Financial Ombudsman Service  

Merricks v Mastercard: A new era in funded group litigation?

It is widely acknowledged that building a claimant group under any opt-in regime can be expensive and laborious, and can result in group claims failing to get off the ground despite having good merits.

In addition, the judgment has illustrated just how robust class representatives will need to be, both emotionally and financially. The two conditions that must be met for certification for an opt-out claim are:

  1. Authorisation of the class representative.
  2. The eligibility of the claim. 

To meet the authorisation condition, the tribunal must conclude, among other things, that the class representative:

  1. Would fairly and adequately act in the interests of the class members.
  2. Does not have a material conflict of interest with the class members.
  3. Will be able to pay the defendant’s legal costs. 

The aspect of the test outlined first above effectively invites defendants to launch a public character assassination of any individual who might be inclined to put their head above the parapet and become a class representative.

While the assault on his previous career record may not have deterred Merricks, this prospect may understandably deter other well-meaning and motivated individuals from acting as the necessary and pivotal class representative.  

Adverse costs order cover

In respect of the last point in the list, the tribunal’s analysis of Merricks’ ability to pay an adverse costs order revealed that Merricks had a litigation funding budget of £45.1m – allowing £12.6m headroom in the legal budget of £32.5m – and an ATE indemnity of £15m to pay the defendants’ costs if the litigation fails.

This is a huge legal budget by any standard, and one that any individual alone is very unlikely to be able to stump up.

An opportunity for litigation funders

These funding requirements present a huge opportunity for litigation funders, a group which the tribunal appeared tacitly to accept as a necessary part of the group claim apparatus. The tribunal considered and approved a term in the litigation funding agreement that allowed the funder to pull out of the claim on 45 days’ notice, and with supporting legal advice, if it looked likely that the funder’s return on the claim fell below £179m.

The clear implication of this being that the funder can reasonably expect to receive a significantly higher return than £179m – nearly four times the funding budget – with this being the floor at which the tribunal accepted that the funder can reasonably pull out. 

As such, the judgment provides a strong reassurance and incentive for commercially-minded funders with deep pockets and strong nerves to search hard for the next lucrative claim to get behind. This is bad news for multi-nationals who may have engaged in anti-competitive behaviour, who would do well to get their house in order ASAP.  

Merricks must now continue on his novel journey that will no doubt lead to more precedent-setting judgments, potentially on areas such as how to share the damages between an unidentified class.