Dispute Resolution Update: Litigation - Who Pays?
07 October 2016
Funding of litigation by non-parties has been the subject of a recent High Court decision, which is now under appeal. Will the Supreme Court align Ireland with other common law jurisdictions and depart from the position that has been in place since the 1600s?
Maintenance and champerty have been, and remain, criminal and civil wrongs in Ireland.
Maintenance is the funding of litigation by a non-party who has no legitimate interest in the proceedings. Champerty, however, goes one step further and involves that non-party receiving a share in the proceeds of the litigation.
The prohibition on both maintenance and champerty is founded in the public interest. It seeks to ensure the integrity of the litigation process and exclude those with no legitimate interest from the process.
Persona Digital Telephony Ltd v the Minister for Public Enterprise
This was the first case in the Irish Courts to really consider professional third-party litigation funding. The court was reluctant to depart from the long standing position and reaffirmed that maintenance and champerty are prohibited.
The court did however note that a decision of an appellate court might be required to consider whether a move from the traditional position was warranted in light of prevailing public policy considerations.
The case related to the award of mobile phone licences by the Irish state in 1996. That process subsequently became the subject of the Moriarty Tribunal, which was heard over the course of 11 years.
The work around
Where the third party has a lawful or legitimate interest in the proceedings their funding of the litigation will not fall foul of the rules. Classic examples include shareholders funding litigation in which the company is a party.
The High Court expressly noted in Persona that it could not deal with the constitutionality of the rules on maintenance and champerty and their interplay with the question of access to justice. The question remains as to whether there will be legislative change in this space.
The Persona appeal will be heard by the Supreme Court. The case has effectively 'leap frogged' the Court of Appeal. In allowing this the Supreme Court recognised the public importance of the matter. Persona is one of only a handful of cases to successfully 'leap frog' the Court of Appeal since its inception in 2014.
Third party funding of litigation in England and Australia is now permitted. It is not unusual for Ireland to follow developments in these, and other common law jurisdictions, some number of years later.This issue is very much a case of “watch this space”.
In 2015 After The Event insurance was found not to be contrary to the rules of maintenance and champerty. If the Supreme Court in Persona moves away from the long established position a whole new market will emerge in Ireland for parties seeking to fund litigation.
Litigation funding was a featured topic at a recent in-house counsel masterclass hosted by our Dispute Resolution team, entitled 'Business Disputes: Recent Trends & Developments'. To view the slides, video and other information from the seminar, please click here.
The content of this article is provided for information purposes only and does not constitute legal or other advice.