Five things to know about litigation funding

Litigation is inevitable, and when it happens, a prospective plaintiff needs to consider whether litigation funding will form part of their litigation strategy.  Whether you’re a lawyer in private practice, in-house counsel, or corporate decision maker, a knowledge of litigation funding will put you in the best position to advise your client, the board, or the C-suite. 

Alexandra McVay, Associate Investment Manager with litigation funder IMF Bentham Limited details 5 key things you need to know when considering litigation funding.

1. Is the prospective claim seeking an award for damages?

   Litigation funding works on the principle that the litigation funder will recover its funding fee from the final award for damages, as determined by a court, or from an agreed settlement.  If the prospective action is for relief that is not monetary, such as an injunction, it is unlikely that it will be suitable for litigation funding.

2. What information or documents are required?

   Before approaching a litigation funder, collate information and documents that will assist the funder assess the prospective claim for litigation funding.  An example of the documents and information include:

   • Overview of the claim (Outlining the causes of action, how the dispute arose, key dates, key people and contract terms);
   • Information about the plaintiff (Who they are and what they do)
   • Information about the potential defendant/s (Who they are and what they do);
   • What is the claim worth, in dollars.
   • Key documents, such as pleadings, contracts, emails, invoices or even audio/visual recordings;
   • Expert reports; and
   • A chronology of events, key people, offers to settle and potential counterclaims.
     
     Corporate decision-makers often turn to their in-house counsel to prepare the above.  In focusing on what a litigation funder may need to assess the viability of a claim, you will also be assisting yourself in critically analysing the merits of the claim, and subsequently advising your key decision makers whether litigation is the best course of action. If you want to know more about the types of documents/information IMF Bentham Limited Investment Mangers review in assessing a matter for litigation funding, click here.
     
     
3. What does litigation funding cover?
   

    

   Not all litigation funders offer the same product.  Generally, litigation funding will cover some or all of the following:

   • Lawyers professional fees;
   • Disbursements (Barrister fees, filing fees, expert fees etc); and
   • Adverse costs cover.

   In addition, some litigation funders assist a prospective plaintiff in choosing the right lawyers for the litigation, as well as managing the litigation to resolution.

4. What happens if a litigation funded claim is unsuccessful?
   
   Generally, if there is no court award for damages, or resolution sum in favour of the plaintiff, then the litigation funder has no basis to recover its funding fee and bears the cost of the litigation.


5. What are the fees?
   
   The litigation funding fee is designed to compensate the litigation funder for the risk it has taken on in providing funding.  The litigation funding fee could be a percentage, a multiple of the expenditure, or even a fixed sum.  Again, not all litigation funders offer the same fee structure; you will need to do your research.

Want to know more?

To discuss your potential claim, locate your nearest Investment Manager at www.imf.com.au and give them a call.  A conversation costs you nothing, will build your knowledge and understanding of litigation funding and is a helpful contact to have when the inevitable happens.