Recent press, television and radio coverage has raised the potential for litigation against conveyancing solicitors for allegedly failing properly to advise large numbers of clients about onerous ground rent clauses contained in leasehold contracts. The leases in question are said to relate to new build properties sold since 2007 with high ground rents which can double every 10 or 25 years, or are linked to the rate of inflation. These expensive ground rent clauses are also said to render the properties difficult to sell. Leasehold Law, an ABS, is understood to be seeking to sign up potential claimants for 'group litigation' against the conveyancing solicitors involved, with one report alleging that solicitors' liability could exceed £500million. However, it is currently unclear what stage the potential claimants are at and how such claims, or litigation, would be funded. This is also not a new issue, or the first time that concerns about onerous ground rents have been raised in the legal, housing and parliamentary sphere. In recent years, there has been criticism of a number of major developers, one of which has apparently made a considerable provision in its accounts to compensate customers.
Prospects of the Court granting a Group Litigation Order ("GLO")
The procedural rules for group litigation are covered by Part 19 of the Civil Procedure Rules (CPR). Group litigation proceedings, in contrast to the US "class action" procedure, must be brought on an opt-in basis, so claimants must actively choose to take part should they wish to receive a share of any damages recovered.
The Court has discretion whether to grant a GLO and would only do so to provide for the effective case management of claims which give rise to "common or related issues of fact or law" (CPR 19.10). Accordingly, until the facts and details of the claims and parties are known there is no certainty that litigation would proceed under a GLO, assuming that the Professional Negligence Pre-Action Protocol did not resolve the issues first. It is also noteworthy that claimants or defendants may apply to the Court for a GLO, or the Court may make an order of its own initiative.
Alternatives to a GLO
In the case of Hobson v Ashton Morton Slack Solicitors  EWHC 1134 (Admin), the Court dismissed the claimants' application for a GLO on the basis that insufficient consideration had been given to pursuing a more cost efficient means of resolving the dispute, such as a 'test case' or 'consolidation' (which is also predicated on effective case management with claimants being permitted to use a single claim form to start all claims). It had not been demonstrated that either method was inappropriate or inaccessible and no group litigation issue had been sufficiently or precisely identified.
More recently, Schmitt v DePuy International Ltd  EWHC 638 (QB) (21 March 2016), was a product liability case involving a number of claims against the same manufacturer. Even though it was accepted that there were common or related issues of fact and law and a large enough group of claimants, the Court still concluded that it would be more appropriate to have a test case or for the claims to be consolidated.
Challenges and benefits of GLOs or other "group action"
Clearly the prospect of any type of group litigation, or claims, involving common facts, parties or practice can present unique challenges for solicitors and their insurers. Depending on the case, these can include issues of notification, aggregation and the coordination of claims amongst multiple or individual insureds.
From our experience of advising on the defence of multiple claims, the likelihood of publicity is invariably a consequence, but effective case management through a GLO, or other group litigation procedure, can be beneficial for defendants and insurers, particularly in relation to coordination, outcomes and issues of costs.
Defendants therefore have an opportunity to be proactive, at an early stage in the dispute resolution process, which could enable large numbers of claims to be dealt with far more efficiently.
Many claimant law firms or alternative business structures periodically seek to bring large numbers of very similar claims, arising from similar facts, where the alleged negligence arises from a common or repeated error. Whether such claims are of sufficient merit to overcome initial scrutiny and justify the pursuit of formal group litigation is always uncertain, with some potential actions falling at the first hurdle, and others being dismissed much later at great financial cost, even if a primary risk of a finding of, for example, breach of duty can be identified. Claimants must establish all of the elements of their cause of action in order to recover damages and as a result many test or lead cases fail.
In relation to the recently reported matters, many of the potential claims may now be statute barred given the passage of almost a decade in some cases. Others may turn on the extent of the advice received, which parties were involved and whether the purchasers would always have gone ahead anyway, even before questions of actual loss come into play.
In the immediate term, affected firms may have to deal with requests by former clients, or claims companies, for the release of files and will need to consider the nature of those requests carefully and how best to respond to them. Something more nuanced than a bland rejection of the request, or the wholesale provision of the file, is likely to be necessary and more prudent.
We are therefore continuing to monitor developments in this area and will provide further updates in due course.