As featured in CCR Magazine.
Could Ryanair have scuppered a legal avenue for claims-management companies?
You are probably familiar with claims management companies who offer their services to recover unclaimed PPI. How many emails or calls have you received offering their services – not to mention all of those adverts?
One problem faced by the claims companies is that once they make their clients claim, the lender pays the PPI direct to the Client. What is meant to happen is that the money should be sent by the Creditor to the Claims company who “net off” their fees which their client has agreed to pay. If the Creditor pays the client direct then the poor old claims management company may have to take court action against their client for their fees.
What has Ryanair got to do with it?
You have probably seen adverts by Solicitors firms who offer to recover compensation for flight delays. BOH & CO is one of those firms. Basically, they brought claims against Ryanair for flight delays. Under EU Regulations 261/2006, the airline paid the gross amount direct to their passenger rather than to BOH & CO who then lost the opportunity to deduct their fee from the compensation prior to sending the balance to their Client.
BOH & CO then brought an action against the airline. The High Court decided that the lawyers were not entitled to a lien over the amount of their costs. The court also decided that the provisions of Ryanair’s terms of carriage with their passengers, which limited the circumstances in which the airline would engage with third party claims, were enforceable.
What did Ryanairy’s conditions say?
In an effort to stop dealing with Solicitor claims companies (who presumably they regarded as an unnecessary nuisance) the airline’s conditions provided that the they would only deal directly with the passenger. Passengers were required to deal directly with Ryanair and allow them 28 days to respond to the Claim. Only after that period would the passenger be entitled to engage with a third party. In addition, any compensation would go directly to the passenger as opposed to the third party. Further, Ryanair would go direct to the passenger even if a third party claim had been submitted.
What did the Court decide?
Several questions were put to the Court:
Were Ryanair obliged to cease dealing with the passenger rather than deal with their Solicitors? – No said the Court.
Were Ryanair obliged to pay the compensation directly to the Solicitors? – No said the Court.
Were Ryanair obliged to indemnify the Solicitors for their fees if the gross amount had been paid to the passenger? – No said the Court.
Whilst lenders in PPI scenarios could impose similar contracts with their customers to effectively “cut out” claims management companies, it is questionable if this would succeed. If this were attempted it could be unenforceable because it was not “fair and reasonable” (Article 3 of the Unfair Contract Terms Act refers).
In any event, all of the contracts which the banks entered into with their customers which contained the PPI are of considerable vintage and nobody is expecting them to be retrospectively reviewed.
However, the Ryanair decision (which is going to the Court of Appeal) does remind us that it is possible for Third Parties to be “cut out” in similar circumstances if the contract with the supplier and consumer is properly drafted.
For further infomation please contact Stephen Cowan
on 0141 572 4251.