Court of Appeal gives green light to Marks & Clerk secret commission claim

 In a judgment handed down at 10.30am today (Thursday 18 January 2024), the Court of Appeal has rejected Marks & Clerk’s appeal and ruled that Commission Recovery Limited’s claim against Marks & Clerk may proceed as a representative action under CPR 19.8. The case is Commission Recovery Limited v. Marks & Clerk LLP and Long Acre Renewals (A Firm) CA-2023-000691. The tribunal hearing the appeal comprised the Master of the Rolls (Sir Geoffrey Vos), Lord Justice Nugee and Lord Justice Snowden. 

The Court of Appeal’s ruling upholds the earlier decision of Mr Justice Robin Knowles CBE, who found that Commission Recovery Limited had successfully met the hurdle for representative claimants. It is the first appellate ruling on the representative action regime since the Supreme Court’s judgment in Lloyd v Google in November 2021. With the litigation funding industry still considering the ramifications of both this and the Supreme Court’s judgment in PACCAR (July 2023), greater certainty around aspects of group litigation are likely to be welcomed. 

David Greene, co-president of The Collective Redress Lawyers Association ("CORLA"), the UK's first member organisation for lawyers who specialise in collective actions, commented: 

“In upholding the High Court’s decision to allow this claim to proceed as a representative action, the Court of Appeal has provided very helpful clarity in an important developing area of law. The decision can be seen as a significant step in the development of the collective redress regime in England and Wales ensuring access to justice for SMEs and consumers” 

Peter Rouse, director of Commission Recovery Limited, commented: 

“The Defendants have taken every opportunity to derail this claim to prevent it from reaching trial - they well know that this trial will fully expose the confidential commission arrangement with CPA Global which, as the Court of Appeal noted, resulted in Marks & Clerk’s affiliated partnership receiving between 30% and 46% of the fees earned by CPA from clients of Marks & Clerk. Comparison with the Post Office is apposite, as progress of the group action led by Alan Bates on behalf of 550 sub-postmasters was obstructed at every stage by the Post Office who ran up costs to such an extent that the claimants recovered very little in the end. The well-funded and equally indignant Defendants in this case seem set on the same strategy and to the detriment of their affected clients.” 

Commission Recovery Limited is a company established to bring the claim against intellectual property law firm Marks & Clerk in relation to secret commissions allegedly paid by CPA Global, an IP management organisation, to Marks & Clerk in return for referring their clients to CPA. CPA allegedly paid these secret commissions to Long Acre Renewals, a partnership set up by current and former partners of Marks & Clerk. 

It is alleged that Marks & Clerk hid these commissions from their clients, breaching their fiduciary duty to their clients to act in their best interests. Under established 

English law confirmed in Wood v Commercial First Business Ltd [2021], secret commissions are treated as bribes. 

In bringing the claim, Commission Recovery Limited pleaded the case based on that of another company and former client of Marks & Clerk, Bambach Europe, arguing that their case was representative of other clients that had been impacted by Marks & Clerk’s alleged actions under CPR 19.8. Commission Recovery Limited argued that they bring the claim on behalf of all those with the “same interest” as Bambach Europe, encompassing all of Marks & Clerk’s clients that: 

• Contracted directly with Marks & Clerk 

• Were subject to Marks & Clerk’s terms of business 

• Had commission paid by CPA to Marks & Clerk in relation to the rights that the client owned or was otherwise authorised to represent 

Marks & Clerk and Long Acre Renewals (represented by Clifford Chance) sought to argue – both at first instance and before the Court of Appeal – that the class did not have the “same interest” under the test established in Lloyd v Google. However, the Court of Appeal upheld Mr Justice Knowles’ ruling in February 2023 that the same interest test was met. 

Delivering the Court’s judgment, Lord Justice Nugee noted Commission Recovery Limited’s “core proposition” that (subject to disclosure and informed consent, and limitation) all that needs to be proved to establish liability are the fact of (i) contracting on Marks & Clerk’s standard terms of business and (ii) the payment of commissions. He ruled that, if such a proposition could be established, then: 

“I see no difficulty in the Court so declaring, and it seems to me self-evident that such a declaration would be equally beneficial to every member of the class.” [51] 

On the point that other issues would still need to be resolved, Lord Justice Nugee noted that: 

“…it is not suggested that there was any routine practice of informing clients about commission, and it seems likely that in many cases M&C LLP and LAR will have no basis on which to assert that the defence is available.” [52] 

The Judge went on to state: 

“I conclude that there is therefore both an issue common to all members of the class and no relevant conflict between them. It follows that the members of the class have the “same interest” in the claim for the purposes of CPR r 19.8(1), and that the rule therefore applies.” [67] 

Also of note for the legal industry are Lord Justice Nugee’s findings in relation to the processes surrounding CPR 19.8 that: 

“it is not an impediment to the use of a representative action that not all issues can be resolved on a class basis.” [54] and that “common issues may not fully resolve the question of liability” [55] 

The Signature Litigation team representing Commission Recovery Limited comprises Daniel Spendlove and Neil Newing (Partners), George Bazinas (Senior Associate) and Katrin Harter (Paralegal). Nico Leslie and Christopher Monaghan from Fountain Court appeared as counsel. 

Notes to Editor: 

Contact: James Lynch, Partner, Maltin PR - +44(0)75 4202 7493 

The judgment can be found here: https://mediaserver.responsesource.com/mediabank/33686/CRLvMarksampClerkfinal.pdf. 

The case is Commission Recovery Limited v. Marks & Clerk LLP and Long Acre Renewals (A Firm), CA-2023-000691. The judgment citation is [2024] EWCA Civ 9. 

The case is expected to go to trial in January 2025. 

The claim was launched in July 2021. Mr Justice Knowles gave judgment on the question of whether the claim could proceed as a representative action on 24 February 2023. The Defendants obtained permission to appeal that judgment, with the Court of Appeal hearing held on 21 - 23 November 2023. The Court of Appeal handed down its judgment on 18 January 2024. 

Since the judgment of Mr Justice Knowles, the Civil Procedure Rules (CPR) have been amended, making references to 19.6 in his judgment now refer to 19.8. 

Signature Litigation is a law firm specialising in commercial litigation, international arbitration and regulatory investigations. Headquartered in London, the firm also has offices in Paris and Gibraltar.