The High Court recently held that the Plaintiffs to an action could not avail of third party litigation funding as it amounted to “champerty” and “maintenance” which are unlawful in Ireland.

Background

The Plaintiffs sought to challenge the manner in which the State’s second mobile phone licence was allocated to Esat Digifone in 1995. In order to fund the challenge, the Plaintiffs engaged a UK-based third party litigation funding company, Harbour Litigation Funding. This company offered to fund the Plaintiffs’ litigation in return for a percentage share of any award of damages payable to the Plaintiffs upon a successful outcome.

The State challenged the lawfulness of the Plaintiffs’ use of Harbour as a source of funding on the basis that such funding amounted to champerty and maintenance. Maintenance is the support of litigation, by a stranger to the litigation, without just cause. Champerty is an aggravated form of maintenance where the litigation is supported in return for a share of the proceeds.

The offences of champerty and maintenance derive from a number of medieval Statutes which have not been repealed in this jurisdiction.  

Legal Principles

In resisting the State’s application, the Plaintiffs relied on the recent High Court decision inGreenclean Waste Management Ltd. v. Maurice Leahy & Co. Solicitor (No. 2) [2014] IEHC 314 which deals with After The Event (“ATE”) insurance which is an insurance policy taken out by a Plaintiff to protect itself against an order for legal costs in the event that it is unsuccessful in litigation.

Despite the similarities between ATE and third party funding, the High Court in Greenclean held that ATE is “a legitimate service by providing access to justice and this service cannot properly be regarded simply as either investing in or trafficking of litigation.” In contrast, the High Court in this case found that the direct funding of litigation was contrary to Irish law.

The Court distinguished the “legitimate service” provided by ATE insurance companies with the services offered by third party funding companies. It found that third party funding contained an element of legal impropriety as it was carried out with a view to sharing of the profits of the action. This amounted to champety which was not permissible under Irish law.

Persona Digital Telephony Limited and Sigma Wireless Networks Limited v The Minister for Public Enterprise, Ireland, The Attorney General and Denis O’Brien The High Court [2016] IEHC 187 20 April 2016