BA claim: Consumers would be better off using its direct compensation scheme
The High Court has struck out a prospective representative action on behalf of people who have suffered flight delays because it was more about the funder making money than consumer rights.
Master Davison said he did not accept that the motivation of the claimant, Claire Smyth, “lies in a desire to secure redress for consumers” when the claim was funded by her employer and they could receive tens of millions of pounds in the event of success.
Ms Smyth’s British Airways flight from London Gatwick to Nice on 18 June 2022 was cancelled four days before departure, triggering her right to £220 in compensation.
She did not use BA’s portal to claim compensation and instead direct access counsel, Hugh Preston KC, wrote a letter before action on behalf of a very large class – members would be those who had booked a flight with BA or easyJet scheduled to depart from, or arrive at, an airport in the UK between 1 December 2016 to 31 August 2022 and whose flight was then either cancelled or delayed by three hours or more.
Master Davison said “an important element” of the case “is that there is low awareness of the passenger rights… and that airlines, including BA and easyJet, do the bare minimum to inform passengers of their rights and to allow those rights to be satisfied”.
Ms Smyth said the claim would “force BA and easyJet to take a proactive stance and to pay the compensation in all cases where it is indisputably due”.
The “rough and ready estimate” used in the hearing was that around 1.45m people would be eligible to claim, making it worth £319m.
It was funded by John Armour, a Monaco-based Australian, who has indemnified Ms Smyth in respect of adverse costs and already provided security for the defendants’ costs in the full sums demanded, over £800,000.
Ms Smyth had been Mr Armour’s yoga instructor and she then set up and is now running a family office for him in London.
But she “has asserted her independence in the conduct of the litigation”, the judge recounted, setting up a consultative panel comprising John Swift KC, “a distinguished competition lawyer”, and Keith Richards OBE, a former chair of the Civil Aviation Consumer Panel.
In May, meanwhile, she obtained an order from Master Pester on a without-notice basis whereby it was declared that she would be entitled to deduct 24% of any compensation recovered in the action comprising legal fees and a “funder’s fee” – more than £70m.
“It did not, as I understand it, approve the funding arrangements as such, nor did it sanction the claimant as an appropriate person to act in a representative capacity,” Master Davison said, adding that Ms Smyth has not disclosed details of the funding agreement or how the £70m would be divided, nor how she came to bring such an ambitious claim.
“Nor has she or Mr Armour himself answered the criticisms of the defendants about certain of Mr Armour’s past activities.” These related to Australian companies of which he was a director and made mass-mailing unsolicited offers to consumers to buy securities at prices substantially below their market value.
This led to the New Zealand Financial Markets Authority taking action and, in 2010, Mr Armour gave an enforceable undertaking to the effect that offer letters would include a warning which disclosed the actual market price for the securities.
Representative actions under CPR 19.8 require the representing party to have “the same interest in a claim” as the parties they represent and Master Davison held that this was not the case here.
He said this defect could not be remedied by the claimant’s plan to make successive amendments to the class to winnow it down, “rather like a game of Russian dolls”, by removing those claims which did not in fact qualify for compensation or which were or could be met with an arguable defence.
Whether represented parties share the same interest was tested by asking whether there was a “common issue” (or more than one), the resolution of which would benefit all the represented parties, the judge explained.
The case did not pass this test. While the claimants may share a cause of action, “the practical reality is that the opening class presents numerous, widely diverging interests requiring individualised determinations. It does not present the same interest, or anything close”.
Master Davison continued that, as a matter of discretion, he would also not allow the claim to go forward as a representative action “because the dominant motive for it lies in the financial interests of its backers, principally Mr Armour, and not the interests of consumers”.
“That motive has translated into a proposed deduction from the compensation available to each represented party which is excessive and disproportionate both in its overall amount and in relation to the available alternative remedies, which would lead to no deduction at all.”
These were BA and easyJet’s direct claims portals – which use alternative dispute resolution – or the county court small claims track. These were “clearly” better options given the costs a representative action would involve.
He complained about the “lack of transparency regarding Ms Smyth’s motivation, funding and suitability”.
“On the material before me, I do not accept that her motivation lies in a desire to secure redress for consumers. She has had no prior involvement in such activities… The availability of funding from Mr Armour, her employer, strikes me as unlikely to have been fortuitous. She was not at all forthcoming about her links with Mr Armour.”
Mr Armour’s activities that led to the investigation in New Zealand “seem to me to be thoroughly inimical to his taking a role in this litigation”, he went on, while Ms Smyth’s consultative panel’s parameters and role “have not been explained and it does not meet the difficulties I have described”.
Another issue was that the representative action would resolve few, if any, disputed claims. “These will simply be jettisoned. That seems to me a melancholy and unfavourable aspect of the comparison [with the alternatives].”
Because the action was not properly constituted as a representative action, Master Davison struck it out and also directed that Ms Smyth may not act as a representative.
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