The Court of Appeal rejects the conjoined challenges of Sony, Visa, Mastercard and Apple against multiple-based litigation funding agreements in a crucial ruling which clarifies the enforceability of litigation funding agreements in collective actions
In a judgment handed down on 4 July 2025, the Court of Appeal dismissed a challenge to the enforceability of the third-party litigation funding agreements in place in the collective actions of Alex Neill v Sony, CICC I and II v Visa and Mastercard, Dr Rachel Kent v Apple, and Justin Gutmann v Apple. In rejecting the conjoined appeals of the four defendants (the "Appellants"), the Court's decision marks an important moment for collective actions and the litigation funding market in the UK and ends any uncertainty over the enforceability of multiple-based funding agreements.
The Court of Appeal rejected the Appellants' arguments that the claimants' LFAs, which based each funder's return on multiples of its capital outlay or commitment, were damages-based agreements ("DBAs") and, in consequence, unenforceable. In doing so, the Court of Appeal has safeguarded the viability of third-party funding in collective proceedings.
Litigation funding allows claimants who would not otherwise have the resources to bring claims access to justice. It is integral to the collective actions regime in this jurisdiction, which allows class representatives to bring collective actions for competition law infringements on behalf of a defined class of corporates or consumers.
The issues raised in the appeal were (variously) raised in four separate collective actions.
The LFAs in these cases were amended in response to PACCAR. The Supreme Court's decision in PACCAR established that LFAs in which a funder's fee is calculated as a percentage of recovered damages are DBAs and therefore, in practice, unenforceable. This catalysed the development of an alternative funding model, which is now prevalent in LFAs in collective actions, in which a funder's return is calculated as a multiple (or multiples) of its capital outlay or commitment. This model was adopted in each of the LFAs in issue in these cases. In each case, the LFA also provided, expressly or by implication, that the amount of the funder's recovery is capped at the level of proceeds recovered. The Appellants challenged the enforceability of these (revised) LFAs, arguing that they too were DBAs and therefore unenforceable.
The previous government introduced a bill to Parliament that would have reversed the Supreme Court's decision in PACCAR (with retrospective effect). However, the bill was not passed prior to the general election, and the incoming Labour government indicated that it intended to await the outcome of the Civil Justice Council's review of litigation funding prior to determining what legislative action to take. Accordingly, whilst the Court of Appeal initially stayed the appeals, on the basis that they would have been rendered academic had the proposed legislation passed, that stay was lifted on 10 February 2025. They were listed for a hearing on 10-11 June 2025.
The appeals raised three principal issues:
The Court of Appeal dismissed all three grounds of appeal: the Chancellor, Sir Julian Flaux, giving the leading judgment.
In relation to Ground 1, the Appellants argued that the mere inclusion of an express or implied cap on the funder’s return by reference to damages recovered meant that each of the relevant LFAs fell within the statutory definition of a DBA, even though the funder’s fee was calculated as a multiple of its capital outlay/commitment (as opposed to a percentage of any proceeds). They contended that such a cap meant the funder’s entitlement was ultimately tied to the proceeds of the claim, bringing the agreement within the scope of the PACCAR ruling.
The Court of Appeal disagreed. The Court determined that DBAs are agreements under which the representative's fees are calculated or determined as a percentage of the damages recovered. An LFA under which the funder's fee is calculated as a multiple of its outlay or commitment is not a DBA. Under such a model, the funder's fee is determined by reference not to the damages recovered but to the amount of funding provided. Furthermore, the fact that the funder's return is subject to a cap by reference to the claim proceeds does not mean it is determined by reference to the value of those proceeds. The cap simply limits the funder’s entitlement - it does not form the basis for calculating the fee.
In relation to Ground 2, many LFAs post-PACCAR allow for funders to be paid a percentage of claim proceeds “only to the extent enforceable and permitted by applicable law.” The Appellants argued that the mere inclusion of such a provision in an LFA was sufficient to render the entire agreement a DBA and therefore unenforceable.
The Court of Appeal gave this argument short shrift, holding that unless and until the law is changed - either through the legislative reversal of PACCAR or in some other way - provisions in LFAs which provide for the funder to be paid a percentage of claim proceeds to the extent enforceable and permitted by applicable law have no contractual effect. A provision which has no contractual effect cannot render what would otherwise be an enforceable agreement an unenforceable DBA.
Ground 3 only arose in the Neill appeal. It was academic given the Court's conclusion on Ground 2, and the Court elected not to decide the point, quoting the "salutary observation" of Mummery LJ in Housden v The Conservators of Wimbledon and Putney Common: "It is unnecessary to decide the issue for the purpose of disposing of the appeal. In general, it is unwise to deliver judgments on points that do not have to be decided. There is no point in cluttering up the law reports with obiter dicta, which could, in some cases, embarrass a court having to decide the issue later on".
This judgment is unequivocally positive for the litigation funding market. By clearly determining that LFAs which provide for funders to be remunerated based on multiples of committed or drawn capital are not, for that reason, unenforceable, the Court of Appeal has provided much-needed certainty and stability. Funders can now confidently continue to support collective actions without any residual concern that their agreements will be struck down as unlawful DBAs. The decision also avoids what the Court described as the “absurd result” of making third-party funding practically impossible in collective actions — a scenario that would have undermined access to justice and the effective enforcement of competition law. The judgment may therefore encourage continuing investment in UK collective actions. At a minimum, it has removed a source of festering uncertainty.
The Court of Appeal’s ruling is also an encouraging outcome for class representatives and claimants more generally. The ability to secure third-party funding is a precondition for bringing collective proceedings, given the quantum, scale and complexity of such cases. The judgment ensures that class representatives can continue to access funding on terms that are both commercially viable and legally robust. The Court’s recognition that caps on funders’ returns serve to protect claimants is particularly welcome, as it underscores the importance of balancing funders’ commercial interests with the need to safeguard compensation for claimants.
The decision is a clear endorsement of the revised funding structures adopted post-PACCAR and is one that will be welcomed by funders, class representatives, and claimant groups alike.
Tim Knight, Partner
Marcus Watkinson, Associate
Jay Kim, Trainee Solicitor
