In the first case to address the ramifications of the UK Supreme Court's decision in R (on the application of PACCAR Inc and others) v. Competition Appeal Tribunal and others (see our July 2023 blog post on this case),1 the English Commercial Court granted an asset preservation/freezing order in favour of a litigation funder. In Therium Litigation Funding A IC v. Bugsby Property LLC,2 the court considered that there was a serious issue to be tried, and that the PACCAR decision did not render the whole of the litigation funding agreement (LFA) unenforceable.


Therium Litigation Funding funded litigation pursued by Bugsby Property against the Legal & General Group (L&G). Another litigation funder, Omni, also was involved, and both had entered into an LFA with Bugsby. Under the terms of the LFA, any 'claim proceeds' were to be held by Bugsby's solicitors on trust for Therium (and Omni) pending distribution of the claim proceeds in accordance with a waterfall arrangement set out in a separate priorities agreement. Therium was thereby entitled to:

    Return of the funding it had provided.
  • A three-times multiple of the amount funded.
  • 5% of any damages recovered over Ł37 million.
  • The litigation against L&G was successful following trial; however, Bugsby was awarded substantially less than it had claimed. Both sides to the litigation appealed but subsequently reached a settlement of around Ł27.6 million. This sum was transferred to Bugsby's solicitors who informed Therium (and Omni) that it had transferred a proportion of the settlement to a Bugsby company, and that it anticipated transferring the remainder to Bugsby. Therium therefore applied for an interim proprietary injunction against Bugsby under section 44 of the Arbitration Act 1996 to prevent release of the remainder of the settlement sum to Bugsby, as there was evidence that it was insolvent.

    In response, Bugsby raised the question of whether there was a serious issue to be tried, as required under the American Cyanamid  test, in relation to the proprietary claim which Therium asserted. Bugsby argued that, following the recent decision of the Supreme Court in PACCAR, third-party litigation funders whose remuneration was to come by way of a share of any damages recovered were providing 'claims management services', and thus, Therium's LFA constituted a damages-based agreement (DBA) which was entirely unenforceable.

    The court's decision

    Therium argued that there was a serious issue to be tried as to whether the entire LFA was unenforceable. In particular, Therium relied on Zuberi v. Lexlaw Ltd, in which the court held that only those provisions of a contract which dealt with payment out of recoveries amounted to a DBA. Therium submitted that the only unenforceable DBA element of the LFA was that part of the LFA which entitled Therium to recover a percentage share of the recoveries. The DBA regime was otherwise not engaged by the provisions entitling Therium to recover the amounts which it had paid out and the three-times multiple of that amount.

    Mr. Justice Jacobs agreed that there was a realistic argument that the parts of the LFA relied upon by Therium were 'not part of the DBA itself'. There was a serious issue to be tried that the provisions concerning the trust, the repayment of the funded sums and the multiple return on those funded sums were not DBAs, and so were not unenforceable pursuant to the decision in PACCAR. Mr. Justice Jacobs rejected Bugsby's argument that all of the payments to which Therium was entitled were only payable out of recoveries and so would constitute DBAs. Bugsby's counsel had not challenged the assertion that a success fee - which is based upon a multiple of costs incurred - would not infringe the relevant provisions. Given that it had been accepted that a return of an amount, or a multiple of such amount, does not fall foul of the legislation, it does not make a difference if those monies came out of recoveries.

    Moreover, the judge found that there was a serious issue to be tried as to whether an unenforceable part of the LFA could be removed or severed from the contract. There was arguably no public policy objection to a severance which removed provisions from an LFA; however, there was no direct authority on this point, thus there was a serious issue to be tried.

    The judge therefore granted the proprietary injunction pending arbitration of the substantive disputes.


    This decision will be of particular interest to third-party litigation funders that have been affected by the Supreme Court's PACCAR decision earlier this year. While this is an interim judgment following an application for an injunction, it does provide some comfort that the courts consider there is at least a serious issue to be tried as to whether clauses entitling funders to multiples of sums invested are enforceable. The judgment indicates that it is possible that some parts of LFAs may still be deemed valid, even if other parts constitute DBA provisions which are held unenforceable.


    1. [2023] UKSC 28.

    2. [2023] EWHC 2627 (Comm).

    The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Ms Victoria Barlow
Cooley LLP
55 Hudson Yards
New York, NY
New York

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