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Also Known As – ‘Funding and Lending, what’s the difference?’ and ‘Big Brother and Big Brother’s Little Brother’. Any other contributions welcomed.

As to what it is depends on who you talk to. To clients and lawyers it is a means of pursuing a case that might not be possible without outside funding. To a funder it is a high risk activity that deserves a suitable reward (i.e. lots).

There are two types of funding, those for big cases and those for smaller cases.

Apart from merits, I think the starting point is the size of the claim, will damages be sufficient to bear the cost of the funding? The whole point is that this is somebody else’s money which is used for the benefit of your client’s legal action, why should their reward not be proportionate? We say a ‘big case’ has an estimate of damages in excess of £500,000. A funder needs a case to be at this level for the reward to be proportionate to risk, a win may cost up to half of a settlement and funders use the theory that to the client ‘half a pie is still better than nothing’. Should a case lose, the funder is left out of pocket.

Funders are being asked to provide money for a case where there is no guarantee of a return, the costs may increase dramatically and they do not know when or even if they will see a return on their investment. Additionally, with the ‘Arkin v Borchard Lines Ltd and others’ Judgement (2005), the funder could be liable for the defendant’s costs up to £1 for every £1 they advance. This though, can be mitigated by an After the Event Insurance policy, which at least insures the adverse costs to the limit of indemnity.

The funding calculations which I have seem are complex, heavily detailed and make my brain hurt.

Smaller cases are those with damages between £25,000 and £500,000 and a different set of lenders (I use the word advisedly) look at this market. Multiples of the sum advanced do not work in these cases. Charging an interest rate is the solution, no need for complex calculations as interest is easy to work out. The lenders follow the familiar model of lending money via a regulated CCA. The repayment due at the end of the case is the principle loan plus interest accrued.

When backed by ATE insurance, this way of lending works well, particularly in the clinical negligence market because disbursements costs are high but so too are damages, making loans affordable without denting damages too much.

The smaller lending market is relatively new initially developing within the clinical negligence field. QLP are at the forefront of these surely needed developments.

Do not forget that Lord Jackson uplifted damages by 10% to help with the cost burden now placed on claimants.

Excitingly, Jeffrey Jones & Others –v- Secretary of State for Energy & Climate Change and Coal Products Ltd [2013] EWHC 1023 (QB) suggest interest is recoverable. Any cost consultants care to comment: qlp@qlp.ltd.uk.

As an independent broker, we make sure we are at the forefront of these developments and have our own facility:

The way forward, is to talk to us at QLP and we will take you through, in detail, all the twists and turns that need to be navigated to achieve a successful outcome.