Supreme Court rejects assignment of cause of action, leaving third-party funding regulation to legislature.

AN CHÚIRT UACHTARACH

THE SUPREME COURT

S:AP:IE:2017:000062

Clarke C.J.

O’Donnell J.

McKechnie J.

Dunne J.

Finlay Geoghegan J.

Between/

SPV Osus Limited

Plaintiff/Appellant

AND

HSBC Institutional Trust Services (Ireland) Limited,

HSBC Security Services (Ireland) Limited,

Optimal Investment Services S.A. and

Banco Santander S.A.

Defendants/Respondents

Judgment of Mr. Justice Clarke, Chief Justice delivered 31st July 2018

1. Introduction

1.1 I should first say that I agree fully with the legal analysis of the issues which arise on this appeal as is set out in the judgment of

O’Donnell J. It follows that I also agree with the order which he proposes.

1.2 My purpose in writing this judgment is to repeat, in the context of this case, some of the sentiments which I expressed in Persona

Digital Telephony Ltd & anor v. Minister for Public Enterprise & ors [2017] IESC 27. In so doing I would wish to emphasise that

nothing in this judgment should be taken as in any way disagreeing with the views of O’Donnell J. as to the law as it is today.

2. Some Observations

2.1 As I noted in Persona, there is a significant and, arguably, increasing problem with access to justice which arises in the context of

the increasingly complex world in which we live, which in turn has increased the complexity of much litigation not least in the

commercial field. The burden of complying with disclosure obligations in such litigation has itself grown almost exponentially with the

vast growth in the amount of electronically stored information which requires to be assembled and searched for relevance. These

problems have been well rehearsed on many occasions both in some judgments of the courts of this and other jurisdictions and also in

academic commentary.

2.2 I would wish to emphasise that I remain strongly of the view that it is necessary that some measures be taken to attempt to

address this problem. Indeed, the observations which I made in my concurring judgment in Persona were precisely designed to

suggest that there is a problem which requires to be addressed, but that by far the best way of attempting to provide solutions is by

means of legislation. This is not just a case where legislation may be considered as the appropriate constitutional route because of

the separation of powers between the courts and the legislature. It is at least arguable that permitting entirely unregulated third

party funding, as was at issue in Persona, or the unregulated assignment of causes of action, as is at issue in this case, as a means

of solving the problem of access to justice runs the real risk of creating more problems than it solves.

2.3 That is not to say that the issues which arise in respect of third party funding are the same as those which arise in the context

of a potential assignment such as is at issue here. In the case of third party funding, the party (whether corporate or natural) who

suffered the wrong continues to maintain the cause of action themselves, albeit in circumstances where some of the proceeds of a

successful case may go to the third party funder. In the case of an assignment, the entire beneficial interest in the proceeds of the

cause of action passes to the assignee so that the proceedings are thereafter wholly maintained by a party who did not suffer the

original alleged wrong. There may, therefore, be entirely legitimate policy considerations which might lead the legislature to take a

different view of, on the one hand, third party funding and, on the other hand, assignments of causes of action.

2.4 Be that as it may, it seems to me that there are compelling reasons for considering that any significant change of the law in

either of these areas should take place in the context of an attempt to establish a properly regulated scheme or structure which

would ensure that the potential benefits of liberalisation are not outweighed by any disadvantages which might flow from an entirely

unregulated commoditisation of litigation.

2.5 However, I remain very concerned that there are cases where persons or entities have suffered from wrongdoing but where those

persons or entities are unable effectively to vindicate their rights because of the cost of going to court. That is a problem to which

solutions require to be found. It does seem to me that this is an issue to which the legislature should give urgent consideration. But it

is not open to the courts to fashion a carefully regulated scheme that balances advantages and risks. I agree with the views

expressed by O’Donnell J. to the effect that it is impossible to define an exception to the general rule to cover this case. It follows

that to take a different view of the proper result of this appeal requires discarding the rule which would allow in turn for the

recognition of the assignment of a cause of action in potentially a wide range of cases. This would run the risk of unintended

consequences in the shape of an unregulated market in causes of action. In like fashion, a re-interpretation of the law of

maintenance and champerty, such as was urged on this court in Persona, would have run a similar risk in respect of unregulated third

party funding.

2.6 That is not to say that either third party funding or permitting the assignment of causes of action may not form part of a solution.

However, what the best solution may be and what rules should be applied to the solution chosen, are primarily a matter for the

legislature.

2.7 In coming to that view I have not ignored the fact that there can, sometimes, be something of an artificiality about the

distinctions which can be drawn between one type of transaction and another where the distinction is based on form rather than

substance. Where the original wronged party is a corporate entity, then it has never been suggested that it is impermissible for the

shares in that entity to be transferred to a third party so that the ultimate beneficial interest in the proceeds as to the cause of

action will, in substance, also transfer. Even where there are complications deriving from the fact that the allegedly wronged

corporate entity has other assets or liabilities, it is unlikely to be beyond the abilities of corporate lawyers and advisors to devise a

re-structuring of the corporate entity concerned in such a way that the relevant cause of action remains in the hands of the same

entity to whom the wrong was done but where all other assets and liabilities are transferred into other corporate vehicles within the

same ownership, thus freeing up the wronged corporate entity for sale. Thus, at least in many cases, it might well prove practically

possible to devise a system whereby the substance of a cause of action which is owned by a corporate entity can be transferred to a

purchaser by means of a sale of the shareholding in the entity concerned.

2.8 However, it may be that this is just another consequence of the separate legal personality of joint stock companies. That analysis

does not, in my view, warrant a significant change in the law being imposed by court decision so as to give rise to a potentially

unregulated market in litigation. Doubtless the legislature can pay proper regard to considerations such as that just identified in

deciding on any potential changes. But I have ultimately come to the view that an unregulated change in this area has the potential

to do more harm than good. As a matter of common law, therefore, it seems to me that the position identified by O’Donnell J. needs

to be maintained unless and until there is considered legislative change.

2.9 I would finally add that, undesirable as unregulated change might be, I would wish to reiterate the point made in Persona that a

point might be reached where the courts had no option but to go down such a route if it became clear that no real effort was being

made on the part of the legislature to address issues such as those which came into focus on this appeal.