Third-Party Litigation Funding

As Featured In

The cost of litigation is often viewed as one of the main concerns when facing a legal dispute. At Witan Solicitors, we believe that everyone has the right to high-quality legal representation and we are here to advise you on the best litigation funding options in your circumstances. Third-party litigation funding offers a solution by providing financial support to cover legal costs, enabling you to pursue your claim without the burden of upfront expenses.

We explain what third-party litigation funding is, how it works, and answers common questions about its benefits and risks for civil and commercial litigation.

What is Third-Party Litigation Funding?

Third-party litigation funding is a financial arrangement where an external funder pays the legal costs associated with a case in exchange for a share of the damages if the claim succeeds. The funder has no direct involvement in the case’s management or decision-making but shares the financial risk and reward of the outcome.

This funding is particularly useful for civil and commercial claims, such as contractual disputes, fraud, intellectual property cases, and shareholder actions, where the potential recovery is significant and large.

How Does Third-Party Litigation Funding Work?

1. Suitability:

• We would assess whether your claim is suitable for third party litigation funding. Please note, we will usually charge at our standard rate for such an assessment and this will also involve instructing a senior barrister to provide an opinion as to the prospects of your claim.

2. Initial Assessment:

• We present your case to a litigation funder for evaluation.
• The funder reviews the claim’s merits as already assed by us and a senior barrister, the likelihood of success, and the potential recovery value.
  

3. Funding Agreement:

• If the case is approved, the funder agrees to cover specific costs, such as legal fees, court costs, and expert witness expenses.
• Terms of repayment, including the funder’s share of the damages (usually a percentage or a multiple of the funding amount), are outlined in the agreement.
  

4. Litigation Process:

• The funder provides the agreed financial support, allowing you to focus on the case without worrying about escalating costs.
  

5. Outcome:

• If you win, the funder recovers their agreed share from the damages awarded.
• If you lose, you owe the funder nothing unless otherwise specified in the agreement.

When Can You Ask for Third-Party Litigation Funding?

You can consider third-party funding if:

• You have a strong case with a high likelihood of success.
• The potential damages or settlement amount justifies the funding arrangement.
• Your case involves high-value civil or commercial disputes, such as:
  • Contract breaches
  • Intellectual property disputes
  • Fraud and misrepresentation claims
  • Professional negligence
  • Shareholder or partnership disputes

We would work together with the funder to assess the case’s viability before the funder enters into a funding agreement. This may sometimes involve us offering a type of Conditional Fee Agreement (CFA) also commonly known as ‘no win no fee’, to cover the legal cost of litigation.

The three most common types of CFA are:

• Classic CFA – Your solicitor does not charge a fee in the event of a loss but if the case is won they receive their full fee, plus an additional success fee (percentage to be agreed at the start)
• Discounted CFA – Your solicitor receive a discounted fee (e.g. 75%) if you lose and their full fee + success fees if you win
• CFA Lite – If your case is lost, your solicitor could either get no fee or a discounted fee but if you win, their additional success fee is capped at a predetermined maximum

CFAs are available for all types of litigation cases, whether the litigant is a private individual or a company. They are most often used by claimants, even though defendants also have the right to use them.

What Happens If You Win?

If your case succeeds:

• The funder recovers their agreed share of the damages. For example, if the claim results in £10 million in damages and the funder’s share is 30%, they receive £3,000,000.
• You retain the remaining damages after the funder’s share and any other costs, ensuring you still benefit significantly from your success.
• Depending on the case, some legal costs may be recoverable from the losing party, further reducing the financial impact on your recovery.

What Happens If You Lose?

If your case is unsuccessful:

• You are not required to repay the funder unless otherwise specified in the agreement.
• However, you may still be responsible for certain costs, such as:
  • Adverse costs (the opposing party’s legal fees if awarded against you).
  • Disbursements not covered by the funding arrangement.

To mitigate this risk, funders often require claimants to obtain After-the-Event (ATE) insurance, which protects against adverse costs. Many funders either work with or themselves provide ATE insurance as part of the litigation funding solution. The ATE insurance protects you if litigation is unsuccessful.

If you have ATE insurance, you will not be liable for paying your opponent’s fees if you lose. This helps you limit the risk of litigation. The premium can be paid in a variety of ways, from paying up-front to having a fully contingent policy where you only pay if you win (but you pay a higher premium).

Why Choose Third-Party Litigation Funding?

• Access to Justice: Pursue valid claims without upfront costs.
• Risk Mitigation: Transfer financial risks to the funder, ensuring you only pay if you win.
• Focused Resources: Funders’ involvement signals the strength of your case and provides credibility to your claim.

Why choose Witan Solicitors?

At Witan Solicitors, we empower you to find the right litigation funding options to secure the best possible legal representation in your case and reach a favourable outcome swiftly. By choosing to work with our litigation experts, you can benefit from:

• Winning litigation cases since 1986
• Recognised by the Legal 500
• Honest legal advice in simple English
• Clear, transparent pricing structure
• Choice of litigation funding options
• Free, initial no-obligation consultation
• Based in London, Birmingham and Northampton

FAQ