Litigation funders will have greater confidence backing UK class actions following a major Court of Appeal ruling that removes financial uncertainty around how they are paid.

In a unanimous decision handed down recently in the case of Justin Gutmann v Apple Inc & Ors [2025] EWCA Civ 459, the Court confirmed that funders are entitled to recover their fees directly from damages before any pay out is made to class members. This clarity is expected to unlock further investment into collective proceedings, particularly those brought in the Competition Appeal Tribunal (CAT) under the Competition Act 1998.

Gutmann v Apple: Background of the Case

Class representative, Justin Gutmann, a consumer rights campaigner and former head of research at Citizens Advice, launched a collective action against Apple in June 2022 on behalf of approximately 23.8 million UK iPhone users. The claim, worth over £850 million, alleges that Apple misled consumers by releasing software updates that intentionally throttled the performance of older iPhones without properly informing users. This was allegedly done to manage battery performance but resulted in reduced device functionality and prompted many users to purchase new devices unnecessarily.

Gutmann alleges that Apple breached UK competition law by abusing its dominant market position, engaging in unfair commercial practices, and misleading consumers. The claim centres on Apple’s lack of transparency and whether its conduct resulted in widespread consumer harm.

The CAT certified the claim as a collective action under the UK’s “opt-out” regime for competition cases, meaning all affected consumers are automatically included unless they choose to opt out. During this process, a critical issue arose around the legality and structure of Gutmann’s litigation funding agreement (LFA) — particularly whether funders could be paid their return before damages are distributed to class members.

Apple’s Objections:

Apple opposed both the certification of the claim and the funding arrangements. One of its arguments was that funders should only be paid from any unclaimed or residual damages, raising concerns that they might be left with little or nothing if all damages were distributed to class members. Apple also alleged that the litigation funding agreement amounted to a damages-based agreement (DBA) — something prohibited under UK law in these types of claims following the Supreme Court’s ruling in PACCAR v Road Haulage Association (2023).

In its April 2025 judgment, the Court of Appeal upheld the CAT’s certification of the claim and the validity of the funding arrangements, ruling that:

• The CAT has the jurisdiction to order funders to be paid their fees from the total damages award, even if it reduces what is distributed to class members.
• There is nothing unlawful in a litigation funding agreement that provides for this, as long as it remains subject to CAT supervision.
• This structure does not breach principles of fairness, nor does it constitute a DBA under the scope addressed in this part of the appeal.

What does the ruling in Gutmann v Apple mean for litigation funders?

Funders had previously faced the risk of receiving nothing if damages were fully distributed to the class before their fees were paid. The Court of Appeal’s ruling removes this threat, confirming that the CAT has jurisdiction to prioritise funder payments from total damages.

Giving the lead judgment, Sir Julian Flaux said it is lawful for a litigation funding agreement (LFA) to provide for funders to be paid out of the overall damages. He emphasised that such arrangements remain subject to CAT oversight, ensuring fairness and proportionality.

Litigation firm Charles Lyndon, which represents Gutmann, welcomed the ruling as a “critical step” for the UK’s class action regime. Director Dorothea Antzoulatos said the judgment offers funders the certainty they need to continue supporting “important and high-investment cases.”

Gutmann himself expressed satisfaction at the verdict, accusing Apple of using legal manoeuvres to delay justice and increase costs. “I’m delighted the Court of Appeal has sent a strong message that these tactics won’t succeed,” he said.

The ruling is separate from a second challenge by Apple, which argues that Gutmann’s funding arrangements are unlawful under the PACCAR decision. That argument will be heard by the Court of Appeal in June.

With this recent ruling reinforcing the financial viability of collective actions, legal commentators expect renewed interest from litigation funders—potentially paving the way for more consumers to seek justice against large corporations.