Locations
The High Court has confirmed a long standing position in Ireland that it is unlawful for a third party with no bona fide interest in a dispute to fund another party’s litigation, especially if the third party is doing so in return for a share of the proceeds.
Justice Donnelly of the High Court refused to allow Harbour Fund III LP (“Harbour”) to fund a legal action to be taken by James Boyle of Personal Digital Telephony. Harbour had offered to fund the litigation in return for a share of any award made in favour of the Plaintiff.
The ruling was made in relation to an Application brought by Mr Boyle where he sought to have the Court declare such an agreement valid.
In an Affidavit filed by Mr Boyle he stated that he was “nowhere near” being able to afford the amount needed to adequately bring his claim and needed to rely on third party funding.
While third party funding is common practice in Britain, in Ireland, it falls foul of the law of maintenance and champerty which dates back to 1634.
Maintenance occurs when a third party funds another parties legal action without a bona fide interest in the matter.
Champerty is seen as a subset of maintenance and occurs when the third party funding the action does so with the intent of benefitting financially from an award of damages.
Mr Boyle claimed that his claim was of “great public importance” and the litigation funding agreement should be approved on that basis.
The Court cited numerous Irish cases upholding the law of maintenance and champetry and refused to allow Mr Boyle to continue with his litigation citing a previous judgment of Justice Clarke in Thema International Fund v. HSBC Institutional Trust Services (Ireland) Ltd which stated;
“In Ireland it is unlawful for a third party without an interest to fund litigation of another at all and, in particular, it is unlawful to fund litigation in return for a share of the proceeds”.
This decision highlights the issue of costs continuing to act as a barrier to justice for many litigants who may have strong claims but lack the financial means to pursue them effectively.
Such an important issue will need further clarity through an appeal to a higher court or legislative change through an Act of the Oireachtas.
A full copy of the judgment is available here.
Personal Digital Telephony Ltd v Minister for Public Enterprise (No. 2) [2016] IEHC
Author: Mark Kelly and JP Comerford