Presentation Transcript

1. LITIGATION INVESTMENT PROPOSITION

   Litigation funding is the investment in litigation or arbitration matters by way of funding the associated costs for a share of the awarded damages or settlement figure or a share in the legal fees derived.

2. LITIGATION FUNDING

   In the US and Australia the business model is mature and annual spending on legal services and fees is in the hundreds of billions of dollars. Litigation funding is still in its infancy the United Kingdom providing an ideal investment opportunity with excellent return on capital investment.

3. FIRMUS UNDERWRITING SOLUTIONS

   Are a bespoke provider of Commercial After The Event (CATE) insurance products. We have access to a large number of commercial litigation cases which we screen and risk assess in the provision of our insurance services. We therefore have access to a large market eager for litigation funding.

4. WHAT IS LITIGATION FUNDING?

   Third party funding of disputes that permits a party wishing to bring a claim to obtain funding for some or all of the legal costs and expenses associated with that dispute in return for a share of any recovery whether through settlement or ultimate adjudication.

5. INVESTMENT OBJECTIVES

   To provide an investment opportunity in the UK legal market in cases deemed to have good prospects of success and backed with CATE insurance products provided by Firmus Underwriting Solutions.

6. INVESTMENT SELECTION AND SUITABLE INVESTMENT CHARACTERISTICS

   Cases are selected for funding and insurance cover along strict criteria; The strength of the claim and its likelihood of success The potential value of a claim both following adjudication and for settlement purposes, subject to minimum / maximum agreed limits, Enforceability of an ultimate award Financial condition of the defendant The likely cost of litigating the claim Proportionate Costs Regulatory and ethical risks, Any relevant jurisdictional issues, Timing to trial and final judgment, and Timing and likelihood of early settlement
7. DEFENDANT LIQUIDITY Will the defendant be able to pay once the litigation is successful. PROSPECTS OF SUCCESS Is it virtually certain that this litigation will be successful? LENGTH OF FUNDING We would therefore seek to identify cases were realisation of investment of 6 - 18 months are sought.

   THREE ESSENTIAL ELEMENTS

8. Based on our underwriting experience our research indicates that selected cases are likely to settle in the following ratio: Be withdrawn, 10% Settle, 80% Fail before trial, 5% Go to trial, 5%: Win 3% at trial; lose 2% 83% win rate expected

   PROSPECTS OF SUCCESS

9. FIRMUS UNDERWRITING SOLUTIONS COMMERCIAL ATE INSURANCE

   The usual order of the Court in civil litigation is to order that the losing party pays the costs of the winning party. ATE Insurance guards against that risk for the insured. It covers disbursements and the costs of the defendants side.
10. The ATE Insurance cover: If the case fails, the ATE insurance covers the defendant’s costs in full plus the costs of the plaintiff's disbursements, the ATE premium and, if agreed at the outset, contributions may be made to the plaintiff’s solicitor’s costs The amount invested is therefore fully protected Where the plaintiff is successful, the insurance does not come into operation but the cost of the policy is paid for by the defendant ATE Insurance succeeds as a product by ensuring that only cases which are likely to succeed are covered.

    ATE INSURANCE

11. A case has to be considered to have good chances of success by the following BEFORE an investment is made: The client’s solicitor The client’s Counsel The investment fund manager The ATE insurer.

    CASE SELECTION

12. The interests of Litigation Funders and ATE providers are exactly aligned in ensuring that only successful cases are funded and insured on an ongoing basis. Investment will be spread over a number of accepted cases thus mitigating risk.

    ALIGNED INTERESTS

13. Our experience includes:-  Underwriting of secure, affordable, cost effective ATE insurance with simple administration and reporting requirements. Designing and delivering a bespoke product for each specific case rather than relying on a “one size fits all” policy. Working closely with firms of solicitors to deliver legal expenses policies that both the lawyer and the client understand and see the benefits of.

    OUR EXPERIENCE

14. We consider each and every case for which an application for insurance and funding is made, For a case to be funded, it must be insurable. This is the principal way in which investor’s capital is completely protected

    INSURANCE REQUIREMENT

15. WORKED EXAMPLES

    Example 1 Claimant A is suing XYZ limited for £1m damages. The Investment funds are used to fund the case for Claimant A. Funding is required for £50,000 disbursements, £40,000 own solicitor’s fees (optional*), and the up-front cost of an insurance policy to cover those costs, together with £100,000 of opponent’s cost cover. Funding outlay: £150,000 made up as follows: £50,000 – Disbursements £40,000 – Solicitor fees* £60,000 – CATE premium Case succeeds at end of Year 2. Claimant A recovers £1,000,000 damages from his opponents, together with all of his costs, including disbursements, solicitor fees, and the CATE Premium. The capital is therefore effectively repaid by the opponents. The litigant pays the total amount of interest (£36,000 approx. at 12% in this case) out of damages and the “Contingency Fee”, (agreed with the Litigant as part of the funding agreement, and in this example say 20% = £200,000), also comes out of damages. Total amount paid by client is £236,000 of which £36,000 is interest on capital invested, and the balance is the contingent return on that investment. In addition, a commission of 15% is paid in respect of the CATE premium. The return at Year 2 is therefore £245,000 giving a 163% return on capital invested over a 2 year period. The Litigant is still left with 76.4% of his damages after payment of funding costs.

16. WORKED EXAMPLES

    Example 2 Case fails at end of Year 1. Claimant A is ordered to pay £50,000 to his opponents, and has used funds of £50,000 for an accountant’s report and other disbursements and paid his solicitors £40,000 fees. Funding has also been used to pay for the CATE insurance policy, and the guarantee/contingency risk cover. A claim is made on the CATE insurance made up as follows: £50,000 – opponent fees payable £50,000 – disbursements paid £40,000 – solicitor’s fees paid* £60,000 – CATE premium paid (as it is self insuring) CATE policy responds and repays the Fund £150,000 (which totals the capital invested) and pays the opponent’s costs of £50,000. *Payment of any proportion of own solicitor’s costs must be approved by the CATE insurers at the outset. It is preferable that the solicitor works on a CFA basis but insurers may agree to cover up to 25% of own solicitors costs.
17. Firmus Underwriting Solutions has a large, ready market of high value commercial and civil litigation cases A large number of these clients are keen to utilise a Litigation Funding Facility in return for a share of the award of settlement or damages. Investment criteria will be strictly controlled and monitored on the basis of agreed risk factors and envisaged length of investment sought. Funding and Insurance interests are closely aligned Excellent security and return on investment

    CONCLUSION