Document Requirements for Litigation Funding

One of the most common questions we are asked is “what should be provided to support a request for litigation funding?”  

In short, after entering into a NDA, the Investment Manager will do an high level screening of the matter. If the case looks suitable for funding, the parties will negotiate non-binding terms and Bentham IMF will then undertake a “deep dive” due diligence.

While it is impossible to lay down hard and fast rules of what will be required for the due diligence process in every case, there are some categories of information that will assist the process.  

The better prepared and organised an application is, the quicker a recommendation can be made to Bentham IMF’s Investment Committee. 

The claim

The first thing our Investment Manager or Legal Counsel will need to understand is how the claim arises and why the claimant is entitled to the remedy sought.  

If proceedings have already been commenced, a full set of the filed pleadings should be provided, together with any court orders or interim decisions.  If the claim is in its infancy, a draft statement of claim or other succinct statement which provides an explanation of the claim is helpful.  

Counsel’s opinion on the prospects of the claim is not a requirement. However, if one has been already prepared it can be useful to help navigate the key issues.  

Any important documents which form the basis of the claim (such as a key contract) or which are relevant to how the claim will be proved should be provided. 

If the defendant’s response to the claim is known or suspected, this should also be provided.  

Experience tells us that documentary evidence is far more reliable than oral evidence. Claims which are wholly reliant on oral evidence are less likely to be funded than cases which have clear documentary support.  

To the extent that proving a particular element of the claim will require evidence from an expert, an expert report does not need to be provided as part of the application for funding. However, some indication of how that aspect of the claim will be proved (including the identity of possible experts and why the expert evidence is likely to support the position) should be given.

Estimated claim size and legal budget

Bentham’s Investment Managers will closely look at the realistic claim size. If work has been done to show how the estimate has been arrived at, that information should be provided.  

The estimated legal budget to take the matter to trial should also be provided. While we recognize that the uncertainties of litigation may make it difficult to create a budget, a considered budget is necessary in order to consider a case.

The relationship between the budget and the claim size is important.  For a case to be suitable for litigation finding, the ratio of the likely budget to the realistic claim size should be approximately 1:10.  This ratio ensures that the claimant will recover the lion’s share of the proceeds, and over our 16-year history, has enabled Bentham IMF’s clients to receive 63% of the claim recoveries.

Information about the defendant and recovery prospects

An important consideration is the ability of the defendant to meet any judgement. 

Any documents that show the financial position of the defendant, or suggest that a defendant may have means of paying a judgement which are not evident from financial statements are important.  

What next?

Once an application for funding is made, your Investment Manager will work closely with you to delve into the details of the case.  The due diligence process involves robust discussion between the client, their lawyers, Bentham IMF and, from time to time, Bentham IMF’s second opinion counsel.  Bentham IMF may obtain a second opinion for complex technical claims or where the litigation is to be conducted in a province where Bentham IMF’s Investment Managers have not practiced.

The case will be thoroughly tested and you will have an opportunity to discuss any issues identified before a decision on funding is made.  

To learn more about how funding might help you or a client, please contact us.