Civil practice and procedure – Particulars of claim – Strike out – Champerty – Party to contract bringing proceedings in respect of alleged debt owed by defendant – Right assigned to claimant partnership – Defendant applying to strike out claim as abuse of process – Whether assignment being of bare cause of action – Whether claim being champertous – Application dismissed
The claimant partnership was the assignee of a claim by a third party founded on an alleged contract of services to be provided for or for the benefit of the defendant. The claim was originally actionable at the suit of the other party to the contract but, after entering into the contract, he had formed the claimant limited partnership and executed an individual assignment of his rights for £1 to the claimant. The assignment included not only causes of action but also debts. The assignor undertook to pass any moneys received directly or indirectly from the defendant to the claimant and to assist the claimant in pursuing recovery of moneys due in respect of the assigned rights by providing information upon request. The defendant applied to strike out the claim as an abuse of process on the ground that it was champertous. He contended that bare assignments of a cause of action, such as in the present case, were a class of arrangements about litigation long recognised as champertous and invalid. To permit the claim to continue would be to allow the assignor, as the subject of the claim, to cost-proof his litigation.
CPR r 25.13 provided: “(1) The court may make an order for security for costs under rule 25.12 if— (a) it is satisfied, having regard to all the circumstances of the case, that it is just to make such an order; and (b)(i) one of more of the conditions in paragraph (2) applies … (2) The conditions are … (c) the claimant is a company or other body (whether incorporated inside or outside Great Britain) and there is reason to believe that it will be unable to pay the defendant’s costs if ordered to do so.”
CPR r 25.14 provided that a person who had assigned the right to a claim with a view to avoiding the possibility of a costs order being made against him and was a person against whom a costs order might be made might be ordered to give security for costs if, having regard to all the circumstances of the case, the court was satisfied that it was just to make such an order.
Held: The application was dismissed.
(1) A bare assignment of a cause of action had long been recognised as champertous (the support of litigation by a stranger to the litigation for a financial interest in the outcome). Without more, an assignment of the claim for the nominal sum of £1 would be likely to offend the public policy against maintenance and champerty. However, in this case, there was more. The rights assigned under the assignment were not confined to a cause of action but included debts. The effect or substance of the arrangement was that the assignor was entitled to one third of the net fruits of the claim, if the claimant partnership succeeded. Further, in this case, the claimant partnership had no separate purpose unconnected with the assignor’s claim against the defendant. As to the assignor cost-proofing himself in litigation against the defendant, if the action was not struck out as champertous, it would be open to the defendant to make an application for security for costs pursuant to CPR r 25.14. Since the claim had been brought by an apparently impecunious limited liability partnership, the defendant might also apply for security for costs against the claimant on the basis that the claimant fell within the terms of CPR r 25.13(2)(c). The court was entitled to have regard to the likely outcome of such an application.
(2) From the point of view of the party confronted with the litigation, an assignment for a purpose which included side-stepping exposure to personal liability in costs would put the integrity of the legal process at risk and bring about an inequality to the detriment of the defendant. No doubt that was the injustice targeted by CPR r 25.14. Thus the law provided a procedure which, depending upon the court’s view of all the circumstances of the case, afforded a defendant confronted with maintained litigation adequate protection against such abuse of the legal process, and which might even work to the defendant’s advantage. Accordingly, this was not a matter which should weigh against the claimant.
In a litigation climate where legal representatives could both share in the fruits of the claim they advanced and underwrite their client’s costs risk of the claim and thereby enable an impecunious client to pursue a just claim, it was not appropriate for the court decline to hear, on grounds of public policy, the claim of an impecunious litigant which had been assigned to an entity in which he had an interest and which assignment created the opportunity to open an otherwise closed door to reasonable and proportionate protection in costs on the application and for the benefit of the defendant. A failure to comply would bring about the termination of the litigation at much less potentially irrecoverable expense to the defendant than would have been the case had the claim not been assigned. Permitting the claim to proceed would not put the integrity of the legal process at risk or otherwise undermine the ends of justice.
Mark Hardy (a limited partner in the claimant, with the permission of the court) appeared for the claimant; Nicholas Vineall QC and Caley Wright (instructed by Harcus Sinclair) appeared for the defendant.
Eileen O’Grady, barrister
