The UK could see a splurge of litigation funded by third parties after it emerged last week (5 January) that one of the largest cases of its kind has been brought in the High Court.
Senior litigators believe the dispute, a $173.6m (£90m) negligence claim organised through specialist litigation funds provider IM Litigation Funding, could be the first of many similar cases.
Clifford Chance litigation partner and president of London Solicitors Litigation Association, Simon Davis, said: “Following the decimation of legal aid funding, we are inevitably going to see more creative attempts to fund litigation.
The good side of the coin would be if it permits meritorious claims to be brought which could otherwise not have been brought due to a lack of funds.” He added: “However, the other side of the coin would be if laudable attempts to introduce more creative funding led to a compensation culture through the back door.”
Lovells dispute resolution partner Hugh Lyons added: “We are increasingly seeing liquidators looking to professional third-party funders to finance litigation, a development which will not be welcomed by ‘deep pocket’ defendants such as banks and accountants.
Barlow Lyde & Gilbert and Norton Rose have landed lead roles in the case.
Barlows is representing City-based accountancy and advisory firm Moore Stephens after the $173.6m negligence claim over audits was brought against it by creditors of failed UK company Stone & Rolls.
Norton Rose is acting for Stone & Rolls, which is being funded on the case by IM. The Norton Rose team is being led by litigation partner Sam Eastwood, assisted by senior associate Richard Blann.
Under the current rules, unconnected third parties such as banks or hedge funds can put up finance to allow a legal claim to be pursued for a return in a share of the winnings if the case succeeds.
However, Linklaters head of advocacy, Mark Humphries, warned: “Funding litigation where you have no interest can expose you to unlimited cost liability.