In the matter of Providence Investment Funds (2017) the Royal Courts considered funding for the first time in open court and decided to approve funding.
It followed the English case of Longmeade Limited (in liquidation) in stating that the following matters should be considered when entering into the funding agreement:
- the merits and prospects of success of the prospective litigation
- the adequacy of funds available to the liquidator
- the likely costs to be incurred if the proceedings were to fail
- the proportion of damages the litigation funder will take under the agreement if proceedings are successful, and,
added by the Lieutenant Bailiff, how and why the office holders lighted on and chose the particular litigation funder as their counterparty.
In this case the Bailiff decided this was a reasonable decision to take.
Law firm Ogier summarised the relevant provisions considered by the court to decide whether the agreement itself was champertous, and we quote:
- the advocates instructed on behalf of the company are agreed or approved by Manolete, although the Administration Managers noted that there was no “improper” influence or restriction in freedom of choice;
- the Administration Managers must “consult” with Manolete in relation to the proposed steps in the claim, although it is expressly recorded that this is without ceding control to Manolete;
- the Administration Managers agreed to follow the advice of the acting advocates and not to discharge them without prior consultation with Manolete;
- the Administration Managers agreed to keep Manolete informed as to the progress of the action and take counsel’s opinions as to aspects of the claim if requested by Manolete;
- Manolete has the right to terminate the agreement in respect of all or any claims but remains obliged to pay amounts due up to the date of termination;
- the Administration Managers agree to pay over to Manolete the “applicable part” of the proceeds of the claims, as specified in the agreement; and
- the agreement is governed by English law.
The Court decided that none of these provisions amounted to control by the funder, such as to make the agreement champertous. The extent of control by the funder is still the critical consideration in a Guernsey matter. This case provides helpful guidance in that regard when funding a Guernsey matter.
Litigation funding is not disclosable in Guernsey under the Royal Court Civil Rules 2007.