A High Court judge’s grant of an asset freezing order pending arbitration in a dispute over the enforceability of a litigation funding deal has prompted calls for a worldwide review of the third-party finance sector. The dispute is the first to reach the courts since the Supreme Court's landmark ruling in PACCAR v Competition Appeal Tribunal threw the litigation funding business model into doubt.

In Therium Litigation Funding v Bugsby Property Mr Justice Jacobs was ruling on an application brought by the funding giant Therium for an asset preservation order against property company Bugsby over its refusal to pay Therium following the award of damages in a dispute involving London's Olympia Exhibition Centre. The disputed sum is held in trust by Bugsby's solicitors, London firm Candey, pending arbitration.

Bugsby argued that its litigation funding agreements were unenforceable following the PACCAR ruling. Therium argued that a serious issue remains to be tried over the enforceability of the entire agreement. Its application followed the granting of an asset preservation order sought by another funder, Omni Bridgeway. 

Ruling on the application, the judge said that the dispute over the agreements requires 'mature consideration and full argument'. The outcome, he said, remains uncertain and is a matter for the arbitrators. For the present, as the funders' claims exceed the damages received by Bugsby 'there is every reason for all of the trust funds to be preserved'. 

A spokesperson for Therium said: 'We are pleased that the High Court has awarded Therium an asset preservation order against Bugbsy over the entire settlement proceeds from a case that was successfully brought by Bugsby with litigation funding from Therium and another funder. The asset preservation order was sought in response to the latest in a series of failed attempts by Bugsby to avoid paying what is owed to litigation funders.'  

The company said the ruling in the case 'will be of great interest to funders, law firms and their clients and discouraging to claimants such as Bugsby that wish to use PACCAR as a means to walk away from their obligations to their funders'. 

However costs lawyer Jim Diamond, who wrote for the Gazette on 8 October predicting a spate of claims arising from the Supreme Court judgment, said the ruling 'is the start of "Armageddon" for the old breed of litigation funders in the UK market place'. He described as 'obscene' Therium's reported assessment that it is due £16.4m. 'This all has to stop and stop now and a global review must be conducted on litigation funding,' Diamond said. 'It certainly can not remain self-regulated.'

 

Joseph Sullivan, instructed by Addleshaw Goddard LLP, appeared for Therium; Jamie Carpenter KC, Duncan McCombe and Guy Olliff-Cooper, instructed by Candey Limited, appeared for Bugsby.

 

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