Representative actions: lessons learnt from two recent cases

One of the options available for claims involving many claimants is to bring a representative action under Civil Procedure Rule (CPR) 19.8, where one or more persons act as representatives of any others who share the same interest (see box “Representative actions”). Historically, this option has been rarely used and, where it has been sought, has often faltered at the same interest test. Two recent cases, Wirral Council (as administering authority of Merseyside Pension Fund) v Indivior plc and Getty Images (US) Inc and others v Stability AI Ltd, illustrate the continuing challenges of pursuing an action under CPR 19.8 ([2025] EWCA Civ 40; [2025] EWHC 38 (Ch), see “Copyright: representative class actions“, Bulletin, IP and IT, this issue).

Wirral and Getty highlight that the courts are alive to the invitation by the Supreme Court in the leading case of Lloyd v Google LLC for more use to be made of the representative action regime ([2021] UKSC 50; see feature article “Lloyd v Google: the upshot for data class actions”). However, the decisions also make clear that the courts will take care to ensure that the regime is used only where it is appropriate, and will not permit it to be used to enable one-sided risk-limiting proceedings or proceedings where the class of claimants to be represented cannot be adequately defined. Fairness within the proceedings and furtherance of the overriding objective remain paramount.

The decision in Wirral

Wirral involved the first attempted representative claim under section 90A of the Financial Services and Markets Act 2000 (FSMA) (section 90A). Section 90A provides redress for shareholders in UK listed companies that are seeking compensation for losses suffered due to misleading statements or dishonest omissions in published information (see feature article “Securities class actions: a gathering storm?”). In order to establish liability under section 90A, the claimant must demonstrate that they relied on the false information in making their investment decision.

Wirral’s representative claim

Wirral Council, acting as the administering authority of a pension fund, brought proceedings under CPR 19.8 on behalf of retail and institutional investors alleging that Indivior plc and Reckitt Benckiser Group plc had made fraudulent statements and dishonest omissions in published information arising from the decades-long opioid crisis in the US.

Wirral sought to rely on Lloyd v Google to bifurcate the proceedings by seeking declarations as to common issues relating to the defendants (the defendant-side issues). Issues of the individual investors who would be represented by Wirral, such as their standing to sue, reliance, causation and quantum (the claimant-side issues), would not form part of the representative proceedings.

The advantage of the representative proceedings, as framed by Wirral, was that there would be no front-loading of costs on the claimant-side issues, such as standing and reliance. An investor would be able to defer any decision on whether to bring their claim until after the declarations had been made. If the declarations were not made, the investors would save the time and expense of bringing their own claim.

Strike-out application

Indivior and Reckitt Benckiser applied to strike out the representative proceedings on the basis that this was not an appropriate procedure for these claims under FSMA, contending that the claims should be brought in the usual way by ordinary multi-party proceedings with each investor being a claimant. Indeed, multi-party proceedings were on foot at the same time as the representative proceedings, although they were stayed pending the result of the appeal. The High Court agreed with the defendants and struck out the CPR 19.8 action (www.practicallaw.com/w-042-1232). Wirral appealed.

Court of Appeal decision

The Court of Appeal held that the High Court’s decision was well within its wide discretion and there was no need for the Court of Appeal to interfere with it. The court observed the importance of the issue of reliance in securities claims and that Wirral was seeking to relegate this issue to a later stage by the use of representative proceedings. The requirement of reliance is a significant controlling mechanism in relation to what claims can be brought under section 90A. The representative proceedings would have deprived the court of its case management powers to strike out speculative unmeritorious claims, which is inimical to the overriding objective.

In the court’s view, the continued pursuit of the securities claims by way of the multi-party proceedings was not only feasible but was in accordance with the overriding objective. There was no doubt that one of the objects of using the bifurcated representative procedure was to avoid the court using its case management powers to order Wirral and the represented claimants to advance some of the claimant-side issues in parallel with the defendant-side issues. The availability of those case management powers would enable the court to determine at an early stage whether some of the claimants only relied on market, price or index information and, therefore do not have a claim at all. In addition, the use of those case management powers was more likely to facilitate a settlement.

The decision in Getty

The wider proceedings in Getty centred on Stability AI’s deep learning AI model, known as Stable Diffusion, which generates synthetic image outputs in response to commands entered by users. Broadly, the claimant companies alleged that Stability AI has scraped millions of images from websites operated by the Getty Images Group, without their consent, in order to train and develop Stable Diffusion.

Getty’s representative claim

The claimants said that there were likely to be in excess of 50,000 copyright owners with a concurrent right of action against Stability AI. The sixth claimant, Thomas M Barwick Inc, was stated to represent and have the same interest in the claim as the numerous other copyright owners. The claimants said that it would be disproportionate to identify all of the members of the class owing to their enormous number and the fact that the precise works used to train Stable Diffusion were within the knowledge of Stability AI. They argued that this was precisely the kind of situation in which a representative claim is intended to be used.

Stability AI’s application

Stability AI Ltd applied for an order that Thomas M Barwick could not act as representative for the proposed class of individuals. Stability AI’s primary objection to the class definition proposed by the claimants was that it depended on a disputed issue in the litigation; that is, whether Stability AI had infringed copyright. This was an impermissibly circular definition and a judgment on liability would have to be obtained before it was known whether the interests of the persons whom Thomas M Barwick sought to represent were the same.

High Court decision

In the court’s view, there appeared to be no way at that time to identify the members of the class and there was no definitive list of the copyright works that had been used to train Stable Diffusion. In the circumstances, the court could see no basis on which it could be satisfied that any particular person qualified as a member of the proposed class or that the court had jurisdiction to permit the representative action. The court could not make a reasoned assessment of whether allowing a representative action to go forward would promote access to justice and could not be satisfied that the representative claim would remove the need for an expensive and time-consuming individualised assessment of numerous issues of liability and quantum relating to the proposed represented parties.

As a fall back and without formal application, the claimants sought to rely on CPR 19.3 to proceed without joining all of the licence holders. The court was not prepared to accede to this without proper evidence and in light of the prospect of Stability AI being vexed by many exclusive licensors pursuing fresh proceedings. Subsequently, the claimants did make a formal application, including an undertaking to indemnify Stability AI against this risk. The court granted this application with the result that, under CPR 19.3, the claimants can proceed without joining all of the licence holders.

Key principles

The following principles may be drawn from the judgments in Wirral and Getty:

• The court has a discretion as to whether to allow representative proceedings to continue, which is fettered only by the need to exercise it in accordance with the overriding objective.
• There is no hierarchy of different procedures whereby a representative action is to be preferred to the other available procedures. In exercising its discretion, the court will assess the advantages and disadvantages of each available procedure.
• The court is likely to require progress to be made on both claimant-side and defendant-side issues in any proceedings.
• The court will not accept an attempt by claimants to use a representative action to progress only defendant-side issues and avoid what they would otherwise be required to do if they had brought multi-party proceedings.
• Representative actions cannot be used to circumvent the court’s ability to use its case management powers.
• Claimants are not assisting the court to further the overriding objective if they try to use representative proceedings to hide inadequacies in their case. The court will not allow representative proceedings to enable the sort of speculative litigation that the fraud-based requirements under section 90A were enacted to avoid.
• Courts discourage “book-building” whereby a representative and its funders get as many claimants as possible joined to the representative proceedings without having to engage in any work relating to their individual claims unless and until the common issues are decided in the claimants’ favour.
• If claimants want to submit that there is a cogent reason for representative action over alternative multi-party proceedings, they need to support that with evidence and a coherent explanation. In particular, the court will be alive to litigation funders trying to game the system.
• The courts will need to be satisfied that allowing a case to proceed without joinder of all members of the represented class will not expose the defendant to the risk of future claims beyond the representative action.

This article was originally published to Thomson Reuters on 27 February 2025.