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Hulk Hogan v Gawker: why it matters in Australia

Opinion

The legal battle between a former professional wrestler and a take-no-prisoners website has highlighted the need for serious examination of third party-funded litigation in Australia, argues Morry Bailes.

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The world has sat enthralled by the battle between former professional wrestling great Hulk Hogan (real name Terry Gene Bollea), and Gawker Media, the somewhat reprehensible “media” house which published details of Hogan’s sexual mores. Gawker has a long-standing reputation for invading people’s private lives and is not in the least deterred from publishing, among other things, particulars of people’s sexual exploits and predilections.

Enter stage left another well-known American figure enmeshed in this curious tripartite affair, Peter Thiel, a filthy rich Silicon Valley tech billionaire.

Why would we be interested from the viewpoint of law and equity in a story that seems to have about as much interest as some of the Fleet Street rubbish that proliferates in London?

The answer lies in the manner in which the litigation brought by Hogan was funded, yielding him $US140 million in damages against Gawker who published the “sex tape”.

Thiel made his money through PayPal and a number of other highly successful technology ventures. He did not escape the scrutiny of Gawker who “outed” him as being gay in 2007. He has neither forgiven nor forgotten.

Thus we had the ingredients for the Hogan versus Gawker showdown, not on the pro wrestling stage, but in a court room, with Thiel re-inventing himself into a real PayPal, and funding Hogan’s successful action reportedly to the tune of $US10 million.

The first interesting question here is one of freedom of the press. Gawker might say, “sure, we unveil dirty little secrets but we also told the world about a crack cocaine smoking mayor of Toronto, published accounts from the complainants of Bill Cosby’s alleged sexual assaults and told everyone that the former Secretary of State, now presumptive Presidential Democratic nominee, Hilary Clinton used private email while conducting state business”.

Others might applaud Hogan for taking on Gawker for publishing something that amounted to little other than prurience and wasn’t a news story at all. It was an invasion of personal privacy that had absolutely nothing to do with anyone else save those involved. In other words it was not journalism.

However, there is another layer to this story and that is the involvement of Thiel who has now revealed he not only funded the litigation but will do so again to deter Gawker and keep them honest. As he put it: “I saw Gawker pioneer a unique and incredibly damaging way of getting attention by bullying people even when there was no connection with the public interest.”

So what might be wrong with what he has done in this case?

The answer lies in the history of the English legal system. In times past old English laws of champerty and maintenance made what Thiel did potentially unlawful. Lord Justice Steyn in Giles v Thompson put it like this: “In modern idiom maintenance is the support of litigation by a stranger without just cause. Champerty is an aggravated form of maintenance. The distinguishing feature of champerty is the support of litigation by a stranger in return for a share of the proceeds.”

In England and Australia, such actions were unlawful. In England the rationale boiled down to a view that rich Barons should not be able to intimidate or bully independent judges or other parties by bankrolling poor plaintiff peasants.

The laws of champerty and maintenance have since been abolished in Australia and thus we see the rise and rise of third party funders. Their game is to use their money to enable litigation for financial reward. Indeed, their financial rewards often far outweigh what lawyers are entitled to charge under our regulating Acts of parliament. This behaviour would be unlawful if we as a profession were to behave in the same way.

Perversely and surprisingly, third party litigation funders are unregulated, but the better ones have their own clear ethical perimeters. Their argument is that many people who might otherwise be unable to afford litigation, say in a class action scenario, gain access to the justice system and compensation, and for that the company is entitled to financial reward if the litigation succeeds.

There is debate across the legal professions in Australia about whether we ought to be entitled to charge on a contingency basis, not unlike what third party litigation funders currently do now, but in a far more regulated way and subject to strict ethical rules. Additionally third party litigation funders generally service corporations or big class action matters, and are not in the game of funding individual claimants or smaller class actions. So it is argued there is an unfulfilled need, something remarked on recently by the Australian Productivity Commission, which has advocated for contingency fees to be allowed in Australia.

Healthily, the Law Council of Australia has adopted a wait and see approach to this subject rather than rushing in, and of course it is ultimately a matter for state and territory Attorneys-General and their governments to decide.

In the meantime, however, with the expense of civil litigation going north, we can expect to see third party litigation funders continue to flourish.

As for Thiel, it is seems his was an example of maintenance not champerty: he does seem to have gained any financial enrichment, just the satisfaction of delivering Gawker a kick in the guts. One suspects given Thiel’s enthusiasm for the fight, this may not be the last time he pays a pal to have another go at Gawker, who he no doubt hopes will gawk a little less and report responsibly a little more.

On the other hand the press should be free, right? And should rich Barons be the puppeteers for poor plaintiffs just to ventilate their own private grievances and agendas?

The bottom line is that it is time for the Australian Government to look seriously at the topic of third party litigation funding regulation in this country. Many would say it is already well overdue.

Morry Bailes is the managing partner at Tindall Gask Bentley Lawyers, treasurer of the Law Council of Australia and is a past president of the Law Society of SA. The opinions expressed in this column are his own.

His column appears every second Thursday.

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