Vol 14 (2017) - Issue 3

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Third Party Litigation Funding for Listed Companies

Introduction
Traditionally, third partly litigation funding was used by claimants who lacked the financial resources to bring or pursue claims against more powerful opponents. Encouraging the third party litigation funding of 'David vs. Goliath' was one of the main aims of the costs reforms implemented in England and Wales in 2013 (also referred to as the 'Jackson reforms') as it increases access to justice in a world were going to court has become a very expensive game. The success of the third party litigation funding model, as evidenced by more claims being funded and subsequently resolved at mediation or at trial/arbitration, coupled with its increased availability, has drawn the attention of listed companies. As funders, we are often invited to pitch to senior management in these companies and asked to explain the benefits of funding outside the ‘David vs. Goliath’ scenario. In this article, we examine several important aspects of third party funding for listed companies such as the context in which these companies come to involve third party litigation funders and the main objectives that they can achieve by choosing the third party funding route. We conclude the article with a reference to two questions that we are often asked by prospective clients, namely whether legal privilege is maintained over documents provided to/created by third-party funders and what level of involvement in the running of a claim will a funder expect once the claim is funded.


1. Why call in a third party litigation funder?
Let us assume that a listed company, to which we shall refer as Company A, operates businesses in the technology, leisure and real estate sectors. In the technology sector, it carries out highly sophisticated and advanced research and development of new products which it subsequently markets throughout the world. In the leisure sector, it owns several brands and has hundreds of franchisees. In the real estate sector, it is an owner/ developer of multi-purpose office and residential developments. Let us also assume that Company A is facing a number of immediate challenges:
– Company A has reasons to be believe that one of its competitors has stolen the technology for a ground breaking product from it; this technology has enabled the competitor to launch a new product and successfully to capture market share from company A;
– One of company A’s competitors in the leisure sector engages in tortious interference and lures a significant number of company A franchisees to its own brands;
– Company A’s receivables have increased dramatically due to its failure to collect rents from hundreds of tenants.