Litigation funding covers the costs of running your litigation against defendants, providing certainty that the costs of litigation will be met until your case is concluded. A funder can fund the legal fees, experts’ fees, disbursements and tactical costs of running a successful litigation, on behalf of a litigant or their acting solicitor. There should be no liability on the part of a litigant, to repay the funder any capital deployed, until the case has successfully concluded.
If a case is unsuccessful, the funder bears the financial loss. That is their risk and how they price their investment. The client should always retain the major part of an award and no funder should ever take a success fee that provides otherwise.
Where a client is facing a ‘David v Goliath’ battle, litigation funding can provide a level playing field whereby it limits the opponents ability to force the client into an early settlement or to run out of money, which could damage the client from being able to pursue their claim further.
For corporate businesses, litigation funding and insurance provides an off-balance sheet solution, that can relieve pressure on legal spending. Legal fees can often increase as the litigation progresses and this makes it very difficult for Financial Directors and controllers to budget accordingly.
How much do funders charge?
If a case is successful, the funder will take their invested capital back plus a success fee. The success fee is often, not always, based on a multiple of the funder’s investment or a fixed percentage of damages. This can vary from one funder to the next and is often based on the overall risk assessment and variables of the case presented. These returns are paid from the damages that the losing opponent is ordered to pay.
What makes a case fundable?
Funders will look for cases with good merits which requires the case to be strong in terms of liability, causation and a financial settlement arising. The Funders will look at how long the case has to run to the final hearing and they will also look to see how the case is currently advancing. The funders would require a written opinion on the merits of your case to assess this fully.
Costs v Proportionality
Funders will require a detailed Costs Budget so they may assess the total costs of running your case through to trial or final hearing. They will evaluate the overall costs of investing in your case as well as assessing a realistic value of where the case may actually settle at. They are looking to see that the costs are proportionate to the value of the case. Some funders will expect your legal representatives to work on some form of conditional fee agreement and others will not insist upon this.
In our experience funders are looking to see if the defendant(s) have the ability to satisfy the damages being claimed, coupled with their asset position and if those assets are easily traceable and accessible. If the defendants have insurance cover then this is a more attractive consideration for the funders.
It is important with all funders that your legal team have the relevant experience in the area of law to which your case relates. Equally it is important that where you have Counsel instructed to act that they also have the relevant experience. Funders are not looking for the cheapest representation but the right expertise. If you do not have a Solicitor at present then speak to our team who may be able to recommend some firms to you.
Adverse Costs Insurance
It is a requirement of most funders for there to be adverse costs insurance in place (ATE) in order for funding to proceed. This is because the funders do not wish to be liable for the adverse costs award should you lose your case. (Please refer to our section on ATE for more information as to this type of insurance cover). The funders will however, look to include within their overall funding commitment the cost of this insurance cover. Maxima can help to source this cover for you, as it will be part of our overall risk assessment of your case requirements.