KA-2025-000017 - [2025] EWHC 2311 (KB)

The dispute between the parties about what payments are permitted under DBAs lies at the heart of Issue 1. Central to the appellants’ argument is a difference in the definition of payment in the Act and the Regulations. To assist evaluating the arguments, it repays setting the two definitions out side-by-side. Section 58AA(7) provides:

“(7)

In this section—

“payment” includes a transfer of assets and any other transfer of money's worth (and the reference in subsection (4)(b) to a payment above a prescribed amount, or above an amount

calculated in a prescribed manner, is to be construed accordingly)”

Regulation 1(2) provides:

“… “payment” means that part of the sum recovered in respect of the claim or damages awarded that the client agrees to pay the representative, and excludes expenses but includes, in respect of any claim or proceedings to which these regulations apply other than an employment matter, any disbursements incurred by the representative in respect of counsel’s fees”

On any view, these are two different definitions. The appellants submit that using the definition under the Act, the declaration of the validity of the 2012 will which favours the appellants produces a financial benefit to the appellants. Their position is materially and substantially better as a result of Green J’s order than if the 2014 will, as the respondent sought, was pronounced the valid instrument. The appellants argue that the favourable decision creates a contingent right for the solicitors to a future sum that they will benefit from in due course. The respondent submits that the declaration made by Green J in favour of the appellants cannot result in any lawful permitted payment under the Regulations and this makes the DBAs unenforceable.

There are various routes to a conclusion about what kinds of payments are permitted under DBAs. The term “money’s worth” is not defined in the Act. The term “transfer of assets” is not defined in the Act. Neither term is mentioned in the Regulations. One distinction between the Act and the Regulations in the definition of payment is that the Act specifies what is “include[d]” whereas the Regulations provide a definition of payment that appears to be comprehensive (“payment” means that part of the sum recovered in respect of the claim damages awarded” (emphasis provided)). As for transfer of assets or money’s worth, they are plainly not damages awarded. Thus, they must fall under “sums recovered”. Much discussed before the Judge was the hypothetical of a dispute over the ownership of a Rembrandt painting (judgment below, para 68). The Judge, to my mind correctly, concluded that the painting could not be the subject of a DBA. Without more, it is difficult to stretch the meaning of a recovered sum to include the transfer of a painting. A painting is not a “sum”. This problem should not be glossed over. The Regulations have been subject at times to disobliging comment from the higher courts. For example, Coulson LJ states in Zuberi at para 74:

“I agree with my Lords that the appeal in this case should be dismissed. Because their reasoning is different, and because nobody can pretend that these Regulations represent the draftsman's finest hour, it is appropriate if I add a few words to explain my own approach to the issues.”

Despite infelicities, the Regulations have the force of law and this court must ascertain their meaning. To begin the task, I note that the most fundamental precepts of statutory interpretation were not in dispute between the parties, nor could sensibly be. Lord Bingham famously said in R (Quintavalle) v Secretary of State for Health [2003] 2 AC 687 that the court should not be confined to a literal interpretation of a particular provision giving rise to difficulty. He said at para 8:

“… It may also (under the banner of loyalty to the will of Parliament) lead to the frustration of that will, because undue concentration on the minutiae of the enactment may lead the court to neglect the purpose which Parliament intended to achieve when it enacted the statute. Every statute other than a pure consolidating statute is, after all, enacted to make some change, or address some problem, or remove some blemish, or effect some improvement in the national life. The court’s task, within the permissible bounds of interpretation, is to give effect to Parliament’s purpose. So 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.”

A further core principle of interpretation is that the delegated legislation should be interpreted in light of the enabling act. Bennion, Bailey and Norbury on Statutory Interpretation (8^th Edn.) (“Bennion”) deals with this at para 3.17:

“3.17

The general principles of interpretation that apply to Acts apply equally to delegated legislation, but with the additional consideration that since delegated legislation derives its authority from the enabling Act it must be interpreted in light of that Act.”

Using these interpretive tools, it seems to require the infliction of considerable violence on the clear regulatory definition of payment to accommodate the transfer of assets or money’s worth. The better conclusion appears to be that the Regulations define and delimit the permitted applications of the Act and this is a choice Parliament has deliberately made. Support for this suggestion comes from rationale for the Regulations and the history of their enactment. Newey LJ sets the scene in Zuberi at para 53:

“53 Provision for the regulation of DBAs was first introduced by section 154 of the Coroners and Justice Act 2009, which inserted a new section 58AA into the 1990 Act. This version of section 58AA was limited to DBAs relating to employment matters, but was otherwise in much the same [as the current version]”

Therefore, the 2013 Regulations were approved by Parliament to replace earlier regulations approved in 2010. Thus, the 2013 Regulations were not Parliament’s first attempt at regulating DBAs. When Parliament considered the draft 2013 Regulations placed before it, it was not proceeding from a standing start. The version of the 2013 Regulations are the result of further scrutiny, as helpfully explained by Newey LJ at para 61:

“A working group of the Civil Justice Council considered DBAs in a report published in August 2015 (The Damages-Based Agreements Reform Project: Drafting and Policy Issues). The working group had been asked to make recommendations to the Government on whether the 2013 Regulations could be made more effective by some improvements”

Thus, the Regulations relevant to the determination, having the force of law, in detail specify which types of DBAs are “permitted”. They act to ensure that DBAs are “properly regulated” (borrowing the phrase from the Jackson Report). Another rule of interpretation is applicable, which has a statutory basis rather than being one of the many tools of interpretation that have grown around the daily interpretive tasks of the courts. The Interpretation Act 1978 provides at section 11:

“11 Construction of subordinate legislation.

Where an Act confers power to make subordinate legislation, expressions used in that legislation have, unless the contrary intention appears, the meaning which they bear in the Act.”

Courts will generally proceed on the assumption that the legislative purpose underlying delegated legislation is consistent with that of the enabling Act. If the Regulations provide a definition of payment that is materially at odds with the statutory definition, that might constitute a contrary intention. While the regulation needs to be interpreted in light of the enabling statute, if there is a clear contrary intention, that must be given legal effect. That nettle must be grasped. However, it seems to me that the position is more nuanced. On plain reading, the definition of payment in the Regulations is different and narrower than in the Act. To understand that difference, one must understand the interrelationship between the Act and the Regulations and their different functions. The Act creates a statutory exception to champerty. It does so by deeming certain arrangements for the payment of representatives to be made from financial benefits obtained in the proceedings not to be unenforceable merely by their creation; the regulations carefully limit what are the permissible types or expressions of that exception, that is, the requirements of permissibility. That there was a need for regulations is clear from the broad terms in which the Act was drafted. Section 58AA deems not unenforceable representative-client payment arrangements where “the amount of that payment is to be determined by reference to the amount of the financial benefit obtained”. Given that one of the objectives has been to promote access to justice while ensuring adequate protection from excessive legal costs falling on clients, there was an obvious need for regulation. The terms “by reference to” provides no meaningful protection to the public. The necessary protection came in regulations. The 2013 Regulations specify the level of permitted payments (regulation 4) and the permitted source of those payments (regulation 1(2)). While I accept the appellants’ submission that the term financial benefit in the Act is “open-textured”, the payments that are permitted under the Regulations are not. For very good reason, the Lord Chancellor sought precision and his approach was approved by both Houses of Parliament.

The appellants submit, with commendable directness, that “the notion of something being contingent should not be a block to the validity of a DBA”. However, the submission is confronted by the clear words of the Regulations. The respondent submits that “Parliament did not legislate for a free-for-all”. While I might not phrase it in quite the same way, I agree that the Regulations do not allow any room for contingent benefits. In many ways, the facts of this case illustrate the point perfectly: nothing has been transferred from the respondent (the opposing party) to the appellants; nothing has been recovered; one will has been pronounced valid over another. However, prior to the grant of probate, without even having to consider that the deceased’s estate has not been distributed, neither the respondent nor the appellants possessed any of the assets. It strains ordinary canons of interpretation to find that such a state of affairs falls within the Regulations, as it must. For as the appellants recognise, the Regulations “cannot be ignored”. Indeed, section 4(3) of the Act states in terms that the DBA “must comply with such other requirements as to its terms and conditions as are prescribed”. The appellants submit that the Regulations “elaborate” the statutory definition without contradicting it. It seems to me, as the Court of Appeal said in Candey, that the Regulations in fact prescribe the permitted payments.

To understand this further, and although regulation 4 is the key regulation for this case, it is instructive to examine the regulation immediately preceding it. I include the relevant part of the Act and Regulation 3 that fleshes it out. Section 58AA(4)(c) provides that for a DBA:

“(4)

The agreement—

…

(c)

must comply with such other requirements as to its terms and conditions as are prescribed”

Regulation 3 provides:

“Requirements of an agreement in respect of all damages-based agreements

3.

The requirements prescribed for the purposes of section 58AA(4)(c) of the Act are that the terms and conditions of a damages-based agreement must specify—

(a)

the claim or proceedings or parts of them to which the agreement relates;

(b)

the circumstances in which the representative’s payment, expenses and costs, or part of them, are payable; and

(c)

the reason for setting the amount of the payment at the level agreed, which, in an employment matter, shall include having regard to, where appropriate, whether the claim or proceedings is one of several similar claims or proceedings.”

Therefore, it is the Regulations that effect the prescribing. So at regulation 3(b), a requirement is imposed to specify the circumstances of the representative’s payment and requirement applies to “all damages-based agreements”. In regulation 3(c), the justification (“reason”) for setting the level of payment at the amount specified in the DBA must be explained. The Regulations do not, therefore, simply deal with the question of permitted payments in passing. The Regulations regulate the payments. This is made clearer still from a consideration of regulation 4. Regulation 4(1) nets off from the payment that the representative receives from the client the costs received by the representative from other parties. Regulation 4(2) deals with personal injury cases and sets a ceiling on the payment of 25 per cent of the damages ultimately recovered. (I will deal with the dispute about the term “ultimately” shortly). Regulation 4(3) deals with non-personal injury cases. It sets a ceiling on the payment made to the representative from the client of 50 per cent of the sums ultimately recovered. This distinction between regulations 4(2) and 4(3) between personal injury cases (damages) and others (sums recovered) mirrors perfectly the definition of payment in the interpretation regulation (regulation 1(2)), where the same distinction is made. These are, to my mind, detailed and comprehensive regulations. The definition purports to cover the entirety of permitted payments (damages awarded or sums recovered). There is no room for transfer of assets or money’s worth. The “ceiling” regulation, regulation 4, does not provide any requirement or ceiling for situations where assets or other money’s worth are purported to be transferred to the representative. This immediately poses a sharp problem. What is the ceiling on the transfer to the representative? Is it to be 25 per cent, 50 per cent or some other figure? Given the open field in the absence of relevant regulation, it could conceivably be higher. It could be 99 per cent. That would not be prohibited by any regulation since no regulation covers this alternative basis of payment. It seems to me that this is highly revealing. The purpose of the ceiling regulations is to provide certainty to clients and protection from excessive payment to their representatives. There is no protection under the regulations if there is a transfer of assets or money's worth. I judge this to be a strong indicator that such payments are not permitted under the Regulations. The silence in the Regulations about the ceilings on such payments cannot have been an oversight by both Houses of Parliament when approving the Regulations with a view to improving the effectiveness of DBA regulation. I judge therefore that the contrary indication in the definition of payment under the rules not to be some infelicity of drafting or oversight. It is better understood as a narrower and deliberately specific definition of what types of payment are permitted and the degree of protection that the client receives (25 and 50 per cent respectively). The way out of this stark problem that the appellants seek is by the notion of conditional right and the interpretation of the word “ultimately” in regulation 4(3).