For the first time the Irish High Court has ruled on the validity of a non-party funding agreement, affirming the prohibition on third party professional litigation funding.
Litigation funding is where a third party provides financing to ensure that a case proceeds. Some such funding is permitted in Ireland, depending on the funding arrangement and relationship between the parties. In the case in question, the Court was asked to consider whether a professional litigation funding arrangement – where the funds are provided by a commercial organisation – contravened rules on maintenance and champerty. Maintenance is the funding of litigation by someone with no direct or legitimate interest in the case, which champerty is the funding of litigation in return for a share in the proceeds of the litigation. Both have been criminal and civil offences in Ireland in legislation dating back to the 1600s.
Observing that maintenance and champerty continue to be torts and offences in this jurisdiction, the Court ruled that there was a prohibition on any entity funding litigation in which it had no independent or bona fide interest for a share of the profits. The plaintiff submitted that the question should be asked whether, in the round and on the whole, the transaction amounted to unlawful maintenance or champerty, or whether it would enable a claim of great public importance to proceed and ensure the attainment of the constitutional guarantee of access to justice.
While the Court acknowledged that the law should consider contemporary legal realities so as to guard against any disproportionate interference with the rights of individuals to access justice, it had not been asked to consider the constitutionality of the Irish rules of maintenance and champerty. As such, the wider issue remains unanswered and the final determination of issues around access to justice, and whether maintenance and champerty are truly in accordance with Irish law, will await such a challenge.
The attitude of Irish courts to third-party litigation funding, however, is seen to be evolving with the decision in Greenclean Waste Management v Leahy, where the Court of Appeal upheld ‘After the Event’ insurance, finding it not to be in breach of maintenance and champerty rules. As this judgement was made in the absence of any legislative change to deal with the issue of litigation funding generally, an update to the law in this area is indeed possible.
Click here for the judgment in Persona Digital Telephony Ltd v the Minister for Public Enterprise.
Click here for a previous Bulletin article on Greenclean Waste Management.