AxiaFunder: Implications Of Surprise Dieselgate Court Loss

Yes, the content here is a little bit legal and technical, but if you persevere, as a reward, you’ll later get to fun facts and a slightly naughty quotation…

The judgment from the High Court on the group claim for 1.6 million people against 14 car manufacturers was handed down on 10th July, 2026. While there was a small win for claimants within the judgment, it was definitely what you’d call an overall loss.

This case relates to the health hazard nitrous oxide, which is emitted by diesel vehicles, as well as so-called “defeat devices” that display lower levels of this environmentally damaging gas than actually occur in normal driving conditions.

It has been widely labelled as “Dieselgate”.

Total legal costs have been in the hundreds of millions of pounds. The potential payout to claimants has been valued at £2 billion to £6 billion, depending who you talk to.

For their part, AxiaFunder* investors have contributed £1.86 million to fund claimants.

In the UK, the legal foundation of laws on nitrous oxide and defeat devices is still based on retained EU law.

Multiple lawyers for the claimants, including the co-lead lawyers, came out right away to strongly indicating that they could seek to appeal, because the judge, Lady Justice Sara Cockerill, has interpreted matters differently to courts in the EU.

A manufacturer has indicated it could also seek to appeal against the claimants’ small win regarding its defeat device.

Appeals are likely to be granted due to the importance of the case.

However, this is a complex case and so it is not certain yet that they will appeal, as they will need to work through the lengthy judgment.

If it does go to the Court of Appeal then whichever side loses is quite likely to take it to the Supreme Court to make a final decision.

With all those legal stages, according to AxiaFunder, it could take three to six years to fully resolve the case. That would mean five to eight years in total since the claim was funded.

It would only resolve more quickly than that if the manufacturers decided to settle the claim. Arguably the fact that the legal costs are considerably lower than the potential payout to claimants makes this less likely to happen.

Impact on people who funded the claim through AxiaFunder

I asked Cormac Leech of AxiaFunder what costs its investors can expect to continue the claim to the next stage. He said:

“We don’t expect that more funding will be required from AxiaFunder’s investors currently.

“The lead lawyers are doing the work. AxiaFunder funded a relatively small number of claimants via one of the smaller associated law firms. There are some large funders backing this claim. We don’t think we will have to put more money in if we don’t choose to.”

If it takes four more years to get a positive resolution, AxiaFunder’s Diana Sweeney estimates that annualised returns for those who funded these cases will fall to 19%-21%. (That’s 19%-21% per year from when the money was put in.)

That’s probably about a half of the annualised returns that AxiaFunder had expected if the case had already been settled by this point. Nevertheless, it would still be just about within the 20% to 30% range that AxiaFunder tends to predict across its various offers.

If this group action ends here without any appeal, I roughly estimate that the average annualised returns for people who have put in equal amounts in every investment offer since AxiaFunder started would fall to around 8% per year, down from about 13% per year historically.

Meanwhile, AxiaFunder investors who have mostly put money into funding housing-disrepair claims – AxiaFunder’s bread and butter – have been making around 20% per year in recent years.

A surprising result

At least some of the legal parties supporting the claimants seem to be taken aback by the ruling.

Volkswagen had earlier settled out of court for £200 million in the UK, and its bill in Europe was around €1 billion. Other manufacturers had had to pay out, too.

Leech told me: “We had felt relatively confident these claims would be resolved in favour of claimants without disruptions, based on counsel’s opinion but also on the outcome for broadly similar claims in France, Germany, South Korea and Australia – almost every other jurisdiction.”

He continued: “We look to invest in claims that have strong technical merits but also are consistent with the public good [and] have the moral high ground. This judgment apparently allows, according to leading counsel, for manufacturers to sell cars in the UK that are not allowed in the EU due to environmental concerns. Specifically, cars that are not bound by limits on diesel emissions. That doesn’t seem consistent with the UK’s general standards on health and safety.”

Cockerill did not agree that most devices in this particular case were defeat devices, even though they understated nitrous oxide emission during tests, versus normal driving conditions.

Leech said: “I’m not a lawyer and am probably oversimplifying, but the view of the judge seems to have been if the device was able to ‘identify’ that it was being tested and consequently reduced the car’s emissions relative to emissions under normal driving conditions, that was illegal. But if a car was designed such that it simply performed in a compliant way during testing but significantly breached emissions during normal driving conditions that was OK. That conclusion would seem to have good prospects of being overturned on appeal.

“That said, it is a complex judgment of around 370 pages. It’s possible we will reassess our overall view once we have analysed it in detail.”

Leigh Day is one of the co-lead firms on the case. A message on its website stated: “The judge accepted that if she is wrong in her interpretation of the law…then a majority of the sample cars would have an unlawful defeat device.”

Unpredictability: the lesson for AxiaFunder investors

Leech speculates whether civil claims where the value is £1 billion or more should have the option to request a jury trial in the UK.

“If our preliminary view is correct, this [judgment] reduces access to justice for claimants and returns for litigation investors.

“There are 1.6 million claimants, £2 billion plus in potential damages and also environmental consequences. Even if successfully appealed, this judgment at best implies a delay of three to four years for claimants and investors.  

“The UK was ranked by the World Justice Project as 14th in the world on rule of law, 21st specifically on civil justice in 2025. It will be interesting to see the ranking changes in the coming years.

“We have had a relatively high opinion of the predictability of the courts in the UK. Defendants, where the merits of a case appear strong, will normally want to settle, but when there are surprising judgments, then the pressure for defendants to settle is less – they are more likely to say ‘Let’s take our chance in court’. This has the knock-on impact that litigation investors will require higher returns on successful claims to offset the lower overall predictability. This reduces access to justice and makes it more difficult for consumers and other claimants to have their interests protected.

“One wonders whether the option of a jury trial, rather than reliance on a single judge, as existed in the UK for example prior to 1933 – and exists currently in the USA at the state level – should be considered by UK policy makers, as a potentially better way for high value civil claims to be conducted. It would arguably help to better ensure democratic transparency and community alignment. The higher cost could probably be justified in my view.

“We [AxiaFunder] have done relatively well as we have a niche, but litigation funders’ share prices are on the back foot. Burford [Capital Limited] is a good bellwether for the sector. They had one big case against them, but in general the environment in recent years appears more hostile for the sector.”

Pause there.

Burford Capital and Omni Bridgeway are litigation funders like AxiaFunder, but they are giants, valued by the market in the hundreds of millions of pounds.

These firms are both now trading at less than half their typical share prices from just a few years ago. Even before Burford lost a big case against the Argentinian government in March this year, it was already down by nearly half.

Manolete Partners PLC is perhaps the purest example, showing a steady decline since January 2023 from a share price of £2.52 to £0.44.

Looking carefully back over Manolete’s recent history, I think this has largely been caused by their shareholders gradually understanding that, in recent times, the risk of successfully winning claims and then enforcing payment from the defendants can be tougher than legal teams working for litigation funders might have thought.

That’s the first part of the lesson for you: the risk of losing a fair number of cases across a wider basket of cases has not been low – and it’s possibly higher than law firms and litigation funders have tended to forecast.

That’s outwardly a possible general trend in worse-than-expected results across a wider basket of claims.

The second part of the lesson is in the form of a series of large, shock events.

For example, in addition to its trending fall in share price, Burford’s stock plummeted an extra 40% after a multi-billion-dollar loss this year.

And Litigation Capital Management’s share price collapsed 70% after two huge losses (one in England and the other in Australia) in the second half of 2025, with not enough insurance to cover the downside. That downside included having to pay the winning side’s legal costs.

So it goes to show that funding legal cases is not a low-risk game, even in countries that are ranked highly by rule of law. (Australia is ranked 11th, while being 14th specifically on civil justice.)

That’s why the potential returns in this space are commensurately very high, with potential rewards for litigation funders – like investors using AxiaFunder – often being two to three times the amount you put in.

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