By Matthew Pascall, Legal Director – Head of Commercial
(Estimated reading time: 2 minutes 39 seconds)
This article is from Temple’s new Commercial Guide to Disbursement Funding and provides a clear explanation of the roles of litigation funding and After-The-Event (ATE) insurance. Also, how funders and insurers such as Temple work together for commercial disputes.
Litigation funding or Third Party funding provides funding by way of a non-recourse loan to an individual or company to meet the legal fees and disbursements they will incur in pursuing a claim. The term “non-recourse” means that if the case is not successful, the funder will not look to the litigant to repay the funding. On the other hand, if the litigant is successful, they will pay a multiple of the amount advanced back to the funder at the conclusion of the case.
Litigation funding is expensive because of the risk the funder will recover nothing if the case they are funding is unsuccessful. Litigation funding will only work where the damages the litigant is seeking to recover will be significantly more than the amount of the funding.
There is no difficulty for Temple to insure a funded client’s case. Though Temple is not a “Third Party funder” and does not fund solicitor’s or counsel’s fees – but we do provide ATE insurance for many cases where those fees are funded. Third Party funders will sometimes make their own arrangements with the client to provide protection in respect of adverse costs; but, where they do not, they will expect the client to obtain ATE insurance.
Funded cases are often attractive to an ATE insurer because the funder will have carried out their own assessment of the merits of the case and their decision to offer funding is a valuable endorsement.
Where cases are funded, we will usually enter into a “Waterfall Agreement” under which Temple, along with the solicitor, the funder and the client will agree how the proceeds of a successfully concluded case will be distributed. This is designed to protect the client and the commercial interests of the other interested parties. It also ensures transparency.
Disbursement funding from Temple is always available for cases insured by us that are Third Party funded, but this option is rarely taken up because the funder will meet the cost of disbursements.
A client and their solicitor should always compare the cost of obtaining Third Party Funding – with or without ATE insurance – against the cost of pursuing the case with ATE and disbursement funding, but where the solicitor and counsel are prepared to act on a contingent basis (i.e. if the case is lost, no payment is made by the client) whether this be fully or partially. In some circumstances, though the latter may be the cheaper option it may not always be feasible.
Third Party funders are always willing to discuss how their funding might work for a particular case and here at Temple we can usefully contribute to those discussions by giving a non-binding indication of the cost of the ATE insurance in the event of a successful outcome and the cost of our disbursement funding.
Click here to download your copy of Temple’s new Commercial Guide to Disbursement Funding. If you have any questions on this subject, please contact us on 01483 577877 or send an email to matthew.pascall@temple-legal.co.uk
Matthew Pascall
Legal Director – Head of Commercial
01483 514428
Matthew Pascall
Matthew was called to the Bar in 1984 and joined Guildford Chambers two years later. Spending more than 30 years in practice there, he was listed as a Legal 500 Tier One barrister.
He joined the commercial team at Temple Legal Protection as Senior Underwriting Manager in 2017.
Matthew was appointed to Temple’s Board in December 2022 as Legal Director and Head of Commercial.
His knowledge of the commercial legal sector and litigation practice is invaluable to the business and our clients, providing specialist experience to lead the commercial litigation insurance team.
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