The Court of Appeal has overturned the decision that stopped the massive £14bn Mastercard class action – the biggest opt-out claim in English legal history.
It held that the Competition Appeal Tribunal’s (CAT) 2017 judgment denying the representative claimant, solicitor Walter Merricks, a collective proceedings order (CPO), contained errors of law and that the tribunal mis-directed itself in applying the new regime.
The claim is a follow-on action after Mastercard was found to have infringed EU law by imposing charges (known as ‘interchange’ fees) on the use of MasterCard debit and credit cards. It is claimed that this increased costs for retailers and consumers.
It is brought on behalf of a class of 46m people who used a Mastercard over a 16-year period, but the CAT dismissed Mr Merricks’ application for a CPO because it was not satisfied that his experts would be able to get the evidence to show that the illegal fees were then passed on to consumers in the form of higher prices.
Further, the CAT said there was “no plausible way of reaching even a very rough-and-ready approximation of the loss suffered by each individual claimant”.
Lord Justice Patten, giving the latest judgment of the appeal court, ruled that the CAT “demanded too much” of the proposed representative at the certification stage in proving that the fees were passed on.
He explained: “Although the CAT rejected the idea that they should carry out some form of mini trial, that is in our opinion more or less what occurred.
“They also required the proposed representative to establish more than a reasonably arguable case which would have been the test had Mastercard applied to strike the claim out.
“What this in practice involved was the appellant’s experts being cross-examined at a pre-disclosure stage in the proceedings about their ability to prove the claim at trial by reference to sources of evidence which they had identified but had not yet been able fully to analyse or assess.”
Patten LJ said the making of a CPO did not prevent the CAT from terminating the collective proceedings later on if the experts did not have sufficient data.
“But a decision of that kind is much more appropriate to be taken once the pleadings, disclosure and expert evidence are complete and the court is dealing with reality rather than conjecture…
“At the certification stage the proposed representative should not, in our view, be required to demonstrate more than that he has a real prospect of success. This is not the test which the CAT applied.”
There was also an error of law in the CAT considering that distribution must be carried out on some kind of compensatory basis, however approximate, the appeal court decided.
Patten LJ observed that the CAT recognised that the likely scale of loss caused to any individual consumer in cases like this, coupled with the costs of the proceedings, made individual claims “a practical impossibility”. He said the collective redress procedure introduced by the Consumer Rights Act 2015 was “obviously intended to facilitate a means of redress which could attract and be facilitated by litigation funding and had Parliament considered it necessary to limit this new type of procedure by what would be required for the assessment of damages in an individual claim then it would have said so”.
While the CAT was required to take into account whether the claims were suitable for an aggregate award of damages when considering whether to make a CPO, this did not extended to whether such an award could be distributed in any particular manner.
More immediately, the rules did not require the CAT at the certification stage to consider more than whether the claims were suitable for an aggregate award of damages. Distribution was a matter for the trial judge to consider following the making of an aggregate award.
The court ordered that the application for a CPO be remitted to the CAT for a re-hearing.
It dismissed Mastercard’s application for permission to appeal to the Supreme Court and ordered the company to pay Mr Merricks’s cost, and unwound the costs he was ordered pay after the initial CAT hearing before the CAT.
Boris Bronfentrinker, the Quinn Emanuel Urquhart & Sullivan partner representing Mr Merricks, described it as “a landmark day for all UK consumers”.
He said: “The Court of Appeal’s judgment also marks a significant day for the collective action regime in this country, after a number of false starts before the CAT. The Court of Appeal has recognised and given effect to the legislative intent.
“Whilst it had been commented that the claim against Mastercard was overblown, the Court of Appeal has today definitively determined the opposite, recognising the need for mass consumer collective actions to be able to be pursued.”
Mr Merricks said it was time for Mastercard “to admit the damage they did, to apologise to the British public, and to agree to pay the compensation they owe”.
He added: “I’m particularly pleased that the judges recognised that the CAT’s decision would have frustrated the will of Parliament when it passed the Consumer Rights Act – that there should be an effective route for consumers to be compensated when businesses break competition law.”
The appeal was backed by third-party funder Innsworth Litigation Funding, which Quinn Emmanuel said “stepped in on short notice”.
Innsworth used to be called Bentham Europe, which was a joint venture between IMF Bentham, the leading listed Australian funder, and US hedge fund Elliott Management. IMF sold its 50% to Elliott in 2016, and it was renamed a year later.