Supreme Court says Third Party Funding a Matter for the Legislature

The Supreme Court today (23 May 2017), by a majority of four to one, upheld a High Court ruling which found that commercial funding of the litigation in Persona Digital Telephony Ltd & anor v The Minister for Public Enterprise, Ireland & ors would amount to maintenance and champerty and was prohibited by law. The Supreme Court observed that issues surrounding litigation funding were complex matters of public policy, and it was for the Legislature to decide on the approach to be taken.

Background

The High Court in Persona* held that it was contrary to public policy and an abuse of process for a third party to provide financial assistance to litigation in return for a share in the proceeds unless the third party had a genuine interest in the litigation. In doing so, it cited the long established rules against "Maintenance" and "Champerty".

Maintenance is the giving of assistance, by a third party, who has no interest in the litigation, to a party in litigation. Champerty is where the third party, who is giving assistance, will receive a share if the litigation succeeds. 

The question before the Supreme Court was:-

“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.”

Denham CJ (with whom Clarke, McMenamin, and Dunne JJ agreed) confirmed that the torts and crimes of maintenance and champerty remained extant in Ireland, noting that there had been no constitutional challenge to those laws in the case before the Court. She held that the Persona funding agreement was champertous and did not fall within any exceptions in the case law, such as a funder with a sufficient connection to the plaintiff. 

Denham CJ refused the plaintiffs' invitation to develop the common law on champerty pointing out that this would be more suited to legislation where parameters could be established and the law developed in a coherent fashion. Likewise, Clarke J noted out that difficulties in funding long and complex cases might have implications for the constitutional right of access to the courts but noted that there were many ways in which these difficulties could be dealt with, including third party funding. It followed therefore, that the choice of solution was a policy matter for the Legislature. 

While the decision showed that, absent legislation, litigation funding remains impermissible in Ireland there were some issues with regard to litigation funding which were not resolved by the decision. Clarke J observed that the matter could be revisited by the Courts in exceptional circumstances such as a proven breach of constitutional rights which could not otherwise be vindicated.

Both Dunne and McMenamin JJ noted a possible issue as to whether champerty or maintenance continued following the enactment of the 1937 Constitution. Dunne J also commented on the lack of clarity of the ingredients of the offences of maintenance and champerty noting that while there was no constitutional challenge before the Court such constitutional issues might have to be litigated another day. Finally, Menamin J also noted the hypothetical arguments before the Court whereby the funders might acquire a shareholding in the plaintiff companies with the intention of procuring funds to process the litigation observing that this issue remained unresolved. 

The minority judgment of McKechnie J expressed concern that a case of great public importance could not be litigated due to the rules on champerty and maintenance. His approach, which was rejected by the majority, was to defer making any order until the State was given an opportunity to address the situation.

Comment

While, as noted above, the decision left some issues with regard to third party funding of litigation unresolved, including the possibility of a constitutional challenge to the prohibition of maintenance and champerty, it appears unlikely that litigation funding will be permitted in Ireland in the foreseeable future unless the legislature intervenes to permit the practice.

For further information please contact a member of the Litigation & Dispute Resolution Team.

Date Published: 23 May 2017