Insolvency Insider's Views uncovers the stories and thoughts of some of the most interesting and influential people in the Canadian restructuring industry. It is meant to compliment our other weekly emails that highlight recent insolvency filings/news, articles and court cases. If you like what you read, consider forwarding it to spread the word. Not getting our emails regularly? Click here to subscribe!
OUR CHAT WITH...
Bentham IMF Canada
Cash is a rare commodity in most insolvencies, and it unfortunately often means insolvency practitioners have to walk away from litigation that could put big dollars in the pockets of creditors. Naomi Loewith and the team at Bentham IMF are aiming to change that with the introduction of litigation funding for the Canadian market. Naomi sits down with us to explain the concept and discuss how it is being received in the market.
1) For those unfamiliar with the concept of litigation funding, can you explain it in 60 seconds?
In the insolvency context, a litigation funder can pay the costs of litigation for the estate, including insolvency practitioner fees, lawyers’ fees, expert reports and other disbursements. In exchange, the funder receives a portion of the proceeds if the claim succeeds. A funder can also provide “seed funding” to investigate if there is a viable cause of action. Ultimately, funding allows a party, a monitor, a receiver or a litigation trustee to advance litigation and maximize returns for all creditors, without any cost or risk.
Sponsored by Infinity Asset Solutions
2) Though Bentham is new to Canada, it has a long track record globally, and its roots are in the insolvency space. When would litigation financing be useful in an insolvency file?
Our roots are indeed in insolvency; the IMF in Bentham IMF stands for Insolvency Management Fund. In our experience, litigation funding is useful in two circumstances:
First, where litigation was ongoing at the time of the insolvency and the insolvency practitioner must decide whether to continue with it.
Second, where there is a potential claim arising out of the insolvency, such as a statutory claim or a claim against a third party.
These claims might not be continued or advanced because the estate does not have the means or the creditors are unwilling to fund the litigation. With litigation funding, the claims can be advanced.
Sponsored by Tiger Group
3) How do you evaluate whether you are willing to fund a case?
The key criteria are:
the litigation has a strong likelihood of success;
the defendant can satisfy a judgment;
the size of the adverse costs exposure; and
the cost - legal and otherwise - of pursuing the claim is roughly 1/10 of the realistic claim size.
The last point is important because we want to ensure that the creditors receive the lion’s share of any recovery. In Bentham’s 17-year history, we have returned 62% of recoveries to clients; that is an important indicator of a fair and sustainable funding industry.
4) What has been the response so far from the insolvency community in Canada? Have you been able to fund any cases yet in the insolvency space?
The insolvency community is curious but cautious. We have had good conversations with judges, lawyers and insolvency practitioners, all of whom see the valuable role funding can play. At this stage, I think everyone is waiting for our first insolvency case to unfold, and we have some promising prospects, so stay tuned.
5) You were previously a litigator at Lenczner Slaght. How has the transition been from working at an established law firm to essentially a start-up?
I love this shift in gears. I rely on my litigation experience every day to assess cases and discuss strategy, but I am also helping to build a new industry in Canada. Lawyers and insolvency practitioners tend to be conservative by nature, and I like the challenge of introducing something that I know is innovative and valuable.
6) What is one thing that most people you work with would not know about you?
I grew up a large dairy farm, which has been in our family for 70 years. Now that I live in downtown Toronto, it’s a great place to take our three boys on the weekend.