Monique Cronin is a Vice President at Burford, leading Burford’s office in Sydney, Australia.
In Australia, paradoxically, while funding is well known in the class action and bankruptcy contexts, the financing of complex commercial litigations and arbitrations is far less familiar. As you talk to more leading law firms in Australia about litigation finance, what do you find resonates with them most? What’s the biggest “aha moment”?
For me, the “aha moment” is when law firms realize the benefits of being able to offer their clients innovative solutions for managing litigation spend. By using legal finance, law firms can help clients take litigation costs off the balance sheet, ensuring these costs have no impact on the company’s overall profitability. Instead, capital is available for other purposes to grow and develop the business. Additionally, lawyers can also help their clients manage legal risk. Because our capital is provided on a non-recourse basis, the client is protected from downside risk in the event the litigation is unsuccessful (a key advantage over self-funding). This is particularly important in a “loser pays” jurisdiction like Australia, where, in the event that a matter is unsuccessful, clients are responsible both for their own and the other side’s costs.
The ability to offer flexible fee structures and help clients protect against downside risk resonates with lawyers as an effective means to improve client relationships, increase the number of matters they can take forward and thus win more business for their firm. It’s a win-win solution for lawyers and clients alike.
What is the biggest question Australian lawyers have about litigation finance—and how do you answer it?
Actually, there are two common questions: “How much does legal finance cost?” and “Will a funder tell me how to run my cases?”
As to the question of cost, Burford doesn’t offer one-size-fits-all pricing—the cost of our capital ranges, but ultimately, it’s priced competitively according to the risks of the individual matter. We offer a variety of capital solutions (single-case financing, portfolio financing, monetization of claims and more) and always take into account the needs and desires of the parties involved to determine the right pricing structure. Should the matter be successful, we want the litigant to receive the bulk of the damages—if the economics do not stack up at the outset, we will not fund the case. Our clients value the fact that Burford’s capital enables them to pursue the matters while shifting risk from their business to ours. (My colleague Craig Arnott addressed this question in greater detail in the Autumn 2018 issue of the Burford Quarterly.)
The answer to the question about control is simple: No, if you work with Burford, you won’t lose control of your cases. Although control of litigation by third-party funders is not prohibited in Australia as it is in other jurisdictions, Burford is firmly in the camp that the control sits with the client and their lawyers. Each deal is set up to make this explicit: We do not control strategy, settlement or other litigation related decision-making. We are passive investors. This is a critical differentiator for Burford in Australia.
Having recently joined Burford’s team after a career as a litigator at two top Australian firms, you are looking at the industry with fresh eyes. From your perspective, what distinguishes Burford from other Australian litigation finance providers?
A key differentiator is our focus: Litigation finance is primarily known in Australia as the provision of transactional capital to fund class actions and litigations associated with insolvency. In contrast to traditional Australian funders, most of Burford’s business elsewhere is committed to high-value commercial litigations and arbitrations. We have funded IP matters, contract disputes, competition claims, construction disputes, business torts and in some cases defense matters. Our aim is to grow market share in areas such as these that traditionally have not been a core focus of Australian funders.
Another key distinguishing feature is, of course, our scale. With a significantly larger market cap than our nearest competitor, Burford is the world’s largest litigation financier by far. This gives our clients two key advantages. First, clients have confidence that they will have the resources they need to see a matter through a lengthy trial, if need be. Second, with scale comes the ability to offer competitive pricing, which we demonstrated in our first foray into the Australian market with the AMP shareholder action. Our risk-based commission structure drove the funding rates down for large scale matters like AMP and forced our competitors to sharpen their pencils for matters of this nature. We think it was long overdue.
Last but not least, the fact that Burford does not seek control of the matters in which we invest is a critical differentiator for us in Australia.
Burford’s 2017 Annual Report shows that over half (63%) of Burford’s current committed capital is invested in portfolio financing arrangements. As this concept is relatively new to the Australian legal market how do you see portfolio approach benefiting Australian lawyers?
The key benefits for Australian firms will be allowing them the flexibility to deploy capital as needed, and work with corporate clients to come up with more innovative pricing models to win business. A portfolio facility provides flexibility for deployment of capital across a range of different matters and the ability to redirect capital if for instance one matter requires more spend than expected.
Although portfolio financing has huge potential value for law firms and companies, it may be the case that we need to walk before we run in Australia. But it’s worth noting that most clients that enter into a portfolio relationship with Burford have done so after proceeding with a single-case finance opportunity in the first instance. This gives them and us the opportunity to get a feel for how we can best work together. We generally find that most clients that have executed a case with us enjoy the experience and the relationship grows from there. And, of course, clients often benefit from lower pricing when risk can be shared across a portfolio of cases.
There are significant gender disparities at senior levels in law—women make up only a quarter of equity partnerships at Australian law firms, for example. How do you see an initiative like The Equity Project—through which Burford has committed USD $50 million to litigation and arbitration led by women–helping to close the gender gap?
I’ve had two careers so far: One in law and one in financial services. Sadly, despite numerous initiatives to address the problem, the gender gap is a reality in both these industries.
One driver of gender disparity is undoubtedly circumstantial. Although it’s not universally the case, women often end up the primary caregivers for children or elderly parents. I know first-hand how difficult it is to manage small children with the demanding hours that senior roles require—it’s tough to balance competing priorities. As a result, many senior women take time out or steps back in pay and roles to the detriment of their career progression.
One thing I’ve learned though working in both law and finance is that economic incentives are particularly powerful drivers of change. By driving capital into the legal market to fund women-led litigation matters, Burford’s new initiative, The Equity Project, squarely targets this issue in a meaningful way. And, crucially, because we are not diminishing the scrutiny of our diligence process, so the case must be meritorious with a quality female lawyer at the lead—meaning women will continue being evaluated based on their merits (as most senior women in finance and law expect and prefer their work to be assessed). I think it’s a fabulous initiative and am really looking forward to seeing where we can take this.
Top five…. Places to visit in Sydney?
- Raw Bar at Bennelong: Enjoy the iconic location in the beautiful Sydney Opera House, looking out at the Harbor while the chefs prepare your meal with painstaking precision in front of you… be sure to order the Red Claw Yabbies and some Sydney Rock Oysters.
- Museum of Contemporary Art Australia: As someone who was not gifted with any artistic bone whatsoever (I can barely draw stick people…), I always enjoy checking out the latest exhibitions at the MCA.
- Bathers Pavilion at Balmoral: The best breakfast and beach views in Sydney, bar none. Absolutely stunning way to start the day walking along the Esplanade.
- Circular Quay ferry return trip to Manly and a pizza and wine at Hugo’s a well-known Sydney Institution is a perfect way to spend a lazy afternoon.
- And for the history buffs… The Rocks do evening Ghost Tours that are always a good laugh with the family… You’ll be taken on a walking tour through the cobblestone lanes and into the hidden areas of the birthplace of Australia… you never know what you might encounter.