According to research (available below) almost a third of businesses fail to pursue even the strongest of claims due to fears over legal costs and risks. These fears are well-founded, given the propensity for many lawyers to seek large payments on account before undertaking any work. Cases are often then conducted by lawyers using ‘hourly billing’ that bears no reflection to the success or otherwise of the lawyer’s advice and approach, or the merits of the case.
In order to help businesses realise the ‘assets’ that are locked up in un-pursued claims for damages, Annecto Legal promotes alternative funding for commercial disputes. By shifting the financial risks of litigation away from the business and on to the balance sheet of professional litigation funders and insurers, claimants can pursue cases at minimal (or even zero) cost and risk.
Rising litigation costs
With even a straightforward case attracting new court fees since April 2015, the costs of litigating in the UK courts has never been higher: the court fee for a small business bringing a £200,000 claim has risen over 600% to £10,000. Yet court fees are usually only a small portion of the overall cost of litigation.
Very few businesses are set up to invest in commercial litigation, and yet every time a company spends money on dispute resolution lawyers, that is exactly what they are doing: If your business is investing money in the hope or expectation of recovering damages, then you are now a litigation funder – congratulations(!)
Litigation funding can be an attractive business to invest in – returns and losses on individual cases can fluctuate wildly, but over a portfolio of well-selected and well-managed cases an investor would expect to make strong returns, in line with their risks. No professional investor would build a business model around just one case – the risks would be incredible. Despite this logic, many businesses find themselves in exactly that situation, without even realising it.
Solicitors actually have an obligation to clients [SRA Code of Conduct 2.03.1(d)ii] to explain all funding options available, although sadly this obligation is not always met (and in some cases this has prompted negligence cases by clients against their solicitors).
Shared/transferred costs means lower risk
If more businesses were aware that they could transfer all the costs and risks of a dispute in exchange for also giving away a share of the damages recovered in a successful case, then perhaps less businesses would drop or under-settle strong cases due to a lack of funds or appetite for the fight.
In most funded cases, the funder will typically take on the burden of all the legal fees (including the obligation to pay opponent’s fees in an unsuccessful case) in exchange for between 5% and 35% of damages recovered. The wide range reflects the stage at which a case might settle, as well as the relative merits (and therefore risks) of the investment. A case which settles early could see a client keep 95% of the damages, whereas one that goes all the way to court would more likely see the client keep around two thirds of damages, with the funder taking 100% of the risk.
Why Annecto Legal?
Annecto Legal can provide access to their network of experienced lawyers to give your claim the best possible chance of success and align this expertise with a funding and insurance solution to alleviate the risks associated with expensive litigation.
Contact a member of our team to explore your options further.
Annecto Legal SME Research
Download Annecto Legal SME Research (851.4 KiB)