Thema Intl. Fund v HSBC Inst. Trust Services (Ireland)

• Jurisdiction: Ireland
• Judgment Date: 20 September 2011
• Docket Number: [2008
• Date: 20 September 2011
• Court: High Court

[2011] IEHC 357,

High Court

[2008 No. 10983 P]

Thema Intl. Fund v. HSBC Inst. Trust Services (Ireland)

Thema International Fund plc

Plaintiff

and

HSBC Institutional Trust Services (Ireland) Limited, Defendant and Thema Asset Management Limited and 2020 Medici AG,Third Parties

Cases mentioned in this report:-

Abraham v. Thompson [1997] 4 All E.R. 362.

Aforge Finance S.A.S. v. HSBC Inst. Trust Services (Ireland) Ltd. [2009] IEHC 565, [2010] 2 I.R. 688; [2011] IEHC 6, (Unreported, High Court, Clarke J., 10th January, 2011).

Chartspike Pty. Ltd. v. Chahoud [2001] NSWSC 585, (Unreported, Supreme Court of New South Wales, 3rd July, 2001).

Cullen v. Wicklow County Manager [2010] IESC 49, [2011] 1 I.R. 152.

Hill v. Archbold [1968] 1 Q.B. 686; [1967] 3 W.L.R. 1218; [1967] 3 All E.R. 110.

Kalix Fund Ltd. v. HSBC Institutional Trust Services (Ire) Ltd. [2009] IEHC 457, [2010] 2 I.R. 581.

Merchantbridge & Co. Ltd. v. Safron General Partner I Ltd.[2011] EWHC 1524 (Comm), (Unreported, High Court of England and Wales, Judge Mackie Q.C., 15th June, 2011).

Moorview Developments Ltd. v. First Active plc[2011] IEHC 117, [2011] 3 I.R. 615.

O'Keeffe v. Scales [1998] 1 I.R. 290; [1998] 1 I.L.R.M. 393.

Raiffeisen Zentral Bank Österreich Ag. v. Crosseas Shipping Ltd. [2003] EWHC 1381 (Comm), (Unreported, High Court of England and Wales, Morison J., 13th June, 2003).

Saunders v. Haughton [2009] NZCA 610, [2010] 3 N.Z.L.R. 331; (2009) 20 P.R.N.Z. 215.

Thema International Fund plc v. HSBC Institutional Trust Services (Ireland) Ltd. [2010] IEHC 19, (Unreported, High Court, Clarke J., 26th January, 2010).

Practice and procedure - Disclosure - Third party funding - Maintenance - Champerty - Costs - Whether third party funding of litigation lawful - Whether costs can be awarded against third party funder instead of impecunious party - Whether disclosure of details of third party funding can be ordered prior to judgment.

Application for directions

The facts have been summarised in the headnote and are more fully set out in the judgment of Clarke J., infra.

The proceedings were instituted by way of plenary summons dated the 19th December, 2008. By order of the High Court (Kelly J.) dated the 2nd November, 2009, the matter was entered into the commercial list of the High Court. By notice of motion dated the 2nd June, 2011, the defendant sought disclosure orders from the High Court.

The issue was heard before the High Court (Clarke J.) on the 25th and 26th July, 2011.

The plaintiff instituted proceedings against the defendant for losses sustained by a fund in respect of which the defendant was alleged to have been the custodian. During case management of the proceedings, the defendant applied to the court for orders requiring the disclosure of the details of the plaintiff's funding for the purposes of the litigation. The court accepted that it was reasonable to conclude from the evidence, and in particular from communications between the plaintiff and its shareholders, that the plaintiff was in receipt of some form of third party funding. However, the court was satisfied that the funders had a legitimate interest in the litigation.

The defendant argued that the court had a jurisdiction to award costs against such third party funders and, given this, an ancillary jurisdiction to require, at an early stage, the disclosure of the identity of the third party funders.

Held by the High Court (Clarke J.), in refusing the reliefs sought, but requiring a senior official within the plaintiff to personally undertake to inform any funders that they could be the subject of a costs order and to maintain proper records identifying the amount and source of any third party funding, 1, that maintenance and champerty still existed in Irish law and third party funding would be unlawful unless it came within the exceptions thereto. Thus, shareholders and creditors of an insolvent company could lawfully fund that company's litigation costs, but unconnected entities could not "invest" in the litigation in the hope of making a profit.

O'Keeffe v. Scales [1998] 1 I.R. 290 applied.

2. That there was a jurisdiction, in an appropriate case, to award costs which might ordinarily fall to be paid by an impecunious party against a third party funder who provided, in furtherance of that funder's own interest, funding to the impecunious party in respect of the litigation. Shareholders and creditors of the impecunious party could thus be ordered to pay costs, however, unconnected entities providing funding out of charitable intent could not.

Moorview Developments Ltd. v. First Active plc[2011] IEHC 117, [2011] 3 I.R. 615 followed; Cullen v. Wicklow County Manager [2010] IESC 49, [2011] 1 I.R. 152considered.

3. That there was no basis for suggesting that, in order to give effect to this costs jurisdiction, the court must have the power to give orders requiring the disclosure of the identity of third party funders prior to the conclusion of the proceedings. Post judgment disclosure would be equally effective and disclosure at an earlier stage would confer an unnecessary and disproportionate litigation advantage on the other party.

Abraham v. Thompson [1997] 4 All E.R. 362,Chartspike Pty. Ltd. v. Chahoud [2001] NSWSC 585, (Unreported, Supreme Court of New South Wales, 3rd July, 2001),Hill v. Archbold [1968] 1 Q.B. 686,Merchantbridge & Co. Ltd. v. Safron General Partner I Ltd.[2011] EWHC 1524 (Comm), (Unreported, High Court of England and Wales, Judge Mackie Q.C., 15th June, 2011), Raiffeisen Zentral Bank Österreich Ag. v. Crosseas Shipping Ltd. [2003] EWHC 1381 (Comm), (Unreported, High Court of England and Wales, Morison J., 13th June, 2003) and Saunders v. Haughton[2009] NZCA 610, [2010] 3 N.Z.L.R. 331 distinguished.

4. That the other party's position in this respect might nonetheless be secured at an early stage of the proceedings by the giving of undertakings in relation to the third party funding.

Cur. adv. vult.

Clarke J. 20th September, 2011

Introduction

[1] This judgment arises out of an application brought by the defendant seeking disclosure orders in relation to how the plaintiff is being funded in respect of this litigation. These proceedings are part of the Madoff litigation which has been under case management for some time and has been the subject of some judgments already namely:Kalix Fund Ltd. v. HSBC Institutional Trust Services (Ire) Ltd. [2009] IEHC 457; [2010] 2 I.R. 581; Thema International Fund plc v. HSBC Institutional Trust Services (Ireland) Ltd. [2010] IEHC 19, (Unreported, High Court, Clarke J., 26th January, 2010); and Aforge Finance S.A.S. v. HSBC Inst. Trust Services (Ireland) Ltd. [2009] IEHC 565, [2010] 2 I.R. 688 and [2011] IEHC 6, (Unreported, High Court, Clarke J., 10th January, 2011).

[2] The order sought by the defendant is of a type which has, so far as I am aware, never previously been sought or indeed made in this jurisdiction. There is, therefore, a very real question as to whether the court has the power to make such orders and, even if there is such a power, a further question then arises as to the criteria which the court should apply in considering whether to order funding disclosure of the type sought.

[3] In support of its application the defendant maintains a number of propositions to which I now turn.

The defendant ' s case

[4] The defendant asserts the following:-

• A. that there is sufficient evidence placed before the court to support the inference that the plaintiff is not funding this litigation itself but rather is obtaining funding from a third party;

• B. that the courts in Ireland have a jurisdiction, in a case where a third party is shown to have funded litigation on behalf of an impecunious party, to make an order against that third party for the payment of any costs which might, in the ordinary way, have been awarded against the...