This guide looks at the key terms in a Litigation Funding Agreement, often long and confusing documents that contain hidden costs and conditions that the party funding agreement can impose upon the party granted funding to pursue their litigation.
Success Fee
The Success Fee – The funder’s share of your damages, if you win your case. It’s usually a multiple of the amount of money they invested in your case. It’s not a straight percentage of the damages awarded to you in your case, and it makes a big difference to how much you end up with.
Return Multiple
The return multiple on the funding provided (Linked to the Success Fee above) and how often the funders’ original capital will be returned in relation to the Award made in your favour. A return multiple of 3 for example would mean that the funder receives back 3 times the original amount of capital invested in your case for every $1 of the original capital invested.
Capital at Risk
This states that the money invested by the litigation funder will be written off by the funder if the case is to lose. Importantly the agreement will outline what will be considered a loss of the case.
Adverse Costs Cover
Adverse Costs Cover – explains how litigation funding covers the adverse costs ordered against you by the civil court and how the limit of cover is set out within your agreement.
You can find out more about Litigation Funding at https://www.novo-modo.co.uk/litigation-funding.
Step-In Rights
Step-In Rights to Take Over the Conduct of the Case: The funder is given the ability to take over the conduct of the case and you are constrained by the terms of the agreement (as agreed with your solicitor) in circumstances that the funder believes the litigation is at risk due to poor legal advice or strategy being followed.
Settlement Approval Rights
Many agreements require a funder’s approval before a settlement can be accepted. It is crucial to understand the threshold and any potential for disagreement between you and your funder.
Read every defined term in your agreement carefully – the word is more important than the heading above it.