Bridging finance

Overview

Unless you have significant access to the funds to pay lawyers on a conventional time cost basis, there is a danger that you might run out of funds to take a claim forward, let alone be able to meet any award of costs made again you.

• this is especially the case as such costs are usually based on “time spent” on matters which can be difficult to estimate from the outset and often beyond your control.
• balanced against this is how to proceed where you either have a very good claim or a very good defence. You can find yourself caught between wanting to proceed but unable to afford to do so.

For some people, it is a case that all their wealth is wrapped up in their home or other property assets, which they either do not or are unable to release to fund a litigation claim or defence of such a claim (despite the benefit that a majority of such legal costs are recoverable if you are successful).

For others, their wealth may be in their income and whilst the proceedings may be very expensive over a short period of time, in the medium-term they do not have the income necessary to repay such costs (although, if they are successful, they may in any event recoup their legal costs from their opponent).

The question is what can you do?

Lending for legals

Help can be at hand from litigation funders who may provide a line of credit or funds to pay such legal costs in a similar manner to a conventional loan. This can avoid the need to pay for legal fees using credit cards or even a remortgage of your property.

Bridging finance

The term “bridging finance” usually extends to short-term, and potentially high interest, loans as a temporary stopgap until more permanent finance is arranged.

However, this term has in recent years been adopted by financiers to refer to finance provided on a temporary basis awaiting an outcome, for example the outcome of litigation proceedings or the outcome of any negotiations in respect of contentious or non-contentious matters.

At Francis Wilks & Jones we have several relationships with brokers and financiers who specialise in providing loans to bring or continue legal proceedings, in circumstances that would otherwise put off standard lenders.

• the cost of such loans are also tempered by these lenders’ experience of such matters, as well as their review of your legal case/interest and rights sought to be enforced, and in consideration of the amount sought to be loaned for the necessary legal costs.
• the loan may or may not be secured against your property and can be structured to enable it to be repaid over a longer period of time in the event it cannot be repaid directly by your opponent (in the event you are successful) or you.

How is the loan secured and repaid?

As is often the case with financiers, the loan will carry interest and costs in respect of the arrangements to set it up. With individuals, the most common way of securing a legal costs bridging loan would be to secure it as a charge against their property asset(s), usually their home.

• the loan does not always have to be secured and indeed many lenders will not require security, but obviously security may reduce the cost of the loan in terms of interest accruing.
• the loan will usually act on a draw down basis in terms of the legal fees and disbursements that become payable during the instruction and so this will limit interest charges as you will only be liable for interest as and when your solicitor’s legal fees require payment from the facility.

The terms of the loan will usually be structured so that such monies are not repayable until conclusion of the legal proceedings. Upon conclusion, the loan and interest/charges will become repayable and no other costs will exist.

Throughout the period of the legal services provided and the loan, whilst proceedings are ongoing for a litigation instruction or otherwise, no repayment will be sought by the lender and it is only upon conclusion of the legal services provided (which may take some time) that arrangements to repay the loan will then be considered.

What are the benefits and risks of bridging finance?

The principle benefit of bridging finance is that it is reasonably low cost when compared to other forms of litigation funding arrangement, either with the client’s solicitor or a funding model with a third party funder.

This will depend on the types of proceedings and whether you are a claimant or a defendant, as some funding options may not always be available to a defendant.

In litigation proceedings, as the solicitor’s legal costs may also be recoverable from the judgment debtor, this can serve to make the loan very inexpensive as most of the loan may be repaid from the solicitors’ costs also recovered as part of the judgment.

However, against this is the risk that if the legal services do not provide the desired results, this loan is still repayable and further could be enforced against the property charged, whereas other forms of funding, whilst perhaps more expensive, do not provide any liability where there is not a successful outcome.

How we can help you

At Francis Wilks & Jones we are extremely familiar with working with financiers and clients in respect of legal funding arrangements, although we are not qualified to provide or broker any such financial arrangement. However, we are always willing to discuss such options on an initial no obligation basis purely from the point of view of ourselves as your solicitors.

Please call any member of our commercial litigation team for your consultation now. Alternatively e mail us with your enquiry and we will call you back at a time convenient to you.