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Some suggestions on bringing a private legal action against carbon credit schemes (part 1)

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Earlier this year, a law firm agreed to provide some advice pro bono about the sale of carbon credits as investments under UK law. Part of the advice was on “what, if any action, may be taken in the UK against companies selling voluntary carbon credits to the retail market.”

The firm has agreed to REDD-Monitor posting the advice, but wishes to remain anonymous. They also recommended that anyone interested in taking action against carbon credit schemes should seek legal advice in relation to the particular circumstances and do not rely on the information contained below.

The law firm provided the following advice on the possibilities of bringing a private action against carbon credits schemes. They also provided advice about voluntary carbon credits and Self-Invested Personal Pensions (SIPPs). I’ll post that part of the advice later this week.

Bringing a private action against carbon credit schemes

1 Misrepresentation claim

Investors who have invested in carbon credit schemes and later found the product to be worthless or very difficult to sell, contrary to what they were told prior to investing, may be victims of voluntary carbon credit trading schemes.

Victims of such schemes may be able to bring an action under the Misrepresentation Act 1967 (the “Act”) against the entity which sold them the carbon credits. In order to be successful the following key elements of misrepresentation under section 2(1) of the Act need to be in place:

  • a representation has been made and it is false;
  • the entity/individual who made the representation is unable to show that there were reasonable grounds for making the representation;
  • the representation was relied on in entering into the contract; and
  • the person to whom the representation was made has suffered loss as a consequence.

A claim can be brought within 6 years from the date when the loss was suffered and a statement made by a voluntary carbon credit scheme must be sufficiently precise in order for it to be relied upon. Any statement made will be considered in the context of the investor market and once it has been established that a false representation has been made the burden of proof will be upon the entity operating the VERs scheme to prove that there were reasonable grounds for making that representation.

2 Group Litigation Order[1]

It may be possible for victims of such schemes to bring a misrepresentation claim as a Group Litigation Order (“GLO”).

The GLO procedure gives effect to the recommendations of the final Access to Justice Report (see Lord Chancellor’s Department: Access to Justice: Final Report to the Lord Chancellor on the Civil Justice System in England and Wales) (CPR 19.10-CPR 19.15 and PD 19B)[2].

Woolf LJ’s report recommended that new procedures dealing with multi-party claims should be introduced with the following objectives:

  • Allowing access to justice, where large numbers of people had been affected by someone else’s conduct, but the individual loss was so small that proceeding with an individual action was uneconomic.
  • Providing effective methods of resolving cases, where damages were large enough to justify an individual claim, but due to the number of claimants and the nature of the issues, the cases could not be managed properly within the normal procedures.
  • Achieving a balance between the rights of claimants and defendants to pursue and defend cases individually, and the interests of a group of parties to litigate the action in an effective manner.

The recommendations were made with a view to addressing perceived weaknesses in the court rules governing representative proceedings. The Civil Procedure Rules (“CPR”) provisions establish a framework for the case management of multiple claims by different parties and provide the court with the flexibility to deal with the particular problems created by these cases.

Where claims give rise to “common or related issues” of fact or law, the court has power to make a GLO enabling the court to manage the claims covered by the order in a co-ordinated way (CPR 19.10 and CPR 19.11). It is important to note that it is the court’s discretion, rather than the parties’ right, to proceed under a GLO.

A GLO should only be used if other methods of claim are not more appropriate (PD 19B)[3].

3 Same Interest Claim (CPR 19.6)

Alternatively, provided that investors can demonstrate that they have a common interest, a common grievance and there is a remedy which is beneficial to them all, there is the option of bringing a same interest claim.

A same interest claim means that one representative can bring a claim on behalf of others. However, claims can only be brought by a party which itself has suffered loss and therefore REDD-Monitor would not be able to bring an action on behalf of carbon credit scheme victims.

As discussed above, VERs are not regulated products and therefore it is not possible for investors to rely on the FCA’s conduct of business rules in order to bring an action for misselling, or a complaint to the Financial Services Ombudsman.

Please refer to: http://www.justice.gov.uk/courts/procedure-rules/civil/rules/part19#19.6 and http://www.fca.org.uk/consumers/scams/investment-scams/carbon-credit-trading#


Footnotes:

[1] http://uk.practicallaw.com/9-509-2801?q=group+litigation+order#a726900

[2] http://www.justice.gov.uk/courts/procedure-rules/civil/rules/part19

[3] http://www.justice.gov.uk/courts/procedure-rules/civil/rules/part19/pd_part19b#1.1
 

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12 Comments

  1. I successfully brought a claim for mis-representation against Carbon-ex. Did this as a ‘Money’ Claim and asked for interest as well as principle and court fee. The form to make the claim is quite simple and you don’t need to provide all the evidence to start your claim, just the basic details.

    If the other side don’t contest the claim (which Carbon-ex didn’t) you can obtain a default judgement. If the other side then ignore the judgement you have to go to ‘enforcement’. The problem is that it all takes time and the other side may go apply to go into liquidation before you can enforce and not have any assets to pay you. Its all possible but be prepared for a long ride.

  2. It would appear that the scheme operated by CAPITAL ALTERNATIVES LIMITED/REFORESTATION PROJECTS LTD together with CITOLA PTY RESOURCES LTD falls exactly into the categories mentioned above.
    I would be VERY interested in joining a group to persue any way in which we can get our “investment” monies back from this scam.

  3. All useful stuff, however most of this is already known. The real issue is not addressed. Who do we claim against. All the “agents” are long gone who made the claims, which were almost always on the phone so there is no “evidence”. What is needed is some sort of “ruling” to substantiate a claim on the basis that ALL Carbon credits sales were fraudulent since nobody has ever made a profit overall. Some people were scammed into re-investing after theoretical profits, which do not count.

  4. Nigel Bailey has it. The “agents” did their business by phone then did a runner or else resurfaced under a different name so it will be very difficult to find them or have concrete evidence to use against them. As for Action fraud; they say that there are not enough complaints for them to do anything

  5. the purchase and registration of carbon credits by MH Carbon and Carbonex was handled by a Law Firm. I have had difficulty contacting them over this and they informed me that the person who dealt with it has left the firm. Is there any way of seeking redress through the law firm or through the Law Society since they surely had some legal responsibility to ensure fair conduct of their client and were party to a fraud at least by association …or worse… ??

  6. Jeremy

    If you were dealing (or were led to believe that you were dealing) with a firm of solicitors then they are responsible for the conduct of their employees.

    In that event you could potentially make a claim against them.

    Contact me if you’d like any assistance (I’m a solicitor dealing with civil litigation including claims against other solicitors).

  7. Hi Michael : thanks for response and yes, I would like to contact you for advice on this. Should I post my email address on this site ?

  8. Hi Jeremy, it’s probably better not to post such details on a public website.

    The best way forward would probably be to phone my office tomorrow – 01200 442600.

  9. @Jeremy (#8) – Please don’t post your email address on this site. That would just invite scammers to contact you, with offers of who knows what… Instead, try a search on Google for “Michael Loveridge solicitor”.

  10. OK, I will contact Richard direct. Thanks for your advice and help. Best wishes. Jeremy

  11. Wondering how may people have been conned by Nexus Trading Partners into buying Certified Emission Reduction units (CER). The company was based in Manchester and now no longer trading.