Although many businesses are aware of the concept of litigation funding, there is little information available on how it actually works in practice. For an organisation with a potential claim, understanding how an application for litigation funding is assessed provides knowledge and confidence. A strong litigation case can be an asset to a company and being able to pursue it without impacting current cash flow provides significant advantages.
Neil Hotchkiss is the Commercial Litigation Manager at BMS Funding. Neil has worked within the insurance and legal industry for over 25 years.
He has managed numerous departments for major insurance providers, supervised corporate uninsured loss/civil litigation teams and handled litigated, personal injury fast track disputes for well-established law practices within the Midlands. In this interview, he explains how an approach for litigation funding and insurance is assessed by BMS Funding Ltd and answers some common questions he receives from potential litigants.
How do I weigh up whether my commercial dispute is worth litigating?
There are several questions a business needs to ask itself when deciding whether to pursue a particular matter in Court. These include:
- Does my dispute have merit?
- Why do I believe the alleged wrongdoing warrants remedy?
- Am I satisfied that all available means of amicable negotiation/resolution have been exhausted?
- Have I sought independent legal advice?
- Have I consulted insurance/funding providers with my proposed action?
- Do I know how much money it will cost in legal fees should the matter proceed and fail?
Litigation is, by its nature, a complex, time-consuming and stressful exercise. Working hand in hand with an experienced partner familiar with the commercial litigation process negates much of the demands and worry. Seeking resolution through the commercial courts is a decision not to be taken lightly. It should never be the first choice; the first consideration should always be, “can this situation be resolved privately, amicably and with mimimum expense?”
If attempts to resolve the ongoing dispute resolution prove unsuccessful, then legal advice on litigation proceedings should be sought at all times.
How does a funder decide if my matter is suitable for litigation funding?
The litigation funder/insurers needs to be confident that the rewards justify the potential risk. In other words, do the numbers add up. This is done by conducting a risk versus reward analysis. A funder/insurer will carefully consider the evidence presented to support the applicant’s case, developing an understanding of the critical legal arguments. At the same time, careful consideration of the costs/disbursements associated with the proposed action needs to be undertaken. To achieve this over-riding objective, it is absolutely vital that open, frank and pro-active discussions are initiated with the perspective client, Solicitor/Counsel, at the earliest opportunity. To assist with the identification of potential obstacles ahead and formulating a strategy for insurance/funding implementation.
What should I look for in a litigation funder?
When investigating potential funders/insurers, claimants should look for the following qualities:
- Honesty and transparency
- Commitment, reliability, and the resources/confidence to see the matter through to the end
- Case management and mentoring facilities to ensure the smooth implementation of funding arrangement and maximise the prospects of case success
- Reliable lines of communication at all times.
- Check the funder has a nationwide network of legal practitioners at their disposal
How does a litigation funder/insurer assess an application for third party funding?
Primarily, the claim will be assessed by obtaining a barrister’s opinion confirming that the proposed action has at least 60% chance of success. After submitting an accompanying application form, the funders/insurers themselves will make a comprehensive assessment of the evidence to hand, the existing case preparation, a chronological account of all developments to date and decide whether the risk in question warrants an indemnity/funding.
It is important to emphasise that litigation is an inherently risky exercise. Even if a litigation funder/insurer decides to fund your case, there are no guarantees the matter will succeed. However, by choosing to partner with BMS Funding Ltd, you can be confident that the merits of the proposed action will be identified early, that you will have access to a UK-wide network of legal practitioners, and the litigation funder/insurer will be supporting you and your solicitor through every stage of the litigation process.
Will I need to pay anything (to the funder or the Solicitor)?
At BMS Funding, we charge a fixed fee of £20k +VAT. The Solicitor will act under a Conditional Fee Agreement, also known as No Win, No Fee. If you lose your case, you will not pay any more than the fixed fee.
What is the role of the insurer?
The insurer covers against the risk of losing by paying the opponents costs and client’s own costs. This is called After The Event Insurance.
Do I have to use a Solicitor appointed by the funder?
It is the client’s prerogative as to which solicitor he/she instructs. Whilst BMS Funding Ltd are perfectly happy to recommend suitable legal practitioners, it is ultimately up to the individual themselves to engage with the solicitor of their choice. However, given the complex nature of high-value commercial litigation, there are obvious advantages in using a Solicitor with pre-existing knowledge of the case and perhaps an historic relationship with the client. Prior to offering to facilitate the proposed funding arrangement, your case will be subject to assessment by an independent commercial solicitor; you may find it is advantageous to continue to use them. However, we would encourage you to look at different practitioners and make a decision you believe is in your best interests.
Will the funder/insurers dictate how much I have to settle the case for? Can I be forced to go to Court?
Absolutely not. All matters relating to the case remain your decision, and you should never feel pressured to take a course of action you are uncomfortable with. That said, it is imperative that the commercial and financial ramifications of ongoing commercial litigation are monitored and managed closely.
All parties involved in the litigation process have an over-riding duty to the Court and, as such, have an obligation to identify means of concluding proceedings early. Everyone involved has a responsibility to consider the financial ramifications of ongoing litigation. An advantage of working with a litigation funder/insurer is they will continue to support and keep you aware of the commercial realities of high-value litigation at all times and are there to provide advice. However, ultimately, the case remains yours, and you have full control at all times.
To find out more about Litigation Funding, you can talk to Neil by calling 0333 222 5731. Alternatively, you can ask your Solicitor.
BMS Funding works with the legal profession and businesses to provide funding solutions for all market sectors.