Nicholas Stoop v Nicola Maxine Johnson
[2024] EWHC 286 (Ch)
R (on the application of PACCAR Inc and others) v Competition Appeal Tribunal and others
26 July 2023
[2023] UKSC 28
Supreme Court
Imagine a company lending money for a lawsuit in exchange for a cut of the winnings. The court ruled these agreements are illegal because they fit the definition of a 'damages-based agreement' even though the lender doesn't actually manage the case. This affects many lawsuits, especially large group actions.
Key Facts
- •Appeal concerns the lawfulness of third-party litigation funding agreements (LFAs) where funders receive a percentage of damages recovered.
- •LFAs are challenged as unenforceable "damages-based agreements" (DBAs) under section 58AA of the Courts and Legal Services Act 1990 (CLSA 1990), as amended.
- •The definition of "claims management services" in section 58AA(7) (referencing the Financial Services and Markets Act 2000) is central to determining if LFAs are DBAs.
- •The LFAs were used to fund collective proceedings for competition law breaches under section 49B of the Competition Act 1998.
- •The Competition Appeal Tribunal (CAT) ruled LFAs were not DBAs; the Court of Appeal upheld this.
- •The key question is whether providing "financial services or assistance" in relation to a claim, without managing the claim, constitutes "claims management services".
Legal Principles
When a later statute defines a term by referencing an earlier statute, the meaning in the later statute must be the same as in the earlier one.
Williams v Central Bank of Nigeria [2014] AC 1189, para 50
Statutory interpretation requires identifying the meaning of words in their context, including the statute's purpose and scheme.
R v Secretary of State for the Environment, Transport and the Regions, ex p Spath Holme Ltd [2001] 2 AC 349; Rossendale Borough Council v Hurstwood Properties (A) Ltd [2021] UKSC 16
Courts avoid absurd interpretations unless constrained by the statutory language.
R v McCool [2018] UKSC 23
The 'potency' of the defined term can inform interpretation, but its applicability is limited if the term lacks a settled legal meaning.
MacDonald v Dextra Accessories Ltd [2005] 4 All ER 107; Phillips v News Group Newspapers Ltd [2013] 1 AC 1
Outcomes
Appeal allowed.
The court found that providing financial assistance in relation to making a claim, as defined in sections 4/419A, broadly encompasses LFAs. The court rejected arguments based on the purpose of the legislation and the presumption against absurdity, holding that the statutory language is clear.
LFAs are DBAs and unenforceable under section 58AA(2) because they did not comply with the DBA Regulations 2013.
The court rejected the argument that the LFAs, even if considered claims management services, were not DBAs because the funders played a passive role and the Tribunal retained control. The court found the LFAs fundamentally matched the definition of a DBA in section 58AA(3).