Some funders are turning their attention to lower-value litigation – at last.
The other day, I got a call from a private equity fund wanting to know more about the litigation funding market. It was in the early stages of sussing out whether litigation is an area that it might want to invest in.
Despite some bad publicity for the third-party funding sector recently (with funder Argentum withdrawing from the Association of Litigation Funders earlier this year, and last year’s scathing judgment in the Excalibur litigation, in which funders faced heavy losses) it is clear that the mainstream funders are doing well.
Publicly owned funders such as Burford and Juridica announced strong results, while others such as Calunius have recently raised a second fund, providing more money to invest in cases. Aussie funder IMF Bentham has also recently set up shop in the UK through a joint venture called Bentham Ventures, and will be funding UK litigation.
These funders are mostly interested in the big commercial cases, and indeed that part of the litigation market seems to have plenty of options when it comes to finding funding.
But what was surprising about the private equity fund, was that it was not actually looking at the big cases – it was more interested in what opportunities exist at the lower end.
I have blogged before about the need for more funding in lower-value cases, and the number of strong legal claims that are not being pursued because the claimant simply can’t afford the litigation, even though their claim may be strong on merits.
Now, some developments are finally starting to happen in this part of the market.
In the June issue of Litigation Funding, we revealed that existing funder Augusta has launched a new ‘Trinity’ product aimed at lower-value cases (it will provide a minimum investment of £50,000). The key to its product is that it combines funding with relatively low-priced after-the-event insurance, and uses technology to create streamlined processes for assessing cases.
It is still early days for the product, but it will be interesting to see how it fares – and I hope it succeeds in making the model work.
Back in June, a property investor also announced his intention to invest in lower-value litigation, worth a minimum of £200,000.
Of course, none of this will help those cases that are worth even less in financial terms, but still hugely important, because small businesses could end up going under if they cannot afford to enforce their contractual rights in, say, a £40,000 claim.
But at least these recent developments are a step in the right direction – and a welcome focus on the need that exists at the lower end of the market.
Rachel Rothwell is editor of Litigation Funding magazine