14 September 2012Print This Post

Australian funder takes multi-million pound hit over failed UK case against law firm

Australia: concerns over case pipeline

Australian litigation funder IMF lost A$5m (£3.3m) in backing a group action against London firm Collyer Bristow and other defendants, its annual report has revealed.

The High Court ruled in May against the 555 claimants in the InnovatorOne case over advice on investment schemes, which included a £50m professional negligence claim against Collyer Bristow.

It was the only loss IMF suffered in the year to 30 June 2012, during which it had net income of A$71m from the nine cases that resolved during the year, with a shareholder action over an Australian company’s defective accounts alone yielding $42m, the most IMF has ever received from a single matter. IMF recorded a net profit of A$43m, nearly double that of the year before.

In all the company has completed 137 cases since it listed in 2001, of which 93 have settled, 12 were won and five lost, with 27 withdrawals. These have generated revenues of A$1.2bn, of which A$800m has gone to clients and A$400m to the company; A$270m has been gross revenue, a gross return on investment of 310%. The average investment period is 2.3 years and lost cases cost A$6.7m. IMF funds 3-4% of the cases presented.

Chairman Rob Ferguson said: “The outlook for the year underway is quite favourable given a number of matters where judgment is expected over the balance of the year. As to the medium term future, the issue of deal flow remains… In Australia our new deal flow was disappointing this year.”

However, he said this was not the case with IMF’s new venture in the US, Bentham Capital, which has received more than two cases a week to review since launching last October, with three investments to be announced shortly.

Managing director Hugh McLernon added that IMF was taking “particular care in the choice of cases to be funded. By way of example, we declined to fund a class action which settled recently for A$40m. That conservative decision on our part demonstrates the inaccuracy of recent statements made by the American Chamber of Commerce that Australian litigation funders are likely to fund meritless cases in the hope of jagging a settlement”.

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