A judgment handed down following a costs and case management conference in Weaver [2021] EWHC 217 (QB) appears to have struck a blow to claimant solicitors seeking to pursue group-action in the UK.

Background

The UK ‘group action’ landscape is ever shifting, notably in the world of data protection compensation.

The relatively steep growth in the number and scale of data protection claims can be traced back to the judgment in Vidal-Hall v Google Inc [2014] EWHC 13 (QB), where damages for non-material losses (i.e. “distress”) were made recoverable – a concept ultimately embodied in the UK-GDPR and the Data Protection Act 2018. Historically, material or pecuniary losses were required and proving that they arose as a consequence of non-compliance with data protection legislation was a difficult task.

The ICO addressed the now well-known data breach that this judgment focused on and noted that just under 500,000 customers were affected and that identity theft was “a severe risk”.  The monetary penalty that was ultimately imposed by the ICO was one of the largest ever imposed for a data protection breach in the UK.  Hot off the heels of the monetary penalty having been issued, the claims firm PGMBM had reportedly built ‘the largest group-action personal data claim in UK history, with over 20,000 victims so far signing up to seek compensation from the airline’.  To build this group-action, the firm had “incurred thus far a sum of £443,000 and intend to incur another £557,000 on future advertising”.

 During the Costs and Case Management Conference, the Court considered, amongst other things, the recoverability of those advertising costs.

 Held

Mr Justice Saini refused to allow the claimants to budget for the fees incurred in marketing and advertising the existence of the group action to potential claimants. He held that “it is clear as a matter of binding authority that these were not recoverable costs” which could pursued by the claimant law firm.

The claimant law firm was essentially told that the costs of building the group-action (c.£1 million of marketing) are unrecoverable as a cost in the claim.  Instead, these expenses should generally be treated as part of a solicitor’s general overheads or expenses.  These were not costs incurred pursuant to the Group Litigation Order, but could more accurately be described as costs relating to “getting the business in”.

 Comment

Building a critical mass of claimants is one of the main issues that claimant firms must overcome in getting a group-action off the ground, and up-front costs such as advertising and marketing fees weigh heavily in the economic balance. In order to bring a group-action, all members of the group must have suffered the same harm (therefore have the same legal claim) and must ‘opt-in’ to the group. Marketing spend is therefore key to attracting a sufficiently large group of claimants so as to be commercially viable for claims firms.

This judgment reinforces the decision of the Court of Appeal in the case of Motto v Trafigura [2012] 1 WLR 657 (CA): that marketing expenditure is not recoverable from the defendants as part of the legal costs of litigation. To this extent, it may be viewed as potentially impacting upon the commercial viability of the group-litigation model for these claimant law firms and claims management companies. As Mr Justice Sani stated: “The expenses of getting business, whether advertising to the public as potential clients, making a presentation to a potential client, or discussing a possible instruction with a potential client, should not normally be treated as attributable to, and payable by, the ultimate client or clients.”

This judgment may therefore impact upon the profitability of group action in the data protection compensation space and maintain an economically-driven limiter. This may act to create a threshold below which it is simply not financially viable for a group action to arise: where the marketing spend required to grow and build a group is likely to outweigh the commercial value of the claim itself.

It will certainly be interesting to see  what the effect is, given the increasing focus of the claims management companies on data protection compensation.

David Cook, Sami Qureshi and Leontia McArdle