Mastercard: Dispute over settlement rumbles on
The Access to Justice Foundation (AtJF) should not make more out of the Mastercard settlement than the funder who took all the risks, the High Court has been told.
Innsworth Capital has confirmed that it is seeking a judicial review of last month’s decision of the Competition Appeal Tribunal (CAT) about how the £200m settlement should be distributed.
As only the actual parties have the statutory right to appeal CAT rulings to the Court of Appeal on points of law, Innsworth said judicial review was the only option open to it.
Despite continuing to consider the settlement itself too low, Innsworth is not challenging the decision to approve it but maintains its strenuous opposition to the return awarded by the court.
The CAT decided that the first £100m (pot 1) will be for consumers, with any unclaimed sums going to the AtJF.
The second tranche of money will go to repay Innsworth the sums it has spent on the litigation, estimated at £46m.
The remaining cash (pot 3) will pay, in order, for: the relatively small other costs and expenses of claimant representative Walter Merricks for which Innsworth is not responsible; a 50% profit for Innsworth; supplementing the £100m in the event that more than 5% of the class submit claims; and then, if any is left, a donation to the AtJF.
The CAT agreed Innsworth should see a “profit return” but in assessing this noted: “Although the settlement has secured a positive payment, the outcome of the present case is very far from a success for a class of some 44m claimants…
“A return on investment of 1.5 is here appropriate… recognising the significant risk but reflecting also the poor outcome.”
According to the grounds for judicial review settled by Charles Béar KC of Fountain Court Chambers and Patrick Halliday of 11KBW, it is currently thought that the foundation could receive more than £30m from pot 3 – compared to £23m for Innsworth.
Despite having taken all the risk, they argued, Innsworth would end up with less than a sixth of the £150m or so in net proceeds, a return “far below anything contemplated” in the litigation funding agreement.
“Not only does Innsworth’s position contrast strikingly with the benefit received by the class, but an entirely unconnected entity, the AtJF, stands to gain £30m out of pot 3 (and potentially even more out of pot 1), substantially more than the profit allowed for Innsworth.
“The distribution to the AtJF can only be characterised as a windfall.”
The judicial review accuses the CAT of misunderstanding the Australian authority on which it based the 1.5 figure by wrongly including the finance costs when calculating Innsworth’s return on investment. This meant it received a return of 0.5, rather than 1.5.
Thus the profit should actually have been £69m, or the whole of pot 3 except those unrecoverable costs.
This would be in line with its suggestion that the CAT should have split the net (rather than gross) proceeds equally between the class and the funder.
The grounds go on to say the tribunal failed in various other way, including by giving no weight to the agreed terms of the funding agreement, which envisaged a return of £520m on the sums spent.
“Since this had been agreed by the class representative on behalf of the class, it should have been for the class to justify any departure from its terms. Instead, the CAT wrongly proceeded on the basis that its supervisory jurisdiction over distribution meant that it started with a blank sheet.”
That Innsworth could not recover that much “did not make the agreed level of return irrelevant”.
The CAT also “failed to appreciate that allocation as between funder and a putative gratuitous recipient, such as the charity, was not equivalent to allocation as between funder and victims of the wrongdoing”.
Innsworth continued: “By allocating the entire residual balance of monies in pot 3 to the AtJF, a charity with no interest or involvement in the proceedings, and no role in the statutory scheme for collective settlements (as opposed to the position where there is a judgment), the AtJF is liable to receive in the region of about £30m, a sum greater than the entirety of the profit for a funder which has already paid out over £41m to enable any benefit at all, and which is contractually entitled to a return.”
Mr Merricks’ solicitor, Boris Bronfentrinker, partner at Willkie Farr & Gallagher, said it was a “positive development” that Innsworth had accepted the decision on the settlement itself.
“It seems that [Innsworth] has reconsidered some of its statements in the immediate aftermath of the judgment where it was suggesting that Mr Merricks and the class could have done better than the settlement had they continued to litigate, which the tribunal concluded was not the case.”
But he criticised the judicial review: “The very same greed that caused Innsworth to take the poorly thought through decision to oppose the settlement, is now driving its attempt to be allowed to judicially review the tribunal’s decision – a judicial review that seeks to award Innsworth more than the class.
“Mr Merricks is confident that this final attempt to disrupt the settlement will fail, and that the decision of the Tribunal will stand.
“It is shame that, at a time when the spotlight is on litigation funders following the report of the Civil Justice Council, Innsworth is acting in a way that only provides ammunition to those that want to argue against the regime.”
A spokesman for the AtJF added: “The foundation has been made aware of the judicial review application. It would be inappropriate to comment on the case at this time.
“Our focus remains on our work and ensuring the money we receive is distributed through grants to organisations and charities which support the most vulnerable in the UK.”
Jeremy Marshall, chief investment officer at litigation funder Winward, backed Innsworth’s stance.
“It is right to pursue this judicial review and it is an important opportunity to seek clarity on how the tribunal assesses what is an appropriate return for litigation funders without whom there would be no settlement or distribution of damages.”
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