The recent case of Barclays Wealth Trustees (Jersey) Limited as trustee of the R2R Bulgaria Property Fund & Others v Equity Trust (Jersey) Limited & Others [2013] JRC094 provides further clarification as to the position of third party litigation funding in Jersey. The claim itself was by the current trustee and manager of certain funds which had been invested in land in Eastern Europe. The claim was against the former trustee and manager and was for breach of trust, breach of contract and breach of fiduciary duty.

After the commencement of proceedings, the Plaintiffs entered into a third party funding agreement with Harbour Litigation Investment Fund LP.

On being informed of this, the Defendants issued a summons seeking to strike out or stay the proceedings on the basis that their continuance with the funding agreement was contrary to the law of Jersey and/or an abuse of the Court's process. The matter was originally heard before the Master who dismissed the summons. The Defendants then appealed to the Royal Court arguing that the matter should be stayed (rather than struck out) so that it could be permitted to continue without the benefit of funding.

The basis of the Defendants' application was that it was contrary to the Code of 1771 (an early codification of the Island's laws and ordinances). The Code was in French and the first argument was as to the proper translation of the relevant wording. The Court held that it meant "No person may contract for things or matters in litigation." This, the Court said, was a prohibition on assignment of a piece of litigation, which had already commenced. The prohibition did not however extend to a contract relating to litigation such as for litigation funding.

Contract Relating to Litigation

The Defendants also relied on the terms of the earlier 1635 Ordinance (which had been registered in the Royal Court being an Order in Council made by the Star Council) which had similar wording. However, the Court referred back to the previous case of Re the Valetta Trust [2012] (1) JLR 1 in which it had been explained that the purpose of the 1635 Ordinance was to prevent maintenance and champerty and it said:

"... one of the abuses which affected the medieval administration of justice was the practice of the assigning of doubtful and fraudulent claims to royal officials, nobles or other persons of wealth and affluence who could in those times be expected to receive a very sympathetic hearing in the courts."

The Court noted that in the present day the risk of such corruption had diminished with the establishment of a modern independent judiciary.

Modern Independent Judiciary

The Court therefore concluded that as with the 1635 Ordinance, the 1771 Code was intended to avoid champerty and maintenance by the prohibition of assigning matters in litigation, but neither had the effect of expressly prohibiting a contract for the funding of litigation.

On that basis, the Court considered that it could dismiss the appeal, but it also went on to consider what the position would be if the funding agreement had been found to the contrary to the 1771 Code. In practical terms, this involved an analysis of whether any claims should be struck out, stayed or left to run their course.

"There is a strong public interest in persons being able to obtain funding to enable them to bring proceedings to vindicate their rights."

The Defendant relied on the case of Grovewood Holdings PLC v James Capel and Co Ltd [1995] Ch 80 in which Lightman J had held that where proceedings were found to be maintained champertously they should be stayed. However, the Court preferred the reasoning in the various subsequent authorities such as Abraham v Thompson [1997] 4 All ER 362 to the effect that even if a funding agreement was found to be champertous, it would not be right for the Court to stay the action:

"A person bringing an action is entitled to get his case before the Court. Access to justice is of first importance. There is a strong public interest in persons being able to obtain funding to enable them to bring proceedings to vindicate their rights. There is jurisdiction to strike out or stay an action which is an abuse of process but it would be a matter of fact and degree in each case as to whether on abuse of process is established."

The Court then referred to the earlier decision of Re Valetta. This case had been decided without the benefit of adversarial argument as it was a trustee's application for authorisation by the Court for it to be a party to an agreement for the funding of litigation. It confirmed the earlier decision to the effect that the Court does have power to declare unenforceable agreements which are contrary to public policy on the grounds of champerty and maintenance.

Purity of Justice

The Court then reviewed the funding agreement in this case and concluded that there was nothing in it which "would harm the purity of justice" and that it would "facilitate the important objective of access to justice." Thus, the court's conclusion was that the agreement was not in breach of the Code of 1771, but even if it was, it would not be an abuse of process for the litigation to continue on this basis of that agreement.

Adversarial Argument

It would appear that this judgment having been with the benefit of adversarial argument will clear the way for the greater use of litigation funding in Jersey, as was begun by the judgment in Valetta. However, it is of note that the Court in that case was at pains to point out that whilst public policy in Jersey may be relaxed so as to allow third party litigation funding agreements, the requirement that officers of the court should be inhibited from putting themselves in a position where their own interests could conflict with their duties to the court (e.g. by way of conditional fee agreement) remained in full force.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.