Should Third Party Litigation Funders Have Greater Influence Over Running Cases???

By Author: Dafne Gayle
Total Articles: 33
Comment this article

The biggest issue with third party litigation funders having any or any significant influence over the cases they fund are the age old concerns of maintenance and champerty which have been ever present in the litigation funding landscape.

"A mischief, in those times it seems but too common, though a mischief not to be cured by such laws, was, that a man would buy a weak claim, in hopes that power might convert it into a strong one, and that the sword of a baron, stalking into court with a rabble of retainers at his heels, might strike terror into the eyes of a judge upon the bench. At present, what cares an English judge for the swords of a hundred barons? Neither fearing nor hoping, hating nor loving, the judge of our days is ready with equal phlegm to administer, on all occasions, that system, whatever it be, of justice or injustice, which the law has put into his hands."
[Jeremy Bentham on maintenance and champerty]

Maintenance is defined as the wanton and officious intermeddling with the disputes of others in which the maintainer has no interest whatever, and where the assistance he renders to the one ...
... or the other party is without justification or excuse.

Champerty is maintenance with the addition of a division of the spoils of the litigation.

Until 1967 maintenance and champerty were both crimes and torts.

If a third party litigation funder becomes too involved in the decision making process and is allowed to act as a 'quasi' client, there is a real risk of the litigation funding arrangement falling foul of the rules on maintenance and champerty and the litigation funding agreement being ruled to be unenforceable.

The rules on maintenance and champerty still exist, and only in 1990 did the Courts in England allow solicitors to benefit from conditional fees. It currently remains against public policy for a third party litigation funder to be able to take control of a matter of commercial litigation that they have agreed to fund

What are the risks??

The concern in allowing a third party litigation funder control of an action is that their motivation is not necessarily the same as the motivation of the client. The funder wants a return on their investment. The client is looking for recompense - usually.

However, in contractual commercial litigation claims, is there really any issue with a third party funder running the show? They are paying the fees and they are taking the risk. The process is being paid for by them. However, it is also possible, indeed likely, that potential claimants will stay away from those third party funders who seek to influence and intermeddle. The third party litigation funder is paying the legal bill, not buying the client or their case. There are many potential commercial litigation claimants who would prefer to use an alternative route to corporate litigation rather than give up control of their case.

The potential rise in traded claims and 'litigations' as a traded?commodity?

One of the concerns that has been raised as an argument against too much control of commercial litigation matters by third party litigation funders is the concern that corporate litigation could become an asset class in its own right. What is meant by that is that investors could begin to 'trade' in pieces of corporate and commercial litigation? They could buy and sell claims in the same way that judgments and arbitration awards or debts can be sold and bought now.

Cases could become a commodity that can be traded between litigation funders.

That raises some public policy concerns. In contract cases, one can see an argument as to why this may not be something abhorrent, but in tortious claims involving individuals it is a concern. A claim for compensation is supposed to provide a claimant with recompense for their pain and suffering in a personal injury claim. There is something not quite right about the ability to buy and sell those cases which is most unlikely to be allowed as a matter of public policy.

The conclusion to this seems to be that it is a bad idea to allow a full trade in all claims but the idea is lees concerning in corporate litigation claims. That said, some realism is?needed and third party litigation funders need to have some ability to influence their investments and they will do so regardless. This has in fact been the experience in Australia, in practice. Whilst after event insurers take similar risks to third party litigation funders, they also have an ability, currently to influence in some ways but not directly. Their remedy is to withdraw. Funders can do the same but they are likely to continue to seek to influence in a greater fashion and ultimately they will as they pay the bills. ??

The Article is written by www.litigationfunding.com providing Commercial Litigation and Corporate Litigation. Visit http://www.litigationfunding.com for more information on www.litigationfunding.com Products and Services___________________________Copyright information This article is free for reproduction but must be reproduced in its entirety, including live links and this copyright statement must be included. Visit www.litigationfunding.com for more services!