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(on the application of PACCAR Inc and others) (Appellants) v Competition Appeal Tribunal and others (Respondents)
Case ID: 2021/0078. Case states litigation fund agreements unenforceable, could be reason for drop.
I'm not invested here though this should bounce back very soon if not just tomorrow morning after investors and the markets realise there's no real risk at all here to that grasping at straws in desperation to stall or derail the LIT case, these sorts of things happen frequently in litigation , the lawyers know they won't win , though they will nearly always try and stall the paying out of compensation awards. The supreme court should see it for what it is, just desperate people doing desperate things to avoid paying out. LIT has no concerns here. A definite buying opportunity ok.
GLA
At least* 15%
Yep - great find. Maybe no RNS even required. Should be a 15% up day tomorrow
Many thanks luthrin.
I just listened to this online myself. I did not register the issue at the time because the ceo was notnconcerned.
Hopefully a good day tom
Good find, Lithrin. I expect a strong recovery tomorrow.
From @Buy100ozSilver on Twitter:
"https://www.supremecourt.uk/cases/uksc-2021-0078.html
Clicked on the link within that article, they would have been aware of this looking at the dates. The fact Jonathan added a bunch of shares March 17 despite this ongoing risk suggests low risk to $lit.l .
Hearing date Feb 23, judgment July 26."
In LCM's Investor Meet Company presentation on 14 March, the following question was asked:
"It has been reported that Britain’s litigation funding industry faces “seismic consequences” if an appeal over funding agreements is allowed by the United Kingdom’s Supreme Court - what are the risks to LCM’s UK investments both directly funded and via either fund? Have you reported any information on how this case may affect LCM's business to private investors and/or other investors who participate in the funds?"
Patrick Moloney's response was as follows (my audio transcription):
"In answer to that question, there has been a challenge in the high court here in the United Kingdom with respect to whether litigation funding arrangements constitute damages based fee arrangements and are therefore caught by the legislation which governs solicitors providing those types of services. Now, the advice that we have received in and around that challenge is that it relates to that portion of the underlying funding agreement whereby the litigation financier is paid a percentage of the outcome of the pool of capital that is created as distinct from being remunerated on a multiple of invested capital. Therefore, the majority if not all of our litigation funding arrangements which have been entered into in the UK market are all based around a remuneration and return mechanism for LCM based on a multiple of invested capital. So, we're not concerned in relation to this challenge. The challenge is yet to be determined and is in early stage in terms of going through the court system, but as I say, we're not concerned about that because it really doesn't reflect the way that LCM structures its underlying litigation funding agreements. So, in answer to the final part of that question - have we reported that to the market or those who have invested in our funds management business - the answer is no because we don't perceive that as a risk."
You don't mean hedge funds, you mean Institutional Investors, of which LIT has a number. Holdings RNS may confirm, but I wouldn't expect this may be PIs panicking.
LIT is far too small for Hedge Funds.
Need to get confirmation from the company before drawing any conclusions. The concerted selling from 2pm onwards suggests a hedge fund or two believe that this will be a significant problem - I jumped out as better safe than sorry…
My understanding is that the ruling states that Litigation funding is not the same as a DBA - see below. Also DAF lost the appeal.
This appeal is concerned with a matter of statutory interpretation in the context of litigation funding. Litigation funding involves the agreement of a third party (with no prior connection to the litigation) to finance all or part of the legal costs of certain litigation, in return for a percentage of any damages recovered should the funded litigant be successful. In particular, this appeal concerns whether each of the agreements to provide this funding, known as litigation funding agreements ("LFAs"), constitute a "damages-based agreement" ("DBA"), a term given a specific definition by statute. In order to be lawful and enforceable a DBA has to satisfy certain conditions. The LFAs have been entered into without satisfying those conditions, so the question whether they constitute DBAs is critical for their enforceability.
Lady Rose dissents and would dismiss the appeal. She agrees with the Divisional Court and the Tribunal that the provision of financial assistance is only included in the term "claims management services" if it is given by someone who is providing claims management services within the ordinary meaning of that term [154]. Lady Rose holds that the fact that litigation funding would not naturally fall within the scope of the term "claims management services" is important [111]. This points to the fact that claims management services include providing financial assistance, but that this does not mean that all financial assistance constitutes "claims management services" whenever it relates to a claim [115]-[122].
First post here but a long standing holder.
1) LIT would have known about this potential ruling.
2) Burford has hardly moved at all and it cannot, by it's very nature, only affect smaller funders.
What's the cases distribution across geographical jurisdictions looks like for LIT?
This may help with evaluating potential write-down exposure.
Agreed - leave the company to respond - they will be all over this. Crazy UK small cap markets at the moment.
Don't bombard them - they will have been well aware of today's judgment but will have to run any release through lawyers/Nomad/broker/etc.
Give them time. It would be better released into close now to allow market to digest.
Ha - a classic small cap panic. I would suggest topping up on the short term fear. DYOR
I normally speak to cfo but she is on leave. So i just asked for urgent call back and rns.
Yes bombard them.
They just need to release a statement
Gallmat - can you relay what they said, why would we all want to bombard them (they are a small team)? They can't give price sensitive information, so you should be able to share freely.
I called the company. Do the same
+44 02039555260
I'm a lawyer and this won't materially affect LITI. Expect a post close RNS to clarify this. Good buying opp IMO
You are spot on. Opening paragraph of news article:
"Litigation funders will have to redraft the terms of their agreements following a widely awaited ruling by the Supreme Court this morning. In PACCAR Inc & Ors v Competition Appeal Tribunal & Ors, four out of five justices ruled that such agreements fall within the statutory definition of damages-based agreements (DBAs). As they had been entered in to without satisfying conditions for DBAs, they were therefore unenforceable."
It isn't saying that litigation funding HAS to be DBA-based but, if they are DBA based, they need to satisfy the conditions of them.
As far as I can tell, LIT don't use DBAs, at least not widely.
We really could do with an RNS!
Https://www.supremecourt.uk/cases/uksc-2021-0078.html
"Are litigation funding agreements ("LFAs") pursuant to which the funder is entitled to recover a percentage of any damages recovered "damages-based agreements" ("DBAs") within the meaning of the legislation which regulates such agreements?"
MeHumbleThinks that the case is not applicable to LCM usual practice (compensation as a function of time, not % of reward), but proper RNS from the company clarifying the legal situation would be more than welcomed.
That’s precisely why we should be concerned. Today’s ruling states that litigation funding must be a DBA. Any funding contract that is not currently structured as aDBA is invalid and unenforceable as of today.
It may be as simple as amending the contract to say DBA somewhere in there but I don’t know for sure.