201709.19

Consumer Claims Agglomeration Legitimate – Landmark High Court Ruling

In a ground-breaking decision, the High Court has upheld the legitimacy of the growing number of companies that specialise in taking over legal claims by disgruntled consumers and pursuing them, en bloc, against alleged wrongdoers.

The case concerned one such company that had taken assignment from a number of members of the public of their claims against an online data storage provider that was alleged to have charged them unfair cancellation fees. Those who assigned their causes of action to the company had the option of receiving a fixed sum or 60 per cent of sums recovered in the event that the claim against the provider succeeded.

In attempting to strike out the company’s claim, the provider – which denied that its charges were unfair – argued that the company’s mode of business amounted to illegitimate support of litigation in which it had no concern whatsoever. The company’s methods were alleged to constitute ‘maintenance’ and ‘champerty’, activities which have been banned since medieval times when intermeddling with litigation was rife.

In rejecting those arguments, however, the Court found that there was a strong public interest in upholding the validity of the assignments and in permitting the company to pursue its claim. Individual claims by the provider’s customers would be too small to be cost- or time-effective and the company had a legitimate and genuine commercial interest in being able to pursue the claims assigned to it.

The company’s methods were an innovative and responsible means of enhancing access to justice in small money cases and there was no risk of the litigation process being abused, inflated damages being awarded or frivolous litigation being pursued. Arguments that the assignments were an attempt to circumvent the regulatory provisions concerning the provision of legal services contained within Section 13 of the Legal Services Act 2007 were also rejected.

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