Sheriff Wallace: I am the law. Don’t you understand, I represent the law.
Rubber Duck: Well piss on ya, and piss on your law.
One of the more surprising decisions of the Supreme Court this year was the recent challenge to litigation funding agreements in the case of R on the application of PACCAR Inc and others v Competition Appeal Tribunal and Others  UKSC 28.
The judgment has erupted in the litigation funding industry with the force of a sleeping volcano, come to life: as in the judgment of the majority of the Supreme Court (Lord Sales with whom Lord Reed, Lord Legal and Lord Stephens) agreed it was found that contrary to popular belief and the ruling of the Competition Appeal Tribunal  CAT 26 and the Divisional Court  EWCA Civ 299 the litigation funding agreements in the case were unenforceable as they were properly to be construed as Damages Based Agreements (DBAs) and unenforceable for failing to comply in form with the statutory formality requirements imposed by section 58AA of the Courts and Legal Services Act 1990 and the Damages Based Agreements Regulations 2013.
Because the litigation funding agreements adopted a funding structure which was (or has been) common to most litigation funding agreements, the consequences are that many, possibly most, litigation funding agreements entered into in England and Wales over the last decade are prima facie unenforceable.
But I think that after the initial squawking has died down, it will be realised that most such agreements can simply be amended, or contain severance clauses, which might apply anyway to sever offending clauses: such as the common provision that a funder will be paid 30% of the recoveries upon the successful conclusion of the case. I say “might” as there is a very interesting argument as to what extent the common law doctrine of severance can apply in the context of a statutory regime of unenforceability.
There may be some litigation on whether payments made to litigation funders can be recovered: but it should be noted that payment under an unenforceable contract, is not an exceptional course, even if the parties were unaware at the time that it was unenforceable. And although the law reports on the doctrine of mistake or failure of consideration, may be scoured for alternative arguments, there may be scant pickings.
From my point of view, the more interesting part of the judgment, which may yet endure is that which deals with principles of statutory construction: the majority of the Court, applied what I would term a black letter approach to the issue before them. The key paragraphs in this respect are 40 to 49. In particular the Court set out a “toolkit” of principles drawn from earlier decisions which I would summarise as follows:
(1) Statutory interpretation is an exercise which requires the court to identity the meaning borne by the words in question in the particular context.
(2) The court’s task within the permissible bounds of interpretation is to give effect to Parliament’s purpose.
(3) The controversial provisions should be read in the context of the statute as a whole and the statute as a whole should be read in the historical context of the situation which led to its enactment.
(4) It is legitimate to refer to explanatory notes which accompanied a Bill through Parliament, but external aids such as these play a secondary role: the focus is on the provision itself within the wider statute.
(5) The courts will not interpret a statute to produce an absurd result unless clearly constrained to do so by the words of the statute: absurdity includes results which are impossible, unworkable, impracticable, inconvenient, anomalous or illogical, futile, pointless, artificial or productive of disproportionate countermischief.
(6) Subordinate legislation made pursuant to powers in a statute can be an aid to interpretation of the statute: but the subordinate legislation should be roughly contemporaneous in time with the enabling statute.
(7) There is a principle called “the potency of the term defined”. When the definition of words in a statute is read as a whole, the ordinary meaning of the word or phrase being defined forms part of the material which might potentially be used to throw light on the meaning of the definition.
But the decision is an odd one, despite the legal learning that went into it. For the last decade no one has believed that litigation funding agreements were regulated, and they have ordered their business affairs accordingly. The Supreme Court judgment is a triumph of legal learning over common sense, and as litigation funding agreements can be amended or redrafted to circumvent the decision, in the end, a futile one.