How to Fund Litigation — Practical insights series (Part Two: What you need to apply)

In the second instalment of the series, litigation expert Jack Bradley-Seddon explains what information is needed when applying for litigation funding.

There are four basic pieces of information that are needed to apply for litigation funding:

• The amount of litigation funding that you are asking for
• The value of the claim, together with some justification for that number
• Whether or not the case has at least a 60% prospect of success
• Some thinking around enforcement – ie if the case is successful, will the funder get paid?

The role of professional judgment

Beyond these basics, underwriting in litigation funding is ultimately a ‘human process’, with funders using their professional experience to identify and understand risk, often exercising significant discretion and commercial judgment.

It is therefore very much not like a mortgage, where there is a pre-published set of criteria, and if certain thresholds are met (such as income, loan to value etc), then the client is ‘likely’ to be offered the loan.

The common theme, however, is that funders look to identify where they think the key risks are, and then to understand those risks in greater detail.

Usually requests for information will be the result of that thinking and, therefore, it is not possible to say in advance precisely what will be required. The exact requirements can ‘move’ depending on the funder’s perception and analysis of risk.

Practical examples

• If a funder is approached with a ‘narrow’ claim for non-payment of an introduction fee or commission, which turns principally on one contract, then they may be in a position to simply review the contract and ‘take a view’. If the same funder was approached with a complex fraud claim, with multiple events having taken place across a number of years, then they may need a detailed and forensic counsel’s opinion in order to truly understand what happened and, therefore, the risk that they are being asked to take by funding the case.
• If a funder is approached with an unfair prejudice claim where there are clear examples of unfairly prejudicial conduct, the key risk may actually be the value of the shareholding. Therefore, the valuation may be the critical piece of diligence required to understand the risk. Taking that a step further, what exactly that valuation information looks like may itself be case dependent. For example, it may be possible to understand the value of a holding company of property from the accounts; but if the company were a more complex trading business, then a formal valuation may be required to reach the same level of understanding of value.

The key point is that, beyond the basic information, underwriting in litigation funding is a human process in which the funder will look to identify and understand risk, and then make requests for information with that objective of understanding risk in mind. 

Written by Jack Bradley-Seddon, a partner at Thaxted Capital and a former litigator in the London office of US law firm Akin Gump Strauss Hauer & Feld.