Court Of Appeal To Consider Legal And Procedural Requirements For Claims Regarding Secret Commissions

• Published date: 12 July 2023
• Subject Matter: Litigation, Mediation & Arbitration, Court Procedure, Class Actions
• Law Firm: Herbert Smith Freehills
• Author: Jan O'neill

The Court of Appeal has agreed to hear an appeal that is expected to involve it addressing the legal foundations of civil claims in respect of undisclosed or "secret" commissions - and what that means for the conduct of proceedings pursuing such actions.

The High Court decision being appealed (Commission Recovery Ltd v Marks & Clerk LLP [2023] EWHC 398) is discussed here on our Litigation Notes blog. The underlying action involves claims that two defendants (a firm of patent / trademark attorneys and an associated partnership) received secret commissions for referring the attorneys' clients to a third party service provider. The proceedings were brought as an "opt out" representative action under CPR 19.6, on behalf of all the clients in respect of whom a commission was allegedly received. The claimant was not itself one of those clients but is suing as the assignee of one of them.

The primary finding in the decision was that the proceedings satisfy the requirement that all class members share the "same interest" in the claim. This was one of the first decisions to consider that "same interest" test since the Supreme Court's seminal decision in Lloyd v Google [2021] UKSC 50 (discussed here), and takes what may be seen as a liberal approach in allowing the representative action procedure to be used despite potentially significant differences between the claimants' individual circumstances. The appeal will therefore be watched closely in that regard.

However, it will also be of interest regarding secret commissions actions more generally. That is because applying the "same interest" test requires a court to consider the legal and procedural features of the particular type of action involved. Accordingly, just as the Supreme Court's decision in Lloyd v Google added to the authorities not only on the representative procedure but on damages claims under the Data Protection Act 2018, the appeal in this case is expected to add to the appellate case law on claims regarding undisclosed commissions.

In particular, the features of secret commissions actions considered by the High Court, and which the appeal may expand upon, include:

• The legal status of an undisclosed commission On the basis of prior authority, the High Court accepted that, at least as between a principal and their agent, an undisclosed commission constitutes property - and so may be pursued via a proprietary claim to the commission itself, rather...