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Irish High Court’s first engagement with litigation funding

AUTHOR(S): Sharon Daly
PRACTICE AREA GROUP: Commercial Litigation and Dispute Resolution
DATE: 19.10.2015

The Defendants in the ongoing Persona litigation (Persona Digital Telephony Ltd & Anor v Minister for Public Enterprise, & Ors [2015] IEHC 457) were successful in their recent application to the High Court seeking disclosure of the litigation funding agreement (the “Funding Agreement”) which the Plaintiffs entered into with Harbour Fund III Limited Partnership (“Harbour”), a specialist litigation funding company.  However, in the interests of ensuring the Plaintiffs’ rights in the litigation were not irreparably damaged, the Court ordered that the Plaintiffs were entitled to redact specified key elements of the Funding Agreement.   

The Plaintiffs, Persona Digital Telephony Ltd ("Persona") and Sigma Wireless Networks Limited ("Sigma"), were unsuccessful applicants in the competition for Ireland’s second GSM mobile telephone licence in 1996.  Persona and Sigma are suing the State for damages on the basis that the competition was unfairly conducted.  As the Plaintiffs are impecunious, allegedly as a result of the Defendants’ wrongdoing, they entered into the Funding Agreement with Harbour to fund the litigation, which they could not otherwise bring.  

Persona and Sigma issued a motion seeking a declaration from the Court that, by entering into a litigation funding arrangement with Harbour, they are not engaged in an abuse of process and / or are not contravening the rules on maintenance and champerty (the “Funding Application”).   

However, the Plaintiffs refused to provide the State with a copy of the Funding Agreement in advance of the application, arguing that its disclosure would confer on the State an unnecessary, unfair and disproportionate litigation advantage in the main proceedings.  In the case Thema International Fund plc v HSBC Institutional Trust Services Ireland Limited [2011] 3 IR 654, the Court stated that providing detailed information about funding to an adversary was bound to convey a litigation advantage.  This would arise, for instance, because an opponent in litigation may take tactical steps with a view to exhausting the other side’s financial resources and consequent ability to bring or defend the proceedings.  

In order to avoid this outcome, yet still obtain the Court’s approval of the Funding Agreement, the Plaintiffs made a number of averments as to the contents of the Funding Agreement on affidavit.  In particular, they confirmed that they would have full control of the litigation with no interference from Harbour whose only involvement would be as a funder.  In response, the State applied to the Court for an order compelling the Plaintiffs to disclose the Funding Agreement in advance of the Funding Application.   

In reaching its decision on the State’s request, the Court acknowledged that the disclosure of the Funding Agreement could provide the State with an unfair and disproportionate litigation advantage.  However, the Judge was equally conscious of the entirely novel nature of the application and emphasised that, in circumstances where the courts in this jurisdiction are not familiar with litigation funding agreements, it was appropriate for the Court and all parties to the proceedings to have sight of the Funding Agreement.   

However, in seeking to strike an appropriate balance between the rights of the parties, the Court ordered that the Funding Agreement be disclosed with the following information redacted: (i) the funding budget; (ii) details of the timeline; (iii) details of the terms and circumstances on which the funder will release funding from time to time; (iv) the details of the funder’s remuneration; and (v) precise circumstances in which the funder may terminate funding.  The Court emphasised that it may be necessary for these details to be disclosed during the Funding Application.  

The Court also rejected the State’s argument that the Plaintiffs had waived privilege in the Funding Agreement by deploying it on affidavit, noting that a party will only “deploy” a document where it is used for the advancement of a particular point in the substantive or “truly interlocutory” proceedings.  The present case was distinguishable on the basis that the existence of the Funding Agreement had to be revealed for the purposes of the Funding Application.   

With this preliminary issue having now been decided, the question of whether the Funding Agreement is champertous will be heard by the High Court in November.  While there was a decision in relation to after the event insurance funding (the Greenclean case), this will be the first time the issue of third party funding will have been litigated before the Irish courts and the decision, which has the potential to shape the Irish litigation landscape in the coming years, will be awaited with interest by lawyers and litigants alike


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