The ability to demonstrate that funds are readily available and strong personal relationships are the most important factors for solicitors when choosing a third-party litigation funder, a poll by funder Vannin Capital has found.
The snapshot survey of commercial litigators also found unrealistic terms and general inflexibility the hardest aspects of dealing with funders and the reason some are put off seeking funding at all.
But around half predicted that the Jackson reforms – and particularly the end of recoverability for success fees and after-the-event insurance premiums – will make litigation funding more attractive, with those who have yet to use it more likely to think so than those with experience of funding. More than eight in ten solicitors are likely to consider using funding in the next 12 months.
Of those who had used funding in the past two years, general commercial litigation (39%), professional negligence (28%), breach of contract (17%) and arbitration (11%) were the main areas. The results showed the contrasting standards in the market, with more than half (56%) complaining that the process of obtaining funding took too long, but 28% saying the speed of decision-making was excellent.
Respondents cited the need to know the funds were there and strong personal relationships as the most important factors when choosing a funder (29% each), followed by the ability to provide an answer at speed (18%). The main difficulties encountered when using funding were unrealistic terms/difficult negotiation (cited by 67%) and the inflexibility of the funder to respond to changes in the case (47%).
Almost three-quarters (72%) of solicitors were required to sign up to a conditional fee agreement, most commonly on a ‘no win, some fee’ basis that saw them paid between 25% and 50% of their usual fee come what may. After-the-event insurance was taken out in 56% of cases.
‘More favourable terms’ was, perhaps unsurprisingly, the one factor that would make solicitors increase their use of funding, or make those who have not used it to date embrace the concept. The existence of the Association of Litigation Funders’ code of conduct was widely welcomed – although many recognised that it was too early to judge the impact of the code. Solicitors were split on whether there needed to be statutory regulation of funding.
“The litigation funding market is split between those that have funds and those that claim to have but don’t,” said Vannin Capital consultant Nick Rowles-Davies. “By making some solicitors wary of the whole market, the latter group is holding back its development just at the time when, due to the Jackson reforms, funding is more important than ever.
“It is no surprise that such companies are inflexible and not good at communication given that even if they can eventually secure money from another source, they are constrained in what they can do with it.
“A good funder will be able to show they have the money ready to go, will make rapid decisions, and will develop a genuine partnership with the solicitor and their client. Membership of the Association of Litigation Funders, with its capital adequacy requirements, acts as a good indicator that you are dealing with a proper funder.”