Third party funding is becoming an increasingly sophisticated industry. Third party funders are essentially investment funds seeking a good return. Professional third party funders focus on high value claims with minimum claim sizes in the millions of dollars. They are highly selective in the claims they choose to fund, given the need to provide attractive returns to their investors.
Third party funding in the context of Singapore’s Civil Law (Amendment) Act refers to a situation where an entity unconnected to the dispute provides funds to a party to pursue a legal claim.
Third-party funding involves a commercial funder agreeing to pay some or all of the claimant’s legal fees and expenses. Claimants who use third party funding often do so for financial management purposes, and are not typically impecunious.
Should the claimant succeed, the funder takes a share of any sum recovered from the claim’s resolution. The funder’s return is often calculated as a percentage share of the recovery or as a multiple of the amount the funder invests.
The principle of the funding is “no win, no fee”. If the claim fails, the funder goes without reimbursement. The funder may also agree to bear any adverse costs liability and provide security for the respondent’s costs.
In Singapore, amendments were made to the Legal Profession Act (LPA) to provide for the following:
Lawyers may introduce or refer third party funders to their clients so long as the lawyers do not receive direct financial benefit from the introduction or referral.
Fees, disbursements or expenses paid by the client for the lawyers’ legal services do not constitute “direct financial benefit”.
Lawyers can act for their clients in relation to third party funding contracts.
The Legal Profession (Professional Conduct) Rules also impose a duty on lawyers to disclose to the tribunal or court and every other party the existence of any third party funding their client is receiving. This includes the identity and address of the third party funder and ensures that there are no conflicts of interest.
Third party funding can only be provided by funders which meet certain qualifying criteria, to ensure that third party funding in Singapore is provided by reputable, professional funders.