Timothy Dutton CBE QC joined Burford Capital UK Holdings as Director in June 2017. Voted Regulatory Silk of the Year in 2010, Mr. Dutton was Head of Chambers at Fountain Court from 2008 to 2013. He has advised and acted in hundreds of cases concerning almost all fields of regulated activity, and is ranked by both Chambers UK & Legal 500 as a leading silk and a star individual.
In the interview below, Mr. Dutton draws on his experience in the legal industry to shed light on the role litigation finance can play in the UK.
As the former Head of Chambers at Fountain Court, you understand the economic pressures facing law firms and their clients. What do you see as the most persistent challenges? Where do you see positive trends or opportunities to relieve pressure?
In Fountain Court, most of our clients have the resources to fund litigation, whether as defendants or as claimants (e.g. banks, public companies, insurers, regulators, government agencies, institutions or wealthy individuals). However, even with these sorts of clients, law firms are often required to bid for the work at highly competitive rates, which can give rise to cash-flow pressures even for those that can predict reasonably secure income streams.
For all clients and law firms, litigation requires ever more up-front costs loading. This is a real pressure point for clients and law firms. Although the London market does not yet routinely consider obtaining assistance in commercial work, I see opportunities for law firms, and their clients, to be helped with funding of the upfront outlays even where the clients are financially secure and well resourced. For lawyers acting for claimants Burford is an already obvious port of call, and will I am sure continue to be so. The London litigation and arbitration market is still working through the financial crisis of 2008 where funders such as Burford have assisted litigants. We are shortly going to have the consequences of Brexit to consider: Burford will I expect be involved in supporting those involved in litigation or arbitration affected by Brexit.
More generally there has been, and I think will continue to be, some consolidation amongst medium-sized law firms, which may find that they can become more efficient and competitive through merger: here the question is whether firms and their clients can be supported by Burford. I think they can be.
Litigation finance has been around longer in the UK than in the US. Arguably, however, its “brand” is less strong in the UK than in the US, with a more persistently tactical and limited understanding of its use, particularly among the most prestigious firms. Do you agree? If so, why—and do you have any views on the best ways to educate and broaden UK lawyers’ thinking about litigation finance?
I do agree. I think there are a few reasons. First, UK lawyers tend to be cautious—possibly more so than their US counterparts. Second, the UK has for a very long time had regimes of costs recovery against the losing party with complex legal and procedural questions around which a vast body of learning has developed. The US is very different in this respect, and has for a long time been accustomed to a regime where lawyers’ costs are not recoverable against the losing party and a contingent fee is tied to the outcome of the case. This makes litigation funding a much easier concept for Americans to work with. Third, we are more wedded to hourly rate billing for litigation cases in the UK than in the US. Finally, although the law on champerty and maintenance in the UK has moved on considerably in the over 20 years since Giles v Thompson, practitioners and many judges have, with memories of reported cases adverse to lawyers, remained cautious about litigation funding.
What criteria should lawyers and their clients use to assess potential funders?
The funder needs to have:
- Understanding of both the client and the cases for which the client seeks funding
- Financial backing: Burford is a well-resourced and successful company
- A willingness to speak frankly to the client
- Teamwork and trust, so that the client knows the funder will support a meritorious case through battles to judgment
And the lawyer and client need to satisfy broadly the same criteria.
The business of law is notoriously slow to innovate. Do you feel that there remains some truth to this cliché, and if so, where would you most like to see innovation?
Yes. A degree of caution is required amongst lawyers and judges if we are to continue to live in a stable country which abides by the rule of law. By ensuring that the law develops incrementally, the country’s citizens, institutions and businesses have legal certainty and therefore are able to arrange their affairs and make good predictions as to the outcome of disputes. They can solve civil law disputes with appropriate settlements precisely because they can make sensible predictions about the likely outcome.
Equally important is that a country’s citizens (and its businesses and institutions) should have access to the law and to the court: Lord Bingham famously makes this one of the pre-requisites for a society that abides by the rule of law. Innovation in the methods by which access to justice is not just maintained but advanced is not only to be expected it is essential, provided it occurs without disrupting other parts of the pre-requisites for the rule of law.
Given this, I expect that innovative funding arrangements will continue to be developed. There are numerous ways this can occur. For example, commercial clients can lay off funding costs and litigation risks much more than they currently do. I am not convinced that lawyers charging simply by reference to fixed hourly rates is necessarily the best or most efficient way to charge clients in certain cases. Nor do I think the government has got Legal Aid right. I have long been convinced that the state should be prepared to support meritorious individual litigants in certain types of cases with a CLAF: A Contingent Legal Aid Fund which is modestly pump-primed by the state and into which any recovered costs plus a modest percentage uplift is paid so as to pay off the start-up costs. These will not be for the types of cases that Burford supports, but the Government could learn lessons from the private market about innovative litigation funding.