Commercial Court grants asset preservation order in favour of litigation funder despite PACCAR

In Therium Litigation Funding A IC v Bugsby Property LLC [2023] EWHC 2627 (Comm),  the English Commercial Court granted an asset preservation order in favour of a litigation funder. 

This was in order to protect the funder’s interests under a litigation funding agreement (LFA) pending an arbitration to decide whether certain provisions in the LFA remained enforceable despite the presence of certain payment provisions which were referable to the amount of damages recovered by the funded party. 

In short, the ruling therefore had to engage with the implications of the landmark UKSC ruling in PACCAR v Competition Appeal Tribunal [2023] UKSC 28. In doing so, Jacobs J held that there was a serious issue to be tried that the PACCAR decision did not render the remainder of the funding agreement unenforceable. 

Factual background and High Court’s decision

In July 2023, a majority of the UKSC held, in a landmark ruling, that as litigation funders provide “claims management services” under the relevant legislation, LFAs which entitle them to receive a percentage of the damages recovered are “damages-based agreements” (“DBAs”) under section 58AA of the Courts and Legal Services Act 1990. Therefore, in the UK, such LFAs are unenforceable unless they comply with the DBA Regulations 2013 (click here for more). Since most existing LFAs do not comply with the 2013 Regulations (one example being if the remuneration to be paid to the funder could exceed the statutory maximum), as Lord Sales observed in PACCAR, the upshot of that decision is that most LFAs in which the funder receives a share of any compensation recovered by the client would be unenforceable. The PACCAR ruling has therefore given rise to serious concerns in the UK litigation funding industry. Therium appears to be one of the first Commercial Court judgments to consider the implications of PACCAR.

Therium concerned an application by the litigation funder Therium for an asset preservation/ freezing order under section 44 of the Arbitration Act 1996 against Bugsby, a property company with whom Therium had entered an LFA concerning claims that Bugsby had pursued against an insurance group. The LFA provided for the resolution of disputes about the funding by LCIA arbitration seated in London. Under the terms of the LFA (the precise effect of which is disputed), Bugsby had agreed that any “Claims Proceeds” would be held by Bugsby’s solicitors on trust for Therium pending distribution of those Claims Proceeds in accordance with a “waterfall” set out in a separate priorities agreement. The LFA provided that Therium’s payment was to be (i) a return of the funding provided; (ii) a return based on a multiple of the amount funded; and (iii) a percentage of any recoveries made by Bugsby.

Bugsby agreed a settlement of the underlying litigation under which it received around £27 million, shortly after which Bugsby’s solicitors informed Therium that they intended to transfer the sums to Bugsby in the coming days. This prompted Therium (and another litigation funder ) to apply, under s.44 Arbitration Act 1996, for an urgent proprietary injunction to prevent the release of the settlement monies to Bugsby (who appeared to be insolvent). Bugsby’s key defence to Therium’s application was that, following PACCAR, the LFA was entirely unenforceable and so there was no “serious issue to be tried” under the American Cyanamid test; this being one requirement for the grant of the injunction pending final determination, by the arbitration, of the overall enforceability of the LFA. 

Granting the injunction, Jacobs J held that there was a serious issue to be tried that the LFA (and therefore Therium’s proprietary claim) remained enforceable notwithstanding PACCAR . Whilst one part of Therium’s remuneration under the LFA was damages-based (i.e. the percentage of damages based component, (iii) above), and would therefore be unenforceable following PACCAR, in his view there was a serious issue to be tried as to whether only that component, rather than the entire LFA, was unenforceable. Principally, he rested his analysis on consideration of the Court of Appeal decision in Zuberi v Lexlaw [2021] EWCA Civ 16 which concerned certain terms in a solicitor’s retainer letter which were non-compliant with the DBA Regulations. Two of the Judges in Zuberi adopted a narrow view of a DBA as being only those provisions in the contract which deal with payment out of recoveries rather than the whole contract. Jacobs J also considered that there was a serious issue to be tried that offending terms could be severed under common law severance principles; a point which would turn on public policy issues and whether the character of the agreement would be changed by severance.  

There being a serious issue to be tried on these points, it could not be said that the other provisions of the LFA (including those concerning the trust, the repayment of funded sums and Therium’s fee based on a multiple of those funded sums) were necessarily unenforceable following PACCAR so as to defeat Therium’s injunction application.


Since the LFA provided for disputes to be resolved in LCIA arbitration, ultimately the question of the extent of the LFA’s enforceability following PACCAR will be determined in arbitration and therefore will not set a precedent on this issue for other cases where the enforceability of an LFA is under challenge. In terms of the precedental value of this s.44 application for such cases, it important to note that the test of “serious issue to be tried” is a low threshold and entails only (in essence) that the relevant claim is arguable. However, Jacobs J’s ruling illustrates that some issues in this area remain unresolved, and that they may well be the subject of further judicial consideration (which will be welcome in due course).

Click here for the judgment.