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The McLaren case – A Step Forward, or a Step Backward for the UK Class Action?

The following article was contributed by Mikolaj Burzec, a litigation finance advisor and broker. He is also a content writer for Sentry Funding.

The Competition Appeal Tribunal, London’s specialist competition court, has confirmed that a special purpose company led by Mark McLaren, formerly of The Consumers’ Association, will act as the Class Representation. McLaren represents millions of motorists and businesses who bought or leased a new car between October 2006 and September 2015 against five shipping companies that imported cars into Europe.

The European Commission has already found that the car carriers fixed prices, manipulated bids, and divided the market for roll-on roll-off transport by sea. According to the Commission, the carriers had agreed to maintain the status quo in the market and to respect each other’s ongoing business on certain routes, or with certain customers by offering artificially high prices or not bidding at all in tenders for vehicle manufacturers.

The class action follows the EC decision. It is one of the first actions of its kind in the UK and damages for car buyers are estimated at around £150 million.

The class representative

Mark McLaren has set up a non-for-profit company – Mark McLaren Class Representative Limited – specifically to bring this claim. Mark is the sole director and only member of the company and therefore has full control over it.

In a collective action, the class representative is responsible for conducting the action on behalf of the class. His duties include:

  • instructing specialist lawyers and experts
  • deciding whether to proceed with the claim and, in particular, deciding whether to refer an offer of settlement to the Competition Appeal Tribunal for approval
  • communicating with the class and issuing formal notices to class members by various means, including posting notices on this website.

An independent advisory committee will be appointed to assist in the decision-making process.

The claim

From 2006 to 2012, five major shipping companies were involved in a cartel that affected prices for the sea transport of new motor vehicles, including cars and vans. During the period of the cartel, the shipping companies exchanged confidential information, manipulated tenders and prices, and reduced overall capacity in the market for the carriage of cars and vans.

The cartel resulted in car manufacturers paying too much to transport new vehicles from their factories around the world to the UK and Europe. Customers who bought a new car or van between 18 October 2006 and 6 September 2015 probably also paid too much for the delivery.

This is because when a manufacturer sets the price of its new cars or vans, it takes into account the total cost of delivery, including shipping costs. For simplicity, car manufacturers usually divide their total delivery costs equally among all the cars and/or vans they sell. When a customer buys a new car or van, he pays for “delivery”, either separately or as part of the on-road price.

Although the car manufacturers themselves have done nothing wrong, customers who bought a new car or van between 18 October 2006 and 6 September 2015 are likely to have paid an increased delivery charge.

The European Commission has already decided to impose fines of several hundred million euros on the shipping companies. The lawsuit seeks to recover these extra costs from the shipping companies who were involved in the cartel.

The Competition Appeal Tribunal’s decision

The Tribunal has authorised the claims to proceed as a class action. This means that millions of motorists and businesses could be entitled to compensation and these individuals and companies will now automatically be represented in court unless they choose to leave (opt-out) the claim.

McLaren is the first Collective Proceeding Order judgment in which the Tribunal has explicitly considered the position of larger corporates within an opt-out class with the defendants having argued that big businesses should be removed and treated on an opt-in basis. The Tribunal’s refusal to treat larger businesses in the class differently to smaller corporates and consumers is noteworthy, and these aspects of the judgment will no doubt be of interest for the future proposed collective actions which feature businesses.

McLaren further explored the appropriate legal test applied to the methodology in order to establish a class-wide loss at the certification stage.

The Tribunal denied the defendants’ strike out request, which was based on purported inadequacies in the claimant’s methodology. The Tribunal concluded that its job at the certification stage is not to analyse the expert methodology’s merits and robustness; rather, the Tribunal will determine whether the methodology provides a “realistic chance of evaluating loss on a class-wide basis.” It further stressed that this does not imply that the Tribunal must be convinced that the approach will work, or that the methodology must be proven to work.

The Tribunal emphasized the critical role of third-party funding in collective actions, as well as confirmed that the potential take-up rate by the class is not the only measure of benefit derived from the proceedings, with another benefit being the role of collective claims in deterring wrongful conduct. Despite the fact that the sums involved per class member may be little, the Tribunal focused on the fact that the total claim value is significant and that the majority of class members would be able to retrieve information about vehicle purchases.

In the end, the Tribunal managed two issues that have been discussed in earlier decisions: inclusion of deceased consumers in the class and compound interest. Corresponding to the previous, McLaren was not allowed to change his case to incorporate potential class individuals who had died before procedures being given, because of the expiry of the limitation period. Regarding the latter, in contrast to the judgment in Merricks last year, the Tribunal was ready to certify compound interest as a standard issue even though it is common just to a part of the class who had bought vehicles using finance agreements.

The Tribunal’s decision is conditional upon McLaren making adjustments to his methodology to account for the ruling on these points, and any determination as to the need for sub-classes.

Case name and number: 1339/7/7/20 Mark McLaren Class Representative Limited v MOL (Europe Africa) Ltd and Others

The whole judgment is available here: https://www.catribunal.org.uk/judgments/13397720-mark-mclaren-class-representative-limited-v-mol-europe-africa-ltd-and-others

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Commercial Regulatory Issues

Burford Capital CEO: Government Inaction on PACCAR is Harming London Market

By Harry Moran |

As we approach the beginning of summer, the litigation funding industry is growing impatient in waiting for the outcome of the Civil Justice Council’s (CJC) review of litigation funding, with funders anxious to see the government provide a solution to the uncertainty created by the Supreme Court’s ruling in PACCAR.

An article in The Law Society Gazette provides an overview of an interview with Christopher Bogart, CEO of Burford Capital; who spoke at length about the ongoing impact of the UK government’s failure to introduce legislation to solve issues created by the PACCAR ruling. Bogart highlighted the key correlation between funders’ reluctance to allocate more capital to the London legal market and “the government non-response” to find a quick and effective solution to PACCAR.

Comparing the similarities in effect of the government inaction over funding legislation to the Trump administration’s tariff policy, Bogart said simply, “markets and businesses don’t like such uncertainty.” He went on to describe the London market as “not as healthy as you would like it to be”, pointing to statistics showing a decrease in capital allocation and the examples of major funders like Therium making job cuts.

One particular pain point that Bogart pointed to was Burford’s newfound hesitancy to name London as an arbitral seat and choose English law for international contracts, saying that the company has moved those contracts to jurisdictions including Singapore, Paris or New York. Bogart said that it was “unfortunate because this is one of the major global centres for litigation and arbitration”, but argued that the strategic jurisdictional shift was a result of having “a less predictable dynamic here in this market”.

As for what Bogart would like to see from the upcoming CJC’s review of litigation funding, the Burford CEO emphasised the longstanding view of the funding industry that there is “no need for a big regulatory apparatus here.” Instead, Bogart suggested that an ideal outcome would be for the CJC to encourage Westminster “to restore a degree of predictability and stability into the market.”

Commercial Deals

Insurance CEO Ceases Trading with Firms Linked to Litigation Finance

By Harry Moran |

The tensions between the insurance industry and litigation finance are well established, with insurance industry groups often at the forefront of lobbying efforts calling for tighter regulations of third-party funding. In one of the most significant examples of this tension, the CEO of a speciality insurance company has declared that his company will cease doing business with any firm that is linked to litigation funding activity.

An article in Insurance Business highlights recent comments made by Andrew Robinson, chairman and CEO of Skyward Specialty Insurance Group, where he said that the company would no longer do business with companies who have any ties to litigation finance. Citing the uptick in the use of third-party funding as one of the primary contributors to social inflation, increasing product costs and reduced availability; Robinson declared that Skyward are “not going to trade with anybody who's involved in this”.

According to the article, Robinson’s decision was triggered by the company’s discovery that an asset manager it worked with was involved in litigation funding. Skyward then “shut off” its business relationship with the asset manager and is in the process of redeeming any remaining assets with the firm. Robinson said that the idea of Skyward having ties to firms involved with litigation finance “is wrong at all levels”, saying that he told his executive leadership team that “we can’t have that anywhere near us”.

Aside from the asset manager, Skyward was trading with a company involved in contingent insurance whose work included litigation finance, but Robinson stated that the unnamed company is reducing its already minor presence in the funding space.

Despite targeting his ire primarily at litigation funding, Robinson suggested that the wider issue stems from a “broken” tort system and that “you have to get to the root cause and toward reform”.  

Commercial Regulatory Issues

Bell Gully Report: New Zealand Courts are “Enablers of Litigation Funding”

By Harry Moran |

Following a 2022 report from New Zealand’s Law Commission, there has been a distinct lack of action by successive governments to introduce a Class Actions Act or any forms of oversight for the use of third-party funding in large group claims.

A new report released by Bell Gully looks at the current state of class actions in New Zealand, examining the rise of large group claims  and the role of litigation funding as a key driver. In ‘The Big Picture: Class Actions’, Bell Gully says that “in the past five years class actions have moved from being a threat on the horizon to a regular feature in New Zealand’s courts”. 

The introduction to the report appears to paint litigation funders as the prime moving force behind this trend, saying that the swell in class actions is “being driven by the availability of third-party litigation funding rather than a groundswell of consumer action.” Identifying the most prominent funders at work in New Zealand, Bell Gully points to LPF Group as the dominant local funder, Omni Bridgeway for its strong market reach from Australia, and Harbour for its global strength across litigation and arbitration funding. 

Without any legislative measures regulating funding and with no established industry association like Australia’s AALF, Bell Gully highlights the courts as the main mechanism of control over funding activity. The report goes further and suggests that “funder-friendly court decisions have contributed to the growing influence of litigation funders in New Zealand”, noting the admission of opt-out class actions and courts’ willingness to make common fund orders.

In its review of the need for a Class Actions Act in New Zealand, Bell Gully argues that the current lack of oversight on funding has led to a situation where the courts are acting as “enablers of litigation funding” rather than regulators of the practice.

The full report can be accessed here.