Supreme Court not Seduced by Third Party Litigation Funding Arguments

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Supreme Court not Seduced by Third Party Litigation Funding ArgumentsHigh Court rejected Third Party Litigation Funding. This case arose as a consequence of the plaintiffs' allegations that there was impropriety in a tender process resulting in the award of a mobile phone licence to Esat Digifone in 1996.

The plaintiffs were unsuccessful in their bid, alleged a resulting loss and so looked to sue a number of parties for that loss.  However, financial constraints led to the plaintiffs seeking to avail of litigation funding from a third party and the ensuing application for a declaration by the High Court as to the validity of the proposed funding arrangement, given the existence of the torts (and criminal offences) of maintenance and champerty in this jurisdiction.

Donnelly J.  examined the long history of the doctrines of maintenance and champerty and held that, while some of the more recent cases appeared to suggest that the doctrines needed to be developed to take into account modern realities, the majority of the pronouncements found that the third party funding of litigation continued to be prohibited on public policy grounds.

Appeal to the Supreme Court

This case was then "leap-frogged" to the Supreme Court on appeal by the plaintiffs. In a majority of 4-1 the Supreme Court recently dismissed the appeal, upholding the torts of maintenance and champerty and the strict prohibition on third party litigation funding.

The Supreme Court examined previous Irish case law, case law from other jurisdictions and the legislative history of the doctrines. In coming to its conclusions, they did not accept the arguments put forward by the plaintiffs, which included:

  1. That the plaintiffs were not inviting the Court to abolish the doctrines of maintenance and champerty, but rather asking the Court to analyse the elements of maintenance and champerty and to determine whether the present funding agreement is likely to bring about the mischief that maintenance and champerty are designed to protect.
  2. That public policy evolves and that this third party agreement has not stirred up litigation but rather the third party agreement had arisen after the litigation had commenced.
  3. That it was part of the function of the Court in evaluating a common law doctrine to look at it in modern circumstances and modern times.

Chief Justice Denham J. held that:

"The Court was asked not to be seduced into changing the law in the interests of what the Court may perceive to be just. It may be said that in light of modern issues, such as Ireland being an international trading State, issues arising on international arbitrations, and in the Commercial Court, it might well be appropriate to have a modern law on champerty and the third party funding of litigation. However, that is a complex multifaceted issue, more suited to a full legislative analysis. This is re-enforced by the retention of the old statutes by the Statute Law Revision Act 2007, and by the work of the Law Reform Commission."

Constitutional Issues & Access to Justice

The Supreme Court was not unaware of the consequences of this ruling or of the potential injustice to future plaintiffs.  However the Court noted that there can be other ways of pursuing litigation, including lawyers taking cases pro bono, "no foal no fee" arrangements and civil legal aid.

The three other Supreme Court judges wrote concurring opinions each of whom expressed varying concerns on the constitutional issue of access to justice and the nature of maintenance and champerty.

Clarke J., in particular, expressed concern about the effectiveness of the constitutional right of access to justice. He held "it is difficult to take an overview of the circumstances of this case without a significant feeling of disquiet. Serious allegations are made against the State and others".  He considered various developments in terms of the increasing complexity of modern laws and the demands of the common law system that he held: "demonstrate that it is at least arguable that there is a very real problem in practise about access to justice….If that be so there may well be an argument, based on the above analysis, that there is an increasing problem emerging in relation to that constitutional entitlement."

He left open the possibility that, whereas normally the choice of a remedy for breach of constitutional rights is a matter of policy (and therefore for the Oireachtas), circumstances could arise where; "after a definitive finding that there had been a breach of constitutional rights but no action having been taken by either the legislature or the government to alleviate the situation, the courts, as guardians of the Constitution, might have no option but to take measures which would not otherwise be justified."

Dunne J. examined the criminal status of the offences but held that as their constitutional status as offences had not been challenged in this case it was a question for the future.

The Future for Third Party Litigation Funding

Many observers of the developments in this area will be disappointed by the outcome of this case, although not surprised. In many jurisdictions litigation funding has been given a statutory basis and consequentially there has been a rapid development of litigation funding as an industry abroad. Whilst the concept continues to raise legitimate concerns in Ireland, it can provide large numbers of claimants, who would otherwise be unable to pursue legitimate grievances, with access to the courts. Further, provisions have been put in place in other jurisdictions to ensure that funding cannot be used to pursue abusive litigation.

The Supreme Court has invited the Oireachtas to develop the law here in a coherent manner but, as MacMenamin J. noted in his judgment, this may be a long process.

See previous William Fry article on the High Court Judgment - here.

Supreme Court Judgment Persona Digital Telephony Limited & Sigma Wireless Networks Limited v The Minister for Public Enterprise, Ireland and the Attorney General [2017] IESC 27.

Contributed by Catherine Thuillier of William Fry.