Post-PACCAR Legislation to be introduced

The government has recently announced (press release here) that it will introduce legislation to reverse the Supreme Court decision in PACCAR Inc & Ors -v- Competition Appeal Tribunal & Ors [2023] UKSC 28. We reported on the decision last year here.

The PACCAR decision reverberated throughout the litigation funding industry when it was handed down, as it held that litigation funding agreements (LFAs) where the funder is to receive a % of the damages should be properly classified as agreements falling within the statutory definition of damages-based agreements (DBAs). As such, LFAs were required to satisfy the statutory conditions for DBAs under the DBA Regulations 2013 failing which they would be unenforceable. Many LFAs in existence at the time were non-compliant with the DBA Regulations 2013 and were therefore unenforceable and urgent steps had to be taken by the stakeholders involved to shore up the position, often by the introduction of a multiple of funding rather than a % of damages. 

The press release refers to the role litigation funding played in supporting the high profile group claim against the Post Office which in 2019 exposed the Horizon IT scandal, which saw 900 sub-postmasters prosecuted on the basis of information provided by the faulty Horizon accounting system. It has been reported that although litigation funding was vital to the bringing of the sub-postmasters’ claim, that its effect meant that the sub-postmasters each only received approximately £20,000 damages, a fraction of the total damages awarded. 

The stated aim of the proposed legislation is to make it easier for members of the public to secure the financial backing of third parties (litigation funders) when launching complex claims against corporations with sizeable legal teams which they could otherwise ill-afford. 

Currently we only have the wording of the press release itself to guide us as to what the proposed legislation is likely to contain and it is stated that the proposed legislation will restore the position that existed before the Supreme Court’s decision in PACCAR last year, which may well mean that there is no requirement to comply with the DBA Regulations 2013 so that once the legislation is implemented, cases will be able to continue being funded as previously.  

No exact details of the legislation have been released as yet, only an indication that the legislation will be introduced shortly. The press release does state that the government is also considering options for a wider review of the sector and how third-party litigation funding is carried out more generally. This may involve consideration of whether there is a need for increased regulation or safeguards for people bringing claims to court perhaps limiting the amount funders are entitled to, particularly given the growth of the litigation funding sector over the past decade. Further details will be available and we will comment in detail in due course.

For further information on this topic, please contact Moya Clifford.