London Capital & Finance Plc (in Administration) & Ors v Michael Andrew Thomson & Ors
[2024] EWHC 1684 (Ch)
Therium Litigation Funding A IC v Bugsby Property LLC
20 October 2023
[2023] EWHC 2627 (Comm)
High Court
Two companies invested in a lawsuit. When the lawsuit settled, they argued the client didn't follow their agreement and should keep the money in a special account. A judge agreed there was a good reason to believe this was true and ordered the client to keep the money in that account until a final decision.
Key Facts
- •Therium Litigation Funding (Therium) applied for an asset preservation/freezing order against Bugsby Property LLC (Bugsby) under section 44 of the Arbitration Act 1996.
- •Both Therium and Omni Bridgeway (Omni) are litigation funders with agreements with Bugsby.
- •The dispute centers on the enforceability of litigation funding agreements (LFAs) in light of the Supreme Court's decision in R (PACCAR) v Competition Appeal Tribunal [2023] UKSC 28.
- •PACCAR held that LFAs with success fees based on a share of damages are "claims management services," potentially rendering them unenforceable under section 58AA of the Courts and Legal Services Act 1990.
- •Bugsby received a £27,636,512 settlement, and Therium argues that funds were improperly distributed, breaching trust arrangements within the LFAs.
- •The LFAs contain clauses establishing trusts over "Claim Proceeds," with Therium claiming a proprietary interest.
- •Bugsby argues that the LFAs are unenforceable due to PACCAR and that the trust arrangements were varied.
Legal Principles
Section 44 of the Arbitration Act 1996 allows for asset preservation orders in urgent matters where the arbitral tribunal cannot act effectively.
Arbitration Act 1996
American Cyanamid test for asset preservation orders: serious issue to be tried, balance of convenience, just and convenient.
Madoff Securities International Ltd v Raven
Courts are more likely to grant interim remedies to preserve trust assets.
Republic of Haiti v Duvalier
Section 58AA of the Courts and Legal Services Act 1990 concerns the enforceability of damages-based agreements (DBAs).
Courts and Legal Services Act 1990
Interpretation of DBAs: Zuberi v Lexlaw suggests a narrow interpretation, focusing only on the recovery-sharing aspects, not the entire agreement.
Zuberi v Lexlaw Ltd
Severance: Criteria for severing unenforceable parts of a contract (Egon Zehnder Ltd v Tillman). Diag Human v Volterra Fietta highlights limitations on severance, particularly where it alters the contract's fundamental nature.
Egon Zehnder Ltd v Tillman; Diag Human v Volterra Fietta
Outcomes
Therium's application for a proprietary injunction granted.
The court found a serious issue to be tried regarding the enforceability of the trust arrangements within the LFAs, despite the PACCAR decision. Arguments regarding the severability of unenforceable portions of the agreement also raised serious issues.
Similar Cases
R (on the application of PACCAR Inc and others) v Competition Appeal Tribunal and others
[2023] UKSC 28
AB and Ors v CD and Ors
[2023] EWHC 2419 (Ch)
Bugsby Property LLC & Anor v Omni Bridgeway (Fund 5) Cayman Invt Limited & Anor
[2024] EWHC 2986 (Comm)
China Evergrande Group v Ding Yu Mei
[2024] EWHC 2100 (Comm)