A commercial firm based in St Albans, Hertfordshire, has invited litigation funders to tender for a panel, in a pioneering move to cut costs for clients.
Luke Harrison, head of litigation and dispute resolution at Debenhams Ottaway, said that cutting out brokers’ fees could make the difference in deciding whether a claim was viable.
Mr Harrison said a “plethora of intermediaries” had set themselves up to broke litigation funding, often those who had previously worked in the after-the-event insurance market.
“The litigation funding market is small – there are only a handful of players. I want to get best value for our clients by going to them directly.
“A broker will get a percentage commission on the return the funder is going to achieve. For claims from £500,000 to £1m, once lawyers’ fees are taken into account, things can be quite tight as to whether they are viable.”
Mr Harrison gave the example of a claim for £1m, which settled at £750,000 shortly before trial. With legal fees of £150,000 for solicitors outside London, a litigation funder might be looking for a return of between £300,000 and £400,000 – a “large chunk” of damages.
“We want to make claims more economically viable for clients. There is no additional benefit in going to a broker, and if we put a lot of cases through a particular litigation funder and they have a bigger basket, we could reduce the cost.”
Mr Harrison said Debenhams Ottaway sent out invitations to tender to more than a dozen funders this week.
The firm’s panel will be divided into three sections – the first for claims of up to £1m, the second for claims between £1m and £5m, and the third for claims of over £5m in value.
“The point of going through a procurement exercise is so clients can see we’ve put together a panel to give them better value,” Mr Harrison said. “We’ll be looking at adequacy of funding and procedures. We don’t want to have to reinvent the wheel every time a client needs funding.”
Mr Harrison said there was now more litigation funding in the market than there were cases, and it was no longer a situation where funders could cherry pick cases.
He described Debenhams Ottaway as a “boutique litigation team within the wrapper of a multi-service commercial law firm” and said it was growing rapidly, with 11 partners, a turnover of £8.5m and former City lawyers joining the litigation team.
He added that the firm carried out a mixture of commercial work, commercial and residential conveyancing, insolvency, IP and had a strong private wealth team.