Revised litigation funding agreements piling up at Court of Appeal

Court of Appeal: Three LFAs heading for review

The Competition Appeal Tribunal (CAT) has granted permission for another rewritten litigation funding agreement (LFA) to go before the Court of Appeal.

The CAT said it was possible that the proceedings could catch up with the two cases where permission has already been granted, “in which case it may be of assistance to the Court of Appeal to have a slightly different fact pattern to consider when resolving the points on appeal”.

In January, the CAT gave permission in the first case, saying that a “conclusive” decision was needed so as end the uncertainty about how best to address the Supreme Court ruling in PACCAR.

That case, in which electronics giant Sony is the defendant, concerned the CAT’s decision that a new provision in the LFA allowing the funder to take a percentage of the damages only once it was “enforceable and permitted by applicable law” did not fall foul of PACCAR.

The second amended LFA going to the Court of Appeal is that in the case of Kent v Apple, which similarly provides that the return to the funder will be determined by applying a multiple to the amount of costs expended by the funder, instead of the percentage-based recovery provided for in the original version.

In both cases, the CAT rejected the substantive challenges to the LFA but held that the post-PACCAR need for certainty provided “a compelling other reason” to grant permission.

It was the same in the latest decision, which concerned the LFAs in both opt-in and opt-out collective proceedings being brought against Mastercard and Visa over alleged overcharging of interchange fees.

The original LFA required the proposed class representatives (PCR, who has not yet been certified) to pay a percentage of the proceeds under a waterfall agreement.

It has been replaced with a requirement that the total fee be determined by reference to the amount expended by the funder and after-the-event (ATE) insurers, plus a multiple of what the funder had spent, initially 200%, increasing by 50% each January and July.

This amount, however, cannot exceed what is paid to the class members.

In January, the CAT held that these arrangements did not have “the character of a DBA”.

It explained: “They are all firmly and primarily based on a determination of the funder’s fee by reference to a multiple of outlay by the funder (or insurer), and not by reference to sharing in a percentage or other proportion of the amount of financial benefit received by the PCRs (the opt-out arrangements), the solicitors (the opt-in arrangements) or the insurers (the ATE arrangements).

“The fact that other factors (apart from the multiple calculation) might affect the actual fee in certain circumstances does not change that analysis.”

In its ruling on permission to appeal earlier this month, the CAT rejected Visa and Mastecard’s contentions that the agreements were DBAs either because the caps on the amounts payable or were paid out of, or as a share of, the reocveries.

But, it added, “as noted in Neill v Sony and Kent v Apple, the continuing uncertainty about these issues of funding enforceability arising in a series of cases before the tribunal is unlikely to be resolved without determination of the issues by the Court of Appeal”.

A government amendment to the Digital Markets, Competition and Consumer Bill currently going through Parliament that was to the impact of the PACCAR ruling on opt-out collective proceedings in the CAT only was withdrawn yesterday after Lord Chancellor Alex Chalk confirmed last week that he would legislate to restore all types of litigation to the pre-PACCAR situation.

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