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Insolvency litigation funding for $173m claim

Insolvency litigation funding is a maturing industry, certainly if you believe the press reports about Insolvency Management Ltd funding a $173m claim by the liquidator against the auditors of Stone & Rolls. The details and merits of the claim need not concern us. What is important is that an "after-the-event" insurer will provide cover sufficient to enable a liquidator to issue such proceedings. Litigation is not something a liquidator can pursue lightly. Even directions hearings can lead to adverse costs orders. But the point has not been lost on the insolvency regulators that arguably liquidators have to explore - even in cases where there are very limited other assets to cover the costs - litigation funding and costs insurance whenever a reasonable antecedent transaction or other recovery claim arises. Although such funding and cover has been available for some years (see "Funding insolvency litigation", Recovery, Summer 2002, p30), only now has it developed into a practical and actively used solution (see also "Using Litigation Funding - a practitioner's experience", Insolvency Practitioner, Summer 2005, p4). The cases will not be a flood, but I see the development of such funding as good for creditors and good for the insolvency profession.

 

 

Date: 23rd January, 2007
Author: Chris Laughton

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