R (on the application of PACCAR Inc and others) v Competition Appeal Tribunal and others

The reaction to the Supreme Court’s decision in Paccar  has been swift and diverse. Is it doomsday or is it just a judgment to file away to read on a rainy day? The suggestion that the decision has taken the industry by surprise does not chime with the reality that funders are sophisticated folk who are in the business of predicting outcomes. Anyone who attended the hearing in February will have appreciated the significant risk of an unhelpful decision. The funding industry will have been in full preparation mode.  However, the truth of the matter is that there is a spectrum of pain that has been created by the decision. For funders who have deployed vast sums on the basis of agreements that are now arguably unenforceable, prospective changes are not the problem; it is the historic position that is more difficult to unravel. The situation is exacerbated when opportunistic claimants consider that, post Paccar, they can just throw their funding agreements into the bin and move on – or even seek to reclaim funds that the funder has received. For many funders, their agreements may well withstand the challenge of scrutiny on enforceability grounds; after all, severability clauses exist just for this situation. One would expect that funders who judiciously structured their modes of return would be able to rely on their contracts to come to their aid. The Courts are unlikely to support the unscrupulous who wish to take advantage of the situation. It is also, for example, inherently unlikely that funders would consider that actions seeking the return of fellow funders’ success fees represented worthwhile investments. At the other extreme, there are claimants, insurers, legal teams and funders whose interests are aligned in seeking to renegotiate acceptable agreements to allow the very significant claims in, say, the Competition Appeal Tribunal to continue. 

The reality, though, is that, in the significant middle band, there is a rump of heartache caused by the required renegotiation and amendment of multiple agreements (particularly in respect of group actions) that is going to be a considerable burden. Funders will inevitably become distracted in relation to the critical need to get their houses in order, and new cases may take longer to go through the due diligence process. It is well known that funders’ response times are a source of frustration as it is. Claimants may not agree to changes and may wish to reopen discussions that funders considered were closed. Additional delay will occur because of the likely interim challenges that will be made in respect of funding agreements, and timetables to cases will have to expand. It is perhaps because of these unwelcome commercial consequences that the hope was that the Supreme Court would not open Pandora’s box.

Unfortunately, as is often the case with an unwelcome decision, there will be attempts either to distinguish it or to rely on the decision in additional, unexpected situations. Either way, it will destabilise the litigation framework and it will introduce elements of uncertainty into what already is an uncertain process. In this sense, the impact of the case for claimants may appear as a cross between biting the hand that feeds them and shooting themselves in the foot. Such impressions would be unfair because it was a defendant to a funded action that brought the challenge, delighting in just this sort of outcome. It is certain that the industry will regroup and emerge stronger. What is less certain, whilst the decision was in no way designed to send a message that English courts are not open to the business of funders, is whether funders will see it that way. 

https://www.bailii.org/uk/cases/UKSC/2023/28.html