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Freshfields Risk & Compliance

| 3 minutes read

Risks in joining the group register for claimants in consumer GLOs

In November 2020, the English High Court made a decision on the scope of common costs in Crossley& Ors v Volkswagen AG & Ors. The decision serves to highlight particular risks that can arise for claimants in group actions. Freshfields acted for the Volkswagen defendants.

The group litigation order (GLO) in the case covers many claims. By the time of the hearing, the litigation had progressed to the stage where the parties were required to nominate claims to ultimately serve as lead claimants. To facilitate that process, the Court had ordered that the parties initially agree to nominate 80 claimants. Those 80 claimants would then provide further information in respect of each of their claims via schedules of information and, based on that information, the parties would then agree which 20 of those80 claims would ultimately proceed to trial as lead cases.  

On selection, one of the 80 claimants nominated – an estate agent trading as a limited company – notified their solicitors that they no longer wished to participate in the litigation. Given the COVID-19 pandemic the estate agent explained that it did not wish to engage in the distraction of continuing in the litigation. The defendants agreed that the estate agent could discontinue its claim (permission being necessary under the terms of the GLO), and requested that they be paid what the defendants contended were common costs incurred in the GLO as a result of scrutinising and selecting that estate agent’s claim. 

The claimants disagreed and argued that such costs should be met by the estate agent itself individually. Clearly, the costs incurred in assessing claims in the context of a group action can be substantial. The claimants’ approach demonstrates the importance that all individual claimants participating in GLOs are made aware via their solicitors that situations can arise whereby the claimants can incur personal liability. As here, a decision to abandon a claim can potentially result in claimants being exposed to significant individual liability.   

A consent order was agreed and sealed by the Court. The consent order made clear that the question as to whether the defendants’ costs were to be paid by the estate agent claimant individually, or treated as a common cost to be shared amongst all of the claimants, was reserved to the next court hearing.  

When skeleton arguments were prepared for that hearing, the claimants argued for the first time that the estate agent had never been a claimant in the litigation. They asserted that an individual, not the estate agent, had in fact initially issued the claim form in 2018 in respect of the vehicle in question. That individual was a director of the estate agent. The director was duly entered on the GLO’s group register but a schedule of information was served in in April 2019 the name of the estate agent, not individual director who had issued the claim form. The claimants therefore argued that the individual’s claim was struck out as a result of failure to serve a schedule of information. The claimants then asserted that no costs could be paid by the estate agent as it had not issued a claim form and thus was not a claimant in the litigation. They added that the estate agent did not benefit from any ATE insurance and that the director had the benefit of insurance only until April 2019. The claimants’ counsel recognised that this was an “unhappy situation”, but that it was unjust that the wider claimant cohort should bear the costs of the estate agent’s decision to discontinue its claim. 

The defendants noted that the director and estate agent were each given the same claimant firm reference and GLO ID by the claimant steering committee such that it was clear that this was the same claim and that the error was not that the individual director had failed to serve a schedule of information but that the name of the claimant in the schedule of information was incorrect. The defendants’ argued that in any case the costs incurred were common costs that should be met by the claimant cohort as a whole.  

The Court agreed with the defendants. The defendants’ costs in selecting and nominating (and de-selecting) that claim were then ordered to be paid by the claimant cohort generally as common costs. It was also ultimately ordered that the notice of discontinuance originally sealed by the Court should be deemed to refer to the individual director. The result of the decision is that the claimants each have a several liability to pay those costs as a whole (presumably via solicitors, litigation funders or ATE insurance providers), and they will ultimately bear the costs of an individual claimant’s decision to abandon their claim.   

The case is a critical example of the very real risks that can arise for individual claimants themselves, and potentially claimant solicitors, funders and insurers when there is a failure to accurately scrutinise claimants’ claims and ensure that they are accurately entered onto the group register.