The Supreme Court recently gave judgment on a third party litigation funding aspect of a case concerning the award of the State’s second mobile phone licence in the mid-1990s to Esat Digifone.
The issue decided by the Supreme Court was whether third party funding, provided during the course of legal proceedings to support a Plaintiff who was unable to progress a case, is unlawful by reason of the rules on maintenance and champerty. The Plaintiff companies, Persona Digital Telephony Ltd and Sigma Wireless Networks Ltd had entered into an agreement with Harbour Fund III, LP (“Harbour”) in order for the latter to provide financial backing for the Plaintiffs’ legal costs in pursuing a claim against the State in relation to the award of the mobile telephone licence.
As was pointed out by Chief Justice Denham in her Judgment, aside from being the funder of the litigation, Harbour had no connection whatsoever with the Plaintiff companies.
The Chief Justice traced through the lineage of the ancient legal concepts of maintenance and champerty. As was stated by the Chief Justice in her Judgment:
“Maintenance may be defined as the giving of assistance, by a third party, who has no interest in the litigation, to a party in the litigation. Champerty is where the third party, who was giving assistance, will receive a share of the litigation succeeds.” Sic
The Chief Justice identified the fact that the Statutes which created both the torts and crimes of maintenance and champerty have been retained in Ireland and can trace their origins as far back as the 14th century.
Having discussed the relevant Irish case law on the subject the Chief Justice concluded that the agreement between the Plaintiffs and Harbour is a champertous agreement and does not benefit from any exception. The Chief Justice found that champerty remains the law in the State and therefore the litigation funding agreement was unlawful. The Chief Justice went on to find that the fact that the third party funding was provided during the course of the proceedings as opposed to being in place at the commencement of the proceedings was not a relevant factor. Nor did she consider the fact that the case was described as one of immense public importance to be a relevant factor.
A number of the observations made by the other Judges of the Supreme Court who wrote concurring Judgments are noteworthy. Mr Justice Clarke pointed to ways in which the barriers presented by the law of champerty could be legitimately overcome including some form of legitimate third party funding. Ms Justice Dunne drew attention to the fact that there have been no prosecutions since the foundation of the State and possibly longer for the criminal offences of champerty and maintenance. She further raised queries over what exactly are the constituent elements of the criminal offences.
It is noteworthy that the Chief Justice cited the High Court Judgment in Thema International Fund v HSBC Institutional Trust Services (Ireland)  3 I.R. 654 wherein Mr Justice Clarke upheld a third party funding arrangement as the funder was found to have had sufficient connection with the Plaintiff to take the arrangement outside the realms of champerty. The Chief Justice distinguished Thema from the Persona case on the basis that there was no such connection between Harbour and the Plaintiffs in the case.
The constitutionality of the criminal offences of maintenance and champerty remains to be tested. Third party funding arrangements are not automatically unlawful in Ireland.
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For further information, please contact Matthew Austin at Hayes solicitors firstname.lastname@example.org.
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About the Author
Matthew is a partner in the Commercial & Business team at Hayes solicitors. Matthew advises clients in relation to all forms of commercial dispute resolution and provides general commercial advice. Matthew also advises clients on general commercial matters including; contract law, intellectual property/ copyright, media law, and general commercial agreements.