Experience and results: litigation funder IMF Bentham interview in The Australian

IMF Bentham Limited’s Andrew Saker and Clive Bowman were interviewed for the Legal Affairs section of The Australian. Andrew is the global Managing Director and CEO and Clive is the Chief Executive for Australia and Asia.  (Video here.)

IMF Bentham has a 90% success rate for claimants because it knows which cases to fund. This know-how, developed over the last 17 years, reflects the collective wisdom of its investment committees, which include former judges, and a talented global team of investment managers who carefully assess cases.

IMF Bentham has experience and results, as well as a stringent investment process, explained in more detail by Andrew and Clive to The Australian. The full interview appears on The Australian website here. It was published in the lead up to The Australian Legal Review, a magazine devoted to legal affairs, to be published on 26^th October 2018.

The interview transcript:

Chris Merritt:                
Hello, I'm Chris Merritt. We're in the Sydney offices of IMF Bentham, Australia's biggest litigation funder. We're here with two of their top Executives, Andrew Saker, who's Managing Director and Global Chief Executive and Clive Bowman, who is Chief Executive for Australia and Asia.

Chris Merritt:                
Clive, what's the success rate like? Do you win most cases?

Clive Bowman:             
We do win most cases. We've got a success rate of about 90%.

Chris Merritt:                
That's incredible. How do you manage that?

Clive Bowman:             
Well, it's a very careful due diligence process. We have investment managers in our various offices, who've reviewed the cases. It's a very stringent process, a number of criteria that they look for. If they decide to fund the case, then that goes to an investment committee and our investment committee has a number of permanent members on it, including judges. A former judge from the South Australian Supreme Court sits in relation to Australian cases and we have a US judge sitting on the US cases.

Chris Merritt:                
Is it majority rule?

Clive Bowman:             
No. It's unanimous and that's been the process since inception and we think it implies a particular discipline.

Chris Merritt:                
What proportion of applicants get through that selection process?

Clive Bowman:             
A small number, probably around about 5%. 95% of cases are rejected, which means that we've got to have in place a very efficient review system.

Chris Merritt:                
How much of the winnings, I suppose, or the settlements are returned to clients?

Clive Bowman:             
About 60%. 60% of recoveries go to clients. 40% go to funders and legal fees.

Chris Merritt:                
Okay. Why do cases settle?

Clive Bowman:             
Because they're good cases primarily. IMF has, as I said, a very stringent selection process and so when a funder comes on board, defendants realise that they can't play the game of seeking to run the plaintiff out of money.

Chris Merritt:                
So, it's the IMF Bentham effect that has an impact?

Clive Bowman:             
Yes, it is the effect of someone coming on board, who now has the capacity to see the case through to the end.

Chris Merritt:                
Is this private enforcement of corporate law and is that a good thing?

Andrew Saker:             
It is, in part. It's in part a response to the limited resources that are available to the government to enforce all types of legal outcomes and, as a consequence, the niche has grown for private enforcement opportunities. There is also an evolution of the return of funds and damages to clients, which public enforcement can't always achieve.

Chris Merritt:                
So are they complementary, you see private enforcement and public enforcement as complementary?

Andrew Saker:             
We do. We see that there is a niche for both public enforcement and private enforcement.

Chris Merritt:                
One cannot operate without the other or what would the situation be if we just have to rely entirely on ASIC?

Andrew Saker:             
I think there would be a number of matters that would unfortunately slip through given their limited resources and, therefore, not all corporate malfeasance would be able to be prosecuted, so private enforcement does provide the opportunity to expand upon and enhance the public enforcement processes.

Chris Merritt:                
Private interest serving a public purpose?

Andrew Saker:             
Yes, indeed.

Clive Bowman:             
ASIC has been positive about the role litigation funding plays. It sees it as complimentary to their role.

Chris Merritt:                
I suppose, it could be, they've got a limited budget, there'd be no way they can handle all instances of misfeasance that come up.

Clive Bowman:             
They do have a limited budget and, often, they are seeking penalties and not seeking recoveries for claimants.

Chris Merritt:                
Where's the growth? The company has been around for a while now. Where is it going to grow? Is it going to grow primarily within Australia or have you got offshore ambitions? What's the growth like?

Andrew Saker:             
We have expanded internationally as part of our diversification strategy. We've now expanded to 14 offices in 6 countries. We do see some additional geographic expansion, primarily into continental Europe but also within the jurisdictions as there is a greater acceptance of litigation funding.

Chris Merritt:                
What's the proportion of work going to be like in the future? Will it continue to be predominantly Australian? Is it predominantly Australian at the moment? Or do you see the rest of the world becoming the dominant part of the company's expansion?

Andrew Saker:             
Our present mix of our portfolio is approximately 60% in the US and 40% in the rest of the world. We do expect that to balance out in the near term as the rest of the world expands its investments, particularly in Asia and in Canada, but we are expecting to see an overall growth in the total portfolio. We do expect further expansion across jurisdictions.

Chris Merritt:                
For Asia, for example, Clive, whereabouts in Asia? Hong Kong, Singapore?

Clive Bowman:             
We are based in Singapore and Hong Kong and we've been there for about a year and a half and seen very significant growth, particularly in the area of arbitration funding and in relation to insolvency.

Chris Merritt:                
Why arbitration?

Clive Bowman:            
Because in Singapore and Hong Kong, the legislature has relaxed these rules that have historically prevented litigation funding and permitted it in relation to arbitration and insolvency. There is a demand from corporations who are involved in arbitration for funding. It's an example of a situation where a corporate, often, which does have the capacity to fund its litigation is taking up litigation funding.

Chris Merritt:                
Why is it so popular? Why is it growing? Arbitration I mean. What's the advantage as opposed to the courts?

Clive Bowman:             
The advantage is it's private, so there's a confidential element to it and, also, where companies are operating in jurisdictions where the court systems aren't as robust, they choose, by agreement, to nominate a particular place.

Chris Merritt:                
Yeah.

Clive Bowman:             
Singapore, for example, where they can arbitrate.

Chris Merritt:                
Is it a competitive market or have you got this all to yourself?

Andrew Saker:             
The market is competitive. It's growing in its degree of competitiveness. In the US, in particular, we've seen a significant expansion of the number of funds that are offering third party litigation funding or dispute finance. In Australia, less so, but there have been some recent entry of international funders into this market.

Chris Merritt:                
That leads onto the next question. What about regulation? What sort of regulation should there be?

Andrew Saker:             
Well, IMF has a constant and consistent view about regulation in the industry and we do support the ALRC's recommendations in relation to regulation. At the moment, that currently looks like they're going to be requiring  litigation funders to get registered with APRA, which we think is a positive development.

Chris Merritt:                
Why?

Andrew Saker:             
Because it provides the users of litigation finance, both as clients as well as defendants and the court, some degree of certainty as to the financial capacity of litigation funders to meet not only the cost of the prosecution of their claims but also any adverse costs in the instance that there is a loss.

Chris Merritt:                
So, it's a consumer protection measure, really?

Andrew Saker:             
Indeed. It's an opportunity for the legislature to get involved with regulating how litigation funding will be provided in the future.

Chris Merritt:                
What would you oppose in terms of the regulation agenda? What would be bad regulation?

Andrew Saker:             
The only matter that really came out of the ALRC's recommendations that caused us a degree of concern was the implications about the relaxation or dilution of the rules and regulations about disclosure and misleading and deceptive conduct. We thought that was a step backwards in terms of the efficacy of the market and the confidence that consumers and users of the capital markets can have. We weren't particularly supportive of that. As we understand it, the ALRC is now proposing not to introduce any new rules about those issues, but to defer them for further consideration.