16 September 2014Print This Post

How to crack open the litigation funder’s safe

Deadman: Pyrrhic victories are no good for anyone

Posted by Christopher Deadman, sales director at Litigation Futures sponsor Augusta Ventures

For many lawyers, successfully navigating a litigation funder’s application process is only a little easier than Jason’s quest for the Golden Fleece. As the country’s most prolific litigation financier by volume, Augusta is well placed to advise on how lawyers can quickly and easily obtain the keys to the funder’s safe.

It goes without saying that your case should have good prospects of success. It is pretty unlikely that a lawyer is going to waste their time making an application for financing on a matter that has a less than 51% chance of succeeding.

But the merits of the claim, as far as the funder is concerned, are only part of the story. Of equal importance are the commercial aspects of the case – how much might realistically be realised and can the other side pay? Pyrrhic victories are no good for anyone.

Based on the significant number of applications we have seen so far this year, there are two areas which invariably cause us to reject a matter for financing: quantum and enforcement.

Quantum is a thorny issue particularly where ‘loss of opportunity’ is alleged. It is not sufficient simply to argue that the client’s business would have continued to grow exponentially were it not for the injury suffered. There has to be a credible and well-argued basis for such a belief.

An initial investment in a good quality forensic accountant’s report can often be the difference between securing funding and receiving a rejection. Not having the funds to commit to this work can be overcome by obtaining the services of an accountant willing to work on a contingency basis – there are enough of them out there.

Make the effort and reap the rewards. Never forget that a funder will view each case purely as an investment decision. It is therefore important that they have a clear understanding of the basis for the return sought.

Most solicitors are pretty good at assessing liability. We see very few cases where the basis of the claim is weak in law. In a number of cases, however, we see that comparatively little thought is given to whether the client and funder are going to realise the proceeds of the claim. It is all very well having a solid claim against someone, but if they have no ability to pay then it makes no sense to issue proceedings.

As with quantum, there is no excuse for not undertaking a sensible amount of due diligence on the defendant’s asset position before making an application for funding. Statements like “we think the defendant has property interests in London” are meaningless. There is enough open source material online to provide the applicant lawyer with a good understanding of the asset position of most corporate defendants.

It becomes difficult where there are corporate shells involved or there is insurance of dubious worth. As with quantum, there are numerous professional investigators and asset tracers in the market who will undertake this work on a conditional basis. Put the work in and reap the rewards.

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