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Civil Litigation Section

The sound of the crowd

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Gareth Raisbeck argues that in light of last year’s ParkingEye litigation, crowdfunding could at last be stepping out of the shadows as a viable and attractive means of financing commercial litigation, especially for a younger generation of tech-savvy litigants.

Third-party funding is not a particularly sexy topic (radical as that statement may seem). However, a new and exciting concept has arrived, borne of the internet age: the funding of the people, by the people – commonly known as crowdfunding.

Whilst crowdfunding has been around for some time, the concept of crowdfunding of litigation has barely registered. Even in the US, at the forefront of such concepts, Manuel A Gómez of the Florida International University College of Law points out ‘if the decade-old crowdfunding industry is still perceived to be in its infancy, crowd litigation funding is simply nascent’.

This holds true to a greater extent in the UK. Indeed, such a notion would have been impossible 50 years ago, owing to common law restrictions. Today, the relaxation in public policy towards CFAs and third-party funding has severely (one might argue, critically) cut short their relevance, and crowdfunding should be viewed as a plausible funding option, in a (albeit limited) number of appropriate cases.

Solicitors may well ponder whether crowdfunding will impact, or even have a place, in their practice. Their first response is likely to be a resounding ‘no’, with most solicitors having never been troubled by such exotic funding arrangements.

However, remember that under the SRA Code of Conduct, it is incumbent upon solicitors to discuss ‘how the client will pay, including whether public funding may be available, whether the client has insurance that might cover the fees, and whether the fees may be paid by someone else such as a trade union’.

It could be argued that crowdfunding slots quite neatly into the definition of ‘someone else’ or even ‘public funding’. Clearly, this would have a significant impact in circumstances where other forms of funding are unavailable or less desirable.

Crowdfunding takes two forms. The first is a traditional incentive-based arrangement, where individual funders hope to profit from the arrangement with often lucrative returns. The second is an altruism-based arrangement, where the individual funder provides funds, perhaps upon principle, to assist an (apparently) worthy litigant in accessing justice.

Clearly, for the latter, it brings to mind a ’David v Goliath’-type action for the public good. It also holds an obvious appeal to the young, tech-savvy litigant.

As crowdfunding is still a fledgling funding option, there has been little debate over its longer-term prospects. In an article for the Law Society Gazette in April 2015, Harry Spendlove identified the problems involved in introducing an under-considered and unregulated funding option. His excellent article should be considered long before any suggestion of crowdfunding is put to a client.

That said, a solicitor would be remiss for failing to at least consider a new and plausible funding option, especially if their client had no other recourse to funds. If crowdfunding does take off in a big way, could a solicitor be criticised for a failure to advise on this funding option?

As widely reported, the ParkingEye Ltd v Beavis [2015] UKSC 67 appeal came about partly on the back of utilisation of crowdfunding as a viable alternative to traditional funding. Whilst in its infancy, crowdfunding may appeal to the millennial generation, diverting from traditional funding routes. It is entirely likely that prospective clients may secure full or partial funding from such sources before even instructing a solicitor. 

In the past, crowdfunding would have been considered fanciful. Today, we must consider the ramifications of its introduction into the litigation funding sphere and its implications for future instructions. Firms must be alive to the possibility that a new funding option has arrived.

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