Persona Digital Telephony Ltd v Minister for Public Enterprise, Ireland

JurisdictionIreland
CourtSupreme Court
JudgeDenham C.J.,Mr. Justice Clarke,Mr. Justice John MacMenamin,Ms. Justice Dunne
Judgment Date23 May 2017
Neutral Citation[2017] IESC 27
Docket NumberAppeal No. 72/2016
Date23 May 2017

[2017] IESC 27

THE SUPREME COURT

Denham C.J.

Clarke J.

MacMenamin J.

Dunne J.

Denham C.J.

McKechnie J.

Clarke J.

MacMenamin J.

Dunne J.

Appeal No. 72/2016

Between/
Persona Digital Telephony Ltd.,

and

Sigma Wireless Networks Ltd.
Plaintiffs/Appellants
and
The Minister for Public Enterprise, Ireland,

and

the Attorney General,

and

by order Denis O'Brien
Defendants/Respondents
and
Michael Lowry
Third Party

Torts – Unlawful maintenance – Champerty – Appellants seeking to appeal on the issue of whether third party funding is unlawful by reason of the rules of maintenance and/or champerty – Whether the fact that the case was described as one of immense public importance was a relevant factor

Facts: The directors of the plaintiffs/appellants, Persona Digital Telephony Ltd and Sigma Wireless Networks Ltd, decided that it was in the best interests of the plaintiffs to enter into an investment agreement with Harbour Fund III, LP, an exempted limited partnership under the laws of the Cayman Islands, referred to as “HF3”, in order to provide financial backing for the plaintiffs’ legal costs and disbursements that would be incurred by the plaintiffs in the proceedings, including for the purchase of the plaintiffs’ adverse costs insurance, and to otherwise protect the assets of the plaintiffs against any adverse costs order made in or relating to any such proceedings. It was a condition of the agreement that the parties enter into a security agreement that was satisfactory to HF3. The agreement was entered into on the 25th March, 2015, between HF3, the plaintiffs, Mr Boyle and Mr McGinley. The plaintiffs contended that the third party funding scheme should be considered in context, and that the question should be asked whether, on the whole, the transaction amounts to unlawful maintenance or champerty, or whether it should be viewed as enabling a claim of public importance to proceed and to ensure the constitutional guarantee of access to justice. The first three defendants/respondents, the State, submitted that maintenance and champerty are criminal offences as well as torts, being common law offences which have had statutory recognition for hundreds of years. The State relied on the Maintenance and Embracery Act 1634. The State submitted that the torts of maintenance and champerty are still extant, and that the courts have defined maintenance and champerty in terms which encompass the funding agreement at issue in this case. The State submitted that the funding agreement was void for illegality, and that the plaintiffs were asking the Court to vary the scope of the offences and torts of maintenance and champerty, which was not within the jurisdiction of the Court. The High Court, on the 12th May, 2016, ordered that the reliefs sought by the plaintiffs be refused. The plaintiffs applied to the Supreme Court for leave to appeal directly from the High Court. On the 25th July, 2016, leave was granted to appeal on the issue of whether third party funding is unlawful by reason of the rules of maintenance and/or champerty.

Held by Denham CJ, Clarke J, MacMenamin J and Dunne J concurring, that the fact that the funding was provided during the course of the proceedings was not a relevant factor. Denham CJ did not consider the fact that the case was described as one of immense public importance to be a relevant factor. However, Denham CJ did consider that third party funding to support a plaintiff (where none of the exceptions apply) is unlawful by reason of the rules on champerty. Denham CJ noted that none of the exceptions arose in this case.

Denham CJ held that the appeal should be dismissed. Clarke J, MacMenamin J and Dunne J also handed down judgments, with McKechnie J dissenting from Denham CJ’s judgment.

Appeal dismissed.

Judgment delivered the 23rd day of May, 2017, by Denham C.J.
Introduction
1

This appeal raises issues in relation to the torts and offences of maintenance and champerty, and to professional third party funding of litigation.

2

Persona Digital Telephony Ltd and Sigma Wireless Networks Ltd., the plaintiffs and appellants in the proceedings, are referred to collectively as ‘the plaintiffs’.

3

The Minister for Public Enterprise, Ireland, the Attorney General and Denis O'Brien are the defendants and respondents in the proceedings, and are referred to collectively as ‘the defendants’. The first three defendants are referred to as ‘the State’. The fourth named defendant is referred to as ‘the fourth named defendant’.

4

Michael Lowry, the third party, is referred to as ‘the third party’.

5

The plaintiffs brought a notice of motion, dated the 25th March, 2015, to the High Court, seeking:-

‘An Order, by way of a Declaration or otherwise, pursuant to the inherent jurisdiction of this Honourable Court and/or Order 34 of the Rules of the Superior Courts, that in entering into this litigation funding arrangement with Harbour Fund III, L.P., the plaintiffs are not engaging in an abuse of process and/or are not contraversing rules on maintenance and champerty’.

Funding Agreement
6

The directors of the plaintiffs consider that the plaintiffs have or may have a cause or causes of legal action against the defendants. The directors of the plaintiffs decided that it was in the best interests of the plaintiffs to enter into an investment agreement with Harbour Fund III, LP, an exempted limited partnership under the laws of the Cayman Islands, referred to as ‘HF3’, in order to provide financial backing for the plaintiffs' legal costs and disbursements that would be incurred by the plaintiffs in the proceedings, including for the purchase of the plaintiffs' adverse costs insurance, and to otherwise protect the assets of the plaintiffs against any adverse costs order made in or relating to any such proceedings. It was a condition of the agreement that the parties enter into a security agreement that was satisfactory to HF3. The agreement was entered into on the 25th March, 2015, between HF3, the plaintiffs, Tony Boyle and Michael McGinley. I shall return to further detail this agreement later in the judgment.

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.

8

Inter alia, the plaintiffs contended that the third party funding scheme should be considered in context, and that the question should be asked whether, on the whole, the transaction amounts to unlawful maintenance or champerty, or whether it should be viewed as enabling a claim of public importance to proceed and to ensure the constitutional guarantee of access to justice.

9

The State submitted that maintenance and champerty are criminal offences as well as torts, being common law offences which have had statutory recognition for hundreds of years. The State relied on the Maintenance and Embracery Act 1634, ‘the Act of 1634’, which was retained by the Statute Law Revision Act, 2007. The State submitted that the torts of maintenance and champerty are still extant, and that the courts have defined maintenance and champerty in terms which encompass the funding agreement at issue in this case. The State submitted that the funding agreement was void for illegality, and that the plaintiffs were asking the Court to vary the scope of the offences and torts of maintenance and champerty, which was not within the jurisdiction of the Court.

The High Court
10

The High Court (Donnelly J.) delivered judgment on the 20th April, 2016, stating, in conclusion:-

‘86. It is important to recall that, the application before the Court is not a constitutional challenge; the Court has not been asked to examine the constitutionality of the offences and torts of maintenance and champerty and no declaration of unconstitutionality has been sought. The resolution of any issues regarding constitutional rights, including access to justice or indeed whether these ancient torts and offences are truly ‘in accordance with law’ awaits any such constitutional challenge. On the basis of the relief claimed in the notice of motion, and in circumstances where the Court is of the view that the ingredients of the offences (and also the torts) of maintenance and champerty have been stated clearly by the Superior Courts of Ireland to prohibit professional third party funding, there are no grounds for entering into an examination of whether the interpretation given to the torts and offences is in accordance with the Constitution.

87

In conclusion, maintenance and champerty continue to be torts and offences in this jurisdiction. From the Irish authorities abovementioned, there is a prohibition on an entity funding litigation in which it has no independent or bona fides interest, for a share of the profits. It is the view of this Court that Harbour III L.P., as a professional third party litigation funder, has no independent interest in this present litigation. Furthermore, 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 extent to afford this Court the opportunity to characterise this funding arrangement as acceptable. While the plaintiff has pressed upon this Court that there is a lack of clarity in this regard, that submission is not accepted in view of the consistent line of authorities to the contrary.’

11

Thus, the High Court, on the 12th May, 2016, ordered that the reliefs sought by the plaintiffs be refused.

Determination
12

The plaintiffs applied to this Court for leave to appeal directly from the High Court, a ‘leapfrog appeal’. On the 25th July, 2016, by Determination [2016] IESCDET 106, leave was granted. This Court granted leave to appeal on the issue of whether third party funding is...

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2 firm's commentaries
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