Third-party funding assists currently in litigation funding for individuals for their lawsuits. It is practised in Australia because it permits an individual to defend herself/himself in court without legal fees. A funder supplies the amount for legal expenses. In such a case, the funder is entitled to get a part of the amount awarded to the case. Often in the case, if the case loses, the person does not need to repay the funder.
But nothing comes risk free as far as litigation funding is concerned. People should be aware of the dangers of this kind of funding as well.
1. High Fees and Deductions
This is because it is known that legal funding companies take high rates for their services. They usually are entitled to a considerable proportion of the claimed amount where the case is won. This share can be anything from 20% to 40%, sometimes more. Hence if a person wins a big amount the funder gets a big slice for him or herself. This makes the person lack much more than he or she needs or expects to have. Consumers have to be informed that the majority of their winnings will be taken by the funder.
2. Losing Control of the Case
Once a person takes litigation finance the funder may have some influence in the management of the case. Certain funders may choose to participate in issues concerning strategy and or settlement or even when to halt the case. This can reduce the degree of control the person has in his or her legal matter. The funder may pressure for settlement to regain his stakes instead of going to the next level of the battle. This can be quite irritating and may make the person make decisions that accord with his/her goals.
3. Limited Financial Return
Litigation funding is utilising a third-party financier where the reward is split between him. Again when the case wins the total amount awarded to the individual could be less than or not as much as they expected. Sometimes, the case stretches for several years and in the process, more expenses or even interests can again cut down the amount. Some get little economic benefit, especially where the case produces an unfavourable outcome that was not anticipated.
4. Possible Consequences for Reputation
Some people may be able to benefit from socially using litigation funding. The public can be critical of key individuals in high profile cases when they accept funding from outside sources. While others may consider litigation funding as being very sensitive. It also involves a third party who has a financial stake in someone’s legal issues, which are supposed to be very personal. This might not seem to be a problem to some people, but it remains worthy of thought.
5. Risks with Case Outcomes
They also do not guarantee success or a positive outcome for the clients of the funding companies. Rarely do cases present themselves simply and may not always turn out how it was expected to. If a person loses they may incur other legal expenses or even indemnity claims. Omegas may not owe the funder, but they could otherwise benefit the other side in terms of costs awarded. This risk is live and such persons should understand that funding of litigation does not inversely eliminate risks that are associated with a lawsuit.
There is now a solution to fund legal cases without initial capital investments through litigation funding for individuals in Australia. But it comes with risks. Costs are also high, decisions are made for people, and they may even get less money. There is also the danger of having the public on the wrong side and comes with additional Legal costs in case of a mishap.
Author Bio – The author of this blog has quite a lot of experience in this field. The experience helped the author to create this blog for the readers to understand the risks associated with individual litigation funding.
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