Court of Appeal strikes out the representative action brought by Wirral Council against Indivior and Reckitt, with implications for securities claims that seek to make use of the representative action procedure.
Executive summary
In Wirral Council v Indivior Plc & Reckitt Benckiser Group Plc [2025] EWCA Civ 40, the Court of Appeal upheld the decision of the High Court to strike out a representative action brought by Wirral Council against Indivior and Reckitt, seeking damages pursuant to s.90A of FSMA. The decision has significant implications for cases in which an attempt is made to initiate representative proceedings on a bifurcated basis as was considered by Lord Leggatt in Lloyd v Google [2022] AC 1217. Under this approach, it is argued that a representative action can be used to pursue declarations on common issues pertaining to the defendants' liability, with individual issues determined at a later stage. This decision also has ramifications for securities claims, and particularly claims under s.90A of FSMA, which attempt to rely on the representative action mechanism.
This article will discuss the background to the case, why the High Court, and subsequently the Court of Appeal, determined that the representative action should be struck out, and what the key implications are for practitioners in the field of securities litigation, and more generally.
Background
Indivior Plc is the manufacturer of the anti-addiction medication, Suboxone, aimed at combatting opioid addiction. On 9 April 2019, a U.S. federal indictment alleged that between 2006 and 2013, Indivior and its parent, Reckitt Benckiser Pharmaceuticals Inc, had participated in a fraudulent scheme to extend the period of patent protection over Suboxone, by falsely claiming that a film version of the drug was safer for children than the original tablet form (the "Scheme"). Indivior agreed to pay US$600 million in settlement of its civil and criminal liability; Reckitt agreed to pay US$1.4 billion in settlement of its own potential liability.
Indivior and Reckitt are, and were at all material times, listed on the London Stock Exchange. The announcement of the U.S. indictment caused significant damage to their respective market capitalisation. In September 2022, proceedings were issued against Indivior and Reckitt by aggrieved investors, seeking damages pursuant to s.90A of FSMA. The claimants alleged that the information published by the Defendants contained statements that were untrue, or misleading, and that the Defendants had delayed in publishing a full and fair description of the Scheme. The claimants also alleged that one or more persons discharging managerial responsibilities within each of the Defendants ('PDMRs') knew or were reckless as to whether such statements were untrue or misleading and/or had acted dishonestly in delaying publication (the "Liability Issues").
The representative proceedings (and parallel multi-party proceedings)
Two types of proceedings were initiated. On 21 September 2022, representative proceedings under CPR R. 19.6 (now r.19.8) were issued, with Wirral Council (as administering authority for the Merseyside Pension Fund) acting as the 'Representative Claimant'. CPR r.19.8 provides that where more than one person has the 'same interest' in a claim, the claim may be begun by a claimant as representative of any other persons with that same interest. Under r. 19.8(2), the court may direct that a person may not act as a representative. Unless the court otherwise directs, any judgment or order made in those proceedings is binding on all represented persons. Over the ensuing days, separate multi-party proceedings on behalf of numerous institutional investors were also issued (notably all those institutional investors had also opted in to the representative action, save for a small number who withdrew).
The representative proceedings were not 'opt-out' claims, where all investors in the Defendants' securities were represented. Rather, they were 'opt-in', because they were limited to identified investors who had agreed to the costs sharing and governance arrangements that had been put in place, and who would (if so inclined) have standing to pursue their own claims.
Further, and importantly, the representative proceedings only sought declarations from the court on the Liability Issues. Wirral proposed bifurcating the Liability Issues from other issues in the claim. In this regard, it sought to rely upon commentary in the judgment of Lord Leggatt in Lloyd v Google, discussed below. Wirral accepted that issues requiring individual determination, including in relation to reliance, causation and quantum, lay outside the representative action, and would have to be determined subsequently.
In Lloyd v Google, the Supreme Court held that a representative action – brought by Mr Lloyd on behalf of 4 million individuals, who he claimed had suffered loss as a result of a data privacy breach by Google – failed the 'same interest' test, because of the need for an individualised assessment of the claimants' alleged losses. However, Lord Leggatt commented (obiter) that it may be possible for a bifurcated claim to be brought, where common issues of fact or law would be decided through a representative action, with issues that required individual determination being dealt with at a subsequent stage.
Indivior and Reckitt applied to strike out the representative proceedings, on the basis that they are not the appropriate procedure for claims under s.90A of FSMA. They argued that the multi-party proceedings should be preferred. The multi-party proceedings were stayed pending determination of the strike out application.
The first instance decision to strike out the representative action
Wirral Council was not coy about why it wanted to proceed by way of representative action. It wanted to avoid the court taking the sort of case management decisions that have been taken in other securities actions, which would have entailed some disclosure and witness evidence being provided by the Claimants, rather than the onus being exclusively on the Defendants to address the Liability Issues. Further, bringing the claim as a representative action would have enabled a prospective claimant to defer any decision on whether to 'opt in' until after the declarations on the Liability Issues had been made.
At first instance, Mr Justice Michael Green granted the Defendants' application to strike out the representative action. Whilst he accepted that Lord Leggatt had considered a potential method by which such claims could be brought before the courts, he did not consider that Lord Leggatt had intended to deprive the court of being able to decide the best way to case manage individual actions. Where there were "perfectly feasible non-representative proceedings", as he considered to be the case here, the Court should be able to weigh whether those were preferable to representative proceedings.
The judge concluded that in this case multi-party proceedings were preferable to the representative action. He determined that the representative action would have unduly fettered the court's case management powers, by effectively imposing on the court a procedure that would result in a one-sided allocation of the litigation burden on the Defendants. The judge held that such an imbalance would not advance the overriding objective or promote the expeditious and fair resolution of proceedings.
The Court of Appeal's judgment
Wirral was granted permission to appeal. Amongst its grounds of appeal, Wirral submitted that the first instance decision had created a "hierarchy" of actions between multi-party proceedings and representative proceedings, with the former (where available) to be preferred, and inappropriately characterised the bifurcated approach outlined in Lloyd v Google as ousting the court's case management powers.
In a unanimous judgment, the Court of Appeal dismissed the appeal. The Court accepted the Defendants' submission that the judge had an unfettered discretion under CPR r.19.8 as to whether to allow the representative proceedings to continue and held that the judge's decision had been "well within the generous ambit of his discretion", such that there was no basis for the Court to interfere. The Court of Appeal explained that in Lloyd v Google, Lord Leggatt did not discuss the possibility of multi-party proceedings, or the case management advantages they might entail (albeit it must be noted that such proceedings would not have been feasible in that case and were not in contemplation). It followed that nothing in his judgment assesses the relative merits of representative proceedings and multi-party proceedings, let alone suggesting that in such a comparative analysis, representative actions ought to prevail.
The Court held that there were sound reasons in this case as to why multi-party proceedings should be preferred to a representative action. In particular, the Court emphasised that it is an essential ingredient of the cause of action under s.90A FSMA that claimants must prove they reasonably relied upon the published information in question, yet reliance was not one of the common issues that comprised the representative action. If the representative action had been allowed to proceed, then the Defendants would have been effectively precluded from testing the extent to which each claimant relied upon the published information in question, and, where appropriate, applying to strike out claims that did not meet the requisite threshold (in accordance with the decision of Leech J in Allianz Funds Multi-Strategy Trust v Barclays plc [2024] EWHC 2710 (Ch)). To allow claimants to pursue a claim in respect of common issues when they may not be able to establish reliance, and therefore may not have any claim at all, would "seem inimical to the overriding objective rather than furthering it".
The Court considered the judge had been right to conclude that there was no evidence to support Wirral's assertion that the adoption of the bifurcated representative procedure would increase the prospects of settlement (on the contrary, the possibility that unmeritorious claims might be permitted to continue might disincentivise settlement). The Court also agreed with the judge that, whilst Wirral submitted that the funder was unwilling to fund the participation of retail investors in the multi-party proceedings such that they might be deprived of access to justice if the representative action was struck out, there was no coherent explanation of this decision.
Implications of the decision
There are four points arising from this decision that we consider bear particular emphasis:
- The court retains an unfettered discretion to determine whether a representative action should be preferred to alternative procedural routes for litigating a claim, including the use of multi-party proceedings where the claim is litigated by individual claimants, rather than by a representative claimant on behalf of a class of affected persons.
- Relatedly, there is no hierarchy of procedural mechanisms for bringing mass claims. The court's discretion as to whether to allow a representative action to continue is not limited to cases where there are structural deficiencies with the representative procedure, such as the suitability of the representative claimant to act as such, or problems with the definition of the class of represented persons.
- Where a party contends that a representative action would provide claimants with access to justice, whereas alternative procedural routes would not, it is incumbent upon that party to provide cogent evidence as to why that is the case.
- It is difficult to envisage how a claim under s.90A of FSMA could be brought using the bifurcated procedure as was attempted in this case, particularly where the individual claimants are not able to plead (and evidence) the same type of reliance or where alternative redress is available (though see (3) above).
