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UNPACKING PACCAR: STATUTORY INTERPRETATION AND LITIGATION FUNDING
Published online by Cambridge University Press: 20 March 2024
Abstract
In the most important funding decision in 20 years, the UK Supreme Court has declared in R. (PACCAR Inc. and others) v Competition Appeal Tribunal and others [2023] UKSC 28, [2023] 1 W.L.R. 2594 that, as a matter of statutory interpretation, a third-party funder’s litigation funding agreement (LFA) is a damages-based agreement (DBA) because third-party funders are offering “claims management services”. This decision, which overturned both the earlier Divisional Court and the Competition Appeal Tribunal decisions, and long-held industry and judicial understanding, has had an immediate impact upon UK litigation. Many LFAs will require immediate re-negotiation, given their non-compliance with the DBA legislation; but for some, the ramifications are much more serious. This article traces the legislation, soft law and law reform activity which preceded this momentous event; it suggests that a key principle of statutory interpretation which governed the outcome might arguably be re-evaluated in future case law; it discusses the possibility of legislative reversal; and it predicts the ramifications of the PACCAR decision upon (especially consumer) litigation unless reversed.
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- © The Author(s), 2024. Published by Cambridge University Press on behalf of The Faculty of Law, University of Cambridge
Footnotes
The author is currently an Ordinary Member of the Competition Appeal Tribunal (CAT) and was a former member of the CAT Rules Working Group, which was tasked with producing rules to support the class action regime, which was enacted, by virtue of the Consumer Rights Act 2015, sched. 8, on 1 October 2015. However, this article is written solely in the author’s academic capacity, and none of the views expressed herein should be taken to represent those of any person associated with any of the aforementioned bodies. The author is grateful for the constructive comments of both referees; albeit that the usual caveat applies.
References
1 [2023] UKSC 28, [2023] 1 W.L.R. 2594 (judgment delivered 26 July 2023). The appeal was heard on 16 February 2023.
2 The majority consisted of Lord Reed, Lord Sales, Lord Leggatt and Lord Stephens; Lady Rose dissented.
3 The appeal issue was narrowly specified: “Case Details: R (on the Application of PACCAR Inc and Others) (Appellants) v Competition Appeal Tribunal and Others (Respondents)”, available at https://www.supremecourt.uk/cases/uksc-2021-0078.html (last accessed 4 February 2024). The author applied for permission to intervene as “a person … seeking to make submissions in the public interest” pursuant to Rule 26(1)(a) of the Supreme Court Rules 2009, SI 2009/1603, which permission was refused on 13 December 2022. In accordance with usual practice, no reasons were given.
4 SI 2013/609.
5 The author examined the complexities of this legislation in detail, as chair and principal author of the Civil Justice Council Working Party’s report: Civil Justice Working Party, “The Damages-Based Agreements Reform Project: Drafting and Policy Issues” (2015), available at https://www.judiciary.uk/wp-content/uploads/2015/09/dba-reform-project-cjc-aug-2015.pdf (last accessed 13 January 2024). The author subsequently revisited the complexities with a view to reform, as government-appointed reviewer (with Nicholas Bacon K.C.) of the DBA Regulations 2013, leading to the report and redrafting exercise: R. Mulheron and N. Bacon, “The 2019 DBA Reform Project: Explanatory Memorandum” (2019), available at: https://www.qmul.ac.uk/law/media/law/docs/research/Doc-3---Explanatory-Memorandum-(13-Oct-2019).pdf (last accessed 13 January 2024).
6 Lexlaw Ltd. v Zuberi (Bar Council intervening) [2021] EWCA Civ 16, [2021] 1 W.L.R. 2729, at [74] (Coulson L.J.).
7 In PACCAR, the funders’ remuneration was calculated in both actions by reference to a share of the damages ultimately recovered in the litigation, and each LFA would be unenforceable if it truly fell within the definition of a DBA in section 58AA(3) of the CLSA 1990: Paccar Inc. and others v Road Haulage Association Ltd. and another (Association of Litigation Funders of England & Wales Intervening); R. (Paccar Inc. and others) v Competition Appeal Tribunal (Association of Litigation Funders of England & Wales intervening) [2021] EWCA Civ 299, [2021] 1 W.L.R. 3648, at [11], [19] (Henderson L.J.) (affd. [2023] UKSC 28, at [29] (Lord Sales)).
8 These details were orally communicated to the author by a funder, whose identity must remain anonymous.
9 [2021] EWCA Civ 16, at [26] (Lewison L.J.).
10 Criminal Law Act 1967, s. 14(2).
11 See R. Mulheron, The Modern Doctrines of Champerty and Maintenance (Oxford 2023), ch. 4.
12 The new regime was contained in Schedule 8 to the Consumer Rights Act 2015. The principal provisions of the regime are contained in Chapter IV of the Competition Act 1998. A new set of rules (“Collective Proceedings and Collective Settlements”) was inserted in the Competition Appeal Tribunal Rules 2015, SI 2015/1648 (“CAT Rules 2015”), rr. 73–98.
13 Noted in UK Trucks Claim Ltd. v Fiat Chrysler Automobiles NV [2019] CAT 26, at [1] (Roth J.).
14 PACCAR v Road Haulage Association [2021] EWCA Civ 299, at [2].
15 Ibid., at [19] (Henderson L.J.).
16 R. Mulheron, “England’s Unique Approach to the Self-Regulation of Third Party Funding: A Critical Analysis of Recent Developments” [2014] C.L.J. 570, 590–96.
17 Civil Justice Council, “Damages-Based Agreements Reform Project”, 33–35; Mulheron and Bacon, “Explanatory Memorandum”, 6, Regulation 1(4)(c). The redrafted DBA Regulations 2019 were presented to the Ministry of Justice in October 2019, but were not taken forward due to resourcing and other issues at the time.
18 PACCAR v Road Haulage Association [2021] EWCA Civ 299 (consisting of Lord Justice Henderson, Lord Justice Singh and Lady Justice Carr). The Court of Appeal held that it had no jurisdiction to hear an appeal from the CAT on the statutory interpretation point and hence constituted itself as a Divisional Court of the Queen’s Bench Division for the purposes of judicially reviewing the CAT’s decision.
19 UK Trucks Claim v Fiat Chrysler Automobiles [2019] CAT 26.
20 R. (PACCAR) v Competition Appeal Tribunal [2023] UKSC 28, at [101]–[255].
21 Certainly the most important since Arkin v Borchard Lines Ltd. and Others (Zim Israel Navigation Co. Ltd. and Others, Part 20 Defendants) (Nos. 2 and 3) [2005] EWCA Civ 655, [2005] 1 W.L.R. 3055.
22 PACCAR v Road Haulage Association [2021] EWCA Civ 299, at [1] (Henderson L.J.).
23 See e.g. R. (PACCAR) v Competition Appeal Tribunal [2023] UKSC 28, at [43] (Lord Sales) and the authorities cited therein.
24 Inserted by the Access to Justice Act 1999 and passed into legislation on 27 July 1999.
25 Courts and Legal Services Act 1990, s. 119(1).
26 C. Brady, Independent Review of Claims Management Regulation (London 2016), at [2.12] (discussed further in Mulheron, Modern Doctrines, 33–34).
27 SI 2006/3322.
28 Ibid., at Regulation 8(1).
29 Ministry of Justice, “Conduct Management Services Regulation: Conduct of Authorised Persons Rules 2014” (Revised 2018), available at https://assets.publishing.service.gov.uk/media/5a7d9ac340f0b60e77c70093/CMR_Conduct_of_Authorised_Persons_Rules_Oct14a.pdf (last accessed 13 January 2024).
30 Inserted by the Coroners and Justice Act 2009, ss. 154(2), 182(1)(e).
31 Tel-Ka Talk Ltd. v Revenue and Customs Commissioners (Law Society intervening) [2010] EWHC 90175 (Costs), [2011] S.T.C. 497, at [21] (Hurst J.).
32 Courts and Legal Services Act 1990, s. 58AA(3)(b). Employment disputes were considered to be a form of non-contentious business (ironically, given their often bitter nature).
33 Viz. the DBA Regulations 2010.
34 This amendment took effect on 12 November 2009: see “Courts and Legal Services Act 1990”, available at https://www.legislation.gov.uk/ukpga/1990/41/section/58AA/2009-11-12 (last accessed 13 January 2024).
35 Sir Rupert Jackson, Review of Civil Litigation Costs: Final Report (London 2010), ch. 3, at [3.3], ch. 12, 133.
36 Ibid., at [2.12].
37 Sir Rupert Jackson, “Third Party Funding or Litigation Funding: Sixth Lecture in the Civil Litigation Costs Review Implementation Programme” (The Royal Courts of Justice, 2011), [4.1], available at https://www.bailii.org/uk/other/speeches/2011/G2XL7.html (last accessed 13 January 2024).
38 The current version, as of January 2018, is “Code of Conduct for Litigation Funders”, available at https://associationoflitigationfunders.com/wp-content/uploads/2018/03/Code-Of-Conduct-for-Litigation-Funders-at-Jan-2018-FINAL.pdf (last accessed 13 January 2024).
39 See “News Release: Civil Justice Council Working Group Agrees Code of Conduct on Litigation Funding”, available at https://www.judiciary.uk/wp-content/uploads/JCO/Documents/CJC/Publications/CJC+papers/CJC+News+Release+-+Code+of+Conduct+for+Litigant+Funders.pdf (last accessed 13 January 2024).
40 “Articles of Association of the Association of Litigation Funders of England and Wales”, Article 2(a), available at https://associationoflitigationfunders.com/wp-content/uploads/2015/02/ALF-Articles-of-Association-final-July-2014.pdf (last accessed 13 January 2024).
41 See Legal Aid, Sentencing and Punishment of Offenders Act 2012, s. 45, which amended section 58AA(3) of the CLSA 1990.
42 The DBA Regulations 2013 were promulgated under sections 58AA(4) and 58AA(5) of the CLSA 1990.
43 See text accompanying note 34 above.
44 Via letter dated 30 October 2014: see Civil Justice Council, “Damages-Based Agreements Reform Project”, vi.
45 See Justice Council, “Damages-Based Agreements Reform Project”. As chair of the Working Group, the author was principal author of that report.
46 Ibid., at 33 (emphasis removed).
47 Ibid.
48 [2019] EWCA Civ 674, [2019] Bus. L.R. 3025, at [60] (Patten L.J.).
49 [2020] UKSC 51, [2021] 3 All E.R. 285, at [98] (Lord Sales and Lord Leggatt).
50 Department for Business, Innovation and Skills, “Private Actions in Competition Law: A Consultation on Options for Reform” (2012), 58, available at https://assets.publishing.service.gov.uk/media/5a79793340f0b642860d8671/12-742-private-actions-in-competition-law-consultation.pdf (last accessed 13 January 2024).
51 Department for Business, Innovation and Skills, “Private Actions in Competition Law: A Consultation on Options for Reform – Government Response” (2013), 26, [5.43]–[5.45], [5.62]–[5.63], available at https://assets.publishing.service.gov.uk/media/5a795a65ed915d07d35b4c60/13-501-private-actions-in-competition-law-a-consultation-on-options-for-reform-government-response1.pdf (last accessed 13 January 2024).
52 Competition Act 1998, s. 47C(9)(c).
53 See Ministry of Justice, Post-Implementation Review of Part 2 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO): Civil Litigation Funding and Costs. CP 38 (London 2019). The MoJ accepted (at [19]) that stakeholders had identified that “the DBA Regulations [2013] would benefit from additional clarity and certainty. … It will give careful consideration to the way forward in the light of the outcome of the independent review of the drafting of the regulations, which is being undertaken by Professor Rachael Mulheron and Nicholas Bacon QC”.
54 Mulheron and Bacon, “Explanatory Memorandum”, 6.
55 By virtue of section 27 of the Financial Guidance and Claims Act 2018 (discussed in further detail in Mulheron, Modern Doctrines, ch. 2(C)(2), and by the sources cited therein).
56 See Brady, Independent Review, 3.
57 Agreed as common ground: PACCAR v Road Haulage Association [2021] EWCA Civ 299, at [12] (Henderson L.J.).
58 UK Trucks Claim v Fiat Chrysler Automobiles [2019] CAT 26, at [45], [100]. The Divisional Court’s reasoning was summarised by the author in R. Mulheron, “The Funding of the United Kingdom’s Class Action at a Cross-Roads” (2023) King’s Law Journal (online publication 5 January 2023, hard copy to follow).
59 PACCAR v Road Haulage Association [2021] EWCA Civ 299, at [87].
60 Ibid., at [89].
61 Ibid.
62 Ibid., at [88].
63 UK Trucks Claim v Fiat Chrysler Automobiles [2019] CAT 26, at [40] (Roth J.).
64 PACCAR v Road Haulage Association [2021] EWCA Civ 299, at [96] (Henderson L.J.).
65 Compensation Act 2006, s. 4(2)(b); FSMA 2000, s. 419A(1).
66 PACCAR v Road Haulage Association [2021] EWCA Civ 299, at [91]–[95] (Henderson L.J.).
67 R. (PACCAR) v Competition Appeal Tribunal [2023] UKSC 28, at [86] (Lord Sales).
68 Ibid., at [63]–[65], [67], [78].
69 Ibid., at [50].
70 Ibid., at [49].
71 Ibid., at [70].
72 Ibid., at [71].
73 Ibid.
74 Ibid., at [201] (Lady Rose).
75 Ibid., at [208], [211] (emphasis added).
76 Ibid., at [216].
77 Williams v Central Bank of Nigeria [2014] UKSC 10, [2014] A.C. 1189, at [50] (Lord Neuberger).
78 R. (PACCAR) v Competition Appeal Tribunal [2023] UKSC 28, at [2] (Lord Sales) (quoting Williams v Central Bank of Nigeria at [50]).
79 D. Bailey and L. Norbury, Bennion, Bailey and Norbury on Statutory Interpretation, 8th ed. (London 2020).
80 Ibid., at section 18.4.
81 R. (PACCAR) v Competition Appeal Tribunal [2023] UKSC 28, at [33].
82 Ibid., at [90]–[92].
83 Arkin v Borchard Lines [2005] EWCA Civ 655 “was decided when third party funding of litigation was still ‘nascent’ and conditional fee agreements and ATE insurance relatively new”: Davey v Money and another; Dunbar Assets plc v Davey [2020] EWCA Civ 246, [2020] 1 W.L.R. 1751, at [36] (Newey L.J.).
84 A number of publications which have explained that development, with additional analysis, are discussed in Mulheron, Modern Doctrines, 30–32, 102–20.
85 [1993] A.C. 593, 634 (H.L.).
86 Bailey and Norbury, Bennion, section 24.12.
87 See notes 50 and 51 above.
88 The Lord Hodgson of Astley Abbotts (HL, Conservative Life Peer).
89 Moved on 28 July 2014 and as part of the Seventh Marshalled List of Amendments to be moved in Grand Committee. These amendments were proposed to the version of the Bill that was brought to the House of Lords from the House of Commons on 17 June 2014: see HL Bill 29 2014–15. The text of the amendments is reproduced at: https://publications.parliament.uk/pa/bills/lbill/2014-2015/0029/amend/ml029-VII.htm.
90 See ibid., amendment 72 at p. 113, line 36, of the Bill.
91 See amendment 74.
92 The Baroness Noakes (HL, Conservative Peer).
93 See HL Deb. vol. 756 col. GC575 (3 November 2014), as occurring on the seventh day of the HL Bills Committee proceedings.
94 The Baroness Neville-Rolfe (HL, Conservative Peer).
95 HL Deb. vol. 756 cols. GC581–83 (3 November 2014) (emphases added).
96 As confirmed by the “tracked changes” version of Schedule 8: https://www.parliament.uk/globalassets/documents/commons-public-bill-office/2013-14/compared-bills/Consumer-Rights-bill-140314.pdf (last accessed 13 January 2024).
97 Via Notice of Amendments moved on Thursday 6 March 2014, as amendments 115 and 116: see Public Bill Committee (Bill 180) 2013–14 (notice of amendments given on 6 March 2014): https://publications.parliament.uk/pa/bills/cbill/2013-2014/0161/amend/pbc1610603a.pdf (last accessed 13 January 2024).
98 Details of the Working Party and its terms of reference are stated at the outset of the Draft Tribunal Rules, which were published on 10 Mar 2014: CAT, “Collective Proceedings and Collective Settlements in the Competition Appeal Tribunal: Draft Tribunal Rules”, available at https://www.catribunal.org.uk/sites/default/files/2017-12/Collective_Actions_Rules_Draft.pdf (last accessed 13 January 2024).
99 The author had raised this during the Working Party’s deliberations, in light of her research on that subject at the time: see R. Mulheron, “Third Party Funding and Class Actions Reform” (2015) 131 L.Q.R. 291, 295–310.
100 Public Bill Committee (Bill 161) 2013–14, col. 588 (11 March 2014) (Jenny Willott) (emphasis added).
101 See Department for Business and Trade, “Department for Business and Trade Statement on Recent Supreme Court Decision on Litigation Funding” (2023), available at https://www.gov.uk/government/news/department-for-business-and-trade-statement-on-recent-supreme-court-decision-on-litigation-funding (last accessed 13 January 2024) (“[t]he department is aware of the Supreme Court decision in PACCAR and is looking at all available options to bring clarity to all interested parties”).
102 See note 34 above and the accompanying main text.
103 See R. (PACCAR) v Competition Appeal Tribunal [2023] UKSC 28, at [25]–[26], [30].
104 Ibid., at [180] (emphasis added).
105 Ibid., at [234] (emphasis added).
106 See note 24 above.
107 Courts and Legal Services Act 1990, s. 58AA(3)(a)(ii).
108 Digital Markets, Competition and Consumers Bill, cl. 126. The relevant provision is now cl. 127 at the time of writing.
109 See HC Deb. vol. 741. col. 132 (20 November 2023).
110 A further amendment to this provision is probably needed, however, to exclude the application of section 58AA entirely to LFAs which would, but for the amendment in section 47C(9), be DBAs under section 47C(8).
111 This provides as follows: “A Bill to provide for the regulation of competition in digital markets; to amend the Competition Act 1998 and the Enterprise Act 2002 and to make other provision about competition law; to make provision relating to the protection of consumer rights and to confer further such rights; and for connected purposes”: see https://bills.parliament.uk/bills/3453 (dated accessed 13 January 2024).
112 Via discussions between the author and officials at the Dept for Business and Trade and the Ministry of Justice.
113 As per the Digital Markets, Competition and Consumers Bill 2023, clause 126(2): “The amendment made by subsection (1) is treated as always having had effect.”
114 BDW Trading Ltd. v URS Corporation Ltd. [2023] EWCA Civ 772, [2024] 2 W.L.R. 181, at [158], citing Wilson v First County Trust Ltd. (No. 2) [2003] UKHL 40, [2004] 1 A.C. 816, at [98] (Lord Hope), [198] (Lord Rodger); R. (Coal Action Network) v Welsh Ministers and another [2023] EWHC 1194 (Admin), [2023] 1 W.L.R. 4536, at [74] (Steyn J.).
115 Bailey and Norbury, Bennion, section 7.13.
116 Ibid., citing various examples of where statutes had reversed particular decisions in that category.
117 PACCAR v Road Haulage Association [2021] EWCA Civ 299.
118 UK Trucks Claim v Fiat Chrysler Automobiles [2019] CAT 26.
119 Each of which is discussed in Section II of the article.
120 [2006] UKHL 20, [2006] 2 A.C. 572.
121 Referred to in O. Gay, “Retrospective Legislation”, SN/PC/06454, available at https://researchbriefings.files.parliament.uk/documents/SN06454/SN06454.pdf (last accessed 13 January 2024).
122 “Explanatory Notes: Compensation Act 2006”, at [14], available at https://www.legislation.gov.uk/ukpga/2006/29/pdfs/ukpgaen_20060029_en.pdf (last accessed 13 January 2024).
123 R. (PACCAR) v Competition Appeal Tribunal [2023] UKSC 28, at [90] (Lord Sales).
124 See notes 48 and 49 above.
125 CAT Rules 2015, r. 98.
126 See R. Mulheron, Class Actions and Government (Cambridge 2020), ch. 4.
127 Competition Act 1998, s. 47C(8).
128 Ibid., at section 47C(5).
129 Civil Justice Council, “The Law and Practicalities of Before-the-Event Insurance: An Information Study” (2017), available at https://www.judiciary.uk/wp-content/uploads/2017/11/cjc-bte-report.pdf (last accessed 13 January 2024) (the author chaired this Civil Litigation Review Working Group of the CJC and was principal author of that report).
130 Department for Business, Innovation and Skills, “Government Response”, 6.
131 In the public domain since the airing of ITV’s series, Mr Bates vs The Post Office (2024). For the history of the dispute and the compensation schemes, see e.g. “Compensation Schemes”, available at https://corporate.postoffice.co.uk/en/horizon-scandal-pages/post-office-compensation-schemes (last accessed 13 January 2024); “Post Office scandal explained” (BBC News, 11 January 2024).
132 Uber B.V. and others v Aslam and others [2021] UKSC 5, [2021] 4 All E.R. 209; see also “Uber Drivers Entitled to Workers’ Rights After Supreme Court Ruling”, available at https://www.leighday.co.uk/news/news/2021-news/uber-drivers-entitled-to-workers-rights-after-supreme-court-ruling/ (last accessed 13 January 2024).
133 As outlined in the media: see N. Barber, “The Latest Equal Pay Claims Against Supermarkets”, available at https://www.peoplemanagement.co.uk/article/1799149/latest-equal-pay-claims-against-supermarkets (last accessed 13 January 2024); A. Willshire and T. Cunningham, “Are You at Risk of an Equal Pay Claim?”, available at https://parissmith.co.uk/blog/are-you-at-risk-of-an-equal-pay-claim/ (last accessed 13 January 2024).
134 See Courts and Tribunals Judiciary et al., “LegalUK: The Strength of English Law and the UK Jurisdiction” (2017), available at https://www.judiciary.uk/wp-content/uploads/2017/08/legaluk-strength-of-english-law-draft-4-FINAL.pdf (last accessed 13 January 2024).
135 Oxera, “Economic Value of English Law” (2021), available at https://legaluk.org/report/foreword/ (last accessed 13 January 2024).
136 “The Global Reach of English Law”, available at https://legaluk.org/the-global-reach-of-english-law/ (last accessed 7 February 2024).
137 Courts and Tribunals Judiciary et al., “LegalUK”, “Summary” point 2 and associated text.
138 R. (PACCAR) v Competition Appeal Tribunal [2023] UKSC 28, at [90].
139 See e.g. Alex Neill Class Representative Ltd. v Sony Interactive Europe Ltd. [2023] CAT 73, at [136]–[137].
140 Also adverted to in recent commentary: see J. Diamond, “Why PACCAR Is a Catastrophic Decision”, available at https://www.lawgazette.co.uk/practice-points/why-PACCAR-is-a-catastrophic-decision/5117468.article (last accessed 7 February 2024).
141 See the DBA Regulations 2013, reg. 4(1), which is by far the most troublesome part of the SI.
142 See ibid., at Regulation 1(2). The crucial provision then pertains to what a DBA permits a “representative” to be paid under Regulation 4(1).
143 See the discussion of this difficult point in Civil Justice Council, “Damages-Based Agreements Reform Project”, 85–91.
144 R. (PACCAR) v Competition Appeal Tribunal [2023] UKSC 28, at [227].
145 Boyle v Govia Thameslink Railway Ltd. and others (Case Management Conference transcript, 12 October 2023), 78–79 (Marcus Smith J.).
146 Alex Neill Class Representative Ltd. v Sony Interactive Entertainment Europe Ltd. and another (Case Management Conference transcript, 9 October 2023), 91.