Funding Non-Disclosure Proves Costly: Tribunal Orders Class Action Claimant to Pay Nearly £1.5 Million

The UK Competition Appeal Tribunal (CAT) has ordered the claimant in a proposed collective action against leading musical instrument manufacturers to make immediate costs payments of nearly £1.5 million, sharply criticising the conduct of both the proposed class representative and her solicitors during the litigation. The Tribunal found that the claimant’s responses concerning litigation funding were “unhelpful, uncooperative, deliberately obfuscatory and misleading,” justifying an indemnity costs order for a substantial part of the proceedings.

The ruling came in Sciallis v Fender & Ors, a proposed collective action brought by Elisabetta Sciallis, a member of the Civil Procedure Rule Committee and former policy adviser at Which?, against five musical instrument manufacturers, including Fender, Roland, Yamaha, Korg, and Casio. The claim followed the Competition and Markets Authority’s 2020 decision, which found anti-competitive conduct involving the suppression of retail price competition in the musical instruments market.

The matter had originally been listed for a preliminary issues hearing. However, the proceedings took a different turn after Sciallis disclosed that she had failed to secure litigation funding and sought permission to withdraw the claim. It later emerged that negotiations with North Wall Capital LLP, the litigation funder identified in the original claim, had broken down as early as March 2023.

Delivering the Tribunal’s unanimous judgment, Mrs Justice Bacon observed that neither the Tribunal nor the proposed defendants had been informed of the collapse in funding negotiations. The change was also omitted from subsequent out-of-jurisdiction applications involving additional defendants. When questioned about the funding position, the claimant’s solicitors, Pogust Goodhead, maintained that the proposed class representative was not required to provide a “running commentary” on developments.

Rejecting that argument, Mrs Justice Bacon emphasised that proposed class representatives in collective proceedings owe a heightened duty of candour compared to parties in ordinary civil litigation. Under the CAT Rules, any material change affecting the information contained in the claim form must be promptly disclosed to both the Tribunal and the opposing parties. The failure to disclose the funding position, she held, was “unreasonable to a high degree and outside the norm of litigation practice.”

The Tribunal was equally critical of Pogust Goodhead, finding that the firm had repeatedly failed to answer enquiries from the solicitors for Yamaha, Roland, and Korg over a three-year period. Its responses were described as “unhelpful, uncooperative, deliberately obfuscatory and misleading.”

Although Sciallis accepted liability for the proposed defendants’ reasonable costs after withdrawing the claim, she argued that they should be assessed on the standard rather than the indemnity basis. The Tribunal concluded that while the claim had been reasonably commenced in 2022, conduct from April 2023 onwards justified indemnity costs. Payments on account of £287,800 to Roland, £161,169 to Korg, £158,250 to Fender, £550,000 to Yamaha, and £300,000 to Casio were ordered, with the latter two remaining subject to detailed assessment.

The ruling underscores the importance of transparency in collective proceedings and reinforces the heightened obligations of proposed class representatives and their legal advisers, particularly where litigation funding is concerned.