Where Now For Litigation Funding? The Likely Impact Of The Supreme Court's Decision In R (on The Application Of PACCAR Inc And Others) v Competition Appeal Tribunal And Others [2023] UKSC 28

• Published date: 27 July 2023
• Subject Matter: Finance and Banking, Antitrust/Competition Law, Litigation, Mediation & Arbitration, Financial Services, Antitrust, EU Competition , Trials & Appeals & Compensation
• Law Firm: Gatehouse Chambers
• Author: Mr PJ Kirby KC and Charlotte Wilk

The likely impact of the Supreme Court's decision in R (on the application of PACCAR Inc and others) v Competition Appeal Tribunal and others [2023] UKSC 28

The Supreme Court's decision

The Supreme Court has today handed down its decision in the PACCAR Trucks appeal. The majority have decided that a litigation funding agreement ("LFA") under which the funder is to receive a percentage of any damages recovered by the funded party is a damages based agreement ("DBA") within the meaning of s58AA Courts and Legal Services Act 1990 ("CLSA"). The majority (Lords Sales, Reed, Leggatt and Stephens) found that litigation funding falls within an express definition of "claims management services", which includes "the provision of financial services or assistance" and that those services are provided "in relation to the making of a claim". A lengthy dissenting decision was given by Lady Rose.

The decision will have a huge impact on the litigation funding industry, commercial litigation and in particular claims in the Competition Appeal Tribunal ("CAT") and other large group actions, many of which are supported by funders. The decision may also have important unintended consequences in light of the majority's very wide definition of claims management services.

The decision involved a consideration of the principles of statutory construction. There are a number of interesting points in the reasoning of the majority that enabled them to come to their decision, including the relevance of uncommenced legislation. Whatever one's views of the legal reasoning, there is no doubt that the decision is contrary to the understanding of the litigation funding industry and those who have benefitted from such funding over the last 20 years. Sir Rupert Jackson endorsed third party funding in his reports and recommended self-regulation - he does not appear to have considered an LFA to be a DBA.

The definition of claims management services is found in s4 Compensation Act 2006 in relation to DBAs before 1 April 2019 and s419A FSMA in respect of DBAs entered into after that date. The parties accepted that there was no material difference between the definitions.

The CAT and the Divisional Court had found that for a service to come within the definition of claims management services that service had to be provided within the context of the management of the claim and that funders did not normally manage a claim.

The majority of the Supreme Court were of the opinion that Parliament had...