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DBAs upheld in the Court of Appeal

I mentioned back in July that a damages based agreement was upheld despite allowing for payment in the case of termination by the client – DBA Enforceable despite early termination clause.

Unsurprisingly, the unsuccessful client appealed as their case was that the DBA in question offended the rule against no other provision for payment. If successful then the client would have no obligation whatsoever to pay.

The Court of Appeal took a fairly clear view, in principle that the DBA Regulations provided, under statutory authority, an island of lawfulness for damages based agreements meeting their requirements out of the sea of unlawfully champertous agreements.

That being the case the Court of Appeal had to consider whether the “escape clause” for payment in the event of client termination violated those Regulations.

In Lewison LJ’s view the clauses caught by and required to comply with the DBA Regulations were those concerned with payment in the event of success those being what are regulated. As the clause in question did not deal with payment in the event of success it could not offend those Regulations.

Newey LJ also gave a full judgment (with which Lewison LJ agreed if his reasoning were wrong) that the relevant restricting regulation did not apply to termination provisions and so did not breach the Regulations.

Coulson LJ agrees with both of those, in that order, and adds the short point that the purpose of the underlying statute was to encourage the use of damages based agreements and so the exceptionally broad interpretation sought by the client could not stand.

Therefore the damages based agreement seems here to stay.