Funded Class Action Targets UK Mobile Operators for Overcharging Customers

The announcement of a settlement being reached is often viewed as the point at which a class action arrives at its preferred destination. However, in the case of the Merivale class action in Australia, it has taken only two months since the announcement of the settlement for the mood to sour and fresh obstacles to arise.

Reporting by the Sydney Morning Herald reveals that the $18 million settlement agreed in the class action brought against hospitality company, Merivale, is now under threat. Whilst a Federal Court hearing to review the settlement had been set for May 7, the law firm representing the applicants is now seeking to renegotiate the settlement, after there was a significant increase in the number of members registering for the settlement.

Adero Law’s Rory Markham stated that during the December mediation hearing, the total number of group members had risen to 788, and therefore the $18 million settlement figure now represented “a poor deal that has been substantially diluted by the additional registrations.” As a result, Adero has withdrawn its approval application and has been ordered by the court to provide further information and financial modelling to explain the group members’ decision to withdraw.

Richard McHugh, SC, who acts as counsel for Merivale, suggested that rather than increase the total settlement figure, “an obvious way through is for the funding commission or legal costs to be reduced”.

As LFJ reported in March, the without-admission settlement would have seen Merivale pay $18 million, with $8.6 million set to be distributed to cover legal costs and the litigation funder’s commission. According to the terms of the original agreement, Investor Claim Partner would have received approximately 25% of the settlement whilst Adero would have received approximately $1.75 million, including administration costs for settlement distribution.

In court, Justice Tom Thawley emphasised that regardless of whether or not “the lawyers for the applicants were grossly incompetent” in miscalculating the number of registrants, “the court isn’t going to approve a settlement which isn’t fair and reasonable.”

Reporting by Lawyer’s Weekly covers a major development in two Australian class actions, where litigation funder Galactic obtained a favourable ruling from the full Federal Court to double its commission from its funding of lawsuits brought against 7-Eleven and ANZ Bank. Justices Craig Colvin, Bernard Murphy and Michael Lee, overturned a 2023 judgement by Justice O’Callaghan that refused to make Galactic’s CFO order. As a result, Galactic’s commission from the class actions will drastically rise from $12 million, to a total $24.5 million.

The Federal Court’s ruling on 2 May found that Justice O’Callaghan had been wrong to refuse making the CFO order on the basis that the court did not have the power to do so. The three Justices wrote that Galactic’s $24.5 million commission “is commercially realistic and properly reflects the costs and risks Galactic took on by funding the proceedings.”

The class actions brought against 7-Eleven and ANZ Bank focused on allegations that the fuel and convenience store chain’s standard Franchise Agreement had ‘unfair contractual terms’ that violated consumer law. ANZ Bank were targeted by the second class action over claims that it had failed to meet its obligations under Australia’s Code of Banking Practice, ‘by lending to buy into the franchise system, often up to 100 per cent of the franchise license.’