At what stage should you involve a litigation funder?

At what stage should you involve a litigation funder?
At IMF Bentham, Investment Managers are requested to consider funding matters at all stages of the litigation life cycle. Subject to its due diligence processes, IMF will extend funding prior to litigation commencing, during the active litigation process, at the appeal stages, and will consider funding enforcement actions.

The factors that influence the timing for involving a litigation funder are multitudinous; some clients are without funds at the outset to pursue their claims; some clients’ litigation funds become exhausted during the litigation process; some claimants only become aware of the option of litigation funding for their claim after commencing proceedings, and sometimes the adverse costs risk becomes a greater issue if a matter takes longer to resolve than anticipated at the outset.

There are distinct benefits to involving a litigation funder at an early stage of the litigation. We outline some of these below.

Know your risks

IMF’s approach in determining whether to extend funding, is to firstly undertake a detailed analysis of the merits of a matter.  This process, carried out by experienced former litigators, provides a clear delineation of the risks in the case.  Known risks can then be considered when formulating the litigation strategy for the case and allow a claimant to make informed decisions about what avenues will be most effective to achieve redress.  

IMF carries out its due diligence process at no cost to the claimant seeking funding. Sometimes this includes obtaining advice from a barrister or expert at IMF’s own cost. IMF’s due diligence process provides a valuable second pair of eyes on the claim and can assist lawyers and claimants to best focus the litigation.  

IMF frontloads litigation risk analysis to determine whether to invest its funds in the matter. This is information litigants themselves benefit from having as early as possible, prior to expending significant sums of money.   

In addition to protecting a claimant against the possibility of having to pay the other side’s costs if their claim fails, wholly eliminating a key risk for the claimant, the claimant also gains the benefit having an expert funder’s assessment of the claim upon engaging a funder.

Fully resourced

Once IMF has agreed to fund a matter, the case will be resourced in a way that maximises the likelihood of the matter successfully resolving, either by way of settlement or judgment.  

In practical terms, this means a claimant can retain high quality barristers to represent them, and obtain any expert evidence they need to develop and prove their case.

When funding a matter, we request that the lawyers involved estimate what costs they expect a client will incur at every stage of the matter through to the conclusion of trial and commit to that level of funding.  As frequent users of the court system, IMF also knows that litigation is unpredictable and that costs sometimes increase unexpectedly. If additional resourcing is required, IMF has the capacity to increase resourcing where needed.

Having certainty at an early stage that costs will be covered is beneficial for claimants. IMF usually covers legal costs and disbursements that are incurred prospectively from the date the funding arrangements are made. In some cases, we will agree to pay for legal costs that have already been incurred, however, not in all cases. If a litigant foresees that they may need the assistance of a third-party funder to see a matter through to resolution, involving a funder at an early stage reduces the risk of a litigant having to carry a portion of the costs themselves through to conclusion of the claim, freeing up a litigant’s capital to be used elsewhere.   

Maximise the prospect of securing funding

IMF takes a flexible approach to funding matters, considering matters on their merits in all cases. When assessing whether to fund a matter, IMF looks at a range of factors, including the amount of time the matter has been in active litigation and the costs already incurred.  As IMF will only fund matters where we assess the claimant is likely to receive a meaningful return, there are times when the accrued legal costs make third-party funding prohibitive.  Also, the age of a claim, or the proximity to a limitation period increases the litigation risk of a matter. The prospect of either of these scenarios impeding a request for funding can be mitigated by approaching a funder early on.  

Similarly, because litigation is more art than science, sometimes there will be tactical decisions that have been made in a case that make it a less attractive funding proposition. For example, joining many defendants to an action, which increases the adverse costs risk for the claim.  Discussing how to structure and execute the litigation strategy with a litigation funder prior to issuing or joining additional parties increases the likelihood that IMF will be able to offer funding.

Strategic Management Services

If a matter is funded, IMF’s Investment Managers assist in the management of the matter, provide oversight on expenditure, and are resources that can be leveraged to assist with problem solving and decision making over the life of the claim. Having the support of IMF in the litigation process can significantly reduce the stress of litigation on a claimant.  In fact, a claimant may use IMF to assist with providing day-to-day instructions to their solicitors, allowing the claimant to focus on other matters, such as their own work or business.

There are numerous benefits in approaching a litigation funder at an early stage of a matter. As one of the world’s most experienced and successful litigation funders, IMF’s reputation for careful case selection means that defendants take claims we fund seriously, and IMF’s expertise can assist a claimant to achieve a better outcome, more quickly and with less risk.

IMF’s Investment Managers are always available to discuss potential matters for funding. Please visit our website for the contact details of IMF’s Investment Managers nationwide.