A class action is a legal procedure enabling a group or class of people with related legal claims to bring their claim to court together in one action. Class action litigation has been a feature of the American legal system for some time with damages, in some prominent cases, running to billions of dollars.
In Scotland however, historically there’s been no class action procedure. Instead, the normal approach is for related cases to be sisted (otherwise known as paused) whilst an individual “test case” proceeds. Alternatively, the court issues bespoke orders in cases with similar facts to control how they progress.
These approaches however can be problematic. Firstly, a suitable case requires to be selected from the actions raised as the test case. Secondly, parties to related cases need to decide whether to negotiate a settlement on the basis of the judgment in the test case or proceed independently in light of that decision.
The uncertain approach of the court and the potential for repeat legal costs has led to claims of this nature being relatively few in number in Scotland.
In introducing a special class action procedure - referred to as “group procedure” in the legislation - the Act is likely to bring about an increase in future “mass” litigation. Such actions will become more feasible financially under the new rules as legal costs will be spread across the group of litigants rather than borne by an individual.
In terms of the new procedure itself the detailed rules as to how it will operate will be developed by the Scottish Civil Justice Council over the coming months. However, the Act sets out the parameters within which these rules will work.
The new group procedure will only be available in the Court of Session, and therefore for claims in excess of £100,000, and there must be a minimum of two claimants.
The permission of the court will be required in order to bring the group action. Permission will only be granted if the claims made raise issues of fact or law which are “the same as, similar or related to each other”. “All reasonable efforts” will also need to be made to notify potential claimants within the specified class. Guidance from the court will be required as to what these concepts are to mean in practice.
Finally, the legislation does not limit the type of claim that can be made in group proceedings. Commonly such claims relate to product liability, shareholder and financial services disputes, large-scale accidents and employee rights, although it’s possible that the final court rules may restrict these categories.
One important preliminary question which is not addressed in the Act, and which will require to be considered by the Scottish Civil Justice Council, is whether the new procedure is to be “opt-in” or “opt-out” or a hybrid regime.
An “opt-in” procedure would allow individual litigants to keep their claims separate from the class unless they opt-in to the group action. On the other hand an “opt-out” approach would require any claimant who doesn’t wish to be bound by the decision of the group action to positively opt-out and take their own action.
Nevertheless, whilst with the opt-in regime the claimant numbers will be clear, the size of the potential claimant group in an opt-out approach may not. For that reason large defenders are likely to prefer an opt-in approach as it should make negotiating settlement of such claims, if necessary, much easier.
We’ll need to wait until the new rules are published to assess the full impact of the new procedure on business in Scotland. However there’s no doubt that in whatever their final form the group proceedings rules will have a significant bearing on how mass claims are litigated in future. Financial institutions and large companies in Scotland should monitor these developments very closely.
Alistair Drummond is a partner and Gavin Deeprose is a senior professional support lawyer, DLA Piper