The Finances of Litigation

Financing any form of litigation is extremely expensive and building defect litigation is no exception. In fact, because construction defect cases often involve multiple rounds of testing and investigation, additional expert fees can make this one of the most expensive forms of litigation.

Using Reserves

By their nature, building defect cases tend to arise early in the life of a scheme when capital reserves will be low or non-existent. However, if there is money in the sinking fund, this can be used to finance litigation to the extent that the claim relates to repair, replacement, restoration or maintenance of major components for which the sinking fund was established.

Bank Loans

Some banks will lend money to strata schemes to maintain and repair common property but so far this has not extended to financing defect investigations and litigation. Owners corporations and community associations are not permitted to give security for such loans and this makes financing litigation difficult.

Solicitor’s Finance

Unlike the current trend in America, construction defect lawyers in Australia are unlikely to finance testing and repairs or other outlays like barristers fees because of the constraints in Australia on contingency or success fees. The practice of advancing money for outlays or extending credit for work in progress is fraught with conflicts of interest on the part of the lawyer in terms of being objective about the advice to the client when the lawyer has a financial interest in the outcome.

Thanks to Teys Lawyers