Michael Lent details how smaller FMCG suppliers and retailers can take on the giants in court with the help of litigation funding
Many SMEs assume that justice is inaccessible to them when up against bigger companies with more resources. The UK government doesn’t always do everything it can to assuage this concern. In 2015, court fees were increased – providing a further barrier to organisations seeking legal redress with limited funds. Faced with the prospect of up to £10,000 in legal fees, small business owners could make the understandable mistake of assuming that compensation is far too expensive to pursue. Many SMEs assume that justice is inaccessible to them when up against bigger companies with more resources. The UK government doesn’t always do everything it can to assuage this concern. In 2015, court fees were increased, providing a further barrier to organisations seeking legal redress with limited funds. Faced with the prospect of up to £10,000 in legal fees, small business owners could make the understandable mistake of assuming that compensation is far too expensive to pursue.
The gul bottlers’ case
Still, it’s most certainly a mistake. In 2014, the High Court awarded Gul Bottlers, a Pakistani soft drinks manufacturer, £8m in damages following a licensing dispute with Vimto manufacturer Nichols PLC. Gul didn’t have the resources of Nichols’, but it did manage to take its case to the High Court – and win. Ordinarily, this would require a financial commitment well beyond the means of a smaller organisation. However, Gul secured more than £1 million worth of alternative litigation finance – an option that most businesses don’t know exists. The prospect of protracted court cases costing hundreds of thousands if not millions, often mean businesses abandon their claims before they even get started, because they wrongly believe they can’t afford access to justice. In turn, this allows larger companies to bend the rules, safe in the knowledge they’ll escape legal redress.
Litigation funding
Litigation funding provides a way to level the playing field, enabling SMEs to concentrate on the things that matter – growing and making money. Before taking on your case, a funder will examine three key criteria: The likelihood of success, the magnitude of the damages you are likely to receive, and your legal costs. The risk can be divided between you and the funder – or assumed entirely by the third-party financier (in exchange for a larger portion of the damages). This gives you an unprecedented level of control over your costs. Take some of the risk and potentially receive a greater reward, or proceed secure in the knowledge that your finances will remain untouched by a potentially costly legal battle. Either way, you can still receive substantial compensation, and your balance sheet benefits from the protection that litigation funding provides. funding knowledge Obviously, solicitors are a vital part of the litigation process – but they’re not always equipped with the necessary funding knowledge. The commercial aspect (outside of their own fees) is often lost on them. They don’t always understand that business claims have value as contingent assets, and they certainly don’t always think about how risk mitigation and elimination can affect a case. Being paid by the hour is simple, so many solicitors tend not to propose anything else. It’s a funder’s job to understand how to finance each claim, so it follows that they’re better equipped to do so than anybody else. Their input is purely financial, however. The direction your case ultimately depends on your decisions and the legal advice you’ve received. If you’ve got an offer to settle outside of court, a funder will often talk through your options with you. If, for example, a perfectly acceptable offer is made but the client is determined to take it to court, the financier may ask for a level of reward commensurate with the new level of risk.
Backing a winner
That said, funders are on your side – frankly, because they have to be. If they back a loser, they don’t make money. Having a funder’s support is as clear an indicator as any that you have a robust claim. This lends a great deal of legitimacy to proceedings: when a large opponent realises they can’t whittle their adversary down through a legal war of attrition, they’re far more likely to attempt to settle. Businesses of any size, with a valid legal claim, should never feel bullied into backing down. Litigation funding is easy to access and enables companies like Gul to stand up to bigger businesses when they know they’re in the right.
