UK Supreme Court rules agreements funding UK trucks claim to be unenforceable damages-based agreements

About this case:

• Citation:
  [2023] UKSC 28
• Judgment:
  External link
• Court:
  UK Supreme Court
• Judge:
  Lord Sales

The issue arose in the context of applications to bring collective proceedings against several truck manufacturers for breaches of European competition law in which compensation was sought for allegedly higher prices paid for trucks as a result of those breaches. The manufacturers, including PACCAR Inc and DAF, sought to establish that the third party agreements were DBAs, it being agreed that they would not meet the statutory requirements if they were found to be so.

The appeal was heard by the Supreme Court President, Lord Reed, along with Lord Sales, Lord Leggatt, Lord Stephens, and Lady Rose. Lord Sales gave the leading judgment with which three of the four other judges agreed. A dissenting opinion was given by Lady Rose, who would have dismissed the appeal.

Statutory meaning

The second and third respondents, UK Trucks Claim Ltd and the Road Haulage Association Ltd, each sought an order from the Competition Appeal Tribunal to enable them to bring collective proceedings on behalf of persons who acquired trucks from the appellants. In order to obtain a collective proceedings order, adequate funding arrangements required to be in place. Both respondents therefore entered into litigation funding agreements with third parties, under which each funder’s maximum remuneration was calculated by reference to a percentage of the damages ultimately recovered.

It was the appellants’ position that the LFAs constituted damages-based agreements per section 58AA of the Courts and Legal Services Act 1990, under which certain conditions needed to be complied with for a DBA to be enforceable. The key issue was whether the LFAs involved the provision of “claims management services”, defined by reference to the meaning found in the Compensation Act 2006 until April 2019 and thereafter the Financial Services and Markets Act 2000, as amended.

The appellants’ case was that the LFA providers did provide claims management services in the form of the provision of financial services or assistance. This was disputed by the respondents, who maintained that the provision relied upon by the appellants was to be interpreted as being in relation to the making of a claim. The LFA providers had no role in the management of the claims against the appellants, and therefore the LFAs were not DBAs within the statutory meaning.

The Tribunal held that the LFAs did not involve the provision of claims management services. As a result, they were not DBAs and were not therefore rendered unenforceable by virtue of section 58AA(2). An appeal was then made to the Divisional Court, which agreed with the Tribunal’s interpretation and dismissed the appeal. The appellants then appealed under the leap-frog procedure directly to the Supreme Court.

Wide language

In his judgment, Lord Sales said of the statutory context: “The statutory purpose of Part 2 of the 2006 Act was to provide a broad power to allow the Secretary of State to decide what targeted regulatory response might be required from time to time as information emerged about what was then a new and developing field of service provision to encourage or facilitate litigation, where the business structures were opaque and poorly understood at the time of enactment.”

He continued: “Viewed in this light, there is good reason to think that Parliament used wide language in section 4 deliberately and with the intention that the words of the definition of “claims management services” should be given their natural meaning.”

Assessing how to construe the term here, Lord Sales said: “The construction proposed by the respondents in substance involves the illegitimate addition or substitution of words in the definition in section 4 of the 2006 Act, either by interpreting section 4(2) to say ‘other services in relation to the management [rather than making] of a claim’ or by interpreting section 4(3)(a)(i) to say ‘the provision of financial services or assistance in relation to the management of a claim’.”

He explained further: “Interpretation of section 4 in this way would also tend to undermine the object of having a definition of the term ‘claims management services’, since the words used to define the term would then be treated as essentially illustrative and so would be redundant as a definition, since a service provided in the context of claims management will necessarily be a claims management service.”

Lord Sales concluded: “Parliament’s purpose in enacting the power in the wide terms it chose was to allow the Secretary of State to tailor its use according to need as more information became available and problems were identified. In my view, it is not for the court to limit the ambit of the power or to qualify the wide language used in the definition of ‘claims management services’ by imagining situations in which use of the power might be unreasonable, but where it is very unlikely to be used and where there are controls in place to police and prevent such use.”

The appeal was therefore allowed by a 4-1 majority.

Representation:

Appellants: Bankim Thanki KC, Rob Williams KC, David Gregory, Ian Simester

2nd Respondent – UK Trucks Claim Ltd: Rhodri Thompson KC, Judith Ayling KC

3rd Respondent – Road Haulage Association Ltd: P J Kirby KC, David Went, Charlotte Wilk