A funder with a £17m receivables book does not end up in administration because the case law moved against them. Yet that is the framing every time a vehicle like this fails.
Fenchurch Legal backed high-volume claims. Housing disrepair. Financial mis-selling. Plevin-era PPI. The underlying work is unglamorous but, done properly, predictable. That is the whole point of a volume book: the numbers are supposed to absorb the variance.
The numbers did not save them. An application by Lowry Trading put administrators in the building. Under the bonnet sits about £2.4m owed by Nicholson Jones Sutton, and another £900,000 or so owed by McDermott Smith Law, whose Liverpool office was discovered emptied out by the SRA and the administrators.
None of that is a case performance story. It is a control story.
What actually failed
Strip the theatre out and the pattern is familiar. A funder advances working capital and disbursement finance to a law firm running a volume book. The firm holds the files, the billing, the disbursements, the client communications and the work in progress. The funder holds a spreadsheet, a facility agreement and a reporting template.
When the firm wobbles, the funder finds out late.
By the time McDermott Smith's administrators landed, the office was empty. Client files had moved to another firm that was itself subsequently shut down by the SRA. Secured creditors included Fenchurch at around £900,000 and Katch Fund Solutions at roughly £7m. The administrators could not confirm when, or if, creditors would see money back. That is not a legal outcome. That is an operational outcome.
The questions that matter right now are not about the merits of Plevin claims or housing disrepair damages. They are about whether payments, disbursements and billing inside those portfolios were visible, verifiable and controlled on a daily basis. From the available facts, they were not.
The real risk funders carry
Case risk is the part funders model best. Merits, quantum, duration, enforcement. The governance stack around it is where the actual exposure has been hiding.
Operational execution. Whether the firm has the capacity and the process to run thousands of cases to a consistent standard.
Billing and third-party spend. Whether disbursements are going where they are supposed to, at the volumes they are supposed to, at rates that were actually agreed.
Process integrity. Whether files are being worked, or parked. Whether outcomes are being booked accurately. Whether what the funder sees reflects what the firm is doing.
Real-time visibility. Whether any of the above is knowable on a Tuesday afternoon, or only at the next reporting cycle, or only once administrators are inside the building.
A funder can be right on every piece of case selection and still lose the portfolio to any one of those four.
Scale is the breaking point
Volume books are where weak controls stop being annoying and start being terminal.
One file with a quiet billing issue is noise. Ten thousand files with the same quiet billing issue is a material loss event. At high volume, every gap in process compounds. The reporting cadence that is "fine" at 200 cases is a fog at 20,000. The exceptions that a partner would spot on a single file disappear into batch totals. Cashflow covers the cracks until it does not, and then collapse looks sudden from the outside even though the signals were months old.
That is the real lesson from the high-volume claims sector over the last two years. The build-up is rarely loud. Caseloads grow. Cash tightens. Disbursement ratios drift. Reporting stays narrative. Then the firm that held the files is gone, and the funder is a creditor queuing for what is left.
Why this keeps happening
Most funders still depend on the law firm as both operator and reporter of its own file. The firm runs the cases, produces the management information and signs off on progress. Independent oversight, where it exists, tends to be periodic, sampled and retrospective.
The data problem sits underneath that. Case context lives in one system. Billing lives in another. Mandate terms sit in a PDF. Reporting is rebuilt in a spreadsheet each month. Nothing ties back cleanly. Comparing what the mandate required against what actually happened across thousands of live files is slow, manual and incomplete.
When that is the operating model, a failing firm can look compliant in its monthly pack almost until the day the office empties out.
From case investment to portfolio governance
The shift that this cycle is forcing on funders is not about picking better cases. It is about running the portfolio as a governed entity rather than a collection of individual bets.
Case investment assumes the job ends at deployment. Portfolio governance assumes the job starts there. Mandate terms have to be tied to observed behaviour on the file. Evidence of activity has to be continuous, not a quarterly narrative. Exceptions have to be logged, tracked and closed. Spend needs to be reconcilable against what was agreed. Firm-side case context needs to flow back into the funder's view without depending on the firm choosing to send it.
Continuous oversight is not extra bureaucracy. It is the only version of oversight that survives contact with a volume book.
The broader litigation funding market is moving into a more scrutinised era, with post-PACCAR clarity and the Civil Justice Council's final report setting higher expectations on how funders demonstrate control. The funders who come through it intact will be the ones who treated governance as a product, not a policy.
The takeaway
Fenchurch did not fail because its cases were bad. It failed because the stack around the cases was thin, the reporting was downstream of the people being reported on, and by the time the cracks were visible from outside, they were already structural.
If a funder cannot see what is happening inside a portfolio today, they are not investing in cases. They are underwriting someone else's operations.
Sources: Fenchurch Legal placed into administration, Law Gazette, Fenchurch Legal winding-up application, Law Gazette, McDermott Smith Law administration, Law Gazette.