Clients in funded cases that are close to settlement have already started seeking advice on forcing concessions from their litigation funders in light of the Supreme Court’s recent ruling in PACCAR, a leading silk revealed yesterday.

Ben Williams KC, barrister at 4 New Square, told the Costs Law Reports conference that such claimants would need to be ‘angelic’ not to capitalise on the ruling in R (on the application of PACCAR Inc and others) appellants) v Competition Appeal Tribunal and others (Respondents) [2023] UKSC 28.

The July judgment sent shockwaves through the litigation finance industry by deciding that litigation funding agreements (LFAs) in which funders are entitled to a share of damages fall within the statutory definition of damages-based agreements (DBAs). The effect is to render many such agreements unenforceable and therefore in need of amendment.

Williams said the Supreme Court’s ‘one-eyed decision’ had followed a trail of logic, ‘but like a sniffer dog that doesn’t lift up its nose to notice the fact that it’s approaching the edge of a cliff, it is a most spectacularly unpractical judgment’.

Asked what the fallout from the ruling would be, Williams said there would only be a ‘really serious’ dispute in a ‘relatively small cohort of cases’ as for cases in their early stages, there will be a strong ‘commercial imperative’ for clients to agree to rectify the agreements; while the ongoing nature of relationships between claimant solicitors and funders means an ‘amiable solution’ will be desirable.

But he added: ‘Where you will see the litigation - and I suspect I’m giving away no secrets when I say members of my chambers certainly, and I’m sure others, have already been approached – is in those cases which are close to settlement.

‘Because obviously, however unfair you may think it may be to your funder who’s invested millions of quid, if you have a choice between, say, having £50 million of damages to yourself, or having £50 million in damages and paying 35% to your funder, you’re going to have to be on the angelic side of the spectrum not to at least try to get some concession from your funder on the basis that their agreement is unenforceable… So I think there will be a cohort of cases, but I don’t think it’s going to be a massive long-term problem.’

Williams also predicted a raft of ‘son of PACCAR’ litigation in the coming months, to explore the ‘outer limits’ of what constitutes a DBA.

He said one question was whether a mere cap on a funder’s fee that is set as a percentage of damages would now create a DBA. ‘Defendants are going to be saying that it is, because they want to strangle these things in their crib,’ he remarked.

A further question mark hangs over the effect of PACCAR in class actions. Williams said: ‘In these representative actions, no one is going to volunteer to be a class representative if they have even a paper possibility that they could become liable to pay the funder out of their own money. So they all say, of course I’m happy to pay you, but it has to be limited to being out of the damages. Does the Supreme Court decision mean you can’t do that any more? This is another known unknown that needs to be tested.’