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Mishcon Academy: Digital Sessions podcast – Litigation Funding in action

Posted on 07 October 2021

The Mishcon Academy Digital Sessions. Conversations on the legal topics affecting businesses and individuals today.

Richard Leedham
Hello and welcome to the Mishcon Academy Digital Sessions Podcast.  I’m Richard Leedham, a Partner in the Litigation Group at Mishcon de Reya and I’m joined by Stephen O’Dowd who is a Senior Director of Funding at Harbour.  Stephen, we shouldn’t assume that everyone listening is familiar with litigation funding.  Could you summarise briefly what it is and a little bit about your role at Harbour?

Stephen O’Dowd
Sure.  I can’t believe that there could be anybody that doesn’t know what litigation funding is but funders can cover, usually do cover all the legal costs of a dispute.  So think of us as standing in the shoes of a claimant and paying for you as the solicitors, the barristers, the experts, all the legal costs that are involved in a dispute and that usually includes as well the costs risk of if the claim is unsuccessful having to pay quite a large portion of the opponent’s costs, the so called adverse costs risk.  We cover all of that, so we take away that burden of costs risk from the claimant, we take it on ourselves.  How we are remunerated, how we’re paid is if the claim is successful and if damages are recovered from the opponent then we get paid an agreed share of those damages.  If the claim is unsuccessful we have to write off what we’ve spent, what we’ve invested or if the claim is successful but no damages are recovered from the opponent we have to write off what we’ve spent or what we’ve invested.  That’s funding in a nutshell.  As for my role at Harbour, I’ve been at Harbour for nearly ten years.  My background was as a litigator working at a law firm where I taught you everything that you know and then I went in-house to a very large FTSE 100 company where I headed up their commercial litigation team but I’ve been at Harbour for ten years and I am a so-called originator.  My job is to source good opportunities, good cases, good disputes for Harbour to spend its money on, for Harbour to fund, for Harbour to invest in and my specialism over the year has become putting in place funding for very large group or class actions in the UK and also around the world.

Richard Leedham
Thank you.  As you know Mishcon and Harbour have a longstanding relationship and Harbour has approximately 200 million pounds worth of funds committed to cases that we are running.  We recently announced a new funding venture where together we will co-invest 150 million more money in litigation and arbitration cases for Mishcon’s clients.  What do you think makes our relationship work?

Stephen O’Dowd
Well it’s obviously my, my magnetisms, my personality… no, simple things, we know and get on with a lot of lawyers in your firm, you and I have known each other for a long time, I’ve taught you many things obviously.  We work effectively together.  The sourcing of opportunities it isn’t all one way, we’ve actually sent things your way that you’ve ended up running and they’re quite big claims.  We know and trust you to deliver – you do a great job and we’ve worked together for several years now so the funding venture to me, which is called MDR Solutions 1, I am sure you are going to mention more about it later – it just seemed to me like the next logical step in our relationship but I am going to throw that back at you.  What do you think makes the relationship work from your perspective and what are your thoughts on the new funding venture?

Richard Leedham
Well without turning this into too much of a love-in, I think one of the key things is that we’ve always found that Harbour have been one of the most professional and easy to work with of all the funders and so as time’s gone by it is perhaps no surprise that you’ve become one of our funders of choice and although as you know we went out pretty widely to the market in terms of who we would want to partner with on this new facility, it’s perhaps no surprise that we’ve ended up working with you.  I think it is a new step for us taking more risk ourselves in cases and sharing in some of the recovery but we are hoping to build on all of the work that we do with you so far including the group cases that you mention and keep that relationship going.

Stephen O’Dowd
Yeah it really is genuinely exciting and let’s get into one of our more recent funded claims which we don’t know for sure but if the new funding venture was up and running when this claim came into being, it probably would have been put in to MDR Solutions 1.  By-the-by we’ll never know but it’s quite recently, it was the business interruption claims that were brought by the Hiscox Action Group that we funded.  Those claims were brought right at the peak of the Coronavirus pandemic.  Do you want to briefly just summarise what the claim was about and why it was so important?

Richard Leedham
Sure, I mean we as you know, had been advising on some business interruption claims in the hospitality sector in early March 2020 and then we picked up from the media about some SME’s who were facing a really serious impact on their businesses because insurers were rejecting claims right at the time when they were being shut down for the foreseeable future and had no income and Hiscox took quite a public stance about rejecting these claims.  We’d looked at one Hiscox policy for an individual insured and felt that that should provide cover and realised that many policies were written on the same standard terms.  At the same time the Hiscox Action group was starting up and I saw some reference to them in the press, got in touch with one of the original members of that group and that lead very quickly to a realisation that these businesses could only take their case forward against Hiscox as a group and wanting to work with us if we could get some early stage funding.  We’ll maybe touch on that in a little moment but what happened with the case, it took various twists and turns in only a year or so which involved us commencing arbitration on behalf of 384 businesses in proceedings which eventually lead to a hearing in March of this year whilst at the same time intervening in a test case brought by the FCA on issues of principle and raised by all of these claims.  That went to trial in July of last year with a leapfrog appeal to the Supreme Court in November of last year with the two proceedings intermeshing along the way and our claims finally settled in June 2021.  So it was a huge rollercoaster of a year and we did get settlement for those businesses but I think back to when you joined in with all of this which all happened at high speed at a very difficult time for everyone.  Perhaps you could talk through the process you had to go through to get that funding in place for our clients?

Stephen O’Dowd
I was saying this to you before that that whole period when the first national lockdown hit until now almost, it’s a little bit of a blur, it’s not quite crystal clear in my head but I think it was around April last year, April 2020 you gave me a call and just said, ‘have you heard about these business interruption claims?’  I’d heard a little bit about them.  You mentioned the Hiscox Action Group, would we be interested in getting involved and crucially the group needed some money to do a little bit of extra analysis, not from you but you wanted to go to a senior Barrister and just verify what you already thought about their claims and you made it very clear that all this had to happen in a hurry because these businesses genuinely were on their knees, they couldn’t access their premises, they’d gone from whatever revenue they were earning to zero revenue, they were struggling.  So we had to mobilise very quickly, like you said, at a time when everybody was still discombobulated with working remotely and how are we doing this, even simple things seemed harder than they should have been but what we actually did was we put together, I am not sure if I mentioned this before, but at Harbour we have an investment committee and it is six senior people who I call ‘the gatekeepers’ to the money that we spend or invest in cases and they decide which cases we invest in or fund and which we don’t and we called an extraordinary investment committee meeting, an emergency one if you want to put it like that and we were able from the point I think that you telephoned me, to the point where we actually signed contracts after committing the funding so that everything was up and running, we did all of that in less than three weeks.

Richard Leedham
Is that normal in your world?

Stephen O’Dowd
No.  I’d love to say yes it’s always that quick but no you have to bear in mind that the commitments we make, they are usually in the millions of pounds, it’s a serious decision that has to be made, there’s a lot of work to be done to put that in place.  More usual is between one to three months and it really depends on the amount of information that’s available about the, the claim or the opportunity that we are looking at.  It helps a lot, we talked about this before but, that we had this pre-existing relationship with you, you and I have worked together for years, it means that the process has been expedited because we know each other, we know each other’s processes, we know each other works, yeah that really did assist in being able to do it that fast but it’s not typical no, it’s generally one to three months is the norm I’d say.  But again, I’m going to throw it back at you because unfortunately I’m well aware that this is not a monogamous relationship and you do date other funders.  What’s your experience and this isn’t about criticising other funders at all, I am just curious, how long does it generally take in your experience to get funding in place and what did you think about the fact that we were able to put it in place in less than three weeks for the Hiscox claim?

Richard Leedham
Yes I’d say that the one to three month period is not that unusual generally with other funders although I would say that you’re at the front end of that, some funders take considerably longer than three months but I think what was particularly unusual in this case is, is the ability that we had through the relationship with you to raise this so called seed funding early on which if you recall, happened within a matter of days at the very beginning to get a relatively small amount of money that we could invest in getting a Counsel’s opinion that was then positive that allowed you to then process the rest of the funding.  That in my experience is really unusual and only arises where there is a good relationship with the funder and they trust the law firm that this isn’t some sort of spurious exercise and in fact in this very case because one of the members of the action group had been talking to another funder we did go to them first because I was asked to by the client effectively and that particular funder would not advance any money upfront and therefore we were stuck in that catch 22 situation so I think that’s a hugely encouraging aspect of our relationship that you’d do that on the better claims that we put in front of you.

Stephen O’Dowd
One of the things I love about my job is the bird’s eye view that we have of disputes and it means that I am not doing the day-to-day which is really the hard work that you do.  It was extraordinary watching this claim progress because of the speed at which it had to move and the fact that everything was happening remotely including the Court hearings but I am conscious that the group comprise, what was it, several hundred small to medium sized companies.  You acted for every single one of them, you ran every one of their claims.  How were you able to run  them or manage them as a group when there isn’t a framework, let’s call it what it is, there is no statutory framework to help you do that really in the UK?

Richard Leedham
Yes indeed it was very difficult working with what turned out to be three hundred and eighty four separate individual businesses who at the time were all facing closure, no income and were incredibly upset with the attitude their insurer was taking and because of the way our system works, we had to sign up each of those separate businesses and each of those businesses had to join into the claim.  We did have the advantage of a pre-existing steering committee; one member of whom was actually a media company as it turned out, who was insured with Hiscox who was very media savvy and had driven a lot of interest in the group so that we had a structure in place and the registered interests of hundreds of businesses.  We then used terms of reference that had been tested out on other cases that we’ve run with you to make sure that whilst we’re of course representing all of those businesses, we had a mechanism whereby we could take instructions from  a workable small committee whilst leaving bigger decisions such as settlement to the group as a whole and that worked well in our case but as I say, the problem we have is that with all of these claims, all of the businesses have to be signed up to our terms and to your terms, that has to be gone through with each claimant, questions are asked and need to be answered on an individual basis, looking at that in a bit more detail, what’s your view about a perceived lack of support in our legal system to accommodate these large group claims?

Stephen O’Dowd
Anyone who knows me, knows that it frustrates me.  There is a lot of noise about group actions or let’s call them what they are usually called, class actions and you may have defence lawyers scaremongering about how if the UK facilitates more class actions the floodgates will smash open and we’ll be inundated by this tsunami of US style class action warfare etcetera, etcetera.  That’s just over the top, it’s not accurate, it’s note the truth but maybe don’t listen to my view or the noise as I call it that you get from some people on the defence side.  We have seen recently some quite compelling comments I think from senior Judges in the UK and if I can paraphrase them about how it’s frankly unacceptable for the UK’s legal system which is top tier to have this gap and this gap is that where you have individuals who have all suffered the same mass harm but where individually their claims are too small to be brought on their own, the cost of doing so will be completely disproportionate to the amount that they are claiming.  That they don’t have the ability to group together and have what you would have in a genuine class action regime, one single representative of that whole group which would bring the claim on their behalf accept for those that decided they didn’t want to be in that group and they opted out, a genuine class action regime.  We are missing that in the UK other than for one sector which is competition litigation but we should have, I feel very strongly about it, a generic class action regime in the UK.  It isn’t right to me that three hundred and however many it was, claimants in the Hiscox Action Group all had to sign separate contracts with you and with us, the so called buck building process had to take place, that’s for three hundred or so.  Some of these mass harm situations they can occur to hundreds of thousands of people even millions and when that happens it’s frankly impossible to sign up that many people, you do need a genuine class action regime to seek redress for groups of that size and we are seeing efforts in the UK to try to circumvent the gaps that are in the system, we’re seeing I think, frustration being voiced by Judges about the gaps in the system.  But yeah, hopefully I’ve expressed that I find it rather frustrating.

Richard Leedham
I’ve got a clear sense of your, your view.  I think why you didn’t go as far as to say this, I think it is certainly something funders do say that funding can provide access to justice to those who otherwise wouldn’t able to bring a claim and that is taken in some aspects parts of the media as going a little bit too far but do you think the Hiscox claim is actually a good example of that access to justice that funding can bring?

Stephen O’Dowd
Yeah it absolutely is and look maybe the access to justice banner is held aloft too often by funders, I couldn’t possibly comment but it is absolutely relevant in relation to certain claims and that includes the Hiscox claim.  Why?  Well we mentioned it before, these were businesses small and medium sized companies who were struggling.  They were genuinely really struggling because they didn’t have access to their business premises, they were bleeding cash, it’s not an exaggeration.  They did not have the means to take on and fight this claim and you know what it took to fight this claim, you know how much it cost, you know what was involved, you’ve talked about intervening in the Supreme Court proceedings, the FCA test case, the Arbitration that you had to fight.  They did not have the means to pay for that and to get the result that they did with Hiscox.  They needed help and that help came from us.  Yes when the claim is successful we get paid a portion of the damages that are recovered but the option of funding does absolutely provide access to justice, it’s not just funders who say it, there are numerous Judges who have said it because it’s true and it does absolutely apply in this case.  But look you are asking me as a funder and I would say that what we do provides access to justice, I do believe in it.  What’s your perspective as the cynical litigator?  I mean what difference do you think funding made to the Hiscox Action Group in this case?

Richard Leedham
I would agree that it was absolutely key for all the reasons you say, particularly businesses almost by definition had had you know, their business interrupted and had no money and had no money coming in but I think another aspect of this goes back to a point you were making earlier about the framework in the UK that for relatively low value claims it plays into the hands of the defendant.  The maximum that nearly all of the members of the Hiscox Action Group could recover was £100,000, that was their so called limit of insurance cover, some had a little bit more and some indeed had a little bit less.

Stephen O’Dowd
Which is a lot of money.

Richard Leedham
It is a lot of money in some contexts but when you are facing Hiscox who would defend en-masse have a public company with millions of pounds at their disposal to fight these claims, any individual claim was going to probably cost well in excess of £100,000 to fight so it becomes totally uneconomic even if the client had the money to fight the claim, it doesn’t work doing it on your own with a hugely well capitalised and very strategically organised defendant that fought on every level and one has to remember here, Hiscox didn’t just fight on the issue of liability whether their policies covered these businesses, they fought on the value, the quantum of the claim at every stage as well.  For the clients they needed accounting experts, other business interruption experts to help them set out their claim properly and without your funding, that just wouldn’t have been possible so I think for all those reasons the funding was absolutely key to the case and what, what we saw and again it touches on something you mentioned, yes the funder takes a slice of any recovery but we managed to do on settlement through quite a complex process was ensure that every single member of the group got some money back, some had stronger claims than others, some had bigger claims than others, everyone got some money and it’s probably to finish worth just reading out on a no names basis, some of the messages we got back from the client group at the end of the settlement process.

Stephen O’Dowd
These better have been nice messages yeah.

Richard Leedham
I think you’ll like them.  One said, ‘thank you so much for all the hard work you’ve done representing us.  As a small business I am sure I would never have received a penny if it hadn’t been for the action group and you.  I really appreciate everything you’ve done for me, please thank everyone concerned’.  Another one, ‘thank you for the update and your support through the process.  I imagine this will go down as a fairly historic claim and your efforts have been most appreciated.  Please pass on our thanks to the steering committee that has supported you and made this result possible’ and finally, ‘many thanks guys, we know we couldn’t have got this result without you and Harbour’.

Stephen O’Dowd
Oooh we got a mention.

Richard Leedham
Just one.  Yeah that’s what, that’s what it’s all about to me and that seems like that’s quite a good way to end our session.

Stephen O’Dowd
Yeah that, that is good.  You did a really good job.

Richard Leedham
I’d like to say thanks to Stephen for joining me for this Mishcon Academy Digital Sessions podcast.

Stephen O’Dowd
Pleasure.

Richard Leedham
The Digital Sessions are a series of online events, videos and podcasts all available at mishcon.com and if you have any questions you’d like answered or suggestions of what you would like us to cover, do let us know at digitalsessions@mishcon.com.  Until next time, take care.

The Mishcon Academy Digital Sessions.  To access advice for businesses that is regularly updated, please visit Mishcon.com.

Join Partner and head of Commercial Litigation, Richard Leedham and Senior Director of Litigation Funding at Harbour, Stephen O'Dowd as they discuss the nuts and bolts of litigation funding and the Harbour/ Mishcon relationship following the announcement of their new litigation finance venture MDR Solutions I (MDRS1). They also share the inside story of the funding of the Hiscox Action Group at the height of the pandemic and its progress through to a successful conclusion.

MDRS1 will be used to fund litigation and arbitration cases for Mishcon de Reya's clients.


Visit the Academy for more learning, events, videos, podcasts and reports.

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