Litigation funder to finance low-value cases

A new player in the third-party litigation funding market has vowed to transform the industry by providing “alternative” litigation funding for lower-value commercial disputes.

The brainchild of Thomas Miller, a firm with $4 billion of assets under management, Caprica aims to invest around £100m in the medium term and claims to already be funding £15m of pre-launch generated cases. The firm has secured backing from banks and other investors for the new venture.

It will consider cases with funding requirements as low as £50,000 compared with other third-party funders whose starting point is around £500,000.

Caprica’s business model, which has received backing from banks, is built around claimants whose access to justice might be impaired by the Ministry of Justice (MoJ) reforms, which will see £350m wiped from the legal aid budget in 2013.

The downsizing of legal aid is expected to cause a dramatic rise in litigants in person as well as making it more difficult for businesses to pursue legal claims through the courts (11 November 2011).

The company says it will redefine the current funding market by offering a competitive pricing model with a funding fee that is not related to its clients damages. It will also scrap a period of exclusivity while conducting due diligence, allowing claimants to shop around.

Caprica expects to take on a high volume of cases, ranging from SME disputes through to major commercial disputes, bi-lateral investment treaty arbitrations and securities litigation.

Commenting on the new venture, Thomas Miller CEO Bruce Kesterton said that Caprica’s core mission is to become a disruptive player in the third-party litigation market.

“ When we looked at the litigation funding market we were adamant we would only get involved if we could fundamentally reshape it,” he said.

“We felt the present funding market did not have mainstream appeal. For many the economics of running litigation is going to become increasingly complex and it will be incumbent upon lawyers to steer their clients to the most economic funding package, which we believe is unlikely to be offered by a traditional third party funder but will be provided by an alternative litigation funder such as Caprica.”

Pannone head of dispute resolution Paul Johnson added: “Some current litigation funding models could alienate claimants involved in small and medium-sized business disputes.

“It’s refreshing to see a funder emerge that is seemingly determined to shake the market up and provide SMEs with greater access to funding and justice.”

The entry of a new player into the third-party litigation arena follows that of Managed Legal Solutions, which launched earlier this month with £20m of funding secured from private investors.

Last week, the Civil Justice Council (CJC) working group on litigation funding published a third-party funding code of conduct, which is aimed at fostering standards of best practice and promoting greater transparency among providers of litigation funding services (24 November 2011).