Duncan Lewis

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Commercial Property

Risk averse companies take third party funding to pursue claims

Date: (3 December 2012)    |    

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Lawyers have warned that rapid expansion of third party litigation funders has surprised the legal community and easy profits in the early years could turn to heavy losses if judges award costs against the losing side at the end of protracted cases.
A Guernsey based litigation firm set up by Leslie Perrin has £40m to back third party cases. Mr Perrin has cited the case of Elvis Presley’s estate which was embroiled in a long running legal action and extracts cash from RCA records in a case that alleges that Elvis was unjustly exploited by his record company. A hefty percentage of any payout would go to a litigation funding business of Mr Perrin.
Mr Perrin has warned that such speculative funding would become a necessity very soon as legal costs were skyrocketing and such investment would be the only way for risk averse companies to pursue claims.
More than £1bn worth of funds were available globally to put into commercial court cases, according to Perrin, who is also chairman of the Association of Litigation Funders of England and Wales.
Being purely a commercial activity the firms make a lot of money if it makes the right choices about cases, Perrin had said a conference in central London organised by the Westminster Legal Policy Forum.
Perrin told the conference that their clients mainly consisted of small firms which do not have the resources to fight David v Goliath claims unable to take on larger businesses and risk averse companies that do not want to put more money into a court case without being sure if they would eventually win.
The Presley lawsuit, filed in August 2011, seeks more than $9m in backdated royalties and a share of future revenue, alleging a 1973 buyout agreement left the singer collecting only $10 a year for worldwide rights on each of his songs. Perrin says that they were at last getting revenge for the ‘King’. The case is being fought in Munich.
Presley was stationed in Germany as a soldier in the army in the late 1950s. The country is "Elvis crazy" and is responsible for 10% of the world's Elvis Presley sales, Perrin said at the time the suit was filed.
London is a major player in the litigation funding industry, Chris Bogart, chief executive of the UK-based litigation funder Burford, told the conference.
Litigation was becoming longer and more expensive, with ever increasing number of disputes with their complexities. Many large firms who use litigation strategy of delaying and overwhelming by force" when confronted by claims, were being balanced by such litigation funding in favour of the smaller claimant and prevents large corporations from using such "steamrollering tactics" Burford added.
But one barrister asked how judges with a negative view on third party funding could be educated to become more sympathetic when they come to know that the applicants were supported by third party litigation funding.
This financing tool is currently limited to commercial cases of a high value, and is not suitable for consumer cases, personal injury cases or generally claims that do not carry a sufficiently high level of damages.

 

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