Third party costs definition

Overview

Litigation Funding is the financial arrangement by which a law firm’s client makes arrangements to pay the law firm’s fees, in circumstances where they cannot normally pay such fees up front.

These litigation funding arrangements are usually entered into between the solicitor and the client directly, where they agree a circumstance in which the solicitor’s fees will become payable (usually at the successful conclusion of the instruction).

• however, sometimes the law firm may not be as inclined to enter into such an arrangement or may be concerned as regards the risk it faces.
• as an alternative to combat this fear, the solicitor/law firm instructed can have its fees paid up front by a litigation funder, who is a finance organisation engaged in investing monies for litigation funding, on the basis of gaining a much larger return from the dispute or any legal proceedings issued.

Third party funders

Such third party funders are interested in the proceedings only for their potential financial return. They have no personal involvement with the proceedings themselves, unless they have sought assignment of any rights upon which such a claim is brought.

However, the funding of such arrangements can in some way associate these third parties to the proceedings and therefore their funding of the associated legal costs can have consequences.

• in litigation, such litigation funding models are usually only appropriate to Claimants (as Defendants will usually have no recovery as a result of such proceedings).
• in addition, a third party funder (which is usually an independent finance company) will need assurance that the sums sought will considerably outweigh the cost of funding a solicitor, such that its own business costs and a profit element are additionally provided for.

Accordingly, third party litigation funding is only appropriate for larger claims and are not appropriate for small claims (particularly in light of the inability to recover legal costs in small claims proceedings).

In addition, as described above,

• the funding itself can mean that the third party could become liable for the opponent’s legal costs incurred in such proceedings,
• this is especially the case where the defendant has no money and so all of the litigation may have concluded without gain for either the claimant (who has no assets to enforce against the Defendant) or the Defendant (who has not successfully defended the proceedings, and therefore does not benefit from any aware for payment of their legal costs).

In such circumstances, where the proceedings have continued solely as a result of the third party’s investment in legal costs, in certain circumstances the third party could become liable in the proceedings. Although this is unusual, it is not unheard of and may arise where the third party has sought to involve themselves in decision-making in the litigation proceedings.

How we can help you

At Francis Wilks & Jones we are extremely familiar with third party funding of legal costs, and the associated risks of litigation, and can assist in either finding a legal funding solution appropriate to your needs and requirements or advising on the associated risks.

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. We have the experts available to deal with or find the right legal funding solution for you.