CANDEY involved in first landmark case on funding following the Paccar and Diag judgments in the Supreme Court and Court of Appeal respectively

CANDEY, itself a funder over many years of contingency disputes, acted for Bugsby Property LLC in the first case to examine funding agreements following key decisions by the Supreme Court and Court of Appeal.

CANDEY finalised a settlement on behalf of Bugsby in the underlying Legal & General Commercial Court proceedings arising from the decision of Mr Justice Knowles for a total sum of £27,636,512. CANDEY immediately thereafter issued proceedings in the Commercial Court seeking a declaration on behalf of Bugsby that the LFAs are unenforceable and that the funders have no interest in the settlement sums.

Bugsby had previously entered into litigation funding agreements with two funders, Therium Litigation Funding A IC and Omni Bridgeway (Fund 5) Cayman Invt. Ltd. This provided funding for a claim against an investment management firm for the breach of exclusivity provisions related to the 2017 sale and development of Olympia London, a well-known exhibition centre. The amount contributed by the funders was circa £7.6 million.

In Paccar v Competition Appeal Tribunal [2023] UKSC 28, the Supreme Court confirmed that litigation funders were providing claims management services and so were subject to the DBA Regulations 2013. Thus, for example, any funding agreement could not charge more than 50% on success. This is demonstrated aptly in Bugsby’s case, where the funders are seeking a recovery of 133% of the proceeds Bugsby received.

CANDEY’s view is that parties should always have access to justice, and it is important that a variety of fee and funding arrangements are available to them. However, it is vital that economically vulnerable parties are protected from extortionate funding arrangements, which have unfortunately been rife throughout the litigation funding sphere in recent years. In Paccar, the Supreme Court rightly recognised this issue and brought the litigation funders into line with other litigation professionals, providing much needed consumer protection.

Says Ashkhan Candey who led the Bugsby team:

“there are some great funders out there who are integral to access to justice, and who do not impose their views on clients or seek to take over their positions and interests. There are others who want the world: the notion here that anyone has to pay 133% of their winnings to a funder is terrifying and will be proven to be unlawful and unconscionable.”

Therium and Omni’s LFAs plainly fall foul of the DBA Regulations. Bugsby elected to take the chance and risk on injunctive proceedings to force the question of whether the funders even had an arguable case, and thus whether the agreement was unenforceable.

On their application, Mr Justice Jacobs held in October 2023 that the funders had an arguable case and there was a serious issue to be tried. Interestingly, a Therium LFA was in issue in Paccar and Therium have not suggested the Bugsby LFA was different. The judgment can be found here. The dispute will now proceed to a contested arbitration.

The funders have each provided a cross-undertaking in damages to Bugsby such that it would be entitled to recover its losses from them should it ultimately be proved correct in the underlying claim. Given the sums involved and the draconian nature of the injunctions, the sums recoverable from the funders under the cross-undertaking could be substantial. Bugsby applied to have these cross-undertakings fortified on the basis that it was looking to enter into a tripartite litigation funding agreement with CANDEY and Benchwalk Litigation Funding.

In a very interesting decision for all funders, Jacobs J found on 03 November 2023 that it was improbable that the funders would not satisfy the cross-undertakings as to do so would place them in contempt of court and liable for imprisonment.

Ashkhan Candey and Sam Claydon led the CANDEY team who instructed Jamie Carpenter KC, Duncan McCombe and Guy Olliff-Cooper. Jamie Carpenter KC was successful in Diag Human v Volterra Fietta [2023] EWCA Civ 1107 in the Court of Appeal, another significant case relied on by Bugsby Property LLC which states that terms causing a conditional fee agreement to be unenforceable could not be cured or severed from the rest of the agreement or cured because it would fundamentally change the character of the agreement entered.

Therium was represented by Joseph Sullivan (instructed by Addleshaw Goddard). Taylor Wessing acted for Omni who instructed Robert Marven KC. George McDonald appeared for Stewarts Law, an interested party.