Is My Claim Suitable for Litigation Funding?

Understanding how litigation funders and legal funding works is essential before exploring specialized funding options for specific practice areas.

If you are considering whether litigation funding might support your commercial claim, the most useful starting point is an honest self-assessment. Litigation funders assess cases on commercial grounds, and understanding their criteria before making contact helps you identify whether your matter is likely to attract funding — and, if it is not there yet, what might need to change.

This article walks through the key questions to ask about your own claim.

Start with the fundamentals

Before exploring any of the detail, three fundamental questions will shape everything else:

• Does the claim have sound legal merits? A litigation funder is not in the business of supporting weak or speculative claims. They are looking for cases where, on a balanced legal assessment, there is a real and reasonable prospect of success. You do not need certainty — litigation never offers that — but you do need a credible, well-reasoned legal basis for the claim.
• Is the claim value large enough? Litigation funding has a commercial cost. The funder's return needs to make sense economically, which means there is an effective minimum threshold for claim value. For most UK litigation funders, this means claims in the hundreds of thousands of pounds at the very least, and most funders are focused on the higher end of the commercial market.
• Is there a realistic prospect of recovery? Winning is necessary but not sufficient. The defendant needs to have assets against which a judgment or settlement can be enforced. A strong case against a defendant with no recoverable assets will not attract funding.

If the honest answer to any of these three questions is no or uncertain, it is worth addressing that issue before approaching a funder.

A practical self-assessment checklist

Work through the following questions to form a preliminary view of your claim's suitability.

On the legal merits

• Has a solicitor reviewed the claim and provided a written legal opinion or detailed analysis?
• Does that analysis support the legal basis of the claim on a balance of probabilities assessment?
• Are the key facts clearly established and capable of being evidenced?
• Is there a clear causal link between the defendant's conduct and the loss suffered?
• Are there any significant legal arguments that the defendant is likely to raise, and how are they addressed?

A claim that performs well against these questions is more likely to attract funder interest. For more on how funders evaluate merits, see our article on what litigation funders look for in a case.

On quantum

• Has the loss been quantified, even in approximate terms?
• Is the quantification based on identifiable, evidenced losses rather than estimates or aspirational figures?
• Does the quantum justify the likely legal costs of pursuing the matter?
• Has consideration been given to the defendant's likely arguments on quantum?

Funders look at quantum on a realistic basis. If your headline claim includes elements that will not survive scrutiny, it is better to identify and address those now than have a funder do so during due diligence.

On the defendant and enforcement

• Who is the defendant — an individual, a company, or a group of entities?
• Are the defendant's assets identifiable and reachable?
• Is the defendant currently solvent and trading?
• Is the defendant based in the UK, or in a jurisdiction where enforcement of an English judgment is straightforward?
• Is there any risk of the defendant dissipating assets between now and the conclusion of the case?

Enforcement is one of the areas where otherwise strong claims can struggle to attract funding. Being able to provide clear, well-evidenced information about the defendant's financial position strengthens a funding application significantly.

On legal costs

• Has a solicitor provided a realistic costs estimate for taking the matter through to trial or resolution?
• Do those costs sit within a sensible range relative to the expected recovery?
• Is after-the-event insurance available for this type of claim?

Funders will model the ratio between their capital commitment and the expected recovery. If legal costs are disproportionate to the claim value, the economics may not work. For more on this, see our guide on how much litigation funding costs.

On the litigation team

• Is the claim being handled by, or will it be handled by, a solicitor with relevant commercial litigation experience?
• Is the firm experienced in the type of dispute involved?
• Has counsel been identified or instructed?

The quality of the legal team is a material factor. A well-instructed, experienced team adds to the attractiveness of a funding application.

Claims that are commonly funded

While suitability always depends on the specific facts, the following types of claim tend to perform well against funder criteria:

• Significant breach of contract claims where liability is reasonably clear and loss is well-evidenced
• Fraud and dishonesty claims where the factual matrix is strong and asset recovery is viable
• Professional negligence claims against advisers with professional indemnity insurance
• Shareholder and partnership disputes with demonstrable loss
• Insolvency-related claims brought by officeholders
• Warranty and indemnity claims arising from business transactions
• International arbitration claims with favourable jurisdictional considerations

Claims that are less likely to attract funding

The following situations regularly present difficulties for funding applications:

• Claims where the legal merits are uncertain or contested without clear resolution
• Claims where the defendant has limited or no traceable assets
• Claims that are too small in quantum to justify the economics of funding
• Claims where the relationship between costs and expected recovery is unfavourable
• Claims where there are unresolved issues about the claimant's standing or ownership of the cause of action
• Claims that are close to a limitation deadline with insufficient time to complete due diligence

What to do if your claim is not yet fundable

Approaching a funder before a claim is in fundable shape wastes time for both sides. If your preliminary self-assessment suggests there are gaps, it is usually worth addressing them first:

• Obtain a proper legal opinion if you do not yet have one
• Commission a quantum analysis or expert report on loss
• Conduct asset tracing or financial investigation on the defendant
• Instruct experienced solicitors if the legal team is not yet in place

A claim that cannot attract funding today may be in a much stronger position after these steps have been taken.

When you are ready to make an application, our guide on what documents litigation funders need explains what to prepare. If you are comparing funders, see our article on how to choose between litigation funders.