Three’s a Crowd?

The continuing prohibition on maintenance and champerty in Ireland has meant an effective prohibition on third party funding of litigation in this jurisdiction save in limited circumstances. The upcoming Supreme Court judgment in the Persona case may see some further expansion here.

The Personal Case

Earlier this month, the Supreme Court reserved its judgment in Persona, a leapfrog appeal from the High Court. The plaintiffs in that case, who were unsuccessful bidders for the second GSM mobile phone licence in 1995, brought proceedings alleging irregularities in that competition. In order to progress their case, the plaintiffs had sought the assistance of a UK-based litigation funder in exchange for a share in the proceeds of the action, if successful. The plaintiffs sought a declaration in the High Court that their arrangement with this company did not contravene the law prohibiting maintenance and champerty.They were unsuccessful but in July 2016, the Supreme Court gave leave to appeal directly to that court on the following question:

“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.”

The framing of this question is significant for a number of reasons. First, the court is not being asked to determine the lawfulness of litigation funding generally but instead to rule on a narrower form of same. This should restrict the potential scope of any positive decision in the plaintiffs’ favour. Second, the question appears to prompt the creation of an exception to the general prohibition only in cases of “immense public importance”.

Finally, the question distinguishes between funding provided during the course of proceedings rather than at their outset (presumably seeking to limit frivolous or vexatious claims).

Over the last number of years, the issue of litigation funding has increasingly been raised before the Irish courts. While recent decisions of the High Court and Court of Appeal have confirmed the continuing prohibition on litigation funding generally, the courts are gradually demonstrating flexibility towards certain non-traditional funding arrangements, such as after the event insurance (ATE), by applying exceptions to the general prohibition which reflect the realities of a modern litigation landscape.

It would also appear that those exceptions are by no means closed. In SPV Optimal,2 Ryan P. in the Court of Appeal, while striking down the assignment of a bare cause of action as champertous in that particular case, acknowledged the changing attitudes to litigation funding, stating that:

“There is a clear rule [prohibiting champerty] that is subject to recognised exceptions. The category of excusing circumstance is not closed, as it seems to me. This acknowledgement takes account of changing times and admits the possibility of some unforeseen circumstances that would justify another exception being recognised or it might mean some new example being accepted of an existing heading.”

This statement, together with other recent trends in judicial commentary, suggests the potential for continued gradual erosion by the courts of the underlying prohibition. In these circumstances, the Supreme Court judgment in Persona is awaited with interest.

Whatever decision is reached in that case, we are likely to see an invitation to the legislature to deal with the rules on champerty and maintenance in a comprehensive fashion, as has been the approach in other jurisdictions, in order to address the modern litigation landscape.

  1. Persona Digital Telephony Ltd v Minister for Public Enterprise [2016] IEHC 187.
  2. SPV Optimal SUS Ltd v HSBC International Trust Services (Ireland) Ltd [2017] IECA 56.

This document has been prepared by McCann FitzGerald LLP for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.