Litigation Funding: An Affordable Way of Accessing Justice

a4_bIn the life-span of a business, there will almost certainly be a protracted legal process. To a small or medium-sized business, this can prove ruinous as legal costs can be prohibitive.

Current solutions

You can sell your claim but the trade-off is only getting a small fraction of the claim.  Or you can ask your lawyer to fund your side of the case using the Contingency Fees Act – but only if you can find an attorney prepared to use this approach.

The Litigation Funder

This concept has gained traction overseas and is worth seriously considering. In this model, the litigation funder pays all legal costs in return for 40-55% of the claim. Before you recoil at this amount remember that 50% of the claim is way more preferable than 100% of nothing.

Requirements to attract a Litigation Funder

  • The case is strong in law and backed by good, preferably written, evidence
  • The person or entity being sued is solvent and is very likely to remain so
  • You are fully committed to the claim and are prepared to see it through to the end.

Other positives

The litigation funder will be as keen as you to see a successful result and can manage this process for you. This leaves you more time to focus on your business.

If your opponent is well-resourced and intimidating, having a litigation funder will dissuade it from dragging out the case until you run out of funds. It could also persuade the other party to settle the case.

Litigation funding has been successfully used overseas and thus there is no reason that it won’t be equally successful in South Africa.

Ask your accountant for advice if you want to pursue this.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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