Third Party Funding Flashcards
(10 cards)
Third-party funding is characterized by which feature?
A. Non-recourse financing—if the claim fails, the client owes nothing
B. A guaranteed return to the funder regardless of outcome
C. Mandatory court approval of the funding agreement
D. Public grant funding for litigation
A. Non-recourse financing—if the claim fails, the client owes nothing
Explanation: In third-party funding, the funder bears the financial risk and is repaid only on success
Under the Association of Litigation Funders’ Code, funders must:
A. Directly manage the client’s litigation strategy
B. Publish clear, non-misleading promotional materials
C. Provide loans repayable irrespective of case outcome
D. Offer funding only for personal-injury cases
B. Publish clear, non-misleading promotional materials
Explanation: The Code requires funders’ marketing to be transparent and honest
A funder’s financial return typically takes the form of:
A. An hourly fee paid by the client
B. Repayment of capital plus a pre-agreed percentage uplift if the claim succeeds
C. Coverage of the opponent’s costs order
D. A fixed statutory fee
B. Repayment of capital plus a pre-agreed percentage uplift if the claim succeeds
Explanation: Funders recoup their investment plus agreed uplift only on a successful outcome
Which case type is least likely to attract third-party funding?
A. Multimillion-pound shareholder dispute
B. Complex cross-border arbitration
C. Large-scale insolvency litigation
D. A £5,000 personal-injury claim
D. A £5,000 personal-injury claim
Explanation: Due to setup costs and risk, low-value claims are uneconomical for funders
A solicitor identifies a £20 m breach of contract case for possible funding. What should happen first?
A. Execute the funding agreement immediately
B. Have the funder conduct merits due diligence on case viability
C. File the claim and then seek funding
D. Notify the court of the funding arrangement
A. Have the funder conduct merits due diligence on case viability
Explanation: Funders assess strength and commercial potential before committing capital
Mid-litigation, a funder insists on veto rights over settlement decisions. The solicitor should:
A. Agree, since the funder bears risk
B. Refuse—this breaches the non-interference principle
C. Seek court approval to override the funder
D. Terminate the funding agreement
B. Refuse—this breaches the non-interference principle
Explanation: Funders must not interfere with the legal team’s conduct of the case
If a funded claim fails in full, the client’s liability to the funder is:
A. Repayment of the invested capital only
B. Payment of court fees only
C. Coverage of the funder’s due diligence costs
D. Nothing—the funder bears the financial loss
D. Nothing—the funder bears the financial loss
Explanation: Third-party funding is non-recourse; clients owe nothing on unsuccessful claims
Which of these is not a core principle of the Litigation Funders’ Code?
A. Clarity in promotion
B. Adequate financial resources
C. Mandatory judicial oversight of funding agreements
D. Non-interference with litigation conduct
C. Mandatory judicial oversight of funding agreements
Explanation: The Code covers clarity, resources and non-interference; it does not require court approval
After due diligence, the next formal step in third-party funding is:
A. Solicitor begins case management
B. Funder transfers capital without agreement
C. Client hires additional counsel
D. Execution of the funding agreement
D. Execution of the funding agreement
Explanation: Parties sign the agreement detailing funding terms once diligence is complete
C. High-value commercial disputes
Explanation: The cost and complexity of TPF suit large, high-value litigation rather than small or public matters
Third-party funding is most appropriate for:
A. Low-value small claims
B. Routine family law matters
C. High-value commercial disputes
D. Criminal defence cases
