Not all litigation funders are alike. Terms and conditions can have as big an impact on a case as the facts of the case. This article aims to provide a practical checklist to consider when choosing a litigation funder to ensure that the chosen funder is suitable for both the case and the solicitors’ practice.
Check Their Track Record
Can they give examples of cases similar in size, in a similar sector and of similar complexity to yours? It’s rare that a commercial fraud litigation funder will also fund a professional negligence case. Even if they have loads of capital to invest, they are unlikely to have experience of cases such as yours. Ask for examples of cases that they have seen all the way through to settlement or trial (not just cases they have agreed to fund).
Assess Their Financial Strength
What is their capital like? Where does the money come from to fund your case? Has the funder ever had to withdraw from a case mid-litigation due to running out of funds? If you are looking at the case costs from a wider responsibility of your firm then this could be referred to as Law Firm Finance and you would need a funder with sufficient funds to allow for any unexpected delays or even an appeal.
Confirm Code Of Conduct Membership
Do they sign the voluntary code of conduct for funders, which sets out a number of voluntary standards relating to, for example, capital, conflicts of interest and the way in which funders deal with clients and their solicitors? Membership of a body that sets out voluntary standards creates a useful reference point.
Clarify Their Role In Strategy
Some funders take a more involved view of cases and require frequent updates, in some cases they will also have a say in key strategic decisions including whether to accept a settlement. This can be very important to understand prior to agreeing the terms of a funding agreement and it is worth getting this set out clearly in writing.
Compare How Returns Are Calculated
How will the funder return money to you? Typically this is a multiple of the amount of capital invested, a percentage of the amount of damages recovered or a combination of both. There will be circumstances in which the return increases over time. It’s also worth establishing whether the funder’s return is based on the total amount of settlement recovered or if there are circumstances where there is no return. The best way to compare a funder’s return is to establish a number (for example the amount of settlement recovered) and get them to work out the return in writing for each of them.
Ask About Turnaround Times
Find out how long it will take the potential funder to assess your case and convert their initial interest into a formal funding agreement. This can vary significantly, even for seemingly straightforward cases. Inevitably, more complex cases will take longer to assess than simpler ones, so find out what sort of time frame the funder are working to and ensure that it is realistic. Get them to commit to a timescale and check that it isn’t merely their best case scenario.
Check Adverse Costs Coordination
Check how the Funder’s proposal for financing your case is going to work with your after-the-event insurance policy. Will they only deal with a specified ATE Provider or are they flexible enough to work with your chosen provider? This is an important question because you will want to ensure that the Funder’s proposal and your insurer’s proposal work together properly. In addition, your solicitors have a number of regulatory obligations in respect of your client’s money. It is therefore important that all parties work together to ensure that all costs are properly handled and that there are no unexpected costs falling due at an unfortunate time.
Talk To Other Firms
See how other solicitors have found their experience of the funder. Other firms will be able to tell you about the communication with the funder’s team, their experience of the funder’s timescales and whether the funder stuck to what they said in the agreement as opposed to what they said orally before the agreement was signed. Most funders will happily introduce you to other clients of theirs who have been through similar situations.
Inevitably, the best way to get the best out of a set of questions is to ask them early on in the process, before you have committed your case to a funder. However, the questions set out above will provide a good starting point for any firm that is managing costs responsibly and looking at the Law Society’s guidance for running a financially sound practice. Third-party funding arrangements are also subject to rules which need to be understood by any funder.
