Scotland is home to a dynamic and successful food & drink sector, an industry providing a pillar of strength to the Scottish economy and the wider UK economy. Scotland also houses a relatively new and growing class action procedure. Group proceedings were introduced in Scotland in 2020 and, while they present an opportunity to widen access to redress, they also increase the risk of litigation for companies operating in Scotland.
We have written previously about some of the risks posed to those operating in Scotland's bustling food & drink sector by the introduction of group proceedings. In this blog we explore further the specific groups that may seek to raise proceedings against food & drink businesses.
Workers
When we first looked at this issue we noted a growing trend in other jurisdictions of class actions being raised against food & drink companies. It was therefore unsurprising that one of the very first Scottish group proceedings was brought against a Scottish producer of tea – James Finlay (Kenya) Ltd – by a group of more than 700 workers who claimed to have been injured whilst working for the company in Kenya.
This case serves as a reminder to companies registered in Scotland that the Scottish courts will have jurisdiction to hear claims arising from their overseas operations.
Consumers
In England, the principal mechanism for raising group proceedings is through a group litigation order or GLO. One of the very first GLOs granted was in the food and drink space more than 20 years ago, when a group of claimants raised an action against a fast food chain over injuries caused when hot drinks were spilled. While ultimately unsuccessful, the case illustrates the prospects of consumers joining forces to take on even the largest food and drink companies.
Business customers
Consumers are not the only customers that pose a potential risk. Indeed, since business customers may be both better-resourced and more aware of potential claims, B2B group litigation is perhaps more likely. This is a particular risk in respect of competition claims, with collective proceedings available in the Competition Appeal Tribunal on an 'opt-out' or 'opt-in' basis. While all other group proceedings regimes in the UK are 'opt-in' only, this can still result in very significant claims (see, for example, the CAT's decision to prefer an opt-in collective claim over an opt-out claim in the ongoing trucks litigation) and there is no reason in principle why other breaches that affect a large number of business customers could not also be pursued collectively.
Shareholders
Companies operating in the food & drink sector should also be aware that proceedings could be raised by their own shareholders. Prominent examples can be found in the US of shareholders raising 'stock drop' class actions when the share price falls on the back of information that was undisclosed to the market, or where shares were purchased as a result of false or misleading information disclosed to the market. For example, a class action was brought by shareholders of Monster Beverage Co due to a drop in stock price allegedly resulting from misleading and false statements made by the Company about its business. Further exploration on this issue and its specific relevance to the UK can be heard in our podcast episode on the subject.
Mitigating Risk
Of course, just because an action has been initiated does not mean it will be successful or even permitted to proceed by the courts. Any group of claimants in Scotland, whether workers, consumers, customers or shareholders, would need to make two applications to the court before they are permitted to make use of the group proceedings procedure.
It is nevertheless important that companies in the food & drink industry ensure they have the necessary insurance cover and strategies in place to robustly defend any group proceedings that might be raised against them. For examples of proactive steps that businesses should consider taking to mitigate this risk, visit our previous blog.
