Litigation funding – why is it right for me ?

In a post Covid-19 World (yes, one day it will happen) disputes are likely to be the order of the day as individuals and companies seek to recoup and pass on losses to their contractual counterparts. The sad reality is, that in every chain of businesses someone (or multiple someones) are going to have to foot the cost of the money which has been lost from the economy because of the Global Shutdown.

While many of these arguments will be capable of resolution between commercial counterparts there are always situations where you need a lawyer to get involved. The most common reasons are:

  1. Where the contractual relationship or intertwining of business interests is complex;
  2. Where a large sum of money is involved; or
  3. Where someone in the contractual line is not prepared to shoulder their share of loss.

If one of those situations applies to you, or you identify that you are going to need help in reaching a resolution to the issue which is commercially acceptable to you, then the earlier that you obtain legal representation the better your chance of achieving the commercial resolution that you want.

What is Litigation?

Litigation is an expensive way of resolving a dispute.

You sink money into it and if you succeed in the claim you recoup your sunk funds and a profit through a mixture of the damages claimed and the costs awarded by the Court as against the Defendant party. If you lose, you forfeit your costs and you pay a proportion of the Defendants costs of defending the claim.

Or, converted into investment language: litigation is a mixture of:

  1. a non-liquid investment with an unknown pay-out date; and
  2. a personal guarantee that may be called in if your investment goes south.

Put plainly, it is not an attractive option and one that is undertaken only when commercial parties have run out of other options. It is no surprise that most litigation cases settle. It is really the only rational response. Points of principal put aside, tied up funds and escalating cost risks tend to erode most (but not all) stubborn tendencies.

Settlement though, by definition, means compromise.

With the expenses involved the financially weaker party is usually the first to blink. Generally, this is the Claimant. The Claimant spends more to bring the claim, for the same reason as it takes more time and effort to build a house than to knock it down, and the Defendant is usually backed by an insurance company, a proverbial pot of money. It is due to this that sitting and waiting for a Claimant to run out of steam, has become a staple Defendant tactic.

Litigation Funding

The markets answer to the financial inequality between Claimants and Defendants is litigation funding firms. These are third party funds that advance money to Claimants to pay for the costs of litigation in exchange for a share of the profits. Litigation funding is, almost inevitably, accompanied by After the Event (“ATE”) Insurance. ATE is Insurance which pays the Defendants’ legal costs and returns the funds advanced by funders if you lose the claim.

Or, converted into investment language: litigation funding is:

  1. A loan that you only pay back (with interest) if you win; and
  2. A complete hedge against your personal guarantee if your investment goes south.

Put plainly, used properly litigation funding is a tool which allows a Claimant to advance a claim without tying up their money and to walk away cost free if the litigation is unsuccessful. The quid pro quo though, is that a Claimant must give the funder and ATE Insurer a share of their profits. What that share is depends on how much money the funder advances.

How can your lawyer help?

Here at Cardium Law we understand that to maximise your profits on a funded claim you need us to achieve a successful resolution as efficiently as possible.

To help you achieve this we:

  • Craft focused strategies to help you best achieve your commercial objectives;
  • Implement these strategies using technology to cut costs and time; and
  • Proactively seek a commercial resolution of the claim on your terms.

We also utilise Hybrid-CFA agreements to defer part of our costs until a successful resolution of your claim. This means that when you use Cardium Law you only need to take out half the amount of funding. You can also be confident that we believe in the merits of your case as much as you do and have fully aligned our commercial interests with your own to prove it.

Should you wish to learn more about litigation funding, and how it can be applied to your claim please do not hesitate to contact our Director Christopher MacQueen, on +44 75 5382 4127 or email him at chrismacqueen@cardiumlaw.com