The third-party litigation funding market received another boost yesterday after a funder raised a new tranche of money to put into cases.
However, the Solicitors Regulation Authority (SRA) has told Legal Futures that solicitors are not under a requirement to choose funders that comply with the new voluntary code of conduct.
Therium Capital Management Limited – part of the listed City of London Group – has closed a third limited liability partnership (LLP), raising £4.3m from high net-worth investors, some of whom are already invested in the business.
It comes only six months after Therium closed its second LLP, which has already returned a sum equal to 51% of the capital invested. The first LLP, which closed in May 2010, has returned 90% of the capital invested. Both LLPs still have a “substantial pipeline of ongoing case investments”, Therium said.
Solicitor Neil Purslow, one of the founders of Therium, said the involvement of existing investors in the new LLP is “a clear endorsement of our business model and our track record to date in litigation funding”.
He continued: “We currently have a strong pipeline of cases for funding and anticipate being able to develop a portfolio of claims for LLP3 very quickly.”
In addition to raising money through LLPs, Therium said it is holding discussions with a number of institutional investors and family offices about managing funds on their behalf.
Last week the Civil Justice Council (CJC) published the long-awaited voluntary code of conduct for third-party funders, with Lord Justice Jackson expressing the hope that solicitors would only use funders which have signed up to it. That the SRA should mandate this has been suggested during the gestation of the code.
Richard Collins, the SRA’s director for policy and standards, said: “It's great that the voluntary code exists and that so many want to sign up to it. We welcome any move that leads to the raising of standards in the legal services market, and third-party litigation funders embracing a code of conduct to demonstrate their commitment to operating quality, ethical services certainly fits the bill.
“However, in line with our own drive to persuade the profession to be focused on outcomes, we wouldn't be looking to be as prescriptive as to make it compulsory for solicitors to only use those funders that had signed up to the code. Such a move might not always be in the best interests of the client, which is of course principle 4 in the new Handbook. So making it mandatory for solicitors to use only funders that subscribe to the code of conduct would not be in the spirit of outcomes-focused regulation.”
A CJC spokeswoman said: “The CJC's role was to facilitate agreement on the code of conduct and establishment of the Association of Litigation Funders of England & Wales, in order to ensure compliance with the code by its members. These objectives have been achieved.
“The council has supported these developments because it believes that the code and the Association will promote best practice and greater transparency in the provision of litigation funding services to the benefit of the consumers of these services.
“The code provides a real measure of consumer protection in terms of capital adequacy, clarity on when a funder can terminate a litigation funding agreement and a QC clause to resolve disputes. The council is pleased to note that the SRA has welcomed the code.”