Sony Interactive Entertainment Europe Limited & Anor v Alex Neill Class Representative Limited

A litigation funding agreement is not a damages-based agreement merely because the funder’s return is paid from, or capped by, proceeds. The decisive question is how the primary contractual entitlement is calculated. A return expressed as a multiple of capital outlay is not determined by reference to the financial benefit obtained. A conditional percentage clause that operates only if enforceable under future law has no contractual effect while unlawful, and does not make the remainder a damages-based agreement. Statutory interpretation should avoid absurd consequences where the text permits and may use relevant explanatory material and subsequent legislation. Unnecessary severance issues should ordinarily be left undecided.

Seven conjoined appeals concerned amended litigation funding agreements used in collective proceedings before the Competition Appeal Tribunal. The appeals involved claims brought against Sony, Visa and Mastercard, and Apple. The class representatives were Alex Neill Class Representative Limited, Commercial and Interregional Card Claims I and II Limited, Dr Rachael Kent and Mr Justin Gutmann.

The CAT held that the amended agreements were not damages-based agreements and were enforceable in [2023] CAT 73, [2024] CAT 3, [2024] CAT 5 and [2024] CAT 18. Permission to appeal was granted because of continuing uncertainty concerning litigation funding agreements after PACCAR. The appeals concerned whether a proceeds cap made a multiple-based return a payment determined by reference to financial benefit, whether conditional percentage provisions were effective, and whether any offending provisions could be severed. A separate issue concerning ratchet arrangements was abandoned.

All appeals were dismissed.

1. Multiple-based returns. The appellants accepted that a funder’s fee calculated by reference to a multiple of its outlay was not, without more, determined by reference to the financial benefit obtained. That concession was correct. Under section 58AA(3)(a)(ii) of the Courts and Legal Services Act 1990, the court must focus on the funder’s primary contractual entitlement and the mechanism by which its return is calculated. A return calculated by reference to outlay is not calculated by reference to the damages recovered.
2. An express or implied cap by reference to proceeds does not alter that analysis. The fact that proceeds are the source of payment, or that the funder cannot recover more than the available proceeds, does not make the fee a percentage of the financial benefit. The contrary construction would make practically all litigation funding agreements damages-based agreements and would produce an absurd result. The wording did not compel that construction. The reasoning in R (PACCAR Inc) v Competition Appeal Tribunal [2023] UKSC 28 supported focusing on the primary contractual entitlement.
3. Conditional percentage provisions. The percentage provisions in the Neill and CICC opt-in agreements applied only to the extent enforceable or permitted by law. While the law continued to prohibit the relevant arrangements, those provisions had no contractual effect. Section 58AA(3)(a)(ii) was therefore not engaged, and the provisions did not render the otherwise enforceable agreements damages-based agreements. The validity principle in Egon Zehnder v Tillman [2020] UKSC 32 provided an additional reason to prefer an interpretation preserving the agreements.
4. There was no evidence that the conditional provisions altered funding decisions or created the alleged elevated conflict risk. The safeguards governing collective proceedings, including independent legal control and the CAT’s supervisory jurisdiction, further undermined the public-policy objection.
5. Severance. Issue 3 became academic. Following the guidance in Housden v The Conservators of Wimbledon and Putney Commons [2008] EWCA Civ 200, the Court left the complex question of severability for a case in which it mattered.

• Court of Appeal (Civil Division). Heard seven conjoined appeals and dismissed them all under [2025] EWCA Civ 841.
• Competition Appeal Tribunal. The CAT held the amended litigation funding agreements enforceable and not damages-based agreements in [2023] CAT 73, [2024] CAT 3, [2024] CAT 5 and [2024] CAT 18. The Court of Appeal upheld those conclusions.