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Third Party Funding A Matter For Legislature - Supreme Court Confirms Old Parameters Still Apply

AUTHOR(S): Sharon Daly, April McClements, Nicola Dunleavy, Julie Murphy-O’Connor, Karen Reynolds, Michael Byrne, Carina Lawlor, Michael Finn
PRACTICE AREA GROUP: Commercial Litigation and Dispute Resolution, Insurance and Reinsurance
DATE: 24.05.2017

In a recent Supreme Court decision, which considered whether third party litigation funding is permissible in Ireland, the Court has indicated that developments in relation to such funding arrangements are a matter for the legislature to decide.

In what was an eagerly awaited judgment, the Supreme Court in Persona Digital Telephony Ltd and another v The Minister for Public Enterprise and others [1] dismissed the plaintiffs’ appeal by a majority decision and in so doing, upheld a centuries-old prohibition on litigation funding by a third party in return for a share of the proceeds.

High Court Decision

In what was the first Irish case to directly concern the acceptability of third-party funding, the plaintiff sought a declaration that the proposed funding arrangement (whereby a UK company was willing to provide litigation funding in return for a share of the proceeds, should the plaintiff be successful), was not in contravention of the principles of maintenance [2] and champerty [3]. In refusing to grant the declaration, the High Court felt that the plaintiffs were asking the court "to develop the law of maintenance and champerty beyond what has been generally understood in this jurisdiction" and reiterated that the “law of maintenance and champerty continue to exist in this jurisdiction”. 

Supreme Court

The public importance and significance of the case, in light of constitutional principles of access to the courts and to justice, was reflected in the fact that the Supreme Court granted special leave for a ‘leapfrog’ appeal [4] to determine the question of:

“Whether third party funding, provided during the course of proceedings (rather than at their outset) to support a plaintiff who is unable to progress a case of immense public importance, is unlawful by reason of the rules on maintenance and champerty.”  

Noting that “the torts and crimes of maintenance and champerty have been retained in Ireland”,  Denham CJ stated that this case raised the “single issue” as to whether the professional funding agreement “is contrary to public policy and is champertous”. 

In dismissing the appeal and finding that the third party litigation funding was unlawful (where none of the exceptions apply), Denham CJ stated that it would not be appropriate for the Supreme Court to develop the common law on champerty, pointing out that it is a “complex multifaceted issue, more suited to a full legislative analysis”. The Chief Justice stressed that the company willing to provide funding in this case had “no connection with the plaintiffs, apart from an agreement to fund their proceedings”, distinguishing it from the recent decision in Thema International Fund v HSBC International Trust Services (Ireland) [5].

Commentary

Ultimately, the Supreme Court has concluded that third party funding is unlawful by reason of the rules on maintenance and champerty, stating that “a person who assists another’s proceedings without a bona fide independent interest acts unlawfully”. 

The courts have clearly indicated that it is a matter for the legislature rather than the courts to develop the law in this area.  Clarke J has however left open the possibility of the courts, in their role as guardians of the Constitution, reconsidering the position in circumstances where there is a breach of the constitutional right of access to the courts and “no action” has “been taken by either the legislature or the government to alleviate the situation”. 

For now, the case acts as a reminder to potential plaintiffs that the possibility of seeking to avail of third-party funding to progress a claim in Ireland remains limited unless and until the legislature steps in.

 

[1] [2017] IESC 27

[2] Maintenance is the giving of assistance, by a third party, who has no interest in the litigation, to a party in litigation.

[3] Champerty is where the third party, who is giving the assistance, will receive a share if the litigation succeeds.

[4] Matters of significant public importance in Ireland may be granted leave from the Supreme Court to skip, or 'leap frog' the Court of Appeal and bring a matter directly to the Supreme Court.

[5] 2011 3.I.R. 654

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