28 October 2015Print This Post

High Court strikes out group action brought on behalf of 65,000 companies

BA: successful application to strike out

BA: successful application to strike out

The High Court has thrown out a massive action brought on behalf of 65,000 Chinese companies over the air freight price-fixing cartel and heavily criticised their solicitors, who it found had not been properly authorised to start proceedings.

The law firm, group action specialist Hausfeld, said it will appeal.

The ruling explained how the claim form issued in May 2014 was signed with a statement of truth by former Hausfeld partner Boris Bronfentrinker, as were the 81-page particulars of claim served four months later.

In terms of the losses, the claimants said they did not have full records of their purchases of air cargo services but put purchases on routes between China and the EU during the period in question at nearly £8bn.

British Airways and four other airlines applied to strike out the claim on the grounds that it was issued without Hausfeld having the necessary authority of any of the 64,697 claimants to bring the proceedings, or alternatively that it was an abuse of process.

By the time of the hearing before Mrs Justice Rose on 15 October, Hausfeld accepted that the vast majority of claims could not continue, because only 5,277 claimants could show that they had shipped cargo by air during the relevant period. It was also conceded that none had authorised Hausfeld to bring proceedings in its name at the time the claim form was issued.

However, Hausfeld said that 362 claimants had recently expressly ratified the commencement of the proceedings and asked to be given until the end of the year to gather more ratifications and then continue the claim on their behalf.

In her ruling, Rose J outlined how since 2011 Hausfeld had contacted and worked extensively to identiy potential claimants with the China Chamber of International Commerce (CCOIC), which has about 200,000 members and is responsible for issuing the certificate required to export manufactured goods from China.

In April 2014, Hausfeld became aware of the possibility that the claims might become time-barred, leading the CCOIC to provide the details of 64,697 companies which it had identified as having been potentially affected by the cartel.

The judge first rejected Hausfeld’s submission that the forms returned by the 362 claimants were effective to ratify the issue of the claim for several reasons, such as failing to tell the company that proceedings had already been commenced in its name in England, and for being “highly misleading” by suggesting that there would be no work or cost involved in pursuing the case.

She concluded: “In my judgment, none of the 64,697 claimants on whose behalf this claim was brought by Hausfeld has either authorised the bringing of the claim or ratified Hausfeld’s actions in starting the claim on its behalf… The only possible course for me to take is to strike the whole of the claim out.”

Rose J added that, had it been necessary, she would have struck out the action as an abuse of process for several reasons.

“The evidence of Hausfeld’s partners as to how the 64,697 claimants were chosen shows that they had no grounds for believing at the time they issued proceedings that any particular claimant had shipped air freight over the relevant period.

“Hausfeld had been working with CCOIC to identify claimants for several years before proceedings were issued in March 2014. Yet when in January 2015 Slaughter and May [for British Airways] queried whether the claimants had shipped any goods by air, CCOIC was able within four months to interrogate its database to discover that only 5,277 of the claimants had shipped freight by air.

“It was wholly irresponsible of Hausfeld to launch proceedings in the name of tens of thousands of additional claimants when there was no basis for signing a statement of truth in the claim form and in the particulars of claim asserting that those claimants had shipped goods by air.”

Further, while recognising that the £8bn figure was not the loss claimed, she said it was “intended to send a clear message that the value of the claim is several billions of pounds, even if only a modest overcharge is eventually proven. It is difficult to imagine on what basis Hausfeld could have signed the statement of truth as regards this figure if in fact only 5,277 of the claimants shipped freight by air”.

The judge was not impressed by Hausfeld’s claim that it had received oral advice that the CCOIC was empowered to instruct the firm to act in the names of its members. Even when written advice was received in April 2015, there was nothing in it that would reassure the firm on this point, she said.

Rose J continued: “There was a complete lack of candour on the part of Hausfeld, despite the very clear guidance of the Court of Appeal in Adams [and others v Ford and others [2012] EWCA Civ 544] as to the proper way for a solicitor to behave when faced with the dilemma Hausfeld thought they were facing.

“Far from alerting Slaughter and May when issuing or serving the claim form that there were serious difficulties with identifying claimants, Hausfeld served the claim form with no explanations and the false statement of truth was compounded when the particulars of claim… was served a few months later. The assertion in correspondence that it was not obliged to disclose details of who had authorised the proceedings is directly contrary to the decision of the Court of Appeal in Adams.”

In a statement, Hausfeld said: “We respectfully disagree with this judgment and are disappointed that access to justice is being denied in this jurisdiction for so many Chinese claimants impacted by the worldwide air cargo price-fixing cartel. We consider the claim was properly brought and will be appealing.

“We will continue to pursue these claims, as well as the ongoing claim on behalf of Emerald Supplies and 564 co-claimants [larger companies unaffected by this ruling].”

By Neil Rose


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