Class actions in the UK - the changing face of compensation claims

As a class action with the potential to be “the largest pharmaceutical products group action in the UK history” was launched by the issue of a letter before action in September, against the seller of talcum powder – Johnson & Johnson (J&J) and, with a further group action pending in respect of “mis-sold” car finance, we examine how the litigation landscape is changing with the increasing presence of both US law firms and litigation funders.

Talc claims

The group litigation alleges that the repeated use of talcum powder was contaminated with asbestos and this has caused a variety, though predominantly gynaecological, cancers. The group is presently said to comprise 1,900 potential claimants, though more may join the action following widespread media coverage of the claims on 20 November 2024 (various sources to include BBC News and The Times).

BBC News Online quoted a spokesperson from Cancer Research UKstating “talc is a mineral and can be mined in places where there is asbestos, causing talc to be contaminated. Asbestos is known to cause a variety of cancers to include mesothelioma and cancers of the lung, larynx and ovary”.

Allegations denied

J&J responded to the group action by stating “Any suggestion that J&J knew or hid information about the safety of talc is false”. Erik Haas, the Worldwide Vice President of Litigation for J&J said “The allegations defy logic, rewrite history and ignore the facts”.

Whilst BBC News Online report the declaration by the World Health Organisation (WHO), in July this year, that talc was itself “probably carcinogenic”, it is understood that the focus of the group action will be on contaminated talc. Whilst litigation could be started as early as 2025, it is unlikely that any representative cases from the group action will reach a final hearing for several years, given the need for extensive disclosure and expert evidence.

The action is spearheaded by KP Law undoubtedly emboldened by similar claims brought in the United States which has resulted in $13 billion already paid out or set aside for claims.

J&J maintain however they have been successful in the majority of claims brought in the United States.

KP Law

KP Law, formerly known as Keller Lenkner UK Ltd and Keller Postman UK Ltd was formed following a merger between Keller Postman UK Ltd and Lanier, Longstaff, Hedar and Roberts in March 2024. The firm is said to be owned by litigation funder Assertis (The Global Legal Post).

The firm is described as a ‘specialist” in bringing large scale consumer claims in the areas of product liability, workers’ rights, data breaches and privacy. Its website contains the following “We are used to standing up to large, world funded organisations ……. with extensive experience in complicated litigation and all the resources we need, we are ready to go head-to-head with deep pocketed Defendants which other law firms shy away from”.

Car Finance claims

This group action centres on the payment of discretionary commissions by motor finance lenders to dealers selling cars. The Financial Conduct Authority (FCA) banned these commissions in January 2021, though claims going back as far as 2007 are potentially implicated.

A Court of Appeal ruling in October 2024 (Johnson v First Rand Bank Limited (2024) EWCA Civ 1106), broadened the scope to include all types of loan commission including fixed non-discretionary arrangements in that any “secret” or “partially disclosed” agreements are unlawful and their lenders were legally liable to compensate claimants.

The judgment is likely to be appealed to the Supreme Court, but if the appeal is ultimately unsuccessful, the leading credit agency Moody’s estimates that this compensation bill could rise as high as £30 billion (The Times, 20 November 2024).

Commentary

Both the talc and car finance actions are two recent examples of the changing face of compensation claims in the UK, arguably fuelled by the growth in litigation funding.

The organisation, Fair Civil Justice, reports an increase from 16 to 73 litigation funders in the UK over the past five years with “assets under management” increasing from £6 million in 2010 to £2.2 billion today.
Fair Civil Justice have led calls for increased regulation of funders and the imposition of a fiduciary duty of care with the identities of funders disclosed to the courts.

Hedge funds and wealthy individuals are usually thought to provide the finance for the cases, and funders point to the claims process being lengthy and uncertain with no guarantee of success. Claimants are usually signed up on a “no win – no fee” arrangement which it is argued makes the process ‘easier and risk free ‘, though they will “sign away” a percentage of any compensation ultimately awarded – typically 30%.

Claims Management Firms – companies which harvest company leads and then typically pass these to a third-party law firm for a referral fee also remain at the forefront of compensation payments. Of the £38.3 billion paid by lenders for mis-sold Payment Protection Insurance (PPI), the amount paid to Claims Management companies exceeded £5 billion.

Historically, the UK’s so- called “compensation culture” has been framed around personal injury and occupational disease, principally in the employers and public liability fields. Data released by The Department for Work and Pensions demonstrates that claims have been steadily dropping from their peak in 2013/2014 (210,000, EL and PL claims notified), with this downward trend accelerating after the pandemic. For the year 2023/2024, there were just 44,547 employers liability and 58,933 public liability personal injury claims registered by the Compensation Recovery Unit – a significant drop from volumes seen in 2013/2014.

The UK’s legal market has shown a seismic shift in recent years with rapidly expanding numbers of US law firms. There are now more than 80 US firms who have offices in London. Whilst media coverage has been dominated by the competition for clients and talent, the increasing US presence, allied to rising numbers of litigation funders has, coincidentally or not, shown an increasing focus upon class actions ranging from data breach and cyber-crime, investment fraud and mis-selling, diesel emissions, equal pay, talc to car finance.

Interviewed by The Law Society Gazette back in October 2022, Mark Lanier and Tom Longstaff, two of the three founding partners of Lanier, Longstaff, Hedar and Roberts LLP, (now KP Law) referenced how they saw the UK as ‘a huge growth area for group litigation’.

The declining personal injury market contrasts markedly with a growth in class actions (driven heavily by social media marketing) and rising numbers of litigation funders. Whilst this may be welcome news for traditional employers and public liability insurers, this trend is unlikely to be viewed positively by larger institutions and multinational companies who are likely to be the target of amply funded litigators who are well versed in class actions.