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LBA or DBA? Revisited...

The Commercial Court has handed down its first judgment addressing the repercussions of R (PACCAR) v CAT [2023] 1 WLR 2594 (PACAAR), the significant Supreme Court case relating to the enforceability of litigation funding agreements (LFAs) where judgment was handed down in July 2023.

As we covered previously, in PACCAR, the Supreme Court decided that litigation funding agreements (LFAs) under which funders are entitled to recover a percentage of damages, amount to damage -based agreements (DBAs). Such LFAs were therefore rendered but the judgment to be unenforceable unless they complied with the Damage Based Regulations 2013. 

This ran contrary to the previously held belief of the litigation funding industry and previous decisions.

In Therium Litigation Funding A IC v Bugsby Property LLC [2023] EWHC 2627 (Comm) (Therium), Jacobs J granted an application for an interim proprietary injunction. In doing so, as with any such application, the judge was required to consider whether there was a “serious issue to be tried”. The application had been contested by the respondent on the basis that, following PACCAR, the underlying LFA was unenforceable and therefore there was no serious issue to be tried.

The LFA contained a number of means for return for the litigation funder, including returns as a:

  1. multiple of their funding, and 
  2. percentage of the damages recovered over a certain amount.

The type of return at b. above was deemed unenforceable following PACCAR. Jacobs J, however considered that there remained a serious issue to be tried, as there remained an enforceable entitlement under a. above, or the offending provision relating to b. could be severed from the LFA in question.

This most recent decision should catch the attention of the wider litigation funding industry, but it will be of particular interest to those who may be looking at a dispute regarding the enforceability of their LFAs in the short term. 

Therium has highlighted where there may be grounds to defend the enforceability of existing LFAs. 

It should be noted however this decision only indicates there is a serious issue to be tried on these issues, not whether LFAs such as the one considered in this case, are enforceable. There remains significant uncertainty on these issues, and therefore scope for dispute.

How we can help

For any queries in relation to litigation funding please contact Katie Byrne or Steve Beahan in our Commercial Dispute Resolution team.