Are we seeing the impact of the PACCAR decision on litigation funding in the Competition Appeal Tribunal?
Market Insight 18 September 2023 18 September 2023
UK & Europe
On 11 September 2023, the Competition Appeal Tribunal (“CAT”) heard submissions on the first day of an application for certification of opt-out collective proceedings in Mr Justin Gutmann v Apple Inc., Apple Distribution International Limited, and Apple Retail UK Limited (“Gutmann v Apple”).
On day 1 of the hearing, it was revealed that Mr Gutmann, the proposed class representative taking on Apple, had not yet finalised a new funding agreement post the Supreme Court’s decision in R (on the application of PACCAR Inc and others) (Appellants) v Competition Appeal Tribunal and others (Respondents)  UKSC 28 (“PACCAR”).
In PACCAR, the Supreme Court found that litigation funding agreements (“LFAs”), pursuant to which the funder is entitled to recover a percentage of any damages recovered, are damages based agreements (“DBAs”) within the meaning of the legislation regulating DBAs (you can read our article on the decision here). The result of the decision is that many LFAs are likely to now be unenforceable as the law currently stands and a review of the litigation funding sector in the UK will be required. Noticeably, section 47C(8) of the Competition Act 1998 specifically prohibits DBAs from being used in opt-out collective proceedings in the CAT.
Now, it seems that we are starting to see the ramifications of the Supreme Court’s decision in PACCAR. In his notice of application, Mr Gutmann stated that he “will be able to pay Apple’s recoverable costs if ordered to do so” because he “has entered into a Litigation Funding Agreement with Balance Legal Capital II G Ltd”. However, at the application hearing, counsel for Mr Gutmann told the CAT that Mr Gutmann was still in discussions with the funder to amend the LFA in such a way as to comply with the Supreme Court’s decision in PACCAR and asked that the CAT hear all other points as to the certification of the claim. In line with the legal industry speculation on what the impact of PACCAR might be for litigation funding in the UK, it appears that the parties may be struggling to determine how to redraft their LFA.
There is at least one view that there isn't a lawful way to fund opt-out claims in the CAT post PACCAR, or to put it another way, there is no proven way to fund opt-out claims in the CAT post PACCAR. We have been waiting with bated breath to see how claimants and the CAT would respond to this existential threat to CAT opt-out collective proceedings. At this stage, the answer seems to be from the claimant “give us more time”, and from the CAT “you can have some time”. It could be that the CAT has taken notice of the Department for Business and Trade’s statement regarding the PACCAR decision, issued on 31 August 2023 which stated, “The Department is aware of the Supreme Court decision in Paccar and is looking at all available options to bring clarity to all interested parties”. The issue of needing more time to amend LFAs to comply with PACCAR in opt-out collective proceedings, if possible, is likely to come up again in other CAT cases in upcoming weeks. Arguably, what is needed is primary legislation that effectively reverses PACCAR or at least excludes its application to certain sorts of cases, such as opt-out collective proceedings in the CAT.
You can follow the Gutmann v Apple application on the CAT’s website here