguable claim, this decision demonstrates a policy decision to ensure that such groups engage properly with their claims from the outset of the proceedings. In particular, it shows that the court will intervene to balance the litigation burden between claimants and defendants.
The decision will make it substantially harder for funders to avoid bringing claims as an opt-in group action, and further emphasises the importance of case management orders utilised in some of the cases to ensure that claimants provide sufficient information regarding the foundational elements of their claim.
As such, the decision may cause funders to consider other approaches to mitigate the costs and group building difficulties under a conventional Section 90A group claim.
This post was prepared with the assistance of Nayantara Mukerji in the London office of Latham & Watkins.
- Wirral Council (As Administering Authority of Merseyside Pension Fund) v. Indivior PLC [2025] EWCA Civ 40. ↩︎
- Lloyd v. Google LLC [2022] AC 1217. ↩︎
- Various Claimants v. Barclays plc [2024] EWHC 2710 (Ch). ↩︎
- Wirral Council v. Indivior PLC, paragraph 130. ↩︎
- Wirral Council v. Indivior PLC, paragraph 143. ↩︎