Litigation funders could make up to $180 million if a class action against ANZ, Citibank and Westpac over bank fees goes ahead.
The case, run by law firm Maurice Blackburn, targets late fees charged to the credit cards of 280,000 customers, speculated to amount to up to $800 million.
Litigation funder Bentham IMF could theoretically make $180 million from the case, because of its proposed 22.5 per cent commission rate.
Maurice Blackburn and Betham IMF have seemingly pre-empted the market by instituting proceedings as an open class that widens the claim, while at the same time warding off competition from other litigation funders and plaintiff law firms.
Bentham IMF is hoping to have its success fee determined by the court, under what is called a common fund approach, that enables it to take a percentage of damages from all members of an open class group, whether or not they have signed up to a funding agreement.
Bentham IMF’s investment manager James Middleweek would not disclose how much it stood to make from the action. He said the claim size was too difficult to determine because the number of claimants was not yet known, and the action was highly contingent on the success of the banks in defending a Federal Court appeal concerning the fees and whether the claim would be subject to a six-year limitation period. It also depended on the court’s approval of its proposed funding arrangements, he said.
“The issue will be not how big the group will be, but what period it covers, because the banks reduced the fees in 2009,” Mr Middleweek said. “One would think if the claim size were bigger, the fee proposition should perhaps be more advantageous due to economies of scale.”
Brian Ward & Partners partner Penny Pengilley said assessing damages in contractual claims such as the bank fees case was much easier to determine than shareholder actions such as breach of continuous disclosure obligations, defective product disclosure statements, price fixing or other anti-competitive conduct.
“This means damages are likely to be much higher and easier to quantify in cases like that against ANZ than in most shareholder action claims,” she said.
“One assumes the banks can run computer programs to identify the accounts that have been lumbered with the fee and reimburse those affected customers. It’s a clear and defined loss.
“It’s much harder to calculate loss in shareholder actions where questions as to how the market may have responded to an announcement arise, quite apart from individual responses to that market, so actually proving there has been a loss, as opposed to the breach, is much more complicated, expensive and unpredictable.”
John Emmerig, head of class action defence at global firm Jones Day said the common fund approach taken by litigation funders was a significant game changer.
“It has the potential to generate larger and more complex open class actions to resolve and greater returns to the funders per case from a settlement or judgment,” he said.
King & Wood Mallesons partner Moira Saville agreed it would encourage litigation funders to bring open class actions, which were potentially larger in scale and value than closed classes.
“It also means that the funders will be able to file class action claims more quickly, as they may be able to forgo the usual ‘bookbuilding’ process where they seek to have class members sign up and secure a critical mass before determining that the class action will generate sufficient return to justify proceeding to file the suit,” Ms Saville said.Author: Marianna PapadakisSource: Sydney Morning Herald