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Jersey backs third-party litigation funding

8 December 2011

For the first time ever, a court in Jersey has backed the use of third-party litigation funding agreements.

Michael Birt, Bailiff (chief justice) of Jersey, told the island’s Royal Court that the reasons for the “sea change in the approach of the English and Australian courts” to third-party funding were “equally applicable in Jersey”.

Bailiff Birt cited Lord Justice Jackson’s approval of third-party funding in his final report.

Delivering judgment in In the Matter of the Valetta Trust at the Royal Court (Samedi Division), Bailiff Birt said: “As we mentioned earlier, there is no judicial authority in Jersey in relation to champerty.

“However, we have no doubt that Jersey law is to like effect as English law and an agreement that provides for a share of the proceeds of litigation may be held to be unenforceable on the ground of champerty if it is contrary to public policy.”

He went on: “It seems to us that the underlying public policy in Jersey in relation to the purity of justice was and remains identical to that in England.

“For the reasons set out in the English cases referred to above, public policy must be kept under review and we have no doubt that today the importance of access to justice is extremely important and the concerns about powerful people corrupting the process of justice by acquiring an interest in litigation have faded away because of the independence of the judiciary.

“We therefore find that the public policy reasons which have led England and Australia to allow third-party funding subject to certain safeguards are equally applicable in Jersey.”

The court heard that the Valetta Trust is a conventional discretionary trust that had as its sole asset a minority shareholding in a company, which was sold. The representors (claimants) in the case were among the beneficiaries and argued that the sale was at a gross undervalue.

The representors could not afford to bring proceedings and so made an agreement with Harbour Litigation Investment Fund.

Bailiff Birt said the effect of this agreement was that Harbour agreed to provide the costs of the claimants in return for repayment from the damages. Harbour would also receive a further fee ranging from 25 per cent of the damages or twice the legal costs, whichever was the greater, to 50 per cent of the damages or three times the costs, depending on how long the case lasted.

“Under the agreement, control of the litigation rests with the plaintiffs although they must keep Harbour informed and they agree to conduct the litigation in accordance with the reasonable advice of their lawyers.

“Harbour has the right to terminate the agreement if satisfied that there has been a material adverse decline in the prospects of success.”

Bailiff Birt concluded that public policy considerations “pointly strongly in favour of upholding the validity of the funding agreement”.

He went on: “In our judgment, it does not have any tendency to corrupt or adversely affect the purity of justice.

“The control of the proceedings remains with the plaintiffs, they will still retain a substantial proportion of the damages if successful and the defendants are protected in respect of costs if the claim fails.

“On the other hand, the agreement facilitates access to justice by plaintiffs who would not otherwise be able to afford to bring the litigation in question.”

Jurats (non-professional judges of fact rather than law) Morgan and Fisher contributed to the judgment.

Susan Dunn, head of litigation funding at Harbour, said the ruling “sends a clear signal to Jersey’s legal community that litigation funding is now an option they can offer their clients”.

Harbour funds litigation and arbitration at the High Court, as well as cases in the US, New Zealand and the Caribbean.

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