Funders should not be forced to give up their share of legal settlements, a court heard Monday in a case involving Mastercard and a decade-long dispute over interchange fees. The Administrative Court is reviewing a distribution order from last year’s settlement between Mastercard and class representative Walter Merricks CBE, with funder Innsworth Capital challenging the breakdown of the £200m payout.
Charles Béar KC, representing Innsworth, argued that Parliament’s creation of the collective action regime under the Consumer Rights Act did not intend for funders—who take on financial risk in litigation—to receive no reward. “The funder who has taken all the risk gets 15% (of the £200m distribution) with the class getting 65%,” he said, noting that a charity, the Access to Justice Foundation, would receive over 19% of the funds.
Innsworth’s challenge focuses on the Competition Appeal Tribunal’s (CAT) decision to allocate portions of the settlement. The funder claims the ruling was based on “demonstrably flawed reasoning,” including a misinterpretation of evidence from the Australian case Street v State of Western Australia. Béar highlighted that the Street case, involving compensation for unpaid Indigenous labor, is “hardly comparable” to the Mastercard dispute.
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The court heard that Innsworth accepts the CAT’s approval of the settlement—though it was for a fraction of the £14bn originally estimated as the claim’s value. However, the funder argues the distribution of the £200m is unfair. It contends that awarding £30m to the Access to Justice Foundation, a charity with “no involvement” in the case, prioritizes “pure surplus” over the funder’s unmet expectations.
Merricks, the class representative, countered that Innsworth’s 15% share is reasonable given the risks involved. He noted that without the settlement, Innsworth could have lost its entire investment, resulting in zero profit. The CAT previously rejected Innsworth’s demand for 89% of the payout, calling it “exorbitant.”
The case, heard by Lord Justice Males and Mr Justice Morris, could reshape how litigation funders are compensated in future class actions. Currently, payouts under the settlement are on hold pending the court’s decision. The dispute hinges on whether funders’ financial contributions warrant a larger share of proceeds, or if their role is considered secondary to the class they support.
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Documents submitted to the court emphasized the complexity of balancing funders’ risks with the interests of claimants. The Access to Justice Foundation, which will receive more than 19% of the £200m, has no direct link to the litigation. This has drawn criticism from Innsworth, which argues the allocation undermines the principle of shared commercial reward in joint ventures.
The outcome may influence how future settlements are structured, particularly in cases involving large-scale litigation. For now, the court’s focus remains on whether the CAT’s reasoning was legally sound. The hearing continues Tuesday, with both sides presenting further arguments on the fairness of the distribution.
