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Litigation can be expensive and outcomes can never be guaranteed. It is entirely understandable that clients considering a substantial commercial claim want to explore the different ways of funding the case and managing financial risk.
Taylor Rose offers flexible and competitive funding arrangements. Our hourly rates are competitive, but depending on the case we may also be able to agree fixed costs for particular stages, a Conditional Fee Agreement (CFA), a partially privately funded CFA, a CFA supported by a litigation funder, or a combination of different arrangements.
We also have close relationships with litigation funders, funding brokers and After the Event (ATE) insurers, enabling us to explore wider funding and risk-management options for suitable cases.
Alternative funding can reduce the amount you need to pay as litigation progresses and share some of the financial risk. However, transferring risk generally comes at a cost, such as a success fee or uplift, a litigation funder's return or an insurance premium.
Our commercial litigation lawyers can help you understand the options and decide which approach makes commercial sense.
As a general guide, we will consider alternative funding arrangements for claims worth around £400,000 or more.
The value of the claim matters because alternative funding has to make financial sense for you as well as for us or an external funder.
Sharing litigation risk comes at a cost. Depending on the arrangement, a successful claim may involve payment of a CFA success fee or uplift, a litigation funder's return, an ATE insurance premium and legal costs which are not recovered from the defendant.
If the claim is relatively modest, those costs can consume too much of the damages recovered. There is little benefit in reducing the financial risk of bringing a claim if the funding structure leaves you with an unacceptably small proportion of the recovery when you win.
The £400,000 figure is therefore a general starting point at which we may consider whether an alternative arrangement could be commercially viable. It is not a strict threshold and does not mean that every claim above that value will be suitable.
We need to consider the economics of the claim as a whole, including:
Realistic recovery – not simply the amount being claimed, but what the case is genuinely likely to be worth.
Likely legal costs – including the complexity and likely duration of the litigation.
Funding costs – including any success fee, funder's return or insurance premium.
Your likely net recovery – what you could realistically retain if the claim succeeds.
Strength of the claim – including the evidence, potential defences and counterclaims.
Recoverability – whether the defendant has the assets or resources to pay a settlement or judgment.
Two claims with the same headline value can therefore have very different funding economics. A relatively straightforward £500,000 claim with proportionate legal costs may potentially support a risk-sharing arrangement, while a highly complex £500,000 claim requiring extensive disclosure, expert evidence and a lengthy trial may not.
The relationship between likely recovery and likely cost can therefore be more important than the headline value of the claim.
External litigation funders make a separate investment decision and commonly focus on higher-value claims. There needs to be sufficient potential recovery to repay the capital invested, provide the funder's required return and, importantly, still leave the claimant with a commercially worthwhile share of the proceeds.
A case which Taylor Rose is prepared to consider for a CFA or another flexible fee arrangement will therefore not necessarily be suitable for third-party funding.
Funders assess individual cases rather than simply funding particular categories of dispute. However, external funding is most commonly considered for substantial commercial claims where success is likely to produce an identifiable financial recovery.
Examples can include:
Breach of contract claims – including substantial claims arising from failed transactions, termination, unpaid contractual sums or significant financial losses.
Shareholder and company disputes – particularly where the likely outcome involves a substantial financial payment or share purchase.
Professional negligence claims – involving significant losses allegedly caused by negligent legal, financial or other professional advice.
Insolvency-related claims – including appropriate claims involving companies, officeholders, creditors and antecedent transactions..
Group and multi-party claims – where a number of claimants have sufficiently similar claims which can appropriately be pursued together.
Other types of commercial claims may also be suitable.
What generally matters most is the strength of the case, realistic financial recovery, likely costs and the prospects of actually recovering money from the defendant.
Claims primarily seeking an injunction, declaration or another non-financial remedy can be more difficult to fund because an external funder needs a clear route to receiving its return.
It is important to understand that alternative funding does not mean the initial assessment of a claim is free.
Before we can decide whether we are prepared to enter into a CFA or another risk-sharing arrangement, the case needs to be properly considered.
This may involve reviewing contracts, correspondence and other evidence, considering potential defences and counterclaims, assessing damages and evaluating the practical prospects of recovery.
We will generally also require an opinion from a specialist barrister on prospects of success, which you will normally need to pay for initially.
If external litigation funding is sought, further work will usually be required. A funder is being asked to invest substantial capital in an uncertain outcome, so the claim needs to be developed and presented in a clear and compelling way.
This can involve presenting:
the factual and legal basis of the claim;
important supporting evidence;
realistic damages or recovery;
likely legal costs and funding requirements;
the principal risks and potential defences;
anticipated timescale; and
prospects of enforcing a judgment.
Funders will then conduct their own assessment and due diligence. Some funders or funding brokers may also charge an assessment fee.
You should therefore expect some initial expenditure before Taylor Rose or an external funder can make an informed decision about taking financial risk on your claim.
There is no universally best way to fund litigation. Depending on the case, we can consider:
Competitive hourly rates – paying our fees as the case progresses. If you have the resources and appetite to fund the litigation yourself, this can be the simplest option and may maximise what you retain if the claim succeeds.
Fixed costs for particular stages – agreeing costs for defined parts of the case, providing greater budget certainty and allowing the position to be reviewed as the dispute develops.
Conditional Fee Agreements (CFAs) – where some or all of our fees depend upon a successful outcome, normally with an agreed success fee or uplift if the claim succeeds.
Partially privately funded CFAs – where you pay an agreed proportion of our fees during the case and we put an element of our fees at risk.
CFAs supported by litigation funding – where an external funder contributes towards the costs of pursuing the claim and receives an agreed return if it succeeds.
A combination of funding methods – substantial litigation can sometimes be structured using private payment, fixed or staged fees, a CFA, third-party funding and insurance.
The appropriate structure depends upon the claim, your available resources and how much of the cost and litigation risk you want to retain or transfer.
A litigation funder provides money towards the costs of pursuing a claim in return for an agreed financial return if the case succeeds. If the claim is not successful, you do not typically have to pay back the capital invested by the litigation funders, but this will depend on the nature of the arrangement.
Depending on the arrangement, funding can contribute towards solicitors' fees, barristers' fees, experts and other litigation expenses.
For businesses, this can avoid committing substantial working capital to litigation. It can also transfer some of the financial risk of an unsuccessful case to the funder.
However, litigation funding is a commercial investment, not free finance.
The funder's return reduces the amount ultimately retained by the claimant. Funding agreements can also contain important provisions dealing with termination, settlement, changes to the litigation budget and what happens if the case or its prospects change.
It is therefore important to understand both what financial risk you are transferring and what you are giving up in return.
Our relationships and experience in dealing with with litigation funders and funding brokers can be particularly valuable where external funding is being considered.
Different funders have different investment criteria, appetites and preferred types of claim. Our commercial litigation lawyers can:
assess whether external funding appears realistic;
identify legal or evidential issues which may affect fundability;
obtain specialist counsel's opinion where required;
develop a realistic assessment of damages and recovery;
prepare the case and supporting information for consideration by funders;
identify and approach appropriate funders or brokers;
present the claim in a clear and commercially compelling way;
respond to questions and further due diligence; and
advise on proposed funding terms and their effect on your potential recovery.
There is no guarantee that a funder will accept a case. Our experience and relationships can, however, help identify realistic options and put suitable claims forward effectively.
The principal advantage is sharing financial risk.
A CFA or external funding arrangement can reduce the amount of your own money committed while the litigation progresses. For businesses, this can preserve working capital. It can also reduce your financial exposure if the case ultimately fails.
The trade-off is cost.
Under a CFA, Taylor Rose may put some of its fees at risk in return for an agreed success fee or uplift if the claim succeeds.
A third-party funder puts its capital at risk and will require an agreed return from a successful claim.
ATE insurance may also involve a premium.
For a claimant with sufficient resources, paying competitive hourly rates may therefore produce a greater net recovery if the claim succeeds. Another claimant may prefer to sacrifice some of that potential recovery in exchange for reducing cash-flow requirements and financial risk.
Hybrid arrangements can sometimes provide a useful middle ground.
The important comparison is not simply which option costs least now, but the likely expenditure, financial exposure and amount you retain if the claim succeeds.
After the Event insurance
Your own legal fees are only one element of litigation risk. If proceedings are unsuccessful, you may also face liability for some of your opponent's costs.
After the Event (ATE) insurance can provide protection against specified litigation risks of this kind.
Taylor Rose has close relationships with ATE insurers, including providers which can offer disbursement funding and counsel's fee indemnity in appropriate cases.
ATE insurance can be considered alongside privately funded litigation, a CFA or third-party funding as part of the overall funding strategy.
Recent examples where we have obtained funding for clients include:
a multi-million-pound breach of mandate claim against a major UK bank; and
a claim on behalf of a group of claimants relating to an investment scheme facilitated by a law firm.
These demonstrate our experience of working with external funding arrangements on substantial and complex commercial claims.
If you have a substantial commercial claim, as a general guide, worth around £400,000 or more, we can consider whether an alternative funding arrangement may be appropriate.
Funding arrangements can be complex. The right approach depends not just on whether funding is available, but on the cost of obtaining it, the risks being transferred and how much of a successful recovery you are likely to retain.
Our commercial litigation lawyers can assess your claim, explain the available options and, where appropriate, use our relationships with litigation funders, brokers and ATE insurers to explore an appropriate funding structure.
Please be aware that assessing a claim for alternative funding will normally involve some initial legal costs, including obtaining specialist counsel's opinion where required.
Contact Taylor Rose to discuss your claim and the potential funding options.
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Partner, Head of Group Litigation & Interim Head of Commercial Litigation
Emily leads a team of experienced and talented dispute resolution lawyers who've been there, seen it and done it. Experience matters in getting the best available result.
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