Claimant lawyers have seen off a significant threat to the future of litigation funding in opt-out class actions in the Competition Appeal Tribunal, with victory in a Court of Appeal ruling handed down today.

In Gutmann v Apple Inc & Ors, the CoA judges unanimously confirmed that litigation funders can take their fee before any damages are distributed to class members. This provides certainty that funders are not restricted to taking their payment from undistributed damages, with the risk that there will not be enough left over to meet their fees. The removal of uncertainty over this key issue is likely to give greater confidence to the funding market to invest in such cases.

In reaching its decision, the court upheld an earlier CAT ruling, given during certification of class representative Justin Gutmann’s claim against Apple on behalf of 23.8 million iPhone users, in which Gutmann alleges Apple’s lack of transparency cost consumers more than £853 million.

Giving the lead judgment, Sir Julian Flaux, with whom Lord Justices Green and Birss agreed, said: ‘I have concluded that the CAT does have jurisdiction to order that the funder’s fee or return can be paid out of the damages awarded to the class in priority to the class. Whether or not such an order should be made would be a matter for the CAT in the exercise of its supervisory jurisdiction.’

Flaux added that he agreed with the submissions of Nicholas Bacon KC, for Gutmann, that ‘Once it is recognised that the CAT has such a jurisdiction… there can be absolutely nothing wrong with the [class representative] entering into a LFA [litigation funding agreement] which makes provision for that to happen.’

He added: ‘The arrangement made in the LFA was importantly always subject to the supervisory jurisdiction of the CAT to determine what is the appropriate order to make.’

Dorothea Antzoulatos, director at litigation firm Charles Lyndon which acted for Gutmann, said that for the collection action regime to work, ‘funders require certainty that if a case is successful, they will make a fair return on their often sizeable and lengthy investments in these important cases.’

She added: ‘The Court of Appeal has confirmed that funders, and other stakeholders, do not need to hope that enough is left over after sums have been distributed to class members to seek their return, and [we] anticipate that this will confirm to the funding market that the UK class action regime is a good place to invest.’

Gutmann said: ‘I began this action in 2022 to hold Apple to account for misleading millions of iPhone users by issuing software updates that avoided addressing their underlying battery issues, choosing instead to curb iPhone performance.

‘Apple has attempted to overturn every major decision of the tribunal, delay proceedings and increase the costs of litigation. I am delighted that the Court of Appeal has issued a strong, unanimous verdict showing them that their tactics will not work.’

Apple has also appealed the CAT’s approval of Gutmann’s funding arrangements on a further ground, alleging that the arrangements amount to a damages-based agreement and so fall foul of the PACCAR ruling. This ground is the subject of separate proceedings that have been listed in the Court of Appeal for 10 and 11 June.