Stagecoach South West Trains: Five given permission to intervene in stakeholder entitlement hearing
The Competition Appeal Tribunal (CAT) has granted business lobby group Fair Civil Justice (FCJ) permission to intervene in a hearing on how to distribute £10m not claimed by consumers in a collective action.
The CAT said FCJ could help as it considered the dangers of financial rewards available to claimant lawyers and funders in collective proceedings being “inversely proportional to the take up they achieve in practice”.
The class representative, Justin Gutmann, alleges that various train companies unlawfully abused a dominant position by failing to make so-called boundary fares sufficiently available to consumers holding valid travelcards, meaning they were charged twice for part of the same journey.
In May 2024, the CAT approved the settlement of the claim against Stagecoach South West Trains (SSWT) for up to £25m, with an estimated 1.4m rail passengers potentially eligible for a share.
However, only £216,500 has been claimed by class members and, under the settlement, it will be for the CAT to decide how almost £10m of unclaimed damages should be distributed. Mr Gutmann’s costs have not been settled yet but could potentially consume all of them.
At a previous hearing, the CAT said that, given the “very low take-up” of damages, it would consider a “substantial payment to charity alongside any claims and representations by stakeholders, to be paid out of any costs, fees and disbursements”.
It gave permission for litigation funder Woodsford, the after-the-event (ATE) insurers and Mr Gutmann’s solicitors, Charles Lyndon, to intervene at that hearing, with the latter suggesting half or more of the money should go to the legal charity, the Access to Justice Foundation (AtJF).
At the latest hearing, both the AtJF and FCJ sought to intervene too; the former’s application was granted unopposed, but Mr Gutmann, Woodsford and the ATE insurers opposed FCJ’s.
The FCJ’s activities are focused on class actions and its members include the British Chambers of Commerce, the Finance and Leasing Association, the European Justice Forum, British American Business and the US Chamber of Commerce.
It told the CAT that it was in favour of all the money going to the AtJF or some or all being used “in an alternative way for the benefit of consumers”.
Either way, FCJ’s position was that the money should “not be allocated as a post hoc incentive to CL [Charles Lyndon] or Woodsford/the ATE insurers in circumstances where the proceedings have failed to distribute a meaningful proportion of the settlement sum and therefore have failed to provide adequate (if any) redress for the members of the class”.
The FCJ said its submission would consider, among other things, the issue of whether any assessment that a collective action was ‘successful’ should involve considering the “actual compensation achieved” by class members.
The tribunal should also have “careful regard” to assurances given by those advancing and funding class actions at “early stages in the proceedings” about the level of compensation which could be achieved and the “reasons for any disparity” between the two.
Those advancing and funding the claims should be aware that if they only achieved de minimis take-up of compensation, this should have implications on the amount of costs they recovered, it went on.
Charles Lyndon, Woodsford and the ATE insurers’ opposition to FCJ’s application included the argument that it was not an “impartial, consumer-focused organisation”.
The intervention, they said, was “not sought in the interests of the public” and instead the FCJ acted “in the interests of large businesses and lobbyist organisations, such as the US Chamber of Commerce’s Institute for Legal Reform, which have established it and which fund it”.
FCJ sought to “reduce the scope and number of class actions being brought in the tribunal”, and its members’ interests were “served by seeking to undermine the viability of funding and legal representation for such claims”.
Granting FCJ permission to intervene, the tribunal said the issues at the stakeholder entitlement hearing would include “the risks posed to collective proceedings in this jurisdiction if the financial rewards available to claimant lawyers and funders are inversely proportional to the take up they achieve in practice”.
The submissions of FCJ were “likely to provide assistance” and provide “an important counterpoint” to the “aligned interests” of the solicitors, Woodsford and ATE insurers.
Given that there have been few decisions on these issues, the CAT said it was “keen to get the balance right between all the interests involved and to reach fair outcomes”.
FCJ’s executive director is the former Conservative MP and minister Seema Kennedy, who is also an ex-City solicitor.
She said: “Less than 1% of the £25m settlement has been claimed by class members. This is despite alleged efforts to inform those affected through advertising and the media. The claimant law firms and funders stand to receive millions.
“This raises the question: Was this case truly in the best interests of consumers?”
“Our intervention presents a critical opportunity to examine why the proceedings have been a failure in terms of putting money back into consumers’ pockets and to ensure that the outcome of the settlement prioritises the consumer over profit for litigation funders.”
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