Third Party Funding: Tales from the Emerald Isle

Given the similarities with regard to the laws of maintenance and champerty in Ireland and Hong Kong, and the “sisterhood” of the common law, the recent judgment of the Irish Supreme Court in Persona Digital Telephony Ltd & Anor v The Minister for Public Enterprise, Ireland & Ors [2017] IESC 27 should be of considerable interest to those who follow the debate about the merits of professional (“commercial”) third party funding for litigation.

As the leading judgment of the Chief Justice of Ireland notes (judgment of The Hon. Mrs. Susan Denham, at para. 7):

“This is the first case to come before the Court which raises the issue of the potential use of a third party professional funding agreement to support a party in legal proceedings.”

In short, the Irish Supreme Court refused to grant a declaration that an investment agreement, entered into during the course of proceedings and providing for the third party funding of the claim, would not contravene the laws of maintenance and champerty. In doing so, the court held that the torts and crimes of maintenance and champerty survived as a matter of statute and common law in Ireland. It did not matter that there appeared to be have been no relevant prosecution in Ireland in living memory or that the statute concerned was ancient.

It is important to note that while the plaintiffs (the appellants) were seeking declaratory relief they were not challenging the doctrines of maintenance and champerty. There was also no suggestion of any wrongdoing on their part.

The Supreme Court’s decision is primarily underpinned by public policy considerations and it is clear that the outcome would have been the same even if the third party funding agreement had been entered into before the proceedings. As a result it appears that, for the foreseeable future, reform in this area in Ireland will be matter for legislation.

The case is relevant in Hong Kong, whose laws of maintenance (Winnie Lo v HKSAR, FACC No. 2/2011) and champerty (Unruh v Seeberger & Anor, FACV No. 10/2006) survive as a matter of common law with respect to Hong Kong court proceedings. Given that Ireland has not adopted statutory reform in this area (unlike, for example, England & Wales) it is interesting to note, as a matter of common law convention, the part that both Hong Kong cases played in the Irish Supreme Court’s deliberations; both cases having been considered (particularly, Unruh).

Short of a legitimate commercial interest (as opposed to a professional third party funding interest) third party funding for litigation in Hong Kong remains unlawful. The miscellany of exceptions that exist in Hong Kong are a result of case law developments.

As previously noted in Industry Insights, progress with respect to commercial third party funding for litigation in Hong Kong is stalled. Legislative reform in this area is unlikely in the foreseeable future; particularly, given the local circumstances of Hong Kong. Efforts for now are concentrated on the coming into force of the Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Ordinance 2016, passed by the Legislative Council on 14 June 2017.

Jurisdictions: 

Partner, RPC