Opus Business Advisory Group
4 Contributions by Opus Business Advisory Group Experts
PRACTICE NOTES
What options are available when deciding how to fund litigation?
Litigation funding, in its broadest sense, means reviewing every way to finance the different costs of pursuing a claim through trial, enforcement and ultimate recovery as appropriate. These routes may include one or more of the following practical mechanisms:
the litigating IP pays some or all costs on a standard private client basis, i.e. meeting costs from money available in the insolvent estate (if any) as they fall due and are incurred
solicitors are instructed under a conditional fee agreement (CFA) or damages-based agreement (DBA), or via a split approach where part of their fees accrue on that basis and part are paid as they arise by agreement
counsel is engaged on a CFA or DBA, or on a mixed model with some of their fees accruing on that basis and some paid as they are
Restructuring & Insolvency
PRACTICE NOTES
This Practice Note covers:
funding issues facing insolvency practitioners
the development of litigation funding
which costs different funding routes meet
general options for funding litigation
insolvency-specific funding solutions
key points for IPs when using litigation funding
exposure to an opponent’s costs
Funding concerns for insolvency practitioners
Insolvency practitioners (IPs) must maximise returns for creditors of an insolvent entity, and current or potential claims can be crucial assets of the estate. IPs are obliged to manage the estate’s claims, or at least decide whether prospective actions should be pursued. Yet inquiries and proceedings are costly and outcomes are uncertain. Planning should address:
the IP’s legal fees (solicitors and counsel)
disbursements, including court fees and expert reports
the probable need to provide security for costs
Under CPR 25, defendants are likely to seek security for costs against an IP at an early stage, because they may fear that the claimant lacks the resources to meet their costs if the
Restructuring & Insolvency
PRACTICE NOTES
What is it?
Third-party litigation funding (Funding) involves a separate entity (the Funder) advancing money to cover part or all of the litigation costs, in exchange for an agreed return if the matter is won or resolved by settlement. Although the idea of Funding is straightforward, it carries many subtleties and particulars, with choices that must be weighed and contrasted before identifying what suits a claim. Funding is specialised—the expense and eligibility thresholds mean a number of disputes do not qualify for Funding. The market of Funders is growing, with differing requirements and preferred investment niches. Funding itself is not regulated; however, many Funders belong to the Association of Litigation Funders (ALF) (the ALF website can be viewed here) and adhere to the ALF’s voluntary code of conduct. Numerous professionals who arrange Funding, including solicitors and brokers, are regulated. Any deployment of capital by a
Restructuring & Insolvency
PRACTICE NOTES
The official receiver (OR) is designated as trustee in bankruptcy (trustee) or as liquidator to manage and investigate every bankruptcy and court-ordered winding up, including those of partnerships. The Secretary of State or the creditors may, in place of the OR, appoint an insolvency practitioner (IP) to act as trustee for personal insolvencies or as liquidator for corporate cases. Under the Insolvency Regulations 1994, SI 1994/2507, as amended (the Regulations), the OR or IP, as appropriate, is obliged to pay into the (ISA) any funds they receive while administering all bankruptcies and compulsory liquidations. Before 1 October 2011, sums from voluntary liquidations could also be lodged in the ISA; now, only unclaimed dividends in a voluntary liquidation may be paid into the ISA. Likewise, unclaimed dividends arising in an administration or an administrative receivership may be paid into the ISA once the company has been
Restructuring & Insolvency
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