Lawyers being sued for making thousands of hopeless financial mis-selling claims have failed to get the case against it brought by the lender struck out.
Mr Justice Jay ruled in Vanquis Bank Limited v TMS Legal Limited that the Solicitors Regulation Authority-regulated firm had ‘fallen well short’ of persuading him to dismiss Vanquis' claim.
The judge stressed his ruling should not be seen as expressing any view that the financial mis-selling claims were improperly brought, only that the case should be heard at trial. It is understood the claim against TMS Legal is valued at around £12m.
Vanquis Bank specialises in ‘second chance’ lending to individuals with low or adverse credit histories. TMS Legal enables mis-selling complaints on behalf of clients alleging that the lender provided unaffordable credit to clients. If the client is not satisfied with Vanquis’ response, they can escalate the issue by referring it to the Financial Ombudsman Service which can order redress. The lender is required to pay a referral fee of £650 for every case referred to the FOS, regardless of the outcome.
The firm operates on a no win, no fee basis and charged its clients up to 45% of any redress obtained (reduced to 30% after July 2024 due to an SRA cap). Around 33,000 mis-selling claims had been submitted to Vanquis as of August 2024 most of which were rejected either as being out of time or on the merits, with only a very small number being partially or fully upheld. Of the 12,250 cases which had been referred to and considered by the FOS, around 84% were either subsequently withdrawn or rejected.
TMS purports to offer expert advice in filing complaints, but Vanquis says that in reality the mis-selling claims are handled by ‘unqualified staff working under minimal supervision’.
The court heard that TMS clients complete a basic online form or questionnaire, but this did not seek any information about credit checks that Vanquis may have undertaken, nor did it investigate details about clients’ financial difficulties. The lender therefore argued that the questionnaire fell short of enabling TMS to properly assess whether the claim was properly arguable or whether it had sufficient information on which to bring a claim.
Edward Levey KC, of Fountain Court on behalf of Vanquis, told the court that his client had been ‘inundated with claims which were submitted recklessly and indiscriminately and in breach of TMS’s duties to its clients’. Levey said that the vast majority of the claims should never have been brought and that they would not have been if TMS had been discharging its duties correctly in the first place.
Summarising Vanquis’s case, the judge said that TMS had ‘no idea which claims will succeed and does not care’. He acknowledged the facts of the case were novel but said the lender had relied on well-established principles to advance its case relying on the tort of causing loss by unlawful means.
‘The reason why this sort of claim has not been brought in the past is that for various reasons it can only stand a chance of succeeding on egregious facts,’ he added. ‘If Vanquis’s case is right, this would be an example of egregious conduct by TMS.’
There will be a further case management hearing for a Master to make directions leading to a trial.
