The high court has blocked a mass lawsuit against Google that aimed to collect as much as £3bn in compensation for the company’s historical practice of collecting data on iPhone users whose privacy settings should have prevented surveillance.

Mr Justice Warby, sitting in London, announced his decision on Monday.

The litigation was brought by the campaign group Google You Owe Us, led by the former Which? director Richard Lloyd. The group sought permission to have the case heard as a “representative action”, a form of class-action lawsuit that would have allowed one legal team to represent the millions of affected users without needing to individually gain their support.

In a statement, Lloyd said: “Today’s judgment is extremely disappointing and effectively leaves millions of people without any practical way to seek redress and compensation when their personal data has been misused.

“People are only now beginning to realise the implications of losing control of their personal data in this way. Closing this route to redress puts consumers in the UK at risk and sends a signal to the world’s largest tech companies that they can continue to get away with treating our information irresponsibly.”

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Lloyd argued that without the ability to fight the case through the courts, legislation was required for users to achieve redress. “There now seems no alternative but for the government to fill this gap by legislating to give groups of consumers the right to affordable collective redress,” he said.

Google said: “The privacy and security of our users is extremely important to us. This claim is without merit, and we’re pleased the court has dismissed it.”

Google faced claims that it bypassed privacy settings on Apple iPhone handsets between August 2011 and February 2012, collecting data on iPhone users despite the fact that the default privacy settings on those devices should have forbidden the company from tracking them.

The campaign group hoped to win at least £1bn in compensation for an estimated 4.4 million users of the device in the UK, and had said the damages could be as high as £750 per affected individual.

The focus of the lawsuit is a setting introduced to iPhones in 2011 called “Do Not Track”. The setting, which was enabled by default, manifested as a simple request from the user’s Safari browser to websites not to track them across the web. For years, Google and Apple went back and forth over how the company should comply with the request, and another setting that blocked sites the user had not visited from tracking them.

That conflict eventually came to a head in 2012, when Google paid a fine of $22.5m (£14.4m at the time) to the US Federal Trade Commission over its practice of “circumventing” Safari’s default settings. At the time, the FTC charged that the company “misrepresented to Safari browser users how to avoid targeted advertising by Google”.

The high court’s ruling did not address the facts of the case, although Mr Justice Warby conceded that “it is arguable that Google’s alleged role in the collection, collation, and use of data obtained via the ‘Safari workaround’ was wrongful, and a breach of duty”. But it found that Google’s actions did not cause damage to users, and that it was impossible to lump the millions of potentially affected people together into one class for the purposes of a lawsuit.

The judgment concludes that: “The damage sustained and the compensation recoverable by each represented individual are modest at best. The main beneficiaries of any award at the end of this litigation would be the funders and the lawyers, by a considerable margin.”

At the first hearing of the case in London in May, lawyers for Lloyd told the court that information collected by Google included racial or ethnic origin, physical and mental health, political affiliations or opinions, sexuality and sexual interests, and social class.

They said information about an individual’s financial situation, shopping habits and their geographical location were also obtained.