Justin Gutmann v Apple Inc & Ors

This is an appeal by Apple against the Competition Appeal Tribunal's judgment of 12 March 2024 concerning the lawfulness and consequences of the class representative's litigation funding agreement. The Court of Appeal considered two issues: (i) whether the Tribunal has power under section 47C of the Competition Act 1998 and the Tribunal Rules to order that a funder’s fee or return be paid out of an award of damages in priority to distribution to class members; and (ii) whether the terms of the litigation funding agreement created such perverse incentives that the proposed class representative was unsuitable.

The court held that section 47C(3)(a) and (b) and the Tribunal's broad case management powers and supervisory jurisdiction permit the Tribunal to order payment to funders or lawyers from damages, including in priority to distribution to class members, and that subsection (6) (dealing with unclaimed damages) does not restrict that power. The court also held that a class representative may enter funding agreements which contemplate such orders, provided the Tribunal retains supervisory control. Applying those principles to the facts, the Court concluded that the funding agreement did not render the representative unsuitable and dismissed the appeal.

The appellants are Apple Inc, Apple Distribution International Limited and Apple Retail UK Limited. The respondent is the class representative, Justin Gutmann. Apple appealed the Competition Appeal Tribunal's decision certifying collective proceedings and approving aspects of the revised litigation funding agreement. The appeal pursued two grounds relating to funding; a separate ground concerning the effects of the Supreme Court's decision in PACCAR was stayed for separate later hearing.

The principal issues were:

• Whether the CAT has jurisdiction to sanction payment of a funder’s fee or return from an award of damages in priority to distribution to class members, and hence whether a class representative may validly enter litigation funding agreements contemplating such payments; and
• Whether the terms of the funding agreement created impermissible conflicts or "perverse incentives" such that the class representative could not be authorised to act for the class.

Apple submitted that the statutory scheme (section 47C of the Competition Act 1998), the Tribunal Rules and the Code of Practice contemplated payment to a representative or payment out of undistributed or unclaimed damages to charity or, in limited cases, to the representative under subsection (6), but did not permit the Tribunal to order that a funder be paid out of the damages award in priority to class members. Apple argued this was a deliberate policy choice of Parliament to protect class members' entitlement to compensation.

The Court of Appeal analysed the statutory provisions (in particular section 47C(3)–(6)), the Tribunal Rules (including Rules 93 and the Tribunal's general case management powers) and the Tribunal's earlier reasoning, and reviewed relevant authorities cited to it (including Merricks v Mastercard, Le Patourel and PACCAR, and several CAT authorities on funding and settlement). The court accepted that subsection (6) addresses the special problem of unclaimed damages in opt-out proceedings but held that subsections (3)(a) and (b) give wide powers to make orders for payment of damages to the representative or to "such person other than a represented person as the Tribunal thinks fit", which can include funders or lawyers. The court further held that the class representative acts on behalf of the class and may enter funding agreements binding the class, subject to the Tribunal’s supervisory jurisdiction at distribution to scrutinise proportionality and fairness.

On the conflict/incentives point the court held that some conflict between funder and class is inevitable, that the funding agreement in this case contained safeguards (express control of conduct by the representative and solicitor, dispute resolution by independent counsel, and express undertaking to act in the class's interests), and that the Tribunal's continuing supervisory jurisdiction provided an adequate protection. The court therefore dismissed the appeal.

Appeal dismissed. The Court held that the Competition Appeal Tribunal has power under section 47C(3)(a) and (b) of the Competition Act 1998 and its Rules to order that a funder’s fee or return be paid out of damages and, in appropriate circumstances, in priority to distribution to class members. Subsection (6) addressing unclaimed damages does not negate the wider powers in subsection (3). A class representative may enter litigation funding agreements that contemplate such orders, subject to the Tribunal’s supervisory jurisdiction to scrutinise proportionality and fairness; on the facts the funding agreement did not make the representative unsuitable.

Appeal from the Competition Appeal Tribunal judgment dated 12 March 2024 ([2024] CAT 18). Earlier CAT certification of the proceedings dated 1 November 2023 ([2023] CAT 67) and prior proceedings in the Court of Appeal and Supreme Court (including consideration of PACCAR [2023] UKSC 28) feature in the procedural history. The Court of Appeal heard this appeal and dismissed Grounds 2 and 3; Ground 1 (relating to PACCAR consequences) had been stayed for later hearing.