What is litigation funding?
Litigation funding (also called litigation finance or legal finance) is a way for law firms to access third-party capital to support the costs of pursuing eligible claims. Instead of the firm or its client bearing all upfront disbursements (such as expert reports, counsel fees and court fees), a funder provides financing in exchange for an agreed return structure.
If a funded matter does not succeed, the funder bears the loss – the firm does not repay the funded amount.
Why would a law firm use litigation funding?
Law firms increasingly use litigation funding to:
- Take on more viable work that would otherwise be constrained by cost
- Improve cash flow by removing upfront disbursement pressure
- Manage risk exposure associated with expensive expert evidence and adverse costs
- Support high-volume or portfolio litigation with scalable capital structures
- Enhance client service by enabling full case preparation without diverting firm funds
Which types of cases are typically eligible?
Eligibility varies by funder, but many law firms seek funding for cases where disbursement costs are significant or portfolios of similar claims are being managed. For Sandfield Capital, core case types include:
- Housing disrepair (HDR) claims
- Tenancy deposit claims
- Undisclosed commission / financial mis-selling
- Military noise – hearing loss
Each type shares characteristics such as clarity in legal basis, realistic recovery prospects and meaningful disbursement needs.
Does litigation funding affect control of the case?
No. When a law firm enters a funding arrangement, control of litigation strategy, settlement decisions and client engagement remains entirely with the law firm and its client.
A litigation funder does not direct legal strategy or interfere with legal privilege. Funders typically receive agreed reporting or milestone updates, but they do not control the conduct of the case.
How does a funder make a decision? What is the process?
While specific steps vary by funder, most follow a staged process that includes:
- Initial review of key claim information
- Detailed legal and economic assessment
- Funding terms negotiation
- Funding approval and documentation
- Deployment of capital for agreed disbursements
- Ongoing (light-touch) engagement throughout the claim
Sandfield Capital’s approach is designed to be clear, collaborative and firm-friendly (as outlined on our How We Work page).
Is litigation funding confidential?
Yes. Information shared during the funding assessment and case progression is treated as confidential and subject to professional obligations. Funders typically enter confidentiality agreements before detailed materials are reviewed.
Any reporting to the funder is agreed at the outset and limited to what is necessary for oversight.
Do we need ATE insurance?
Most commercial litigation funding arrangements for consumer or small-ticket work involve After the Event (ATE) insurance to protect against adverse costs risk. In these cases, ATE insurance is usually arranged alongside funding to mitigate downside exposure.
Sandfield Capital’s funding model incorporates ATE insurance to support responsible risk management.
Can litigation funding be used on all cases?
Not all matters will qualify. Funders typically look for:
- A solid legal basis
- Reasonable recoverability
- Credible evidence strategy
- An appropriate economic profile
Funders will decline cases that do not meet their criteria, but many are open to discussing cases at an early stage to assess suitability.
How soon should we approach a funder?
It is advisable to engage a potential funder early in case preparation – ideally once you have an initial merits assessment and an understanding of key disbursements (such as expert requirements and counsel estimates).
Early engagement can help ensure funding is in place before significant costs are incurred.
What information will a funder ask for?
Typical information includes:
- Case summary and legal basis
- Estimated quantum and cost profile
- Indicative expert needs
- Relevant documentation and pleadings
- Track record and capability of the firm handling the matter
Each funder has its own diligence checklist, but early clarity helps streamline decision timelines.
Does using litigation funding affect the solicitor-client relationship?
No. The solicitor-client relationship and the firm’s professional duties remain paramount. Funding agreements are between the law firm (or its client) and the funder and do not alter ethical or regulatory obligations.
Law firms continue to advise clients in their best interests and retain autonomy over legal strategy and settlement decisions.
What about adverse costs risk?
In addition to ATE insurance, funders will evaluate how adverse costs risk is managed in a case. Some funding arrangements may require higher levels of adverse costs protection depending on the opponent’s profile, jurisdiction or case complexity.
The amount and type of insurance cover is agreed as part of the funding structure.
Need more detail?
If you have specific questions about how litigation funding might support a particular matter or portfolio, please get in touch. Our team can talk through eligibility, timing and expected engagement.