Do you have a good claim for compensation or indemnity under the Commercial Agents Regulations but cannot afford the legal costs to pursue it? Or even though you can afford the costs, would you prefer to share the risks with another party? If so, third party funding may be the answer.
Under a third party funding arrangement, a funder will finance some or all of a claimant's legal costs in exchange for a share of the compensation or indemnity which the claimant recovers at trial (if successful) or through an earlier settlement. So, although it means sharing the cake, if you cannot afford to pursue a claim, then better to have some cake than no cake at all! Or if you can afford the costs but are risk averse or would prefer to use your cash for other purposes, then sharing the rewards in exchange for no or only a partial liability for costs may be an attractive option.
So far so good, but how easy is it to obtain third party funding? Typically, a funder will be looking for three things in order to agree to fund:
In practice, this means that you will need to have:
How big a share of the damages will the funder take? This can vary significantly depending on the funder and the level of risk it perceives it is taking. Some funders will look to take a percentage of the damages: others will calculate their share as a multiple of the finance they have committed.
What happens if your claim is not successful? The funder takes a hit on the investment it has made, so there is no come back against the claimant unless there has been a significant breach by the claimant of the funding agreement (for example, a material fact has not been disclosed, which had the funder known about, it would not have agreed to provide funding).
If you can get funding and are happy with the share the funder is going to take from the damages you recover (if successful), be aware of the pittfalls:
Tom Custance is a partner in the Dispute Resolution department and a member of the agentlaw team. Tom can be contacted on tcustance@foxwilliams.com.