In GreencleanWaste management Ltd v Maurice Leahy p/a Maurice Leahy & Co Solicitors, the High Court was asked to decide whether or not, as a matter of principle ATE (after the event) insurance was unlawful as being contrary to the law of champerty and maintenance. ATE insurance is provided by the insurance industry to cover a plaintiff’s potential exposure to his opponent’s legal costs if the plaintiff loses litigation and is ordered to pay his opponent’s legal costs.
The law of maintenance and champerty makes it unlawful for a third party to support litigation when the third party does not have a direct or legitimate interest (maintenance) or to provide such support in return for a share in the proceeds of the litigation (champerty). The Court concluded that the provision of an ATE insurance policy did not amount to champerty or maintenance and in fact served an important purpose in that it facilitates access to justice for persons who might otherwise be denied such access.
Despite the High Court finding that ATE insurance did not violate the law of champerty or maintenance, it warned against any agreements that would give rise to trafficking in litigation. That being said, the High Court stated that the law of maintenance and champerty is not frozen by reference to social and policy conditions which pertained hundreds of years ago and the law must accordingly move on and assess whether by reference to modern conceptions of propriety, ATE amounts to trafficking in litigation.
According to Maurice Phelan and Ailbhe Gilvarry of Mayson Hayes and Curran, the Court’s comments could have implications for future funding of litigation in Ireland. They believe the Court’s comments regarding access to justice and the continuous assessment of third party funding of litigation “may tempt a brave commercial funder into an untapped market”.
Click here to read a summary of the case on the Mayson Hayes and Curran website.
The landscape for third party funded litigation is quite different in other common law jurisdictions. In the UK the tort of maintenance was abolished in 1967. In Australia, the doctrines of maintenance and champery were also abolished. Today, third party funded litigation of class actions is common place in Australia. According to Annette Hughes and Christie Jones of Corrs Chambers Westgarth “litigation funding of class actions is economically attractive to third party litigation funders as it allows for the accumulation of potential claims and therefore the multiplications of potential returns.
Click here to read an article outlining the landscape for third party litigation funding in Australia.