Wirral Council (as administering authority of the Merseyside Pension Fund) v Indivior Plc; Wirral Council (as administering authority of the Merseyside Pension Fund) v Reckitt Benckiser Group Plc [2025] EWCA Civ 40
In a judgment handed down on 23 January, the Court of Appeal ruled, unanimously, against Wirral Council’s attempt to use representative proceedings to pursue a claim under sections 90 and 90A of schedule 10A to the Financial Services and Markets Act (FSMA) 2000 against Indivior plc and Reckitt Benckiser Group plc. Wirral has applied to the Supreme Court for permission to appeal.
Background
In April 2019, Indivior (a subsidiary of Reckitt) was indicted by the US authorities in relation to an allegedly fraudulent scheme to extend the patent period for an anti-addiction medication (Suboxone) from 2006 to 2013. Following the indictment and related Federal Trade Commission investigations, the defendants settled for a combined total of $2bn.
On 21 September 2022, Wirral, as administering authority of the Merseyside Pension Fund, issued representative proceedings under Civil Procedure Rule 19.8 on behalf of an ‘opt-in’ class of institutional and retail investors in the defendants, in respect of alleged fraudulent statements and dishonest omissions in their published information in relation to the scheme. It also issued multi-party proceedings, which were stayed pending the outcome of the appeal.
This was the first time a claimant had tried to use the representative action procedure in a section 90A FSMA claim. Such claims are typically brought as multi-party actions. Claimants can issue representative actions as of right, but it was common ground that the court has discretion as to whether to permit the representative action to continue, so as to give effect to the overriding objective.
Wirral relied on the Supreme Court decision in Lloyd v Google LLC [2022] SC 1217 in seeking a bifurcated approach. It sought declarations in respect of common issues relating to the defendants (including whether the defendants’ published information included fraudulent statements/dishonest omissions, and whether persons discharging managerial responsibilities within the defendants knew or were reckless as to the same), with issues relating to the individual claimants (standing, reliance, causation and quantum) to be dealt with at a subsequent stage. The defendants applied to strike out the representative proceedings on the basis that this was not an appropriate procedure for these claims under FSMA.
Michael Green J granted the application by his judgment of 5 December 2023. He struck out the representative proceedings on the basis that (as the defendants contended) allowing them to proceed would oust the court’s case management powers by predetermining issues of split trial and other matters of case management in the claimants’ favour, without those issues being put before the court.
Males LJ granted Wirral permission to appeal, on the basis that the decision may have wider significance for other cases.
Judgment
The Court of Appeal (chancellor Sir Julian Flaux, with Lord Justice Nugee and Lady Justice Falk concurring) dismissed the appeal, holding that the judge’s discretion under CPR 19.8 as to whether to allow the representative proceedings to continue was ‘quite unfettered other than that it is to be exercised in accordance with the overriding objective’, and that his decision was ‘well within the generous ambit’ of that discretion.
In reaching its decision, the court held that there was no hierarchy of different procedures in which a representative action is to be preferred, whether because that was the procedure adopted by the claimants (a ‘reverse hierarchy’, as described by Falk LJ during argument) or otherwise. In exercising its discretion, the court must assess the advantages and disadvantages of each available procedure. In making that assessment, the judge was entitled to have regard to the case management decisions of other judges in section 90A cases, in which, where the court has ordered a split trial with defendant-side issues to be determined at the first stage, it has invariably also ordered some progress in tandem on claimant-side issues.
Here, Wirral had sought to avoid the court taking precisely those kinds of case management decisions and, in that context, the court held that it was ‘extremely unsatisfactory’ that Wirral had declined to identify which claimants relied on which category of reliance. By relegating the issue of reliance (described by the court as a ‘significant controlling mechanism’) to a later stage by the use of representative proceedings, the defendants would not know how many claimants had sustainable claims. As a result, the court would be deprived of its case management powers to strike out speculative unmeritorious claims, which is inimical to the overriding objective. Settlement would be less, rather than more, likely (contrary to Wirral’s submissions). Moreover, Wirral’s approach would encourage book-building (that is, the joinder of claimants without having to engage in work relating to their individual claims unless and until the common issues are decided in their favour), which has been discouraged by the courts.
The court cautioned against ‘reading too much into’ Lloyd v Google: while Lord Leggatt advocated more use of the representative procedure, he was not saying that it would always be appropriate. In this case, the multi-party proceedings provided an appropriate alternative procedure, and would not, for example, prevent Wirral from seeking to persuade the court to adopt a bifurcated approach at the first case management conference. While Wirral sought to challenge this on the basis that some of the retail claimants would not be funded to participate in the multi-party proceedings, this was rejected by the court on the basis that ‘no cogent or coherent explanation’ for the funders’ decision in this regard had been provided.
Clare Hennessey is special counsel at Jenner & Block, London
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