Irish Supreme Court holds third party funding prohibited by maintenance and champerty but expresses “disquiet”

24 May 2017

Persona Digital Telephony Ltd v. The Minister for Public Enterprise, Ireland and the Attorney General.

The Irish Supreme Court, in a 4-1 decision, has decided that a third party funding agreement between a plaintiff and an English third party funder, Harbour Litigation Limited is contrary to the laws on maintenance and champerty under ancient statutes from the 14th century to the Maintenance and Embracery Act 1634.  The statutory prohibitions on maintenance and champerty have not been repealed in Ireland albeit no criminal prosecution has been brought under such statutes since the foundation of the State.

The issue arose out of a claim brought by Persona Digital Telephony against Ireland, Denis O’Brien and, as a third party, Michael Lowry, a former Minister for Communications.  The plaintiffs’ case is based on a finding by a Tribunal of Inquiry that a consortium in which Mr. O’Brien had a major shareholding obtained the award of Ireland’s second mobile telephone license in 1996 on foot of improper payments and other benefits furnished on behalf of Mr. O’Brien to Minister Lowry in relation to the latter’s involvement in securing the license for Mr. O’Brien’s consortium.  The plaintiffs were amongst the other bidders for the licence and claim that had the process been run properly, they had a significant chance of being awarded the licence and thus seek to recover damages against Ireland and Mr. O’Brien.  Lacking the funds to prosecute the action, they entered into a third party funding agreement with Harbour Litigation Limited and then brought an application before the Irish High Court seeking a declaration that in entering into such an agreement, the plaintiffs were not engaged in an abuse of process and/or were not contravening the rules on maintenance and champerty.  The High Court ruled against the plaintiffs but in light of the importance of the issue, the Supreme Court certified for a direct appeal on the issue to the Supreme Court.

Four of the five Supreme Court judges held that the funding agreement contravened the rules on maintenance and champerty and that although it had been argued that the court could develop the common law on maintenance in light of modern policy considerations and constitutional issues, including the constitutional right of access to the court, the policy issues involved were sufficiently complex as to be more suited to legislation than to judicial development.

However, a number of the judges expressed in various ways serious disquiet over the fact that a case which has previously been described by the Supreme Court as “absolutely unique, without precedent or parallel” in the history of the State and where there was a “significant public interest in having these matters of high public controversy determined in a court of law,” may not now proceed because of a lack of funding.  In the leading judgment, Chief Justice Susan Denham stated that “I do have a concern that the defendants and third party who vigorously oppose the plaintiff’s motion are beneficiaries if the case does not proceed.” Clarke J. said that “it is difficult to take an overview of the circumstances of this case without a significant feeling of disquiet” and acknowledged that “it is at least arguable that there is a very real problem in practice about access to justice [which] is growing.” McKechnie J. took the unusual step of deferring the making of an order “until such time as the State has been given an opportunity to address the deeply disturbing situation of the appellants being unable to prosecute this action solely because of the continuing existence of ancient principles of law, such as those of maintenance and champerty.” He stated: “It is of immense concern that legislation of such enormous antiquity has the capacity of preventing any merit review of such allegations. Such, however, is what the defendants and the third party in this case agitate, precisely the same parties who would, if the allegations were sustained, be damnified in a manner heretofore unexpressed in the State’s history.  The significance therefore of the decision arrived at on this application and its consequences cannot be overstated.”

He added: “To terminate an action of such magnitude is both highly disturbing and terribly disquieting… Whilst I fully acknowledge the decision of my colleagues and the reasons therefor, the conclusions so reached represents a deeply unsatisfactory outcome.  As emphasised above, given the critical importance of these allegations being ventilated in full, it is unseemly, almost unpalatable, that the State should try to cut these proceedings off at the pass in this manner… The outcome of this case is manifestly troublesome from the perspective of the giving of effect to the constitutional right of access to the courts; indeed, all the more so given the importance of the questions at issue.  On other occasions, one could expect the State to aggressively engage with the legal process by seeking the speediest trial possible so as to vindicate its integrity.  Not so, however, in this case.  Such is to be regretted.”

It remains to be seen whether the legislature will act upon McKechnie J.’s invitation.

Michael M. Collins SC was leading counsel for Persona Digital Telephony Limited.