knowledge 22 April 2016 |

Is the Ruling Against Third Party Litigation Funding in Ireland Fatal?

The eagerly anticipated judgment of Ms Justice Donnelly in Persona was handed down on 20 April 2016. This is the first Irish decision that directly addresses the validity of professional third party litigation funding in Ireland. It is likely to be appealed.

This ruling¹ is the latest in the long-running litigation surrounding the grant of the second GSM mobile telephone licence to Esat Digifone Ltd in the 1990s. In 2001, Persona Digital Telephony Ltd and another party, who were runners-up in the competition for the licence, sued alleging irregularities in that competition.

Last year the court was told that the plaintiffs could not fund the litigation and that a British company was prepared to do so in exchange for a share of the proceeds if the action succeeded. Given that maintenance and champerty remain both torts and criminal offences in this jurisdiction, with roots in long-established principles of common law as well as statutes dating from the 16th and 17th centuries, it was unclear whether this arrangement was permissible.² The plaintiffs therefore sought a declaration that they were not engaging in an abuse of court process or contravening the rules on maintenance and champerty.

The court conducted a thorough review of the relevant case law and concluded that the torts and offences of maintenance and champerty continue to exist in Ireland and have a “practical vibrancy”. The provision of assistance with a view to supporting litigation in return for a share of the proceeds in the absence of a bona fide interest in the litigation remains contrary to public policy and an abuse of court process. The modern view of propriety in litigation has not expanded to such an extent as to allow the court to consider the proposed funding arrangement as acceptable.

Donnelly J considered that the court was being asked to develop the law beyond what had been generally understood in Ireland, which required a departure from existing jurisprudence. There is a divergence between the law of Ireland and of England & Wales but the approach in Ireland is binding. The legislature has not dispensed with maintenance and champerty and, while this was not determinative, it was a significant factor to be taken into account.

It is of note that the acknowledged access to justice arguments were made but the court expressed concern that the development of the law sought by the plaintiffs would trespass on the separation of powers between the courts and the legislature. In particular, developing the ingredients of an offence to fundamentally alter the nature of that offence was beyond the jurisdiction of the court.

Significantly the court also held that on the question of whether public policy considerations support a move away from the “deep suspicion of properly policed professional third party funding arrangements”, that was for an appellate court to determine, if not the legislature. The court noted that the application before the court was not a constitutional challenge to the offences and torts of maintenance and champerty and no declaration of unconstitutionality had been sought.

What next?

It is anticipated that an appeal may be lodged, and that it may leapfrog the Court of Appeal as a matter of general public importance. If that occurs, the Supreme Court will have to consider whether public policy considerations have changed, and whether access to justice is adversely impacted by the ban on third party funding of litigation.

Separately, the judgment appears to have left open the possibility of a party seeking a declaration of unconstitutionality and there may be scope for the issue to be raised on that basis.