Tacit Approval Of Conditional Fee Arrangements In TCI
The Supreme Court of Turks and Caicos Islands recently considered whether to widen local access to litigation funding and finance. Such arrangements can be of interest to clients who cannot afford to litigate, or those who prefer to keep some or all of litigation costs off of the balance sheet. In this article, we take a closer look at the court's tacit approval of conditional fee arrangements.
In this article we seek to review developments in TCI law relating to the funding of litigation matters, which can be of interest for those clients who would otherwise be unable to afford to litigate, or who would prefer to keep some or all of the costs of litigation off balance sheet.
There are currently three common types of litigation funding agreements: (1) Conditional Funding Agreements ("CFAs"); (2) Contingency Fee Agreements ("Contingency Fees"); and (3) Third Party Funding ("TPF") agreements.
- CFAs provide that attorney's fees and expenses, or (more usually) a part of them, will be paid only in certain circumstances (typically when the client's case is won).
- Contingency Fees are understood by the common parlance "no win, no fee". Under a CFA clients agree that remuneration for legal services is contingent, in whole, or in part, on the success or completion of a case.
- TPF agreements are where a third party agrees to fund part or all of the client's costs in return for a fee payable from the proceeds recovered by the funded litigant.
Each type of agreement has received varying degrees of acceptance in common law jurisdictions. In the US and Canada contingency fees are accepted subject to specific legislation and professional regulations. Third Party Funding Agreements have also received broader acceptance for particular matters. In the UK CFAs and contingency fees have also been accepted subject to specific legislation and professional regulations and TPFs have also seen broader acceptance. Certain Caribbean jurisdictions have also followed suit. The Cayman Islands introduced the Private Funding of Legal Services Act, 2020 on 1st May 2021, codifying the rules which apply to litigation funding. The Commercial Court in the British Virgin Islands recently approved TPFs1 and the Legal Profession Act 2015 and Code of Ethics permit CFAs and Contingency Fees to a certain extent.
Consideration of CFAs in the TCI
The Turks and Caicos Islands ("TCI"), until recently, remained an outlier among competing commonwealth jurisdictions in that the availability of funding agreements, including CFAs, Contingency Fees and TPFs, were held back by common law principles relating to champerty and maintenance. However, CFAs were recently considered by Justice Carlos Simmons QC of the Supreme Court of the TCI in a consolidated judgment delivered on 23rd July 2021.2 In his judgment Justice Simmons thoughtfully considered the place of CFAs in the laws of the TCI. The Consolidated Judgment considered two unrelated proceedings on the issue of the approval and acceptance of CFAs. Griffiths & Partners' David Cadman QC acted as amicus curiae for the Bar Council of the TCI in this important and precedent setting decision.
Regent Grand: CL 86/2019
The Regent Grand case came before the Supreme Court of the TCI as voluntary insolvency proceedings. The applicant, acting as liquidator for the Regent Grand Management Ltd ("RGML") was also the principal of a firm of attorneys who were themselves legal advisors to their principal as liquidator of RGML.
In July 2019 the applicant brought an originating summons seeking the Court's approval of payment from the liquidated estate for his fees and expenses incurred during the course of the liquidation and further approval to commence proceedings against a creditor, Freedom Group Management Ltd ("FGML"). That summons was heard and disposed of in May 2020, at which time Chief Justice Margaret Ramsay-Hale declined to sanction the debt collection proceedings concluding that the "risk of commencing such proceedings would be greater than the reward to the liquidation estate" and therefore of no benefit to the creditors of the liquidated estate.3
Subsequently, the applicant, as liquidator, brought forward an interlocutory summons requesting court approval to enter into a CFA with his firm of attorneys to support the proceedings, against FGML. The rationale behind the request was that, having been denied "conventional funding" to recover the FGML debt, a CFA would "insulate" the liquidation of the estate from costs, except costs in the event of a recovery.
Mr Justice Simons QC considered two issues before sanctioning the CFA: (1) whether there would be a benefit to creditors under the CFA; and (2) whether the CFA would be considered champertous and against public policy of TCI.4
With respect to issue (1) Mr Justice Simmons QC deferred to the analysis of Chief Justice Ramsay-Hale in that there was a strong possibility of success on a claim against FGML. While the amount of recovery may be considered small in the opinion of the judge, there still may have been a benefit to creditors. With respect to issue (2) Mr Justice Simons QC was taken to a line of cases involving insolvency proceedings where CFAs had been sanctioned by the courts in the British Virgin Islands, Cayman Islands and other Caribbean jurisdictions. Mr Justice Simmons QC also drew a bright line between insolvency proceedings, where litigation funding arrangements were "common" and accepted, and lawyer/client cases where the approach of the courts was considered more "restrictive".5 Mr Justice Simons QC also undertook an analysis of the specific CFA and the retainer, in the end approving the arrangement without reservation.6
Kajeepan: CL 8/21
The Kajeepan case came before the Supreme Court of the TCI as a habeas corpus proceedings relating to three Tamil speaking Sri Lankan nationals (the "Applicants"). The Applicants had arrived in the TCI in October 2020 from Haiti and were detained within an Immigration Detention Centre administered by the immigration authorities. The habeas corpus proceedings (seeking the immediate release of the Applicants) were heard before the Chief Justice on 24th April 2020. The judgment delivered on 1st May 2020 refused to release the Applicants, holding that their detention was lawful up to that point. The Applicants' attorney acted for them on a pro bono basis with respect to their habeas corpus applications.
The decision to dismiss the habeas corpus applications was appealed to the TCI Court of Appeal, where a three-judge panel held, by a majority, that the Applicants had been unlawfully detained until their conditional release in August 2020. Following the decision in the Court of Appeal, overturning the decision of the Supreme Court, the applicants brought a claim for damages arising from their unlawful detention and false imprisonment. Judgment in the action was entered by consent and all that remained was for the applicants' damages to be assessed in those proceedings. Their attorney, as in the Regent Grand case, requested that the Court approve a CFA between his firm and the Applicants for legal fees and disbursements.7
The basis for the request of the approval of the CFA in the Kajeepan case was different from that in Regent Grand. Whereas in the Regent Grand case there were liquidation proceedings, the Applicants in the Kajeepan case were indigent and the argument advanced was that if no CFA was approved by the Court, the Applicants claim would not be "viable," there being no legal aid available at that time for civil matters in the TCI.8
Mr Justice Simons QC reviewed three judgments in Williams v Carib West Limited,9 Kellar v Williams10, and Kellar & Anor v Williams11, coming from the TCI Supreme Court, Court of Appeal and the Privy Council respectively. The issue of consideration of the lawfulness of CFAs in TCI was only considered in obiter comments in those judgments. In the first instance decision, Chief Justice Ground QC in the TCI Supreme Court doubted CFAs would be lawful. Sir Elliott Mottley QC, Justice of Appeal in the Court of Appeal, held that CFAs would be against public policy "unless sanctioned by statute." Finally, when the matter reached the Privy Council, the Board declined to opine on the subject of lawfulness of CFAs in TCI.
In considering specifically whether the engagement letters put forward by the applicants were champertous or against public policy, Mr Justice Simons QC concluded that they were not and in fact were:
...conducive to public policy in that indigent Applicants who would otherwise be shut out from the seat of judgment are afforded access to justice; and this in a jurisdiction where the executive is bound by its Constitution to afford just such access.12
In approving the engagement letter, Mr Justice Simons QC made note of the surrounding circumstances that gave rise to the applicants' situation, including that there had been two decades since the previous consideration of the issue in TCI and the jurisdiction was, at that time, without provision for legal aid for civil matters. This, for Mr Justice Simons QC, was therefore an access to justice issue that the Court had a duty to ensure.13
Takeaway for the TCI
The Consolidated Judgment has provided the TCI with a tacit approval of CFAs on an ad hoc or case by case basis. The Consolidated Judgment in these recent cases do not in any way confirm that CFAs in the TCI will be unreservedly approved, rather it can be understood that in certain types of proceedings (in this case, those involving insolvency and public interest) CFAs may be approved if those issues are brought before the court. The ad hoc or case by case basis for the approval of CFAs in the TCI has opened the door for the future consideration of court sanctioned TPF agreements and Contingency Fee arrangements, as well as possibly giving grounds for future legislative change or court rules, as in other competing common law jurisdictions.
2. CL – 86/19 Regent Grant Mgmt Ltd. (In Liquidation) and IMO Application of Tim Prudhoe as Liquidator of Regent Grand Mgmt Ltd. ("Regent Grand") and CL 8/21 Kajeepan, Paintamilkavalan and Ors v The Director of Immigration, Derek Been, Minister of Board Control Hon. Vaden Delroy Williams and The Attorney General ("Kajeepan") (collectively, the "Consolidated Judgment").
3. Regent Grand at para. 51.
4. Consolidated Judgment at para. 14.
5. Consolidated Judgment at para. 25.
6. Consolidated Judgment at para. 31.
7. Consolidated Judgment at para. 35.
8. Consolidated Judgment at para. 35.
10. Kellar v Williams, CA 3 2003.
12. Consolidated Judgment at para. 62.
13. Consolidated Judgment at para. 65.
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.