If a business behaves in such a way as to cause consumers harm or loss, there is an assumption that the business responsible for that harm, however powerful they are, can be held to account under the law.  

For centuries that principle has been vitiated by the undeniable fact that going to law is expensive.

Only during the last 20 years has there been any progress towards a way of breaking down cost as producing fundamental inequality of access to justice.

One of the most recent innovations in access to the law was the establishment of the Competition Appeals Tribunal (CAT) whose founding regulations had the evident intention of enabling the ordinary citizen to confront even the greatest business behemoths if they were found to have violated the laws of competition. 

These laws were established to prevent ruthless corporates from using flagrant breaches of regulations to make unlawful profits at the expense of consumers, formerly powerless to obtain redress.

The powers given by legislation to the CAT include the certification of class actions under the control of a class representative, in which consumers may be joined together in proceedings if they have suffered loss from the same unlawful behaviour by the same business entity. The CAT was, crucially, also given the responsibility of approving settlements as being just and reasonable in all the circumstances.

However, just combining consumers together does not solve the main problem. If none have the resources necessary to finance litigation, then collecting them together in a class will not deliver the wherewithal. 

Litigation funding

This is where litigation funding comes into the picture. As permitted in this country, funding allows a financial entity to finance a class representative so that the rights of consumers so represented, can be upheld. 

Make no mistake, these class actions cost sums that shock observers, even the lawyers themselves who are, of course, the immediate beneficiaries.  

In the recent and highly publicised Merricks litigation against Mastercard, the funder, Innsworth, has invested more than £45m in the legal costs of the class representative’s claim. Meanwhile, the defendant’s external lawyers are likely to have pocketed still greater sums.

There is much criticism currently of the class action regime and funding, most from lobbying groups backed by big business. How can such sums be justified? 

One key point that seems to have been conveniently forgotten by some is that defendants in the CAT have generally been found by a regulator to have taken unlawful profits from consumers. The consumer class in such cases often consists of millions of consumers whose losses are estimated in the billions.

Readers could be forgiven for assuming that the defendant’s profit from its unlawful activities in such cases was also to be measured in billions. Small wonder that such defendants are willing to spend many millions on legal fees on its defence.

There is in operation in the CAT a vigorous parallelogram of forces between the interests of the class representative, its funder and the defendants.

Now, in a development that stunned observers, Mastercard (the defendant in the proceedings) has funded the class representative (the claimant in the proceedings) to cover the defence costs of an arbitration brought against him following his agreement to settle the £14bn claim for just £200m, which I calculate as being less than 2% of the original claim that was endorsed to proceed by both the Court of Appeal and the Supreme Court.

In this situation, the funder, Innsworth, obtained permission to intervene in the process whereby the CAT is to discharge its responsibility to approve or withhold approval of this settlement. The CAT has now approved the settlement as just and reasonable.

Concerns

However, in indicating its view that the settlement was just and reasonable in the circumstances, chair, Justice Peter Roth said that the tribunal will comment on their misgivings about the process by which the settlement was arrived at, outlining there were “some concerns about how the matter was dealt with” in the lead up to the deal being reached by Mastercard and Merricks. 

Lessons will clearly need to learned and any comments grappled with for future cases.  

For the sake of the regime, there has to be hope that Merricks’ settlement with Mastercard is not a blueprint for other cases and class representatives – because it will no doubt encourage other defendants.   

The funder’s intervention to challenge the settlement has been unjustly criticised, but its intervention did ensure that all arguments were heard and that the settlement was duly scrutinised.

In all this it should not be forgotten that the long-term purpose and value of the powers that have been invested in the CAT is twofold; first to secure a remedy for tens of millions of consumers who may have suffered loss from unlawful or anti-competitive behaviour and secondly, and equally importantly, to deter even the largest of businesses from such wrongdoing. 

The fight to deliver that purpose and value will continue.

Leslie Perrin is chair of litigation funding firm Calunius Capital and a former chairman of the Association of Litigation Funders