- The are four key factors a litigation funder looks at when assessing whether or not they are going to fund a case.
- Whilst lawyers will often start by looking at merits, a litigation funder’s primary concern is to recover its investment, and wherever possible also obtain a return on that investment.
- Lawyers should always be realistic and conservative about both the value of the case and the budget needed to bring it to a successful conclusion.
Getting a litigation funder to support a case may seem like a daunting task but in reality there’s no great mystery to how they review cases. In the first instance just pick up the phone to your funder to explain the case, and they should quickly give you a sense whether the claim is one which could potentially be investible. A quick conversation early on, even on a no names basis, can save a lot of unnecessary work later. If you don’t know funders, any member of the Association of Litigation Funders of England and Wales will be a good starting point.
If the funder thinks the claim is investible, they may ask for a summary of the key details, usually under the protection of an NDA. Don’t give us every detail – focus on the key facts and set out why you’re advising your client it’s a claim worth pursuing.
Whilst funders will apply different criteria when making a decision, there are four key things they will usually all have in mind. If you can tailor your first phone call or your case summary to address these points, you will be giving your case the best chance of success.
Recoverability
Lawyers think the merits of the case is the most important factor for funders but actually our primary concern is to recover at least the invested capital. A judgment in your client’s favour is simply an unbanked cheque – funders will want to know how and when the defendant can be made to pay. Are they of sufficient means to satisfy an award against them? Are their assets in an enforcement-friendly jurisdiction? If it looks like it will be impossible or take too long to recover the money at the end of the case, then a funder is unlikely to think it is a case which will provide a good and timely return for their investors.
Funders will also want to know the law firm’s track record of bringing similar cases to successful conclusion. Duration is also really key – give your funder a realistic assessment on how long it will take to conclude the case.
Value
Harbour’s data indicates lawyers are regularly over-optimistic about the value of their client’s claim. It is our almost universal experience that claim values fall over the lifetime of a case, and litigation budgets tend to creep upwards.
It’s helpful to set out the basis on which a claim value has been calculated – even if a more accurate assessment on quantum will follow later after further work. It’s also useful to know how, based on your experience, quantum might be negatively impacted (for example, if an element of the claim value relates to consequential rather than direct loss).
The value of a claim needs to be high enough to ensure all the bills are paid, that the funder can recover its investment and a return, and – most importantly – the claimant walks away with most of their damages. So funders may impose a minimum value for these economic reasons. Don’t forget, though, that smaller cases can be grouped together into a portfolio, as the aggregate value may make funding them economically viable.
The Budget
Be realistic about the budget required – a small budget is not more persuasive; what funders want to see is a conservative assessment, as accurate as it can be at this early stage. What does your firm’s data on concluded cases suggest the budget is likely to be? Have you factored in some cost overrun provision? Have you discussed with counsel what their fees may need to be? Have you explored likely costs with experts?
Funders want to make provision for the right amount – it’s easier to ask for more earlier on than it is to go back and ask for a budget increase later. Clearly unexpected costs arise, but try to include anything reasonably foreseeable in your budget first time around.
Merits
Having said merits are further down the list of priorities for a funder, clearly they are still really important. What funders really want to know is why and how you think it’s a winnable case. A formal merits opinion will usually be required, though what is of more interest to a funder is to learn where the risks in the case are and how they will be mitigated, rather than a simple assessment from counsel that the prospects of success are over a certain percentage.
In summary, then:
– Contact your funder early for an informal chat – they are always happy to talk about a case, and it can save a lot of unnecessary work later.
– Understand that for a funder this is an investment and not just a case; it needs to work economically as well as legally.
– Be conservative and realistic on both budget and quantum.
If you would like to understand if Harbour would be able to fund your case, please contact Maurice MacSweeney.
