Class action lobby dealt body blow as Irwin Mitchell loses vitamins appeal

Class action lobby dealt body blow as <a class=Irwin Mitchell loses vitamins appeal” />Irwin Mitchell suffered a blow in the Court of Appeal last week in a case that could spell the end for US-style class actions in the UK.

In ;2004 ;the ;firm embarked on a mission to bring the first multi-party action for damages. The case was brought against a series of vitamins companies, including Switzerland’s Hoffman-La Roche and Germany-based BASF, which had been on the receiving end of an e855m (£669.94m) fine after being found guilty of colluding on price-fixing.

Irwin ;Mitchell ;was brought ;on ;board ;to ­represent a number of clients from the poultry and animal feeds sector, which alleged that the activities of the companies unfairly inflated the prices they were paying for vitamins.

The ;lead ;claimant, Devenish Nutrition, a Belfast-based supplier of pig and poultry feed, was seeking a share of the cartelists’ profits, despite being unable to prove that it had made a financial loss as a result of the cartel.

The Court of Appeal was asked to determine whether the claimants were entitled to compensatory damages, exemplary ;damages, ­restitutionary damages and an account of profits.

Irwin Mitchell instructed Christopher Vajda QC of Monckton Chambers and Andrew Burrows QC of Atkin Chambers to argue that compensatory damages alone would not be an ­adequate remedy.

The claimants argued that, if the court ruled in their favour, it would act as a deterrent against other cartelists.

In an ideal world the case would have been brought in the US, where claims such as these are seen as the key deterrent in preventing cartels from being established.

However, here in the UK, where class actions are still unusual, Irwin Mitchell was forced to go to the Court of Appeal after the claim was rejected by the High Court.

The Court of Appeal’s 14 October decision could be another nail in the coffin for the class action lobby in the UK. For several years it has been pushing for a change in UK law to allow more ­people to participate in class actions.

“It’s certainly the end of people trying it on,” said one senior partner close to the case. “These people seem to be encouraged by lawyers who want them to get damages for losses they haven’t suffered. This is a sensible ruling which sits within the law as it is. The judges couldn’t have done anything else.”

According to Cohen ­Milstein Hausfeld & Toll ­partner Vincent Smith, the Devenish litigation is a good example of how cases can collapse if ­collective claimants ;fail ;to ;act ­together.

Smith said: “This wasn’t an unexpected ruling – [the judges] are bound by ­previous precedent. What it does show is that we need to choose claimants very ­carefully and make sure everybody’s involved from the very beginning.”

Smith said the case highlighted an urgent need for a framework on which to bring class actions.

“The Government is expected to respond to the CJC recommendations on class actions shortly and we expect it to come out in favour of the proposals,” he added.

To some extent the ruling recognises that changes are afoot in the class action arena. Yet Mr Justice ­Longmore pointed out that the court cannot act alone.

Longmore J, who sat alongside Mr Justice Tuckey and Lady Justice Arden, said: “The only real argument in favour of an order for an account of profits is the argument of policy that cartels are a notorious evil and the civil courts should in some way provide an incentive for their eradication by making such an order.

“But it doesn’t seem to me to be right for the courts to take this step on their own initiative.

“Neither the law of ­restitution nor the law of damages is in the business of transferring monetary gains from one undeserving recipient to another undeserving recipient, even if the former has acted illegally while the latter has not.”

With this single sentence, Longmore J must have shaken the confidence of every claimant lawyer looking to bring a class action.

“I think the class action lobby are on a hiding to nothing in the UK court,” said one litigation partner. “These are claimants who’ve suffered no actual loss – why should they be entitled to damages?”

But Irwin Mitchell’s lead partner on the case Jeremy Marshall is now planning to seek leave to appeal to the House of Lords. “This isn’t yet over, and the Court of Appeal’s given us the inkling that this should go to the Law Lords,” Marshall said.

It is understood that Irwin Mitchell is working on a contingency fee basis and therefore has a lot ­riding on the success of this case. If the firm wins in the Lords it will certainly be able to say that it won against the odds.

Claimant lawyers have for some time been calling on the Government to improve access to justice by modifying the class action framework and allowing more people to participate. Yet at every corner the lobby is curtailed by current UK case law. Only the case against the BA-­Virgin cartel has been ­successful and that was largely because it was first brought in the US.

And while the defendant has the cash to pay for ­powerful lawyers and the claimant still scratches around for suitable funding, the situation will remain.

THE CIVIL JUSTICE COUNCIL’S APPROACH

The ruling comes as the Government considers ­proposals put forward by the Civil Justice ­Council (CJC) on how UK class actions should be handled.

Earlier this year CJC chief executive Bob Musgrove told The Lawyer: “There’s overwhelming evidence of a need for reform of the laws and processes ­surrounding group actions.”

Although the CJC stopped short of recommending that a future framework for class actions should resemble its US counterpart, it did argue in favour of an opt-out rather than opt-in system. In the latter the size of the claimant group needs to be known before the case gets to court, meaning that only those named on the claim are entitled to damages. Total damages would vary depending on the number of people claiming.

With an opt-out system, anyone eligible for compensation can make a claim after an award has been granted, but they need to opt out if they do not want to be involved in the case.