Journal

Practico Blog: Merricks v Mastercard

Welcome to the first of what I anticipate will be a monthly blog in which I discuss Practico’s take on current litigation trends and what the potential implications are for costs.

I think all of us who have been associated with chunky pieces of litigation in the past will be keen to see whether the Supreme Court gives the green light for Merricks v MasterCard to proceed in what would be a completely new scale of consumer class actions – one in which millions of consumers become class members unless they specifically opt out.

The costs issues were confined to the first instance hearing in 2016 and relate chiefly to the validity of the funding agreement, which was challenged unsuccessfully by MasterCard.

During argument, the applicant indicated a preparedness to amend the funding agreement and was permitted to do so to rectify difficulties with the termination provision.
The CAT also applied a purposive interpretation of the regulations to allow the funder’s bounty to be recoverable out of the unclaimed damages pot as ‘costs incurred’.

The tribunal dealt shortly with the potential conflict of the applicant’s interest between his inherent duty to maximise the distributable damages to class members and his obligation to use his best endeavours to realise the ‘total investment return’ to the funder. If any settlement agreement did not appear to the CAT to balance the interests of the class members and the funder, the CAT would simply not approve the settlement.

Funding did not form part of the first appeal and if the Court of Appeal is upheld, the certification application is expected to be remitted to the CAT for re-hearing. It is therefore possible that aspects of the funding model will be revisited.

Meanwhile it would appear that in either Merricks or some other consumer class action, the courts will need to grapple with the reasonableness of costs for which there is no traditional client liability and it will potentially fall to a paying party to invoke the protection of the same class members it has been opposing in order to limit its net exposure to the aggregate of damages and costs.

It would be logical to expect a form of costs budgeting to be required in a certified consumer class action. The absence of a costs estimate or budget submission from MasterCard gave the CAT a simple reason not to determine that the £10m adverse costs provision in the funding agreement was inadequate. But there is an obvious placeholder here for the issue to return. Just because the numbers will be huge is not a good reason to avoid the exercise – quite the opposite.