Landmark court ruling on “omnibus” motor finance claims

A claimant law firm has won a landmark High Court ruling paving the way for group actions in motor finance mis-selling cases, allowing multiple claimants to make a single “omnibus” claim with a lender, rather than having to file separate claims for each individual.

The move is set to speed up the court processes for handling claims relating to discretionary commission arrangements (DCAs), and is likely to put banks under pressure to settle cases more quickly, particularly those that closely match cases that have already gone to court.

The High Court appeal was brought by Manchester-based firm Barings Law, and related to eight group actions which were first issued in November 2022, involving over 5,000 consumers. However, in September 2023, His Honour Judge Worster at the Birmingham County Court ordered that each claimant must issue a separate claim form within three months or be struck out.

In Barings Law’s appeal, which has been successful, Mr Justice Ritchie said the judge rightly followed the guidance in Abbott v Ministry of Defence in deciding whether or not multiple claimants could use a single form, but that since then the Court of Appeal in Morris & Ors v Williams & Co Solicitors had given clear guidance that the test applied in Abbott was not correct.

Grounds for appeal

The appeal looked at a range of issues relating to both regulatory breach and lender liability, with Ritchie stating that in the earlier court hearing, the judge had not questioned the commonality of the issues relating to non-disclosure of DCAs and breach of the guidance, but had decided that there was insufficient commonality for the agency issue to meet the requirements in Abbott.

It considered claims brought against Black Horse, Close Brothers, Aldermore, Startline, Vauxhall Finance, Stellantis Financial Services, BMW Financial Services, Volkswagen Financial Services, and Motonovo.

In the original court case, using the Vauxhall claims as an example, the judge noted a “huge variability of facts”: 118 different dealers; dealer contributions ranging from £0 to £4,440; commission ranging from £100 to £2,000; interest APRs varying from 2.88% to 22.31%. As a result, the first court hearing determined there was no “series of transactions”.

Ritchie disagreed on this point, stating: “At this very early stage one can only proceed on the basis that the defendants deny all the generic assertions. Certainly, they were not prepared to concede any.

“So, it is clear to me that the agency issue and lender liability under S.56 of the CCA (para. 32 of the pleading in Angel) was a common issue on all claims.

“The fact that a defendant, take Vauxhall who the Judge used as the example, used 118 dealers, is quite irrelevant to commonality on agency. So is the type of car or the size of the loan. It seems to me that, at this stage, before the defendants were prepared to disclose any brokerage agreements, the only realistic assumption should have been that Vauxhall had a standard form of brokerage agreement for longish periods (maybe years) which they offered to dealers, some of whom signed up to it and offered their loans to lots of claimants.”

The judge also took into account the comments made in last October’s Court of Appeal ruling relating to three cases (Hopcraft, Wrench and Johnson) which included wider commission disclosure issues.

He concluded that in relation to the cases brough by Barings Law, “omnibus disposal will assist in the appropriate choice of lead cases to determine the common broad and specific issues (to be determined later)”. 

Potential outcomes

This approach should make moving cases through the courts more streamlined, speed up processes and cut costs, and also mean greater consistency in the decisions reached.

“The omnibus route would favour access to justice for those claimants with small claims track and fast track claims. There is an imbalance of financial power between individual claimants and the defendants,” Ritchie said.

Craig Cooper, managing director at Barings Law, welcomed the judgment, saying it prompted access to justice for consumers.

“To date, consumers have faced barriers in their ability to seek compensation for being mis-sold car finance and falling victim to costly hidden commission arrangements. As vast amounts of affected consumers are potentially entitled to amounts on average of £1100, there has been a difficulty in proceeding to trial on such claims, owing to the cost of legal representation and barristers’ fees.

“Where claims are issued in groups, as part of group actions, this makes it more viable for claims to be issued and barristers to be instructed, with the associated costs being spread across all claimants in the group. This means that, while costs could be higher for defendants, it will be lower for claimants, granting them easier access to justice. The judgment is therefore welcomed in facilitating this approach.”

A court date will be set in due course to determine the next steps in the litigation, but it seems likely that lenders can expect a growing number of omnibus claims.  This comes at a point where banks are anxiously awaiting the outcome of the Supreme Court appeal to be heard on 1 April, and may potentially drive some to consider early settlement in some cases currently on their books.