1 October 2015Print This Post

Litigation funders: Consumer Rights Act class actions could have “far-reaching consequences”

Edwards: Act will make group actions easier

Edwards: Act will make group actions easier

Litigation funders have predicted far-reaching changes following the introduction of the Consumer Rights Act 2015, which comes into force today, particularly as a consequence of the collective redress regime that it ushers in.

Among other changes, schedule 8 of the Act for the first time makes available opt-out competition law class actions in England and Wales. This means cases can be brought by a defined group of people with similar claims either as follow-on or standalone actions, once they are certified by the Competition Appeal Tribunal.

The tribunal also has powers to order them to be opt-in, will subject them to a preliminary merits test, and will have to approve any settlements. It will not be able to award exemplary damages – although it can award damages without quantifying the loss of each individual claimant – and actions cannot be brought under damages-based agreements.

Litigation funders suggested the Act would have a significant impact on litigation. Rosie Ioannou, senior counsel at Vannin Capital, predicted the advent of UK class actions could have lasting implications if such actions were deemed successful and were extended beyond the competition sphere.

She added: “There has been much academic debate about the legislative nuances of the Act and how the new class action regime will work in practice. What is clear, given experiences in other jurisdictions where class actions now operate, is that funding will be key to their success.

“Litigation funding has already seen exponential growth in recent years and since it is well suited to supporting class actions, I would expect to see this continue at an even faster pace as class actions in the UK gain traction.”

Fellow litigation funder, Jeunesse Edwards, engagement manager at Augusta Ventures, said the new Act would improve the difficult balance involved in a group action under the previous system.

“As a funder you won’t have an endless recruitment process to try and hit that critical mass in terms of number of claimants and what quantum they signed up for…

“You’ll know at the point you’re successful that the other side have to pay for all the costs of paying people out and categorising them, getting them on the system and dealing with them…

“I think it’s going to make it easier to get group actions off the ground. That makes it much more attractive for us to be able to get involved, and it also makes the process much slicker for everybody, which is what we always try to achieve.”

Leading group action lawyer Mark Harvey, a partner at Hugh James and head of its claimant division, observed that it seems the government has not pursued its original plan to bar lawyers or third party funders from acting as the representative.

He regretted the fact that contingency fee arrangements were prohibited, however. “A shame as this would have made these representative claims even more viable.”

Mr Harvey said the Act would make such actions as the PIP breast implant litigation – in which he is the court-appointed lead solicitor – “tidier and easier to follow, especially for the consumer”.

He added: “However, from my perspective the largest impact will arise from the collective redress regime it improves.”

Claimant lawyers Leigh Day suggested the Act would not bring about an increase in claims. Jill Paterson, a partner in the firm’s consumer law and product safety group, said: “The new legislation consolidates and simplifies pre-existing legislation, clarifies timescales for redress, and extends the range of remedies for consumers, such as ADR.

“A notable addition to rights brought in by the Act is the inclusion of ‘digital content’, signifying a much needed move with the times.

“Anything that makes matters simpler for consumers can only be a good thing, and we welcome the legislation.”

By Dan Bindman

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