Class warriors

With group litigation on the rise, Neil Rose examines the different options for bringing a class action, the law firms building a reputation in this field and the role of litigation funding

Group litigation, class actions, collective proceedings, representative claims – call them what you will (and in fairness they do have different meanings) but legal actions brought on behalf of large groups of people are booming.

Research released in March by Consumer Voice, which tracks the progress of all the consumer group claims in the UK, found that every adult in the land could be due compensation from at least four group claims against “rule-breaking big businesses”. If won, these claims could leave consumers owed up to £22.5bn.

The data was based on 12 opt-out collective actions which have all been certified to proceed to trial by the Competition Appeal Tribunal (CAT) against household names such as Apple, Google, Mastercard and Sony PlayStation. All stand accused of abusing the dominant position they hold in a market and breaking competition law.

Indeed, according to international law firm CMS, the UK is “the highest-risk jurisdiction in Europe for class actions”.

Its European Class Action Report 2023, published last autumn, said the value of class actions in the UK had risen by more than a third to over £106bn, while the number of people involved in them almost doubled to over 340m.

However, the number of claims filed in the UK last year hardly changed at 121.

Class action is a generic term that is becoming increasingly common and actually the only one that is not a specific type of claim. UK lawyers have historically shied away from using it because of the strong connotation it has with US litigation and perception of murky, out-of-control, John Grisham-esque litigation brought primarily for the benefit of the lawyers.

But with more and more big claims being taken before the CAT, backed by large litigation funding businesses, the analogy is becoming harder to resist, even though of course there are fundamental differences between the UK and US legal systems, most notably our adherence to ‘loser pays’.

The annual Class Action Report by Portland Communications found last year that consumers were becoming more activist and willing to take action against companies they believed have broken the law.

It said consumers continued to be sceptical about both litigation funders and law firms, most of them believing, for the third year running, that these categories were “the most likely beneficiaries from class actions”.

However, an increased majority said this year that they believed class actions “cannot be brought without someone footing the bill”.

Four routes to court

There are four ways to bring a class action in England and Wales. Perhaps the best know is a group litigation order, a procedure to manage individual claims with common or related issues of fact or law that has been available since 2000. However, in that time, only 123 have been made. After something of a lull, 11 have been made this year as part of the diesel emissions litigation being brought against various car manufacturers.

Then there are ‘opt-out’ representative actions under rule 19.8 of the Civil Procedure Rules where claimants have the same interest, but their use has narrowed since a Supreme Court ruling in 2021.

The relatively new kid on the block is ‘opt-out’ collective proceedings, introduced by the Consumer Rights Act 2015 and only available for competition claims in the CAT. This has been where many of the most eye-catching claims are being brought, often as ‘follow-on’ actions to findings of anti-competitive behaviour by the European Commission.

Finally, multiple claimants can sue the same defendant(s) using the same claim form. Earlier this year, the Court of Appeal allowed 134 claimants to start a negligence action against a law firm with a single claim form. The appeal concerned the circumstances in which it was permissible for multiple claimants to bring claims in one claim form and one set of proceedings.

David Niven, the partner at Penningtons Manches Cooper representing the claimants, said: “This landmark judgment is a significant step forward not just for this claim but for collective redress in the English courts. It provides claimants with access to justice in the simplest form of a group claim: a single claim form for all claimants and claims.

“Class actions are on the rise in the English courts. This crucial judgment highlights the courts’ willingness to ensure that procedural complexities do not prevent access to justice in large-scale litigation.”

“64% of consumers said they would sign up to a class action given the chance, although 37% said they would be less likely to do so where the company involved issued a public apology” 

It may be that a single procedure for group actions will in time need to be created because the Portland research showed increased consumer appetite for certain kinds of claims. Larger majorities than in previous surveys reported that they would consider joining a class action after being affected by unfair pricing (57%), if they were overcharged when buying a product or service (64%), or if their own employer broke the law in a way that directly affected them (63%).

Seven out of 10 consumers said someone should be held accountable when a company failed to properly manage climate risks, with 62% believing this should be individual company directors.

A similar proportion were willing to join a class action if they were impacted by environmental damage from business operations.

Generally, 64% of consumers said they would sign up to a class action given the chance, although 37% said they would be less likely to do so where the company involved issued a public apology. Where they were directly contacted after an incident and informed of what was being done to solve the issue, that proportion rose to half.

A burgeoning sector

The rise of class actions has brought with it a burgeoning law firm sector, with leading class action practices from the US – most notably Hausfeld – and, to a lesser extent, Australia setting up shop in England and Wales alongside domestic practices such as Leigh Day.

The firm making the biggest splash, arguably, is Pogust Goodhead, which last year set its sights on becoming the biggest consumer class action law firm in the world after unveiling a landmark $553m (£453m) financing deal with emerging markets investment manager Gramercy.

Pogust Goodhead only launched in 2018 – initially in Liverpool under the name SPG Law and then PGMBM – and already employs more than 700 people. Headquartered in London, it also has offices in Amsterdam and Edinburgh, four in the US, three in Brazil, and most recently one in Australia.

The firm made its name first with the diesel emissions litigation – it has around 1.8m clients suing 14 different car manufacturers and was the first law firm to advertise on TV for a specific claim.

Pogust Goodhead is also running the UK’s biggest ever class action on behalf of 720,000 victims of the Mariana dam disaster, Brazil’s worst ever environmental disaster. The trial of the £36bn claim is due to start this year.

There are also signs of consolidation of the market; earlier this year, class action firms Keller Postman UK and Lanier Longstaff Hedar & Roberts (LLHR) merged to create a specialist practice called KP Law. With six partners and 14 other lawyers, KP Law focuses on product liability, workers’ rights, data breach and privacy, investment fraud and financial products mis-selling, and competition law.

The merged firm will also pursue in the UK and Europe cases being brought by The Lanier Law Firm in the US, headed by leading US trial lawyer Mark Lanier. In particular, this means continuing building a group to sue talcum powder manufacturers whose product is alleged to have caused cancer.

Mr Lanier has had success with this in the US. In 2018, he acted for 22 women and their families in securing an award of $4.7bn (reduced on appeal to $2.1bn) against Johnson & Johnson over their claims that its asbestos-laden talcum powder products caused the women’s ovarian cancer.

He only co-founded LLHR in October 2022 with barristers Tom Longstaff and Duncan Hedar; Keller Postman UK – which spun off from the US class action firm of the same name – is particularly well known for its data breach claims, as well as diesel emissions and equal pay actions.

Interestingly, larger London practices are also getting into the act. Mishcon de Reya, for example, acquired a majority stake in a global group actions management business called Somos earlier this year. It will now seek to expand its group action work by targeting environmental, fintech and financial services claims.

Simmons & Simmons, meanwhile, is running a new CAT case alleging collusion and unlawful price-fixing between six of the world’s top salmon producers. The action seeks as much as £382m for UK consumers who it is claimed overpaid for their fish for at least four years.

Funding dilemma

The big issue facing the sector in recent months has been third-party litigation funding. This is crucial to get such cases – which generally involve big legal teams, scores of experts and significant class management challenges – off the ground. The funders often lay off at least some of their risk by buying legal expenses insurance too.

Last summer, in a case known as PACCAR, an opt-out CAT claim, the Supreme Court decided that litigation funding agreements taking a percentage of the damages were caught by the Damages-Based Agreement Regulations 2013 – as it had hitherto been assumed that they were not, most agreements in place at the time did not comply with them.

A government bill to reverse the impact of the decision – unusually, it was also to have retrospective effect – was going through Parliament but fell when the election was called. It is not a party political issue and the hope is that the bill will be revived by the new government.

The issue has put funding in the spotlight. Alongside the bill, the Ministry of Justice commissioned the Civil Justice Council to conduct a review of funding. It will explore whether funding currently delivers effective access to justice and identify possible alternatives, limitations and reforms.

Last summer the Supreme Court found litigation funding agreements taking a percentage of damages were caught by the Damages Based Agreement Regulations 2013

The two big issues facing the review are whether funding should be regulated – the industry currently enjoys voluntary self-regulation through the Association of Litigation Funders – and whether there should be a cap on the portion funders can take from any damages.

The Post Office case – the group action on behalf of 555 sub-postmasters brought by Alan Bates that blew the scandal into the open – is often cited as evidence of the need for a cap, with pressure from business groups for one. The sub-postmasters only received £12m of the £57m settlement after legal and litigation funding costs were paid.

But Mr Bates – famously played by Toby Jones in the ITV drama – has spoken out in defence of the funder, saying the scandal would not have been exposed without its support.

Writing in The Guardian, he said: “The terms of the deal were clearly explained by our lawyers. Our funders, the litigation financing firm Therium, extended our credit on a number of occasions when the Post Office cynically drove up our legal costs. Therium, and our legal teams, even took a haircut on their returns to ensure the victims group received some return as they went on to pursue the truth through further court cases, enabling convictions to be overturned and real financial redress to be sought…

“Critics of the litigation sector have also argued for caps on funders’ fees. But that simply wouldn’t work. In our case, it would have just provided a target for the Post Office to aim for to achieve its stated goal of forcing us to ‘give up’. There have to be ways of discouraging these appalling legal tactics, not encouraging them.

“It should be defendants who have to pay the legal bills of successful claimants – that would certainly make them think twice about cynically dragging a case out. It would save time for the courts, reduce suffering for claimants, and it would ultimately save money for all.”

“The two big issues facing the review are whether funding should be regulated – the industry currently enjoys voluntary self-regulation through the Association of Litigation Funders – and whether there should be a cap on the portion funders can take from any damages” 

Speaking in the House of Lords during the bill’s passage, Lord Arbuthnot, who as an MP championed the sub-postmasters’ cause, said Therium was not “unfairly recompensed”. He explained: “They took the immense risk of taking on the country’s most trusted brand, the Post Office, which was backed by the bottomless purse of the taxpayer. That was a risk that needed a high pay-off if it succeeded, because it would have been ruinously expensive for the litigation funders if it had failed.”

But Lord Arbuthnot argued that, alongside a “properly regulated system of litigation funding”, there should be other methods of obtaining redress, “including the model of regulators-plus-ombudsmen”.

A separate review of litigation funding published in May by the Legal Services Board concluded that it supported the public interest and access to justice but would remain niche in aiding consumers. The report, by Professor Rachael Mulheron KC (Hon) of Queen Mary University in London, the leading academic in the field, found that between 2019 and 2024, there were 44 consumer cases involving litigation funding, mostly collective actions in the CAT or group actions in the High Court.

“By virtue of being able to fund litigation which would, otherwise, not be capable of being funded, litigation funding serves a public interest,” she wrote.

Though litigation funding was not for many cases – due to the economics of funding, and the screening or filtering mechanisms applied – “the entirety of the collective proceedings in the CAT, as well as significant collective actions and commercial litigation” bore testament to its ability to improve access to justice.

Notably, the Portland Communications research found that nearly two-thirds of consumers would prefer litigation funders to take a share of their compensation from class actions than pay legal fees.

Class actions are by definition high stakes, often the only way that people with individually minor claims can obtain justice against a wrongdoer. Though small in number, they are big in size and look set only to get bigger and more high profile. For those litigators in the middle of it, it is a very exciting time.