High Court considers Defendant-side Damages Based Agreement (DBA)
July 07, 2021
High Court considers Defendant-side Damages Based Agreement (DBA)July 07, 2021 Tonstate Group Ltd & Ors v Wojakovski & Ors [2021] EWHC 1122 (Ch) Court rules against Defendant DBAs. Background
Facts of the Case
“you recover damages, monies, costs incurred by your previous lawyers, other sums and/or derive any benefits (excluding our hourly rate costs and Counsel's fees) in or arising out of all of the current Court proceedings”
The JudgmentThe High Court rejected C’s arguments on two grounds: 1. On a proper construction, the phrase “derive any benefits” from the Court proceedings, in the definition of Proceeds in the DBA, was solely intended to refer to a situation where D recovers benefits from another party in or as a consequence of the claims. D’s ownership of the Shares pre-dated the proceedings and was not a “benefit derived” from them: at best, “what he derived from the proceedings was the avoidance of a detriment to the extent that he retained the Shares”. This approach was supported by the fact that the DBA was titled a “Damages Based Agreement” (and the “essential feature of damages is that they are recovered from another party”), and a further paragraph of the DBA which stated that C would not be entitled to any payment at all if D did not recover any funds in the proceedings (along with other supporting paragraphs of the DBA). 2. The DBA was unenforceable, as it did not comply with the requirement of the DBA Regulations 2013 that any payment from D to C would be made from “sums recovered in respect of the claim or damages awarded”. The Judge held that “to be enforceable under the Act, a DBA must provide that payment to the representative is a proportion of the amount recovered by the client in the proceedings”. Where this leaves us
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