Salmon claim: Damages less than £10 per person
Judges have refused to grant a collective proceedings order (CPO) over an alleged salmon production cartel because it appears more for the benefit of lawyers and funders than consumers.
A costs budget exceeding £20m was out of proportion to potential compensation to consumers of less than £10 each, the Competition Appeal Tribunal (CAT) found.
“A problem with many class actions is that they offer enormous and irresistible commercial benefit to the lawyers and funders, whereas the commercial benefit to individual members of the class is relatively small,” it said
“This can distort the incentive to pursue such proceedings. This distortion arises in part because many class actions are initiated by legal teams and not by the class itself.”
Consumer advocate Anne Heal – represented by City firm Simmons & Simmons – is the proposed class representative (PCR) for the action, which alleges that the defendants unlawfully colluded to increase the price paid for Atlantic salmon by retailers and that this increased cost, at least in part, was passed on to consumers.
There are two other claims issued in CAT brought by supermarkets that will cover the same ground up to the point of deciding whether the cost was passed on.
The three cases will likely be case managed together and the CAT was critical of Ms Heal’s failure to consider how her costs could be reduced as a result, such as by co-operating with, or piggy-backing on, the other two cases in the liability phase.
The class is thought to comprise 35-44m people and a preliminary estimate of the harm caused is between £71m and £382m – or £1.61 to £8.77 per class member.
Ms Heal’s budget was for litigation costs of nearly £16m plus VAT – described by the CAT as “inexplicably high” – and another £5.3m for after-the-event insurance.
Proposed success fees for the lawyers and insurer only emerged after questioning by the CAT. “It was wrong, and potentially misleading, not to present these contingent sums, alongside other legal costs, on the application for certification.”
There was also a fee for the funder, Erso Capital, of up to five times its outlay. Ms Heal said during the hearing that she would seek an order that the funder’s unrecovered costs and expenses only be taken from any undistributed damages.
“That may sound like a concession but equally it might be said to underscore an expectation that there will be significant sums which are undistributed,” it observed.
Mindful of the take-up of compensation in the Gutmann train boundaries case – just 1% of class members claimed – the CAT said Ms Heal should have addressed distribution in her application.
“It is within reasonable contemplation that take-up may be measured in the hundreds of thousands,” it said.
“That would mean the sums returned to the lawyers and funder would be likely to swamp the relatively small sums that would be returned to the class. The litigation in those circumstances would have principally benefitted the lawyers and funder.”
The CAT also questioned the £300 an hour Ms Heal was to be paid for her work on the claim, with the budget contemplating paying her up to £317,000 in total.
“Being a class representative carries with it solemn responsibilities and is likely to be time-consuming, and for that reason a class representative may desire to receive remuneration,” it acknowledged.
“But the receipt of remuneration at the levels claimed by Ms Heal gives the appearance of a motivation beyond pursuing the interests of the class… [It] vastly exceeds the remuneration that would ordinarily be expected for a person engaged in public service…
“We consider that the trend towards class representatives self-authorising fees of this magnitude is undesirable and gives rise to a potential blurring of the lines between the interests of the class representative and the interests of the legal advisers and funders which they are required to scrutinise.”
The CAT also wanted to better understand why another £262,500 was put aside for Ms Heal’s advisory panel, which includes Kate Wellington, a former lawyer at Which? and ex-chief executive of the Costs Lawyer Standards Board, former Dentons partner Helen Charlton, and Nicholas Spearing, a former partner at Freshfields Bruckhaus Deringer.
The CAT concluded that the costs and benefits of the proposed proceedings did not come out in favour of certifying the claim and it was not prepared to authorise Ms Heal as the PCR.
But it said she could have another go: “We see scope for advancing a costs budget much smaller than the one which has so far been advanced by the PCR. Moreover, we see an opportunity for a more creative mechanism for returning damages to the class.
“Subject to further consideration we see no reason why a scheme could not be devised, perhaps with the cooperation of retail outlets, which has the potential to return close to 100% of damages to members of the class (with appropriate deductions for unrecoverable costs and a funder’s fee).
“If these matters were addressed then the costs and benefits of the proceedings could be revisited.”
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