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Big rise expected in third-party funders

15 November 2010

The number of organisations providing third-party funding jumped by 20 per cent since the publication of the Jackson report, foreshadowing significant market buoyancy when ABSs go live in October next year, research by a leading legal think tank has revealed.

Quite how, and how quickly, the sector will develop remains difficult to predict with too little information available to make an accurate forecast, the study prepared by Jures for law firm Fox Williams suggests.

“As the profession is going through its own version of the kind of big bang experienced in the City in the 1980s it is difficult, if not impossible, to identify where third-party funding will take root in a newly liberalised legal service market – if indeed it will at all”, said Jon Robins in his introduction to the study.

Two cases funded through third parties reached the public consciousness in the past year: the case brought by Dr Christine Gill against the RSPCA over her mother’s will; and the case of Stone and Rolls v Moore Stephens, where the claimant alleged professional negligence against the accountancy firm. Dr Gill won her case but Stone and Rolls cost IM Litigation Funding £2.5m, an outcome which many have seen as a setback for the third-party funding industry.

“We are still in pioneering stage with those pioneers trying to find their place in the market,” said former head of the Civil Justice Council, Robert Musgrove. “Funders recognise there is a lot of scope to bring in commercial litigation funding whether that is in areas where there is no funding and access to justice is inhibited – for example, an SME; or where funding is used as a hedge in a large litigation dispute where it’s a matter of choice for a large corporation to do it that way.”

According to the CJC, only 100 cases went to court through third-party funding since this emerged as a mainstream litigation option, but Musgrove and others reckon many more have not been recorded.

The Jackson report has couched third-party funding in terms of promoting access to justice, according to Robins, but, before the market can shift from commercial to consumer cases, it needs to raise its profile in the financial community and a workable, convincing self-regulatory model will have to be agreed.

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