Bao Xiang International Garment Centre & Ors v British Airways Plc

Where solicitors commence English proceedings without authority, any later ratification of that act is governed by English law. Ratification requires a sufficiently informed manifestation that the principal adopts the unauthorised act and accepts responsibility for the proceedings. A form that fails to explain that proceedings have already been commenced, or materially misstates the claimant’s obligations, will not suffice.

Proceedings issued without authority are defective and liable to be struck out. The court may allow them to continue where the client wishes to proceed and accepts responsibility. Separately, issuing proceedings in the names of a very large group without a reasonable basis for believing that they have claims, combined with misleading statements and lack of candour, may constitute an abuse of process.

The claimants issued proceedings in England against British Airways and other airlines, alleging losses caused by an air-freight price-fixing cartel. The claim was issued in the names of 64,697 Chinese entities on instructions from the China Chamber of International Commerce through Hausfeld.

It was later accepted that only 5,277 claimants could show relevant air-freight shipments and that none had authorised Hausfeld to issue proceedings when the claim form was filed. The claimants relied on express ratifications returned by 362 claimants and sought time to obtain more. The applications sought strike-out for want of authority and, alternatively, abuse of process. The central issues were whether the purported ratifications were effective and whether the manner in which the proceedings were commenced was abusive.

1. Strike-out for lack of authority. The claim was struck out because no claimant had authorised Hausfeld to commence it and the returned forms did not amount to effective ratification.
2. Applicable law. The question was whether the claimants had ratified Hausfeld’s conduct in commencing English proceedings, not whether they had ratified CCOIC’s instruction to Hausfeld. Following Presentaciones Musicales S.A. v Secunda and another [1994] Ch 271, that question was governed by English law because the unauthorised act was the commencement of English proceedings.
3. Requirements for ratification. Ratification may be express or by conduct. At the time of ratification the principal must have full knowledge of the material circumstances, unless the principal deliberately intends to ratify while taking the risk as to those circumstances. The forms did not disclose that proceedings had already been commenced in the claimants’ names, inaccurately suggested that participation would not be direct, and gave unsupported assurances about costs and liability. They therefore failed to ratify Hausfeld’s act.
4. Effect of unauthorised proceedings. Under Adams and others v Ford and others [2012] EWCA Civ 544, unauthorised proceedings are defective and liable to be struck out, but are not devoid of legal effect before strike-out. The court is not bound to strike them out if the client wishes them to continue and accepts responsibility. That condition was not established here.
5. Abuse of process. The alternative ground also succeeded. The solicitors had no proper basis for asserting that the named entities had shipped goods by air, made a false statement of truth, failed to be candid about authority, and used misleading ratification forms. Applying the abuse jurisdiction described in Hunter v Chief Constable of the West Midlands Police and others [1982] AC 529, the conduct was manifestly unfair to the airlines and brought the administration of justice into disrepute.