August 2, 2023
R (on the applying of PACCAR Inc and others) (Appellants) v Competitors Attraction Tribunal and others (Respondents), [2023] UKSC 28
In a significantly anticipated judgment of the UK’s Supreme Court docket (the “UKSC”), a 4-1 majority has dominated that litigation funding agreements (“LFAs”), below which the funder’s remuneration is calculated by reference to a share of the damages in the end recovered, fall throughout the statutory definition of damages-based agreements (“DBAs”). Though the choice largely activates rules of statutory interpretation, the results of the UKSC’s ruling are probably vital:
- Current and future LFAs below which the funder’s remuneration is calculated by reference to a share of the damages in the end obtained will now be unenforceable in England & Wales until they adjust to the circumstances set out within the Damages-Based mostly Agreements Rules 2013 (the “Rules”).
- Within the context of opt-out collective proceedings earlier than the Competitors Attraction Tribunal (the “CAT”), such LFAs might be unenforceable even when they adjust to the Rules because of a prohibition on DBAs for opt-out collective proceedings.
Though the complete extent of its implications will not be but clear, the choice will undoubtedly have a major impression on litigation funding within the UK, and specifically in collective proceedings earlier than the CAT. It stays to be seen whether or not, in mild of the choice, the UK Parliament will think about direct intervention to control this space.
I. Background to the UKSC Judgment and Procedural Historical past
The case involved the query of whether or not LFAs are to be categorised as DBAs, and subsequently topic to the UK laws governing DBAs, together with the Rules and the Courts and Authorized Providers Act 1990 (the “CLSA”). Lord Henderson underscored the significance of this query in his judgment on the Court docket of Attraction stage in 2021 as follows:
The difficulty […] is generally phrases whether or not funding agreements entered into with claimants by third events who play no half within the conduct of the litigation, however whose remuneration is mounted as a share of the damages recovered by the consumer, are “damages-based agreements” throughout the that means of the related laws which regulates such agreements. If they’re, the seemingly consequence could be that the majority, if not all, litigation funding agreements presently in existence could be unenforceable […].[1]
The UKSC was subsequently requested to think about whether or not the rules governing DBAs prolonged to litigation funders in addition to to solicitors. In essence: ought to a LFA be handled as the identical sort of settlement as a client-solicitor DBA, regardless of the actual fact the litigation funder might be a third-party to the proceedings?
The query primarily turned upon the definition of a DBA, which is discovered at part 58AA(3)(a) of the CLSA:
[A DBA is] an settlement between an individual offering advocacy companies, litigation companies or claims administration companies and the recipient of these companies which gives that—
(i) the recipient is to make a fee to the individual offering the companies if the recipient obtains a specified monetary profit in reference to the matter in relation to which the companies are offered, and
(ii) the quantity of that fee is to be decided by reference to the quantity of the monetary profit obtained.[2]
Since 1 April 2013, DBAs have been a permitted type of price association for contentious proceedings in England & Wales.[3] However regardless of the introduction of DBAs being characterised as a optimistic growth for flexibility and accessibility to justice for candidates,[4] DBAs in high-value English civil instances stay comparatively uncommon.[5] Authorized professionals have been reticent to embrace the observe as a result of lack of certainty concerning compensation for his or her companies, in addition to the shortage of readability within the present drafting of the Rules that govern DBAs.[6]
a. The Competitors Attraction Tribunal Section
The case originates from a cartel choice by the European Fee (the “EC”), dated 19 July 2016. In that call, the EC held that 5 main European truck manufacturing teams, ((1) DAF, (2) Daimler, (3) Iveco, (4) Volvo/Renault and (5) MAN)), infringed EU Competitors Legislation by, inter alia, exchanging data on their respective future gross pricing.[7] Subsequently in 2018, Highway Haulage Affiliation Restricted (“RHA”), a haulage commerce affiliation, and UK Vehicles Declare Restricted (“UKTC”), an SPV arrange particularly to pursue the declare (collectively, the “Candidates”), introduced proceedings within the CAT searching for damages from the producers pursuant to part 47B of the UK Competitors Act 1998.[8] Each the Candidates had LFAs in place. The CAT heard the case in June 2019, having ordered in December 2018 that the 2 purposes be heard collectively.[9]
DAF contended that the Candidates’ LFAs represent DBAs, with the consequence that they have been unenforceable as they didn’t adjust to the necessities below 58AA(3)(a) of the CLSA. Additional, DAF contended that the Candidates didn’t fulfill the necessities for being authorised to carry the collective proceedings as a result of part 47C(8) of the Compensation Act 2006 (the “CA”) stipulated {that a} DBA is unenforceable if it pertains to opt-out proceedings.[10]
In its judgment dated 28 October 2019, the CAT present in favour of the Candidates.[11] DAF thereafter utilized to the Court docket of Attraction for permission to use for judicial evaluate.
b. The Court docket of Attraction Section
The Court docket of Attraction handed down its judgment on 5 March 2021,[12] dismissing DAF’s attraction and holding that it will not grant DAF permission to use for judicial evaluate on the substantive DBA challenge.[13]
The Court docket of Attraction targeted on the interpretation of the definition of “claims administration companies” in part 4(2)(b) of the CA; specifically, whether or not that time period encompassed LFAs.[14] The phrase was imported into part 58AA(3)(a) of the CLSA’s DBA definition, as outlined above. The Court docket of Attraction decided that the definition of DBAs below these statutes didn’t embody LFAs. DAF thereafter opted to attraction on to the UKSC; permission to take action was granted in Could 2022.
II. The UKSC Judgment
The case was heard on 16 February 2023.[15] By a majority of 4-1, the UKSC overturned the Court docket of Attraction’s judgment on 26 July 2023 and held that LFAs may quantity to “claims administration companies” such that they’re thought-about DBAs which should adjust to the Rules as a way to be enforceable. As famous above, a lot of the UKSC’s evaluation targeted on English regulation guidelines of statutory interpretation.
Lord Gross sales (with whom Lords Reed, Leggatt and Stephens agreed) held that “claims administration companies”, as referred to in part 58AA(3)(a) of the CLSA, consists of LFAs. Lord Gross sales targeted on construing what he understood to be the unique intention of the drafting and, as such, discovered that “Parliament used huge language […] intentionally and with the intention that the phrases of the definition of “claims administration companies” needs to be given their pure that means.”[16] His Lordship concluded that the pure that means included the function of litigation funders in financing claims, and famous that “[p]articipants within the third celebration funding market might have made the belief that such preparations will not be DBAs and therefore will not be made unenforceable by part 58AA(2). However this might not justify the court docket in altering or distorting the that means of “claims administration companies” as it’s…”[17]
In a dissenting minority view, Girl Rose would have upheld the CAT and Court docket of Attraction’s place that LFAs didn’t represent DBAs. Her Ladyship discovered that LFAs didn’t represent “claims administration companies” as a result of “the giving of monetary help is simply included within the time period claims administration companies whether it is given by somebody who’s offering claims administration companies throughout the bizarre that means of that time period.”[18] In reaching her conclusion, Girl Rose maintained that Parliament didn’t intend for 58AA(3)(a) of the CLSA to “to render unenforceable damages-based litigation funding agreements.”[19]
III. Implications of the UKSC Judgment
The UKSC’s judgment has vital implications for third celebration litigation funding within the UK. Events concerned in UK litigation which are supported by a 3rd celebration funding settlement might want to assess whether or not their present LFAs are (or is perhaps thought-about) DBAs in mild of the judgment and, if that’s the case, think about whether or not amendments are wanted to make sure that they adjust to the Rules. There could also be additional dangers for totally resolved instances below funding preparations, in that quantities already paid to the funders could also be challenged on the premise that the funding settlement could possibly be deemed unenforceable.
For opt-out collective proceedings within the CAT, the implications of the UKSC’s judgment are extra acute given the overall prohibition on DBAs for such instances. It stays to be seen whether or not – and the way – funders may search to restructure LFAs in opt-out collective proceedings, in order that they aren’t thought-about DBAs. It’s seemingly that the judgment will, within the quick time period not less than, create problems for funders and sophistication representatives concerned in present and future opt-out proceedings.
The broader and extra long run impression of this choice on the litigation funding market within the UK (which has been robust and rising in recent times) stays to be seen.
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[1] Paccar Inc. v RHA and UKTC [2021] EWCA Civ 299, para. 2 (emphasis added).
[2] The Courts and Legal Services Act 1990, section 58AA.
[3] The Damages-Based Agreements Regulations 2013.
[4] See Ministerial Foreword, Ministry of Justice, “Reforming Civil Litigation Funding and Costs in England and Wales – Implementation of Lord Justice Jackson’s Recommendations – The Government Response”, March 2011, p. 3-4.
[5] Within the Civil Justice Council 2 September 2015 Press Release on DBA Recommendations, Professor Rachael Mulheron, Chairman of the CJC’s working celebration, famous: “DBAs have been used very sparingly by the authorized occupation because the Jackson reforms took impact in 2013. This has been unlucky, provided that using DBAs in contentious litigation was, arguably, probably the most novel facet of these 2013 reforms.”
[6] Lord Justice Jackson proposed wide-ranging reforms to the civil litigation prices system in 2009 – these are broadly known as the “Jackson Reforms” and included the introduction of DBAs addressed above. Following a public session, these have been carried out largely by way of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (“LASPO”) and the 2013 Regulations. In November 2014, the Ministry of Justice recognised that there have been drafting points with the Rules and requested the Civil Justice Council to evaluate them to think about doable enhancements.
[7] Case AT. 39824 – Trucks, 19 July 2016; UK Trucks Claim Limited v Fiat Chrysler Automobiles N.V. and Others [2019] CAT 26, paras. 1-2.
[8] N.B: The UKTC application was brought against Iveco and Daimler; the RHA application against Iveco, MAN and DAF.
[9] UK Vehicles Declare Restricted v Fiat Chrysler Cars N.V. and Others [2019] CAT 26, paras. 1-2.
[10] Id., para. 15.
[11] Id., para. 110(1).
[12] Paccar Inc. v RHA and UKTC [2021] EWCA Civ 299.
[13] Id., paras. 105-107.
[14] The Compensation Act 2006, section 4(2)(b).
[15] The UKSC had, earlier, granted permission for the Affiliation of Litigation Funders of England & Wales to make written submissions as an intervener, which it did (a mirrored image of the significance the attraction needed to the litigation funding sector on this jurisdiction).
[16] R (on the application of PACCAR Inc and others) (Appellants) v Competition Appeal Tribunal and others (Respondents), [2023] UKSC 28, para. 72.
[17] Id., para. 91.
[18] Id., para. 254.
[19] Id., para. 253.
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