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Why Clients should engage a litigation funding consultant

During the whole litigation funding process clients often find that protecting their financial rights and obligations can be daunting. They have limited understanding of the process. By its very nature, arrangement of litigation funding and related processes creates uncertainty and stress. The first step for any client should be to appoint a litigation funding consultant. In our experience incentives matter, even when dealing with highly professional people (lawyers, litigation funders, insurers and brokers alike). Having a capable consultant in place at the outset who is exactly aligned with the client interest increases the likelihood of a good outcome for the client.

The Funder-Client-Lawyer Relationship

The effective management of tripartite relationship between funder, client and lawyer are integral part of the litigation funding process. This may be of particular significance in multi-party proceedings, where lawyers and funders interest can be better aligned with client interest.

It is in the interests of the funder as well as the client that experienced and competent lawyers act in the proceedings. The funder can also support to improve the efficiency and cost effectiveness of the lawyers through the funder’s review on the lawyers and the legal budgets, as they are well experienced in managing litigation. A properly drafted Litigation Funding Agreement will do just that.

An independent assessment and advice of a litigation funding consultant can foster the development of the funding industry and its competitiveness by advising their clients of the various options available for funding litigation.

APPOINTMENT OF A RELEVANT LAWYERS

Frequently clients find themselves having to make key decisions with limited information. Perhaps the most important decision is choosing a relevant lawyers / law firm. A client’s urgent need for good litigation advice may lead them to select a lawyers without a rigorous process. Having an experienced consultant in place before selecting lawyers is generally likely to produce a better outcome.

Therefore, a slight increase in overall costs due to the consultant is likely to be greatly outweighed by the improvement in strategy and relevant team configuration.

LAWYER’S ALIGNMENT OF INTEREST

Once a lawyer / law firm is in place, the client starts benefitting from the advice of an experienced operator. However, this interest needs to be aligned to the mutual benefits and find a win-win proposition. The lawyer’s own fees are the fundamental expenditure of the client in the litigation. Typically, the lawyer advises the client in determining the optimum financing strategy to finance their case. However, one of the essential levers in that financial planning involve the lawyer themselves, in particular, the lawyer’s hourly rate and whether any proportion of the lawyer’s fees may be conditional on a successful outcome.

Furthermore, key to the planning process is weighing the cost versus the benefit of selecting a more specialized lawyers / law firm and/or one more willing to work on a conditional basis vs. the cost solution being offered by the original lawyers.

CAVEAT CAPITAL will work with clients and their lawyer / law firms, if appointed, to find the optimal cost / reward solution.

SELECTION OF A RELEVANT FUNDER

We always do the necessary review and assessment before suggesting to establish relationship with a relevant funder. Here are some decisive factors we believe should be considered by clients when evaluating litigation financing providers.

Litigation funder should have a successful track record of consistently invested in successful cases. They should know how to evaluate matters to determine their potential value and chances of success.  The funder should adhere to legal ethics standards and sound business practices.

Every legal case is different in its own nature, jurisdictions and complexities. The funders that strive to develop bespoke and creative funding solutions for clients can provide far greater opportunities to maximize clients’ interests than funders focused on single-case investments. The funder should be financially capable, reliable and transparent to deliver on its promises. We carefully consider the funder’s reputation and experience in the marketplace.

It is important to conduct due diligence through an independent consultant / advisor before partnering with a litigation funder. We exercise careful judgement in evaluating the funder’s track record, reputation, and financial position. Such diligence leads us to the most relevant funder best suited to the client’s complex requirements, one that offers a history of success and conducts itself in a fair, transparent and ethical manner.

FUNDER’S ALIGNMENT OF INTEREST

A major potential area of interest between the funder and the client is in relation to early settlements needs to be aligned. While both funders and funded litigants have broadly the same interest in maximizing any settlement or damages award and they will share the proceeds of the litigation, funders interest should be aligned with the client in the situation of potential early settlement opportunities.

This funding risk can best be dealt with by providing that any irreconcilable difference over settlement be referred to counsel in the proceedings for a binding expert opinion.

Engage a Litigation Funding Consultant

ADVANTAGE OF A LITIGATION FUNDING CONSULTANT

We believe that before selecting their legal team, insurer or funder, clients should get input from a litigation funding consultant who’s focus is on the client’s success and therefore, is commercially aligned with the client.

On several occasions funders has seen many cases where they are unable to proceed because the solicitor running the case was too expensive, because for example they were not prepared to operate with a sufficiently high proportion of their fees being on a conditional basis, or where the client was continuing the litigation despite a relatively attractive settlement offer being on the table.

A litigation funding consultant can often help clients to avoid these value-destroying outcomes. With a litigation funding consultant engaged, these checks and balances (to align interest of all stakeholders) give Clients the best chance of a good net outcome.