Litigation funders should not be expected to make gifts of their share in proceeds from group actions, the Administrative Court heard today. In the latest twist in the decade-long group litigation over interchange fees charged by Mastercard, funder Innsworth Capital is challenging a distribution order made following last year's settlement between the financial services giant and class representative Walter Merricks CBE.
Opening for Innsworth, Charles Béar KC said that in creating the collective action regime under the Consumer Rights Act, parliament could not have intended that funders, as partners in the 'joint venture' of Competition Appeal Tribunal claims, should not receive a commercial reward. Under the Mastercard settlement, he said 'the funder who has taken all the risk gets 15% (of the £200m distribution) with the class getting 65%.'
Meanwhile the Access to Justice Foundation 'a charity with absolutely no involvement, will get more than 19%.
'Funders accept the need to split the upside of litigation with the class, but it is not reasonable or commercial to expect them to make gifts,' Béar said in submissions to the court.
In the hearing, listed for two days before Lord Justice Males and Mr Justice Morris, Innsworth said it accepts as 'water under the bridge' the CAT's approval of the settlement for a fraction of the £14bn originally mooted as the value of the claim. Payouts under the settlement are currently stayed pending the outcome of the dispute between Innsworth and Merricks.
The Jersey-based funder argues that the CAT's ruling on distribution was based on 'demonstrably flawed reasoning'. It seeks an order that the CAT's decisions relating to two 'pots' of the £200m be quashed. It was irrational, it submitted, to award £30m to a charity which 'at most could point to its statutory status as the recipient of any pure surplus remaining after a judgment - in preference to the funder which had unmet expectations ... having funded access to justice for the class'.
The court heard this morning that the CAT's distribution ruling was made on the basis of a 'clear misreading of evidence' cited in the Australian authority Street v State of Western Australia. Béar agreed with the judge's observation that Street, which involved compensation for the historical employment without pay of First Nation Australians, 'could hardly be more different' to the Mastercard claim.
In documents submitted to the court, Merricks maintains that, had he not settled with Mastercard, Innsworth could have lost the entirety of its investment and would have made zero profit. The CAT had rejected Innsworth’s 'exorbitant claim' that it be paid 89% of the £200m, he said.
The hearing continues.
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