Consumer claims to recover allegedly unlawful charges were validly assigned to claimant company

The High Court has found that a company was able to bring a claim in its own name to recover allegedly unlawful charges paid by third party consumers, where the company had taken an assignment of those claims in return for either an upfront fee or a share of any recoveries: Casehub Ltd v Wolf Cola Ltd [2017] EWHC 1169 (Ch).

The court found that the assignments did not fall foul of the principles of champerty and maintenance (the ancient rules against “trafficking” in litigation). In recent years, it has become clear that those rules will not invalidate an agreement whereby a third party funds litigation in return for a share of the proceeds - unless there is some other feature of the agreement that is contrary to public policy. It had appeared, however, that the rules might be applied more strictly where claims are assigned to a third party to pursue in its own name (as for example in the case of Simpson v Norfolk & Norwich University Hospital NHS Trust [2011] EWCA Civ 1149, outlined here).

But the present decision, together with the decision in JEB Recoveries LLP v Binstock [2015] EWHC 1063 (Ch) (outlined here), suggest that the courts may be increasingly flexible in this context also. Interestingly, the business model pursued by the claimant in this case, which the court described as "a company which builds consumer group actions online", appears similar to a practice common in some other EU jurisdictions, such as Germany, where claims can be “bundled” in an SPV to be pursued together.

It is not clear, however, that such claims will always be allowed to proceed in this jurisdiction. Each case will turn on its facts, including such factors as whether the claimant is considered to have a legitimate interest in pursuit of the claims and whether there are other elements that render the assignments contrary to public policy. 

Background

The defendant operated a software business selling server space to customers for a £20 monthly subscription fee for a minimum 12 month term. If a customer terminated its agreement within the minimum term, a lump sum cancellation fee would be payable.

Due to system problems, a number of the defendant's customers who signed up in August 2016 were unable to access the service and so terminated their agreements. They were each charged a cancellation fee of £196 calculated in accordance with the defendant's terms and conditions.

In September 2016, the claimant entered into claim purchase agreements with three of those customers. In the agreements, the claimant took assignments of the customers' claims to be refunded the cancellation fees on the grounds that the relevant provisions in the terms and conditions were unlawful. The claim purchase agreements were of two types: in the first, the claimant would account to the customer for any sums recovered less a fixed percentage of 40%; in the second, the customer received a fixed amount of £40 and the claimant would retain the sums recovered.

The claimant then brought a claim against the defendant to recover the charges. As well as disputing the claim on the merits, the defendant disputed the claimant's ability to bring the claim, alleging that the assignments were void as they fell foul of the rules against champerty and maintenance, which have been described as the "wanton and officious intermeddling with the disputes of others ... without justification or excuse". In the past, the assignment of a bare right of action (as opposed to a debt, which is readily assignable) has been found to fall foul of these rules.

Decision

The High Court (Stuart Isaacs QC sitting as a deputy judge) granted declarations that the assignments were not void as against the rules of champerty and maintenance.

The judge referred to Trendtex Trading Corp v Credit Suisse (1982) AC 679 HL as the leading case on when the assignment of a right to litigate will be champertous. In that case, the House of Lords found that an assignment would not fall foul of the rules if it was an assignment of a property right or interest and the cause of action was ancillary to that right or interest, or if the assignee had a "genuine commercial interest" in taking the assignment and enforcing it for his own benefit - so long as it was not otherwise champertous.

Here, the judge said, although the claim purchase agreements referred to the defendant as the "debtor" and the charges in question as the "debt", it was clear that the claims were not for a debt owed by the defendant to the customers (in which case there would have been no issue regarding validity of the assignments).

However, they were claims in restitution for a liquidated sum. The judge held that under the claim purchase agreements the claimant acquired the right to the sums in question, and the assignment of the right to bring a restitutionary claim to recover the sum was incidental and subsidiary to that right, and was not a bare cause of action - the fact that liability to repay was disputed did not affect its assignability. The judge said there appeared to be no English authority directly on point, but cited an Australian decision in support of the proposition.

The final question was whether, taking all aspects of the claim purchase agreements together, there was "wanton and officious meddling" in the dispute between the defendant and its customers "without justification or excuse". That depended on whether the claimant had a legitimate interest in the subject matter and whether the integrity of the legal process was in some way impugned by the assignment. The judge concluded that there were no sufficient public policy grounds to find that the assignment was invalid; on the contrary, there were strong public policy grounds in favour of upholding the assignment. Relevant factors cited by the judge included the following:

• The individual customers' claims were too small for it to be cost or time-effective for them to bring claims directly against the defendant - customers should have the choice of pursuing the claims themselves, at their risk and expense, or entering into a claim purchase agreement with the claimant.
• Even if the customers had alternative means to pursue their claims, for example by third party financing or with "no win no fee" arrangements, it did not follow that other alternative arrangements should be prevented.
• The arrangements enhanced access to justice for the customers, and "the courts recognise the need for innovative but responsible ways of increasing access to justice for the impecunious"
• Since the sums in dispute were quantified, there was no risk of damages being inflated or the litigation process being abused in other ways; there is no adverse impact on the administration of justice;
• The judge rejected the defendant's submission that the claimant was encouraging frivolous litigation, saying "the claimant has little motive for acquiring and then pursuing claims which are frivolous and any such claims would be liable to be struck out in the ordinary way".
• The claimant had a legitimate and genuine commercial interest in being able to pursue the claims assigned to it in order to protect the liquidated sums it acquired under the claim purchase agreements.

The defendant heavily relied on Simpson (referred to above) in which the Court of Appeal had found that the assignment of a bare right of action was champertous. However, the court in this case found that it provided no support to the defendant, noting that it was a very different case on the facts. The cause of action assigned in that case was a bare action in tort for personal injury, and the claimant had taken an assignment of the tort claim in order to pursue a campaign against the hospital. The Court of Appeal held that the assignment was void, as it was an assignment of a bare right to litigate in which the assignee had no legitimate interest, and it was not in the public interest "to encourage litigation whose principal object is not to obtain a remedy for a legal wrong, but to pursue an object of a different kind altogether". That had no bearing on the present decision.