High Court Clips the Wings of Class Action against Airlines

The English High Court has struck out a class action claim against two airlines in which the Claimant sought to secure flight delay compensation on behalf of millions of passengers using the representative procedure under CPR 19.8 (full decision available here).

Background 

The Claimant, Ms Claire Smyth, was booked on a British Airways flight scheduled to fly from London Gatwick to Nice on 18 June 2022. Four days before scheduled departure, the flight was cancelled. This gave rise to an entitlement on the part of the Claimant to claim compensation under Article 7(1) of EU Regulation 261/2004 (which was incorporated into UK law following Brexit). Subject to certain conditions, the Regulation requires airlines to compensate passengers when their flights are cancelled or delayed by more than three hours. 

CPR 19.8 provides that a claim can be commenced by or against one or more other persons who have the “same interest” as those being represented. Even where the “same interest” test is met, the court retains a discretion as to whether to permit the representative action to proceed. CPR 19.8 is ordinarily seen as an "opt-out" procedure, as there is no requirement to identify the represented parties or join them to the claim, but any judgment will be binding on them. 

In pre-action correspondence, the Claimant explained that her proposal was to recover compensation where that was legally due but had not been paid, including because the customers had not been made aware of their right to claim compensation. Her position was that this claim would, effectively, force the defendant airlines to proactively pay compensation in all cases where it is undeniably owing.

What did the parties argue?

The airlines argued that the “same interest in a claim” test was not met. In the case of some class members, the airlines would have defences to their claims; in others they would not. Within the class there would be numerous interests requiring individualised determinations. The Claimant sought to meet this criticism by proposing a sifting process pursuant to which, following factual enquiries, the class would be progressively trimmed in an effort to reach a rump of claimants who had the “same interest” in the claim. For example, those claimants who had been given more than seven days’ notice of cancellation (which would, under the Regulation, vitiate any entitlement to compensation), would be culled. The airlines maintained that this was an impermissible use of the CPR 19.8 procedure. 

The airlines also submitted that, whether or not the “same interest” test was met, the Court should exercise its discretion to strike it out and/or direct that the Claimant may not act as a representative. In this regard, they submitted that, as a matter of reality, the proposal would operate as a sort of mandatory compensation scheme, which was what Parliament had decided not to impose. They also argued that passengers who qualified for payments under the Regulation had available to them a free, easy-to-use direct claims procedure operated by the airlines, by which they could achieve full compensation. To this, the Claimant argued that the action was brought for the benefit of those unaware of their rights or for whom the process of claiming via the airlines’ compensation schemes was too complex. 

The airlines also submitted that the funding arrangements were relevant to the exercise of the Court’s discretion. The precise funding arrangements had not been disclosed, but it became apparent that the claim was funded by a Mr John Armour, an Australian citizen who is a resident of Monaco and who was Ms Smyth’s employer. The Claimant had obtained (in a separate application) an order that she would be entitled to deduct 24% of any compensation recovered (at least a portion of which appears to have been a funder’s fee, payable to Mr Armour). 

What did the Court decide?

The Master found that the proposed representative action fell short of the jurisdictional requirements of CPR 19.8 as the Claimant and the represented parties did not share the “same interest”. That defect could not be cured by sequential amendments to the class. 

The Master was also persuaded that, as a matter of discretion, it would not be appropriate to allow this claim to go forward as a representative action. The principal motive for the claim lay in the financial interests of its backers, rather than the interests of consumers. Of note, the Claimant had initially failed to reveal her links to Mr Armour, describing herself in a witness statement as an office manager (without revealing that it was Mr Armour’s office that she managed) and neglecting to disclose that she had once been his yoga instructor. The Claimant had also reserved her position on the issue of her personal remuneration. In these circumstances, the Court did not accept that the Claimant’s motivation lay in a desire to secure redress for consumers.

The Court therefore struck out the claim and directed that the Claimant may not act as a representative, making clear that this decision was based on both jurisdictional and discretionary factors.

Comment 

This case represents the latest in a series of recent attempts by claimants to use CPR 19.8 to fashion somewhat novel group actions (see, for example, our post here). While this case is in some respects confined to its own (rather peculiar) facts, it raises interesting points of law about the permissible scope of a representative action under CPR 19.8. 

The Claimant in Smyth may have been emboldened by the comments of the Supreme Court in Lloyd v Google LLC [2021] UKSC 50, where the “same interest” test – which has historically been interpreted strictly – has arguably been relaxed somewhat. There, Lord Leggatt drew a distinction between “conflicting interests” and interests which were “merely divergent”, holding that, in the latter scenario, there was no reason in principle why all claimants should not be represented by the same person. However, the Smyth decision should serve as a reminder to claimants that, when formulating the class, the “same interest” requirement must still be given careful consideration – and whether claims can be categorised as “merely divergent” will be a “question of fact and degree”. Further, the court will not permit claimants to cast a wide net at the outset in the hope of reducing the class at a later stage so as to achieve compliance with the “same interest” requirement. 

The case also underscores the extent of the court’s discretion to decline to allow a claim to proceed under CPR 19.8 where it would be inappropriate to do so. Claimants seeking to pursue a representative claim where an alternative compensation scheme exists, or where the dominant motive of the claim lies in the financial interests of its funders, should expect an uphill battle.