Sony Interactive Entertainment Europe Limited & Anor v Alex Neill Class Representative Limited

This appeal sat inside a much bigger fight about litigation funding in UK collective competition claims. Sony was defending a claim brought by Alex Neill Class Representative Limited on behalf of PlayStation users. The underlying allegation was that Sony required digital PlayStation games to be sold through the PlayStation Store and imposed excessive and unfair prices.

But the Court of Appeal was not deciding whether those allegations were true. The immediate dispute was about whether the claim’s litigation funding agreement could legally stand after the Supreme Court’s decision in PACCAR.

That mattered because collective proceedings in the Competition Appeal Tribunal are expensive. If the funding agreement failed, the claim could become much harder to run. The same issue was arising across other major claims too, so the Court of Appeal heard Sony together with appeals involving Visa, Mastercard and Apple.

The judgment also shows how quickly funding structures were rewritten after PACCAR. The original agreements had been rendered unenforceable because the funder’s fee was calculated as a percentage of proceeds. The revised agreements tried to preserve funding while changing the fee formula.

PACCAR had already changed the market. In that case, the Supreme Court held that certain litigation funding agreements were damages-based agreements because the funder’s fee was calculated as a percentage of the proceeds recovered. If an agreement is a DBA and does not satisfy the statutory conditions, it is unenforceable.

After PACCAR, many class representatives amended their funding documents. The revised model used in these appeals generally moved away from a percentage-of-damages return. Instead, the funder’s fee was mainly calculated as a multiple of the money advanced, or a multiple of committed outlay.

The defendants said that this drafting change did not really solve the problem. Their point was that the funder was still being paid out of the proceeds of a successful claim and was often capped by those proceeds. On that basis, they argued the amount payable was still determined by reference to the financial benefit obtained.

That argument was commercially attractive for defendants. If right, it would mean many revised post-PACCAR agreements were still unenforceable despite the new drafting. It would also mean a claimant could have a strong substantive case but still struggle to continue because the funding structure failed.

The Court of Appeal said the appeals raised three agreed issues. The first was the main one across all appeals. If the amount payable to a funder is paid from, or capped by, the proceeds of a successful claim, does that mean the payment is determined by reference to the amount of the financial benefit obtained for the purposes of section 58AA?

The second issue arose in Sony and the CICC appeals. Some agreements said that a percentage-based return would apply only to the extent enforceable and permitted by law. The defendants argued that this wording itself created a DBA problem, or at least made the arrangement impermissible or unsuitable.

The third issue arose only in Sony. If any part of the agreement was unlawful or unenforceable, could that part be severed so the rest of the agreement survived?

Although the wording sounds technical, the court’s task was quite practical. It had to decide whether the law looks mainly at the source of payment, the cap on payment, or the actual formula used to calculate the funder’s return.

The judgment gives examples from the related appeals to show how these revised agreements worked in practice. Broadly, the funder’s return was no longer expressed as a straight percentage of damages. Instead, the documents used multiples of capital outlay, committed capital or similar funding inputs.

At the same time, the agreements still linked payment mechanics to claim proceeds. Some said the funder would be paid out of proceeds under a waterfall. Some expressly capped the total recovery at the amount of proceeds, or at undistributed damages plus recovered costs. Others were said to contain an implied cap because the money could only come from proceeds.

That combination created the legal tension. The defendants said the cap and payment source meant the amount was still effectively tied to the financial benefit obtained. The class representatives said the cap was only an outer limit and did not change the underlying calculation method.

For a business owner, this is the drafting point to watch. Two agreements can both be paid from damages, but one may still be enforceable and the other may not, depending on whether the fee itself is calculated as a percentage of damages or as a multiple of funding provided.

The Court of Appeal dismissed all the appeals. It held that where the funder’s primary entitlement is calculated as a multiple of its outlay, the fee is not determined by reference to the amount of the financial benefit obtained merely because payment comes from the proceeds or because the amount recoverable is capped by those proceeds.

The court said the statutory words should be read by focusing on how the funder’s return is calculated. A fee calculated as a percentage of damages is one thing. A fee calculated as a multiple of funding provided is another. The fact that the damages are the source of payment does not turn the second type into the first.

The court also rejected the argument that a cap linked to proceeds changes the analysis. A cap is an outer limit. It does not alter the basic method of calculation where the primary entitlement is still a multiple of outlay.

The judgment also relied on the practical consequences of the rival interpretation. The court considered it would be an absurd result if a cap, which protects the class and class representative from excessive payments to the funder, were itself enough to make the agreement unenforceable.

The court added that even if the recoverable multiple might later be adjusted by reference to damages or by the Tribunal’s discretion, that did not change the character of the primary contractual entitlement. The entitlement still began with a multiple of outlay, not a percentage of damages.

In Sony and some of the related appeals, the agreements included wording that a percentage-based return would apply only to the extent enforceable and permitted by law. The defendants argued that this wording itself infected the agreement.

The Court of Appeal rejected that argument in clear terms. It said that unless and until the law changes, the percentage provision has no contractual effect. Because it has no present effect, it cannot make an otherwise enforceable agreement into an unenforceable DBA.

The court also said the defendants’ argument would produce a perverse result. The wording had been included to avoid the need for another amendment if the law later changed. On the defendants’ case, that protective drafting would achieve the opposite and invalidate the agreement now. The court would not read the contract or the statute that way.

The defendants also raised points about public policy, incentives and possible conflicts of interest. The court was not persuaded. It noted there was no evidence supporting those concerns and referred to the safeguards already built into collective proceedings, including the Tribunal’s supervisory role and the class representative’s independent legal support.

The court also noted that funding agreements typically prevent the funder from controlling important legal decisions, and that disputes between the class representative and the funder can be referred to an independent KC. That wider framework mattered when the court assessed the conflict arguments.

The court did not decide whether Sony had breached competition law. That underlying dispute remains separate. The appeal was only about the enforceability of the funding arrangements.

The court also did not decide the severance issue in Sony. Because it held that the fallback percentage wording did not make the agreement unenforceable, the severance question became academic. The court said it was wiser to leave that issue for a case where it actually mattered.

That is useful for businesses because it shows the limits of the ruling. This case gives a strong answer on multiple-based funding structures and proceeds caps. It does not give a general answer on every possible drafting problem in every litigation funding agreement.

If your business is defending a competition claim, this decision narrows one route for attacking the claim at an early stage. You can still analyse the claimant’s funding documents carefully, but you should not assume that a proceeds cap, a payment waterfall or payment out of damages will automatically make the arrangement unenforceable.

If your business is considering bringing a large competition claim, the decision supports a common post-PACCAR structure. The funder’s return can be based mainly on a multiple of the funding advanced, while payment still comes from recoveries and may be limited by them.

For founders, boards and in-house teams, the broader lesson is that funding terms are not just technical drafting. They can affect whether a claim is certified, whether it has enough capital behind it, how much settlement pressure exists and how realistic it is to run the case through to judgment.

This is especially relevant in platform, pricing and market power disputes. Those cases can be expensive, document-heavy and slow. If a claimant has a funding model that survives challenge, the commercial pressure on a defendant can increase significantly.

This case is a reminder that the exact wording of a funding structure matters. The court looked at the contractual formula for the funder’s return, the role of any payment waterfall, and whether any percentage wording had present legal effect.

For businesses reviewing litigation risk, the practical exercise is to separate three questions. First, what is the underlying claim exposure? Second, does the claimant have a funding model that is likely to survive challenge? Third, what control and approval mechanisms sit around the use and distribution of proceeds?

That matters especially in platform, pricing and market power disputes, where collective proceedings can be expensive and long-running. A viable funding model can materially change the settlement dynamic.

It is also worth remembering that the court paid attention to the wider legal framework. The Tribunal’s approval role, the class representative’s independence and the limits on funder control all formed part of the background against which the court rejected broader policy objections.

If you are on the defence side, ask for a clear map of the claimant’s funding structure early. The right question is not simply whether the funder gets paid from damages. The right question is how the fee is actually calculated under the contract.

If you are on the claimant side, make sure the drafting is internally consistent. A multiple-based entitlement can still be undermined by careless wording elsewhere in the agreement, especially if a clause appears to create a present percentage-based entitlement rather than a future conditional one.

For both sides, funding should be treated as part of the commercial case assessment. It can affect whether proceedings are launched, how long they can be sustained, and how much leverage each side has in settlement discussions.

The Court of Appeal heard the combined appeals on 10 and 11 June 2025. Judgment was first handed down remotely on 4 July 2025. An amended final judgment was issued on 24 July 2025, and earlier copies were superseded.

The court dismissed all of the appeals. So, on the issues argued in this judgment, the revised litigation funding agreements were upheld as enforceable and not treated as unenforceable damages-based agreements merely because payment came from proceeds or was capped by them.

The judgment also records that a proposed Bill which would have excluded litigation funding agreements from the DBA definition was not passed before Parliament was dissolved. The court therefore decided the appeals on the law as it stood.