The key principles of litigation funding

Legal claims are expensive to bring.  It is also expensive to defend claims and a majority of legal claims tend be settled for these reasons, namely that it is too expensive to go to Court.  

By the time the Court fees are paid, the solicitors are paid and your barrister is paid, then the marginal benefit of bringing or defending proceedings may narrow from what could have been agreed amicably with your opponent at the outset.

Risks

If you have extensive resource to fund legal proceedings (sometimes over a number of years) sufficient for the case to be successful at Court, this still does not fully eliminate the following risks:

  1. That a judge could take a different view of your evidence.
  2. That there may be facts or information you were not previously aware of.
  3. That one of your witnesses performs badly at trial or one of your opponent’s witnesses does better than expected.
  4. That your opponent appeals or issues some other legal application which may delay matters, seek to bring in other parties or alter their case.
  5. That event if you obtain judgment, or successfully defend yourself, your claim (or, for Defendants, the claim for recovery of their legal costs) may be difficult or impossible to enforce, either because of the other party not having sufficient resources or because of territorial or other issues.

The above risks mean that, no matter how strong your claim or defence appears to be, there is a very long road between the issue of proceedings and the outcome that you desire.

The threat of issuing proceedings

Litigation proceedings, or rather their very issue, is often all that is required to secure a settlement or payment, which may otherwise be inflated under a future Court Order at trial, together with interest and the legal costs incurred.

However for a Defendant, they often face litigation (or more commonly the threat of litigation) not as an option but instead as a choice between agreeing to pay or settle a claim or face the prospect of perhaps vastly higher legal costs being incurred in defending proceedings, without any guarantee of successfully defending the case no matter how strong their defence is (see our list of risks above).

The additional risk of paying to litigate a claim as you go along (either as Defendant or Claimant over potentially a number of years) is that, even if you are successful, the Court is unlikely to (or rather, will never) award all of your legal costs and thereafter you have to enforce the judgment against someone who’s wealth is uncertain (and therefore who may be unable to pay).

Mitigating Risk

This is where Litigation Funding may be useful.  There are a number of products which enable litigants to access risk-free or risk-minimised legal advice and assistance throughout to trial (and perhaps even further).  Please see our webpages which outline the arrangements which may be entered into with your solicitor or with third parties.

A core protocol when it comes to legal costs (be they an award for legal costs on your claim or in respect of a successful defence at the end of the legal proceedings) is that you can never claim legal costs from your opponent if they are not payable to your solicitor.

This is called the Indemnity Principle and prohibits any agreement with a solicitor where his/her legal fees due and payable change dependant on whether they can be recovered or not.  Litigation Funding models do not breach the Indemnity Principle as a result of legislation introduced in the early 1990s ( and since amended to include other type of agreement).

Accordingly, if you have a good claim or defence but are unwilling to commit - or do not that the ability to commit - the investment in legal costs (potentially a large sum over a number of years),  then Litigation Funding is the solution.

At Francis Wilks & Jones can assist with all types of litigation funding and will be able to assess your case to determine which product is most appropriate for you.  Please visit our webpage which deals with types of Litigation Funding arrangements.


Please call any member of our commercial litigation team for your consultation now on 020 7841 0390.  Alternatively e mail us with your enquiry and we will call you back at a time convenient to you.