Scottish Victory for Consumer Rights

Consumer rights litigant Richard Durkin

In 1998, Richard Durkin bought a laptop in Aberdeen. Neither he, nor PC World, nor HFC Bank (who financed his purchase) could have known that Richard Durkin was making legal history.

He paid £50 up front for the laptop, and signed a credit agreement with HFC Bank for the remainder of the £1,499 price tag. He was also given assurances by the sales assistant that the laptop could be returned if there were any problems, defects or issues.

Upon discovering at home that the laptop had no inbuilt modem, Mr Durkin returned the laptop to the PC World store the very next day. Although eventually refunded his £50, HFC Bank did not consider his credit agreement void upon the return of the laptop- despite the consumer’s repeated assertions that the initial contract of sale was now cancelled by the return of the laptop- and still sought payment from Mr Durkin.

Mr Durkin went to court over his inability to cancel his credit agreement, and HFC’s demands for payment. Instead of being a matter settled out of court, or at a local magistrate’s court, the matter escalated legally. In the ensuing proceedings, Mr Durkin’s credit rating, (and therefore his ability to get credit and loans) had been affected by his essentially defaulting on the credit agreement with HFC Bank (in their eyes). Despite Mr Durkin’s repeated efforts to quite legally cancel his credit agreement, HFC did not consider the agreement void, and so pursued him for the payments due which they considered he should still make. The effect of this was to severely damage Mr Durkin’s credit rating. Loss of capital gains was also an issue before the courts, as Mr Durkin was unable to get the required finance to purchase properties in Spain as he had intended, and indeed started the process for.

Aberdeen Sheriff’s Court in 2008 found for Mr Durkin, and ruled that he could legally return the defective goods, and (sic) cancel the credit agreement. Damages were awarded to the value of £116,000. The key of the matter, the Court held, was in s.75 of the Consumer Credit Act (1974). Applying s.75, the various courts had to establish whether in fact Mr Durkin had legally rescinded the contract, and had the ability to do so under the terms of the 1974 Act. In that matter, the various judges who presided over the case seemingly though differently.

In appeal and cross appeal under the various heads of claim, the case made its way to the First Division of the Inner House of Session (Scotland’s Appeal Court). The Inner House overturned the lower court’s verdict. Upon another appeal, the case made its way from Edinburgh to London, and was heard by the Supreme Court for final adjudication.

The leading judgement was given by Lord Hodge (the Scottish judge on the Supreme Court). In his brief and concise 13 page judgement (with which the other judges agreed), Lord Hodge found in favour of Mr Durkin, allowing his appeal. However, only £8,000 in damages was awarded to Mr Durkin after 16 years of litigation (Lord Hodge was legally unable to restore the damages awarded by the Sheriff’s Court).

Although a shallow victory for Mr Durkin- the case of Durkin (Appellant) v DSG Retail Ltd and another (Respondents) (Scotland) is a great triumph for consumer rights.

Applying Lord Hodge’s verdict, consumers making purchases under a credit agreement can now legally cancel the credit agreement if the purchased goods are rejected on the grounds of being faulty or similar. Additionally, any lender that seeks to blacklist or negatively affect a consumer’s credit rating upon default of a credit agreement now owes the consumer a duty of care to investigate thoroughly if the consumer is stating that they have cancelled the purchase funded by the agreement, and therefore the agreement itself. Indeed, Lord Hodge found that HFC Bank (now owned by HSBC) had a duty to establish the truth behind Mr Durkin’s repeated assertions that the agreement had indeed being terminated- and that the bank had failed to act on, and investigate, those assertions.

Furthermore, a major result of the case is that banks and other financial institutions now have to be especially careful, and be absolutely certain of their facts, before informing credit reference agencies that a customer is in default. In these financial times, such protection as regards negative credit reports is very welcome indeed.

The case is finally over for Richard Durkin, after a 16 year odyssey that has cost him very dearly, and not just financially. Understandably angry at the Supreme Court verdict, in a statement he said that “I am disappointed that the Supreme Court was unable to restore to me the full damages awarded by the sheriff – even though it was clear that they were sympathetic to my position on this… This decision is a great victory for all consumers and I am proud to have been the driving force behind it.”

Despite his own lack of legal victory, Richard Durkin leaves a legal legacy which is to the benefit of a great many consumers.

 

The final word in the case goes to Lord Hodge. Quoting from his judgement at paragraph 35: “There may be cases in which a creditor, having made enquiries, acts reasonably in reaching the view that the debtor’s assertions are unfounded. This is not such a case”.

Such reasonable actions, and acting according to certain duty of care to make accurate statements (applying the famous case of Hedley Byrne & Co Ltd v Heller & Partners), are already a part of tort (civil) law, and banking and financial regulations, due diligence, and consumer rights. Mr Durkin’s case serves to greatly reinforce and strengthen those consumer rights, and to place the onus squarely on the financial institutions to act reasonably as regards the consumer, according to Lord Hodge.

 

 

 

Forex manipulation- and the Bank of England

At a time when the financial industry was sure that no more skeletons remained, and that all the bad behaviour and previous excesses of the turn of the millennium were exposed and dealt with by the regulators- they were wrong.

Although not as high profile or devastating as previous scandals like Payment Protection Insurance, the current scandal reaches right to the top – the Bank of England.

Throughout the criticism and banking excesses, the Bank of England has aloofly remained above the fray. Refusing to comment or get involved in such matters, and leaving the regulators to investigate and punish, the Bank of England, has remained above the murky mess of the financial scandals (as is only right and befitting for the UK’s central bank).

However, very recent allegations and evidence indicate that the reality was not the same as the public image. A few weeks ago, a Treasury Select Committee was convened to investigate allegations that senior Bank of England officials were involved in manipulation the Forex currency trading market.

The Bank steadily denies any such involvement. However, minutes of meetings reveal that a senior Bank official was informed of “attempts to move the market”, and of a meeting with senior Forex dealers and traders from amongst the world’s largest banks.

Further evidence indicates that Forex traders have been communicating with each other in attempts to agree the rate of exchange for currency exchange deals. It is thought some traders used online chat rooms in further efforts to fix the rates for such deals, or to set a benchmark for currency trades. Whilst these accusations are also been investigated, these matters are outside the scope of the Bank of England enquiry.

Pending further investigations, a senior official has been suspended, pending (another) enquiry into their own conduct. Meanwhile, the Bank in an official statement has said that it “does not condone any form of market manipulation in any context whatsoever”. As the central bank, such actions are highly morally and legally questionable. The investigations continue at this time. Indeed, a Bank of England oversight committee is also investigating how much the Bank knew, and what actions were or were not taken, assisted by law firm Travers Smith. In the matter of Forex manipulation, the question really is how much did the Bank know? The answer to that is under investigation.

The Forex manipulation scandal, tipped by many insiders and commentators to be the next Libor rate fixing scandal (or even bigger) has been largely quietly and sensitively investigated by the new Financial Conduct Agency (FCA). Essentially, Forex traders are alleged to have colluded in setting some key currency exchange rates, resulting in very big profits.

With the FCA investigation into the scandal on going, the scale of the rate manipulation prompted FCA Chairman Martin Wheatley to remark that currency exchange fixing was “every bit as bad” as the Libor rate fixing scandal. In the wake of that scandal, banks such as RBS, Barclays and UBS were fined nearly $6bn for fixing the Libor rates at which banks loaned money to each other. Both scandals are on par with the PPI scandal, which is still being resolved at a cost of billions to banks.

To prevent such excesses happening again, banks have improved their compliance and due diligence. More regulations have been imposed. The FCA, led by a fierce Martin Wheatley, has been very proactive and determined in its endeavours to tackle such banking scandals and excesses. Many big financial service providers have been fined or prosecution for current of past wrongdoing. From that, many banks have learned the value of cooperating with the FCA: according to Mr Wheatley when he appeared before MP’s, 10 (unnamed) banks are cooperating or assisting with the current Forex rate fixing investigation.

Celebrated and visionary Bank of England head Mark Carney; how much did he know?

Over all of this sits the Bank of England, the UK’s financial and economic regulator in chief and supreme authority. Under the steady and capable hands of former Governor Sir Mervyn King (now Lord King of Lothbury), and the genius and dynamic direction of its new Governor, Canadian Mark Carney, the Bank has presided over an era of banking scandals untouched by the scandals that has troubled it for so long. Now a scandal reaches to Threadneedle Street itself, a matter of grave concern and embarrassment to the Bank.

The matter also throws up the question of who or how is the Bank of England regulated; ultimately, for bank regulation, quis custodiet ipsos custodes? To paraphrase one MP, either the Bank was guilty of complacency in letting such rate fixing happen (allegedly since 2006/7), or grave stupidity and naivety in not knowing what was happening inside itself.

With the Bank of England now being implicated in a financial scandal, and in the crosshairs of both the government and the regulators, consumers can rest assured that, in this new era of compliance, due diligence and increased regulation, that banks are not going to take part in malpractices as happened previously. These days, the banks have more to fear from the regulators than customers have to fear from their banks. However, such due diligence and compliance itself has to be carefully considered to ensure that a new financial order emerges that is not overly tied up in red tied and regulation. After all, the banks should not be looking over their shoulders in fear of reprisals for the FCA.

It is a delicate balancing act. In the immediate wake of the banking scandals being revealed and prosecuted, regulation was tightened in an instinctive reaction to protect customers. Some consider that such protection has now gone too far, and needs to be relaxed to restore a sense of balance.

The key element in such regulation are the watchdogs (or rather, in the case of the FCA, the seeming attack dogs). However, as the Forex scandal implicating the Bank of England shows, one question has to be asked: quis custodiet ipsos custodes?

 

Pre-Nuptial Agreements win Support of Law Commission

A new proposal from the Law Commission calls for England and Wales to give legal status to pre-nuptial agreements. The proposal  was made in a report that stemmed from three years of consultations on the issue, and there have been some months of recent discussion on the matter from various quarters.

Family Lawyers have welcomed the Law Commission’s call for “pre-nups” to gain legal status. At present, courts afford them some recognition, but they are far from legal binding. Instead, they are just a single factor taken into account when it comes to dividing up a couple’s assets in the event of divorce and have no actual, specific status enshrined in law.

By contrast, the draft bill proposed by the Law Commission would give them legal status and make them almost entirely binding. As a result, couples could make agreements before marriage in the knowledge that, should they later break up, the terms they agreed upon will be recognised by the courts. The result is that both partners will have better protection in terms of keeping the assets they brought into the marriage.

If the Commission’s proposed bill or a very similar one should be passed, courts will not be able to deviate from the terms of the agreement, provided that it meets with all criteria for eligibility. There would be only one key exception to that rule, which would relate to cases where the agreement does not properly provide for the needs of both partners or of children. This would make pre-nuptial agreements binding in the considerable majority of cases, without overriding the requirement that both partners be adequately provided for following a break-up of their relationship.

According to James Carroll, co-chair of the Law Society’s  Family Law Committee, “Parties can choose to opt out of sharing non-matrimonial property, but they will not be able to contract out of providing for each other’s needs.”

To be legally binding, a pre-nup would have to meet several criteria of eligibility:

  • The agreement must contain a statement made by the couple that they understand the agreement is binding and can usually not be overridden or altered in court following a divorce.
  • Legal advice must have been received by both partners, and both must undertake full disclosure.
  • There must be no misrepresentation, fraud or undue influence involved.
  • The agreement must be signed no less than 28 days before the wedding.

However, if not all of these criteria are met the agreement will not be rendered totally invalid. However, there will be more discretion available to the courts in deviating from the agreement when deciding on the final settlement.

Have Patent Wars Stifled Creativity in Business?

Two of the technology world’s biggest companies – Apple and Samsung – have been in and out of the headlines recently due to their prolific legal battles.

The two smart phone manufacturers have been at war over the rights to technology used in their hardware, leading many in the technology world to claim that patents are hurting creativity.

From engineers to legal commentators, the idea that patent wars have stymied tech industry progress is certainly popular. Investment and technology magazines alike have commented on the immense sums spent by Apple and Samsung to attack their competitors over perceived intellectual property violations.

Those sums – often in the hundreds of millions of dollars – could be better spent on research and development, claim many in the tech industry. The August 12 edition of Money Morning, a digital finance journal, claimed that the patent war between the two technology companies was producing a massive amount of waste.

The journal discussed the wasteful consequences of the litigation, where money was taken from Apple and Samsung’s corporate accounts and spent on litigation instead of innovation and progress. The patent wars also have chilling effects, namely that a large number of technology companies are fearful of innovating due to the potential for a patent holder to sue them.

Many patent holders have spent the last two decades acquiring odd, overly broad, or simply vague patents. Microsoft has its own history of patent warfare dating back to the 1980s, while leading search and online publishing companies like Google and Yahoo have their own messy patent history.

However, the prior patent wars of leading technology companies have been mostly defensive in nature. Companies attacked when they saw their intellectual property under attack by others, and focused on research and development when the coast was clear.

Today’s patent wars, in contrast, are offensive. With profit margins falling and the level of competition in the technology industry growing, companies are using their patents offensively. What was once a tool to protect against aggression is now used for aggression, particularly by companies like Apple and Samsung.

Just like the United States and the Soviet Union rushed to acquire large arsenals of nuclear weapons during the Cold War, today’s leading technology companies are involved in a scramble to acquire as many patents as possible.

Experts estimate that leading smart phone manufacturers spent over $20 billion on patent acquisition from 2010 to 2012, and that many still maintain billion-dollar IP protection budgets. Google alone has spent an estimated $12 billion on patents in its operational history, with rival Microsoft purchasing over 21,000 patents since the 1980s.

Patent-related lawsuits increased by 70 per cent from 2004 to 2009, causing many in the legal community to express concerns that technological innovation could be overtaken by aggressive litigation. Each patent – or each patent lawsuit – reduces the amount that technology firms can spend on research and development.

For many companies, patent acquisition and patent infringement litigation is now a greater expense than research and development. The average patent infringement claim costs $2.5 million to fight – money that reduces each company’s ability to bring new products and technologies to market. Many of the companies most heavily involved in patent litigation have histories of innovation and creativity – histories that are now used as justifications for their aggressive patent warfare. Apple, for example, states: “Apple has always stood for innovation. To protect our inventions, we have patented many of the new technologies in these ground-breaking and category-defining products.”

The Cupertino-based company claims that if competitors could copy its products and innovations, it wouldn’t “spend millions of dollars creating products like the iPhone.”

The iPhone itself is an interesting example of the unusual patents used by many technology companies in litigation. The tiny smart phone contains thousands of patented technologies, many of which are vague and hard to define.

On average, smart phones contain an incredible 200,000 patented parts. Many of these patents are somewhat vague and dubious, covering technology that allows them to be used aggressively rather than defensively in protecting the intellectual property of their creators.

US patent lawyers recently criticised a software patent for online price calculation on shopping websites, claiming that it was too loose and flexible. Financial services companies are also taking issue with the rush to acquire patents. St Louis Federal Reserve Bank claims that there is “no empirical evidence” linking patent laws to an increase in productivity.

Leading legal researchers, universities, and businesses have spoken up on the rush to attack competitors for perceived patent infringements, noting that the massive dependence on patents makes it difficult for startups to flourish. In response to the criticism, the world’s leading technology companies have turned a blind eye and continued their efforts to acquire more loosely worded, incredibly vague patents. They’ve also increased the amount they spend on legal services to arm themselves against threats from competitors.

The surge in patent warfare threatens the unique balance that’s allowed the world’s top technology companies to innovate for so long. Innovators and risk-takers need to be protected, but not at the expense of further development and innovation.

An executive vice president at Samsung offered an amazingly honest statement on the ongoing patent disputes, stating that the cost of patent warfare ultimately hurts consumers as well as businesses: “Legal battles with Apple have been a loss for both the industry and innovation as a whole.”

While companies like Apple, Microsoft, and Samsung may be winning their battles against each other, it’s consumers that are suffering the most from the technology industry’s destructive and costly patent warfare.

This article was written by Vannin Capital. Visit their website to learn more about how litigation funding works: litigationfunding.com.

The litigation of floods

2014 started in spectacular style for the UK; with the heavens opening up, and weather patterns bringing storms across the south of the country.

As people returned to their desks after the New Year festivities, to settle work outstanding from 2013, and to start in earnest with the demands of 2014, the first thing they were confronted with was bad weather. Not your stereotypical British rain, gloom and wind, either. Rather, extreme weather patterns and storms which made the Boscastle floods of recent years look insignificant in comparison.

February brought no relief. Instead, a fresh round of bad weather systems, and a strong indication of more to come. Most of Somerset has been plunged underwater, with emergency services (and now the military) working tirelessly to rescue people and property, and to do what is possible to counter the rising floodwaters. The Environment Agency has been condemned and criticised for their endeavours, and politicians of all parties have ventured south of Westminster to see the floods at first hand, and to be seen by the media.

Fire truck rushing to the rescue amidst heavy floods- and the Defence Secretary, shortly after sending troops to the region to assist with disaster relief

Fire truck rushing to the rescue amidst heavy floods- and the Defence Secretary, shortly after sending troops to the region to assist with disaster relief

 

Amidst all the dangers to life, the damage done to property, town and countryside, and the long term effects of the bad weather, one matter needs to be considered early; litigation and claims.

The weather and the storms will result in many contracts not been honoured. The effect on businesses will be vast, both due to less sales and less supplies, or even damage to business premises. Homeowners and car owners will have damaged property to repair or rebuild; the government has stated that efforts will be made to get such insurance claims processed and settled as rapidly and practically as possible, so people can start sooner than later to rebuild

Legal issues such as those will be relatively easy to settle, unlike some claims. It is civil claims for personal injury and accidents and related that will cause the greatest confusion and uncertainty. After all, just how certain is it that a certain accident or personal injury came about as a result of the recent weather? How remote was the weather from the cause of the damage- or was there a human cause to the damage? Inevitably, many will want to argue that any accident was not due to their fault or negligence, but rather the weather. Equally inevitably, the courts on policy grounds will not want to find the fault for a civil action to be the weather. Although in legal theory an ‘act of God’ can be established as the cause of an accident- in legal reality, such a line of argument is incredibly unpopular with judges, and very rarely succeeds.

Personal injury claims, accident claims, and similar civil claims will doubtless fill the courts for a long time in the aftermath of the severe floods. Given the severe conditions, it will be hard to judge whether that accident or injury was a result of the weather or a man-made hazard. If man made, then there could a claim against the individual or business at fault. To assess whether there is a claim, though, consult a personal injury or accident specialist (such as NoWinNoFeeClaim.co), who will professionally assess accident claims and advise and assist in any subsequent legal action. Specialist companies will be able to lodge such accident claims, and take any claims to court.

Accident and personal injury litigation aside, the recent floods have been a catastrophic environmental disaster for the UK- and show no signs of abating. It is to be hoped that the weather will not be as severe over the next few weeks, and that the affected regions will be able to start the long and painful process of reconstruction. It is equally to be hoped that the government will extend every effort in tackling the floods, both now and later on. Much support has been given to the region, and many in the emergency services and military have worked tirelessly to save lives, and to do what is possible to check the flooding, and to repair the damage inflicted.

Above all, it is to be hoped that lessons are learned, so that flood defences, prevention and the response to such a natural disaster (which will happen again) can be improved upon.

Legal Aid Cuts Unpopular With Legal Professionals

Lawyers and other professionals in the legal aid sector continue to oppose the ongoing plans to cut legal aid. A number of legal professionals specialising in this field have joined together to form a new group dedicated to opposing the proposed reduction of the legal aid budget.

The National Justice Committee has been formed as a result, with a number of high-profile member organisations. Groups that are taking part in the committee include the Solicitors’ Association, Criminal Law Solicitors’ Association, Criminal Law Solicitors’ Association, London Criminal Courts,  Justice Alliance and the Criminal Bar Association.

Other bodies which will attend as observers but not as part of the committee include the Law Society and the Bar Council.

Legal aid provides those who cannot afford to hire a solicitor out of their own pockets to receive funding in order to secure fair representation. As such, there are fears the proposed cuts will reduce the access people on low incomes have to a truly fair trial.

Among the first actions on the new committees agenda, it is believed, is to decide upon a date for a day of protest. This follows a half-day’s protest action which took place in the early part of January. The full day of protest is expected to be scheduled for some time around the end of February.

In a statement issued to announce the fact that the National Justice Committee had been formed, they stated their intention to “[oppose] all further legal aid cuts,” and suggested that the proposals would “weaken the ability of the ordinary citizen to challenge unlawful decision-making.”

The statement also spoke of ” the devastating effects of legal aid cuts and restrictions in social welfare law, family law and immigration law.”

The committee also contends that all necessary savings can be made without cuts to the legal aid budget. They also question whether cutting the legal aid budget will really result in any money being saved, and described the measures as “unnecessary and counter-productive.” They claim that they can provide evidence in support of this stance.

The cuts have become particularly pertinent after recent revelations that around half of domestic violence victims remain unable to access legal aid. This is claimed to be due to strict legislation on the matter of “qualifying evidence” rather than lack of funds. However, the revelation has led many to believe that legal aid should be expanded and made more widely available in order to prevent women feeling they are not able to leave abusive relationships – something which cuts to funding would likely hinder.

 

Environmental Legal Aid Centres Have All Government Funding Cut

The coalition government made cuts to the Environmental Defenders Offices which are supposed to please the mining industry.

This decision for removal of funding from all environment legal centres will expose communities to damaging development and reduce control  on the mining industry, according to conservationists.

The attorney general’s office has told the network of Environmental Defenders Offices that it will be removing the $10m in funding, over four years, announced by the previous Labor government this year.

The facts are clear: all government funding for the network will stop after further  $100,000-a-year stipend given to each EDO office, which has been provided for the past 20 years, will also be withdrawn.

Those cuts will directly affect the offices of the Environmental Defenders in Western Australia, Tasmania, Northern Territory and north Queensland  which will probably have to close. Larger offices in New South Wales, Victoria and Queensland should continue operating but would experience a reduced range of services.

EDOs operate by providing free advice to individuals and community groups on environmental law. As well as taking on legal cases, it handles advocacy and a helpline, which is used by 1,500 people a year in NSW alone.

From the Environmental Defenders Offices  said that they were expecting that the mining industry would be pleased by this decision because they have been lobbying against EDOs for some time because EDOs helps community groups to take on big developments. According to their words, they are what stands between the community and sustainable development which is such a hot topic in the recent years.

However, the scale of the government cuts was a shock to the EDOs which were warned to reduce its activities. It is unfortunate that these cuts will affect frontline services and therefore new alternative sources of funding would have to be found. This will make difficult the handling of cases of the community.

Top Six Considerations when Filing a PPI Claim

The misselling of Payment Protection Insurance to almost 3 million borrowers is considered as one of the biggest UK financial scandals in recent years. Borrowers were duped into paying for an insurance coverage which they were completely unaware of or were considered to be ineligible in the first place. Claims management companies such as the PPIClaimsAdviceLine have stepped up and have been offering expert assistance to borrowers who want to make a PPI claim with their mortgage lender, credit card companies, and car loan creditor.  These agencies mostly offer no-win-no-fee services, which in turn attracts borrowers to obtain their services altogether.

Before diving into these so-called professional claims management services, here are some things that you may need to ask yourself first. Your answers to these questions will help you on deciding of whether to go forward and seek expert help or go the other way and file directly to the lender on your own.

-          Do I have a PPI included on my Financial Loan Agreement?

Check your original contract and monthly payments if it includes Payment Protection Insurance under the list of payables. PPI is also called ASU, loan care, and card protection. If you see these terms on your contract, chances are you were missold PPI.

-          How far back in my statements should I go?

If your PPI is still active or has been active in the last 6 years, you may go ahead and submit a PPI claim.

-          Can I still get refund from a past lender?

Even if the loan has already been paid off, but you were still in paying terms a good five years ago, you can still get a refund from a missold PPI. However, the farther back you go on your loan agreements, the lower the chances of claiming compensation for missold PPI.

-          Can I still claim for PPI compensation without the necessary paperwork?

Yes! You can still reclaim your PPI even if you lack paperwork or documentations. Lending companies have agreed to accept claims and evaluate if they are eligible for a refund or otherwise. They have records of documents are deemed to evaluate claims despite a borrower’s lack of paperwork.

-          Can I file multiple PPI claims to a single lending company?

If you happen to have a mortgage and credit card loan from one company, you can certainly file two or more claims at one time. They will be handle as separate claims.

-          What contributes to a missold PPI?

A PPI is considered as missold if your situation falls under one or more conditions:

  • You are told that PPI is compulsory despite ineligibility
  • PPI was added onto your agreement without your knowledge
  • The company knew you suffer from a preexisting medical condition but sold you PPI anyways
  • At the time of loan approval, you were either self-employed or unemployed.

If you see your case under any of these conditions, it’s time for you to prepare a PPI claim. PPI claims processing is tedious and time consuming. If you don’t see yourself allocating a huge amount of your time towards the claiming process, you can then seek out the expertise of claims management companies. Just be sure to read the fine print as a large number of these agencies will get a large portion of refunded PPI as payment to their service.

Eurobond exemption loophole puts government in question

After investigation by the Corporate Watch and a small UK newspaper, more than 30 companies have been found to use a Eurobond Exemption loophole. The Labour Party is interrogating David Cameron regarding his government’s failure to close the obvious legal tax loophole that is costing an alleged £500 million from taxpayer money. Labour’s MPs wanted ministers to explain why HMRC did not close the loophole. According to Labour, it was a “blatant tax avoidance” scheme that allowed companies to get away with huge profits while leaving the UK taxpayer to plug the holes.

Labour said it was disappointed with the government’s slow move in addressing these concerns. They said they will grill the government regarding who is advising them and what sort of loopholes are they concerned in closing in the UK legislature. Labour was concerned the government and HMRC are taking advice from companies who wish to avoid heavy taxes and play a huge stake in the UK economy.

MP Shabana Mahmood, the shadow Exchequer Secretary to the Treasury, also demanded answers from the government because of the heavy losses due to the loophole. She said that official figures show that uncollected tax had accumulated to £35 billion the previous year.  In particular, such loopholes play a part during a time UK citizens are suffering from high costs of living and deficit. She said that it is important that all tax avoidance schemes be closed down if the government plans to ensure the stability of the economy and the wellness of its taxpayers.

HMRC said that the organisation denies the country was losing £500 million to the loophole. They said that they monitor such transactions between interest payment on loans between core and group companies, but they do not recognize additions and restrictions of such activities.

Litigation Funding – is it a worthwhile investment?

With an estimated value of $1 billion the global litigation market is no small player in the financial markets. At a time when few individuals can afford to fund their own litigation and even corporate companies baulk at the risk, then it is hardly surprising that money-rich investors see an opportunity for speculation as third party funders. Add to this the recent global recession and the uncertainties of traditional asset investment and world stock markets, the attraction of investing in litigation has been all the keener. Litigation funding, defined as an arrangement where the litigants (usually the claimant but not exclusively so) have part or all of their legal costs paid by a third party, has its roots in Australia but recent expansion has been in the USA and UK, both global jurisdictions.

Obviously third party funders have to see a strong potential return on their investment. On average a funder would be looking for a share of between 30 and 60% of a winning claim, which would yield 3 to 4 times the initial investment. Also it is only worthwhile backing cases that are of sufficient value; most litigation funders would not consider claims below £500,000 and on average most would be several million. The agreement for each funded case is obviously a unique one, and confidential! However, the principles are the same. Some might claim a fixed percentage of the successful damages. Others might reclaim a multiple of the initial funding. Experienced funders will purchase insurance to protect their risks.

How big are those risks for the would-be third party funder? Clearly the biggest risk is that a claim will not succeed. In such cases, the ruling is clear: the investment is lost and must be written off. No costs are incurred by the client. In the worst case scenario, a failed claim might also involve in payment of costs and damages to the successful party. So it is of paramount importance that the litigation funder chooses cases with a high chance of winning. They must work closely with the lawyers; before agreeing to invest in a case they might need to get an opinion from counsel. They will need to assess the reliability of their witnesses and expert opinions will be advisable. Also it would be foolish to back a case without doing a thorough examination of the defendant, and especially his ability to fund a claim. Needless to say, all this due diligence will be costly and time-consuming, but far better than signing up dubious and weak cases. Indeed, successful funding companies can expect to reject over 90% of applications. One leading company claimed it funded 30 cases of the 1200 it considered. Litigation is a slow and costly process: it only follows that litigation funding is equally slow and costly. Would-be investors must realise that there will be no fast return on their investment, and that choosing the cases to actually invest in is a key factor. Once a case is filed the progress can be painfully slow, many cases taking years.

Therefore, third party funders must have big funds available for investment. Most funders will be managers of investment funds, such as Juridica Investments Ltd. and Burford Capital or private equity companies, such as Vannin. Some funders are insurance companies and others might be brokers. Average funds available for investment are in the region of £150 million.

So given that at least some carefully chosen cases will be winners, what sort of profits can the third party funders expect to make? Juridica’s 2012 profit was $38 million, based on a $256 million investment.  Burford claimed a 61% net return  on its invested capital for 2012. An example of the returns on a winning case for the latter was a $18 million return on a $6 million investment. The case was a breach of contract dispute between two Arizonian real estate agents. However, that can be weighed against its selling of its investment in Lago Agrio v. Chevron when charges of fraud emerged. Another funded case which crashed was Stone & Rolls (in Liquidation) v. Moore Stephens. IM Litigation Funding bore the loss (£40million). In this swings and roundabouts business IM L claim an 80% success rate.

Legal opinion is strong on the side that third party litigation funding will grow. Thus it remains a growing opportunity for the canny investor. The investor in litigation funding must have a good appetite for risk and reward, a healthy investment pot and the patience to wait for a return on his investment. Like all gambles, some cases will be winners!

This article was provided by Vannin Capital, experts in litigation funding. Visit litigationfunding.com today for more information.