FAQ’s – ABOUT SPARKLE FUNDING PARAMETERS
WHAT IS NON-RECOURSE FUNDING?
Non-recourse means that your Sparkle funding is not repayable under any circumstances. In the case of litigation funding, this means that if a claim is unsuccessful, the claimant will not have to repay the funds that are advanced or any interest or return component.
WILL SPARKLE FUND ANY CLAIM?
No. We will not typically fund claims above £10m. We also only fund cases in England and Wales and under exceptional circumstances, Scotland and Northern Ireland. We will also not fund certain claim types. Please see our underwriting criteria.
WHAT COSTS DO SPARKLE TYPICALLY FUND?
Sparkle products will fund own side solicitor costs (non-CFA portion where applicable), disbursements and the ATE insurance premium, where the premium is required to be paid upfront.
DO SPARKLE NEED TO FUND ALL THE COSTS OF A CASE?
No. If the claimant wishes to fund part of the costs, this will reduce the cost of Sparkle products as the interest component is applied only to drawn amounts.
WILL SPARKLE FUND A CLAIM WHICH HAS ALREADY BEGUN LITIGATION?
WILL SPARKLE FUND RETROSPECTIVELY / COSTS ALREADY INCURRED?
Yes. Where solicitor costs have already been incurred and remain unpaid by the claimant, these can be funded by Sparkle products.
DO SPARKLE FUND CASES OUTSIDE OF ENGLAND AND WALES?
Typically no. Under exceptional circumstances, Sparkle may fund cases in Scotland and Northern Ireland but we focus on claims in England and Wales at the moment.
WHAT SORT OF CLAIMANTS APPLY FOR SPARKLE FUNDING?
Claimants are typically companies, high net worth individuals and other business entities. Aside from individuals who would fall under Consumer Credit Act regulations, Sparkle is happy to consider all parties for sparkle funding.
CAN SPARKLE FUND DEFENDANTS?
No. The business is premised on being able to generate a return on the case, which can only be funded from a successful claim.
WHICH CLAIM TYPES DO SPARKLE PROVIDE LITIGATION FUNDING TO?
Sparkle funds commercial litigation claims. More information can be seen on our Underwriting Criteria page.
WHICH CLAIM TYPES WILL SPARKLE NOT CONSIDER FUNDING?
While each case is assessed on its own merits, there are some claim types that Sparkle will not consider funding for various reasons. These can be found on our Underwriting Criteria page.
WHAT SIZE OF CLAIMS WILL SPARKLE FUND?
Sparkle will typically fund up to claims of £10m. However, it focuses on claims usually sub-£5m, which is underserved by the litigation funding market.
WILL SPARKLE ONLY WORK WITH A PRE-DETERMINED LIST OF SOLICITORS?
No. Sparkle has no solicitor restrictions and as a general principle, neither Sparkle, nor Acasta, will advise or otherwise seek to influence a claimant’s choice of solicitor. However, Sparkle and Acasta will undertake some due diligence as part of its assessment in determining the suitability of a solicitor for an application. It is rare that Sparkle and Acasta do not accept the solicitors.
CAN SPARKLE FUND ANY KIND OF CLAIMANT?
Sparkle’s customers are usually companies, high net worth individuals and other business entities. Sparkle cannot fund individuals who would fall under Consumer Credit Act regulations.
WHAT ARE CFAS AND DBAS?
CFAs and DBAs are contingent fee (no-win no-fee) agreements between claimants and solicitors.
Conditional Fee Agreements (CFAs) are where a solicitor acts on a no-win no-fee basis for some or all of the incurred fees, on the condition that if the claim is successful, that unpaid portion will be paid with a mark-up / uplift, capped at 100%.
Damages-Based Agreements (DBAs) are where a solicitor acts on a no-win no-fee basis for some or all of the incurred fees on the condition that if the claim is successful, the solicitor will receive a pre-agreed share of the award.
MUST A SOLICITOR BE INSTRUCTED ON A CFA OR DBA?
This is preferable as a CFA or DBA is an explicit endorsement by the solicitor of the legal merits of a claim. However, Sparkle recognises that most solicitors have a limit on the amount of work they can run on a CFA / DBA basis. Where a claim is very clearly meritorious but the solicitor is not able to do a CFA, then Sparkle will be willing to fund the case, including own solicitor costs.
AT WHAT STAGE SHOULD CLAIMANTS APPLY FOR LITIGAITON FUNDING?
An application with as much documentation as possible would receive the highest likelihood of securing Sparkle funding. However, Sparkle recognises that funding is required to proceed with the claim.
Typically, the earliest stage that funding should be applied for is at the point that pleadings are drafted, along with a case summary and a solicitor’s risk assessment. Where funding is being sought ahead of a solicitor’s risk assessment, the claim is evidently too early for application.
WHAT IS AFTER-THE-EVENT INSURANCE?
After-the-Event (ATE) Insurance is an insurance policy that covers the risk of Adverse Costs for meritorious claims.
Please read our section on After the Event Insurance
WILL SPARKLE FUND CASES WITHOUT ATE INSURANCE IN PLACE?
No. The ATE insurance does not have to be provided by Acasta but an ATE insurance policy is required to protect the claimant from Adverse Costs risk.
WHAT IS FINANCIAL GUARANTEE INSURANCE?
Financial Guarantee Insurance (FGI) is the insurance policy provided by Acasta which covers the loan amount, so if the case is unsuccessful, the claimant is not required to replay the loan.
WHAT ARE STAGED PREMIUMS?
Staged premiums refer to the different level of premiums (increasing) as the case progresses. Typically, the premium at each of the stage is usually a percentage of the overall premium, with the stages and percentages unique to each insurer.
IS A COUNSEL’S OPINION INCLUDING PROSPECTS OF SUCCESS REQUIRED BEFORE SPARKLE AGREE TO FUND?
It is preferred but Sparkle recognises this is not always possible. If the claim is evidently meritorious, then Sparkle can fund it without Counsel’s opinion.
WHAT IF THE REQUIRED FUNDING INCREASES?
The funding amount is agreed at the outset on a cost budget that is fully expected to be met. Where costs overrun, a review of the situation and overrun in costs would have to be undertaken with the solicitor and the claimant. A decision will then be made, balancing the additional costs required versus the legal merits of the case and the impact on quantum.
WHAT ARE THE COSTS OF SPARKLE FUNDING PRODUCTS?
1&20 charges the following:
– 1% per month on drawn amounts;
– 20% of net damages;
Fixed Interest Release Funding charges the following:
– if the case settles within 12 months, a fixed interest of 35% return on drawn amounts only;
– if the case settles within 24 months, a fixed interest of 65% return on drawn amounts only;
– if the case settles within 36 months, a fixed interest of 90% return on drawn amounts only;
– if the case goes beyond 36 months, then 1% is added on to the fixed interest every month;.
Note these rank in priority in repayment, all of which will be set out in the Priorities Deed.
IS INTEREST CHARGED ON THE FULL AMOUNT?
No. Interest is only charged on drawn amounts.
IS INTEREST CHARGED ON A COMPOUNDED BASIS?
No. It is charged on a simple basis.
IF THE CLAIM IS UNSUCCESSFUL, HOW MUCH DOES IT COST THE CLAIMANT?
Nothing. If the claim is lost, the claimant will not be required to repay any monies to Sparkle and will be protected against any Adverse Costs order.
HOW DO MONIES GET DRAWN FROM SPARKLE?
A draw down request form is completed on a monthly basis, setting out expenses incurred to date and the costs about to be incurred.
IF SPARKLE AGREE TO FUND MY CASE, WILL THE CLAIMANT HAVE ANY ON-GOING COSTS TO PAY FOR?
No, unless if the claimant has agreed to fund some of the costs themselves.