March 12, 2018
Litigation Funder Phil Newland doesn’t exactly pretend he’s doing God’s work with LPF Group, but despite the naysayers, he does say he’s on the side of the little guy to even up the litigation playing field.
Celebrating its 10 years in business next year, LPF has already settled 15 cases and has achieved success for both its investors and the “little guy” who previously lacked the financial fire power to take on the insurance companies and corporate defendants.
But it has been hard work, Newland told LawFuel.
From a business he started as a sideline in 2009, LPF Group now has a track record to rely on and a high profile board, including former Supreme Court Justice Bill Wilson QC and more recently was joined by leading liquidator Michael Stiassny.
But it’s time New Zealand got up to speed with litigation funding arrangements, saying we are at least 10 years behind other countries like Australia, Canada, the UK and Singapore in terms of class action and litigation funding of claims.
Insurance companies have largely had the litigation world to themselves. “Insurance companies are in essence litigation funders for defendants. In New Zealand they’re used to funding defendants and having plaintiffs who don’t have the money or perseverance to fight and the insurers are not subjected to the scrutiny and rules that plaintiffs’ funders are.”
“They’re taking a little bit of getting used to the fact that there’s someone in town who can stand up to them.”
It’s been a kicking-and-screaming struggle though. Twice LPF has been taken to the Supreme Court on funding related, interlocutory matters, one being from CBL and the other the PVL – Walker v Forbes proceeding involving David Henderson’s property group and defendants including PricewaterhouseCoopers. “They lost at every level,” he says. But the actions ultimately cost the plaintiffs a lot of money.
“If we conducted ourselves that way, as a plaintiffs’ funder, we would be punished for it by the Courts, and rightly so” he said.
The CBL case became the leading case on litigation funding, raising issues of champerty to attempt to kick the funders out of court and the funding field altogether. “They tried to take advantage of ancient prejudices,” he says, using their ‘champerty’ and ‘intermeddler’ terms that ultimately “will go nowhere.”
While he would like greater judicial support, he nonetheless accepts that the courts reject the insurers’ arguments and have been telling the insurance industry to “grow up, the funders are here to stay.”
He’s hopeful that the forthcoming Law Commission inquiry into class actions and litigation funding, which was set up following a request for the consultation from former Justice Minister Amy Adams, will deal with some of the practical issues that remain regarding funding arrangements.
Cases Inquiry Level
Although the company has funded a small number of cases in Australia and continues to examine opportunities across the Tasman, he says the small size of the local market means business is “sporadic” in terms of the number of good cases that can “carry the weight of funding.”
Heavyweight litigation funder Harbour Litigation Funding is already involved in the local market, funding Athina Thorn’s class action against James Hardie Industries, but funders need to choose their cases carefully.
The quantity and quality of cases have steadily increased over time. “There’s been a step change since last year – following both the PVL and Kiwifruit PSA cases. We are still awaiting a decision on the kiwifruit case but whichever way it goes there will almost certainly be an appeal, he says.
“That case (the kiwifruit case) would have been a lot bigger if Zespri hadn’t intervened,” he says.
The level of inquiry for new cases is now as strong as it’s ever been.
Later this year the Courts are expected to hear the Mainzeal case, also funded by LPF.
A former Russell McVeagh lawyer himself, Phil Newland soon recruited ex-Factory colleague Jonathan Woodhams (left) to work with the new company, before reaching for high profile directors Bill Wilson, QC, who also chairs the board, former Shareholders Association president Bruce Sheppard and Michael Stiassny, who came to the board in January and now shares offices with the LPF personnel after leaving KordaMentha.
There are “extremely vigorous” debates about the merits of cases. “We’ve funded cases suing boards who don’t quite do that,” he says.
In terms of checking cases to fund, he says the team is top notch, including having someone of Bill Wilson’s experience and legal smarts. “We’re obviously extremely lucky to have someone like Bill” he says. “He does a great job for us.”
But they also ensure the plaintiff is “worthy” and morally as well as legally deserving. The team generally get external opinions on case quality and ensure they tick all the boxes.
“We’ve turned away good cases that involve bad plaintiffs.”
The company doesn’t look at cases below $2 million, but realistically he says the amount is more likely closer to $5 million plus. He doesn’t want to fund a case that succeeds, but with the lion’s share of the collect being paid to the lawyers and themselves.
Most of the work comes from lawyers and insolvency practitioners.
Most of the cases coming to them have seen plaintiffs already traumatised by the pre-litigation experience. Although insolvency experts don’t feel that emotional ‘hurt’, they have hitherto largely lacked the financial muscle to take cases.
They bring some “rationality” to the process, he says.
Based on a private partnership model, the fact is forecasting returns is an impossibility. Phil Newland is one of the largest investors in the original partnership, a $15 million partnership put together in 2009.
“We’ve returned 60 per cent of the money we’ve collected net of the legal costs to the plaintiffs we fund, which is substantial”.
“It’s substantial money that the plaintiffs would not have seen if we were not involved and is a ratio our competitors are jealous of.”
The company always retains substantially more cash reserves than it needs, but is considering another fund, only its second in its 10 years.
“Litigation is a pressure game it’s about merit -at the end of the day it must have merit – but you must do everything you can to reduce pressure on the case.
“Where so many litigants get it wrong is they run their case on a shoestring budget so they come under pressure to settle.
“We always maintain maximum flexibility”
But Newland has no desire to grow the fund to the point where they adopt the sort of “spray and pray” model overseas where litigation is funded on a wholesale basis with a return sought on a kind of law-of-averages basis.
“We don’t think that’s good for litigation funding where cases that are not meritorious are taken.”
Instead, he remains committed to simply levelling the playing field, holding insurers and others to account and taking quality cases that they can win.
To date, their success and decade of achievement puts paid to the argument that litigation funding has no place in the country. Winning big money returns for small plaintiffs who would generally otherwise be left out of pocket is hardly failing the call of justice.
And with almost 10 years behind it, LPF Group is set more than ever upon achieving that level playing field for the small guy seeking to tackle the deep pockets of the insurance giants.