Reflections on the FX decision: what next?
The decision late last year in Evans v Barclays Bank & Ors UKSC/2023/0175 ("FX") is well known and many articles have summarised it's findings, so I will be brief: the Supreme Court upheld the original decision of the CAT (and overturned that of the Court of Appeal) that the class in FX claim would not be certified on an opt-out basis, for essentially two reasons: (1) that the merits of the claim were low (the CAT had been close to ordering that the claim be struck-out) - it was made clear in the decision that the CAT was right to consider this as a relevant factor in deciding whether to certify on an opt-out basis; and (2) that the composition of the class (being made up of a relatively low number of sophisticated claimants, many of whom had claims which were sufficiently large in their own right that opt-in or standalone claims were entirely feasible) was such that certification was not appropriate.
The decision as it relates to FX itself is clear and perhaps not unexpected. What is, perhaps, less clear, and, to me, more interesting, is what the decision means for non-consumer CAT claims going forward.
In one sense, the fact that the Supreme Court emphasised that the CAT itself is well-placed to make determinations around certification, and that such decisions are by their nature fact sensitive and case-specific is to be applauded: in the FX case itself, the Court of Appeal, in reality, simply preferred its own view of the issues to that of the CAT, which should not be the function of the appellate courts, particularly in this specialised area.
However, in another sense, the decision, when we reflect on it some months later, provides less clarity as to how CAT claims which involve commercial/corporate claimants will be dealt with going forward than might have been hoped.
What I think can be said with near-certainty, is that the effect of FX cannot be that the CAT will deal only with opt-out consumer claims and exclude all claims in which the claimants are commercial entities. Such an approach would be entirely inconsistent with the overarching purpose of the CAT and the competition regime.
At the other end of the spectrum, it is possible to view FX as an outlier, such that in practice, unless both factors are present (ie: (1) very weak merits; and (2) very serious issues around the concentration of claims with large sophisticated entities) future non-consumer claims will face no special or additional hurdles to certification. This may well be where we end up, but it seems inevitable that defendants will seize upon the uncertainty post-FX and raise these types of issues at the certification stage.
In practice then, the safe assumption is that the CAT will adopt a more nuanced approach somewhere in between these two extremes, weighing up the merits and the composition of the class as part the overall exercise of its discretion. This is also, it seems to us, the correct approach. The slight difficulty is that this nuanced approach means that, post FX, it may be more difficult for lawyers, class representatives and funders to predict whether any given claim involving commercial claimants will be certified. It is almost inevitable that any class of commercial claimants will include a degree of concentration of value in a relatively small number of larger, more sophisticated entities. The difficulty arises in where the line will be drawn. If 90% of the damages sit with only 1% of the class, the decision may be easy. But what about 70% of the value with 15% of the class? Does it matter if overall class is 50 claimants, or 10,000? How important a factor is the merits of the claim (and to what extent can those merits be truly assessed at certification in any event)? Will strong merits trump all these potential concerns? Can any potential issues of this type be addressed through a hybrid opt-on/opt-out structure?
Given we now have the benefit of a Supreme Court decision on this issue, it is unfortunate that some of the questions above remain outstanding. However, given the flexibility of the CAT and those who use it, the expectation must be that over time the position will become clearer and that ultimately, meritorious and appropriately structured non-consumer claims will continue to be brought and heard in the CAT.
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Sam Tacey
Senior Partner
Toremis Specialty