The costs incurred by Mastercard in defending an attempt to bring one of the largest class actions ever appear “wholly unreasonable and disproportionate”, the Competition Appeal Tribunal (CAT) has found.
The credit card company is seeking to recover more than £1.2m in fees charged by City giant Freshfields Bruckhaus Deringer, but the tribunal said its provisional view was that a reasonable and proportionate figure would be around £250,000.
It made the comments in deciding that Walter Merricks should pay interim costs of £290,000 after the CAT ruled last summer that it could not grant a collective proceedings order (CPO).
The CPO would have allowed him to act on behalf of 46m people in bring a £14bn claim against Mastercard over charges imposed on the use of credit and debit cards. Mr Merricks is appealing.
The CAT ordered that Mr Merricks should pay 80% of Mastercard’s costs after dismissing a raft of his objections to it making any order at all.
“We do not think that the novelty of the regime for collective proceedings… is a reason for giving the applicant immunity from a costs award in this case,” said the tribunal.
“This was, on any view, a very ambitious application for what would have been one of the largest class actions seen in any jurisdiction in the world. It was hardly typical of the kind of case that may be expected to be brought by way of collective proceedings.”
The reduction reflected Mr Merricks’ success over the question of whether he was a suitable class representative, and the fact that both sides used specialist costs counsel to argue over the funding agreement Mr Merricks has with Burford Capital. Their fees were disallowed.
Mastercard’s costs were just shy of £2m, with Freshfields’ fees topping £1.25m, fees for counsel Mark Hoskins QC, Matthew Cook and Tony Singla coming in at £630,000 and foreign lawyers’ fees of £96,000, plus disbursements.
After deducting costs counsel fees and 20%, that left the maximum recoverable up to 30 June 2017 at just over £1.5m.
Mastercard sought an interim payment on account of costs of £629,247.
The CAT said: “We recognise that this was a claim estimated at around £14bn and that it is reasonable for any company, however large, facing the prospect of a claim of that size to leave no stone unturned in mounting its opposition.
“Nonetheless, it should be borne in mind that on this application: (a) the respondents put in no evidence, whether factual or expert; (b) no disclosure of any kind was ordered; and (c) the oral argument took 2½ days (of which a little over half a day concerned the funding agreement).
“We do not question the expenditure by the respondents on foreign lawyers, given that both sides put in copious reference to US and Canadian jurisprudence which was helpful.
“But apart from that, we have to say that we regard costs of this magnitude as wholly unreasonable and disproportionate. We say that as regards both counsel’s and solicitors’ fees.”
The size of the costs relative to the value of the claim was not the only test, it added, while the £1.75m spent by Mr Merricks in making the CPO application was not relevant, as he had to do substantially more work.
The CAT said that, so as to make the interim order, it had to reach a provisional view as to what level of costs was likely to be awarded “and then err on the side of caution”.
“Taking a very broad brush approach and having regard to the very full skeleton argument that was prepared by the respondents’ counsel for the hearing, we consider that a reasonable and proportionate figure for counsel’s fees (excluding specialist costs counsel) would be no more than £250,000.
“Considering what was involved on the respondents’ side, we find it difficult to see that the reasonable and proportionate figure for solicitors’ fees could be any higher than that for counsel.
“However, we are conscious that we have not been provided with a breakdown of the slightly over £1.2m charged by the respondents’ solicitors.
“In these circumstances, we are simply unable to come to even a very provisional estimate of the global figure for the reasonable and proportionate costs which the respondents may be likely to recover on detailed assessment.”
As a result, the tribunal excluded the solicitors’ fees from the question of payment on account and award 80% of what remained, leading to an order for £289,280.
Mastercard also sought interest on its costs, but the CAT said its rules did not enable such an award. “We recognise that this is a lacuna in the rules which requires urgent attention.”