The FCA test case and collective justice - the jury is out

While we should welcome the strides that the Courts are making towards access to justice through the development of collective redress mechanisms, we need to ensure there is a way for individual voices to be heard, such that those accessing the Courts are left with a sense that justice has been served.

The Supreme Court handed down its judgment in the The Financial Conduct Authority v Arch and Others on 15 January 2021. This case was on appeal from the decision of the High Court, handed down on 15 September 2020. 

The Supreme Court judgment has important implications for businesses that purchased business interruption insurance and suffered loss as a result of COVID-19. The judgment also contains a wider discussion on issues such as causation that will have an application beyond the world of insurance claims. In this piece, however, we consider the impact of the first use of the Test Case Scheme in the Financial List; the advantage of this scheme to serve the interests of access to justice as well as the potential draw backs of this as a collective redress mechanism. 

The Financial Market Test Case Scheme

The Scheme was introduced to apply to any Financial List claim which raises issues of general importance in relation to which immediately relevant authoritative English law guidance is needed. Mr Justice Butcher at first instance considered that this case met these criteria and allowed the application made by the FCA, supported by the defendants for the case to be heard under the Scheme. 

The Test Case Scheme has an important role to play in access to justice. The FCA claim is a case in point. It would not have been feasible for individuals to bring cases against insurers who refused to pay out. Obtaining third party funding for group actions, such as the Hiscox Action Group, can be challenging in circumstances where the pay out under insurance contracts is already capped at relatively modest levels. Through the Test Case, as many as 370,000 insured obtained clarity as to whether their policy will pay out for damages related to the pandemic, without having to fund the claim themselves. This is tremendously valuable.

Other case law

This decision comes hot on the heels of the decision of the Supreme Court in Merricks v. Mastercard which clarified the standard which opt-out competition claims will need to meet at the certification stage. The judgment, handed down on 11 December 2020, provides clarity as to certification ‘test’ and effectively gives the green light for such actions to be brought on a straightforward and easily understood basis. It paves the way for millions of consumers and thousands of small businesses to seek redress by bringing opt-out collective actions against those who have breached competition law. We also keenly await the decision regarding representative actions under Civil Procedure Rule 19.6, which relates to opt-out style class actions including beyond the competition law context, in the case of Lloyd v. Google to be heard by the Supreme Court this spring.

The jury is out

It is important, however, in developing the Court’s ability to hear claims through collective redress, that an individual claimant feels that justice has been served. We can take the FCA claim as an example. 

This case proceeded upon the basis of an agreed set of facts and agreed sample policy wording. The parties adopted a categorisation of the business affected by the COVID 19 Regulations. These covered a wide array of different businesses including restaurants, cinemas and theatres, retails stores, holiday accommodation and pharmacies. In addition, there was an agreed set of assumed facts, which were essentially illustrative factual scenarios as to how certain businesses had been affected. These factual scenarios were not, however, referred to before the Court, and they were not included in the judgment, although the justices state that they have been taken into consideration in reaching their conclusions. 

Notwithstanding the use of factual scenarios, the court did not hear from any individual insured parties, or for that matter anyone from the insurers. They did not have the opportunity to hear from people whose businesses, once thriving, have been destroyed by the coronavirus pandemic, or from the employees whose livelihoods have been put at risk. Would this have made a difference?

The use of juries in civil trials has been in decline in England over the decades and it is now very much the exception. It is not, however, unusual, to include what might be considered to be “jury” points when presenting a claim to a judge. While it is the judge’s role to interpret the law and decide the case based upon the application of the law to the facts presented, it must still be the case that judges take notice of the impact on individuals of the disputes before them, as they remain human beings.

Is this more human aspect lost when claims are run under the Test Case Scheme? The FCA case was decided very much in a vacuum of human emotion and personal circumstances. The High Court judgment leaves us with an excellent summary of the general principles of construction set out in the case of Rainy Sky SA, as well as the maxims of contra proferentem, ejusdem generis and noscitur a sociis. To this the Supreme Court adds a fascinating exegesis on the law of causation, drawing on 19th century case law as well as Aristotelian notions of causation and the overturning of the Court of Appeal’s decision in Orient Express Hotels Limited.

The resulting judgments from the High Court and the Supreme Court, while studies in legal excellence, are virtually impossible for anyone other than a lawyer to read. A lay client reading the judgment would not see the difficulties faced by his or her company and its employees reflected in the reasoning. While a judgment in an individual claim would set out at length the facts as presented to the Court, the FCA test case judgments do not delve into the facts, other than the background to the pandemic. 

Further, the difference in outcome for individual insured often turned on the precise wording of a contract. This, of course, is how contract law works. To a lay client, however, it may feel somewhat out of touch with reality when the individual insured did not negotiate the contract in the first place and did not even begin to appreciate that, for example, whether or not the insurance would pay out would depend upon whether the word “vicinity” was a defined term. These points cannot be explored in the context of a test case.


Perhaps we should pause to consider the purpose of our justice system. One such purpose is for client to feel that they have been heard and that they leave their interaction with the courts with a sense of justice having been served. This objective is undermined when individual factual scenarios are not put before the Court. 

This issue is inherent in any form of collective redress, although it may be highlighted in the context of a test case where the particulars of each individual case may be quite distinct. This is less likely to happen in the case of a claim in the CAT where all claimants may have suffered similar loss or indeed in a claim under CPR 19.6 which requires the claimants to have the same interest to be made a party to a claim in a representative capacity. 

It is a very positive development that the English legal system is so encouraging the use of collective redress, of which the Test Case Scheme might be considered one example. It will be important going forward to balance the need for collective redress to allow claimants access to justice and the need for their individual voices to be heard to allow the interests of justice to be served. 

The Supreme Court decision
The judgment of the first instance court

Other Perspectives