Mr Bates vs The Post Office puts legal funding in the spotlight

Although Leigh Day is not involved in that case, our firm has a long and proud history of fighting for justice on behalf of those who have been wronged by both governments and corporates.

As in the case of the sub-postmasters depicted in the ITV series, legal disputes are costly. Bringing a legal claim in the courts means incurring court fees, lawyers’ fees, experts’ fees, and other necessary costs, and at least some of these costs would normally need to be paid upfront.

This is where external funding has the potential to make the seemingly impossible, possible – particularly for someone without the means (or, understandably, without the desire or appetite for risk) to incur these upfront costs themselves in order to get a claim off the ground.

For the right claim, external investors will agree to pay the upfront costs, sometimes providing millions in funding, on the basis that if the claim is unsuccessful, they will take the hit and it is their investment that will be lost. This was the route taken by Alan Bates and his fellow sub-postmasters in their David and Goliath fight against the Post Office.

Benefiting from this kind of financial backing can be hugely important. It demonstrates to defendants that claimants are serious and can afford to fight a case to the bitter end. It has the potential to make the playing field more level.

In return for providing this kind of funding and for the risks that they incur, funders will seek a reward in the event of a successful claim, with a fee typically calculated as a percentage of the compensation awarded.

In the Post Office claim, the percentage taken by lawyers and funders was undeniably high. However, as Alan Bates has since explained in the media (note- this article is behind a paywall), in their case it is difficult to see how the claims could have gone ahead had it not been for the support from funders.

There is of course an important balance to be struck between the interests of the claimants and making it feasible for funders to provide upfront investment with a significant degree of long-term risk. Nonetheless, put simply, it has to be worth funders’ while.

Last year, following a legal challenge by a defendant seeking to dispute a claimant’s funding terms, the Supreme Court ruled that certain types of legal claim funding are unenforceable in certain circumstances. This ruling affects the potential for funding where the fee is calculated with reference to a percentage of the claimants’ compensation. This has created a myriad of difficulties and uncertainty throughout the legal claim funding market.

The government is now considering the reversal of some of the consequences of this court decision by adding provisions about legal claim funding to the Digital Markets, Competition and Consumers Bill, in a step that will bring some welcome clarity for funders and potential claimants.

An overly simplistic view of this mutually beneficial system risks unintended consequences which could make cases like the Post Office much harder to pursue in future.

So much more could and should be done to improve access to justice in the UK, but these potential changes to the Bill would be a positive step.