7 November 2017: “always difficulties associated with externally funded litigation” says Court

Not a case summary this time, just a mention of the following curious judicial comment:

There are always difficulties associated with externally funded litigation. The very fact that there is litigation which takes time and may drag on for years is to the disadvantage of the creditors. Moreover, the eventual return to creditors will necessarily be reduced by the fees payable to the litigation funder. The liquidator's capacity to control the litigation and determine whether it should be settled may well be limited by the litigation funding agreement. So while litigation funding may be available to the liquidator it is not an approach without its difficulties.

The full context isn’t analysed here. In short, it included that a creditor was trying to have Eclipse Resources wound up, in circumstances where Administrators of Eclipse were trying to delay, amid speculation about a possible voidable transactions claim which the Eclipse could bring if the liquidators could get some form of litigation funding.

But I will say that, where the claim might have returned between $70m and $200m, it seems weird for litigation funding to be vetoed on the grounds that funders would receive some part of a recovery, when it may make more sense to focus on the fact that a lion’s share would go to the creditors. After all, 75% of $200m is considerably better than nothing, especially when pursuing it doesn’t involve any risk for the company’s creditors?

And is it really fair to say that the winding path of a piece of litigation is because of a funder’s involvement? It’s not as if major litigation without funders proceeds down a merry road of sensibility which takes no time or intensity. In fact it’s my experience that the business like professional involvement of a funder brings a level of discipline and common sense to the conduct of claims, certainly supressing a lot of emotional attitudes.

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