Playstation: £5bn claim
The Competition Appeal Tribunal (CAT) has approved a litigation funding agreement (LFA) that was amended to take account of the Supreme Court ruling in PACCAR [1].
It accepted that a new provision allowing the funder to take a percentage of the damages only once it was “enforceable and permitted by applicable law” did not fall foul of the decision.
The unanimous decision of the CAT [2] came as it certified Alex Neill as the class representative in collective proceedings being brought against Sony over how it controlled the distribution of Playstation games made by third-party developers.
Nearly nine million people who were allegedly overcharged as a result are potentially in the class, with the claim worth up to £5bn. Milberg is acting for Ms Neill and Woodsford is funding her.
It was the first certification decision since PACCAR, in which the Supreme Court held in July that LFAs which provided a return to the funder based on a percentage of the damages awarded to the class were damages-based agreements (DBAs), which are not permitted in opt-out collective actions like this.
The LFA between Ms Neill and Woodsford fell foul of this and was amended so that the use of a percentage of damages to calculate the funder’s fee was made conditional upon it being enforceable and permitted by applicable law.
We reported last week that the government had added a new clause [3] to the Digital Markets, Competition and Consumer Bill to state that the bar on DBAs in opt-out collective actions will not apply to LFAs.
The CAT rejected Sony’s argument that the new LFA was still a DBA. “The clauses operate with a contingency, such that they have no legal effect until the contingency (legislation by Parliament to reverse the effect of PACCAR) eventuates,” it said.
“There is therefore no logical possibility that section 58AA [of the Courts and Legal Services Act 1990, which defines what a DBA is] could be engaged to make the provisions unenforceable.
“As a matter of freedom of contract, it is open to [Ms Neill] and the funder to agree on such a provision, and we see no reason of public policy or otherwise to make that objectionable.
“The drafting expressly recognises that the use of a percentage to calculate the funder’s fee will not be employed unless it is made legally enforceable by a change in the law, which appears to us to be an entirely proper position to take.”
The amended LFA also included a clause that severed this provision “if necessary to ensure the enforceability, legality or validity of this agreement” and without changing the nature of the contract.
Sony argued that this would change the character of the LFA, so that it would cease to be a DBA. The panel disagreed, saying it saw “no reason” to go behind the express agreement between the parties that severance would not have that effect.
“We would therefore have been prepared to sever the clause if we had agreed with Sony’s primary argument to the effect that the current drafting [on the funder’s fee] still engaged section 58AA.”
The CAT also dismissed Sony’s submission that the PACCAR ruling should have a broader impact on its decision to certify Ms Neill.
“In our view, the exercise carried out by the Supreme Court was just as Lord Sales JSC described – an exercise in statutory interpretation, in which the majority expressed no view on the public policy considerations.
“While the outcome in PACCAR is of course significant in terms of the application of section 58AA, it does not in our view have materially wider ramifications for the approach we should take to the questions of fulfilment of the eligibility and authorisation conditions.”
Natasha Pearman, head of competition litigation at Milberg, said: “We hope that the certification of our claim provides some clarity as to acceptable litigation funding agreements in the post-PACCAR environment for opt-out claims.”
Charlie Morris, chief investment officer for Woodsford, added: “Sony sought to advance numerous unmeritorious and opportunistic arguments, all of which unsurprisingly failed.
“Defendants to these actions would be better advised to resolve meritorious actions in a speedy and cost-efficient way rather than spending millions on spurious and ultimately unsuccessful satellite disputes aimed solely at stymying access to justice.”
Ms Neill, who was chief executive of online complaint resolution facilitator Resolver, this year co-founded Consumer Voice [4], which aims to provide consumers with free advice and information about group claims in the UK.
Its website says Consumer Voice makes money “by providing consumer-friendly communications and engagement services to law firms to help raise awareness of claims. In some cases, we take a fee from legal firms when someone from our community joins a claim”.
See also: The CAT’s welcome boost for the funding industry [5]