iPhones: £853m claim
There is “nothing surprising or unusual” about the Competition Appeal Tribunal (CAT) ordering payment to litigation funders and lawyers from a damages award ahead of the class in collective actions, the Court of Appeal has ruled.
The court decided yesterday that the tribunal has the jurisdiction to make such an order, rejecting an appeal against a CAT decision.
The underlying case is an £853m claim that alleges Apple “throttled” the batteries in certain iPhones, meaning users suffered reduced performance and/or were forced to upgrade early, paying early termination fees, or purchase a new battery for an additional fee.
The class representative is Justin Gutmann, his solicitors are City law firm Charles Lyndon and the claim is financed by Balance Legal Capital.
The litigation funding agreement (LFA) provided two methods of calculating the funder’s return depending on whether the CAT approved repayment of this and payments to solicitors and counsel in priority to the payment of damages to class members.
In November 2023, the CAT held it has the power to make such an order at the conclusion of proceedings and that it was “not impermissible for a class representative to enter into a litigation funding agreement which contemplates this”.
At the time of the CAT hearing, the funder was entitled to a return of 3.8 times its committed capital, which was £18.6m, meaning an uplift of £70m.
Giving the Court of Appeal’s unanimous ruling, Sir Julian Flaux, Chancellor of the High Court, held that payment of the funder’s return and lawyers’ fees in priority to the class was “clearly permitted” under sections 47C(3)(a) and (b) of the Competition Act 1998.
There was, he went on, “nothing surprising or unusual about the CAT ordering payment to funders or lawyers from the award in priority to the class”.
He explained: “Subsection (3) is predicated on the CAT having entered judgment in favour of the class so that there has been a successful outcome to the proceedings, which have only been possible because the funder was prepared to fund them on the terms of the LFA, which entitles the funder to its return in the event of a successful outcome, subject always to the amount that it recovers by way of return being approved by the CAT.”
The supervisory jurisdiction of the CAT “will ensure that what is recovered is not excessive”, Sir Julian added.
As a result, Apple’s further argument – that the LFA requires Mr Gutmann to argue against the interests of the class he represents in favour of paying “extraordinary sums” to the funder – fell away.
“Once it is recognised that the CAT has such a jurisdiction… there can be absolutely nothing wrong with the CR entering into a LFA which makes provision for that to happen,” the court said.
A third ground of appeal, on the consequences of the Supreme Court’s PACCAR ruling, will be heard by the court alongside similar appeals in June.
Matthew Lo, director at Exton Advisors, a litigation funding advisor, welcomed the decision, saying: “The possibility of being paid out in priority to class members can be fundamental to funders in certain cases, particularly where a high take-up of damages by the class is likely, for example where a payment by way of account credit is proposed.
“It would be a perverse outcome if funders were disincentivised from investing in cases with a possibility of high take-up, which should be the very cases the regime encourages to be brought.”
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