A Hedge Fund Lifeline – With Strings Attached
Ben Thomson, LawFuel contributing editor
Pogust Goodhead, the claimant firm spearheading the £36 billion Mariana dam class action against BHP, has drawn another £65 million from hedge-fund backer Gramercy, taking its overall debt north of $1.7 billion, once interest is factored in. The chief Executive and co-founder of the firm, Tom Goodhead, (pictured) has been removed from his role before the ruling in the massive case, which highlights the fault line in modern litigation with the rise of third-party funding.
Investors are underwriting billion-pound legal actions, but in doing so may end up running the firms themselves. For Pogust Goodhead, survival isn’t just about winning against BHP — it’s about convincing the profession it’s still a law firm, not a financial instrument.
The case has become increasingly bitter as Pogust Goodhead accused BHP of using underhand tactics, while BHP has questioned the role of the hedge fund behind the class action.
The price is the pledging security over assets, intellectual property, and future fee streams. In short, almost everything except the office kettle
Who’s Really in Charge?
Court documents show Huw Dolphin, a restructuring consultant, now effectively controls the firm with over 75 percent of the voting rights, edging out founder Tom Goodhead.
The shift has prompted speculation as to whether Pogust still a law firm, or just the litigation arm of a hedge fund?
Red Flags from the Auditors
The firm’s overdue 2022 accounts make for grim reading with pre-tax losses of nearly £292 million and liabilities of more than £500 million. Auditors flagged a “material uncertainty” about Pogust’s ability to keep trading, according to a report in The Times in April.
However in a statement from the firm and reported in the Law Gazette, the firm’s interim Chief Executive Alicia Alinia referred to fresh funding from Gramercy “. . which is a strong vote of confidence in our litigation, our leadership, and our long-term vision. We will not be distracted by those seeking to discredit our fight for justice on behalf of our clients. Crucially, we remain fully independent, with complete control over the strategy and direction of every case.”
‘With a number of landmark cases ahead, it was essential to have the right board in place to protect the integrity of every process and outcome. The appointment of Howard Morris and Joseph Moreno to the board, alongside myself, reflects our determination to set the highest standards of leadership and accountability as we prepare for a pivotal and successful year,” she said in the statement.
Legal Ethics in the Crosshairs
BHP’s lawyers have seized on the firm’s precarious financing. Under UK rules, litigation decisions must be controlled by lawyers, not financiers. With Gramercy’s outsized influence, the line between law practice and loan collateral is uncomfortably blurred.
Despite the financial drama, Pogust continues to act for more than 640,000 Brazilian claimants in what is billed as the largest group action in UK history. For its supporters, the firm is a modern champion of access to justice.
For its critics, however, it’s a hedge-fund experiment in legal services.
Why It Matters
Why It Matters
The case highlights a fault line in modern litigation: the rise of third-party funding. Investors are underwriting billion-pound legal actions, but in doing so may end up running the firms themselves. For Pogust Goodhead, survival isn’t just about winning against BHP but it’s about convincing the profession it’s still a law firm, not a financial instrument.
