The Australian litigation funder coordinating shareholders’ legal action against Tesco is promising to launch more mass claims against large firms in the UK.
Bentham Europe, whose parent company is based in Sydney, is eager to develop a service providing financial backing for consumers who do not believe they will succeed by pursuing individual complaints.
Simon Dluzniak, a solicitor from the claims funder which has recently expanded into Europe, said UK law prevented class actions being taken through the courts but permitted group actions.
“We have the ability to fund multiple [claimants] in large groups,” he said. “In a class action, there is a lead plaintiff and unnamed others. In the UK, it’s a group action and each member of the group is a plaintiff.”
Bentham says it will only fund cases where the claim is for £30m or more, “but north of £50m is where we start to get comfortable”. The firm says it normally takes a third of claimants’ final winnings to cover its costs and profits.
For the Tesco action, Bentham is accepting claimants with a minimum of 10,000 shares. The legal action will seek to establish whether shareholders are entitled to compensation for financial losses suffered after Tesco’s admission that it had overstated first-half profits by £263m.
The Bentham business is backed by joint venture partners, including Elliott Management which has assets of US $30bn. It aims to have six to eight cases under management in the UK by the end of the year.
Critics of litigation funding believe that the estimated £30m losses incurred by funders in the Excalibur case in 2013 – over disputed rights to Kurdish oilfields – would have deterred new firms entering such a speculative market.
“Excalibur has been written up as a disaster for the funding industry,” Dluzniak said. “We have also lost cases but not many. We are used to funding large commercial complex disputes and we can’t win every one.”
Bentham’s record, mainly in Australia, is of having fought 160 cases and lost five. “Only a dozen have gone to trial. But there have been others where we received expert reports; where they didn’t come back positive, we withdrew. We have had about 40 withdrawals.
“The largest loss was about A$8m-10m. It’s a big, risky game. Our largest return was Centro class action, against a property firm.” The final award was for A$200m. Bentham recovered its outlay of A$18m plus winnings of A$42m.
“It’s clear that your RBS shareholder or your consumer in respect of a faulty product won’t individually claim against large companies,” Dluzniak said. “Without funding, it’s unlikely they can pursue claims. The other side will say we are just in it for the money, but we support the arguments for mass redress mechanisms.”
The threat of group actions “keeps companies on their toes”, he said. Other litigation funders have tended to back cases involving claims by either a single firm or individual rather than engaging with large numbers of claimants.
Bentham hopes that the consumer rights bill will open up the way for class actions eventually making their way into the UK courts. There has been strong international opposition, however, from the US chamber of commerce, which has previously argued that “the UK should not make the same mistakes of the US justice system, allowing a huge expansion in spurious litigation, driven by litigation funders whose sole purpose is to make a profit and not to encourage fair justice.”