Garrard: Decision may discourage investors
The litigation funder in the Mastercard collective action has hit out at the Competition Appeal Tribunal’s (CAT) decision to allow it a £23m profit on its seven-year, £46m investment in the case.
Innsworth Advisors, which manages Innsworth Capital, also kept up the war of words with class representative Walter Merricks.
Meanwhile, the Association of Litigation Funders (ALF) rejected Mr Merricks’ claim that it “chose to do nothing” over concerns about Innsworth.
We reported yesterday that the CAT issued its full decision to approve Mr Merricks’ £200m settlement with Mastercard and how the money would be distributed, with Innsworth Capital set to be repaid the £46m or so it has spent on the litigation (the final figure has yet to be confirmed), plus a profit of 50%.
This recognised “the significant risk” it took but reflected also “the poor outcome” of a case originally valued at £14bn. Innsworth had argued for £179m.
Innsworth has been vocal in its opposition to the settlement but the CAT did not accept its objections.
Managing director Ian Garrard described the profit figure – representing 15% of the £150m surplus after costs are repaid – as “unreasonable”.
He said: “We also consider that the specific reasons given for it are demonstrably mistaken.
“The CAT has acknowledged the critical role of third-party litigation funding for the opt-out class action regime established by Parliament to further the objectives of redress for victims and deterring anti-competitive behaviour.
“This judgment may have far-reaching implications for class actions in the UK. We do not think it is a reasonable division of the proceeds, or one that will do anything to encourage investors to fund other opt-out collective actions in the future.
“We are therefore considering of all of our options, including asking the courts to look again at this matter.”
Stressing his disappointment at the settlement, Mr Garrard noted that “long after the serious setback of the February 2024 judgment” on causation that ultimately led to the settlement, Mr Merricks “was still telling the class via his website that the claim was worth £10bn”.
The settlement accepted that the main element of the claim, concerning Mastercard’s alleged overcharging of UK domestic transactions and accounting for more than 90% of its value, was worthless, he said.
It was limited to the claimed overcharges on the much smaller volume of cross-border transactions; had the claim been presented on this basis only, a budget of over £40m “would never have been sustainable”.
Mr Garrard argued that Innsworth was justified in challenging the settlement – “and its intervention was specifically authorised and welcomed by the CAT”.
He continued: “The tribunal came to the conclusion that the settlement was reasonable because in its view, not tested by argument as to the merits, the domestic claim was not going to succeed.
“Innsworth remains of the view that, had the case continued through the pass-on trial and the domestic claims been fully prosecuted – for which it made an offer of further funding – there would have been a better result for the class.”
The CAT noted this view but said: “The tribunal is not concerned to decide the best negotiating strategy but to determine whether the settlement itself is just and reasonable.”
It highlighted too the “difference in perspective” that may encourage a funder to fight on for a bigger return when the class representative could not take the risk.
Mr Garrard contrasted the financial risk it took over seven years – following the previous funder’s withdrawal – with the solicitors’ refusal to accept “any contingent fee element, although this is now common in collective proceedings”. By the time of the settlement, he said, the solicitors’ total fees exceeded £18m.
In his statement after the judgment, Mr Merricks said: “I would very much hope that the tribunal’s judgment and its findings regarding Innsworth Capital, are carefully considered and acted upon by the funding industry’s UK self-regulatory body, the Association of Litigation Funders.
“It chose to do nothing at the time, despite being aware of concerns, but I very much hope it takes action now.”
In response, ALF said these comments were “unfortunate and misleading”.
It explained: “ALF did not ‘choose to do nothing at the time’. Rather, ALF proactively contacted Mr Merricks and asked him if he wished to make a complaint, a necessary first step to engage ALF’s investigatory powers.
“Mr Merricks declined to do so and to this day has not done so. Should Mr Merricks make a complaint, ALF will investigate it.”
More broadly, the association said it regretted “the public and intemperate airing of the parties’ disagreements”.
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