Mastercard: Foundation set to receive portion of any unclaimed damages
Competition Appeal Tribunal (CAT) rules need to change so that a portion of unclaimed damages from collective actions go to charity when cases settle, the Access to Justice Foundation (ATJF) has argued.
It also called for a government portal for consumers to access damages from opt-out collective actions, saying this “would do much to increase take-up”.
The CAT rules say that the ATJF should receive residual damages following judgment. But the charity said that, in setting up the opt-out collective actions regime in 2015, the government had “left open the question of what should happen in the context of settlement”.
Last month, the CAT approved a £3.8m payment [1] from unclaimed damages in a settled collective action to the ATJF, and it could receive money from the Merricks settlement [2] too – but there was no obligation on the CAT to do so.
Responding to a Department for Business and Trade (DBT) call for evidence on the regime, the ATFJ said it should “ordinarily be expected” that a proportion of any unclaimed funds following a settlement should be paid to an access to justice charity.
The CAT rules failed to “reflect that principle”; rather, they said that “a provision that any unclaimed balance of the settlement amount reverts to the defendants shall not of itself be considered unreasonable”.
The response urged replacing this with a rule that, save in exceptional circumstances, a settlement “shall not be considered reasonable unless it provides for a reasonable proportion of any unclaimed balance of the settlement amount to be paid to the Access to Justice Foundation”.
The response pointed out that the collective actions regime was designed to provide redress for victims.
“Even in the settlement context, it is contrary to the interests of justice for the entirety of unclaimed funds to revert to the alleged wrongdoer, who would receive an unjustified windfall from the fact that a low level of people entitled to compensation have made such claims (which is itself indicative of challenges with access to justice), or to the litigation funder.”
But the current regime did not give class representatives “a positive incentive to negotiate for unclaimed funds to be paid to charity rather than to revert to the defendant”.
It added: “Rather, given that the class representative owes their duties to the class members, they may be placed in an invidious position if a defendant is only willing to settle on terms that include full reversion of unclaimed funds.
“Further, in cases where the settlement sum is relatively low, class representatives will often find themselves in a position where the funder is claiming to be entitled to any unclaimed funds and the class representative is under a contractual duty not to argue against the funder’s interest.”
More broadly, the ATJF said that given “the present state of online resources”, consumers were “understandably wary of providing personal information, including financial information, to third-parties online”, who were often “of limited or dubious reputation”.
As “a first and relatively simple practical step”, the “establishment of a government portal to access consumers’ share of damages would do much to increase take-up”.
In a separate response to the DBT, class action law firm Hausfeld, argued that “any move to dilute or politicise” the framework for collective actions “would undermine access to justice, distort competition, and damage the UK’s reputation as a fair, rules-based market”.
Collective actions were “central to the UK’s civil justice and competition system”, allowing consumers and small businesses to obtain “redress at scale for dispersed, low-value but systemically significant harms”.
It could also drive accountability where regulatory fines fell short and provide “a credible deterrent that complements public enforcement”.
The DBT should concentrate on “reinforcing – not rolling back – the existing framework”, including by permitting damages-based agreements in opt-out claims.