Soon-to-be-listed litigation funder International Justice Fund will have a current and future case pipeline worth more than $600 million, including claims worth more than $100m directly flowing from the financial planning scandals that have engulfed the nation’s banking industry.
Documents provided to investors as part of the roadshow for the listing of IJF, which is staging a roadshow in Melbourne and Sydney this week, reveal the firm’s pipeline of class action opportunities contains two cases against banks.
One is in relation to the wrongful issue of a speculative financial product to sophisticated investors, and another is based on misleading and deceptive conduct relating to the sale of financial products.
Asked if the recent Senate inquiry into the financial planning practices of the banks and other financial institutions had provided fertile ground for the newly listed firm, managing director Michael Becker said yesterday: “Absolutely.’’
“Certainly there is investigatory work being conducted and whether there are cases ready to be filed in court, possibly not. But they are certainly in the first and second stages in preparation for that,’’ Mr Becker said.
He declined to name the banks in the two cases.
The raising by IJF of between $30m and $40m to fund legal claims and working capital, which is being handled by Bell Potter, is likely to be cornerstoned by three institutions, including one from offshore.
Litigation funding is increasingly giving plaintiff law firms, companies and private citizens involved in class actions the financial backing to pursue claims.
A Productivity Commission report last year backed litigation funding as a means of improving access to justice.
The biggest rival to IJF is listed IMF Bentham, which has dominated the market since it launched in 1998.
“For the first time, individuals now have a choice. Now these people and institutions have the ability to enforce their rights,’’ said IJF director and co-founder Glenn Vassallo, now the Brisbane-based managing partner of GRT Lawyers.
A boon for the firm is the exclusive retainment for at least 12 months of former Federal Court judge and former president of the Australian Competition Tribunal, Ray Finkelstein, to provide independent advice to the case selection committee.
He played a key role in establishing the class action system in Australia.
IJF has also secured the services of senior Victorian barrister Tomo Boston, who has been engaged on a non-exclusive basis.
“Having the best legal minds is definitely a point of difference for us,’’ Mr Vassallo said.
The firm will start with a claims book worth $155m secured from unlisted litigation management services firm, Litman Holdings, which is associated with Mr Becker.
It includes four claims, with IJF holding an economic interest of 5-7.5 per cent of the gross claim proceeds.
Two of the claims relate to subprime lenders Provident Capital and Wickham Securities, which left a trail of uncertainty for investors two years ago after they closed their doors in Sydney and Brisbane.
There is also an additional claims pipeline, which includes the cases against the banks.
“There is a pipeline we have developed over the past three months, and more particularly over the past month, since it has become known we are listing on the ASX. We have had a big inflow of injuries,’’ Mr Becker said.
“We have narrowed that down to a list of 10 cases, with a potential claim value of around $600m. These cases are under review and following the IPO we will put them through our claims selection process.’’
Mr Becker said the firm had put in place a strategy to mitigate the downside of not winning cases and being subject to adverse cost orders.
“We have obtained insurance out of the London market — a product called ‘after the event insurance’,’’ he said.
He said where insurers declined specific cases, IJF would also reconsider its strategy in those cases.
Author: Damon Kitney
Source: The Australian
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