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Supreme Court rules against Third Party litigation funding in Ireland

On 23 May 2017 the Irish Supreme Court concluded that third party litigation funding is unlawful by reason of the rules on champerty[1]. 

Persona Digital Telephony Limited and Sigma Wireless Networks Limited had brought an application to the High Court on 25 March 2015 seeking approval of an investment agreement with a Cayman Islands litigation funder, Harbour Fund III, LP ("HF3"). The purpose of the agreement was to provide "financial backing for the plaintiffs' legal costs and disbursements that would be incurred by the plaintiffs in the proceedings, including for the purchase of the plaintiffs' adverse costs insurance, and to otherwise protect the assets of the plaintiffs against any adverse costs order …". HF3 had no other connection with the Claimants.

When the High Court refused to approve the agreement, the parties appealed to the Supreme Court (leap-frogging the Court of Appeal on the grounds of public importance).

The Supreme Court dismissed the appeal and held that: the funding agreement was a champertous agreement; champerty remains the law in Ireland so that "a person who assists another's proceedings without a bona fide independent interest acts unlawfully".

In her judgment Chief Justice Denham acknowledged that the defendants and third parties were beneficiaries if the case did not proceed. However, she said that it was not appropriate for the Court to change the law "in the interests of what the Court may perceive to be just". She said that the issue was a "complex multifaceted" one and a matter for legislative analysis, not "in an ad hoc, piecemeal, method".

Third party litigation funding must be differentiated from After the Event ("ATE") insurance. In Greenclean [2] the High Court in Ireland held that the claimant's ATE insurance policy did not amount to maintenance or champerty. However, Judge Hogan stated in his judgment that agreements which involve"trafficking in litigation"would be held void as champertous and contrary to public policy. It appears that the Supreme Court agrees.


[1] Persona Digital Telephony Limited & Sigma Wireless Networks Limited and The Minister for Public Enterprise, Ireland and the Attorney General and, by order, Denis O'Brien and Michael Lowry [2017] IESC 27

[2] Greenclean Waste Management Limited v Maurice Leahy practising under the style and title of Maurice Leahy & Co Solicitors (No 2) and (by order) DAS Legal Expenses Insurance Company Limited [2009/7548P] – decision of Hogan J 5 June 2014

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

Nina Gaston

Partner

I am a partner in DWF's insurance litigation team, specialising in professional indemnity insurance defence litigation on instructions from London and Irish insurers.

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