Irish Supreme Court rejects litigation funding

Ireland remains closed to litigation funding, following a majority ruling by the Supreme Court that Harbour Litigation Funding could not fund the long-running Persona litigation against the government, a former minister and a businessman.

The Supreme Court of Ireland has dismissed the appeal in Persona Digital Telephony v Minister for Public Enterprise, upholding the Irish ban on third-party litigation funding.

The 4-1 decision by the panel of five judges effectively ensures that third-party funding could now only be legalised by legislation by the Oireachtas, Ireland’s National Parliament.

Chief Justice Susan Denham and Justices Frank Clarke, John MacMenamin and Elizabeth Dunne all ruled in favour of the government and its co-respondents Denis O’Brien and Michael Lowry, while Justice Liam McKechnie dissented.

Persona Digital Telephony and Sigma Wireless Networks brought the case, seeking permission to fund their litigation against the government, former minister of communications, Michael Lowry, and businessman, Denis O’Brien.

The matter goes back to the awarding of a mobile phone operator’s licence to Esat Digifone (now part of Three Ireland) in 1996. A 2011 judicial enquiry, the Moriarty Tribunal, found that the then minister of communications had received payments from O’Brien, the owner of Esat, in return for assistance in winning the bid ahead of its competitor, Persona, owned by Tony Boyle.

Persona launched litigation seeking compensation, but unable to pay for the case on its own, reached a funding agreement with Harbour Litigation Funding in March 2015.

In April 2016, the Irish High Court turned down an application from Persona to permit funding, and in July that year, a panel of Denham, McKechnie and Dunne decided that “exceptional circumstances” made the case suitable for a ‘leapfrog appeal’ to the Supreme Court, bypassing the Court of Appeal.

QUESTIONS AND ANSWERS

Eversheds Sutherland’s Dublin head of dispute resolution and litigation Norman Fitzgerald represented Persona, joined by fellow partner Neil O’Mahony, senior associate Eoin MacAodha and associate John David, instructing barristers Michael Collins SC, Colm Ó hOisín SC and Nathan Dunleavy.

Collins argued that as the case was already ongoing and a matter of public importance, it was exceptional and should be considered outside of the ban on funding.

He asked the court not to abolish maintenance and champerty, but to consider whether or not funding falls within those offences, which have been part of law since the Maintenance and Embracery Act of 1634, a law which was retained as recently as 2007 by the Statute Law Revision Act.

Collins also asked the court to consider Ireland’s position within the international dispute resolution world, in which funding is an increasingly common part.

The government was represented by the Chief State Solicitor’s Office, instructing John O’Donnell SC, Conleth Bradley SC and Michael Hourican.

In response O’Donnell argued that the law was clear that champerty and maintenance were still offences and that no specific or exceptional circumstances applied in this case. He said any decision about whether to keep the law as it was, was a question for the legislature, and that the plaintiffs should still be able to continue their case, even without funding.

The court also heard representations from Paul O’Higgins SC, who was instructed alongside James O’Callaghan SC and Darren Lehane by Meagher Solicitors on behalf of O’Brien, while Niall Buckley appeared for Lowry and made a particularly strong impression on Clarke and MacMenamin with his argument against the commoditisation of litigation.

The court found that the funding arrangement with Harbour was champertous and dismissed the appeal. Denham, in her judgment, said Harbour had “no connection with the plaintiffs, apart from an agreement to fund their proceedings. It is, thus, a champertous agreement as described in case law by the High Court and this court over the last four decades”.

The plaintiffs had cited the acceptance of funding in other common law jurisdictions, but Denham’s judgment dismissed the overseas case law as “not very helpful” and said Ireland’s place in the international dispute resolution world was a matter for the Oireachtas: “That is a complex multifaceted issue, more suited to a full legislative analysis,” said Denham.

Nonetheless, the Chief Justice did acknowledge that the ruling was imperfect because “the defendants and third party who vigorously opposed the plaintiffs’ motion are beneficiaries if the case does not proceed”, and did express hope that an alternative method of supporting the case could be found, such as through lower costs.

Clarke echoed these concerns, speaking of his “significant feeling of disquiet” due to “the very real possibility that this case might not go to trial because of the difficulties encountered by the plaintiff/appellant in being able to run the case without third-party funding”.

His remarks appeared to leave the door open for a wider consideration of access to justice: “There may well be an argument that, in modern circumstances, it may be necessary to consider whether the right of access to the court needs to be looked at on a broader basis.”

REACTION

In a statement, Susan Dunn, Harbour’s head of funding, said: “We will carefully consider the implications of the judgments in this matter. Both we and the claimants are disappointed by today’s outcome. We spent a lot of timing reviewing this claim and still believe it to be one of the most meritorious cases we have ever considered, and one in the public interest, and that it should be pursued.”

Dunn continued: “It is a shame if meritorious claims such as this still cannot be pursued in Ireland, simply for lack of funding.”

The result was expected says Peter Bredin, a Dublin-based litigator with Dillon Eustace, because the law is clear and “because of the separation of powers under constitutions, the court was not going to be able to re-write the law or say that this law did not apply”.

Steven Friel, chief executive of Woodsford Litigation Funding and the only Irish lawyer to lead a major litigation funder, describes the ruling as “the easy option” because “there is a certain amount of complexity in discarding these ancient principles of champerty and maintenance”.

“They have decided that it is better for the Parliament, the Oireachtas, to do it, and that is the easy option for a court in a situation like this,” he explains.

Friel tells CDR that as a funder he is disappointed by the decision, given developments in other common law jurisdictions like Hong Kong and Singapore: “The modern trend is to embrace litigation funding as a valid access to justice tool and it is disappointing from a business perspective that Ireland is going to be potentially off-limits for us for another while.”

As a lawyer, “it is equally disappointing”, he continues, “that the defendants are effectively going to get off scot free, because the claimant here doesn’t have the financial wherewithal to bring what is potentially a very good claim that goes to important issues of alleged political corruption and such a good claim is now going to go unlitigated by way of ancient principles which have no place in modern dispute resolution”.

Clarke’s judgment observed that as “guardians of the constitution” the courts might have to take “measures which would not otherwise be justified”. Bredin interprets this as meaning that “if someone has a strong enough case and is willing to take a constitutional challenge to the current law, the Supreme Court has opened a door” to a future challenge, “in the event that steps were not taken by the legislature to address the laws of maintenance and champerty as they stand”.

However, Friel sees little chance that the court will reconsider in the future, saying the ruling is clear “that subject to Parliament stepping in, litigation funding is simply prohibited”.

The decision puts the ball firmly in the Oireachtas’ court for legalising funding and he says “there is certainly an appetite from legal professionals” for a change in the law, particularly from Dublin claimant firms.

“You cannot maintain a position as a centre for international dispute resolution without being fully embracing of litigation funding. Now, it is a separate question of whether Parliament has an appetite for this,” he acknowledges.

Bredin agrees, telling CDR it will “give a fairly large prompt to the legislature to address the situation” although “whether the legislature takes the prompt or not is another thing”.

He is less certain about the demand for change: “I am not aware of a big demand from commercial litigators around the city, of an urgency in getting litigation funding. It probably would be welcomed by us all, but I don’t think it is preventing cases from coming on.”

Ultimately, Friel rues not only the failure to accept funding, but that it will likely halt a case of public significance in Ireland: “It is perhaps sad that it is actually a question of political corruption that is at play in the Persona case [as was alleged in the findings of the Moriarty Tribunal] and that is going un-litigated by reason of champerty and maintenance rules.”

CREDIT: CDR News

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