Death of class actions?

Not, argues Russell Jones & Walker partner Richard Langton, if the Ministry of Justice (MoJ) introduces the sweeping reforms proposed by Lord Justice Jackson on civil litigation costs.

Langton was in court this morning (15 December) asking Mr Justice MacDuff to approve a settlement agreed between his 400-plus clients and insurance giant Zurich, which until now has resisted any opportunity to settle the claim.

Langton was first instructed to represent more than 4,500 people in a group action against Argos Home Retail Group, Unibrook (trading as Walmsley Furnishing), Land of Leather (in administration) and Zurich in early 2008. The claimants wanted compensation for the retailers after they suffered dermatological injuries from exposure to Chinese-manufactured leather furniture containing mould inhibitor DMF.

In April MacDuff J approved plans for a compensation fund worth £20m for claimants pursuing claims against Argos, Land of Leather and Walmsleys. But the court also found that Zurich could not be held liable for claims against Land of Leather, which had gone into administration.

The insurer agreed to pay only the claims against Land of Leather, where sofas had been supplied by Chinese company Eurosofa, leaving 400 claimant without compensation.

When judgment was given by MacDuff J, Langton said of the insurer and its legal team: “Zurich and their solicitors knew that there was a question about indemnity, but they didn’t tell us or the court.

“If the retailer was still trading as a half-billion pound company they would’ve been forced to pay up. Had we known what was happening a year earlier we would’ve done something. We’re very, very unhappy we were kept in the dark.”

The case was due to be heard by the Court of Appeal (CoA) in January, but today the defendants caved in, agreeing to pay an average of £1,800 to each of the claimants. Zurich will pay £1,000 to the claimants it is liable for plus £275 to the claimant lawyers.

Langton said the claimants were willing to accept a reduced settlement to avoid costs escalating at the CoA and the risk of losing. That said, he added: “It’s difficult to speculate on the motive of why they waited until a month before it came to the court to settle.”

Langton argues that this will be the last low-value group claim to be heard in the UK if the MoJ agrees to scrap recoverability of success fees and after-the-event (ATE) insurance premiums.

“It’s the end of group litigation for smaller value cases,” he laments. “There’s never going to be another case like this heard by the appeal court. There’s still some time left to change the Government’s mind, but I doubt that’ll happen.”

Appetite to take on such cases will diminish and claimants will not want a portion of their compensation to be taken by their legal team, he suggests.

Repeated attempts have been made to make group actions work in the English and Welsh courts. Last month, Lord Justice Mummery threw out a claim brought by Hausfeld on behalf of flower shippers, Emerald Supplies and Southern Glass House Produce, against British Airways (BA) (19 November 2010).

The claimants had attempted to bring a representative action against BA, seeking damages in respect of losses they claimed to have suffered as a result of an alleged cartel in the provision of airfreight services.

But Mummery LJ was scathing in his rejection: “Emerald’s case for a representative action, whether as originally pleaded or as proposed to be amended, is fatally flawed.”

There are now plans to take that case to the CoA, but BA, which has a raft of supporters and is represented by Slaughter and May litigation heavyweight Richard Swallow, is confident of a win.

There is little appetite from the judiciary or Government to embrace class actions in the UK. Aiming to drive down legal costs is a worthy cause, but it should not be done at the expense of claimants who will now need to leap over higher financial hurdles to have their cases heard.

Counsel:

Russell Jones & Walker partner Richard Langton instructed 12 King’s Bench Walk’s Frank Burton QC to act for the appellants in the build up to the CoA.

39 Essex Street’s Charles Cory-Wright appeared for the defendants