Marilyn Stowe Blog

Litigation funding: are brokers really “rescuers”?

I was interested to read in The Times that a barristers’ chambers in London has set up a company that will arrange funding in divorce cases:

“Steve Jones, its business development manager, says: “It’s a way of reducing the balance between unequal parties where one has resources and one hasn’t — giving access to justice.”

“What is striking is that the set itself does not stand to gain directly from this venture. Divorce is not its area of expertise so it is referring the case to other specialist barristers and solicitors. It is acting as the middleman, or broker, arranging money with one of the 14 companies now providing what is called third-party litigation funding. “We don’t take a percentage or brokerage fee — we benefit in goodwill,” Michael Martin, the senior clerk, says. “Solicitors may refer cases on to us — it’s good old-fashioned rain-making.””

I believe that, contrary to what is stated, litigation funding is more generally available than is suggested in this article, at normal commercial rates from high street banks when clients need funding for their divorce. We don’t organise it; our clients do. However problems do arise with cases where the assets are very difficult to trace, or are offshore, or are in the husband’s name. Then banks are understandably reluctant to lend without security. In such cases a Sears Tooth Agreement may be appropriate. If not, and as a last resort, the husband may be ordered to pay out of his monthly income towards the wife’s costs.

I am not a fan however, and would not recommend high risk funding at substantial additional cost to the client. Divorce is an extremely emotional and turbulent time. In many cases, clients don’t need large litigation loans at high levels of interest to worry about as well.

Suppose the client does enter into this type of funding, and then the solicitors and barristers run up tens or even hundreds of thousands of pounds in fees chasing the husband, often half way round the world? It is possible that they will then decide that they can’t continue because the case is becoming (predictably) too drawn out and expensive - and so they drop the client.

When this happens the client is, arguably, in an even worse position than before she started. She must recover the sum she has borrowed to pay these lawyers; if she begins again with new lawyers, she must obtain additional funding. So she goes into court in a negative situation before the case has begun.

And what if the husband continues to maintain that he has nothing? The court may take the firm view that such an assertion is nonsense and make appropriate orders against such a husband, but a determined litigant can salt money away over years. Then there are all the additional costs of recovering the award.

Where does the client come in all this? A firm second.

So here is my question. How does litigation funding, offered at high levels of interest, help to settle these very difficult, expensive types of disputes where, no matter how hard the lawyers try, they may find themselves chasing fool’s gold?

Isn’t it better to call it a day, and negotiate a deal on the best terms possible?

Not everybody comes out of divorce feeling like a “winner”, no matter how deserving they believe themselves to be. However I believe it is better to come out of a divorce with something, not bankruptcy.