The recent interim judgment of Therium Litigation Funding A IC v Bugsby Property LLC [2023] EWHC 2627 (Comm) appears to give us an early indication of what might become key battlegrounds between Third-Party Funders and certain funded litigants in the wake of the Supreme Court’s impactful determination in R (PACCAR) v Competition Appeal Tribunal [2023] UKSC 28.

Whilst Bugsby Property in no way can be said to have provided an opportunity for a full or head-on tackling of the litigation funding environment post-PACCAR, nevertheless Mr. Justice Jacobs’ judgment does shed light on some important questions with which the courts may very well soon find themselves wrestling, at least in the near-term whilst the funding landscape seeks to find a new equilibrium, and certainly in the absence of any clarifying government intervention.

First, what do we mean when we say DBA?  This was a question it was noted the Court of Appeal had previously considered in Zuberi v Lexlaw Ltd [2021] EWCA Civ 16 when it posited the question of whether a DBA should be determined to describe either (i) the identity of an entire contract of retainer that contained any provision which entitles a lawyer to a share of a client’s recoveries; or (ii) only those provisions in a contract of retainer which deal with payment out of recoveries, and sit alongside other provisions which provide for payment on a different basis and/or other terms which do not deal with payment at all.  The determination of the Appellate Court (a couple of years before PACCAR but not overruled by it) was that the second formulation was to be preferred.  However, it looks like we can expect the legal team for Bugsby to argue at trial that Zuberi could and should be distinguished on the basis (1) there is a big distinction between on the one hand the termination provisions which were under consideration in 2021 by the Court of Appeal, and on the other the payment provisions which arise for consideration in the instant matter; and (2) given that payment in the instant matter was always expressed to come out of recoveries, and the only obligation to pay arose if there was a recovery, then this must make it an inherent part of the arrangements forming a DBA between the parties.

Second, in the wake of PACCAR, is it correct to say that a litigation funding agreement (LFA) is not a DBA if it only contains provisions which entitle a Funder to recover as its success fee (i) the amounts it had invested; and (ii) a multiple of such amounts.  Whilst a finding on this issue was not for the Court on this occasion, and the funding arrangements under dispute are also not of this limited nature as they included a percentage recovery aspect that would apply in certain circumstances, nevertheless the parties in Bugsby Property certainly appeared to agree that if a Funder was only charging a multiple of its investment, that would not be a DBA.  It was also noted by the Court that this position was entirely consistent with views that had been expressed by Professor Rachael Mulheron, a thought leader in the area of contingency funding and DBAs and a member of numerous litigation funding working party groups and drafting committees, in a 2023 article entitled “The Funding of the United Kingdom’s Class Action at a Cross-Roads” (albeit again written pre-PACCAR). 

We note that the above view is also a predominant one that has emerged amongst a number of other academic commentators, law firms and Funders following the disruption that came in the wake of the PACCAR decision.  However, it must be said that absent a clear and unambiguous determination on the point there will inevitably remain some element of uncertainty around the issue.

Whether a trial of the claims being brought by Therium against Bugsby will help bring some clarity to any of the issues highlighted above or any broader questions around DBAs remains to be seen, but for now Mr. Justice Jacobs’ judgment at least takes us to a threshold of there being “a realistic argument” that a DBA can be said only to encapsulate certain, divisible aspects of an LFA.  Thus, provisions relating to matters such as “recovery of amounts spent, and the multiple” may very well remain enforceable aspects of an LFA because they fall outside of the DBA regime.

Regardless, it is unlikely that these proceedings will be the last or only ones to require the courts to wrangle with the ramifications of the Supreme Court’s determinations in PACCAR for the world of third-party funding.