Third party litigation funders, once seen as “strangers to litigation”, have recently been welcomed with open arms by the Grand Court. Departing from the historical common law offences of maintenance and champerty, the Grand Court has confirmed that commercial funding of litigation is not contrary to public policy. On the contrary, third party litigation funding may promote access to justice and have a role to play in the modern justice system. In A Company -v- A Funder (unreported, 23 November 2017) Segal J noted that:

“Cayman has an important, world-class court system and litigation culture and there is no reason why responsible, properly regulated commercial litigation funding undertaken in accordance with the principles I have set out should not have a place in this jurisdiction”.

Maintenance and Champerty

Maintenance and champerty are both crimes and torts in the Cayman Islands. Maintenance involves the procurement by direct or indirect financial assistance of another person to institute or carry on or defend civil proceedings without lawful justification. Champerty is an aggravated form of maintenance whose distinguishing feature is the support for litigation by a stranger in return for a share of the proceeds. These doctrines developed under English common law as a safeguard to prevent against frivolous litigation and the corruption of the public justice system through the meddling of unrelated parties.

In modern times, as the legal profession developed and procedural rules improved to better protect the justice system, several common law jurisdictions (including England and Wales) abolished the historical doctrines of maintenance and champerty. In the Cayman Islands, while not yet abolished by the Legislature, the Courts have recognised that the nature of common law itself needed to change to meet the needs of society. In relation to maintenance and champerty, this has meant an increasing willingness by Cayman Islands Courts to allow third party litigation funding, as long as adequate protections were built into such arrangements to prevent the corruption of public justice. The decision in A Company -v- A Funder confirms this approach.

Stay current with our latest legal insights and subscribe today