The group alleges that the manufacturers, which produce four-fifths of Britain's cigarettes intake, negligently failed to comply with a legal duty of care to minimise risk.
Leigh, Day & Co, the firm co-ordinating the case, decided to use a US- style contingency fee agreement - the first involving a group action since the principle was introduced a year ago - after the Legal Aid Board pulled the financial plug on claimants in July.
The decision to press ahead with the ground-breaking action will be a blow to Gallaher, the makers of Benson & Hedges and Silk Cut, and Imperial, which makes Embassy, Players and Capstan.
Ash, the Campaign for Freedom from Tobacco, urged brokers and investors to take "careful note" of the legal action when considering whether to invest in the tobacco industry. There were now good financial, as well as moral, reasons for not investing in an industry with an increasingly bleak future, it said.
There has been an avalanche of lawsuits in America from individuals and from states hoping to recoup the costs of treating smokers' illnesses. Tobacco shares tumbled by about 20 per cent last month after a smoker in Jacksonsville, Florida, won $750,000 after contracting lung cancer.
In another case in Indianapolis, a jury dismissed a case because the claimant was more than 50 per cent to blame, but held a press conference afterwards to declare that they believed the tobacco company had been culpable.
According to Martyn Day, Leigh Day's joint senior partner, the growing use of litigation in the US has been accompanied by a wave of whistle- blowing from former employees of the tobacco conglomerates, believed to be 10 in all, who are anxious to spill beans on the past activities of their companies.
Mr Day said several hundred lung cancer victims, or their surviving relatives, could join in the British action. An additional significant feature would be that one judge is likely to be appointed to deal with all tobacco claims. The judge's decision in the group action would then become the standard against which all future claims are measured.
If the companies lost, they could be faced with a massive liability for claims arising from among the 30,000 people who are believed to die each year from smoking-related illnesses.
Mr Day, who will approach the High Court for the appointment of a judge next month and who will seek a trial in October 1988, estimates that if the group action is won, the companies could be at risk of claims for the next 10 to 15 years from people who began smoking in the late 1940s and early 1950s.
Assuming that an average claim is worth about pounds 50,000, Mr Day has estimated that there is a potential legal liability of between pounds 1bn and pounds 2bn a year over the 10 to 15-year period.
The two companies are expected strenously to defend the claims. Each case could well turn, in the final event, on whether the alleged negligence in not reducing tar levels at an earlier stage either caused or materially contributed to the onset of the cancers that the smokers later contracted.
While Gallaher said it never commented on current or pending litigation, Imperial Tobacco said it would vigorously defend the case.
Mr Day's firm stands to lose about pounds 3m worth of fees if it loses. It has also agreed to limit the fee it will claim if it wins so that each claimant pays out no more than 25 per cent of his or her damages as a success fee.
Other senior lawyers have agreed to work on a cash-on-results basis, including Dan Brennan QC, president of the Personal Injury Bar Association, and Professor Mark Mildred, of Nottingham Law School, an expert in the field of multi-party actions.
Karen Williams, a spokeswoman for Ash, said: "The lawyers are confident they can win and believe there is a just case to answer. Over the last 20 years, companies have started to reduce the tar in cigarettes but that was a long time coming. They didn't do that when they knew the cigarettes were cancer-giving."
A small number of the 40 victims announced yesterday have died and their surviving spouses are bringing their claims. The remainder have suffered serious illness.
Martin Margolis, now 74, is typical. He contracted lung cancer 14 years ago after beginning smoking at school and continuing the habit through service in the RAF. After lung and heart surgery, he now survives with two-thirds of a lung.
His illness led to the failure of a family fancy goods business and loss of a pounds 350,000 north London home. He and his wife now live in a flat.
Another sufferer, Anthony Bywater, a 57-year-old former car worker from Birmingham, had a lung removed six years ago. He said: "It is a risk for all of us in taking on the tobacco companies, but I am confident we will end up victorious."Reuse content