PACCAR and Litigation Funding Agreements – October 2024 update
The story so far.
PACCAR (see R (PACCAR Inc and Others) v Competition Appeal Tribunal and Others [2023] Costs LR 1193)
The world of the Competition Appeals Tribunal (“CAT”) moves in a way that no Division of the English and Welsh Courts does so. Before having their day in court (or to be more accurate, before a judge of the High Court presiding in the CAT), prospective claimants must prove not only that they have adequate funding to meet their own costs, but also those of their opponent on a loss. In order to provide such proof, Litigation Funding Agreements (“LFAs”) have become the name of the game, whereby a third-party funder pays for a litigant’s costs in return for a share of the damages if the case is successful. Perhaps the most famous LFA in terms of being well known, is that used by Sir Alan Bates and the Postmasters, in their claims against the Post Office. That, at least, was the position until…..PACCAR !
What happened in PACCAR?
The claimants in PACCAR (including UK Truck Claim Ltd and the Road Haulage Association) made an application to the CAT for a collective proceedings order against Truck Manufacturers. Its purpose was to enable them to bring proceedings to recover compensation for overpriced vehicles which they had purchased, following unlawful and anti-competitive collusion in the European Union area by the Truck Manufacturers that had inflated prices of trucks sold between 1997 and 2011.
As a preliminary issue, it was the Truck Manufacturers’ case that the LFAs used by the claimants to fund the case were Damages Based Agreements (“DBAs”) within the meaning of s.58AA Courts and Legal Services Act 1991 (as amended) which needed to comply with DBA Regulations 2013. It was common ground that none did and if the Manufacturers were right, that meant than all the LFAs were unenforceable.
At first instance, the Manufacturers lost, and their appeal was dismissed by the Court of Appeal. However, they fared better in the Supreme Court, where, by a majority (Lady Rose delivered a blistering dissenting judgment), the decisions below were overturned. That meant that, going forward, most third party LFAs already in use, would be unenforceable and unlawful.
Tories ride to the rescue (but not for long)
To illustrate the potential carnage that the decision in PACCAR created, a further mention of Bates v the Post Office fits the bill perfectly. Had PACCAR been decided before Mr Justice Snowden had given judgment in the Postmasters’ cases, their claims would have been stopped in their tracks because none of the LFAs they used would have complied with the DBA Regulations, thereby rendering them unlawful.
The then Conservative Government’s answer to PACCAR? Pass a law stating that whatever the Supreme Court had decided, LFAs were not DBAs and did not need to be subject to the DBA Regulations to be lawful and enforceable. Thus was born the Litigation Funding Agreements (Enforceability) Bill 2024, which had the additional feature that the new law would be retrospective, thereby making LFAs that were deemed to be bad after PACCAR, good after all.
By the early summer, the Bill had reached the report stage in the House of Lords, but then an unexpected turn of events. Rishi Sunak called the general election for 4 July and the Bill failed to be listed for consideration in “wash-up” after Parliament had been dissolved, and so it withered on the vine and died.
Labour to the rescue?
Possibly, but not yet. Prior to leaving office as Lord Chancellor, Alex Chalk KC MP had arranged for a Review of litigation funding to be carried out by a six-person working group under the aegis of the Civil Justice Council co- chaired by Mr Justice Picken. The brief was to :-
“….set out the current position of litigation funding, including that of third-party funding”.
And to :-
“ …consider access to justice, its effectiveness, and regulatory options…….The CJC will look to provide an interim report by summer 2024, and a full report by summer 2025”
It is now mid-October!
No sign of a summer 2024 report in that case unless we have missed something, so where does that leave existing and prospective litigants in the CAT?
The answer for new litigation is one that is relatively easy to provide. Parties wishing to apply for a collective proceedings order can do so by demonstrating to the CAT that their funding vehicles comply with the DBA regulations in so far as they need to: see for example Mark McLaren Class Representative Ltd v MOL (Europe Africa) Ltd and Others [2024] Costs LR 355. The difficulty lies with pre-PACCAR matters or where the case has ended, and the successful parties and their funders have found themselves in dispute. A striking example is Therium Litigation Funding A IC v Bugsby Property LLC [2023] Costs LR 1641 where the spoils of victory were £27,636,512, but the lot was taken by the funders, leaving those who had been funded, with nothing, at least for now. Following PACCAR, it is the latter’s case that as their LFAs are now unenforceable, the damages belong to them after all. A fine mess!
Back to “What Next?”
The Litigation Funding Agreements (Enforceability) Bill appears to be a casualty of the general election, no indication having been given after the first turbulent one hundred days of Labour government, dogged with pensioners’ winter fuel allowances and free business suits, that it will be revived. All eyes are, accordingly, on the working group, but at the time of writing this article, there is no word about when we can expect the interim report to be published. It’s a case, therefore, of “Watch this Space”!
Colin Campbell, Consultant at Kain Knight Costs Lawyers
