Smith & Williamson sees litigation opening

Litigation funding has certainly ruffled the feathers at Moore Stephens, the
firm being sued with an unconnected third-party bankrolling the case. But the
controversy hasn’t stopped Smith & Williamson, which has its own established
audit arm, from setting itself up as a litigation funder.

Litigation funding is a new concept in the UK, travelling across the pond
from the litigious US. A third party funds the litigation and takes a cut from
any money won in the ensuing court battle.

Auditors are particularly worried that they will be targeted more
speculatively in litigation by liquidators of failed businesses, if the
liquidator can gain access to a funder.

But experts suggest that Smith & Williamson, with its own knowledge of
insolvency, is unlikely to fund spurious and speculative claims because of the
reputational damage it would have on the firm.

Some insolvency industry insiders suggest the firm’s service, provided
through its banking arm, could actually prove to be useful for them.

‘It’s very important that funding is made available to liquidators to get the
ball rolling and pursue assets,’ says Chris Laughton, partner in business
recovery at Mercer & Hole.

Laughton adds that he believes there should be ‘minimal worry’ for auditors,
as liquidators must jump several hoops, including clearing their plan with
counsel, before they get the go-ahead to enter litigation.

He also dismisses concerns that firms would not want to work with S&W,
essentially a rival.

‘Do you want to give them the advantage of making profit out of a deal? If
they offer the best chance for a return then that [concern] shouldn’t matter. I
can’t think of a reason to say “we won’t work with them because of who they are

Philip Long, head of corporate recovery at PKF, says: ‘While there are
insurance products on the market, additional tools [for insolvency
practitioners] are always welcome.’

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