Capital Law launches £50m litigation fund in law firm first

Cardiff headquartered Capital Law has become the first commercial law firm to launch its own litigation fund, raising £50m from investors to provide cash backing to a raft of future claims.

The move comes on the back of a significant win for the firm on the Roadchef workers litigation, which completed last year after 17 years. Capital Law secured payouts for 600 Roadchef employees who lost money as a result of a management buy-out of the chain.

Capital Law senior partner Chris Nott spearheaded the creation of the fund, which came into effect on 1 January and has already been used to fund two recently launched claims.

The first case is a “seven-figure contract claim for a private client against a Government department”, revealed Nott, with the second an auditors negligence claim over a missed £50m fraud. Both claims are mediating this month.

Nott said: “What drove us to do this was the difficulty of dealing with funders and underwriters. In the past we will look at a case, decide we’re prepared to take it on and then seem to have to do the whole process again with bankers.

“It struck me as bonkers that we would know a case was a good one, but had to prove it to a list of funders and executives,” he added.

Nott also said funders were increasingly going after “the big £100m plus cases” while there was a “big market in the UK of untouched cases that are slightly too small for funders but that we were very happy to take on”.

He added the aim of Capital’s Law’s litigation fund was to “speed the process up” and “hit the middle market” by funding claims of up to 12 years old, continuing to use conditional fee arrangements (CFAs) and implementing a “heavily staggered uplift so the fund only gets a modest return” and fees remain low for clients.

“The model is completely unique,” he added. “We came up with it with our investors and had it validated by leading regulatory QCs.”

The investor is a single entity putting up the entire £50m pot with the option to increase the investment should it turn a profit, Nott said.

“This is the inevitable next step for litigation funding. Lawyers will take more control over the process,” he said.

The fund follows another significant development in the litigation funding market last week. The Lawyer revealed Burford Capital had signed a deal with BT to provide a pot of £30m for litigation matters, becoming the first fund to secure such an arrangement with a FTSE 20 corporate.