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Commercial Regulatory Issues

Car Finance Mis-Selling: What the UK Supreme Court Verdict Really Means

By Kevin Prior |
August 18, 2025

Car Finance Mis-Selling: What the UK Supreme Court Verdict Really Means

The following article was contributed by Kevin Prior, Chief Commercial Officer of Seven Stars Legal Funding.

On Friday 1st August 2025, the Supreme Court delivered its ruling on car finance commission complaints. While banks avoided the massive £44 billion liability some predicted, one customer called Johnson won his case – and that victory has opened the door for thousands of similar claims totalling somewhere between £9bn and £18bn – still a huge market.

The Bottom Line: Johnson proved his finance deal was “unfair” because:

  • The dealer received a massive undisclosed commission (55% of all the interest he paid)
  • He was misled about getting independent advice when the dealer was actually tied to one lender
  • Important information was hidden in small print

What This Means

The Supreme Court has given us a clear roadmap. Claims will succeed where customers can show:

  • Excessive hidden commissions (Johnson’s was 55% of his interest payments)
  • Poor disclosure – burying commission details in terms & conditions isn’t enough
  • Misleading sales practices – claiming to offer “best deals” while being tied to one lender
  • Pre-2021 agreements often have the strongest cases

Why This Is Good News

  • No government bailout risk – the ruling removes fears of political intervention to protect banks
  • Clear success criteria – we now know exactly what makes a winning case
  • Settlement pressure – lenders know more claims are coming and want to avoid court
  • Immediate opportunity – claims can start now without waiting for regulators

Our Position

Our cautious approach to date has been vindicated. While others rushed in with untested legal theories, we waited for clarity. Now we have it.

The car finance opportunity is very much alive – it just requires smarter case selection. We’re actively evaluating opportunities and expect to be funding cases that meet the Johnson criteria in the coming weeks.

The FCA will announce their compensation scheme plans in October, but the legal pathway is already clear. Well-selected cases with Johnson-style facts have strong prospects of success.

About the author

Kevin Prior

Kevin Prior

Commercial

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Commercial Regulatory Issues

Life After PACCAR: What’s Next for Litigation Funding?

By John Freund |

In the wake of the UK Supreme Court’s landmark R (on the application of PACCAR Inc) v Competition Appeal Tribunal decision, which held that many common litigation funding agreements (LFAs) constituted damages-based agreements (DBAs) and were therefore unenforceable without complying with the Damages-Based Agreements Regulations, the litigation funding market has been in flux.

The ruling upended traditional third-party funding models in England & Wales and sparked a wide range of responses from funders, lawyers and policymakers addressing the uncertainty it created for access to justice and commercial claims. This Life After PACCAR piece brings together leading partners from around the industry to reflect on what has changed and where the market is headed.

An article in Law.com highlights how practitioners are navigating this “post-PACCAR” landscape. Contributors emphasise the significant disruption that followed the decision’s classification of LFAs as DBAs — disruption that forced funders and claimants to rethink pricing structures and contractual frameworks. They also explore recent case law that has begun to restore some stability, including appellate decisions affirming alternative fee structures that avoid the DBA label (such as multiple-of-investment returns) and the ongoing uncertainty pending legislative reform.

Discussion also centres on the UK government’s response: following the Civil Justice Council’s 2025 Final Report, momentum has built behind proposals to reverse the PACCAR effect through legislation and to adopt a light-touch regulatory regime for third-party funders.

Commercial

Litigation Funding Founder Reflects on Building a New Platform

By John Freund |

A new interview offers a candid look at how litigation funding startups are being shaped by founders with deep experience inside the legal system. Speaking from the perspective of a former practicing litigator, Lauren Harrison, founder of Signal Peak Partners, describes how time spent in BigLaw provided a practical foundation for launching and operating a litigation finance business.

An article in Above the Law explains that Harrison views litigation funding as a natural extension of legal advocacy, rather than a purely financial exercise. Having worked closely with clients and trial teams, she argues that understanding litigation pressure points, timelines, and decision making dynamics is critical when evaluating cases for investment. This background allows funders to assess risk more realistically and communicate more effectively with law firms and claimholders.

The interview also touches on the operational realities of starting a litigation funding company from the ground up. Harrison discusses early challenges such as building trust in a competitive market, educating lawyers about non-recourse funding structures, and developing underwriting processes that balance speed with diligence. Transparency around pricing and alignment of incentives emerge as recurring themes, with Harrison emphasizing that long-term relationships matter more than short-term returns.

Another key takeaway is the importance of team composition. While legal expertise is essential, Harrison notes that successful platforms also require strong financial, operational, and compliance capabilities. Blending these skill sets, particularly at an early stage, is presented as one of the more difficult but necessary steps in scaling a sustainable funding business.

Commercial Regulatory Issues

Australian High Court Limits Recovery of Litigation Funding Costs

By John Freund |

The High Court of Australia has delivered a significant decision clarifying the limits of recoverable damages in funded litigation, confirming that claimants cannot recover litigation funding commissions or fees as compensable loss, even where those costs materially reduce the net recovery.

Ashurst reports that the High Court rejected arguments that litigation funding costs should be treated as damages flowing from a defendant’s wrongdoing. The ruling arose from a shareholder class action in which claimants sought to recover the funding commission deducted from their settlement proceeds, contending that the costs were a foreseeable consequence of the underlying misconduct. The court disagreed, holding that litigation funding expenses are properly characterised as the price paid to pursue litigation, rather than loss caused by the defendant.

In reaching its decision, the High Court emphasised the distinction between harm suffered as a result of wrongful conduct and the commercial arrangements a claimant enters into to enforce their rights. While acknowledging that litigation funding is now a common and often necessary feature of large-scale litigation, the court concluded that this reality does not convert funding costs into recoverable damages. Allowing such recovery, the court reasoned, would represent an expansion of damages principles beyond established limits.

The decision provides welcome clarity for defendants facing funded claims, while reinforcing long-standing principles of Australian damages law. At the same time, it confirms that litigation funding costs remain a matter to be borne out of recoveries, subject to court approval regimes and regulatory oversight rather than being shifted onto defendants through damages awards.