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Litigation funding platform targets wealthy private investors

Leech: Opportunity at the smaller end of the market

An online funding platform has recruited 200 high net-worth individuals to back commercial litigation cases in the UK and is employing litigation analytics to support its work.

Cormac Leech, chief executive of AxiaFunder, said the service was the only one in Europe enabling individuals to invest in litigation funding.

The minimum individuals can invest with AxiaFunder is £500, but the maximum is not fixed and depends on the size of the case and number of other investors.

Mr Leech said he had identified a gap in the litigation funding market when searching for alternative finance for his own commercial dispute.

“Larger funders tend to focus on larger cases, creating an opportunity at the smaller end of the market.

“The economies of funding small cases can be quite challenging, but if you have a lean and efficient approach which avoids high fixed costs, you can make it work.”

Mr Leech, a mathematician who advised private equity groups before setting up an alternative finance company, said his first thought when looking for litigation funding was alternative finance.

“I thought a company like AxiaFunder already existed. It turns out that it existed in the States, but not in Europe.”

LexShares, which provides a similar service to AxiaFunder in the US, has been operating since 2014.

Mr Leech said his own dispute had now been settled without the need for funding.

He said that AxiaFunder, which launched in November last year, had already financed two cases and had 10 more in the pipeline.

The two, a professional negligence case and a construction dispute, involved financing court fees of £10,000 each.

The 10 cases the company was currently “evaluating and negotiating on with a view to funding” were worth an average of £500,000 to £600,000 in terms of damages, and funding would cover the cost of solicitors, counsel and experts all the way to trial.

Mr Leech said the 10 had been selected from a group of around 90 potential cases with the help of commercial lawyer Michael Lent, head of case origination and assessment.

Mr Lent left private practice and joined Temple Legal Protection before setting up his own after-the-event insurance underwriting agency.

Mr Leech said AxiaFunder was a funding platform open only to approved private investors, who are screened and have to sign non-disclosure agreements before they could access details of cases.

He said investors could get returns of between 20% and 40% on their investments in litigation, with an average of around 30%, although returns were never guaranteed.

He co-founded AxiaFunder with Rabin Tambyraja, head of business development and Sophie Xuemei Liu, the chief operating officer. The three met 20 years while on a MBA course with INSEAD.

AxiaFunder has recently teamed up with litigation analytics specialists Solomonic to help assess cases.

“For us moving to a process for determining funding that is based on rigorous data is critical to our business model and Solomonic’s data and analysis is unrivalled in the UK market,” Mr Leech said.

“Our goal is to transform litigation funding by introducing a wider group of sophisticated investors to litigation assets that traditionally haven’t been funded in this way.

“To do that we have to have more dynamic case evaluation supported by data, rather than relying solely on the traditional approaches still in use in the sector.”