“Omnibus” legal win opens up mass motor finance claims

A Court of Appeal ruling has opened the way for thousands of motor finance misselling claims to be dealt with under multi-complaint “omnibus” group actions, potentially paving the way for large-scale mass litigation at a time when the Financial Conduct Authority’s (FCA’s) industry-wide redress scheme is stalled due to legal challenges.

 The judgment in the case of Black Horse Limited v Angel & Ors concerned the procedures followed when the county court in Birmingham heard claims against eight lenders (Black Horse, Close Brothers, Aldermore, VW Financial Services, Startline Motor Finance, Vauxhall Finance, BMW Financial Services and Moto Novo).

The court dealt with around 5,000 cases, all involving consumers who had bought cars during the past 14 years using finance, who claimed that as they were unaware of discretionary commission arrangements (DCAs) between the lenders and dealers, the relationship between them and the finance companies was unfair under the terms of the Consumer Credit Act 1974.

Instead of each consumer making a separate, individual claim, the group served a single, generic particulars of claim, brought by northwest legal firm Barings Law. The arguments heard at the High Court centred on whether this process met the legal requirements for an “omnibus” approach – they were not concerned with whether or not the claims themselves had merit.

Commercial reality

Amongst the issues considered by the judge was whether such a group action passed the  “convenience” test, whereby large numbers of claims which demonstrate common issues are bundled together in order to streamline the approach, so that more people are potentially able to access justice, and the burden on the courts is reduced. 

The Court of Appeal’s judgment overturned a previous High Court ruling in favour of the lenders, by concluding: “The most practical way in which the court can achieve at least a measure of justice for the claimants in this case is by efficiently case-managing their claims to a convenient disposal. The defendants’ opposition to that outcome is commercially understandable, but… ultimately unrealistic.”

In its discussions, the court pointed out that in some respects the lenders’ opposition to an omnibus claim was hard to understand, given the modest amount of compensation at stake (assessed as around £1000 per case) which made the costs and administrative overhead of addressing each individually out of proportion.

In the judge’s view, “the only plausible answer must lie in the commercial advantage to them of separate determinations. If there are 5000+ separate claims then, in theory, they would have to be determined by 5000+ separate hearings.

“Given the disproportionate nature of the costs, that is most unlikely to happen. It will be the individual claimants who fall away, because they lack the financial resources of the defendants (as the High Court judge said, ‘there is an imbalance of financial power between individual claimants and the defendants’. It also suits the defendants for there to be separate claims because the stronger claims can be settled and the less strong claims can be run into the ground.”

Criticism

The judge was critical of actions taken by both the lenders and claimants. He pointed out that efforts to establish how similar the individual claims were to each other were hampered by the lenders’ reluctance to provide details of how DCAs were calculated.

As regards the omnibus claim, the judge said the details provided were far too sparse, amounting to a list of the claimants in alphabetical order (albeit that it was alphabetical by reference to their first names rather than their surnames) and their addresses, and no particulars of claim.

He also said that details of the “single simple premise” which united all the claims depended on “too slender a thread” when it came to the  legal arguments and there was “a definite sense of the claimants thrashing about, trying to find any issues which could be tried which avoided any investigation of any facts.”

Both the lenders and the claimants were castigated for the absence of co-operation and for taking a hardline approach, with the judge stating: “There are various features of these claims which are irreconcilable, and these may in turn have led the parties to adopt extreme positions. It is a remarkable thing that so much effort and expense has been incurred in respect of claims that have barely got going.”

Tip of the iceberg

As regards the specific omnibus claim under consideration, the judge pointed out that on the assumption that each claim is worth around £1,000, Black Horse faces a potential liability of £1,852,000, while, at the other end of the spectrum, Aldermore faces claims totalling £29,000.

However, he noted that these claims are only “the tip of the iceberg”, with the court service, and Birmingham County Court in particular, currently inundated with single claim forms with thousands of claimants, suggesting many thousands of claims could flood into the courts.

Barings Law, which has been leading the case against Black Horse since 2022, called the ruling “a decisive victory for motorists across England and Wales”.

“Today’s judgment finally brings certainty and allows these claims to continue progressing through the courts as they always should have done.

“We’ve always believed that consumers should be able to pursue the strongest legal route available without unnecessary barriers, in order to recover the full compensation to which they are entitled.

“That’s why we’re launching ‘No Fee PCP’ today. If we win a claim, our clients will receive 100% of their damages. We’ll limit our costs to whatever contribution the losing party pays towards their legal fees and, if our costs are higher than that, we’ll waive the difference so our clients keep every penny of the compensation they recover.”

FCA redress scheme

The FCA’s £9 billion redress scheme, launched in March, is intended to offer an industry-wide mechanism for the swift resolution of most motor finance claims, by introducing agreed formulas for calculating compensation so payments can be made swiftly.

However it has been challenged at a tribunal by three captive lenders and a consumer action group, with the case not due to be heard before October this year. This means the scheme is unlikely to be implemented before 2027, and could be scrapped depending on the outcome of legal arguments.

Whitehead stated: “Consumers have been told to wait, and then told to wait again, while legal challenges continue to delay the FCA’s proposed redress scheme. Meanwhile, the courts haven’t stood still.

“Consumers are once again being given the choice: allow the redress scheme to take its course, or allow legal experts to guide their case forward with the promise of full compensation.”