Lit Fin as an Alternative Finance Solution

A frequent talking point among claimant law firms and litigation funders is the use of delaying and prolonging tactics by defendants, hoping to continually increase the financial cost of bringing a case until it is no longer viable to do so. However, as a recent example demonstrates once again, third-party litigation funding provides a significant weapon in the claimant’s arsenal when it comes to combating this type of strategy.

An article in The Law Society Gazette covers ongoing developments in the group action being brought against the Ministry of Defence over claims that its prescription of Lariam, an anti-malarial drug, caused harmful side effects to armed forces personnel. The law firm leading these claims, Hilary Meredith Solicitors, has denied reporting that it is facing bankruptcy due to the large costs involved in the case, and told the Gazette that its financial backing is secure.

In a statement to the Gazette, the law firm stated that its “bank and litigation funders have confirmed their ongoing financial support”, which will allow the law firm to continue with the Lariam cases without fear of bankruptcy. Hilary Meredith Solicitors admitted that whilst it had been necessary “to borrow millions of pounds to fund this David and Goliath type action”, the law firm’s financial footing was secure with the support of outside lenders.

The identity of the litigation funder supporting Hilary Meredith Solicitors is not specified by the law firm’s statement or the Gazette’s reporting.

The firm also confirmed that with 10 lead cases scheduled for trial at the High Court next year, they are now “close” to agreeing a settlement with the MoD. The Gazette also cites its reporting from last year, which revealed that the MoD had spent £20 million on its legal budget to defend against the claims brought between 2021 and 2022.

As the Litigation Funding Agreements (Enforceability) Bill is subject to a line by line examination during the committee stage today, we can analyse the amendments that have been put forward by members of the House of Lords. Of the three amendments that were discussed during the committee stage, two were put forward by Lord Stewart of Direlton and one by Lord Marks of Henley-on-Thames.

Both of Lord Stewart’s amendments deal with the section of the bill that provides a definition of a litigation funding agreement.

The first of Lord Stewart’s amendments calls for the following line to be inserted at the end of the Clause 1, page 1, line 14: “(ia) where the litigant is a litigant in person, expenses incurred by that litigant, or”. In his explanatory statement, Lord Stewart said that this language “ensures that the definition of litigation funding agreements includes agreements under which a funder agrees to fund expenses incurred by a litigant in person.” 

The second of Lord Stewart’s amendments relates to Clause 1, page 1, line 16, which would take the following sentence: “the payment of costs that the litigant may be required to pay to another person by virtue of a costs order”, and would now be followed by: “, an arbitration award or a settlement agreement”. Lord Stewart explained that this would ensure that the bill’s definition of an LFA would also include “agreements under which a funder agrees to pay costs relating to litigation that arise by virtue of an arbitration award or a settlement agreement, as well as by virtue of a costs order.”

Lord Marks’ “probing amendment” would follow Clause 1 and would be titled “Review: enforceability of litigation funding agreements”. The language of the amendment requires the Lord Chancellor to “establish an independent review of the impact of provisions in this Act” and lays out the scope of such a review. This would include a review of safeguards for claimants, regulation of third-party funding, funders’ returns, and alternatives to LFAs. The amendment dictates that the review must be completed by 31 August 2025, and that the Lord Chancellor must then provide a response before Parliament within three months of receiving the review.

The full text of the amendments can be read here.

The current version of the bill can be read here.

LFJ will be providing a summary of the committee stage hearing once the Hansard transcript is available.