Judges say lead cases may help resolve thousands of discretionary commission claims
The Court of Appeal has dismissed an appeal by motor finance companies seeking to break up thousands of claims over alleged undisclosed discretionary commission arrangements.
In Black Horse Limited v Stuart Angel & Ors, the court upheld a High Court order allowing multi-claimant proceedings against motor finance companies to continue and requiring the defendants to provide disclosure of documents, including relevant brokerage agreements.
The claims have been brought by more than 5,000 individuals who bought cars with finance over the last 14 years. They allege that when they entered into credit agreements, they allege commission was paid to dealers without their knowledge to car dealers under discretionary commission arrangements, by which dealers could set interest rates and receive commission linked to those rates.
The claims are brought under section 140B of the Consumer Credit Act 1974 on the basis that the relationship between the claimants and the finance companies was unfair. The defendants argued that the claims were too fact-sensitive to be dealt with conveniently through multi-claimant claim forms and should instead be disaggregated into thousands of separate claims.
The claims were originally case managed in the Birmingham County Court by HHJ Worster, who found that the CPR 7.3 convenience test had not been met and ordered the claims to be disaggregated. On appeal, Mr Justice Ritchie concluded that the judge had erred in principle and that the claims could proceed through the existing multi-claimant claim forms.
The finance companies appealed to the Court of Appeal. Lord Justice Coulson, giving the lead judgment with which Lord Justice Stuart-Smith and the President of the Family Division agreed, said the appeal should be dismissed and the High Court’s orders maintained.
Coulson LJ said the question was not simply whether there should be one claim form or thousands of separate claim forms, but whether there was a suitable way to manage the claims through to convenient disposal, taking account of the interests of the parties and the resources of the court.
He said CPR 7.3 asks whether claims can be conveniently disposed of in the same proceedings, not whether a single claim form is the most convenient way forward. The court said case management tools, including disclosure, questionnaires, a pleading pool and lead cases, could form part of the assessment.
The court accepted that each unfair relationship claim would require an individual assessment. However, Coulson LJ said that did not mean lead cases would be an irrelevant waste of time. If properly selected, lead cases could produce a range of outcomes and assist with the commercial settlement of other claims with similar fact patterns.
Coulson LJ said it also suited the defendants for there to be separate claims because stronger claims could be settled while weaker claims were “run into the ground”. He said the most practical way for the court to achieve “at least a measure of justice” for the claimants was by efficiently case-managing the claims to a convenient disposal. The defendants’ opposition to that outcome was, he said, commercially understandable but ultimately unrealistic.
The judgment said the High Court judge was entitled to conclude that the trial of lead cases would be a sensible step and a clear pointer towards convenient disposal of the claims under CPR 7.3.
The court also upheld the High Court’s case management directions requiring the defendants to plead to the generic particulars of claim and provide disclosure of documents, including brokerage agreements. Coulson LJ said those documents were central to identifying suitable lead cases.
The defendants had objected to the disclosure burden, but the court rejected the challenge. Coulson LJ said that if the documents were relevant to the wide-ranging investigation into unfairness that the defendants themselves said was required, they could not complain about the difficulty of disclosing potentially relevant material.
The court removed the stay on the High Court’s directions and remitted the case to Birmingham County Court for further directions.
Coulson LJ was critical of the way the litigation had developed, saying the case had achieved “almost nothing” in three and a half years except to generate “extravagant” costs. The claimants’ costs of the appeal alone were £1.3m, and he said the defendants’ costs were likely to be similar, if not more.
He said that level of costs was “insupportable”, particularly because the individual claims were likely to be modest, around £1,000 each.
Coulson LJ described the litigation as ‘the tip of an iceberg’. Coulson LJ said he was acutely aware that allowing such multi-claimant claims would mean a huge increase in workload, but that would need to be managed through effective case management.
He said it would be useful for HMCTS to compile statistics on the effect of such claims on court resources, including fee revenue lost by the use of single claim forms. He also said the Civil Procedure Rule Committee should reconsider CPR 7.3 in light of the sharp increase in multi-claimant litigation.