Author: Simon Browne KC

  1. In our Litigation Funding webinar on 21st May 2025 (Browne and Loomes “Parallel Lines – the Government consults on Litigation Funding whilst the Court of Appeal forges ahead” we commented on the Court of Appeal hearing collectively a number of appeals from the CAT, where amended litigation funding agreements following PACCAR, were upheld as enforceable.

  2. As forecast the appeals were heard on June 10th and 11th 2025 and judgment was handed down on 4th July 2025.  These appeals, in six actions in the CAT, were all heard together. They are reported under the name of the first appeal, namely, Sony Interactive Entertainment Europe Limited v Neill [2025] EWCA Civ 841. A full list of the parties is set out at the end of this article, together with a summary of the case brought and reference to the amended funding arrangements deployed.

  3. The judgment of the Court of Appeal is a prime example of how the courts should, and have, applied the principles of statutory interpretation to resolve issues. As seen below, the Court placed reliance on the comments of Lord Sales JSC in PACCAR that “the Court will not interpret a statute so as to produce an absurd result, unless clearly constrained to do so by the words Parliament has used”. In the present cases, the Court of Appeal decided that it was not so constrained.

  4. Further, the Court considered that even if the contrary interpretations placed on the wording of the statute by the appellants and respondents were both feasible, then to aid interpretation it is permissible for the Court to look at other aids to the construction of the statute such as Explanatory Notes and Memoranda, which the Court also did.

    The Funding Agreements and the Issues in the Appeal

  5. Each appeal concerned the enforceability of litigation funding agreements (“LFAs”) entered by various class representatives with litigation funders in collective proceedings before the Competition Appeal Tribunal (“the CAT”).

  6. The LFAs under consideration were amended from the LFAs originally entered which had been rendered unenforceable because of the decision of the Supreme Court in R (PACCAR Inc) v Competition Appeal Tribunal [2023] UKSC 28; [2023] 1 WLR 2594 (“PACCAR”). In that case, the majority of the Supreme Court (Lady Rose JSC dissenting) held that the LFAs in question were damages-based agreements (“DBAs”) under section 58AA of the Courts and Legal Services Act 1990 (“the CLSA”) since the funder was providing “claims management services” within that section and, in consequence, the LFAs were unenforceable.

  7. The “funder’s fee” in the original LFAs in PACCAR and in the present cases on appeal was calculated as a percentage of the proceeds which the class representative would recover if the proceedings were successful. In broad terms, the revised LFAs provide that the funder’s fee is to be calculated as a multiple or multiples of the funder’s outlay (or its committed outlay) in the proceedings, although it is still paid out of the proceeds. The revised LFAs also provided, expressly or by implication, that the amount of the funder’s recovery is capped at the level of the proceeds recovered (or some possible subset thereof). As stated above, the Appendix hereto lists the cases on appeal, a summary of the claims, and references in the judgment where the relevant passages of each amended LFA is set out.

  8. In each of the cases under appeal, the CAT found that the revised LFAs were not DBAs so that the LFAs are enforceable. The unsuccessful defendants appeal in each case with the permission of the CAT.

  9. The Court of Appeal identified three issues on appeal as follows: (1) If the amount payable to a funder or insurer under the LFAs is payable from and/or capped by the proceeds of a successful outcome, is the amount of the payment “to be determined by reference to the amount of the financial benefit obtained” for the purposes of s.58AA(3)(a)(ii) of the CLSA? This issue arose in all the appeals. (2) If the LFAs provide that the funder or insurer is paid a percentage of the proceedings, “only to the extent enforceable and permitted by applicable law” (or similar), is it a DBA, otherwise impermissible, or inappropriate for the purposes of certification? This issue arises in the Neill and CICC appeals. (3) If the LFA is unenforceable and/or unlawful, can any parts of it be severed? This issue only arises in the Neill appeal.

  10. The judgments of the CAT in the proceedings below are summarised in paragraphs 29 – 44. The parties’ submissions are set out in detail in paragraphs 45 to 114. Importantly the Court of Appeal’s discussion of the issues commences at paragraph 115.

    Issue 1

  11. The important starting point for consideration of Issue 1 on the appeal was the acceptance by the appellants that, if the funder’s fee is calculated by reference to a multiple or multiples of its outlay, then the fee is not “determined by reference to the amount of the financial benefit obtained” (i.e. the proceeds or damages recovered) within the meaning of section 58AA(3)(a)(ii) of the CLSA.

  12. The appellants argued, however, that where there is an express or implied cap on the funder’s return by reference to the amount of the proceeds or the undistributed damages, then the amount of the payment to the funder is “determined by reference to the amount of the financial benefit obtained” within section58AA(3)(a)(ii) of the CLSA, making the LFA a DBA which is unenforceable unless it complies with the DBA Regulations 2013.

  13. It follows that the logical consequence of the appellants’ submission, that any express or implied cap on the amount of the funder’s fee by reference to the damages recovered or a sub-set of them, converts the LFA into a DBA is that it is difficult to see how any LFA could avoid being a DBA.

  14. In dealing with these arguments the Court of Appeal placed reliance on the comments of Lord Sales JSC in the passage in PACCAR at [45] that the Court will not interpret a statute to produce an absurd result, unless clearly constrained to do so by the words Parliament has used. In the present cases, the Court of Appeal decided that it was not so constrained, primarily for three reasons.

  15. First, the effect of the appellants’ argument was to produce the absurd result that funding under LFAs in the CAT would become practically impossible save in those cases where the DBA Regulations could be complied with. Furthermore, given that, as the appellants accepted, an LFA which provided for a funder’s return as a multiple of the outlay without any sort of cap as an outer limit, if that were practically possible, would be an enforceable LFA, the equally absurd result is reached on the appellants’ case, that a cap on the funder’s recovery, which by definition protects the class and the class representative from having to pay excessive amounts to the funder, renders the LFA an unenforceable DBA.

  16. The fact that the multiple recoverable by the funder may be subject to adjustment depending on the amount of damages recovered or at the discretion of the CAT does not alter the character of that primary contractual entitlement which is to a multiple of outlay.

  17. Secondly, and following on from the first reason, the Court of Appeal held that the words “determined by reference to the amount of the financial benefit obtained” are focusing on how the payment of the funder’s return is calculated, in other words whether it is calculated as a percentage of the financial benefit obtained, as in PACCAR, or as a multiple of outlay which is not by reference to the financial benefit obtained at all.

  18. Thirdly, if contrary to the above conclusions, a possible construction of section 58AA of the CLSA is that the cap does make the funder’s return “determined by reference to the amount of the financial benefit obtained”, then one is in the territory where both parties’ constructions are feasible, in which case it is permissible to look at other aids to the construction of the statute such as Explanatory Notes and Memoranda. On examination they supported the case of the respondents and not the appellants.

    Issue 2

  19. Issue 2 only arose in the CICC opt-in LFA and the Neill LFA and then only if Issue 1 is decided in favour of the respondents. Both make clear that the alternative basis for calculating or determining the funder’s fee or return by reference to a percentage of the damages only arises “to the extent enforceable or permissible by law” (“the percentage provision”). The Court of Appeal held that the short and clear answer to this issue is that, unless and until the law is changed either by the legislative reversal of PACCAR or in some other way, the percentage provision in the two LFAs is simply of no contractual effect. In those circumstances, the argument that the percentage provision is an unenforceable DBA, let alone an argument that (if severance were not possible) the presence of the percentage provisions renders the whole LFA an unenforceable DBA, is unsustainable.

    Issue 3

  20. On the basis that the answer to Issue 2 is that the inclusion of the percentage provision in the Neill LFA does not render the LFA an unenforceable DBA, the Court of Appeal held that Issue 3 about severability becomes academic. Given that the issue would give rise to complex and difficult questions about whether the LFA is severable, the Court stated “ it is wiser to leave that issue for decision in a case where it matters”, referring to the salutary observation of Mummery LJ in Housden v The Conservators of Wimbledon and Putney Commons [2008] EWCA Civ 200; [2008] 1 WLR 1172 at [30]:

  21. “It is unnecessary to decide the issue for the purpose of disposing of the appeal. In general, it is unwise to deliver judgments on points that do not have to be decided. There is no point in cluttering up the law reports with obiter dicta, which could, in some cases, embarrass a court having to decide the issue later on.”

  22. A copy of the judgment of the Court of Appeal on 4th July 2025 can be found here.

APPENDIX

The relevant parties in the appeals and the issues involved are listed below together with reference in the judgment setting out the amended funding provisions under scrutiny for each appeal.

BETWEEN:

(1) SONY INTERACTIVE ENTERTAINMENT EUROPE LIMITED
(2) SONY INTERACTIVE ENTERTAINMENT NETWORK EUROPE LIMITED
Appellants / Defendants
-and-
ALEX NEILL CLASS REPRESENTATIVE LIMITED
Respondent / Class Representative

The Neill proceedings involve a standalone claim against Sony concerning alleged restrictive terms and conditions and/or technical restraints in breach of Article 102 of the Treaty on the Functioning of the European Union (“TFEU”) in that it requires sole distribution of digital games for its PlayStation video games console via its PlayStation Store and imposes excessive and unfair prices for distribution via the PlayStation Store, which is said to have caused PlayStation’s users loss and damages valued at between £600 million to £5 billion (excluding interest).

Details of the amended LFA can be found at paragraphs 23 – 25 of the judgment.

BETWEEN:

(1) VISA INC.
(2) VISA INTERNATIONAL SERVICE ASSOCIATION
(3) VISA EUROPE LIMITED
(4) VISA EUROPE SERVICES LLC
(5) VISA UK LIMITED
Appellants / Defendants
-and-
COMMERCIAL AND INTERREGIONAL CARD CLAIMS II LIMITED
Respondent / Class Representative

AND BETWEEN:

(1) VISA INC.
(2) VISA INTERNATIONAL SERVICE ASSOCIATION
(3) VISA EUROPE LIMITED
(4) VISA EUROPE SERVICES LLC
(5) VISA UK LIMITED
Appellants / Defendants
-and-
COMMERCIAL AND INTERREGIONAL CARD CLAIMS I LIMITED
Respondent / Class Representative

AND BETWEEN:

(1) MASTERCARD INCORPORATED
(2) MASTERCARD INTERNATIONAL INCORPORATED
(3) MASTERCARD EUROPE SA
(4) MASTERCARD / EUROPAY UK LIMITED
(5) MASTERCARD UK MANAGEMENT SERVICES LIMITED
(6) MASTERCARD EUROPE SERVICES LIMITED
Appellants / Defendants
-and-
COMMERCIAL AND INTERREGIONAL CARD CLAIMS II LIMITED
Respondent / Class Representative

Known as the “CICC Claims” these three actions concerned standalone claims brought by card merchants for the imposition of inter-regional and commercial card transactions fees in the UK and/or EEA by Mastercard and Visa in alleged breach of Article 101 TFEU in such a manner as to artificially raise prices leading to the class being overcharged.

Details of the amended LFA can be found at paragraphs 15 – 22 of the judgment.

BETWEEN:

(1) APPLE INC
(2) APPLE DISTRIBUTION INTERNATIONAL LIMITED
Appellants /
Defendants
-and-
DR RACHAEL KENT
Respondent /
Class Representative
-and-
THE COMPETITION AND MARKETS AUTHORITY
Intervener

The Kent proceedings brought standalone claims against Apple concerning alleged excessive pricing and/or exclusionary abuses in breach of Article 102 TFEU in relation to the Apple App Store, involving the imposition of restrictive terms and conditions and/or technical restraints on the development and distribution of iOS-compatible applications which had the effect of increasing prices which caused loss and damages to Apple users.

Details of the amended LFA can be found at paragraphs 26 – 27 of the judgment.

BETWEEN:

(1) APPLE INC
(2) APPLE DISTRIBUTION INTERNATIONAL LIMITED
(3) APPLE RETAIL UK LIMITED
Appellants / Defendants
-and-
MR JUSTIN GUTMANN
Respondent / Class Representative

The Gutmann proceedings concern standalone claims against Apple concerning the introduction of a performance management feature to address the increased prevalence of unexpected power offs in iPhones, and the alleged lack of transparency over these issues. It is alleged that the introduction of the additionalfeature and the alleged lack of transparency around this amounted to a breach of Article 102 TFEU.

Details of the amended LFA can be found at paragraph 28 of the judgment.