On 4 March 2024, the Ministry of Justice published a press release unveiling plans to introduce legislation which will make it easier for claimants to secure third party funding, in an apparent reversal of the Supreme Court’s ruling last year in PACCAR, which made many litigation funding agreements unenforceable.

Lord Chancellor, Alex Chalk, provided the following comments:

It’s crucial victims can access justice – but it can feel like a David and Goliath battle when they’re facing powerful corporations with deep pockets. This important change will mean more victims can secure vital third party funding to level the playing field and support their fight for justice.The sub-postmasters were able to secure third party funding in their legal action against the Post Office. Now others will too.”

Speaking to Alex Bagley from the Global Competition Review, regarding the MOJ’s announcement, Erso’s Sarah Breckenridge provided the following comments:

“Yes, [we are pleased with the MOJ’s decision], whilst we await the detail on the legislation itself, it is gratifying to see that the MOJ appears to wish to address all types of litigation, not just competition opt-outs, in a PACCAR reversal.  The focus of the MOJ press release appears to be on cases by individuals against big corporations, and – rightly- uses the Post Office case as an example. I do think though it’s important to remember that funding plays an important role in more than just such “David v Goliath” disputes. The financial risk of litigation can have a chilling effect on all types of businesses from SMEs upwards, and the ability of a funder to offer to invest on commercially negotiated terms (ideally without being hampered on the structure of a return) can address that problem.

It’s difficult to say [how we expect this legislation will be drafted to fix the Paccar ruling].  Various commentators quickly identified potential issues with the initial drafting proposed to address opt-out cases in the CAT. It was incompatible, unintended, or conflicting drafting across the complex web of primary and secondary legislation in this area which led to the PACCAR problem in the first place. One hopes that the draft legislation is given full scrutiny and that the industry participants themselves have time to review and comment on it.

Funders have been quick to adapt to the constraints of the PACCAR decision. However, until there is legislative change, and/or the Court of Appeal has ruled on the particular drafting solutions which have been put forward for high-stakes cases such as O’Neill v Sony, we can expect defendants to continue to try to unpick LFAs in the CAT for all manner of reasons, not just the percentage share. Regardless of the PACCAR decision there had been a natural shift in the funder approach to pricing anyway, motivated by the increased competition in the market over time and by individual funder innovation. Multiples have been a mainstay of Erso’s approach from its outset and in many cases will continue to make economic sense for us and for funded parties whether or not PACCAR is reversed.”

Realistically, much as we would welcome it, we cannot see a new, workable law being implemented in short order. The Post Office issue has no doubt contributed to the MOJ’s widely publicised stance on reversing PACCAR, but we should not conclude that addressing PACCAR therefore has a higher priority than the other matters demanding legislative time in the run-up to an election.  

The resulting GCR article can be found here (subscription required).

Update 19 March 2024: After the publication of this article the government published HL BILL 56  ” described as a bill to amend section 58AA of the Courts and Legal Services Act 1990 to make provision about the enforceability of litigation funding agreements.”  You can view the bill and track its progress here.