Woodford compensation and No Win No Fee fees

thetrainengineer

Not sure if the following has been sent to everyone.

Which may be the final payment warning message even though I have paid.

Look at the last line regarding partial payment.

I have replied to ask that if partial payments are accepted will I get a refund, as otherwise it would be unfair on me if others 'got away' with only a partial payment. No offence intended against anyone who goes down that route.

Harcus Parker launched its claim against Link Fund Solutions in August 2020 and were the first firm to do so. To date, the claim has been financed by Augusta, a third-party litigation funder which has invested over £4m in the claim thus far. ‘After the event’ insurance (otherwise referred to as ATE insurance) was also taken out to protect claimants from ‘adverse costs’, in the event we lost the claim. This is because in litigation, the typical rule is that the losing party pays the costs of the winning party, known as ‘adverse costs’. Part of the cost of the ATE insurance was on a deferred and contingent basis which meant that the insurer would be due a fee at the end of the claim if it was successful (successful meaning that our client received compensation and was not ordered to pay Link’s costs). With the funding and insurance in place, this has allowed us to investigate, formulate and advance a claim against Link, including making representations against the Scheme of Arrangement at both the convening and sanctions hearing, while managing the risk of costs in doing so. At these hearings, we instructed a barrister to appear on behalf of our clients and make a case against the implementation of the Scheme of Arrangement on the basis that the Scheme did not represent a good outcome for investors.

The Scheme of Arrangement was set up and implemented by Link to settle all claims from investors of the LF Equity Income Fund (formerly known as the LF Woodford Equity Income Fund) who held shares in the Fund when it was suspended. Your agreement with Harcus Parker states that in the event of a win (which is defined to include sums received by way of a settlement), you will be liable for 35% + VAT, plus your share of the deferred and contingent insurance premium. 

Unfortunately, we have been unable to waive our entitlement to our fee without the third-party funder’s consent, as they can only be paid through that fee. In this case, the fee payable will be used to repay Augusta for their initial investment in the case. Harcus Parker will not receive any of the sums. 

I should also add that we are not a party to the insurance: unlike other costs which we meet on your behalf, such as barristers’ fees, you have a direct contractual relationship with the insurers, implemented by the claimant committee on your behalf. 

Taking all of this in the round, the funder’s perspective is that it has spent considerable sums on behalf of the group and the Scheme of Arrangement does not represent a good outcome for them either, but they are not willing to give investors a free ride for the work that has been carried out since late 2020. The insurers have also expressed that, as they have carried the risk that if your claim had lost, they would have paid Link’s costs on your behalf, that they have earned their fee as well.

As mentioned in our email on the 8 December, However, we have also been asked to provide the funder with a list of people with outstanding invoices and payments, and Augusta and the insurers might wish to pursue payment directly. This would not be something Harcus Parker would be able to influence.

If you wish to make a partial payment offer, please reply to this email, and we will forward it to the funder and insurers for their review.

Thank you, and we look forward to hearing from you.

 

Knarf01

thetrainengineer said:

After paying the invoice and in response to my other questions they responded as follows -

What constitutes a win

As you know, our agreement with you entitles us to charge you a fee of 35% of any Claim Proceeds you receive, plus VAT. In addition, you have a separate agreement to pay your share of the deferred and contingent insurance premium due to the insurers (to which Harcus Parker is not a party).

Clause 5.2 of our Damages Based Agreement (“DBA”) with you states that you will 'win' if you recover or are awarded any Claim Proceeds. Clause 5.1 in turn defines 'Claim Proceeds' as 'the sum recovered in respect of the Claim, or any damages awarded to you'. This definition captures any sums received as compensation for losses arising from the Woodford matter.

In simple terms, this means that you will have ‘won’ if you receive any money (claim proceeds) for your claim, which is defined as follows:

 (the 'Claim') against Link Fund Solutions Limited, any relevant subsidiary or associated entities, authorised agents, and/or any other entity against whom Harcus Parker advises you to bring a claim (together, the 'Defendants') which arises out of losses suffered by you as a result of the mis-management and suspension of the LF Equity Income Fund (formerly known as the LF Woodford Equity Income Fund) (the 'Fund') in which you hold or held shares or units, either directly or through an intermediary, between 2 June 2014 and at least 3 June 2019.

The Scheme of Arrangement and its relationship with the Claim

The Scheme of Arrangement is a court-approved agreement between investors in the Woodford fund and Link Fund Solutions Limited (“LFSL”). Under the Scheme, investors receive compensation and, in return, agree not to pursue their claims against LFSL or other members of the Link Group, whether proceedings have already been commenced or not. The purpose of the Scheme from Link’s perspective was to close off any liabilities it may have arising from its management of the Woodford Equity Income Fund, expressly including the claims of our clients. It represented to the Court that if the claims were to proceed, along with the FCA fine that had bene proposed, it would be rendered insolvent and so it sought the approval of the Companies Court for a settlement which would bind all of its creditors, in this case chiefly the investors in the Woodford Equity Income Fund, whether they agreed to it personally or not. It had to convince the court it was fair to sanction it doing that. We argued it was not fair, chiefly because investors could avail themselves to the Financial Services Compensation Scheme if Link were to become insolvent. The Court rejected that argument on the basis it was not proven that Link would go on to lose the Claims, and so it was fair for investors to decide whether to accept the limited recompense on offer now instead of a potentially greater return later.

The Order of the Court, sanctioning the Scheme of Arrangement, included a Release Deed. Clause 3.2 of the Release Deed states that each Scheme creditor ‘fully, finally, irrevocably and unconditionally releases … any and all claims … arising out of, related to or in connection with the Woodford Equity Income Fund up to and including the Record Date, including any existing or prospective proceedings’.

That is typical settlement language.

While it was not a significant part of the press reporting, this interpretation of the Scheme, as a settlement of claims, was the common understanding of the parties and the Court. That is reflected in the Court’s judgment sanctioning the Scheme in paragraph 10: “[the Scheme] effects a settlement between LFSL and persons who might have civil claims against it … (including, but not limited to, those creditors who have brought Litigation Claims).”

The court in paragraph 8 specifically referred to Harcus Parker clients when describing the creditors who brought ‘Litigation claims’. I have attached the relevant High Court judgment for your convenience.

The consequences

We maintain that our terms were sufficiently fair and transparent as we are only charging clients who have received compensation. The wording of our agreement is tightly regulated by the Damages Based Agreements Regulations 2013. We also routinely obtain advice from a top regulatory barrister on our agreements which are blessed before they are sent out to clients. The definition of a win is standardized through these Regulations and it is intuitive. The alternative would be to not include funds received through settlements, which would discourage all settlement and prevent cases from being run in the first place. It is also worth noting that despite agreements being routinely scrutinised by defendants as a means of avoiding liability and causing the claimant solicitor relationship to collapse where possible, this particular argument has never been considered to be of strong enough merits to be advanced.

The obvious injustice of this is that those who have actively advanced a claim and engaged a lawyer to do so to receive less than an investor who chose to do nothing. Link itself acknowledged this in the Explanatory Document in which it set out the effect of the Scheme to the creditors, at Part 4 paragraph 19: Where a Scheme Creditor has entered into an arrangement with Leigh Day, Harcus Parker, Wallace LLP or any claims management company with respect to claims they wish to pursue against LFSL, they may need to consider whether there are any fees that may be payable under those arrangements if they receive compensation under the Scheme.

The counterbalance against that injustice is that a third party funder, Augusta, has invested in the claim on behalf of its underlying investors and it is beholden to those investors to recoup any claim proceeds which it is ultimately due. Augusta has spent over £4m on the claim.

The definition of a ‘win’ in the DBA was drafted to ensure fairness to all parties involved. While claimants receive compensation under the Scheme, the funder and insurer have carried significant financial risk throughout the litigation. It would be inequitable for them to bear those costs without any recovery when the claim ultimately results in compensation for claimants.

Because the Claimants have received as little as they have through the Scheme, and because it is unlikely that all of the claimants will pay an invoice, Augusta will not recoup its initial investment or make a profit and the insurer will not receive its full contingent premium. As you would expect, Harcus Parker must pay back Augusta in full before it can retain any of its contingent fee as profit. That is why we have communicated that our firm will make nothing from the case; once the time and expenditure required to seek payment from the clients is factored in, we will have lost money as a result of the Scheme.

Referral to Augusta or insurers

We have a duty to properly advise our clients and that includes advising them on the risk if they elect not to pay, particularly where third parties are involved. For example, whether a client raises a complaint with a law firm as to their service does not have a bearing on their separate agreement with an insurer, to which the law firm is not a party.

Harcus Parker will not take further legal action to recover the amount if the invoice remains unpaid. We have already taken reasonable steps to obtain payment and sent our final reminder email last week. If payment is still not made after this, we are required to provide Augusta with a list of clients who have outstanding invoices. At that point, Augusta and/or the insurers may decide to pursue recovery directly, which would be entirely at their discretion and outside Harcus Parker’s control.

Thanks thetrainengineer for sharing 🙏🏻 The wordy HP response spends a lot of time justifying their entitlement for 35% plus VAT of the FCA payout which I agree is hard to contest IF a retained client relationship can be evidenced and that crucially hinges on the Survey Monkey Questionnaire. The completion may indicate assent in principle but it had procedural weaknesses because it did not reliably trigger the sharing of the DBA in a durable medium as required by the DBA Regulations 2013. In addition the response only skirts the issue of how the share for litigation funding and ATE insurance crystallises for retained clients. This should be clearly explained under ‘Disbursements’ in the DBA. I have read and re-read it numerous times and do not believe it is sufficiently transparent to be compliant with the DBA Regulations 2013 that they themselves refer to. The ‘top regulatory barrister’ they had advising them was likely unaware of the arrangements HP were planning in relation to litigation funding and ATE insurance at time of scrutinising the DBA. So in a nutshell the DBA may appear compliant in isolation, but the sign-up process, document delivery, funding mechanics and fee calculation may not be. I will see if HP can provide evidence to the contrary when they reply to my latest SAR clarification email…

Knarf01

thetrainengineer said:

Not sure if the following has been sent to everyone.

Which may be the final payment warning message even though I have paid.

Look at the last line regarding partial payment.

I have replied to ask that if partial payments are accepted will I get a refund, as otherwise it would be unfair on me if others 'got away' with only a partial payment. No offence intended against anyone who goes down that route.

Harcus Parker launched its claim against Link Fund Solutions in August 2020 and were the first firm to do so. To date, the claim has been financed by Augusta, a third-party litigation funder which has invested over £4m in the claim thus far. ‘After the event’ insurance (otherwise referred to as ATE insurance) was also taken out to protect claimants from ‘adverse costs’, in the event we lost the claim. This is because in litigation, the typical rule is that the losing party pays the costs of the winning party, known as ‘adverse costs’. Part of the cost of the ATE insurance was on a deferred and contingent basis which meant that the insurer would be due a fee at the end of the claim if it was successful (successful meaning that our client received compensation and was not ordered to pay Link’s costs). With the funding and insurance in place, this has allowed us to investigate, formulate and advance a claim against Link, including making representations against the Scheme of Arrangement at both the convening and sanctions hearing, while managing the risk of costs in doing so. At these hearings, we instructed a barrister to appear on behalf of our clients and make a case against the implementation of the Scheme of Arrangement on the basis that the Scheme did not represent a good outcome for investors.

The Scheme of Arrangement was set up and implemented by Link to settle all claims from investors of the LF Equity Income Fund (formerly known as the LF Woodford Equity Income Fund) who held shares in the Fund when it was suspended. Your agreement with Harcus Parker states that in the event of a win (which is defined to include sums received by way of a settlement), you will be liable for 35% + VAT, plus your share of the deferred and contingent insurance premium. 

Unfortunately, we have been unable to waive our entitlement to our fee without the third-party funder’s consent, as they can only be paid through that fee. In this case, the fee payable will be used to repay Augusta for their initial investment in the case. Harcus Parker will not receive any of the sums. 

I should also add that we are not a party to the insurance: unlike other costs which we meet on your behalf, such as barristers’ fees, you have a direct contractual relationship with the insurers, implemented by the claimant committee on your behalf. 

Taking all of this in the round, the funder’s perspective is that it has spent considerable sums on behalf of the group and the Scheme of Arrangement does not represent a good outcome for them either, but they are not willing to give investors a free ride for the work that has been carried out since late 2020. The insurers have also expressed that, as they have carried the risk that if your claim had lost, they would have paid Link’s costs on your behalf, that they have earned their fee as well.

As mentioned in our email on the 8 December, However, we have also been asked to provide the funder with a list of people with outstanding invoices and payments, and Augusta and the insurers might wish to pursue payment directly. This would not be something Harcus Parker would be able to influence.

If you wish to make a partial payment offer, please reply to this email, and we will forward it to the funder and insurers for their review.

Thank you, and we look forward to hearing from you.

 

Thanks for sharing this, I’ve not had any further emails from HP.
The crucial paragraph is
‘I should also add that we are not a party to the insurance: unlike other costs which we meet on your behalf, such as barristers’ fees, you have a direct contractual relationship with the insurers, implemented by the claimant committee on your behalf.’
This is a change from previous assertions and indicates HPs evolving position, probably due to commercial pressure from Augusta and I expect we’ll see a culmination of the entire saga shortly. If there’s any substance to this or if it is just pressure language will depend on the documentation disclosed in the SAR response (or not as the case may be) 🤔 
Tricky to negotiate a fee reduction after you have paid. I think you mentioned going through a rough patch at the time of paying the fee. Were you receiving medical treatment? If so I would lean on that as it made you vulnerable to exploitation. Good luck 🤞 

securityplease

Thanks everyone. I'm in the same boat. Being pursued but have not paid. My holding was very small and my 'compensation' was probably only a couple of hundred pounds (I'm checking today) I've told HP that my holding now is worth about £30 (sadly I did not liquidate it sooner) so I'm not sure whether to agree with the fee or not- I have not received an actual invoice as they don't have a record of what I hold. Advice please? Simon

Knarf01

https://forums.moneysavingexpert.com/discussion/comment/81856332#Comment_81856332

Hi, I think you are confusing the windup payments with the FCA compensation, the latter was only a few pennies depending on share class (from 4.0602p for Class X Income to 5.1581 for Class Z Accumulation shares). You should re-read the posts in this forum, there is a lot of pertinent information there that should help you to know what steps to take. You mention that HP don’t have any information about your shareholding which immediately raises a red flag and makes any fee crystallisation questionable. How can they meaningfully represent you without this information? You should however engage with them in relation to their fee request and prepare yourself for the eventuality that Augusta pursue alleged HP clients for a proportion of the funding and insurance costs. A SAR under GDPR is a good start, different templates have been shared in previous posts here. Good luck!

MapsterUK

To and fro emails to Harcus Parker. They seem unable to produce any document that shows my acceptance of their terms and conditions. Indeed I didn’t receive any confirmation of my acceptance. They insist that answers on a mailchimp form and their database entries ARE the contract. It seems very unprofessional.

Interestingly they are now touting a partial payment offer option.

Partial payment

If you wish to make a partial payment offer, please confirm the amount in your reply, and we will present it to the funder and insurers for their consideration. Otherwise, the final date for invoicing you is 30 January. After this date, we will need to send the list of unpaid invoices to the funder, as Harcus Parker will no longer be involved.

SmellyWellies

What happens if it is referred on to Augusta?

Knarf01

https://forums.moneysavingexpert.com/discussion/comment/81861553#Comment_81861553

That is the million dollar question quite literally 😉 Augusta has now inherited the weaknesses in the HP onboarding process and contract formation. They will be checking if the HP assertion that a contractual relationship between clients and Augusta was established by the claimant’s committee has any substance and if this is legally enforceable. Based on what has been disclosed following the SAR requests thus far, I have my doubts but they may yet pull a rabbit out of the hat. The interaction of DBAs bound by the poorly drafted DBA Regulations 2013 with third party funding and ATE insurance arrangements, i.e. what qualifies as ‘disbursements’, occupies great legal minds and I doubt anyone here has the answer… So annoyingly all we can do is wait for events to unfold 😬 From a commercial angle it will be difficult for Augusta to know how much they stand to gain from pursuing individuals as in many cases they have no shareholding information and this needs to be balanced with the expenditure and potential reputational damage of legal proceedings/enforcement action. Let’s hope sanity prevails, they cut their losses and move on 🤞

brewerdave

Being a cynical soul ! I suspect that Augusta et al. will pursue some clients where there are relatively large sums involved (some who posted here and elsewhere earlier, had received five figure £ sums in "compensation) but may sell on smaller "claims" to debt collectors as a parcel. Personally as my "compensation" amount was less than £1000, I'm sitting on my hands……..

Knarf01

https://forums.moneysavingexpert.com/discussion/comment/81864400#Comment_81864400

You are right that Augusta may ramp up the pressure language and make assertions closer to misrepresentation which HP had to avoid as they are answerable to the SRA. However, none of the risks you outline can be done covertly, bearing in mind that in many cases no actual invoice has been issued.

If any of the following happens seeking legal representation may become necessary:

• Letter Before Action with deadline;
• threat of court proceedings;
• claim form or pre-action protocol letter;
• insurer or funder asserts contractual ATE liability directly;
• Court claim issued (however unlikely).

An unresolved SAR within the statutory 30 day timeline as per UKGDPR is somewhat protective (unless they formally asked for a 90 day extension) and making an ICO complaint would shift some of the pressure back to HP/Augusta