In Zuberi v Lexlaw [2021] EWCA Civ 16 last week, however, the Court held the purpose of the legislation was to widen the available forms of funding and that the inclusion of termination provisions is not a breach of the regulations.
Moreover, the majority view held the regulations only covered the part of the agreement providing for the DBA payment. Therefore, hybrid agreements will be allowed.
Nicholas Bacon QC, speaking on behalf of the Bar Council, which intervened in the case, said: ‘The uncertainty surrounding the meaning and effect of reg 4 of the DBA Regulations has resulted in a longstanding impediment to the use of DBAs in the legal market.
‘A significant piece of unfinished business from the Jackson reforms has been to ensure that DBAs work and are an effective means of funding cases. I am delighted that the Court of Appeal has stepped in to grease the wheels of the legislation and removed so much of the uncertainty over their operation.’
Steve Din, founder, Doorway Capital, which provides risk capital to law firms, said: ‘Not only will law firms feel considerably more confident about entering DBAs but by offering DBAs and hybrid DBAs to potential clients facing what would otherwise be unaffordable legal fees, these clients can now enter into litigation with a genuine sense of optimism they might secure most, if not all, of the compensation they are entitled to.’
He predicted most law firms would try to craft a form of hybrid DBA that offered the firm the upside of the contingency fee but with downside protection.
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