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Class Action Claim Funding Is Not A Damages Based Agreement

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A recent ruling by the Court of Appeal in London means that a large group action claim against a number of large truck manufacturers can proceed based on its existing funding arrangements.

In the claim, Paccar Inc & Ors v Road Haulage Association Ltd & Ors, 16,000 claimants have filed a class action claim against major commercial vehicle manufacturers, alleging them to be engaged in cartel-based activity. In defending the claim, Dutch-based truck manufacturer and a division of Paccar Inc DAF argued that the existing funding arrangement being provided by third party litigation funders Calunius and Therium constituted a Damages Based Agreement (DBA). If this was found to be the case, then the agreement would be unenforceable between the funder and the claimant and in such a situation, a tribunal may refuse to authorise collective proceedings.

The Court of Appeal was asked to consider whether funding agreements ‘entered into with claimants by third parties who play no part in the conduct of the litigation, but whose remuneration is fixed as a share of the damages recovered by the client’ count as DBAs. If the court had ruled in the affirmative, ‘the likely consequence would be that most litigation funding agreements currently in existence would be unenforceable’. In judgment, the Court of Appeal agreed with a Competition Appeal Tribunal decision from 2019, which found that the funding was not a DBA and therefore did not fall foul of regulation. In reaching his decision, Lord Justice Henderson made a clear distinction between proactive ‘claims-farming’ and the non-champertous litigation funding by professional third-party funders in return for a reasonable share of the client’s recoveries. He commented:

The result of the construction for which DAF contends is in my judgment both anomalous and unreasonable, because it would bring any form of the provision of financial assistance for the making of a claim within the ambit of the [Compensation Act 2006], without regard to the fact that pure litigation funding was not then perceived to be a problem which required fresh legislative intervention”

DAF sought permission to appeal from the Court of Appeal and to begin proceedings for judicial review. The court dismissed the application for permission to appeal due to lack of jurisdiction, but it also granted permission to challenge the tribunal’s judgment through a judicial review.

Commercial Litigation Funding

If you are thinking about taking legal action against another individual or company but are worried about the costs involved, Advantage Litigation Services have the skills and expertise to help you find a way of funding commercial litigation without risking your personal finances or those of your business. Click here to contact us today or call 0800 160 1298 to see how we can help.

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