Litigation funder set for £100m payday if estate agents beat Rightmove

A subsidiary of the hedge fund Elliott Management is expected to win at least £100m if a lawsuit accusing Rightmove of charging excessive fees to estate agents is successful in claiming £1.5bn in damages.

Innsworth Advisors, Elliott’s UK-based litigation funding arm, is financing the class action on behalf of hundreds of estate agents who claim FTSE-listed Rightmove has "abused a dominant position" in the online property portal market.

An estate agent who spoke to the BBC said they were charged £5,000 a month for a basic membership to advertise about 30-50 properties online. Rightmove has said the claim is “without merit” and that it “will defend it vigorously".

Andrew Leitch, a partner at Hogan Lovells, said the litigation funder budgets for similar cases “tend to be around the £20m to £30m mark” and pay out at least “three times return plus your investment”. Innsworth’s commitment in the Rightmove case is understood to be less than £45m – the total it paid from a previous eight-year action against Mastercard.

The multiple on investment – which is determined on a case-by-case basis by the Competition Appeal Tribunal (CAT) – can vary widely. In the Merricks vs Mastercard case, the agreed multiple was roughly eight times, though the CAT ultimately awarded far less.

Litigation funding agreements (LFAs) are hotly debated. Innsworth is seeking to be paid from whatever pot of money Rightmove hands over, either at trial or in a settlement, should liability be established. But Innsworth’s return, legal fees and costs will be taken out before estate agents see a penny. So the bigger those deductions, the less is left for the class.

Yet litigation funders argue that returns must be consistent enough to invest on behalf of claimants. The highest-profile example of these tensions was the legal battle brought by more than 550 sub-postmasters over the Post Office’s faulty Horizon IT system.

Although the group received a reported £58m, after the deduction of costs associated with the action, individual sub-postmasters received about £20,000 each. The government still had to set up separate compensation schemes because the original payout was inadequate. The litigation funder in that case, Therium, is winding down its funding operations and has been sold to a private equity firm.

Rightmove is one of the most profitable companies on the FTSE 100, and its own research says it has 80% share of time spent on property portals. On Wednesday its shares dropped slightly after news of the claim.

Photograph by Mario Gutiérrez/Getty Images