Litigation Funding In Jersey

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...