Litigation Funding

Litigation funding is worth considering as an alternative to debt purchase if:

  • pre-action collection attempts to obtain payment have failed
  • a debtor / defendant indicates that there is a dispute i.e. the claim is going to be defended at Court
  • a creditor has no funds to pay legal fees or has run out of funds to pursue a Court claim that has already started.

Litigation funding began to take hold in the U.K. marketplace for legal services when litigation funding agreements were specifically made legal through the Access to Justice Act 1999. The litigation funding market is growing rapidly to meet the innate problems of funding commercial litigation: litigation being extremely expensive and solicitors generally requiring significant sums on account once instructed and further fees throughout the litigation cycle. In the current economic climate, funds to pursue litigation may not be readily available.

Litigation funders are professional funders who may fund all or a part of a law firm and barrister’s fees for a client to pursue litigation, in return for a percentage of the settlement (typically in excess of 30%).

For the above reasons and as a matter of common sense, it is generally advisable to seek to avoid litigation and the involvement of lawyers if possible, and this is where Bluestone adds real value.

Litigation funding may also be used to buy After the Event (ATE) Insurance to protect a claimant against a costs order made in favour of the Defendant if the case is decided against them at trial. Consequently, arranging ATE insurance is advisable.

Litigation funding agreements need to be carefully considered and drafted as third party involvement in litigation can lead to a degree of loss of control by the claimant. Independent advice should be obtained on the merits of any funding arrangement.

As an alternative to purchasing debts, we advise on the best means for obtaining litigation funding to pursue debts. With significant experience in the marketplace for litigation funding and legal services, we are on-hand to advise on the merits of litigation funding as part of an overall recovery strategy.

Some litigation funders specialise in funding certain kinds of debts, such as debts owed to insolvent companies. Others are more general. But most litigation funders are prepared to fund the following debts:

  • contractual debts
  • claims against directors for breach of fiduciary duties
  • wrongful trading
  • professional negligence
  • tracing claims to pursue property belonging to a company
  • intellectual property disputes
  • insolvency related debt collection

How it works

Litigation funders will assess the merits of a claim and agree in advance with you and/or stakeholders the percentage of the proceeds of the claim they will charge in return for agreeing to fund the litigation.

The criteria – qualifying debts

For a claim to be taken on by a litigation funder the case, typically, the following criteria would need to be met:

  • the legal claim has a 60% or more chance of success
  • the defendant has sufficient funds to pay any judgement (plus costs)
  • all fees are proportionate to the claim
  • the value of the claim is typically over £150,000
  • Litigation funding is an alternative to selling debts. However, litigation funders are generally restrictive in their criteria of debts, and typically clients will instruct funders only on relatively high value debts when it is clear that litigation must be commenced, whereas we are typically consulted by clients at an earlier stage and where costs can be saved without recourse to court claims.
  • Our experience in debt litigation means we have a panel of litigation funders as strategic partners.