It is unlikely to have escaped readers’ attention that pursuing claims can be costly. Construction disputes in particular are often complex, with many factual and expert issues to be resolved – and this adds to the expense. Over the last 15 years or so an industry has grown up selling products intended to lighten the burden of funding disputes. Two such products are third-party funding and after-the-event (ATE) insurance. 

Third-party funding of litigation costs (usually for the claimant) is increasingly common. Finance is provided for an agreed return from the proceeds of the litigation. This return can be calculated in a number of ways, including by reference to a multiple of the costs funded or as a percentage of the sums successfully recovered in the litigation. 

One can immediately see the attractions of this because it may mean a party who would otherwise be unable to pursue a claim can do so, and it avoids the potentially significant cash flow impact of litigation. 

“Third-party funding does not usually cover the risk to the claimant of losing a case and becoming responsible for paying the defendant’s costs”

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