Retrospective or not retrospective, that is the question

I need to start by declaring an interest in that Winward is a litigation funder whose launch post-dates the PACCAR decision.

As such, it is not impacted by the debate as to whether the Litigation Funding Agreements (Enforceability) Bill should be retrospective because we do not have any funded claimants seeking to unwind their agreements.

This good fortune provides an opportunity to debate the issue objectively at a time when two businesses in dispute with their litigation funders have threatened a judicial review over the bill’s retrospective effect.

The phrase “very opportunistic lobbying” was uttered during the course of the recent debate on the bill in the House of Lords and it is crucial to understand what is the true vice in retrospective legislation.

No statute is to have retrospective effect unless it says so. The rationale is that Parliament is presumed not to have intended to alter the law applicable to past events and transactions in a manner which is unfair to those concerned in them, unless a contrary intention appears.

Indeed, one of the leading cases refers to the fact that the basis of any presumption in this area of law is no more than simple fairness.

In respect of litigation funding, therefore, the argument really boils down to whether it is unfair to a claimant that a funder is able to rely on a contractual agreement that was freely entered into by both parties even though the parties contracted on the basis of a mistake of law – both thinking that the agreement was lawful when in fact the Supreme Court held that it was not.

The common law right to recovery of money paid under a mistake has been held by the highest court to be allowed wherever the mistake led to one party receiving an unintended benefit.

So the debate needs to be had within the parameters of fairness and unintended benefit. When looked at though this lens, it is apparent that there is an inherent danger and illogicality in looking backwards when the whole difficulty in funding exists in looking forwards.

Unpacking this oddity is the fact that claimants who have received their funding and completed their successful claims are now complaining that they are deprived of the opportunity – as the lawyers who wrote the letter before action for the judicial review put it (somewhat optimistically) – to argue for “the right to retain the proceeds of their respective litigation without disbursing any part of those proceeds” to their funders.

It seems to be suggested that claimants should have a chance to renegotiate, now that the claims are completed, on the basis that the outcome is unfair – and potentially keep everything for themselves?

But what of the funders’ respective arguments that they may feel that the cases have proceeded in a way that was not intended at the time of the original agreements – perhaps the cases went on for too long, or became too expensive? Does not fairness demand that the position of both sides is considered?

Both sides have their arguments, but there is nothing inherently unfair in following the terms of a negotiated agreement. There is no conferring of an unintended benefit when the only benefit that has accrued is one that was drafted in a contract.

When the funding agreement was originally put in place, there was no certainty of a success. A case is not bound to win. As Lord Wolfson observed in the recent debate “There is no such thing as a case that is bound to win.”

So, absent retrospectivity, you would start having to explore unreal counterfactuals. It would allow satellite litigation to develop which would quickly embroil the funding industry – to no real benefit because the chances are that any cases based on such a counterfactual could fail on causation grounds – because funders simply would not have funded the claims on a different basis.

The vice in retrospectivity is the inherent danger in prejudicing one party to the exclusion of the other. Or conferring an unexpected benefit to one party at the expense of the other. Oh, hang on, isn’t that what is trying to be done by those who challenge this Bill?