30 08 2017 Insights Litigation & Dispute Resolution

Persona case and the law of maintenance and champerty in Ireland

Courthousecolumns LR

By John C. Jermyn & Neil Nolan
12 June, 2017

On 23 May 2017 the Supreme Court delivered its highly anticipated judgement in the case of Persona Digital Telephony Limited and Another v The Minister for Public Enterprise, Ireland and Others [2017] IESC27 (“Persona”). By a 4/1 majority (McKechnie J. dissenting) the Supreme Court upheld the law that precludes persons with no interest or connection in proceedings from funding the litigation of one of the parties. The Court held that legislation prohibiting such litigation funding arrangements was still in force in Ireland and due to the separation of powers, the courts were unable to make a ruling contrary to legislation.

Persona concerned the granting of mobile phone licenses to Esat Digifone in the late 1990’s. Persona Telephony Limited and a Second Party, who had both failed in their bid for such a licence, had sued citing irregularities in the tender process. Persona Telephony Limited subsequently ran into financial trouble while undertaking this litigation, and entered into an agreement with a British firm that provided funding to claimants in the UK in return for a share of the proceeds of any successful claim. Questions remained as to whether such arrangements were contrary to the laws of maintenance and champerty in Ireland. Due to this legal uncertainty, the Plaintiffs sought a declaration from the High Court that such an arrangement was not illegal in this jurisdiction.

Maintenance and Champerty in Ireland
Maintenance in the context of litigation means the provision of funding for litigation by a person who has no legitimate interest in the proceedings. Champerty is the funding of litigation by such a person, but in return for supplying funding that person receives a portion of the proceedings if the litigation is successful. Maintenance and champerty have long been considered to be contrary to legal principles both here and abroad, where the legislation prohibiting such activity in Ireland dates back to the 14th century.

High Court Decision in Persona
In the High Court Donnelly J. considered the nature and history of maintenance and champerty in Ireland. The Plaintiff sought to rely on the fact that “After the Event” insurance was legal in Ireland and was a form of maintenance. After the Event insurance cover is a form of insurance that is taken out at the start of the litigation process, and covers litigation costs in the event that the party taking out such insurance is unsuccessful in litigation. The High Court rejected the Plaintiff’s application drawing a distinction between After the Event insurance as being a legitimate service that aids in access to justice, and the maintenance and champerty which was considered to be trafficking in litigation. The Plaintiffs also argued that this was a new factual situation within the common law, and that the Court should find that the kind of litigation funding that was occurring in this case would not cause the mischief that the rules against maintenance and champerty were concerned with. This argument, too, was rejected with Donnelly J. who stated

“It is clear that third party funding arrangements cannot be viewed as being consistent with public policy in this jurisdiction or that modern ideas of propriety in litigation have expanded to such an extend to afford this Court the opportunity to characterise this funding arrangement as acceptable”.

The Plaintiffs then appealed directly to the Supreme Court in order to establish

whether third party funding, provided during the course of proceedings (rather than at their outset) to support a Plaintiff who was unable to progress a case of immense public importance, is unlawful by reason of the rules on maintenance and champerty”.

The Supreme Court Decision
Denham C.J. gave the lead judgement in this case, with Clarke J., MacMenamin J., and Dunne J. agreeing.

Denham C.J. stated that the rule against maintenance and champerty is still enforced in this jurisdiction, and that the Plaintiffs in the Persona proceedings had not come within any exceptions to the rule. She commented that she did not think that it made a difference whether the funding came before or during the proceedings.

The Court held that the Plaintiff’s appeal be dismissed. The company that agreed to fund the Plaintiff’s litigation had no interest in the litigation save for the agreement to fund the litigation. Such an agreement was therefore champerty and contrary to statute and also common law. Denham C. J. was unequivocal in her judgement, stating “Champerty remains the law in the state. It has been described clearly in recent cases. A person who assists another’s proceedings without a bona fide independent interest acts unlawfully”.

The Supreme Court decision in Persona is a clear restatement of the law concerning litigation funding in Ireland. Maintenance and champerty remain unlawful in this jurisdiction, and the statutes dating back to the 14th century prohibiting such behaviour remain in force.

It is a matter for the legislature to change the law as it stands and it is unknown at this time whether the Oireachtas will engage in any reform of this area. The Supreme Court in its decision also left open the possibility that a constitutional challenge may be brought against the current laws against maintenance and champerty. While the Persona decision is unequivocal in stating that third party litigation funding remains illegal in Ireland (with some limited exceptions), it remains to be seen whether any legislative changes will ultimately change this position.

For more information on the content of this Insight, please contact a member of our Litigation & Dispute Resolution department.

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