Commercial Litigation Funding – Headed to CFA?

As observed in previous Industry Insights, recent debate about third party funding has focused on arbitration in Hong Kong (and mediations covered by the Mediation Ordinance). However, the issue of third party funding for commercial litigation has not gone away and there have been genuine differences of view as to whether (in the local circumstances of Hong Kong) any progress might come about as a result of (for example) legislative reform or a “test case”.

Just as with some other common law jurisdictions, that do not expressly provide for third party funding as a matter of legislation, a “test case” appears to have come to Hong Kong and it will be interesting to see where it is headed.

In Raafat Imam v Life (China) Co. Ltd & Ors [2018] 1852, the Court of First Instance considered a proposed litigation funding agreement between the plaintiff and a well-known professional litigation funder (a listed company in Australia). The proposed agreement had not yet been entered into by the plaintiff although the litigation had already commenced. The judgment is quite long, and much of it is obiter, but the key determination (at paragraph 98) is the court’s refusal to grant the plaintiff’s application for a declaration (to the effect) either that the proposed agreement did not contravene the torts and crimes of maintenance and champerty in Hong Kong or, alternatively, that it came within a recognised “access to justice” exception.

The judgment makes for an interesting read and offers some insights into (among other things) -

  • the history of maintenance and champerty in Hong Kong (paras. 47–52);
  • the state of progress with third party funding for arbitration in Hong Kong (paras. 53–54);
  • common law developments in jurisdictions such as Ireland and the Cayman Islands (paras. 79–90); and
  • aspects of the world of professional litigation funding and of a redacted funding agreement (for example, paras. 114–132). For more, with respect to this last point, readers are referred to Industry Insights, December 2015 (“Lunch with a Funder”).

To date, exceptions to maintenance and champerty in Hong Kong have been limited; they have tended to arise in an insolvency context or to focus on so-called cases of legitimate commercial interest or “access to justice” (for example, “pure funders”).

At the time of writing it is not known whether the plaintiff will launch an appeal. If this case is typical of test cases in some other jurisdictions the plaintiff and his lawyers may already be considering their points of law for a final appeal. If so, much may turn on (among other things) whether the circumstances of the plaintiff’s lack of resources are the right “test case” to pursue in order to forge an exception to the laws of maintenance and champerty, especially where there is no prior commercial relationship between the funder and the plaintiff.

In the meantime, a plaintiff in these circumstances is left with a dilemma of how to fund the case.

Jurisdictions: 

Partner, RPC

Senior Consultant, RPC