Case No: 1266/7/7/16
Neutral citation  CAT 16
IN THE COMPETITION APPEAL TRIBUNAL
London WC1A 2EB
21 July 2017
Proposed Class Representative
(1) MASTERCARD INCORPORATED
(2) MASTERCARD INTERNATIONAL INCORPORATED
(3) MASTERCARD EUROPE S.P.R.L.
|B. THE MIF AND THE EC DECISION||7|
|C. THE COLLECTIVE PROCEEDINGS REGIME||16|
|D. CERTIFICATION OF THE CLAIMS||22|
|THE PRESENT CLAIMS||25|
|(I) THE VOLUME OF COMMERCE||29|
|(II) OVERCHARGE PERCENTAGES||31|
|(1) AGGREGATE DAMAGES||68|
|E. AUTHORISATION OF THE CLASS REPRESENTATIVE||92|
|(1) TERMINATION OF THE FUNDING AGREEMENT||99|
|(2) INSUFFICIENT COVER FOR LIABILITY IN COSTS||128|
|(3) POTENTIAL CONFLICT OF INTEREST||133|
"Individuals who between 22 May 1992 and 21 June 2008 purchased goods and/or services from businesses selling in the UK that accepted MasterCard cards, at a time at which those individuals were both (1) resident in the UK for a continuous period of at least three months, and (2) aged 16 years or over."
B. THE MIF AND THE EC DECISION
(i) where a card issued in one EEA Member State is used at a merchant based in a different EEA Member State, a cross-border MIF applies. This is the EEA MIF referred to above which was the subject of the EC Decision;
(ii) where a card issued in the UK is used to pay a merchant based in the UK, the domestic UK MIF applies. We were told that around 95% of the value of the present claim is based on the UK MIF; and
(iii) outside of the EEA, where a card is used at a merchant based in a different global region from the Issuing Bank, for example if a US tourist uses a card issued by a US bank to make purchases in London, a different cross-border MIF applies.
"A further consequence of this restriction of price competition is that customers making purchases at merchants who accept payment cards are likely to have to bear some part of the cost of MasterCard's MIF irrespective of the form of payment the customers use. This is because depending on the competitive situation merchants may increase the price for all goods sold by a small margin rather than internalising the cost imposed on them by a MIF."
C. THE COLLECTIVE PROCEEDINGS REGIME
"(1) Subject to the provisions of this Act and Tribunal rules, proceedings may be brought before the Tribunal combining two or more claims to which section 47A applies ("collective proceedings").
(2) Collective proceedings must be commenced by a person who proposes to be the representative in those proceedings…
(4) Collective proceedings may be continued only if the Tribunal makes a collective proceedings order.
(5) The Tribunal may make a collective proceedings order only—
(a) if it considers that the person who brought the proceedings is a person who, if the order were made, the Tribunal could authorise to act as the representative in those proceedings in accordance with subsection (8), and
(b) in respect of claims which are eligible for inclusion in collective proceedings.
(6) Claims are eligible for inclusion in collective proceedings only if the Tribunal considers that they raise the same, similar or related issues of fact or law and are suitable to be brought in collective proceedings.
(8) The Tribunal may authorise a person to act as the representative in collective proceedings—
(a) whether or not that person is a person falling within the class of persons described in the collective proceedings order for those proceedings (a "class member"), but
(b) only if the Tribunal considers that it is just and reasonable for that person to act as a representative in those proceedings.
(11) "Opt-out collective proceedings" are collective proceedings which are brought on behalf of each class member except—
(a) any class member who opts out by notifying the representative, in a manner and by a time specified, that the claim should not be included in the collective proceedings, and
(b) any class member who—
(i) is not domiciled in the United Kingdom at a time specified, and
(ii) does not, in a manner and by a time specified, opt in by notifying the representative that the claim should be included in the collective proceedings."
"The Tribunal may make an award of damages in collective proceedings without undertaking an assessment of the amount of damages recoverable in respect of the claim of each represented person."
"(1) Where the Tribunal makes an aggregate award of damages, it shall give directions for assessment of the amount that may be claimed by individual represented persons out of that award.
(2) Directions given may include—
(a) a method or formula by which such amounts are to be quantified …"
D. CERTIFICATION OF THE CLAIMS
"(1) The Tribunal may certify claims as eligible for inclusion in collective proceedings where, having regard to all the circumstances, it is satisfied by the proposed class representative that the claims sought to be included in the collective proceedings—
(a) are brought on behalf of an identifiable class of persons;
(b) raise common issues; and
(c) are suitable to be brought in collective proceedings."
"(2) In determining whether the claims are suitable to be brought in collective proceedings for the purposes of paragraph (1)(c), the Tribunal shall take into account all matters it thinks fit, including—
(a) whether collective proceedings are an appropriate means for the fair and efficient resolution of the common issues;
(b) the costs and the benefits of continuing the collective proceedings;
(c) whether any separate proceedings making claims of the same or a similar nature have already been commenced by members of the class;
(d) the size and the nature of the class;
(e) whether it is possible to determine in respect of any person whether that person is or is not a member of the class;
(f) whether the claims are suitable for an aggregate award of damages; …"
"(3) In determining whether collective proceedings should be opt-in or opt-out proceedings, the Tribunal may take into account all matters it thinks fit, including the following matters additional to those set out in paragraph (2)—
(a) the strength of the claims; and
(b) whether it is practicable for the proceedings to be brought as opt-in collective proceedings, having regard to all the circumstances, including the estimated amount of damages that individual class members may recover."
The present claims
(i) the volume of commerce affected;
(ii) the overcharge percentages; and
(i) The Volume of Commerce
(ii) Overcharge percentages
"… if the available data suggests that the Overcharge was materially different across different market sectors, because we understand that there were 225 different IFs during the Full Infringement Period [i.e. 1992-2008], then it may be appropriate to calculate a weighted average MIF and Counterfactual IF (weighted by reference to the VoC and Overcharge applicable to each sector) when determining the aggregate Overcharge."
|Est. average MIF||1.3%||1.1%|
|Counterfactual IF (a)||0.0%||0.0%|
|Counterfactual IF (b)||0.3%||0.3%|
|Overcharge %ge||1.3% or 1%||1.1% or 0.8%|
|Est. average MIF||0.7%||0.6%|
|Counterfactual IF (a)||0.0%||0.0%|
|Counterfactual IF (b)||0.2%||0.2%|
|Overcharge %ge||0.7% or 0.5%||0.6% or 0.4%|
"6.2.1 In our opinion, in the absence of evidence to the contrary, it is appropriate to assume a single, but not necessarily constant over time, weighted average MSC Pass-On rate across the United Kingdom economy…. The averaging of the MSC Pass-On rate takes account of any data limitations and the computational complexity of determining MSC Pass-On across the United Kingdom economy for over one and a half decades.
6.2.2 For the reasons set out … below, the MSC Pass-On is likely to be high (50%-100%) and could have been fully passed-on."
"6.2.3… (b)…Assuming the MSC Pass-On rate is consistent across Businesses operating in the same sector, which we consider is a reasonable economic assumption at this preliminary stage, then, based on the evidence from those claims, it may be possible to estimate the MSC Pass-On across key sectors such as food and drink, clothing, household goods, motoring, entertainment, travel and other retailers. This covers approximately 70% of all payments processed with a card in the United Kingdom …;
6.2.4 If MSC Pass-On rates are ultimately found to be significantly different for different sectors of the United Kingdom economy, then we may be able to calculate a weighted average MSC Pass-On rate (weighted by reference to the VOC and pass-on rate associated with each sector during each year of the Infringement Period). This approach will depend on the availability of evidence and whether that evidence relates to the same period as the Full Infringement Period.
6.2.5 We note that, whether we are quantifying the loss suffered by the proposed class as defined, or sub-groups of the proposed class, or even an individual consumer, the approach we will adopt would be the same. In other words, MSC Pass-On is a common issue amongst the proposed class."
"Obviously within each category there will be different types of businesses, and we will have to make a decision about how that is going to be handled, if we get the data that underlies it…"
Accepting that there will be many markets from which no retailer has brought a claim against Mastercard, he said:
"We will have to rely on third party studies, Competition Commission reports, information that is available about market structure and demand and supply conditions in those markets and come to some judgment, but there is going to be a high degree of aggregation in dealing with this matter because the cost of looking at all these sectors at a very detailed level is going to be certainly more than the budget that we have been given to do this."
"… we will have to form our own judgment as to whether there are markets within these categories that need to be treated separately, but I cannot say at the moment – and some of these categories are obviously so broad as to be fairly meaningless like "Other services"…. I think one would – in some of these circumstances – have to make some broad-brush estimates of what the pass-on rate is likely to be."
"First, the Collective Proceedings Claim Form (the "Claim Form") seeks an award of aggregate damages and accepts that any other form of award would be "impracticable". However, an award of aggregate damages in this case would be inimical to the compensatory nature of damages and impossible to assess on any reliable basis.
Second, the proposed distribution mechanism to individual members of the class would also be inimical to the compensatory nature of damages as the amounts received by individuals would bear no reasonable relationship to their actual loss."
"…that the extent of cost pass-through by a business depends on the responsiveness of the demand and supply conditions it faces; and that cost pass-through varies with the degree of competition between businesses up and down the supply chain."
Discussing the availability of evidence for particular sectors, the Report found that:
- "Empirical work on cost pass-through issues in industrial organisation settings is relatively new, and analysis that attempts to quantify pass-through rates in this context is scarce. Most notably, we have identified few studies that shed light on the relationship between cost pass-through and market structure and competition. Moreover, the pass-through measures reported in the empirical literature, notably pass-through elasticities, are often difficult to interpret and compare.
- Nevertheless, there is a small body of empirical work that has considered pass-through at the firm level, both in response to industry-wide and firm-specific cost changes.
- The evidence suggests that there may be significant differences between firms in the extent of cost pass-through, even in response to industry-wide cost changes. In other words, firm-level asymmetries appear significant…"
"… once the value of such cardholders' benefits is taken into account, it is likely to result in a finding that some class members will not have suffered any net loss."
The nature and scale of such benefits varied significantly as between different Issuing Banks and so, it was submitted, their value would vary greatly as between class members.
"…the expert methodology must be sufficiently credible or plausible to establish some basis in fact for the commonality requirement. This means that the methodology must offer a realistic prospect of establishing loss on a class-wide basis so that, if the overcharge is eventually established at the trial of the common issues, there is a means by which to demonstrate that it is common to the class (i.e. that passing on has occurred). The methodology cannot be purely theoretical or hypothetical, but must be grounded in the facts of the particular case in question. There must be some evidence of the availability of the data to which the methodology is to be applied."
(1) that the level of the EEA MIFs had an effect on the level of the UK MIFs (for both Mastercard credit and debit cards);
(2) the amount by which those MIFs were higher than the counterfactual IFs that would have applied in the absence of an infringement;
(3) the level of pass-through of these MIF overcharges in the MSC charged by Acquiring Banks to the merchants where the claimant bought goods and services;
(4) for each merchant at which the claimant purchased goods and services, the degree to which that merchant passed through those overcharges and the percentage impact on its prices;
(5) the amount that the claimant spent at each of those merchants;
(6) if the claimant held a Mastercard credit card, what if any interest payments were made and what if any benefits were received under that particular card.
"434. When faced with an unavoidable increase in cost, a firm can do one or more of four things:
(1) It can make less profit (or incur a loss or, if loss making, a greater loss).
(2) It can cut back on what it spends money on – reducing, for example, its marketing budget; or cutting back on advertising; or deciding not to make a capital investment (like a new factory or machine); or shedding staff.
(3) It can reduce its costs by negotiating with its own suppliers and/or employees to persuade them to accept less in payment for the same services.
(4) It can increase its own prices, and so pass the increased cost on to its purchasers.
435. The picture becomes even more complex when it is borne in mind that an enterprise is unlikely to react to an unavoidable increase in costs immediately. In the short term, a firm may well bear an unavoidable increase in costs by making less profit (or incurring a loss or a greater loss), but that is most unlikely to be the firm's response in the medium or long term. In the medium or long term, the firm will seek to maximise its profit in one of the ways enumerated in paragraph 434(2) to (4) above."
(1) Aggregate damages
(a) Other actions against Mastercard
"Because the way in which the costs constituting the UK MIF were dealt with is unknowable, it is our conclusion that it is impossible to say what proportion of this cost was (i) passed on in the form of higher prices; or (ii) paid out of cost-savings; or (iii) paid for by reducing expenditure and so service levels."
(b) Disclosure from third parties
(c) Published data
"In the case of damages in general, there is one principle which does underlie the assessment. It is what may be called that of restoration. The idea is to restore the person who has sustained injury and loss to the condition in which he would have been had he not so sustained it. In the cases of financial loss, injury to trade, and the like, caused either by breach of contract or by tort, the loss is capable of correct appreciation in stated figures. In a second class of cases, restoration being in point of fact difficult – as in the case of loss of reputation – or impossible – as in the case of loss of life, faculty, or limb – the task of restoration under the name of compensation calls into play inference, conjecture, and the like. And this is necessarily accompanied by those deficiencies which attach to the conversion into money of certain elements which are very real, which go to make up the happiness and usefulness of life, but which were never so converted or measured. The restoration by way of compensation is therefore accomplished to a large extent by the exercise of a sound imagination and the practice of the broad axe….
In all these cases, however, the attempt which justice makes is to get back to the status quo ante in fact, or to reach imaginatively, by the process of compensation, a result in which the same principle is followed."
"Given the passage of time and difficulties of proof which Devenish faces in relation to the sales and purchases which it made, it is faced with the real prospect that it may not be able to prove its losses in the face of an attack by the defendants to the effect that it must have passed on its losses to its customers, or failed, as a matter of law, to prove that it has mitigated its losses by passing them on."
The claimants argued that the difficulties of proof were such that the court should allow damages to be based on the profits earned by the defendant cartelists.
"… the fact that damages will be very difficult to prove is not in my judgment enough to justify a gains-based remedy."
E. AUTHORISATION OF THE CLASS REPRESENTATIVE
(i) the Funding Agreement would not enable the Applicant to continue to fund the litigation or pay Mastercard's recoverable costs, if he were ordered to do so, since it could be terminated by the funder;
(ii) even if it could not be so terminated, the limit of £10 million for funding a liability for Mastercard's recoverable costs was inadequate;
(iii) the terms of the Funding Agreement gave rise to a conflict of interest on the part of the Applicant.
Mastercard contends that these are very material considerations on the question of authorisation of the class representative. See in that regard rule 78(2)(d) and (3)(c)(iii).
(1) Termination of the Funding Agreement
"the greater of (i) £135,000,000; or (ii) 30% of the Undistributed Proceeds up to £1 billion, plus 20% of the Undistributed Proceeds in excess of £1 billion"
plus any contractual interest on late payment by the Applicant of this principal amount.
Further, sect 1 FA states that:
""Transferred Undistributed Proceeds Rights" means, subject to an order of CAT that Seller will use best endeavours to obtain, the amount of Undistributed Proceeds payable to Purchaser in accordance with the terms and conditions of this Agreement."
Since this appears in a definition section of the Funding Agreement, it cannot in itself give rise to an obligation. The relevant obligations arise under subsequent provisions of this convoluted and verbose contract.
"In consideration of the Commitment, Seller, subject to any order of CAT, … (b) agrees to use his best endeavours to ensure Purchaser obtains the full benefit of the Transferred Undistributed Proceeds Rights."
"(b) In the event that the Litigation is successful or a collective settlement is approved pursuant to Rule 94 of the CAT Rules, Seller will use his best endeavours to obtain orders from CAT that (i) the Total Investment Return be paid to Purchaser; and (ii) MasterCard pay Seller's fees and costs in connection with the Litigation.
(c) In the event of an order from CAT that the Total Investment Return be paid to Seller, subject to the terms of such an order, and receipt of the Total Investment Return, Seller will immediately arrange for payment of the same to Purchaser."
"If …(iv) CAT disapproves, or provides any negative commentary regarding, the transactions contemplated by this Agreement or the terms hereof, then, at any time thereafter and upon written notice to Seller, Purchaser may terminate Purchaser's obligations with respect to any unfunded portion of the Commitment, and permanently reduce the Commitment to the Purchase Price, although Purchaser will pay all Deployments owing as of the date of termination and will continue to cover Seller's liability for any costs related to defendant(s) or third parties in the Litigation, if any, incurred up to the date of termination."
"(5) Subject to subsection (6), where the Tribunal makes an award of damages in opt-out collective proceedings, any damages not claimed by the represented persons within a specified period must be paid to the charity for the time being prescribed by order made by the Lord Chancellor under section 194(8) of the Legal Services Act 2007.
(6) In a case within subsection (5) the Tribunal may order that all or part of any damages not claimed by the represented persons within a specified period is instead to be paid to the representative in respect of all or part of the costs or expenses incurred by the representative in connection with the proceedings."
"(4) Where the Tribunal is notified that there are undistributed damages in accordance with paragraph (3)(b), it may make an order directing that all or part of any undistributed damages is paid to the class representative in respect of all or part of any costs, fees or disbursements incurred by the class representative in connection with the collective proceedings.
(5) In exercising its discretion under paragraph (4), the Tribunal may itself determine the amounts to be paid in respect of costs, fees or disbursements or may direct that any such amounts be determined by a costs judge of the High Court or a taxing officer of the Supreme Court of Northern Ireland or the Auditor of the Court of Session."
Rule 93(6) provides that subject to any order under rule 93(4), the Tribunal shall order that all or part of any undistributed damages is paid to the charity prescribed under sect 47C(5) CA.
"For the purposes of these rules "costs" means costs and expenses recoverable before the Senior Courts of England and Wales, the Court of Session or the Court of Judicature of Northern Ireland, as appropriate, …."
(a) the "Total Investment Return" under the Funding Agreement does not constitute "costs or expenses" within the meaning of sect 47C(6) CA;
(b) even if (a) is wrong, it is not a cost or expense "incurred" by the Applicant, in view of the terms of the Funding Agreement and in particular sects 2.1 and 2.5(b)-(c).
(a) "costs or expenses"
"Subject to the provisions of this or any other enactment and to rules of court, the costs of and incidental to all proceedings in –
(a) the civil division of the Court of Appeal;
(b) the High Court;
(ba) the family court; and
(c) the county court
shall be in the discretion of the court." [emphasis added]
"… authorities show that the expression "of and incidental to" is a time-hallowed phrase in the context of costs and that it has received a limited meaning, and in particular that the words "incidental to" have been treated as denoting some subordinate costs to the costs of the action."
(b) "incurred" by the Applicant
"In consideration of the Commitment, Seller, agrees to pay the Purchaser the Total Investment Return, limited to such amount of the Total Investment Return as determined by the Tribunal to be payable to the Seller pursuant to Competition Act 1998, s.47C(6) and, subject to any order of CAT, (a) absolutely assigns, conveys, sells, sets over, transfers, and warrants to Purchaser the Transferred Costs Rights, free and clear of any Encumbrance; and (b) agrees to use his best endeavours to ensure Purchaser obtains the full benefit of the Transferred Undistributed Proceeds Rights."
Somewhat surprisingly, no corresponding amendment was proposed to sect 2.5(b) FA. Nonetheless, the additional wording inserted into sect 2.1 imposes an obligation on the Applicant to pay the funder, conditional upon the Tribunal making an order to pay the Applicant the equivalent amount under sect 47C(6) CA.
"Where advocacy or litigation services are provided to a client under a conditional fee agreement, costs are recoverable under Parts 44 to 47 notwithstanding that the client is liable to pay the legal representative's fees and expenses only to the extent that sums are recovered in respect of the proceedings, whether by way of costs or otherwise."
(a) the class representative is obliged to pay the funder's fee of £x;
(b) the obligation under sub-clause (a) is reduced to the extent that the amount which the Tribunal orders should be paid to the class representative in respect of this obligation falls below £x"
then we consider the obligation to pay the funder's fee of £x would be a cost "incurred" within the meaning of sect 47C(6) CA. And on that basis, we do not see that the different formulation used in the amendment here should produce a fundamentally different result: that would elevate form over substance.
"We have thought carefully about this. The Bill already contains restrictions on the financing of claims as it prohibits damages-based agreements and does not provide for a claimant to be able to recover any uplift in a conditional fee agreement. Therefore there is a need for claimants to have the option of accessing third-party funding so as to allow those who do not have a large reserve of funds or those who cannot persuade a law firm to act pro bono to be able to bring a collective action case in order to ensure redress for consumers.
Blocking access to such funding would result in a collective actions regime that is less effective. This would bar many organisations, including reputable consumer organisations such as Which?, from bringing cases as Parliament hoped in 2002. Restricting finance could also create a regime which was only accessible to large businesses. This would weaken private enforcement in competition law, which is of course not the Government's wish or intention."
(2) Insufficient cover for liability in costs
(3) Potential conflict of interest
"Under the Funding Agreement, the Applicant is required to seek to ensure that the Total Investment Return is paid to the Funder. In order to do so, the Applicant therefore has an obligation to ensure that there is a sufficient amount of unclaimed damages so that the Funder will receive the Total Investment Return. This is in conflict with the interest of the class, which is to maximise the amount of damages which are claimed and distributed to them."
"…the difficulty may arise where a settlement that is reasonable vis-à-vis the participating claimants, could founder upon the Applicant's contractual obligation to secure the payment of the Total Investment Return out of undistributed damages. It would require MasterCard to agree to potentially a billion pounds or more being deducted from undistributed damages where … one of the principal incentives for settlement under the opt-out scheme is that if you settle, the undistributed damages can revert to the defendant…"
"The Tribunal's consideration of the amount and terms of the settlement will include the monetary and non-monetary benefits offered by the settling defendant, as well as any related provisions as to the payment of costs, fees and disbursements. In particular, the Tribunal may consider the amount allocated to costs, fees and disbursements as a proportion of the overall settlement. Where legal costs make up a significant proportion of the settlement funds, the Tribunal will scrutinise whether this allocation is appropriate and will be alert to any potential conflict of interest between the class (or settlement) representative and its lawyers on the one hand and the class members on the other hand."
(a) the claims should not be certified under rule 79 as eligible for inclusion in collective proceedings;
(b) if, contrary to (a), we had certified the claims, then on condition that the Funding Agreement was amended as proposed, we would have authorised the Applicant under rule 78 to act as the class representative.
EXTRACTS FROM THE
"PREPAID FORWARD PURCHASE AGREEMENT"
"This Prepaid Forward Purchase Agreement (as amended, supplemented, or otherwise modified from time to time in accordance with the terms hereof, this "Agreement"), dated as of 22 June 2016 (the "Agreement Date"), is made by and between [X] ("Purchaser"), and Walter Merricks, an individual domiciled in England ("Seller"). In consideration of the agreements set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Purchaser agree as follows:
Section 1. Definitions. The following terms shall have the following meanings when used in this Agreement:
"Claimants" means United Kingdom consumers on whose behalf the Litigation is brought and who are eligible to participate in the distribution of Proceeds.
"Costs Award" means any amount ordered to be paid by any other party to the Litigation in respect of the Representative's fees and costs incurred in the Litigation.
"Funding Completion Date" means the earlier of (i) the date on which the Purchase Price has reached the Commitment Amount; and (ii) the conclusion of the Litigation.
"Litigation Counsel" means Quinn Emanuel Urquhart & Sullivan UK, LLP, a UK limited liability partnership.
"Litigation Counsel Letter" means the letter, in a form approved by Purchaser, from Seller to Litigation Counsel, that relates to the payment of the Undistributed Proceeds and any Costs Award to Purchaser pursuant to this Agreement and subject to any order of CAT.
"Proceeds" means any and all proceeds, receivables, property, cash, and other consideration payable to, or on behalf of, Seller or the Claimants in connection with the Litigation (whether by suit, judgment, settlement or otherwise), including (a) any consequential or actual damages on account thereof, and (b) any interest awarded or later accruing on the foregoing. Subject to any order of CAT, the Proceeds will be calculated and determined without taking into consideration and prior to deduction of (i) any taxes payable by Seller or the Claimants in connection with the Proceeds; (ii) setoffs of any kind, including setoffs in respect of any claim or counterclaim asserted against Seller or the Claimants by any Entity; or (iii) fees and/or expenses incurred in connection with the Litigation or the collection of any Proceeds. The Proceeds exclude any Costs Award.
"Purchase Price" means the aggregate amount of Deployments.
"Total Investment Return" means an amount of the Undistributed Proceeds and any Costs Award equal to the sum of: (a) the greater of (i) £135,000,000; or (ii) 30% of the Undistributed Proceeds up to £1 billion, plus 20% of the Undistributed Proceeds in excess of £1billion; plus (b) the Late Payment Interest, if any. In calculating the Total Investment Return, credit will be given for any Costs Award that is paid by Seller to the Purchaser.
"Transaction Documents" means, collectively, this Agreement, the Litigation Counsel Letter, and any other documents, instruments, or certificates entered into or delivered in connection with this Agreement.
"Transferred Costs Rights" means all of Seller's right, title, and interest in and to any Costs Award.
"Transferred Undistributed Proceeds Rights" means, subject to an order of CAT that Seller will use best endeavours to obtain, the amount of Undistributed Proceeds payable to Purchaser in accordance with the terms and conditions of this Agreement.
"Undistributed Proceeds" means Proceeds that are not distributed to the Claimants….
Section 2.1. Commitment and Deployments. Subject to the terms and conditions of this Agreement, Purchaser commits (the "Commitment") to make payments to Seller or on Seller's behalf (each payment, a "Deployment"), at any time and from time to time from the Agreement Date until the Funding Completion Date (unless (a) the Commitment is terminated earlier in accordance with the terms of this Agreement; or (b) Purchaser agrees in writing to make Deployment(s) after the Funding Completion Date), in the maximum aggregate amount of £35,642,250, inclusive of any VAT (the "Commitment Amount"); provided, however, that the foregoing reference to £35,642,250 assumes that Deployments for costs related to administration of any Proceeds under Section 2.2(a)(iii) equals £3,500,000 (exclusive of VAT) and, in the event that Deployments under Section 2.2(a)(iii) are in excess of £3,500,000 (exclusive of VAT), the Commitment Amount shall increase by the amount of such excess (e.g., if Deployments under Section 2.2(a)(iii) were equal to the maximum of £10,000,000 (exclusive of VAT), the Commitment Amount would instead be £43,442,250 (inclusive of VAT)… In consideration of the Commitment, Seller, subject to any order of CAT, (a) absolutely assigns, conveys, sells, sets over, transfers, and warrants to Purchaser the Transferred Costs Rights, free and clear of any Encumbrance; and (b) agrees to use his best endeavours to ensure Purchaser obtains the full benefit of the Transferred Undistributed Proceeds Rights.
Section 2.2. Use of Deployments. Deployments made under this Agreement are only for payment on Seller's behalf of (a) reasonable, documented out-of-pocket costs for the following purposes (with the following amounts being in each case exclusive of any VAT that applies thereto (other than payments for Seller's time spent and costs incurred, to which VAT does not apply)): (i) up to […][✂] to cover Seller's reasonable, documented time spent and costs incurred (both time and costs reflected in a rate of […][✂] per hour for time spent, as documented by Seller and provided to Purchaser (i.e., Seller will not be reimbursed for actual out-of-pocket costs, but rather will be paid solely based on time spent)), in performing the role of Representative (with no more than […][✂] being deployed in any continuous 12 month period for such purposes); (ii) up to […][✂] for the creation of a website to promote the claim in the Litigation and inform United Kingdom consumers about the claim in the Litigation; (iii) an amount for costs related to the administration of any Proceeds that is equal to […][✂]% of Proceeds, but which amount shall in no event be less than […][✂] or greater than […][✂]; (iv) up to £10,000,000 to provide for any fees and costs awarded to the defendant(s) or any third party in the Litigation (if applicable); (v) up to […][✂] for an e-discovery provider in connection with the Litigation; (vi) up to […][✂] for a public relations consultant in connection with the Litigation; (vii) up to […][✂] for experts' costs; and (viii) the costs and expenses of Purchaser that are treated as a Deployment under Section 7.8, (b) up to […][✂] (exclusive of any VAT that applies thereto) for reasonable, documented out-of-pocket solicitors' fees, and (c) up to […][✂] (exclusive of any VAT that applies thereto) for reasonable, documented out-of-pocket counsel fees. Notwithstanding the foregoing, Seller may, in its reasonable discretion, elect to differently allocate the amounts set forth in the foregoing clauses (a)(ii), (a)(v), (a)(vi), (a)(vii), (b) and (c) among the purposes described therein, so long as the aggregate amount of Deployments under such clauses does not exceed the cumulative sum of the amounts set forth in such clauses.
Section 2.4. Termination and Reduction of Commitment.
(b) If: (i) Purchaser reasonably ceases to be satisfied about the merits of the Litigation, provided that Seller has been given a reasonable opportunity to address Purchaser's concerns about the merits of the Litigation; (ii) Purchaser reasonably believes that the Litigation is no longer commercially viable because the quantum likely to be recovered is less than would allow recovery of the Total Investment Return, such a view to be reached based on independent legal and expert advice that has been provided to Purchaser and Purchaser has provided Seller a reasonable opportunity to address Purchaser's belief regarding the Litigation no longer being commercially viable; (iii) Purchaser reasonably believes that there has been a material breach by Seller of this Agreement that has not been remedied within the applicable time period provided in this Agreement with respect to such breach; or (iv) CAT disapproves, or provides any negative commentary regarding, the transactions contemplated by this Agreement or the terms hereof, then, at any time thereafter and upon written notice to Seller, Purchaser may terminate Purchaser's obligations with respect to any unfunded portion of the Commitment, and permanently reduce the Commitment to the Purchase Price, although Purchaser will pay all Deployments owing as of the date of termination and will continue to cover Seller's liability for any costs related to defendant(s) or third parties in the Litigation, if any, incurred up to the date of termination.
Section 2.5. Investment Return.
(a) Seller agrees to seek approval of this Agreement and the other Transaction Documents from CAT at the earliest opportunity in the Litigation although any failure to obtain a decision or any comment from CAT on approval or otherwise does not give rise to any breach of this Agreement…
(b) In the event that the Litigation is successful or a collective settlement is approved pursuant to Rule 94 of the CAT Rules, Seller will use his best endeavours to obtain orders from CAT that (i) the Total Investment Return be paid to Purchaser; and (ii) MasterCard pay Seller's fees and costs in connection with the Litigation.
(c) In the event of an order from CAT that the Total Investment Return be paid to Seller, subject to the terms of such an order, and receipt of the Total Investment Return, Seller will immediately arrange for payment of the same to Purchaser.
Section 3.2. Seller's Representations. Seller represents and warrants to Purchaser as of the Agreement Date that:
(g) Seller will have sole control of the Litigation and any settlement decisions related thereto, subject to the approval and any orders of CAT, and will not delegate such control to any Entity.
(i) Seller proposes to bring and continue to pursue the Litigation in the exercise of his independent judgment in connection with Litigation Counsel. Purchaser has not prompted or encouraged initiation of any Litigation…
Section 4.2. Litigation. At all times, Seller will maintain complete control of the Litigation and any settlement decisions related thereto, subject to the approval and any orders of CAT. Seller will consult with Purchaser before accepting or rejecting any settlement offer in connection with the Litigation, but Seller will have no obligation to follow Purchaser's advice. Seller will: (a) use his best efforts to prosecute the Litigation with all due skill, care and speed; (b) use his best efforts to prevail in the Litigation; (c) use his best efforts to obtain an outcome in the Litigation that maximizes the amount of Proceeds and any Costs Awards; (d) use his best efforts promptly to collect any Proceeds and any Costs Award payable in connection with the Litigation and obtain approval from CAT to distribute Undistributed Proceeds and any Costs Award in accordance with this Agreement; and (e) promptly and fully assist Litigation Counsel as reasonably necessary in connection with the foregoing; provided, however, that nothing in this Agreement shall require Seller to continue the Litigation to the extent Seller reasonably determines that the Litigation no longer has merit.
Note 1 Save that persons falling within the class definition who are not domiciled in the United Kingdom on a date to be specified in the CPO, would need to opt in to the proceedings for their claims to be included: sect 47B(11) CA, set out at para 16 below. [Back] Note 2 19 December 2007 is the end date of the period of infringement found in the EC Decision: para 3 above; 21 June 2008 is the date on which it is said that Mastercard changed the EEA MIF as a result of the EC Decision. [Back] Note 4 He accepted that if the quantum was to be calculated by sector (see below), it might be necessary to make an adjustment in that regard in the travel sector, where differential pricing was proportionately more frequent, especially in the later years of the claims period. [Back] Note 5 The claim form states that transactions made in other EU Member States are included but it was accepted at the hearing that the overstatement covers transactions entered into anywhere abroad. [Back] Note 6 However, the source on which Mr Dearman relied, while stating that business cards represented only 3% of all MasterCards in issue in the UK in 2004 (as indicated by Mr Dearman in his evidence), reported that purchases on such cards represented 9.4% by value of all transactions made on such cards: Office of Fair Trading decision on MasterCard UK Members Forum Ltd (Case CP/0090/00/S) of 6 September 2005, fn 60. [Back] Note 9 Food & drink, Mixed business, Clothing, Household, “Other retailers”, Motoring, Entertainment, Hotels, Travel, Financial and “Other services”. However, for the years 1998-2001, Financial was included in Other services. [Back] Note 12 Since the purpose of the Funding Agreement is to enable these proceedings to be brought for the benefit of a large class of consumers, who are entitled to see a copy (save for confidential sections), it is unfortunate that it is drafted in such an impenetrable manner. [Back] Note 13 In the event that costs of administration of monies recovered in the action (i.e. distribution to the class) exceed £3.5 million, this sum is subject to corresponding increase: see the full clause in the Appendix hereto. [Back]
Note 1 Save that persons falling within the class definition who are not domiciled in the United Kingdom on a date to be specified in the CPO, would need to opt in to the proceedings for their claims to be included: sect 47B(11) CA, set out at para 16 below. [Back]
Note 2 19 December 2007 is the end date of the period of infringement found in the EC Decision: para 3 above; 21 June 2008 is the date on which it is said that Mastercard changed the EEA MIF as a result of the EC Decision. [Back]
Note 4 He accepted that if the quantum was to be calculated by sector (see below), it might be necessary to make an adjustment in that regard in the travel sector, where differential pricing was proportionately more frequent, especially in the later years of the claims period. [Back]
Note 5 The claim form states that transactions made in other EU Member States are included but it was accepted at the hearing that the overstatement covers transactions entered into anywhere abroad. [Back]
Note 6 However, the source on which Mr Dearman relied, while stating that business cards represented only 3% of all MasterCards in issue in the UK in 2004 (as indicated by Mr Dearman in his evidence), reported that purchases on such cards represented 9.4% by value of all transactions made on such cards: Office of Fair Trading decision on MasterCard UK Members Forum Ltd (Case CP/0090/00/S) of 6 September 2005, fn 60. [Back]
Note 9 Food & drink, Mixed business, Clothing, Household, “Other retailers”, Motoring, Entertainment, Hotels, Travel, Financial and “Other services”. However, for the years 1998-2001, Financial was included in Other services. [Back]
Note 12 Since the purpose of the Funding Agreement is to enable these proceedings to be brought for the benefit of a large class of consumers, who are entitled to see a copy (save for confidential sections), it is unfortunate that it is drafted in such an impenetrable manner. [Back]
Note 13 In the event that costs of administration of monies recovered in the action (i.e. distribution to the class) exceed £3.5 million, this sum is subject to corresponding increase: see the full clause in the Appendix hereto. [Back]