Director Tom Davey explores the Qantas class action in Litigation Finance Insider

Australian airline Qantas is currently facing a class action lawsuit over its refund policy for flights cancelled due to the pandemic, with lawyers alleging that the airline failed to fairly refund passengers and thus illegally benefited by retaining hundreds of millions of dollars of customer funds. By forcing customers to accept flight credits in lieu of cash refunds for cancelled flights, and by applying stringent terms as to how and when the credits could be used, claimants allege that passengers’ retained funds were treated as more than $1bn in “interest-free loans” by the carrier.

The class action against Qantas, as well as other claims against airlines such as the greenwashing lawsuit facing Delta in the US, brings into sharp focus how individuals who have been mistreated but have only modest compensatory rights can achieve compensation and justice by way of bringing group actions. Delta stands accused by litigants of making “false and misleading” claims that it is “the world’s first carbon-neutral airline”, and duping climate-conscious passengers into choosing to fly with the carrier over its rivals as a result. Delta’s reliance on the purchase of so-called “offsets” – in the form of questionable and controversial carbon credits – is key to the suit, which was filed in a Californian court in May.

While the Australian and Californian class action systems have a high level of success from complainants’ perspective, which may offer a glimmer of hope to Qantas and Delta customers in their respective suits, bringing such claims in the UK can often be tortuous and expensive, and the collective action space is beset by uncertainty over how cases may be brought.

The recent Supreme Court judgment PACCAR and ors. v Competition Appeal Tribunal and ors, exemplifies this uncertainty, with the Court’s ruling making illegal many funding agreements, which claimants rely upon to fund group action lawsuits. In what was widely seen as a shock decision, the Supreme Court found that litigation funding agreements (LFAs) in which funders recuperate funds based on a percentage of damages ultimately recovered meant that such LFAs should be classed as damages-based agreements (DBAs) instead.

DBAs require more substantial form and content than LFAs, rendering many current LFAs unenforceable as a result of the Supreme Court’s ruling, and making it harder for many claimants to bring group actions in the future thanks to the economic barriers thrown up as a result of the reclassification. While the Department for Business and Trade promised it “is looking at all available options to bring clarity to all interested parties” following the PACCAR ruling, its pontifications could last months or years, before a clearer set of guidelines is eventually published to govern the class action regime.

A fair system in which to bring such claims is urgently required, where the rules and procedures are clear and understood regarding collective and representative actions. Otherwise, claims will continue to be brought where much of the courts’ time – which is already in desperately short supply – is taken up with preliminary hearings addressing how the collective actions should proceed, if at all.

A cynic might argue that there is a detectable hesitancy at times within the judiciary to usher in a collective action system where everyone understands the rules. The defendant lobby vociferously argues that enabling a claimant-friendly system will promote vexatious or unmeritorious claims. There is no evidence of this, however, since it is not possible to bring large-scale litigation without the backing of law firms, funders and insurers who will take on substantial financial risk. No reputable organisation will commit to such endeavours to support vexatious or unmeritorious claims, knowing that such cases would be struck out early on and thus be a waste of time and money.

At the same time, in the absence of a sufficiently robust system for collective actions, customers currently without the means or access to bring claims through the courts are forced to rely on regulators which do not necessarily hold the statutory powers or have the ability to levy meaningful penalties to effectively correct bad behaviour by large corporates. While fines imposable under the current regulatory regime may appear to be significant for smaller companies, for the largest firms they are all too often seen as a manageable occupational hazard, rather than as a deterrent against breaching the rules.

Until the necessary changes are made to the collective action system, the choices for affected consumers are limited to voting with their feet by choosing not to do business with offending firms, hoping for assistance from largely toothless regulators, or relying on pursuing often prohibitively expensive legal redress through the courts. Much more needs to be done, and fast, to finally afford proper protection to consumers and uphold their rights.