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Jersey open its doors to third-party funding

Royal Court ruling 'good news for individuals'

12 December 2011

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

Lisa Springate, partner at Bedell Cristin in St Helier, said that, until now, although third-party funding had been mentioned in cases, “nothing has come before the courts where they have recognised that these agreements are enforceable provided they are properly structured.

“We have obviously now caught up with what is happening in England, but this decision is good news for individuals as well.”

Springate said litigation funders had visited Jersey but were concerned that their agreements would not be enforceable.

“Given the amount of litigation that goes on in the Channel Islands, they’re keen to break into this market,” she said.

Springate added that the ruling made clear that conditional fee agreements were not permissible in Jersey and the same applied to contingency fees.

Delivering judgment in In the Matter of the Valetta Trust at the Royal Court (Samedi Division), 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.

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 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.”

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

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