Authored By Gordon Dawes, Partner, Mourant Ozannes And Justin Harvey, Partner, Mourant Ozannes

The Channel Islands, comprising the "Bailiwicks" of Guernsey and Jersey, are ancient jurisdictions with their own laws and customs, separate from each other and separate from the United Kingdom. Historically they formed a part of the Duchy of Normandy, and a quick glance at any map will show you that, geographically, they are much more obviously a part of France than the British Isles. When, in 1066, William the Conqueror (also known in France as Guillaume le Bâtard) conquered England he became both King of England whilst also Duke of Normandy. William's great-great-grandson was King John, of Magna Carta fame, but, in a somewhat chequered career he also lost continental Normandy to the French King of the day, but held on to the Channel Islands. Their anomalous position as near-independent dependencies of the English Crown dates back to that year, 1204.

Channel Island law has its roots in the customary law of Normandy, itself overtaken by the Code civil (or Code Napoléon) of 1804. Channel Island courts still look to ancient Norman law and modern French law, when appropriate. However, much of Channel Island law has become anglicised, albeit without Channel Island courts ever being bound to follow English cases, let alone statutes. The relationship is much more subtle. The more established and less controversial a principle of English common law, the more likely it is, in those areas where we look to the common law, that the same principles will be applied in Channel Island courts, and vice versa. It is not at all uncommon either to look to authorities from other leading common law jurisdictions such as Australia and New Zealand.

We are rather behind the times, rightly or wrongly, when it comes to such things as conditional or contingency fees; they are not permitted. But it is a different story when it comes to commercial litigation funding.

The starting point in both jurisdictions is that we would very likely adopt the English common law principles governing maintenance and champerty, the former occurring where a person supports litigation in which he has no legitimate concern without just cause or excuse, and the latter where the person maintaining another contract for a share of the proceeds of the action or suit1. Historically, maintenance and champerty were criminal offences in the UK, until abolished as such in 1967; however, they remained contrary to public policy and illegal in civil law. That position has changed out of all recognition in English law to the point that third-party funding of litigation is, of course, permitted; although English courts retain the right to regulate, outlaw and sanction funding arrangements if, on the facts, they are regarded as contrary to public policy. The change in attitude was heralded by the report of the Civil Justice Council on access to justice and Lord Justice Jackson's final report reviewing civil litigation costs where third-party funding was stated to be beneficial in that it promoted access to justice. A working party was established by the Council which produced a code of conduct for litigation funders to be administered by the Association of Litigation Funders, a body also established by the Council, and charged with the self-regulation of litigation funders. Mourant Ozannes is an associate member of the ALF and Vannin Capital is a member.

Litigation funding, or at least litigation funding by members of the ALF, was given a considerable boost by the English Court of Appeal in the recent case of Excalibur Ventures LLC v Texas Keystone Inc. and others2 where Tomlinson LJ commented as follows:

"... champerty involves behaviour likely to interfere with the due administration of justice. Litigation funding is an accepted and judicially sanctioned activity perceived to be in the public interest. What the judge characterised as 'rigorous analysis of law, facts and witnesses, consideration of proportionality and review at appropriate intervals' is what is to be expected of a responsible funder ... and cannot of itself be champertous. I agree ... that, rather than interfering with the due administration of justice, if anything such activities promote the due administration of justice."

There is Jersey case law which clearly shows that, in principle, commercial litigation funding is permitted. The cases are at Royal Court level only (the equivalent of the English High Court) but both judgments were given by the former Bailiff, Sir Michael Birt, a highly respected judge. Our Courts of Appeal are drawn from eminent United Kingdom silks, themselves immersed in English case law, but again without being bound by it when sitting in Channel Island cases. This again makes it unlikely that they would reach a different conclusion to the Royal Court.

In a 2011 judgment3 the Bailiff said this:

"... we have no doubt that Jersey law is to like effect as English law and an agreement which 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. However, the reasons for the sea change in the approach of the English and Australian courts as to the requirements of public policy are equally applicable in Jersey."

That judgment was affirmed by the Bailiff in the later case of Barclays Wealth Trustees (Jersey) Ltd v Equity Trust (Jersey) Ltd4 in which one of the co-authors appeared for the successful Plaintiffs.

There is no Guernsey case law on the subject, but it is highly likely that a Guernsey court would follow both the Jersey and English case law in this context. Indeed there have been litigation funded cases before Guernsey courts and the point has not been taken by the opposing parties, which suggests that they accept it would fail.

There are subtle wrinkles though. It would, for example, be open to an opposing party to argue that the so-called "Arkin cap"5 does not apply in Channel Island cases, something which any prospective commercial funder should take into account when assessing whether to fund a Guernsey or Jersey case.

However, in principle it can be said with confidence that commercial litigation funding is an accepted part of Channel Island litigation and does not, of itself, offend against such of the rules against maintenance and champerty as it survives. A Channel Island court could be expected to reach the same conclusions as the English Court of Appeal in this context and also to retain the same powers to regulate all such arrangements in terms, inter alia, of disclosing the fact of funding, the identification of the funder and liability in costs.

Footnotes

1 See the judgment of Lord Phillips MR in R (Factortame Limited and others) v Secretary of State for Transport, Local Government and the Regions (no. 8) [2002] 3 WLR 1104 at para 32. 2 [2016] EWCA Civ. 1144.

3 In the matter of the Valetta Trust [2011] JRC 227.

4 [2013] JRC 094. Justin Harvey-Hills appeared.

5 The principle that the liability of a litigation funder for adverse costs will be limited to an amount the equivalent of the amount of funding provided by it; the name derives from the decision in Arkin v Borchard Lines Ltd [2005] 1 WLR 3055.

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.