News

Directors Mohsin Patel and Tom Davey explore the importance of third party funding in Litigation Finance Insider

Following recent class action lawsuits against several UK universities, Directors Mohsin Patel and Tom Davey explore how third party funding can change the tide of these David vs Goliath battles.

Mohsin and Tom’s article was published in Litigation Finance Insider, 27 March 2023.

Some 90,000 students have now signed up to join a multi-million-pound group action against universities across the UK, seeking compensation for the impacts of strike and coronavirus pandemic disruption.

This case is just one of the latest group litigation cases to be taken in the UK. It is also one of the largest such cases brought to date and clearly highlights the benefits of third party litigation funding to claimants. Needless to say, few students would have the resources to hire a legal team to take a complex case against well-funded universities. The advent of third party funded litigation makes justice accessible for claimants, who can often proceed on a no-win, no-fee basis, and with the protection of insurance to guard against the risk of costs being awarded against them.

Many such David vs Goliath cases are funded and insured by third party providers, which is crucial for enabling claimants to access justice. This recent multi-million-pound group action against UK universities is indicative of a broader, growing trend in the UK’s litigation sector, with the value of class actions launched in the UK rising steeply during the past year.

Research suggests that the value of assets held by UK litigation funders hit £2.2 billion in 2022, which represents a more than 10 fold increase a decade. England and Wales is now reported to be the second largest market for litigation funding in the world.

Ordinary workers are already benefiting from the rise in group litigation as opposed to going it alone. For example, a group of mostly female Tesco supermarket workers are currently seeking equal pay with the mostly male Tesco distribution centre workers. In the wake of a landmark UK Supreme Court ruling which held that Uber drivers were workers, drivers embarked upon a group litigation case, which is paving the way for other gig economy workers to take similar actions.

Consumers are also benefiting from the advent of group litigation. The Volkswagen “Dieselgate” group litigation case settled in May 2022, with a £198m pay-out to the 91,000 claimants, with an average payment of some £2,100 each. The Mastercard group litigation case could see some 46 million UK consumers be awarded an average of £300 each for excessive fees charged, according to the claimants.

The UK Supreme Court’s 2020 judgment in the Merricks v Mastercard case underlined that funded litigation is now regarded by the judiciary as a crucial way for consumers to vindicate their rights against big businesses. This case relates to the alleged overcharging of some 46 million consumers between 1992 and 2008. In 2021, it was certified by the Competition Appeal Tribunal (CAT) as the UK’s first ever opt-out collective proceedings order, meaning that all consumers affected will be automatically deemed as a plaintiff, unless they actively take steps to opt out of the action.

In our digital age, group litigation claims for data protection breaches also look set to increase, with BA settling a case involving 16,000 claimants in 2021, even as more such cases make their way through the courts.

Before the advent of third party funded litigation, large corporations often took advantage of the fact that litigation in the UK was not only prohibitively expensive but exposed an unsuccessful claimant to adverse costs under the “loser pays” principle. This risk posed a significant barrier to access to justice for individuals and often allowed large companies to act with impunity. There have been far too many examples of cases where big companies were fined significant sums by regulators for various clear breaches. Yet the same companies then deliberately dragged their feet or outright refused to compensate the individuals affected by their misconduct or negligence. This shows how often the cards are stacked in favour of big corporations.

In this sense, group actions provide a valuable service in enabling large scale consumer rights, pay and social change on behalf of those who ordinarily would not have access to leading legal teams. Third party funders, insurers and brokers play an invaluable role in this process, taking the financial risk of a major case on behalf of claimants. Yes, they hope to make a profit, if the case is successful, however, the risks involved in complex litigation are very real and notoriously difficult to accurately assess at the outset of a case.
In the 2020 Supreme Court judgment in Mastercard v Merricks [2020] UKSC 51, Lord Briggs noted that: “Proof of breach, causation and loss is likely to involve very difficult and expensive forensic work, both in terms of the assembly of evidence and the analysis of its economic effect. Viewed from the perspective of an individual consumer, the likely disparity between the cost and effort involved in bringing such a claim and the monetary amount of the consumer’s individual loss, coupled with the much greater litigation resources likely to be available to the alleged wrongdoer, means that it will rarely, if ever, be a wise or proportionate use of limited resources for the consumer to litigate alone.”

It is clear that without third party funders, insurers and brokers, the vast majority of group actions would simply not proceed for reasons of complexity, risk and costs. This is why third party funded litigation funding is increasingly regarded by the judiciary as essential for securing access to justice for all, not only in principle, but in practice.