The Irish High Court has handed down a significant judgement in Greenclean Waste Management Ltd v Leahy which legitimises the use of After the Event legal expenses insurance in Ireland.
The case related to a professional negligence claim brought by Greenclean against its former solicitors, Maurice Leahy & Co. arising from the defendant solicitor’s alleged failure to advise in relation to a relevant limitation period and failure to disclose a material conflict of interest. Greenclean issued proceedings against the defendant solicitors in 2009 but subsequently, Greenclean went into insolvent liquidation, which prompted the defendant solicitors to bring an application for security for costs. The Claimant had taken out ATE insurance covering its potential risk of adverse costs as well as its own disbursements. The premium was deferred to the end of the case and only payable in the event of success (out of the damages or settlement received).
The Defendant argued that such an arrangement was champertous, as it amounted to “a person maintaining another’s litigation stipulates for a share of the proceeds of the action or suit”.
Maintenance and champerty remain criminal offences in Ireland and the courts have been reluctant to follow the English courts’ more relaxed views on maintenance and champerty.
Justice Hogan acknowledged that the insurance arrangement before him did have elements (the contingent premium payable from damages in particular) which on the face of it could appear champertous, however he accepted that ATE insurance [has a wider significance], notably in facilitating access to justice. Judge Hogan observed that the law of champerty was developed [in an age before…] and as such need to be updated to reflect modern [society].
Given the clear judicial blessing of post event litigation insurance in Ireland, lawyers should as a matter of course consider and advise their clients that insurance may potentially be available to cover their litigation risk.
In England, Irwin Mitchell have recently announced that they will be considering claims against solicitors for failing to advise about ATE insurance [see our blog on this topic]. Whilst such an extreme situation may not have arisen in Ireland whilst there was still uncertainty about the lawfulness of after the event insurance, now that the position has been clarified, it is possible that lawyers that fail to mention the possibility of insurance to their clients may be at risk.
Champerty Alive and Well
Notwithstanding this landmark judgement, third party litigation funding still remains unlawful in Ireland on the grounds of champerty. A 2011 case, Thema International v. HSBC serves as an important reminder of this. In Thema the court drew a distinction between third party funding from a connected party such as shareholder or creditor funding (where the funder has an existing interest in the outcome of the proceedings) and professional third party funding of the sort that is prevalent in other jurisdictions. The latter form of funding being a “free ride” designed for their benefit, without any real risk of a meaningful costs order being made against them.
However, the Greenclean decision could suggest the start of a judicial shift which may culminate in the emergence of third party funding in the Irish market. If the court was willing to approve a policy which included cover for own side’s costs and where the premium was contingent upon and payable out of recovered damages, on the basis that it facilitates access to justice, it would seem a relatively small step from this to allowing a similar arrangement where the litigation financing arrangement were utilised to fund interim costs as the case progressed.
It is also interesting to note the similarities between the Irish High Court’s decision in Greenclean and the landmark decision of the English Court of Appeal in Arkin, in which a similar rationale is followed to legitimise the use of professional third party litigation funding in England & Wales.
We may yet, therefore, see third party funding arriving on the Irish shores, brining greater flexibility for lawyers considering alternative funding options for their clients. For information on the role of ATE insurance in relation to security for costs in Ireland, contact us on 0845 257 6058.
i. Greenclean Waste Management Ltd v Leahy (No 2)  IEHC 314.
ii. Thema International Fund PLC v. HSBC Institutional Trust Services (Ireland) Limited and others  IEHC 357
iii. Arkin v Borchard (No.2)  1 WLR 3055