lf tablesThe latest lists of third-party funders and ATE providers

23MeetING a NeeD Litigation Funding celebrates 16 years of publication

4 passING the batoNThe difficulty with assigning conditional fee agreements

10 part 36 perIlProblems with settlement offers in recent cases

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LITIGATION| FUNDING The essenTial guide To finance and cosTs

the future Is fIXeDescalatIoN of fIXeD costs oN the horIzoN

DECEMBER 2015 ISSUE 100

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19 Bell YardLondon WC2A 2JR (LDE 100)

Editor: Rachel RothwellEditor-in-Chief: Paul Rogersonemail: rachel.rothwell01@virginmedia.com

AdvertisingAlison James, Vera BannermanTel: 020 7841 5542/5494Email: litigationfunding-advertising@ lawsociety.org.uk

Subscriptions tel: 020 7841 5523

All other enquiriestel: 020 7841 5551

Litigation funding is a bi-monthly Law Society Gazette publication, published by the Council of the Law Society. All rights reserved. No part of this publication may be reproduced in any material form, wheth-er by photocopying, scanning or downloading onto a computer or otherwise, without the written permis-sion of the Law Society, except in accord-ance with the provisions of the Copyright, designs and Patents Act 1988. Printed by Pensord. ISSN 1465-590X© The Law Society 2015

4 MEETING A NEED LF’s original editor-

in-chief Michael Napier recalls how it all began

7 HISTORY REPEATS ITSELF

Kerry underwood on how little has changed since LF began

8THE FUTURE IS FIXED

dominic Regan predicts a bold extension of fixed costs

10 PASSING THE BATON

Andrew Hogan looks at the problems in respect of assignment of CfAs

12 HOT TOPICS Recent events

have featured fixed costs and conspiracy theories

14 THE PERILS OF PART 36

deborah Burke and Nicola Magrath on settlement offers

16 A HARD LINE Steve davies on a

tough judicial approach to costs in PI claims

17A MIXED BAG Sue fox

on the pertinent

issues surrounding budgeting

18 PROTECTING INNOVATION

david Bloom on enforcing IP rights

20CENTRE STAGEJeunesse Edwards

on mainstream funding

21UPDATERachel Rothwell

on the lastest deals

23 TPF TABLE Our list of third-

party funders and brokers

26 ATE TABLE Our listing of

after-the-event insurance providers

inside December 2015 | Issue 100

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In this issue‘Epidemic of cold calling’ warning

CFA assignment bid

In this 100th edition of Litigation Funding (LF), we mark 16

years of unrivalled analysis of the ‘money’ side of litigation: legal costs; ‘no win, no fee’

agreements, external investment in litigation, and more.

Throughout that time, lawyers have been drenched by wave upon wave of reform, and – as Kerry Underwood, a member of LF’s original editorial board, points out – we have seen the rise and fall of such things as recoverability, referral fees, and alternative business structures. Michael Napier, the original LF editor-in-chief, points out that back in 1999, launching a magazine dedicated solely to the funding of cases was deemed a risky enterprise; but in the intervening years, the subject matter has grown into a field of law in its own right.

In this perpetually changing area, it is easy to get caught up in the issues of the moment. But it is worth taking a step back and asking, what has really changed since 1999? More than two-and-a half years on from Jackson, and 16 years after Woolf, are legal costs as low as litigants need them to be? The honest answer must be ‘no’ – except in those areas, such as low-value road traffic accident claims, that have been forced to don the straitjacket of fixed recoverable costs (FRC).

And so, to the future – and our cover headline, ‘The future is fixed’. Dominic Regan predicts a strong push for the expansion of FRCs coming from Jackson in a speech next month. Fixed costs do not just control spending; they give certainty, and avoid both proportionality and budgeting.

But they are bad news for law firm profit margins; and it would be a mistake to assume that their creeping spread will be confined to personal injury and clinical negligence.

As we report on page 12, even commercial lawyers may soon be staring down the barrel of tariff costs, if the instincts of the judge in charge of the Commercial Court prove accurate.

Perhaps in another 16 years, the costs landscape will finally be looking quite different after all.

Rachel Rothwell, editor

Claimant lawyers warned of ‘an epidemic of cold calling from claims management companies’ following the government’s announcement last month that it intends to increase the small-claims limit for personal injury cases from £1,000 to £5,000.

The move stunned the claimant PI sector, which until now had always staved off the threat of an increase in the limit.

Chancellor George Osborne announced the move in his autumn statement, along with a proposal to remove damages for ‘minor’ soft-tissue injuries. The plans will be consulted on next year, with the scrapping of whiplash damages – which will need primary legislation -scheduled for April 2017, while the small-claims limit rise may be introduced sooner.

Jonathan Wheeler, president of the Association of Personal Injury Lawyers, said: ‘Only two years ago the government ruled out increasing the small-claims court limit because there were no adequate safeguards to protect genuine claimants. There are still

no adequate safeguards. ‘If the small-claims court limit is raised to

£5,000 all that will happen is that genuine victims of injury will not be able to afford the legal help they need to bring genuine claims, and there will be an epidemic of cold calling from claims management companies as they rush to take advantage of vulnerable

people who won’t be able to afford legal representation.’

Law Society president Jonathan Smithers added that the move would

force injured people to litigate their own claims and would remove representation

for serious injuries including facial scarring.

However, insurers welcomed the move as an important step against fraud, and said the savings would be passed on to the premium-paying public.

Following the autumn statement, there were immediate signs of impact on the claimant sector, with Australian-listed Slater and Gordon’s share price dropping by more than 50% overnight. Insurers saw their share prices increase following the

announcement.

A case with considerable significance for law firms that have taken over pre-Jackson caseloads from other practices has been listed for appeal this month.

The appeal in Jones v Spire Healthcare (Case no. A13YJ811, 11.9.15) will be heard on 16 December in Liverpool County Court, before HH Judge Wood.

In October, DJ Jenkinson held that SGI Legal, which bought the personal injury book of Barnetts when that firm went into administration last year, could not recover its costs in a PI claim because the conditional fee agreement drawn up by Barnetts was not successfully assigned to it.

The judge held that the claimant was entitled to recover the costs incurred by Barnetts, but not those later incurred by SGI Legal. He said the agreement between SGI and the claimant was a ‘novation’ rather than

an assignment, meaning that it did not come into effect until January 2014.

This put it in breach of regulations introduced in 2013, because the agreement mentioned a 100% success fee without referring to the 25% statutory cap – although the wording had been valid when drawn up by Barnetts in 2012.

The judge said the claimant could ‘potentially’ recover disbursements incurred by SGI, but he had not heard submissions on this point.

The outcome of the appeal will be closely watched by law firms that have bought up books of pre-Jackson cases and sought to preserve recoverability of the success fee and after-the-event insurance premium through ‘assignment’ of the CFA. l See Andrew Hogan’s article on page 10 for analysis of the assignment issue.

The future is fixed

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FIXED COSTS

S ir Rupert Jackson is back on the reform trail. On 28 January next year, he is going to deliver a talk about fixed costs. I have never read a Jackson speech which dwelled on the past. When he

speaks, it is with the primary purpose of setting out another vision of radical reform. Anticipate profound proposals rather than tinkering at the margins.

Jackson’s reports, which led to the 2013 reform package, lavished praise on the German fixed-costs model. The perceived virtues are utter certainty, the absence of the need to budget, and no pesky arguments about the continuing uncertainty of the proportionality test.

Inevitably, there has been intense speculation about what will be pulled out of the hat. More than a few have said that the proposals will be modest; perhaps an increase in fast-track to £50,000 with a corresponding extension of fixed costs confined to those matters where they are already in place, mainly personal injury claims.

Nonsense. If one looks back to the breathtaking scope of the April 2013 changes, which did not deliver all that he sought, it strikes me that modest meddling is not what Sir Rupert had in mind. Speculating as I do, my intuition is that a bold extension of fixed fees is on the horizon. I believe that change with be both horizontal and vertical. There is no justification for singling out one litigation sector – injury – and leaving costs at large everywhere else. Why should one category of litigant be treated differently from another? A universal application of fixed costs would make sense, subject to crucial qualifications I express below.

A vertical extension is certain. Fast-track matters have been ticking along nicely at £25,000 for a long time. Optimists fondly suggest that they could cope with an increase to £50,000. This figure has been mentioned in dispatches emanating from the Rule Committee. But something far more audacious is possible. An overwhelming volume of mainstream disputes would be captured if the ceiling were to be set at a far higher level, maybe £175,000 or even £250,000. At that level, the bulk of conventional multi-track activity would be captured.

I had an illuminating general discussion in October with Mark Field PC MP, deputy chairman of the Tory party. He utterly appreciates how important our litigation process is for the economic health of the UK, and is MP for Westminster and the City of London. What intrigued me was his general statement that the new government was looking to pursue a radical agenda for change. He was not talking about litigation, but rather looking across the entire social landscape, of which law is an integral component. I detect a will to push seismic changes through in all directions.

ClInICal nEglIgEnCEJackson has unfinished business. Despite his insistence that the reform package be implemented in one single sweep, he was advocating that fixed costs be accelerated to the front of the queue. He ruefully reflected, in a fine essay to be found in the autumn 2013 White Book supplement, that his wishes remained unsatisfied.

Injury practitioners have piled into clinical negligence work, perceived as a safe and lucrative haven. It is a discipline that is often complex, and as far removed from the mainstream of conventional lower-value injury work as one could imagine. But how much longer until fixed costs will be introduced into this arena? At the unveiling of the Jackson report, the very first matter the judge alluded to was the disproportionately high level of costs in this field; though it is worth acknowledging that experts can have an immense impact on the bill. The government has a vested interest in slashing bills here, for it stands

behind the NHS Litigation Authority. Any saving will translate into a benefit for the state; and so there is overwhelming pressure to slot clinical negligence into a fixed costs matrix too.

an ESTablIShED TEmplaTEHow in practice might all of this work? The template in current fixed costs work will be attractive to the reformers. It is now established and simplistic. Costs would be determined by reference to the subject matter of the dispute, stage of settlement and quantum. Low costs at the outset give defendants a fervent incentive to settle in a hurry. It can then be claimed that accelerated dispute resolution represents a virtuous outcome.

The contrary argument is that a typical clinical negligence action is horrifically complicated, with much evidence and documentation to master. An injury claim is generally far simpler. Putting aside the

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Dominic Regan predicts a bold extension of fixed costs

remote prospect that clinical negligence will be left untouched, I suppose that one could either apply a discrete and more generous scale of costs, or attach a significant uplift to clinical claims.

Fixed costs are not necessarily a bad thing. Having an independent and transparent mechanism for determining what is due could be good. As ever, caveats must be entered. First, the level of costs must be realistic and not set at a random, arbitrary level by an ignorant civil servant. Second, it is imperative that unreasonable conduct is penalised so that, for example, a defendant who makes a meal of a matter should pay handsomely for their untoward behaviour. These two considerations are non-negotiable.

ThE hObbS CaSEThe recent decision of Master O’ Hare in Hobbs v Guy’s And St Thomas’ NHS Foundation Trust (2015) EWHC B20 (costs) illustrates the current dilemma in this field, and shows the downward pressure that now exists, with costs at large having to be proportionate. The claim settled for just £3,500. A bill for £32,329.12 was presented. Any objective viewer, lawyer or not, would be bemused. Master O’Hare undertook a provisional assessment, slashing the bill to £9879.34 plus the costs of the assessment, before making a further deduction for proportionality.

Some of those who are complaining about the prospect of fixed

costs have also whinged about budgeting. If budgeting were universally embraced, then the case for an alternative device to regulate costs would be diminished. Even now, it strikes me that a wholesale effort to embrace costs management and particularly J-codes might just persuade

Sir Rupert to take a more benevolent approach to higher-value claims.It is one thing to make proposals, and quite another to deliver them.

Jackson has a strong following within the insurance world, which has immense lobbying clout. Portals and fixed costs were fanciful just a few short years ago; yet his 2013 changes were embraced by both politicians and the senior judiciary. Whatever Sir Rupert proposes on 28 January will shake the profession. Mark my words. Dominic Regan of City Law School is an expert on costs reform and founder of Dominic Regan Training Ltd

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Having a transparent mechanism for determining what is due could be good

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lf: 100 issues on

Litigation Funding is 100 today. That is 100 issues, not years, although the costs war might feel like The Hundred Years’ War. The first two issues were in spring 1999. Looking through them

now, there is an element of what goes around comes around. Recoverability of success fees and after-the-event insurance premiums

was over a year away, but the proposals were going through parliament in what was then The Access to Justice Bill. That Labour government bill became an act, and abolished legal aid in personal injury cases, but in 1999 clients still paid the success fees. These were not capped by reference to damages, but almost everyone adopted the Law Society’s recommendation of a 25% damages cap (see The Cap – 25% of What – Issue 2). Sound familiar?

Jackson was the name of the state capital of Mississippi and the surname of a popular singer who had a pet chimpanzee. Some have suggested that it may have been better if the singer and chimpanzee had written the eponymous report. Others insist that they did.

You may think this is cynical and unfair. Following the remarkably smooth implementation of the Jackson Report costs have plummeted, costs budgeting has become unnecessary and the system works so smoothly that the government has been able to halve court fees, and liti-gants in person have virtually disappeared as everyone can afford justice in the new post-Jackson world. Something like that anyway.

In 1999, we were twixt Woolf and Jackson. There always has to be a report on the go, and all the talk then was about implementation of the Woolf report. In the first two issues of Litigation Funding, there are adverts for courses on Civil Costs After Woolf, Civil Justice Reforms, Surviving and Maximising Profits under Woolf. Replace the ‘Woolf’ with ‘Jackson’ and nothing has changed. The legendary Michael Cook, author of Cook on Costs, explained to me some time ago that about every 15 years throughout history, there is a report on cutting costs and improving efficiency – but all that such reports ever do is to increase costs, which means that another report has to be prepared in the 15-year cycle.

This goes back to the 13th century. Following the Magna Carta in 1215 there was a flurry of legislation establishing the modern court system in remarkably similar language to now, including the Attorneys in County Courts Act 1235, Limitation of Writs Act 1235, Inquests Act 1267, Juries Act 1267, Suits of Court Act 1267, Champerty Act 1275, Coroners Act 1275, Maintenance Act 1275, and a forerunner of today’s ASBOs and CRIMBOs, the Trespassers in Parks and Ponds Act 1275, followed in 1331 by the Arrest of Night Walkers Act and in 1388 by the Nuisances in Towns Act. The Statute of Westminster 1275 is the most important early act of parliament, and was a consolidating measure, with key provisions still in force. Concern about legal fees and delay existed – see the Recovery of Damages and Costs Act 1278 and the Commands in Delay of Justice Act 1328.

A full system of legal aid was introduced in Scotland in 1488 and in England and Wales by the Poor Persons Act 1495, which exempted

the poor from court fees and assigned lawyers to prepare pleadings and represent poor people free of charge. In 1531 a system of full, not qualified, one-way costs shifting was introduced for poor persons by statute – Henry VIII C15. Legal aid lasted until late Victorian times, was reintroduced in 1949, and has now been scrapped again. Thus for the last 520 years, England and Wales has had a full legal aid system for all bar 60 years. Just thought you would like to know.

Back to those early editions of Litigation Funding, and the McDon-alds coffee spill was in the news. Remember alternative business struc-tures? They had not even been thought of then, and their birth and premature death in the intervening 16 years is unlamented. No men-tion either of referral fees or claims management companies, although both were around, illegally and underground. Since then, referral fees in personal injury work have been legalised and then banned again.

A working party had been set up by the Institute of Advanced Legal Studies to look at the ethics of no win, no fee funding. Research was also planned by the Policy Studies Institute. The Law Society formed a funded working party. In 1999, there were more such studies and research groups than actual practising solicitors. Also, just as now, there was a singular lack of interest in looking at the ethics of charging hundreds of pounds an hour, win or lose.

So 1999 was a pre-recoverability, pre-legal referral fee, pre-ABS world. In the meantime they have all come and gone.

Looking back at these first two issues, one commentator, a youthful looking member of that first editorial board, predicted that fixed costs would be introduced for fast-track cases, that recoverability would not last, and that his firm would be self-insuring against adverse costs, and would charge the client 30% instead of the standard 25% of damages (page 14 – issue 2).

I wonder who that was. Kerry Underwood is senior partner at Underwoods and was a member of Litigation Funding’s original editorial board. Blog: kerryunderwood@wordpress.com; Twitter: @kerry_underwood

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History repeats itself

Kerry Underwood re-flects on how little has changed since LF began

Kerry will be running a series of courses throughout England and Wales next year, with 25 ‘tour’ dates in March to May 2016. There will be separate courses on: portals, fixed costs, guideline hourly rates and proportionality; and qualified one-way costs shifting, wasted and non-party costs orders. This spring, Kerry is also publishing a series of books on the por-tals, fixed costs, and QOCS. Course delegates will receive a copy of the relevant book.For course details, see https://kerryunderwood.wordpress.com/2015/11/10/kerrys-60th-birthday-tour/. Places booked before 18 Dec will receive a 20% discount.

The perils of Part 36Deborah Burke and Nicola Magrath assess recent case law on settlement offers and costs

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part 36

When we first sat down to write this article, we originally planned to highlight the potential benefits of the Part 36 regime – having had some recent successes in cost

negotiations on behalf of receiving parties. In one of our recent cases, a perfectly pitched Part 36 offer, which we beat at an assessment hearing, resulted in the receiving party being awarded Part 36 additional sums to the tune of more than £20,000. We have had similarly good outcomes in cases proceeding through the provisional assessment regime.

This is what we thought we would be writing about – but on examination of the case law, it soon became apparent that in fact, Part 36 is often proving problematic for practitioners. This article therefore concentrates on two aspects of Part 36 that are causing difficulty.

The first point relates to the old chestnut of whether an offer is, in fact, a Part 36 offer.

(1) Tim-Alexander Gunther Nikolaus Hertel (2) Artemis International Sarl v (1) John Francis Saunders (2) Liquid strategies Ltd (2015) EWHC 2848 (ch) (09 october 2015)This case arose out of a partnership dispute. Proceedings were issued

and the claimants intended to expand their particulars of claim to include a further claim. While the claimants were establishing that the defendants did not oppose the amendment of the claim, the defendant made an offer to settle. The offer was stated to be a Part 36 offer, and included reference to the claimants’ amended claim. The claimants accepted the offer within the primary acceptance period. So far so good; the defendants accepted liability for the claimants’ costs, and were ordered to pay these costs up to the date of expiry of the primary period. But on appeal, the defendants then argued that the offer which the claimants accepted included matters which were not within the pleaded claim, so that the offer fell outside the scope of Part 36.2, which applies only to offers made: ‘… in respect of the whole, or part of, or any issue that arises in…. a claim’.

The court agreed with the defendants so far as the interpretation of Part 36 was concerned – the claimants learned the hard way that the parties agreeing that an offer is a Part 36 offer does not make it so.

Even worse for the claimants was the fact that - because the original case against the defendants had failed – the court found that the defendants were the successful party, and the claimants were ordered to pay the defendants’ costs of the main proceedings.

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was made. The court ordered the defendant to pay the claimant’s costs on the

standard basis, up to and including 30 June 2012. After that date, the claimant had to pay all of the costs relating to the surveillance evidence obtained by the defendant and the defendant’s costs from 30 June 2012. To add insult to injury, the claimant was also saddled with the costs of the defendant’s application on the indemnity basis. Ouch.

Duncam v Churm (Oxford County Court 12 September 2014)This is a slightly older case, where the value of a personal injury claim plummeted during the course of the case. In 2013, a schedule of loss adding up to £1m was served. When the schedule was amended, the value of the claim halved. The defendant then made a Part 36 offer of around £200,000, and six months after this offer was made, it was accepted out of time.

Again, in the absence of a deemed costs order or any agreement about costs, the judge had to make a decision about the incidence of costs. The ‘exaggeration’ of the claim led the judge to decide that the claimant should lose costs from the time of service of the original schedule of loss, that is, considerably before the defendant’s Part 36 offer was made.

In both of these cases, the court made adverse costs orders against the claimant. The court was only able to make these adverse orders

because the claimant had put itself at risk after not accepting a Part 36 offer within the primary acceptance period.

On a practical level, if there is even a sniff of an exaggerated claim (or other potential difficulties with the claim such as the service of adverse surveillance evidence and so forth) and your opponent makes a low Part 36 offer, consider that offer very carefully with your client - and scope out the possible consequences of not accepting it in detail. Part of the conversation should be to highlight the risks of allowing the primary acceptance period to expire only to accept the offer at a later date; the cases referred to above should help you highlight to your client the potential seriousness of this kind of action.

To slightly misquote Dickens, Part 36 can give your client the best of outcomes when a well-pitched, compliant offer is accepted – or the worst of times, when the offer is not compliant or is accepted late. Be vigilant to make sure that the outcome is as you and your client want it to be.Deborah Burke is owner of Attain Legal Costs Management Ltd, which specialises in costs and costs management work, and in providing costs and costs management consultancy advice to litigators. Tel: 01664 565325.Nicola Magrath is a non-practising solicitor and a costs specialist at Attain Legal Costs Management.

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N J Rickard Ltd v Holloway & Ors (2015) CAWithin this landlord and tenant litigation, claims and counterclaims had been made. The claimant made a ‘drop-hands’ offer, expressed to be a Part 36 offer, that was not accepted, and the matter proceeded to trial. On the back of the claimant’s offer, the court held that Part 36 costs consequences should apply, and ordered the defendant to pay the claimant’s costs on the standard basis until the date of the offer – and on the indemnity basis thereafter, together with interest. That is what you expect when Part 36 is in play.

The defendant appealed the costs order, arguing that the offer made did not specify a period within which the defendant would be liable for the claimant’s costs if the offer was accepted, the offer made simply referred to a period. Guess what – on appeal, the court agreed.

Having removed the tag ‘Part 36’ from the offer, the court could then look afresh at the costs position. It held that, at first instance, the judge had insufficiently considered the parties’ conduct and partial successes. The claimant had failed to respond to the defendant’s requests for mediation and this was found to be unreasonable.

The court concluded that the defendant had won more issues than the claimant (even though not in financial terms). Taking into account the refusal to mediate, the court made no orders as to costs, and said the fact that the claimant and defendant had incurred costs of £85,000 and £100,000 respectively was worthy of comment.

It is just as important as it ever was to check the validity of Part 36 offers made by the parties. If the offer is not Part 36 compliant, the Part 36 consequences will not apply. Just because both parties believe an offer complies with Part 36 rules, does not mean it will be construed this way by the courts.

Late acceptaNce of offersThe second issue for practitioners relates to late acceptance of Part 36 offers, after the primary period for acceptance has expired. The relevant provision is CPR 36.13 (before the recent change to the rules, the same provision appeared in CPR 36.10).

CPR 36.13 (4) sets out the position clearly:Where a Part 36 offer which relates to the whole of the claim is

accepted after expiry of the relevant period… the liability for costs must be determined by the court unless the parties have agreed the costs.

The crucial thing to note is that there is no deemed costs order when a Part 36 offer is accepted out of time. Two recent cases show what this can mean in practice.

Karl Worthington v 03918424 LTD (2015) DR (Manchester) (District Judge Harrison) 16/06/2015 (unreported)This is an unreported High Court decision. The claimant originally claimed £500,000. The defendant had concerns about causation. It obtained surveillance evidence and made a Part 36 offer of £40,000 in May 2014. The defendant then served its surveillance evidence. In December 2014, the claimant accepted the defendant’s Part 36 offer out of time.

District Judge Harrison found that if the litigation had been conducted without exaggeration by the claimant of the value of the claim, the matter would probably have been resolved by the end of June 2012, ie. almost two years before the defendant’s Part 36 offer

The claimant learned the hard way that the parties agreeing that an offer is a Part 36 does not make it so

Protecting innovationDavid Bloom explains how insurance can help to enforce IP rights

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IP RIGHTS

Intellectual property litigation is one of the most costly to undertake, with highly specialised lawyers working on large evidence-based disputes. This raises real concerns for IP-rich businesses which – to

protect the value of their rights – often have no option but to take legal action against infringers.

Before the Jackson reforms, there were alternative funding options. In the days when I was an IP litigator, conditional fee agreements and after-the-event insurance were critical in a right-holder’s decision to embark on hugely expensive IP litigation. Many cases would not have got off the ground but for these risk-sharing tools.

In sweeping them away, Jackson did acknowledge that IP litigation was a problem area – and his report led the way to the rebirth of the Patents County Court, now known as the Intellectual Property Enterprise Court. This provides a quicker, cheaper forum for SMEs to enforce their rights.

The court has been a huge success, but a patentee is still unlikely to get much change from £100k when enforcing its rights; a substantial amount for any SME. Anecdotal evidence also suggests that the costs of running a patent action in the High Court have actually increased quite dramatically, despite Jackson’s attempts to reverse that trend.

In addition to these high costs, right holders are also facing a huge increase in the amount of IP litigation, both in the UK and around the world. The Court Service statistics confirm that between 2010 and 2014, IP cases issued in the UK High Court almost doubled. This is a worrying statistic – but not surprising when put into context.

Over the last few years, the UK has experienced an entrepreneurial boom, with 580,000 new companies being incorporated last year alone. Of these, all will trade under a new name, most will be selling a product or service and many will be innovating, whether creating online content, designing new products or building brands. That is a significant amount of new IP being created each year which, inevitably, will lead to more and more companies coming into conflict, whether intentionally or otherwise.

HaRD cHoIceSSo with the costs of IP litigation still high and the risks of harm to these valuable assets rising, companies are facing difficult choices about when and how to protect their rights. This is an important issue, because IP rights – notably patents, trade marks and copyright – provide UK companies with a competitive advantage over their rivals, both at home and abroad. If a company wants to prevent a competitor copying its latest products or free loading off a successful brand, it must have the financial resources to assert its rights. If it does not, these infringements go unchecked and any competitive advantage is lost – along with the associated R&D and marketing costs. The recent case brought by Trunki against a cheap competitor is a case in point.

It is not lost on right-holders that unless they have sufficient resources to instruct lawyers to protect their rights, they could end up being worthless. The UK Intellectual Property Office has raised its concerns that if companies fear they will not have the funds to enforce

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and provide and indication of price. It can also, at this stage, request further information about the IP. If the indication is within the client’s expectation, it needs to provide any further information requested in order for a formal quote to be prepared. The whole process can, if necessary, take a matter of days.

Policies will have an excess and a co-insurance element, which might vary depending on which jurisdiction the claim is being fought in. These are to ensure the insured and the insurer’s interests are aligned and reduce the level of ‘moral hazard’.

Once the insurance is in place, if a claim arises, the right-holder will need to obtain an opinion on the likelihood of success. The wording varies between policies, but generally if the opinion confirms that it is more likely than not that the claim will succeed, the insurer will pay out. Claims that are known about or ought to have been known about before the policy was incepted are excluded from cover.

BenefITS of InSuRanceAll businesses that are exploiting IP – whether it is one patent or trade mark or a whole portfolio of rights – should consider purchasing IP insurance. It gives businesses the power to take action to enforce rights even if their financial position would not otherwise allow it, and means that litigation does not tie up capital which could be being used to

grow the business. It also acts to protect the balance sheet, considering that most businesses do not make any provision for IP litigation.

IP insurance can also add value to rights. An IP portfolio backed by insurance can be worth considerably more than one where there are concerns about whether the rights can even be enforced. Similarly, if a company is accused of infringing a third party’s rights, insurance provides the means to take vital defensive action.

It might be that some commercial policies will have an element of IP cover contained within them, but these will often be restricted to defence actions, exclude patents, and have fairly low limits of cover. It is important that these are reviewed in conjunction with any additional IP cover purchased.

Given the specialist nature of this type of insurance, right-holders should seek the advice of specialist IP brokers on the scope and nature of cover required.David Bloom is founder of IP insurance broker Safeguard iP; www.safeguardip.com

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their rights, which many do not, they will not seek to obtain them in the first place. This mindset will ultimately lead to the UK becoming less competitive; which is contrary to the government’s stated aim of driving UK innovation.

an InSuRance SoluTIon Fortunately, there is a solution. Since the Jackson reforms, the BTE insurance market for IP insurance has developed rapidly, with an increase in the number of insurers leading to the availability of wider cover and larger limits. There is evidence in the market that limits as high as £50m are now more prevalent.

A number of insurers now offer a range of different heads of cover. The policies principally cover the costs of either enforcing rights or defending claims that rights have been infringed, respectively known as enforcement and defence cover.

IP insurance can also be purchased to cover:1. Any damages awarded if a company is found to infringe a third party’s rights, and the costs of recalling infringing products from the market;2. Any exposures arising under warranties and indemnities given by right-holders to their licensees, distributors, franchisees and agents;3. The legal costs arising from disputes with third parties to whom rights have been licensed;4. Profits lost if rights are found to be invalid. For example, if a company is receiving royalties for a licensed patent, if that patent is challenged and found invalid, the royalty income can be insured for a period of time following revocation.5. The costs of hiring a PR company if the right-holder is involved in high-profile litigation which is damaging the brand.

These examples show how the market now caters for a wide range of IP risks, far more than is often imagined.

PRemIum coSTThe million dollar question is, of course, how much does this insurance cost? Unfortunately, it is difficult to provide firm figures. By its very nature, each piece of IP is unique; so it is impossible to give accurate estimates of premium, although prices have fallen over the last few years. As a very rough guide, premiums should be between 1% and 3% of the limit of cover sought, but this is not set in stone.

A number of factors will be considered by the underwriter to determine the premium. Namely the nature of the right being insured (patents tend to be more expensive than other rights), the nature of cover (enforcement, defence or both) and litigation history. The geographical scope of cover is also important. If the insured is operating in the US, this will certainly result in an increase in premium levels, because costs are generally not recoverable, win or lose.

oBTaInInG coveRThe process for obtaining cover is also more streamlined. Once the client and its broker have decided on the scope of cover needed, the client must complete a relatively short application form disclosing, among other things, details of the rights to be protected, details of the scope of cover required and litigation history (if any).

From this information, the insurer will undertake a high-level review

An IP portfolio backed by insurance can be worth more than one where there are concerns about whether the rights can even be enforced

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funding

At Augusta, we are receiving an increasing number of direct approaches from claimants seeking more than just litigation finance. They also seek an introduction to a good law firm

with support and guidance throughout the application process and the conduct of the litigation.

The types of claims vary, as do the identity of the claimants themselves. So far, our split of finance actually shows that slightly more individuals (52%) than companies (48%) are using our finance, and interestingly the average claim size is broadly the same at about £216,000.

The option of litigation funding is now available to claims of almost any size, and so it follows that the barriers to entry have been removed for the majority of claims. We have financed cases with damages ranging between £20,000 and £14m.

The pressures to secure and retain good quality work remain a perennial challenge to solicitors, and all are expected to engage in some form of networking and marketing, alongside their fee-earning duties. Most of the claimants that contact us directly are looking for an introduction to a firm they can trust, as the endless resources of the internet can in reality prove just as daunting as helpful. It makes good business sense for litigation funders to refer work to their preferred solicitors based on success rates.

Claimants are pushing their legal advisors to explore alternative options to alleviate pressure on their cash flow and minimise their risk, as they are increasingly empowered with the knowledge that there are now options to assist them. The benefits of empowered claimants are that they are results driven and engaged in the process, and they seek professional advisors whom they can trust to offer the right service.

Increasingly, awareness of litigation funding is spreading among non-legal professional advisors such as accountants and independent financial advisers, who are familiar with navigating their way through the alternative asset finance market. They also see litigation funding as a valuable addition to their arsenal of options to introduce to their clients.

In addition, the increase of court fees has forced many claimants’ hands, where legal fees and adverse costs risk are a daunting enough prospect. But litigation finance is a valuable proposition to more than the impecunious client, as the reduction of risk and alleviation of pressure on cash flow make it a sound and indeed intelligent decision, leaving the company or individual free to use their money for other purposes.

A growing profileThe profile of the industry is building, with increased awareness within the legal profession. As a whole, the industry is actively challenging perceptions and has embraced a policy of increased transparency by releasing transparent reports on their businesses and investments. We are also, along with our fellow funders, devoting a significant amount of time and resource to continuing to develop this profile, as we see engagement and participation grow.

Since the Jackson Reforms, a dialogue has opened between litigation funders and lawyers, in order to develop solutions that are competitive and attractive, and that are now making a real impact in the market.

We have been forced to address concerns from the legal community such as certainty of funds, and frustrations with the decision-making process and length of time required to reach a funding decision. We place the full amount of finance into a firm’s client account on approval,

we are transparent from the outset of our requirements, and we have used technology to support the entire life cycle of an investment.

The reality is that litigation finance as a product is already mainstream, and is enabling corporates and individuals alike to pursue meritorious claims. The biggest hurdle we face is to challenge misguided and outdated pre-conceptions and reservations.

The legal profession is a challenging one, with extremely high standards of professional conduct - and indeed there is a duty to advise clients on the availability of litigation funding. Beyond this though, a lawyer who fully understands the availability of litigation funding can add significant value to their client relationships.

The tide has changed, and there is now a great opportunity for firms that immerse themselves in our industry at this early stage. Those that do not actively engage in litigation funding may find themselves left behind.Jeunesse Edwards is engagement director at Augusta Ventures

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Jeunesse edwards on how third-party funding is entering the mainstream

“ Claimants are pushing their legal advisors to explore alternative options to alleviate pressure on their cash flow”

Taking centre stage

UPDATE

The big news in the third-party funding market last month was an announcement by listed funder Juridica that it will not invest in any new cases. Juridica chair Lord Brennan said that both the

funder’s board and its investment manager ‘acknowledge that scale and diversity are now required in order to invest successfully in this asset class, which is not achievable under the company’s existing structure’.

Juridica will continue to provide further funding to existing investments in the company’s portfolio, where this is ‘reasonably required’ to realise ‘maximum shareholder value’. It said it will ‘seek to return capital to shareholders in the most appropriate manner, following the completion if investments’.

The board has also began a comprehensive review of all its costs and fees structure, in a bid to reduce ongoing costs. It said its approach means it will not need to dispose of assets ahead of their reasonably expected maturity, and will not result in the liquidation of the company ‘in the near future’.

Juridica declared an interim dividend of 5 pence per share. In a ‘portfolio update’ earlier in the month, it reported a low damages award in one of its investments.

It said: [The case], which involved a theft of trade secret dispute brought by a smaller plaintiff against a much larger company, has completed a trial by jury. In spite of a full win on liability, the jury only awarded an amount which will result in a return to the company of approximately $2.0m. This compares with an original investment of $3.5m and the case valuation of $9.4m in the net asset value at 30 June 2015.

‘The plaintiff and its advisers are considering whether there are grounds to appeal the low damages.’

Juridica’s broker Peel Hunt said that legal cases were ‘unpredictable’, and Juridica had found it difficult to take a ‘portfolio approach’ when two competition cases accounted for ‘35% of fair value’.

BUrforD DEAlIn October, funder Burford committed to providing €30m to global claimant firm Hausfeld, for the financing of German competition claims; a fertile area for claims in Germany following recent legislative developments. Hausfeld will open an office in Berlin.

NEw rEcrUiTsElsewhere in the funding sector, there have been some significant staff hires. Woodsford Litigation Funding has appointed Steven Friel as chief investment officer, reporting to Yves Bonavero, who continues as executive chairman. Friel was previously a partner in the London office of international firm Brown Rudnick, and has particular experience in finance, insurance and disputes involving complex technology.

At Harbour Litigation Funding, a series of new hires include Michael Hartridge (pictured left), who joins as senior director of litigation

funding, and Mark King (bottom right), who joins as associate director of litigation funding. Hartridge moves from Lloyds Banking Group, where he was previously general counsel for litigation, regulatory and competition. King joins from City firm Mayer Brown, where he was a senior associate advising domestic and international clients in high value complex litigation and arbitration.

fUNDiNg ToolIn other news, funder Augusta has launched a new ‘claim outcome calculator’ on its website, to make it easier for lawyers, claimants and introducers to see the cost of funding. Users insert the approximate sum of damages, then adjust the scale for the amount of legal fees likely to be needed to run the trial, and the amount that the claimant would be able to contribute. The calculator then provides an estimate of the returns. Augusta’s finance is targeted at the SME market. See www.augustaventures.com/dispute-process.

Earlier in the month, Augusta also published an update of its current caseload, which it said was dominated by breach of contract and professional negligence claims, particularly against solicitors. The funder said 41% of the 56 cases it has funded since its launch last year were for breach of contract, while 32% were for professional negligence.

funding update

21Users adjust the scale for the amount of legal fees likely to be needed to run the trial

rachel rothwell reports on the latest deals and comings and goings