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Funding Secured for £250m KPMG Negligence Claim

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Following the collapse of construction giant Carillion in Jan 2018, litigation funding has recently been confirmed allowing the defunct business to pursue legal action against accountants KPMG. The funding has been agreed by Litigation Capital Management (LCM), who have agreed to fund the £250m claim being made by Carillion’s liquidator in the Commercial Court.

It what is widely regarded as the largest ever corporate failure in the UK’s construction sector, Carillion collapsed in January 2018 with reported liabilities of around £7bn. Before their collapse, Carillion formed part of a consortium that held contracts to build part of the forthcoming HS2 high speed railway line, it maintained 50,000 homes for the Ministry of Defence and managed schools, highways and prisons.

On 10 July 2017, Carillion announced that its profits would be hit to the tune of £845m and, as a consequence, its chief executive would resign and there would be no dividends paid that year. Of the £845m charge, the business said £375m related to business in the UK and £470m to overseas markets. Two months after this, the firm’s half-year financial statements revealed a total hit to the company’s worth of £1.2bn - enough to wipe out the profits from the previous eight years put together. The company entered compulsory liquidation, a court-based procedure that sees a business’s assets realised for the benefit of creditors, the following January. Later that month, the court appointed the official receiver - a civil servant employed by the Insolvency Service - as a liquidator of Carillion.

According to The Times, the £250m charge was quantified by the official receiver due to the about £250m paid in dividends and advisory fees paid between 2014 and 2017, which it says it “would not have been paid if the misstatements in the financial statements had been detected by KPMG”. Commenting on the case, LCM’s CEO Patrick Moloney said:

As a pioneer of the litigation finance industry, LCM has long and deep experience in funding insolvency related disputes. As such, LCM is extremely well placed to tailor a finance package to pursue these claims.”

FCA Investigation

The Financial Reporting Council has already conducted two initial investigations into potential breaches of professional standards. The subsequent reports have both been handed to KPMG but have not yet been made public.

In a separate investigation, the Financial Conduct Authority (FCA) found in November last year that Carillion and some of its executive directors “recklessly misled” markets and investors. Commenting at the time, the FCA said: “They made misleadingly positive statements about Carillion’s financial performance generally and in relation to its UK construction business in particular.” Commenting further on on LCM’s involvement, a spokesperson for the London-based funder said:

This investment demonstrates LCM’s prominence and pedigree in the disputes finance industry and in particular, LCM’s position as funder of choice in the UK insolvency market and we are delighted to be supporting thousands of creditors who have suffered as a consequence of the biggest insolvency in recent UK history.”

 

Claim Funding Options

If you are thinking about taking legal action against another individual or company but are worried about the costs involved, Advantage Litigation Services have the skills and expertise to help you find a way of funding commercial litigation without risking your personal finances or those of your business. Click here to contact us today or call 0800 160 1298 to see how we can help.

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