Posted by Christopher Deadman, sales director at Litigation Futures sponsor Augusta Ventures
This funding game is a walk in the park. All you need is a bucket-load of other people’s cash, a good suit and a nice line in glib patter. You will drift around the country like some Law Society-enabled Willy Wonka dispensing largesse like gumballs to an open-mouthed and grateful townsfolk. You will be universally adored and feted. King Midas will be a poor relation. The Elysian Fields will look like a Brazilian favela.
Deploying finance in the legal market is hard graft. Just the other day I had a text from my old mate Sisyphus which said “rather you than me!”. I spend my days chasing solicitors for updates on cases previously notified. I make endless calls to firms for news on applications promised to me. I know the standard voicemail greetings of every network carrier by heart. In fact, should I ever fancy a change of career, I am perfectly equipped to sell penny stocks over the phone to retired dentists in Iowa.
None of this is surprising, however. Litigation in the main moves at the pace of a heavily sedated wardrobe. It is perfectly possible to keep a claim on life support for months or even years. Solicitors are also reluctant to apply for finance because of the perception that it is a complicated process and, well, let’s just hang on for a bit longer and it might just settle. All of this comes with the territory.
But what never fails to surprise and disappoint is the capacity of some firms to regard the funder as a ‘mark’, a ‘john’, a ‘rube’ to be exploited.
What do I mean? I mean that an albeit tiny number of firms enter into dialogue with funders but have no intention of entering into a financing arrangement. They are using the funder’s due diligence processes simply as a free second opinion on the merits of their claim.
Let’s face it – you don’t need the seduction powers of the fictional charmer Ralph Gorse to persuade a funder to look at a good-quality claim. If the due diligence results in the likelihood of an offer of funding being made, then that position is relayed to the other side in an attempt to expedite a settlement in advance of the funder deploying its capital.
If the funder rejects the claim, then they will almost certainly provide supporting reasons which may assist the solicitor in plugging the legal or factual gaps or encouraging them to abandon the case all together.
And it’s not just solicitors. We have seen opinions from counsel which are so optimistic that I am certain the authors believe Glenn Miller to be on the cusp of releasing new material any day now. We have also been treated to opinions which form part of a series, each from a different author, and each expressing a progressively sunnier view on success. The final iteration, brimming with hyperbole and marbled with abundant possibility, would make Polyanna look like Henrik Ibsen.
This is hugely frustrating and expensive for the funder as well as slightly depressing. No one is pretending that litigation financiers are big-hearted philanthropists with solely charitable intentions. Litigation finance companies are there to make money for their investors by sourcing good-quality opportunities in which to sink their cash.
In the main, however, they are a pretty straightforward and honest bunch of people to deal with (at least at the legitimate end of the spectrum). It is therefore disappointing when some firms think it is perfectly acceptable to prevail on the funder’s goodwill for their own purposes.
Part of the problem may rest with the perception amongst sections of the legal market that funders are somehow faintly disreputable and ‘deserve’ to be gulled. This sort of attitude says more about the solicitor than it does about the funder. Firms who exhibit this sort of behaviour are burning their bridges not only for themselves but also their clients.
The gimlet-eyed amongst you will have picked up on the slightly impish and deliberately provocative tone of the above. The overwhelming majority of legal professionals access funding for the right reasons – to enable their clients to pursue meritorious claims which would otherwise not have been possible.
A tiny number, however, look to take advantage of the process by wasting the funder’s time and eating into their goodwill.