Solicitor – Assignment of claim – Champerty – The appellant firm of solicitors representing claimant in litigation pursuant to damages-based agreement and deed of assignment – Following claimant’s death, appellant seeking to be substituted for claimant in litigation – Court finding agreement champertous and void – Appellant appealing – Whether judge applying wrong test to determine validity of assignment – Whether judge wrongly concluding assignment contrary to public policy – Appeal dismissed
In October 2013 the claimant (F) entered into a damages-based agreement (DBA) with the appellant under which F agreed to pay the appellant 50% of the proceeds from claims against the respondent instead of paying the appellants’ fees on an hourly rate basis.
In April 2014, F issued a claim form against the respondent claiming damages for breach of an alleged oral agreement concerning the development and sale of a piece of land in Norfolk known as “Long Stratton”.
F and the appellant subsequently executed a deed of assignment of F’s claims against the respondent. F died unexpectedly and the appellant applied to be substituted as claimant in place of F.
The issue was whether a firm of solicitors which has been acting for a claimant in litigation pursuant to a DBA could validly take an assignment of their client’s cause of action.
The High Court held that the appellant, which had been acting for the respondent in the litigation pursuant to the damages-based agreement could not validly take an assignment of their client’s cause of action because the assignment was champertous: [2021] EWHC 1950 (Ch).
The appellant appealed contending that: (i) the judge erred in applying the wrong test to determine the validity of the assignment as he should have asked whether the appellant had a genuine commercial interest in taking the assignment and enforcing the claim for its own benefit; and (ii) even if the judge applied the correct test in asking whether the assignment was contrary to public policy, he was wrong to conclude that it was.
Held: The appeal was dismissed.
(1) A bare cause of action (i.e. not one ancillary to a property right or interest) could only be assigned where the assignee had a genuine commercial interest in enforcing the claim. An assignee who could show that he had a genuine commercial interest in the enforcement of the claim of another and to that extent took an assignment was entitled to enforce that assignment unless by the terms of that assignment he fell foul of the law of champerty. If the assignee had a genuine commercial interest in taking the assignment and enforcing it for his own benefit, there was no reason why the assignment should be struck down as an assignment of a bare cause of action or as savouring of maintenance: Trendtex Trading Corp v Credit Suisse [1982] AC 679 applied.
However, the Court of Appeal was bound by its previous decision in Pittman v Prudential Deposit Bank Ltd (1896) 13 TLR 110 that a solicitor acting for a client in legal proceedings might not validly take an assignment of the client’s cause of action prior to judgment. The rule did not depend on whether the assignment was champertous. Its rationale was the conflict of interest which would arise between the client and the solicitor if the solicitor could negotiate for an assignment of the client’s claim, bearing in mind that the solicitor owed the client fiduciary duties.
(3) A person was guilty of maintenance if they supported litigation in which they had no legitimate concern without just cause or excuse. Champerty occurred when a person supported litigation and stipulated for a share of the proceeds of the action or suit. Although champerty was formerly regarded as an aggravated form of maintenance, more recently it had been recognised that there could be champerty without maintenance: Sibthorpe v Southwark London Borough Council [2011] EWCA Civ 25, [2011] 1 WLR 2111 applied.
Section 58(1) of the Courts and Legal Services Act 1990 was explicit that conditional fee agreements that did not comply with all the relevant conditions were unenforceable. The same was true of section 58AA(2) of the 1990 Act and damages-based agreements. It was no answer to that point that the assignment was neither a conditional fee agreement nor a damages-based agreement: what section 58(1) and section 58AA(2) showed was that parliament, being well aware of the common law rules, decided to go so far towards relaxing them as sections 58 and 58AA provided and no further. Accordingly, a champertous agreement not sanctioned by the 1990 Act remained contrary to public policy and was therefore unenforceable: Awwad v Geraghty & Co [2001] QB 570, Sibthorpe v Southwark and Rees v Gateley Wareing [2014] EWCA Civ 1351, [2015] 1 WLR 2179 applied
In those circumstances, although it was not necessary to decide whether the judge was correct to conclude on the facts of this case that the assignment was offensive to justice, it was far from obvious that his concerns were misplaced.
Muhammad Haque QC and Hossein Sharafi (instructed by Candey Ltd) appeared for the appellant; Jonathan Cohen QC (instructed by North Star Law Ltd) appeared for the respondent.
Eileen O’Grady, barrister
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