Against Justice
Cases
Simon Fraser and Another v. Denis Buckle and Others;
[1996] 2 I.L.R.M. 34 Supreme Court:
O’Flaherty J The law of Ireland
I would uphold the trial judge\’s findings that the agreements were champertous and unenforceable in Irish law. In his essay, The History of Maintenance and Champerty 35 LQR 50, Sir Percy Winfield has documented the story essentially from an English standpoint.
While it appears that some of the excesses of the feudal system were more rampant in England than in Ireland — it may be because the Norman conquest was never completed in Ireland (see James, Lords of the Ascendancy: The Irish House of Lords and its Members, 1600–1800 [1995]; Irish Academic Press, 1995) — and the result of some of which excesses called for much legislative and judicial intervention outlawing maintenance and champerty, nonetheless, the Irish common law developed in tandem with English law in condemning maintenance and champerty. In a case decided in 1796, by the Irish House of Lords , Kenny v. Browne (1796) 3 Ridg PC 462 , Lord Clare LC said (at p. 498):
It is a crime at common law to maintain a suit in which the man maintaining is not interested, and the particular species of maintenance of which the appellant has been guilty is called champerty — that is — maintaining a suit in consideration of having some part of the thing in dispute. The rule of the common law is ‘Culpa est se immiscere rei ad se non pertinenti ’ .
See, too, Littledale v. Thompson (1879) 4 LR (Ireland) 43 .
In the High Court decision McElroy v. Flynn [1991] ILRM 294 , Blayney J had to consider a similar agreement to those in debate here. Following Rees v. De Bernardy [1896] 2 Ch 437 , he reached the conclusion (at p. 297):
… in the case before me I think the true agreement made by the defendants was one contrary to the policy of the law. I agree that a contract by a person to communicate information on terms of getting a share of any property that may thereby be recovered by the person to whom the information is to be given, and, nothing more, is not champerty or void: see Sprye v. Porter (1856) 7 E & B 58 . But if the arrangement come to is not merely that information shall be given, but also that the person who gives it and who is to share in what may be recovered shall himself recover the property or actively assist in the recovery of it by procuring evidence or similar means, then I think the arrangement is contrary to the policy of the law and void: see Sprye v. Porter and also Stanley v. Jones (1831) 7 Bing 369 , where the agreement held void was one by Stanley to communicate information to enable the defendant to recover a sum of money and to use and exert his utmost influence and means for procuring such evidence as should be requisite to substantiate the claims of the defendant.
It is true that the law can and, indeed, on occasion should develop so as to ameliorate the strictness of an existing precept of the common law or, indeed, extend its advantages: McKinley v. Minister for Defence [1992] 2 IR 333 . The American experience in regard to contingency fees is instructive as to how the law developed there in a particular direction. It should be remembered that in the United States costs do not follow the event as is generally the case in our system. So, instead of counsel and solicitors being prepared to put effort into litigation in the expectation that if — and only if — their side is successful they will get their fees and costs from the unsuccessful party, the American mode provides for a bargain to be made at the outset between the attorney and the client so that, if successful, the attorney will get a percentage of what is recovered in the suit.
As far back as 1848 when New York enacted a regime of free enterprise for lawyers, the Field Code repealed the statutes regulating lawyers\’ fees thereby dealing the champerty restriction a major blow and contributing significantly to the legitimation of contingency fees. Subsequent revisions of the 1848 Act added language which provided that the compensation of attorneys was to be governed by agreement with the client ‘which is not restrained by law’ . This provision was afterwards adopted by several other states and, by the middle of the nineteenth century, it had become common for lawyers to assist in collection matters, with their payment based on a percentage of the amount collected by the client.
The increase in the number of industrial accidents produced many working class plaintiffs with no means to pursue their claims. It appears that young lawyers, struggling to become established, discovered that the contingent fee retainer agreement enabled them to represent a greater number of clients, since more clients could ‘afford’ to hire them. Judicial acceptance accelerated as these developments took hold.
There is a view in the United States that litigation is a form of political and even commercial speech, which is to be encouraged and protected rather than disfavoured. Fees which promote access to the legal system are seen as an expression of national policy favouring such access.
The contingent fee is regarded as the cornerstone of ‘people\’s law’ ; it is strongly supported by consumer organisations who regard it as the strongest weapon in the hands of consumers when they do battle with large corporations and other defendants with substantial resources. The contingency fee has been called ‘the key to the courthouse door’ for the poor and the middle class. However, it is right to point out that contingency fees in personal injury cases, certainly, are almost universally regulated by law and by court rule. The courts keep a wary eye on matters so that a plaintiff is never mulcted.
Further, as noted by Dr John Murray in his book On Contracts (3rd ed., 1990) at p. 522:
Notwithstanding the decline of maintenance and champerty, an agreement that has an undue tendency to promote litigation for the benefit of the promoter rather than the litigant, or which is oppressive to the litigant, or which involves an abuse of legal proceedings, is more than likely to be deemed unenforceable.
Of course, as related by the trial judge, these heir-locator agreements are disapproved of in New Jersey as being void and unenforceable as well as being contrary to public policy; similar disapproval is evident in other states of the United States.
I am satisfied that the law on maintenance and champerty has not undergone any sea change in this jurisdiction since the last century and, indeed, s. 68(2) of the Solicitors (Amendment) Act 1994 , makes it clear that solicitors are not entitled to charge percentage or contingency fees except in very restricted circumstances.
Therefore, I would uphold the statement of the law contained in the McElroy decision, which followed Rees v. De Bernardy and which in turn was followed by the High Court judge in the present case, as being correct.
English law
As already related, the trial judge was faced with opposing views on the applicable English law and, therefore, resolved the question as one of fact and held that Rees v. De Bernardy represented the law of England and Wales.
While one would always approach the enterprise of discovering other people\’s laws with due deference, when the law in question seems to be in a state of flux, one must, in addition, regard it as a risky business.
It is clear, I think, that Lord Mustill in the course of his speech (in which he spoke for the House of Lords ) in Giles v. Thompson [1994] 1 AC 142 was presaging a very restricted future role for maintenance and champerty. At the outset of his speech he said the following (at p. 153):
My Lords, the crimes of maintenance and champerty are so old that their origins can no longer be traced, but their importance in medieval times is quite clear. The mechanisms of justice lacked the internal strength to resist the oppression of private individuals through suits fomented and sustained by unscrupulous men of power. Champerty was particularly vicious, since the purchase of a share in litigation presented an obvious temptation to the suborning of justices and witnesses and the exploitation of worthless claims which the defendant lacked the resources and influence to withstand. The fact that such conduct was treated as both criminal and tortious provided an invaluable external discipline to which, as the records show, recourse was often required.
As the centuries passed the courts became stronger, their mechanisms more consistent and their participants more self-reliant. Abuses could be more easily detected and forestalled, and litigation more easily determined in accordance with the demands of justice, without recourse to separate proceedings against those who trafficked in litigation. In the most recent decades of the present century maintenance and champerty have become almost invisible in both their criminal and their tortious manifestations. In practice, they have maintained a living presence in only two respects. First, as the source of the rule, now in the course of attenuation, which forbids a solicitor from accepting payment for professional services on behalf of a plaintiff calculated as a proportion of the sum recovered from the defendant. Secondly, as the ground for denying recognition to the assignment of a ‘bare right action’ . The former survives nowadays, so far as it survives at all, largely as a rule of professional conduct, and the latter is in my opinion best treated as having achieved an independent life of its own.
Nonetheless, despite the apparent relegation of maintenance and champerty, it is the position that the heir-locator contracts stand condemned by the decision of Rees v. De Bernardy and that decision has not been disapproved of to date. It is in that context, too, that the American experience is illuminating because while restrictions as regards attorneys\’ contingency fees have been relaxed there over the years, the bonds remain as regards heir-locator contracts.
The learned trial judge made a finding of fact on the applicable English law. It was submitted on behalf of the appellants that we could form our own view of what the English law on the subject was just as readily and as properly as the trial judge but, as with any other finding of fact, I hold that we must pay great respect to the finding of the trial judge. In any event, I find no cause to disagree with it and, therefore, I would uphold his finding as to what the English law on the matter is and the only change I would make, as I indicated earlier in my judgment, is that I would regard this as the prime consideration in resolving the matter in dispute in favour of the respondents. But that change marks a difference in emphasis rather than substance.
I would dismiss the appeal.
Persona Digital Telephony Ltd & Sigma Wireless Networks Ltd v The Minister for Public Enterprise & Others
Dunne J
I agree with the judgment of Denham C. J. just delivered. I wish to make some short observations about the offences of champerty and maintenance which remain part of Irish law by virtue of the Statute Law Revision Act 2007 (“the Act of 2007”).
S. 2 (1) of the Act of 2007 provided for the repeal of all statutes enacted before 6th December, 1922 then in force save for, inter alia¸ those specified in Schedule 1 of the Act of 2007 which concerns pre Union Irish Statutes. Schedule 1 lists as one of the Statutes retained the Maintenance and Embracery Act 1634 (1634 (10 Chas. 1 sess. 3) c. 18) (“the Act of 1634”). Also retained was a Statute of England of an uncertain date of the 14th Century, namely, the Statute of Conspiracy (Maintenance and Champerty) as set out in part 2 of the Second Schedule together with the Maintenance and Embracery Act 1540 (1540 (32 Hen. 8) c.15).
Section 3 of the Act of 1634 is set out in the judgment of Denham C. J. (at para. 23) but, for ease of reference, I will set it out here:
“That no manner of person or persons, of what esteate, degree or condition soever he or they be, doe hereafter unlawfully maintaine or cause or procure any unlawful maintenance in any action, demaund, suite or complaint in any of the Kings courts of the chancery, castle-chamber, or elsewhere within this his Highnesse Realme of Ireland … and also, that no person or persons of what estate, degree, or condition soever he or they be, doe hereafter unlawfully retaine for maintenance of any suit or plea any person or persons, or embrace any free-holders or jurors, or suborne any witnesses by letters, rewards, promises, or any other sinister labour or means for to maintaine any matter or cause, or to the disturbance or hinderance of justice, or to the procurement or occasion of any manner of perjury by false verdict or otherwise in any manner of courts aforesaid” .
What then is the offence of maintenance and the offence of champerty? Denham C. J. in her judgment (at para. 29) referred to the definitions of these offences to be found in Cross and Jones, An Introduction to the Criminal Law, 4th Ed., (London, 1959) (at p. 294).
Archbold’s Pleading, Evidence and Practice in Criminal Cases, 32nd ed., (1949) gives the following definitions at (p.1280):
“Champertors be they that move pleas or suits or cause to be moved either by their own procurement or by others, and sue them at their proper costs for to have part of the land in variance, or part of the gains: 33 Edw. 1 (Ordinacio de Conspiratoribus).”
and
“Maintenance is said to consist in the unlawful taking in hand or upholding of or assisting in civil suits, or quarrels of others, to the disturbance of common right, and from other than charitable motives.”
Ryan and Magee in The Irish Criminal Process (Dublin, 1983), in their Table of Indictable Offences and Penalties, lists champerty as an offence at common law punishable by imprisonment or a fine, as is maintenance.
In the course of their written submissions, Counsel on behalf of the Appellants posed the question (at para. 72), “When, for example, was someone last prosecuted under the doctrines?” It appears to be the case that since the foundation of the State, no prosecution has been brought against anyone in respect of the offences of maintenance and champerty.
It is undoubtedly the case that champerty and maintenance are torts which remain part of the common law in this jurisdiction as stated in the judgment of Denham C. J. and as reflected in a number of judgments opened to the Court on this appeal. However, no modern day statute defines the offence of champerty or maintenance. What are the ingredients of the offence? By looking at the case law in this jurisdiction, one can tell what types of arrangements may fall into the category of being champertous or amount to maintenance from the point of view of tort law. Could one say with certainty that a particular arrangement is an offence?
Denham J. (as she then was) addressed a similar issue in the case of Attorney General v Hilton [2005] 2 IR 374 (“Hilton”) where she said (at p. 381):
\”In criminal law the constituent parts of offences should be clear. The law must be certain. If there is ambiguity, it is rendered to the advantage of an accused. It is a fundamental principle that the criminal law must be clear and certain. The constituents of an offence must be clear and certain. The ‘possibility’ that such an offence exists in our common law is insufficient clarity of the situation. The ambiguity as to its constituent parts is relevant. These are most relevant factors.”
That was a case which arose in the context of extradition which involved an individual who was sought for prosecution in England for the offence of cheating the public revenue at common law. The Supreme Court considered whether there was a corresponding offence in this jurisdiction. There had been a reference to such an offence in the Criminal Justice (Theft and Fraud Offences) Act 2001, which stated (at section 3(2)):
“Any offence at common law of larceny, burglary, robbery, cheating (except in relation to the public revenue), extortion under colour of office and forgery is abolished.”
Denham J. continued (at p.381):
“Analysis of the possibility that the offence is extant has to be conducted in light of the practice of the last 100 years. This offence is submitted to be in our common law. Common law is judge-made law. Yet counsel could not bring before the Court a judicial decision by any judge of this State on such an offence. This must be a relevant factor.
It has been the practice that offences of this type have been prosecuted by way of statutory offences. This is the modern practice. This is a relevant factor.”
Another interesting case is Corway v Independent Newspapers (Ireland) Ltd. [1999] 4 IR 484 (“Corway”) which concerned a possible prosecution for blasphemous libel. Section 8 of the Defamation Act 1961 provided that no such criminal prosecution could be brought against a newspaper without leave of a judge of the High Court. The newspaper was represented on an application for leave to prosecute which was refused by the High Court. (At issue was a cartoon, published following the 1995 divorce Referendum, depicting a priest and three politicians.) On appeal to the Supreme Court, it was held, inter alia, that in the current state of the law and in the absence of any legislative definition of the constitutional offence of blasphemy, it was impossible to say of what the offence of blasphemy consisted. Barrington J. in the course of his judgment commented that (at p. 502):
“The task of defining the crime is one for the legislature, not for the courts. In the absence of the legislation and in the present uncertain state of the law, the Court could not see its way to authorising a criminal prosecution for blasphemy against the respondents.”
It goes without saying that criminal offences ought to be clearly defined and legislative provisions which fall short in this regard will not stand scrutiny. One is entitled to know that if one commits a particular act it is a crime and could lead to a criminal sanction.
The offences at issue in the case of Hilton and Corway referred to above had not resulted in prosecutions for upwards of a hundred years. In the case of champerty and maintenance, there have been no prosecutions since the foundation of the State and possibly longer, but there have been a number of cases on the civil side of the courts which have considered the place of these torts in our law. However, the arguments in this case did not engage with the status of the criminal offences. Denham C. J. noted in her judgment (at para. 10) quoting from the judgment of the learned trial judge delivered on 20th April, 2016 ([2016] IEHC 187):
“86. It is important to recall that, the application before the Court is not a constitutional challenge; the Court has not been asked to examine the constitutionality of the offences and torts of maintenance and champerty and no declaration of unconstitutionality has been sought. The resolution of any issues regarding constitutional rights, including access to justice or indeed whether these ancient torts and offences are truly ‘in accordance with law’ awaits any such constitutional challenge. On the basis of the relief claimed in the notice of motion, and in circumstances where the Court is of the view that the ingredients of the offences (and also the torts) of maintenance and champerty have been stated clearly by the Superior Courts of Ireland to prohibit professional third party funding, there are no grounds for entering into an examination of whether the interpretation given to the torts and offences is in accordance with the Constitution.
87. In conclusion, maintenance and champerty continue to be torts and offences in this jurisdiction. From the Irish authorities abovementioned, there is a prohibition on an entity funding litigation in which it has no independent or bona fides interest, for a share of the profits. It is the view of this Court that Harbour III L.P., as a professional third party litigation funder, has no independent interest in this present litigation. Furthermore, it is clear that third party funding arrangements cannot be viewed as being consistent with public policy in this jurisdiction or that modern ideas of propriety in litigation have expanded to such an extent to afford this Court the opportunity to characterise this funding arrangement as acceptable. While the plaintiff has pressed upon this Court that there is a lack of clarity in this regard, that submission is not accepted in view of the consistent line of authorities to the contrary.”
An historical analysis of the role of champerty and maintenance would show how the torts of maintenance and champerty have changed and adapted to reflect the need to protect the integrity and independence of the courts and to prevent trafficking in litigation over the centuries. (See for example, Winfield, The History of Maintenance and Champerty size=\”2\” face=\”Verdana\”>, (1919) 35 L.Q.R. 50.) It is not part of the role of the courts to change and adapt the criminal law so as to ensure that the ingredients of an offence reflect what is necessary to prevent the behaviour that is offensive, in this situation, conduct that interferes with the integrity of the courts and trafficking in litigation. Thus, the question remains as to whether the definitions of these offences found in sources such as Cross and Jones referred to in the judgment of Denham C. J. or in Archbold, referred to above, are sufficiently clear to enable a criminal prosecution to take place for either champerty or maintenance. One can identify certain features which would undoubtedly form part of the constituent elements of an offence, thus, the giving of financial assistance in return for a share of the proceeds of an action would, no doubt, be an ingredient in the criminal offence of champerty. What of the mens rea involved in the offence? What intention would the Director of Public Prosecutions have to prove in order to obtain a conviction?
These are questions for the future. The offences remain on the Statute book despite the fact that they have not been the subject of any prosecution in living memory. Given that the status of the offences of champerty and maintenance has not been challenged on the application before the Court, unless and until the issue of their status is raised and argued in an appropriate case, it would be inappropriate to reach any conclusion on their continued presence in this country as criminal offences.
For the reasons set out in the judgment of Denham C. J., I would dismiss the appeal.
SP v Optimal Osus Ltd -v- HSBC Institutional Trust Services (Ireland) Ltd & Ors
[2017] IECA 56
The President
34. The general understanding which is not in dispute is that champerty is a variety of maintenance, in fact a more severe or heinous version. Broadly speaking, maintenance is interfering in litigation by supporting it financially without having any legitimate interest in the case which could justify the interference. Champerty is taking a share in the outcome of the case in return for funding it. Neither of those descriptions – “definitions” is too precise a word – is apt to cover the issue that arises in this present case. That is not to say that this is unique because the situation has arisen previously. For the purpose of this case, I think that there is one clear rule that the court must recognise. That is that the assignment of a bare cause of action is invalid because it savours of champerty or is actually champertous in itself. The appellant SPV does endeavour to submit that the present application of the rule requires something more, namely, the identification of a specific public policy detriment that is a result of the impugned assignment. There is, however, little or no judicial support for this proposition. The decision in Fraser v. Buckle emphasises that the law against champerty seeks to guard against conduct which has the potential to undermine the administration of justice. The actualisation of the potential is not required. Agreements which seem innocuous can be considered contrary to public policy for savouring of champerty.
35. The English law is helpfully summarised in Guest on the ‘Law of Assignment’ by Professor Anthony Guest, from which the following quotations are taken from Chapter 4:
“A chose in action is not assignable if the assignment ‘savours of’ or is conducive to maintenance or champerty. For this reason, a bare right of action, that is, the mere right to litigate, cannot in principle be assigned.”
For this proposition, a line of authority from 1835 to 1998 is cited. The main qualification to the general rule is where the assignee has a genuine and legitimate interest in taking the assignment. One of the exceptions is where the right is considered to be incidental to the property transferred, such as in Dawson. In Ellis v. Torrington [1920] 1 KB 399 the assignment of covenants to repair with the right to sue for breach of covenant was made to the freehold purchaser. The right was considered as incidental to property, theoretically part of the property the purchaser had bought:
“An assignment to support and enlarge a right which the assignee has already acquired will also be upheld.”
Paragraphs 4 to 25 enter the important qualification, which finds echo in Fraser v. Buckle in the judgment of Costello J, that the interest that is relied upon to avoid the taint of champerty “must not be generated by the assignment itself”. It must exist independently. This point directly contradicts a submission made by the appellant that it is often the case that the interest is independent of the acquisition contract but not a requirement.
36. Maintenance and champerty are kinds of abuse of process. They are thought to undermine the integrity of litigation. It is sometimes difficult or somewhat difficult to define just what it is about these kinds of activity that represents a threat to public policy in the protection of the integrity of the court and litigation process. It may be impossible to characterise or define fully the nature of champerty as it applies in all circumstances. The courts approach the question in each case by reference to the underlying principles that can be derived from authority by inductive reasoning. And yet, there is general recognition that these are vices that should not be tolerated. The rationale may be that litigation is a matter for the parties in dispute; if they cannot find a way of resolving the issues between them then they come to the court. This process is interfered with or potentially contaminated when others become involved without having any legitimate interest or concern in the proceedings. Their motivations may be quite different from litigants who are genuine, in the sense of persons or parties directly involved in the dispute. There is no doubt that the courts do not countenance trading in litigation, whereby one party not otherwise connected becomes involved for the purpose of profit. Litigation is not a commodity to be traded or discounted and so a simple or bare cause of action may not be the subject of an assignment. That would be the situation if for example a person with a claim for personal injuries were to assign it to another party whose intention was to pursue the action in the name of the original plaintiff with a view to gain. Admittedly, new situations arise where it might appear at first sight that the rules against champertyand maintenance would operate to invalidate a contract or assignment or arrangement but they do not have that effect. That is why the courts say that public policy has to move with the times, what was condemned previously is not necessarily wrong today, commercial practices must be taken into account and obviously they change with the times.
37. There have indeed been very substantial changes in attitude to maintenance and champerty, particularly in England since the changes in legislation were introduced to allow for Conditional Fee Arrangements (CFAs). After the Event (ATE) insurance which came more or less with those agreements was not considered contrary to the rules against maintenance and champerty. Ultimately, there were aspects of the regime that dramatically changed the relationship between plaintiffs and defendants which in turn had to be adjusted. It was eventually decided that there was an imbalance between a plaintiff who was protected by insurance from any risk, and a defendant who was liable if the plaintiff succeeded to pay extra for the plaintiff’s solicitor’s success fee and also the ATE premium, which massively increased the defendant’s exposure. That is the English background to the question that arose in Greenclean.
38. The appellant finds in the judgment in Greenclean the proposition that champerty is interference in another party’s litigation for a purpose not permitted by law. That is of course correct. It is however submitted that this directs the focus of a court’s enquiry to identifying whether any improper purpose exists. The implication is that failing identification of some specific impermissible object champerty will not be established. However, that is not a correct reading of the judgment and is not the law either in Ireland or England. The principle is that an assignment of a bare cause of action is void unless it can be excused as an exception recognised in law.
39. Before considering the nature of the transaction effected by the assignment in this case, I conclude that champerty does not require something more than the transfer of a bare cause of action. The objector does not have to identify a specific threat to the integrity of litigation or some other element of public policy. There is a clear rule that is subject to recognised exceptions. The category of excusing circumstance is not closed, as it seems to me. This acknowledgement takes account of changing times and admits the possibility of some unforeseen circumstances that would justify another exception being recognised or it might mean some new example being accepted of an existing heading. The appellant submits that the modern understanding of this civil and, in Ireland, criminal wrong requires that there should be some identified infraction or attack on a specific public policy interest. HSBC rejects this argument, proposing that the authorities are clear that the transfer of a bare cause of action constitutes champerty, which may be excused if it can be brought within one of the recognised exceptions. In my view, it is clear from the authorities in this jurisdiction and in England that the general statement in Guest on Assignment as quoted above is correct.
40. It seems to me that the remaining questions that arise for resolution on this appeal are as follows: –
(i) Is the assignment of the third party claims in the deed of 6th May, 2011, the transfer of a bare cause of action?
(ii) If the answer to question 1 is No, the appeal must be allowed. If the answer to question 1 is Yes, is it excused by reason of a recognised exception?
41. We begin by looking at the assignment of 6th May, 2011. The assignment expressly deals with the Accepted Customer Claim that the bankruptcy trustee admitted in respect of the investors who lost money as described in the earlier statement of the facts in this judgment. There is, therefore, for the purpose of these proceedings, a transfer of a right of action from a party with an interest to a different entity. There is also a prospect of recovery outside of the trustee’s activities in the possibility that the US Department of Justice may establish a fund. The third party claim stands separate as a non-bankruptcy cause of action. So, the first point is that the bankruptcy claims and this cause of action in suit are different and separate. True, the claims are included in the same document but that does not establish a legal connection or relationship between them that affects the legal status of the third party claim. It could not do so. Any number of different causes of action or claims could be put into one document and that coincidence by itself is insufficient. We therefore have an assignment of the claim against HSBC.
42. The claims are not connected in the sense of being dependent one on the other. The fact that the trustee allowed a certain level of claim has nothing to do with whether there is a case in negligence against HSBC for the way it supervised the operation of the funds that gave rise to the loss. The nature of the claims is different. The circumstances giving rise to the claims are not the same. Yes, they have their historical origin in a general way in the same events. It is also true that if it were not for the fraudulent or unlawful activities that resulted in the losses sustained by the investment funds, there would not be a claim against HSBC. But again that does not make them the same. There is a relationship in time and circumstance but that is not sufficient. They do not arise out of the same loss, but it could be said truly that they have their origins in the same factual circumstances. In these circumstances, it is apparent that the assignment involves the transfer of a bare cause of action and that the rules of champerty prima facie apply and the assignment is unenforceable unless one or more of the exceptional circumstances applies. It is not a bare cause of action if it is sufficiently connected with another legal right or interest.
43. Another basis of exclusion from champerty is where an assignment of a right of action is made to a party with a genuine commercial interest in taking it and enforcing it for its own benefit. Trendtex considered this exception although holding in the particular circumstances that a provision for onward trading of the cause of action to an anonymous third party involved the likelihood of profit and savoured of champerty.There is in this assignment no genuine commercial interest existing independent or antecedent to the transfer itself. The only claim that the plaintiff has or could have in an action against HSBC arises from the assignment itself and not otherwise. In Fraser v Buckle, Costello J. endorses this requirement which is generally accepted. The appellant is incorrect in saying that while it is often the case, the requirement of an independent basis is not essential. Neither is the example of a bank disposing of loans a precedent establishing the opposite because the assignment of a debt is permitted by law.
44. As indicated above, there is no requirement on a party objecting to a transaction on the ground of champerty to establish any specific infringement or threat to public policy. The law presumes that the transaction is wrongful and unenforceable if it constitutes or savours of champerty. In this jurisdiction, maintenance and champerty remain as crimes as well as civil wrongs
45. The appellant invokes the decision of the English Court of Appeal in Brownton, but at page 509, the court enumerated elements of a test of genuine commercial interest including at (iii): “A bare right to litigate, the assignment of which is still prohibited, is a cause of action, whether in tort or contract, in the outcome of which the assignee has no genuine commercial interest”.
46. Is the assignment of the third party claims connected with a property right? The suggestion is that it is intimately involved and connected with the Accepted Customer Claim which was the principal purpose of the assignment. Secondly, it is suggested that this third party claim assists with the Accepted Customer Claim or is protective of it. But the third party claim does not protect the bankruptcy claims. They are simply not related. If the Accepted Customer Claim in the bankruptcy process did not actually result in payment of the amount specified and agreed, it is true that the third party claim if successful might make up the difference. Again, however, that is more a matter of coincidence and that has nothing to do with a legally accepted relationship. The plaintiff has obtained an assignment of two sources of recovery, potentially in one case and predictably in the bankruptcy depending on the ultimate outcome of the trustee’s efforts by way of recovery. It is of course the case that it will have to give credit for the amount recovered in the Accepted Customer Claim but that is a consequence of legal rules prohibiting double recovery.
47. It is argued that the third party claim is incidental and subsidiary to the bankruptcy claims. It is not. The words incidental and subsidiary appear to have their origin in Dawson v Grade, Northern & City Railway Company [1905] 1 KB 260 and a glance at the facts of that case reveals the aptness of the characterisation and the chasm of understanding that lies in endeavouring to associate the instant case with that authority. Leaseholds were assigned to the claimant together with the benefit of sums of money that he might be entitled to recover under the Lands Clauses Consolidation Act, 1868 for damage previously done to the structure of houses and trade stock on the leased land. It was held that the assignment was valid since it was incidental and subsidiary to the conveyance of the land. The legal relationship or connection is clear.
48. It is true that characterising the assignment as savouring of champerty does inhibit the plaintiff’s capacity to sue. It does indeed interfere with its access to the courts and its right to litigate, which are recognised constitutional rights. But the whole purpose of champerty and maintenance is to prevent actions being pursued that are illegitimate because they are contrary to law and because they offend the integrity of the legal system and are abuses thereof. If the enforcement of this law results in the escape, so to speak, of a party from a potential liability arising from alleged wrongdoing, that may be considered an unfortunate consequence. But it cannot be a reason for permitting a claim that is contrary to law.
49. SPV submits that Massai is the most equivalent case to the matter in suit here. The relevant facts appear above in the summary of the appellant’s submissions at para 21. There is, however, a material difference that militates against the validity of the comparison. Aerostar purchased the capital of the company and was subsequently assigned the company’s interest in the lawsuit. Aerostar then sold its shareholding to a third party but maintained the lawsuit itself. The significant difference is that the company in its original ownership or that of Aerostar held the right to litigate the action. How did it lose that right by selling its shareholding? It is clear that Aerostar would have been within its rights to dispose not only of the company but also of the right of action and the purchaser would have been in a position to receive it, without the taint of champerty. Aerostar was at all material times entitled to the benefit of the right of action; it was free to assign it with the shares or to retain it. In the event, it retained the right of action. The vendors in Dawson v. Grade, Northern & City Railway Company, Ellis v. Torrington and Williams v. Protheroe and the other classic authorities were obliged to sell the rights in issue; the courts found that they were entitled to do so. By the same reasoning, Aerostar was not obliged to dispose of its right of action and it was not in breach of the law of champerty by retaining it. The case, accordingly, is not of assistance to SPV.
50. In Greenclean, there was a legitimate commercial purpose behind the insurer\’s involvement in the case in supporting the claimant. Such insurance was a feature of litigation in UK since the 1990 reforms. Here, the plaintiff is not supporting the litigant, but purchasing the right to litigate this particular claim.
Conclusion
51. In my judgment, the High Court judge was correct in her analysis of the law and its application to the facts of the case. The appellant has not established any basis for overturning the result. The court was correct to hold that the impugned transaction gave rise to the potential sale of the right to sue third parties. The court did not have to find that there was an intention on the part of the assignee to engage in trading of litigation, whether professional or otherwise. I am satisfied that the High Court was correct in the conclusions it reached, and in the order it made dismissing the proceedings herein.
52. I would accordingly dismiss the appeal.