Commercial disputes worth between


&

How Do

You Fund Them?

There is a general assumption among many Commercial Litigation lawyers that lower value disputes cannot be funded by anyone other than the client.

Clients pursuing litigation are therefore forced to take on considerable costs and risks, as well as a huge amount of uncertainty over what those costs and risks really are (or could be). Alternatively, the client does not pursue the case, and writes off their losses: The solicitor is unable to help the client and the only winner is the defendant, who no longer needs to answer for their actions.

This is frustrating, and one of the reasons that Tony Sullman set up BMS Funding back at the start of 2015.

There are options for clients seeking to pursue cases between £100,000 and £1m, and they just require some thought and a good knowledge of the available options in the market

PI case funding from BMS Funding Telford

Questions to consider

One of the first things to consider is the financial position and the appetite for risk of the parties involved:

Question 1

Is the defendant in a financial position to satisfy any judgment/settlement?

Question 2

Is the client willing to contribute a fixed amount of £20,000?

Question 3

Does the legal team have a willingness to put ‘skin in the game’ in the form of a discounted conditional fee agreements?

BMS Funding works in conjunction with major UK funders and is able to provide confidential discount funding on RTA portal case acquisition costs. BMS Funding works in conjunction with major UK funders and is able to provide confidential discount funding on RTA portal case acquisition costs.

(I often hear that these ended back in 2013, with the Jackson Reforms: They didn’t!).

A practical example of funding a lower value commercial dispute

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This is a breakdown a solicitor recently sent me, asking for suggestions on funding:

  • £800k damages claim.
  • Estimated £200k adverse costs to trial.
  • Estimated £200k own costs to trial.
    • £30k own disbursements
    • £75k counsel
    • £95k solicitor

    (65%/35% discounted CFA so £61,750 funded)

It is a long established fact that a reader will be distracted by the readable content of a page when looking at its layout.It is a long established fact that a reader will be distracted by the readable content of a page when looking at its layout.

What is an alternative for funding lower value commercial cases?

It is a long established fact that a reader will be distracted by the readable content of a page when looking at its layout. The point of using Lorem Ipsum is that it has a more-or-less normal distribution of letters, as opposed to using ‘Content here, content here’, making it look like readable English.

Should the client risk circa £400k to potentially get £800k? (Would you?)

What follows is a detailed breakdown to show how insurance and disbursement funding can allow lower-value claims to be financed in an economical way:

BMS funding check icon

ATE insurance

One of the first things to consider is the financial position and the appetite for risk of the parties involved:

  • Adverse costs risk
  • Own Disbursements estimated at £105,000 – which includes, solicitor fees, disbursements EVERYTHING except the clients contribution of £20,000
£100,000
Total limit of indemnity (LoI) required

The cost of the ATE insurance premium will be £30,500 and is fully funded

£30,500
Case Settles

The cost is 30.5% of the LoI (30.5% of £100,000) Client pays £30,500 for ATE once the case settles from their damages

If the case loses the client pays nothing for the ATE nor the Funders investment including the interest or for the opponent’s costs.

Disbursement funding

Disbursement funding

Now that the disbursements are insured, we can arrange funding at much lower rates than those associated with typical third-party funding:

Funding solicitor’s fees

The Solicitor will act on a hybrid/discounted conditional fee agreement (CFA) where they are paid a portion of their fees monthly, with the rest deferred until a successful conclusion of the claim.

Let’s assume the Solicitor needs 40% of the fees paid monthly, with a further 60% deferred to conclusion and an additional 35% as a success fee (a reward for taking on some risk).

The funding needed for the Solicitor is 40% of £95,000, which is £38,000. This is funded monthly and either repaid from the client’s award or by the ATE policy in the event the case is unsuccessful.

What does the client get at judgement/settlement?

If this case goes to trial and wins
within 2 years then the client pays:
  • ATE = £30,500
  • Dibs = £68,250 (including funding costs)
  • CFA = £57,000 (assuming 100% uplift on deferred solicitor fees)
TOTAL = £155,750

Assume costs recovery of 70%, leaving a £40k shortfall: £800k minus £155,750 = £644,250 which is 80.5% of the recovery to the client.

If the case settles for £450k (including costs of £60,000) after 6 months then the costs would be:
  • ATE = £30,500
  • Dibs = £42,000 (funding costs)
  • CFA = £8,000 (best guess of success fee on costs after 6 months)
TOTAL = £80,500 (plus £40k legal costs)

The client gets £329,500 net, or 73.2% of the recovery.

To summarise:

The option above reduces the Client’s costs and financial risks pre-settlement to £20k