Strong step forward for litigation funding in the class action arena

Wednesday 18^th August saw confirmation from court that the first consumer group class action claim in the UK – Merricks v Mastercard – could proceed to trial, on the basis that a suitable undertaking of costs liability is given by the Claimant’s new litigation funder.

The Competition Appeal Tribunal (CAT) confirmed that the action was suitable for collective proceedings against Mastercard, reviving a potential claim by former Financial Ombudsman, Walter Hugh Merricks CBE, on behalf of 46.2 million individuals in the UK for alleged losses spanning over 16 years. The class action will seek an estimated £15 billion of compensation for allegedly inflated prices paid by UK consumer cardholders because of unlawful default interbank fees passed on to them in the period between 1992 and 2008.

Whilst the terms of the litigation funding agreement were not challenged by Mastercard, save for one exception, the Tribunal scrutinised the litigation funding agreement in order to protect the interests of the members of the proposed class.

The CAT commented in its judgment that the anticipated costs of the action will be “vast”. With the change in litigation funder, Merricks has access to funding for his costs and disbursements of £45.1 million, in addition to £15 million for adverse costs. This is a marked increase on the previous funding agreement which was scrutinised by the CAT in earlier proceedings. A revised costs budget was produced by Merricks setting out total anticipated costs of nearly £32.5 million. This provided insight for the Tribunal to be satisfied that the new funding agreement will allow the Claimant to pursue the claim adequately for the potential class members. The Tribunal observed that even if third party disclosure proves to be extensive, any consequent budget excess would be covered and funding would be in place.

Areas of potential conflict of interest between funder and potential class members i.e. settlement of the proceedings and termination of the funding agreement, were reviewed by the Tribunal and found to be satisfactory. The Tribunal also observed that, although lengthy, the funding agreement is clearly drafted.

Not only does this judgment pave the way for the future of class actions in the UK, it is also a colossal step forward in the field of third party litigation funding and its potential to support large-scale litigation, providing access to justice for consumers and other connected groups of individuals.