knowledge 9 October 2015 |

Further New Developments in Litigation Funding in Ireland

In our recent article Litigation Funding in Ireland: Are Times Changing? we outlined how the continuing prohibition on maintenance and champerty has restricted non-party funding of litigation in this jurisdiction. As discussed in that piece, the courts, in the recent Greenclean case,¹ have accepted ATE insurance as a legitimate form of litigation funding.

High Court to rule on validity of non-party funding agreement

Now, in another development, the Irish courts have been asked for the first time to consider the validity of a non-party funding agreement in the context of the long-running litigation surrounding the grant of the second GSM mobile telephone licence to Esat Digifone Limited in the 1990s. In 2001, Persona Digital Telephony Limited and another party, who were runners-up in the competition for the licence, commenced proceedings alleging irregularities in that competition.

The High Court has been told that these plaintiffs are unable to continue to fund the litigation. A limited partnership incorporated in the Cayman Islands, referred to in the proceedings as ‘Harbour’, is prepared to do so in exchange for a share of the proceeds if the action succeeds. In November, the High Court will rule on the propriety of the arrangement and whether it contravenes the prohibition on maintenance and champerty.

High Court has ruled on preliminary issue

In the meantime, the High Court has ruled that the defendants are entitled to limited disclosure of the litigation funding agreement in advance of the main application.² The plaintiffs had resisted disclosure on the basis that the agreement was privileged as it had been prepared in contemplation of litigation. It was also argued that disclosure would give the defendants a significant tactical advantage as they would then know the plaintiffs’ pressure points such as when funding might run out. The plaintiffs also submitted that the validity of the funding agreement was a matter between the plaintiffs and the court and the defendants’ participation in that application was unnecessary.

In reply, the defendants argued that there was a risk of injustice if they could not see the agreement as it would then be impossible to make submissions upon it. They noted that in the recent Greenclean case, the court, which had been asked to rule on the validity of an ATE insurance policy had been able to review a copy of that policy. They argued that the plaintiffs’ contention that they were entitled to have a bilateral dialogue with the court in seeking a ruling on the funding agreement was misconceived. The defendants questioned the validity of the privilege claim, remarking that confidentiality would not be sufficient to prevent disclosure. They argued that if the funding agreement was indeed privileged, that privilege had been waived as the document had been ‘deployed’ in litigation.

Analysis by the High Court

The court agreed that it would be inappropriate to hold a two way discussion between the court and the plaintiffs on the validity of the agreement to the exclusion of the defendants as they too had an interest in the outcome of the application. The court accepted that giving detailed information in relation to a funding arrangement would confer a significant tactical advantage on the other side. However, in the context of the entirely novel application before the court, it was appropriate that the court and the other parties to the proceedings had sight, in general terms at least, of the funding agreement. Any privilege that might have attached to the agreement by virtue of being brought into existence exclusively for the purpose of litigation necessarily had to be waived to this extent to allow the court to rule on the funding application. The court should also see the precise commitments entered into by Harbour preventing its interference in the conduct of the litigation. While these might conform to a code of conduct for litigation funders in England and Wales, this code did not on its face apply to disputes in Ireland.

On the other hand, this disclosure should not go so far as to destroy the possibility of vindicating the plaintiffs’ rights in the substantive proceedings. Therefore, in so far as the agreement made reference to the details of the funding budget, the timeline, the terms and circumstances in which the funder would release funding, the funder’s remuneration and the precise circumstances in which the funder could terminate funding, these could be redacted at this time. A redacted version of the document might be sufficient to determine the issue of whether the agreement contravened the rules on maintenance and champerty or was an abuse of process. That was not to say that further disclosure might not be ordered later if relevant to the issues before the court.

The court rejected the argument for wider disclosure based on the ‘deployment’ of the funding agreement in the proceedings. Such deployment must relate to deployment for the advancement of a particular point in the substantive or in truly interlocutory proceedings, which these were not.

Outcome awaited with interest

The outcome of the plaintiffs’ funding application in this case will be of importance to both practitioners and litigants alike. A decision by the courts on whether non-party funding arrangements do indeed breach the prohibition on maintenance and champerty or whether they are permissible and enforceable will be of particular interest to litigants who may previously have found their access to the courts impeded by lack of funds. A successful day out for the plaintiffs here, combined with the recent developments in relation to ATE insurance, could transform the litigation funding landscape in Ireland.