Therium Litigation Funding A IC v Bugsby Property LLC
| Jurisdiction | England & Wales |
| Judge | Mr Justice Jacobs |
| Judgment Date | 20 October 2023 |
| Neutral Citation | [2023] EWHC 2627 (Comm) |
| Court | King's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2023-000685 |
[2023] EWHC 2627 (Comm)
Mr Justice Jacobs
Case No: CL-2023-000685
IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Joseph Sullivan (instructed by Addleshaw Goddard LLP) for the Applicant
Jamie Carpenter KC, Duncan McCombe and Guy Olliff-Cooper (instructed by Candey Limited) for the Respondent
Hearing dates: Monday 16 th October 2023
Approved Judgment
This judgment was handed down at 10.30am on Monday 20 th October by circulation to the parties or their representatives in court, by e-mail and by release to the National Archives (see eg https://www.bailii.org/ew/cases/EWCA/Civ/2022/1169.html).
A: Introduction
Therium Litigation Funding A IC (“Therium”), the applicant in these proceedings, applies for an asset preservation/freezing order against the Respondent (“Bugsby”). The application is made pursuant to section 44 of the Arbitration Act 1996. A similar application for an asset preservation order (but not a freezing order) was made on a without notice basis by Omni Bridgeway (Fund 5) Cayman Invt. Ltd (“Omni”) and was granted by Cotter J on 2 October 2023 following an out-of-hours application. Therium gave notice of its separate application, and I ordered that it be listed to be heard together with the return date for Omni's application which had been fixed for Monday 16 October 2023. Both Therium and Omni are litigation funders who each made a litigation funding agreement (“LFA”) with Bugsby.
The skeleton arguments served on behalf of Therium, Bugsby and Omni prior to the hearing raised a large number of disputes. In addition to the applications of Therium and Omni, there was a separate application issued by Bugsby to set aside the injunction granted by Cotter J. Bugsby's former solicitors, Stewarts Law (“Stewarts”), had also issued an application for, in substance, a similar asset preservation order, but on a different basis. As will become apparent below, each of Therium, Omni and Stewarts makes claims in respect of settlement monies which Bugsby had received following the compromise of a dispute with two entities in the Legal & General Group (“L&G”).
A central question raised by Bugsby, in response to the applications of both Omni and Therium, was whether there was a serious issue to be tried in relation to the proprietary claims which they asserted. Bugsby's key defence to those proprietary claims is based on the very recent decision of the Supreme Court in R (PACCAR) v Competition Appeal Tribunal [2023] UKSC 28 (“ PACCAR”). That case decided, contrary to the views apparently held by many in the industry (and contrary to both decisions in the case below) that third party litigation funders, whose remuneration was to be by way of a share of any damages recovered, were providing “claims management services” within the meaning of section 58AA (3) of the Courts and Legal Services Act 1990 (“the 1990 Act”). That section provides, in relevant part:
“ 58AA Damages-based agreements…
(1) A damages-based agreement which … satisfies the conditions in subsection (4) is not unenforceable by reason only of its being a damages-based agreement.
(2) But [(subject to subsection (9))] a damages-based agreement which … does not satisfy those conditions is unenforceable.
(3) For the purposes of this section—
(a) a damages-based agreement is an agreement between a person providing advocacy services, litigation services or claims management services and the recipient of those services which provides that—
(i) the recipient is to make a payment to the person providing the services if the recipient obtains a specified financial benefit in connection with the matter in relation to which the services are provided, and
(ii) the amount of that payment is to be determined by reference to the amount of the financial benefit obtained;”
Lord Sales, delivering the leading judgment in PACCAR, said at [13] that:
“The court was told that if LFAs of this kind, whereby the third party funders play no active part in the conduct of the litigation, but are remunerated by receiving a share of any compensation recovered by their client, are DBAs within the meaning of section 58AA, the likely consequence in practice would be that most third party litigation funding agreements would by virtue of that provision be unenforceable as the law currently stands”.
A “DBA” as referred to in that quotation (and later in this judgment) is a “damages-based agreement” within the meaning of section 58AA.
Both Omni and Therium submitted, however, that their proprietary claims could survive the PACCAR decision, and that there was a serious issue to be tried in that regard. If so then the proprietary injunction which Omni had obtained and sought to continue, and the proprietary injunction which Therium sought to obtain, could be granted. Since the relevant LFAs concluded by both parties contained provisions for the resolution of disputes by arbitration in accordance with the rules of the London Court of International Arbitration (“LCIA”), the final decision on the issues raised by the parties would be a matter for the arbitrators.
The written submission of Mr Carpenter KC, for Bugsby, invited the court to set aside a substantial amount of court time (2 days) to hear full argument on the issues raised by the various applications, but in particular the question of whether the claims of Omni and Therium under their LFAs could survive the PACCAR decision. It is clear from the correspondence, and court proceedings that Bugsby has itself issued, that Bugsby wishes to ventilate its arguments in court rather than arbitration proceedings, where full rights of appeal are potentially available. By contrast, both Omni and Therium wish to arbitrate their respective claims against Bugsby, and thus to resolve the issues in LCIA arbitration proceedings in accordance with the parties' agreement. Hence, the applications of both Omni and Therium were for injunctive relief in support of arbitration proceedings.
Following argument at the start of the hearing on 16 October 2023, I decided that it would not be appropriate for the court to set aside a further 2 days for hearing, when the central argument was whether there was a “serious issue to be tried”. It seemed to me that such an issue should be readily capable of being ventilated in the course of the day which was available for the hearing. Indeed, if the point at issue required argument stretching over 2 days and – as a letter from Bugsby's solicitors, Candey had indicated, would potentially engage the appeal courts as well – then the question of whether there was a “serious issue to be tried” could be said to answer itself. It is well-established that it is no part of the Court's function, at this stage of the litigation, to decide “difficult questions of law which call for detailed argument and mature consideration”: see White Book Vol 2 para 15–8 (3).
I therefore said that I would hear argument on “serious issue to be tried” during the course of the day. Having taken instructions, Mr Carpenter then accepted that certain of Omni's arguments did raise a serious issue to be tried (but not those raised by Therium) and accordingly that his client would give undertakings whose substance would be to preserve the sum of £13,133,956.56 which Omni claimed. Omni did not seek to preserve any more than that sum. This resolved the substance of the application made by Omni, and the hearing then proceeded with Therium (represented by Mr Joseph Sullivan) making his submissions as to why there was a serious issue to be tried, and Mr Carpenter responding on behalf of Bugsby. At the conclusion of the argument, I said that I wished to consider the arguments further before giving a decision. Mr Carpenter's client then, helpfully, offered an undertaking which would preserve the position until Friday 20 October 2023 so as to enable me to give judgment. This, therefore, is my judgment on the “serious issue to be tried” point which is central to Therium's application for a proprietary injunction.
B: Factual background
As described above, Therium is a litigation funder which funded litigation pursued by Bugsby against L&G. Subsequent to Therium's initial involvement, further funding was provided for that litigation by Omni and Therium. That litigation was successful following a trial before Robin Knowles J, although Bugsby was awarded substantially less by way of damages than it had claimed: see [2022] EWHC 2001 (Comm). Permission to appeal was granted to both sides of that litigation and the appeal was listed to be heard for four days beginning on 10 October 2023.
The contractual arrangements between the parties, which are described in section C below, set out how “Claim Proceeds” should be distributed in the event of (amongst other things) judgment or settlement in Bugsby's favour. (Where the context so requires, I will use in this judgment the capitalised terms which are contained in the contractual agreements). Therium's case is that these contractual arrangements also provided that payment of any such sums should be made to Bugsby's solicitors and that the sums should be held on trust for Therium/Omni pending completion of the contractual mechanism for the distribution of the proceeds. As described below, the broad contractual mechanism is that, in the first instance, any Claim Proceeds are to be paid to Bugsby's solicitors, to be held on trust pending distribution of those Claim Proceeds in accordance with a “waterfall” arrangement, set out in a priorities agreement. Therium contends that this ensures that the entirety of the funds are protected, pending the...
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