“58AA Damages-based agreements (1) A damages-based agreement which satisfies the conditions in subsection (4) is not unenforceable by reason only of its being a damages-based agreement. (2) But … a damages-based agreement which does not satisfy those conditions is unenforceable. (3) For the purposes of this section— (a) a damages-based agreement is an agreement between a person providing advocacy services, litigation services or claims management services and the recipient of those services which provides that— (i) the recipient is to make a payment to the person providing the services if the recipient obtains a specified financial benefit in connection with the matter in relation to which the services are provided, and (ii) the amount of that payment is to be determined by reference to the amount of the financial benefit obtained. (4) The agreement— (a) must be in writing; (aa) must not relate to proceedings which by virtue of section 58A(1) and (2) cannot be the subject of an enforceable conditional fee agreement or to proceedings of a description prescribed by the Lord Chancellor; (b) if regulations so provide, must not provide for a payment above a prescribed amount or for a payment above an amount calculated in a prescribed manner; (c) must comply with such other requirements as to its terms and conditions as are prescribed; and (d) must be made only after the person providing services under the agreement has complied with such requirements (if any) as may be prescribed as to the provision of information. (5) Regulations under subsection (4) are to be made by the Lord Chancellor and may make different provision in relation to different descriptions of agreements. … (7) In this section— … ‘claims management services’ has the same meaning as in theFinancial Services and Markets Act 2000 (see section 419A of that Act).”
“3.1 The Funder is entitled to receive a payment out of the Total Fee in accordance with the Waterfall. 3.2 Subject to the terms of any order or direction of the Tribunal, on each occasion, if any, on which Proceeds are received by the Solicitor, the Class Representative or any connected party, the Class Representative will procure that a portion of those Proceeds equal to the Total Fee be applied in accordance with the Waterfall to pay fees to the Solicitor, to Counsel and to the adverse costs insurer and to pay to the Funder the Capital Outlay and Profit Share.”
“Proceeds means the total amount of damages and costs paid by the defendants in aggregate in the Claim pursuant to an order of the Tribunal or otherwise.” “Total Fee” is defined as follows: “Total Fee means such amount as is determined in accordance with Annex 6.”
“Annex 6: Definition of Total Fee (new) Total Fee means, subject to the following sentence of this definition, an amount equal to: (a) the Capital Outlay; and (b) the Insurer Outlay; and (c) the amount of the success fees due to the solicitors under their conditional fee agreements; and (d) an amount equal to the Capital Outlay multiplied by 200% (such percentage increasing by 50% on 1 January and 1 July in each year, starting on1 January 2024 , and will stop increasing on the earlier of: (i) the date of a final judgment of the CAT that brings the Claim to a final resolution by way of an award of damages, and following the determination of any appeals from that Judgment; (ii) the date of a settlement that brings the Claim to a final resolution; or (iii) the occurrence of a Termination Date as a result of a Funder Default. Notwithstanding any other provision of this Agreement, the Total Fee shall not exceed the portion of the Proceeds that have not been distributed to class members within any period stipulated by the Tribunal for distribution to class members following success in the Claim.”
“The total liability of the Class Representative for the Total Fee shall not exceed the sum total of (i) the amount of any unclaimed damages which the CAT orders to be paid to the Class Representative and (ii) any costs and disbursements recovered from the defendant.”
“REPAYMENT 2.1 On the date on which any Proceeds are received or, if later, the date on which all relevant permissions required from the Tribunal have been granted, the relevant recipient will procure that a portion of the Proceeds equal to the Total Fee be paid into the Ringfenced Account and distributed within 5 Business Days of receipt as provided for below. Until that distribution is made, and subject to any order or direction of the Tribunal, any party receiving any portion of the Proceeds agrees to hold those Proceeds on trust for the parties in accordance with the terms of this Agreement: 2.1.1 first, to pay, on a pro rata basis and pari passu: (a) to the Funder, an amount equal to its Capital Outlay plus a monthly compounding rate of interest of 25% per annum on all amounts advanced by the Funder under the Funding Agreement; and (b) to the Insurer an amount equal to (a) the Insurer Outlay plus without double counting (b) any insured losses actually paid by the Insurers (and not previously reimbursed to them pursuant to this Agreement) in respect of the Claim that are covered by a common ATE insurance policy (but excluding for the avoidance of doubt any insured losses actually paid by the Insurers in respect of the related opt-in claim against substantially the same defendant entities as the Claim). 2.1.2 secondly, to pay, on a pro rata basis and pari passu: (a) to the Solicitor for its own account, all outstanding fees and disbursements properly incurred by the Solicitor at its standard rates and as set out in the Budget plus any uplift and other amounts due to the Solicitor under the terms of its CFA; (b) to Counsel, all outstanding fees properly incurred by them plus any uplift and other amounts due to them under the terms of their respective CFAs; and 2.1.3 finally, the balance of the Total Fee to be apportioned as follows: (a) 16% to the Insurer; and (b) 84% to the Funder.”
“The Funder is entitled to receive a payment out of the Proceeds in accordance with the Waterfall.” “Proceeds” is then defined in Annex 1: “Proceeds means any and all value due to and/or received by (or in lieu of payment to) the Counterparty or a related party directly or indirectly pursuant to the terms of any of the DBAs in any circumstances whatsoever.”
“2.1 If any party receives any Proceeds, that party agrees to hold those Proceeds on trust for the parties in accordance with the terms of this Agreement and to immediately remit such Proceeds to the Ringfenced Account and within 5 Business Days of such remittance, the Counterparty shall apply, or procure the application of, those Proceeds as follows: 2.1.1 first, to pay, on a pro rata basis and pari passu: (a) to the Funder, an amount equal to its Capital Outlay (as defined in the Opt-in Funding Agreement and to the extent not previously reimbursed to it pursuant to this Agreement or any other agreement) plus a monthly compounding rate of interest of 25% per annum of such Capital Outlay under the Opt-in Funding Agreement; and (b) to the Insurers an amount (if any) without double counting equal to any insured losses actually paid by such Insurer (and not previously reimbursed to them pursuant to this Agreement or otherwise) in respect of the “opt-in”
“If the Class Representative makes any application (including under clause 10.2) for an Order for payment of the Class Representative’s costs, fees and disbursements (within the meaning of and including under CAT Rule 93(4) or CAT Rule 94) other than from Undistributed Damages, the Funder’s Fee shall be the greater of: 11.1.1 a multiple of the Costs Limit; or 11.1.2 only to the extent enforceable and permitted by applicable law, a percentage of the Proceeds, calculated in accordance with the table in this clause 11.1, clause 11.4 and clause 11.6.”
“37.1 If any provision of this agreement, including any part-provision, shall be held to be illegal, invalid or unenforceable, the legality, validity or enforceability of the remaining provisions (and part-provisions) of this agreement shall not be affected. 37.2 Any illegal, invalid or unenforceable provision in this agreement shall be severable and all other provisions (and part-provisions) will remain valid and unaffected. 37.3 If any provision of this agreement, including any part-provision, shall be held to be illegal, invalid or unenforceable in one jurisdiction that shall not affect the legality, validity or enforceability of the whole of this agreement in any other jurisdiction. 37.4 Without prejudice to the generality of clauses 37.1 to 37.3 inclusive, the Parties acknowledge and agree that, if necessary to ensure the enforceability, legality or validity of this agreement, any provision of this agreement which begins with the words “only to the extent enforceable and permissible by applicable law” shall be severable: (a) without modifying or adding to other terms of this agreement; (b) with the consequence that the remaining terms continue to be supported by adequate consideration; and (c) without changing the nature of the contract, such that it is not the sort of contract that the Parties entered into at all.”
“9.1 In the event of Success, the Class Representative, assisted by her Solicitors, shall: 9.1.1 in addition to compliance with the provisions of clause 3.2.12.5, use all reasonable endeavours to procure that the Court makes an Order that Undistributed Damages may be paid to the Class Representative in respect of her costs, fees, disbursements and expenses, within the meaning of CAT Rule 93(4), incurred by the Class Representative in connection with the Action including but not limited to the Funder's Fee;… 9.1.6 pay or procure payment of the Funder's Fee from Stakeholder Proceeds, save that subject to Clause 9.1.1 and 3.2.12.5 this obligation shall be reduced to the extent that the aggregate amounts ordered by the Court to be paid to the Class Representative in respect of this obligation falls below the Funder's Fee. 9.2 The Funder's Fee shall be payable as set out in the Priorities Deed and calculated as follows: 9.2.1 a sum equivalent to the greater of: (i) two times the Funder's Outlay; or (ii) 30% (thirty percent) internal rate of return on the Funder's Outlay (the "Funder's Initial Return"); 9.2.2 a further sum equivalent to two times the Funder's Outlay; (the "Funder's Further Return"); and 9.2.3 a further sum equivalent to either (i) 0.5 times the Funder's Outlay in the event that Stakeholder Proceeds are determined and available to be distributed in accordance with Clause 3 of the Priorities Deed prior to10 March 2026 or (ii) one times the Funder's Outlay in the event that any Stakeholder Proceeds are determined and available to be distributed in accordance with Clause 3 of the Priorities Deed on or after11 March 2026 ("Funder's Additional Return").”
“"Proceeds" means the total amount of damages (including any non-monetary damages) paid by the Defendants or one or more of them in the Action pursuant to an Order of the Court or otherwise.” “Stakeholder Proceeds” is defined in clause 1.44: “"Stakeholder Proceeds": means (i) any Recovered Costs; (ii) any amount paid from Undistributed Damages to the Class Representative pursuant to an Order of the Court in respect of costs, fees, disbursements or expenses incurred by the Class Representative within the meaning of CAT Rule 93(4); and (iii) any amount approved by the Court in a Collective Settlement Approval Order to be paid to the Class Representative as costs, fees, disbursements or expenses within the meaning of CAT Rule 94.”
“158. We do not accept Sony’s submission…for the following reasons: (1) Sony could not point to any provision in the Current LFA by which the amount of the Funder’s Fee was limited by the amount of the Proceeds. The Current LFA is not therefore “an agreement…which provides that…the amount of the [Funder’s Fee] is determined by reference to the amount of the [Proceeds]”, as section 58AA requires. (2) It is in fact the Tribunal, exercising its discretion under Rule 93, that will determine the Funder’s Fee in the event of any judgment. In a settlement, the Funder’s Fee will be determined by the terms of the settlement, if approved by the Tribunal, in accordance with Rule 94. (3) It may well be the case, in either scenario, that the size of the Proceeds will be a relevant consideration for the Tribunal (or indeed the parties, in a settlement), not least to ensure that the Funder’s Fee (together with other Stakeholder payments) does not eliminate or unfairly reduce the benefit of the collective proceedings to class members. That is entirely beside the point, as far as section 58AA is concerned. Neither situation will give rise to an agreement between the funder and the PCR by which the amount payable to the funder is determined by reference to the amount of the financial benefit obtained by the PCR. (4) In this regard, we note that Lord Sales JSC dealt with an argument about the significance of the Tribunal’s intervention in [96] to [99] of the majority judgment in PACCAR, in which he said that the Tribunal’s discretion in settling the return to the funder did not prevent a percentage based funder’s fee from being a DBA. That must, with respect, be correct, but it is quite a different position from this case, where there is no effective provision for a percentage based funder’s return. In this case, Sony is arguing that the exercise of discretion by the Tribunal, in referring to the size of the Proceeds, itself gives rise to a DBA. We do not think that PACCAR assists on that point. (5) Finally, we have already dealt with Sony’s argument that PACCAR has materially changed the way that the Tribunal should approach the question of whether a funding agreement is a DBA (see [144] above). We do not, as Sony suggested, consider that the approach we have accepted above is a mechanistic one which ignores the reality of the funding arrangements. On the contrary, our conclusions reflect the reality of the situation, and we reject the artificial approach urged on us by Sony.”
“Mr Kennelly [counsel for Visa and Mastercard before the CAT] accepted in argument that his position would be more difficult (in relation to the Cap Point at least) if there were no contractual provisions in the funding arrangements in this case. 9 We pointed out that it seemed a rather arbitrary result for the LFAs to be DBAs because of an express provision, put in to protect the PCRs, about a cap on the funding obligations, whereas the LFAs would not be DBAs if there was no express provision, but the PCRs would be exposed to potentially greater risk. Mr Kennelly’s answer was that this consequence flowed from the exercise of statutory construction and in particular the broad scope of the language, which was designed to regulate funding arrangements across the entire legal market.”
“We consider there to be a difference between a factor which might have an influence, and one which is determinative in the sense of being the substantive mechanism by which the funder’s fee is arrived at. In other words, it is necessary to form a view about the true nature of the contractual arrangements and what can be said to be the real and substantive basis on which the funder’s fee is determined.”
“and whether that commercial arrangement is substantially based on the size of the proceeds determining the size of the funder’s fee.”
“98. Under the opt-out LFA Yarcombe's funder's fee is expressed to include a percentage of the proceeds of the litigation. As the appellants point out, according to the procedural rules in the Tribunal and by virtue of theCompetition Act 1998 the funder of opt-out proceedings always takes the risk that all of the damages recovered will be distributed to members of the class with the result that there will be nothing left to pay its fee and also takes the risk that the Tribunal might decline to exercise its discretion to order a payment in favour of the funder. UKTC is the proposed representative in the opt-out proceedings and, if those proceedings succeed, will obtain an award of damages on behalf of the class represented. Distribution of the damages is governed by rule 93 of theCompetition Appeal Tribunal Rules 2015 (SI 2015/1648). Members of the class who claim their share of the damages in time are to be paid; but it is in the nature of opt-out proceedings brought on behalf of a wide class of people, many of whom may be unaware of or uninterested in the proceedings, that there may be a substantial amount which is not collected. Rule 93(4) enables the Tribunal to order payments out of undistributed damages in respect of the representative's costs, fees and disbursements and it has been established that this also permits payment of a funder's fee: Merricks v Mastercard Inc[2017] 5 CMLR 16 , paras 117 and 127. The terms of the opt-out LFA between UKTC and Yarcombe are structured to take this mechanism into account. Clause 10.1 imposes an obligation on UKTC to pay the funder's fee (including the stipulated percentage share of the damages) save to the extent that the aggregate amount ordered by the Tribunal to be paid to UKTC in respect of that obligation falls below the funder's fee, and by clause 3.1.4 UKTC warrants that it will use its best endeavours to obtain such an award. [99] None of this affects the application of section 58AA(3). The LFA provides that payment of the funder's fee is conditional on UKTC receiving a "specified financial benefit'' in the litigation. The payment to be made is obviously a success fee. As the appellants submit, the fact that a claims management service provider enters into an agreement which adds a further condition which must be met before a payment is due does not deprive the remuneration being of the character of a specified financial benefit within the meaning of section 58AA(3)(a)(i). This is a general point which has particular force when, as here, the additional condition simply reflects the mechanism in the Tribunal Rules which allows such a payment to be made. It also remains the case that the amount of the payment due to Yarcombe is to be determined by reference to the amount of the financial benefit obtained'', so as to satisfy the condition in section 58AA(3)(a)(ii) as well, even though the structure of the opt-out regime according to theCompetition Act 1998 and the Tribunal Rules means that this is treated as capable of being departed from in certain circumstances. Yarcombe's primary contractual entitlement is to payment of an amount determined as stated in that sub paragraph, even if there may be a departure from that in certain identified circumstances. As a matter of substance, the LFA retains the character of a DBA as defined. It is inherent in any DBA that risk is shared by the funder, so the fact that under the opt-out LFA Yarcombe as funder shares the financial risks associated with the litigation provides no basis to say that this LFA falls outside the statutory definition of a DBA.”
“Lord Sales JSC refers to the substance of the character of the LFA in that case as being plain. In order to reach a conclusion in relation to the funding arrangements in these proceedings, a similar focus on the substance of the character of those arrangements is required.”
“capturing agreements where there was no obvious reason why they should fall within the regime created by section 58AA and described in detail in PACCAR, and despite the substance of the arrangement providing no basis for that.”
“We view the contractual provisions as creating a contingency that will only have any effect if Parliament was in terms to permit funding arrangements of this sort to be enforceable. Section 58AA cannot apply to make the provisions unenforceable, as the premise of the contingency is that section 58AA no longer operates to that effect.”
“We also disagree with the [defendants’] argument that the creation of incentives that mirror those made unenforceable by section 58AA is contrary to public policy. Either the LFAs are caught by the statutory scheme or they are not. In the latter case, it is difficult to see what public policy considerations would arise. We see no reason why the contingencies set out in the Priorities Agreements should offend public policy and we were not cited any authority to support that proposition.”
“We can see no basis on which it can sensibly be suggested that the mere fact that the damages which the Class Representative might be awarded creates a limit or cap on the funder’s fee is enough to bring the revised LFA within section 58AA(3)(a)(ii). As in Neill v Sony, we have seen no contractual provision that would engage section 58AA in this way. On the contrary, the contractual provisions in the revised LFA provide for the funder’s fee to be determined by reference to a multiple of the Funder’s Outlay. This is the real and substantive reference point for determination of the funder’s fee. Any natural cap or limit is ancillary to that and does not engage section 58AA. We see no reason to depart from the conclusion reached in Neill v Sony on essentially the same issue, for the additional reasons given by the Tribunal in that judgment.”
“The final point raised by Ms Cunningham [counsel for Apple in that case] is that the fact that the Funder's fee is payable from, and limited to, the amount of proceeds received, which provides a natural cap on the fee, she submits, makes this agreement a DBA. Mr Bacon acknowledges that the fees to be paid cannot exceed the payments made to the class by way of damages. Ms Cunningham recognised that the same point had arisen in [Neill][2023] CAT 73 (“Neill”) and [Kent][2024] CAT 5 (“Kent”) where the Tribunal held that a natural cap of this sort does not mean the LFA is a DBA. We agree. Ms Cunningham did not argue this point at length but made it clear she was reserving the point for any appeal given that there is to be an appeal on this point in Neill and Kent.”
“Where a term in a later statute is defined by reference to a definition in an earlier statute, it seems to me self-evident that the meaning of the definition in the later statute must be the same as the meaning of the definition in the earlier statute. Hence, the meaning of the term in the later statute is determined by the definition in the earlier statute. Further, the adoption of the definition in the later statute cannot somehow alter the meaning of the definition in the earlier statute. It accordingly follows that one has to determine the meaning of the term in the later statute simply by construing the definition in the earlier statute.”
“In my view, on this basis and in line with the position for explanatory notes, the Scope Order is admissible as an aid to interpretation both for such light as it might throw on an assessment of the purpose of the primary legislation and to assist in resolving any identified ambiguity in a provision in that legislation.”
“Where the primary legislation and the subordinate legislation are drafted by or on the instructions of the same government department at about the same time, as would be normal in this type of case, it is reasonable to suppose that they are inspired by the same underlying objective and are intended to reflect a coherent position as understood at the time the primary legislation is presented to Parliament. In that situation, it has been observed that the subordinate legislation made under a power in the primary legislation can be regarded as a form of parliamentary or administrative contemporanea expositio (exposition of contemporary understanding) in relation to the primary legislation which may provide some evidence of how Parliament understood the words it used in the primary legislation, even though this does not decide or control their meaning: Hanlon v The Law Society[1981] AC 124 , 193-194 (Lord Lowry, with whom Lord Edmund-Davies, Lord Fraser of Tullybelton and Lord Scarman agreed). This point is strengthened where, as here, the subordinate legislation is broadly contemporaneous with the Act and is subject to review by the same elected Parliament which passed the Act according to the positive or the negative resolution procedure. This can provide grounds to infer that the Parliament which passed the Act regarded the subordinate legislation as in accordance with it and a fair reflection of it.”
“Mr Rhodri Thompson KC, for the respondents, submitted that later legislation, in particular section 58AA, may be referred to as an aid to interpretation of the 2006 Act in order to resolve an ambiguity in that earlier legislation. He contended that the interpretation of section 4 of the 2006 Act proposed by the appellants produces absurd effects in relation to the application of the later legislation and that this supports the interpretation preferred by the Divisional Court. I am not persuaded by this. It is not clear to me that section 58AA would provide helpful guidance even if the statutory definition of “claims management services” in section 4 of the 2006 Act or section 419A of FSMA were ambiguous. However, it is not necessary to examine this submission in detail, because I do not consider that there is any ambiguity in that definition.”
“the reason for setting the amount of the payment at the level agreed, including having regard to, where appropriate, whether the claim or proceedings is one of several similar claims or proceedings”
“The payment” that the amount prescribed for the purposes of sub-section 4(b): “is the amount which, including VAT, is equal to 35% of the sum ultimately recovered by the client in the claim or proceedings.”
“If the agreement is terminated, the representative may not charge the client more than the representative’s costs and expenses for the work undertaken in respect of the client’s claim or proceedings.”
“The aim is to protect consumers from unfair and unclear agreements by regulating those specific aspects of damages-based agreements where there is most potential for consumer detriment.”
“The draft Regulations only cover damages-based agreements in the employment sector because evidence suggests that different representatives – for example solicitors and claims managers – currently operate in this field under different levels of professional regulation.”
“A damages-based agreement is a private funding arrangement between a representative and a client whereby the representative’s fee is contingent upon the success of the case, and is usually determined as a percentage of the compensation received by the client. Damages-based agreements are not permitted in litigation before the courts, but their use developed in employment tribunals which traditionally deal with ‘non-contentious’ business i.e. work which falls outside the courts. Section 58AA (2) defines an employment matter as “a matter that is, or could become, the subject of proceedings before an employment tribunal”.”
“The rationale behind this is to provide an incentive to improve cost efficiency on the part of DBA claims managers and lawyers, and also to provide an incentive to consider alternative dispute resolution avenues (instead of the Employment Tribunal) for less certain cases.”
“7.1 Until now, damages-based agreements have not been permitted in litigation before the courts, but their use has developed in ‘non-contentious’ business (i.e. work which falls outside the courts), including employment matters… 7.2 Lord Justice Jackson recommended that DBAs should be extended to all areas of civil litigation. He argued that this would provide litigants with the choice of funding methods and the freedom to choose the one that they consider is most appropriate for their case. The Government accepted this recommendation, which is reflected in section 45 of the LASPO Act.”
“7.7 The Civil Justice Council (CJC), during their consideration of how DBAs should be implemented, suggested that in consumer and micro enterprise cases, the lawyer’s fee should be a capped at 50%, but there should be no cap in commercial cases. The Government agreed that there should be a cap of 50% of the damages that the lawyer may take in DBAs, but considered, in the interests of the claimant, that this should be extended to all cases which were not otherwise capped (i.e. personal injury claims and employment matters). The figure of 50% is based on the CJC’s recommendation, and would allow claimants to keep 50% of damages.”
“2.1 A damages-based agreement (“DBA”) is a private funding arrangement between a representative and a client whereby the representative’s agreed fee (“the payment”) is contingent upon the success of the case, and is determined as a percentage of the compensation received by the client.”
“288. Damages-based agreements (“DBAs”) are another type of ‘no win, no fee’ agreement under which a lawyer can recover a percentage of the client’s damages if the case is won, but will receive nothing if the case is lost. Currently, solicitors and barristers are not permitted to act under DBAs in civil litigation, but solicitors are permitted to act under DBAs in non-contentious business, including cases before employment tribunals.”
“(1) A conditional fee agreement which satisfies all of the conditions applicable to it by virtue of this section shall not be unenforceable by reason only of its being a conditional fee agreement;…”
“(4A) The additional conditions are applicable to a conditional fee agreement which— (a) provides for a success fee, and (b) relates to proceedings of a description specified by order made by the Lord Chancellor for the purposes of this subsection. (4B) The additional conditions are that— (a) the agreement must provide that the success fee is subject to a maximum limit, (b) the maximum limit must be expressed as a percentage of the descriptions of damages awarded in the proceedings that are specified in the agreement, (c) that percentage must not exceed the percentage specified by order made by the Lord Chancellor in relation to the proceedings or calculated in a manner so specified, and (d) those descriptions of damages may only include descriptions of damages specified by order made by the Lord Chancellor in relation to the proceedings.”
“The Government’s Decision”, it is stated: “The Government recognises that there are strong and passionately held views on both sides of this debate. It recognises the concern of those respondents who worry about frivolous cases and has no wish to introduce a regime that would create a ‘litigation culture’.”
“5.62. Prohibiting the use of damages-based agreements (DBAs), sometimes called contingency fees, was one of the key safeguards highlighted by many respondents as necessary to ensure that an opt-out collective actions regime did not lead to a ‘litigation culture’. The Government agrees that this prohibition would be an important safeguard and that allowing DBAs could encourage speculative litigation, thereby placing unjustified costs on defendant businesses and creating an incentive for lawyers to focus only on the largest cases. No win no fee conditional fee agreements (CFAs) and after the event insurance will remain available for use in these cases, subject to the changes in theLegal Aid, Sentencing and Punishment of Offenders (LASPO) Act 2012 . 5.63. The Government has therefore decided to prohibit DBAs in collective actions cases in the CAT. This will require an amendment to theLASPO Act 2012 for this new type of case.”
“33 There are two possible views of what the DBA consists of. One view is that if a contract of retainer contains any provision which entitles the lawyer to a share of recoveries, then the whole contract of retainer is a DBA. In other words, a DBA is a contract which includes a provision for sharing recoveries. But another view is that if a contract of retainer contains a provision which entitles a lawyer to a share of recoveries; but also contains other provisions which provide for payment on a different basis, or other terms which do not deal with payment at all, only those provisions in the contract of retainer which deal with payment out of recoveries amount to the DBA. 34 In my judgment, there are good reasons for preferring the latter view. First, the object of the legislation was to permit the remuneration of lawyers by means of a share of recoveries. Second, the only part of the common law that needed to be changed to achieve that purpose was the rule against champerty. As I have said, at common law the contract of retainer, shorn of clause 9.1, would have been enforceable. There was no particular reason for Parliament to modify the other statutory and regulatory controls over lawyers’ fees. Third, there is a presumption that Parliament does not intend to change the common law, except expressly or by necessary implication. There is no express provision which displaces the common law (except the rule against champerty). Fourth, the legislation cannot be said to be undermined by the co-existence of the common law. Fifth, the legislative scheme is far from comprehensive.”
“As the judge pointed out, the factual premise underlying regulation 4 is that there were in fact recoveries available for sharing. In that respect he was plainly right.”
“Any further modification of public policy in this area is for Parliament to establish and define: it is not for this court to attempt. This must be borne in mind when considering the issue of severance, not least because many of the authorities about severance are cases about restrictive covenants in contracts of employment, where the nature and scope of public policy are not the same as in the field of champertous retainers of solicitors.”
“a contract which contains an unenforceable provision nevertheless remains effective after the removal or severance of that provision if the following conditions are satisfied: 1 The unenforceable provision is capable of being removed without the necessity of adding to or modifying the wording of what remains. 2 The remaining terms continue to be supported by adequate consideration. 3 The removal of the unenforceable provision does not so change the character of the contract that it becomes ‘not the sort of contract that the parties entered into at all’.”
“Once the “blue pencil” was applied to the offending provisions in Garnat (which all related to the work done on the appeal and nothing else) the parties were left with the original retainer, which continued to govern all other work and was unchanged: the original terms (and the consideration provided for them) remained unaffected by the severance.”
“If the “blue pencil” is applied to the paragraphs that provide for a success fee, the agreement between the parties in relation to all work carried out by the solicitors is converted from being a CFA into an agreement for payment on a conventional (if discounted) hourly basis. On any view, this is a major change in the overall effect of the provisions as they existed before applying the “blue pencil”; alternatively it may be said that the agreement after the “blue pencilling” (a standard contract for the payment of fees on an hourly basis) is not the sort of contract that the parties entered into (a CFA) at all.”
“Even if I were wrong in this conclusion, I would hold that severance is precluded as contrary to public policy. The principal effect of severance would be to permit partial enforcement of the unenforceable CFA. As was pointed out during submissions, if the client lost the arbitration, the effect of allowing severance would be that the solicitors would recover precisely the same amount of their fees as if the CFA had been held to be enforceable. That is not, in my view, a tolerable outcome.”
“43. The courts will not interpret a statute so as to produce an absurd result, unless clearly constrained to do so by the words Parliament has used: see R v McCool[2018] UKSC 23 ,[2018] 1 WLR 2431 , paras 23-25 (Lord Kerr of Tonaghmore), citing a passage in Bennion on Statutory Interpretation, 6th ed (2013), p 1753. See now Bennion, Bailey and Norbury on Statutory Interpretation, 8th ed (2020), section 13.1(1): “The court seeks to avoid a construction that produces an absurd result, since this is unlikely to have been intended by the legislature”
“Bennion, Bailey and Norbury on Statutory Interpretation, 8th ed (2020), para 24.19 cites the above extract from para 59 of N as authority for the proposition that where the legal meaning of an enactment is doubtful, subsequent legislation on the same subject may be relied on as persuasive authority as to its meaning : see also DSG Retail Ltd v Mastercard Inc [2020] Bus LR 1360, paras57-58(Sir Geoffrey Vos C).”
“As a matter of substance, the LFA retains the character of a DBA as defined.”
“The fee is payable only if the claim is successful and is calculated by reference to the damages awarded.”
“The key feature of a DBA is that the persons using the agreements are not paid fees if they lose a case but are paid a percentage of the damages recovered if they win.”
“Class actions and the use of DBAs We are aware of concerns raised by the United States Chamber of Institute for Legal Reform and others that the introduction of DBAs in civil litigation could have the potential to encourage speculative actions. particularly in collective or class actions, given the experience in the US. However, there are a number of important distinctions between civil litigation in England and Wales in and in the US. Further, the Government has always maintained the position that we are not in favour of the introduction of class actions as they exist in the US. and does not intend to introduce any sort of generic class action across the various types of civil litigation. As a result, the Government announced on29 January 2013 that it would prohibit the use of DBAs in collective actions cases in the Competition Appeal Tribunal (CAT). Third party litigation funding This matter was debated at some length during the passage of the LASPO Act through Parliament. Some colleagues were concerned about the future growth of third party litigation funding arrangements and, in particular, a move into personal injury claims, While there was a call for the introduction of statutory regulation, the Government does not believe this is the right course of action at his stage: rather this is an issue that we are keeping under review and we will not hesitate to act should we need to do so in future.”
“Mr Bacon referred us to the House of Lords debate on3 November 2014 , when the Parliamentary Under Secretary of State for Business, Innovation and Skills resisted a proposed backbench amendment to what became s.47C CA that would have prohibited the use of third party funding in collective proceedings. Baroness Neville-Rolfe stated: “We have thought carefully about this. The Bill already contains restrictions on the financing of claims as it prohibits damages-based agreements and does not provide for a claimant to be able to recover any uplift in a conditional fee agreement. Therefore there is a need for claimants to have the option of accessing third-party funding so as to allow those who do not have a large reserve of funds or those who cannot persuade a law firm to act pro bono to be able to bring a collective action case in order to ensure redress for consumers. Blocking access to such funding would result in a collective actions regime that is less effective. This would bar many organisations, including reputable consumer organisations such as Which?, from bringing cases as Parliament hoped in 2002. Restricting finance could also create a regime which was only accessible to large businesses. This would weaken private enforcement in competition law, which is of course not the Government’s wish or intention.” 127 The Government in promoting the legislation therefore clearly envisaged that many collective actions would be dependent on third party funding, and it is self-evident that this could not be achieved unless the class representative incurred a conditional liability for the funder’s costs, which could be discharged through recovery out of the unclaimed damages. Accordingly, insofar as it might be thought that the statutory provision is ambiguous, we consider that the statement from the relevant Minister in the House of Lords on the passage of the Bill supports the conclusion we have reached. In the form in which it is proposed to be amended, the funding agreement is therefore not rendered ineffective by s.47C(6) CA.”
“Collective actions and opt-out collective settlements” [434] and [435] stated: “434. The second aim is to introduce an opt-out collective actions regime and an opt-out collective settlement regime (both of which involve a case being brought forward on behalf of a group of claimants to obtain compensation for their losses). Cases would be able to be brought by representatives on behalf of individuals and/or businesses. 435. The CAT can already hear opt-in collective actions under the existing section 47B of the CA. An opt-in regime requires claimants to “opt-in” to the legal action to be able to obtain any damages. However, the CAT does not currently have the power to hear optout collective actions. An opt-out regime means claimants are automatically included into the action unless they “opt-out” in a manner as decided by the CAT on a case by case basis. The purpose of introducing opt-out collective actions is to allow consumers and businesses to easily achieve redress for losses they have suffered as a result of breaches of competition law.”
“A damages-based agreement (“DBA”) for the payment of legal fees is unenforceable if it relates to opt-out collective proceedings. The same restriction does not apply to opt-in collective proceedings. DBAs are defined insection 58AA(3) of the Courts and Legal Services Act 1990 . In essence, a DBA provides that the fees payable by the client to its legal or other representative are determined as a percentage of the damages awarded to the client.”
“…the validity principle proceeds on the premise that the parties to a contract or other instrument will have intended it to be valid. It therefore provides that, in circumstances in which a clause in their contract is (at this stage to use a word intended only in a general sense) capable of having two meanings, one which would result in its being void and the other which would result in its being valid, the latter should be preferred.”
“Even if it might be said that it is desirable in public policy terms that third party funding arrangements of the kind in issue in this case should be available to support claimants to have access to justice (as to which I express no view), this is not a reason why there should be any departure from the conventional approach to statutory interpretation.”
“the question to be answered in any given case is whether the proposed severance would change the character of the contract as a whole so that, if severance was implemented, it would cease to be "the sort of contract" into which the parties had originally entered.”
“The court will not sever the bad from the good unless this accords with public policy. For example, part of the consideration for the promise of either party may be such as so gravely to taint the whole contract that there is no ground of public policy requiring the courts to assist either party by severing the offending parts.“[i]n all the cases a distinction is taken between a merely void and an illegal consideration.”
“The key feature of a DBA is that the persons using the agreements are not paid fees if they lose a case but are paid a percentage of the damages recovered if they win.”
"It is unnecessary to decide the issue for the purpose of disposing of the appeal. In general, it is unwise to deliver judgments on points that do not have to be decided. There is no point in cluttering up the law reports with obiter dicta, which could, in some cases, embarrass a court having to decide the issue later on."