Recent case on champerty

The recent case of Mansell v Robinson [2007] EWHC 101 (QB) has demonstrated the court's modern, more flexible approach to the rules against champerty. The court will not apply a mechanistic rule but will consider each case on its facts, in particular as to whether the facts suggest that the person assisting in litigation for a share of the proceeds might be tempted to abuse the litigation process for personal gain (for example, by seeking to influence witnesses). The court's approach to this issue is important in light of growing instances of litigation being supported by third party funders in return for a share of any recovery.

Background

The claimant, a freelance journalist, had entered into an agreement with the defendant to assist a third party in a dispute with Time Warner over the rights to commercial exploitation of the "Batman" comic strip. Under the agreement, the claimant was to make inquiries into circumstances surrounding the dispute, identify issues that could be of public interest and assist in the preparation and distribution of news stories about those issues. In return he was to receive a weekly retainer, expenses, and a 1% share of any recovery from Time Warner. The present action was a claim for unpaid retainer/expenses under the agreement (there was no claim for a share of proceeds as no recovery had been made).

At first instance (in the Wandsworth County Court), the claim was struck out on the basis that the agreement for a share of the proceeds was champertous, and it was impossible to sever the offending provision because the remuneration had been conceived as a package.

Appeal

Underhill J in the High Court allowed the claimant's appeal. On the facts, the agreement to provide investigation services in relation to potential litigation which was to be remunerated (in part) by a 1% share of any proceeds was not unenforceable as champertous. The judge held that the modern authorities on the issue of champerty had made it clear that the mere fact that litigation services have been provided in return for a promise of a share of the proceeds is not by itself sufficient to make the promise unenforceable.

The judge relied on R (Factortame Ltd) v Secretary of State for Transport Local Government and the Regions (no. 8) [2003] QB 381, in which the Court of Appeal held that an agreement under which a firm of accountant rendered litigation services to the claimants in return for an 8% share of recoveries was enforceable. The court in that case emphasised that it was wrong to apply a mechanistic rule and that it was necessary in each case to decide "whether the agreement in question had a real tendency to produce the evils against which the law of maintenance and champerty is intended to guard". Lord Phillips of Worth Matravers stated this meant considering whether the facts suggest that the agreement "might tempt the alleged champertous maintainer for his personal gain to inflame the damages, to suppress evidence, to suborn witnesses or otherwise to undermine the ends of justice".

In the Mansell case, the judge held that the agreement could not realistically be said to have a "tendency to corrupt public justice" in England and Wales, for a number of reasons. There was no direct relationship between the claimant's services and any potential litigation, still less litigation within the jurisdiction. Whether any litigation would occur, and if so in what forum, was highly speculative. The fact that the claimant was to make inquiries directly with potential witnesses of fact came "nearer to the line", but on the facts of this case it was not enough to make the agreement contrary to public policy.

The judge went on to say that, if he was wrong on the champerty issue, the promise to pay a 1% share could be severed so that the contract for payment of the retainer/expenses remained enforceable.

Comment

This case does not establish new principles but demonstrates the court's modern, more flexible approach to the rules against champerty. The case suggests that an agreement may be held champertous if the services to be remunerated by a share of the proceeds include interviews with witnesses or potential witnesses (though in this case that point was not enough to cross the line, as the judge felt that the relationship with any potential English litigation was too remote). The judge stated "It is not difficult to see why it might be undesirable for a non-professional researcher tasked with interviewing witnesses to have a direct pecuniary interest in their giving evidence that favoured the case of the party employing him".

Other factors that the judgment suggests might be relevant are:

• whether the maintainer is subject to professional regulation (if not, a finding of champerty is more likely);
• whether the maintainer is in possession of information which he volunteered to supply, or whether the litigant took the initiative to engage a researcher to supply information on his behalf (in the former case, a finding of champerty is more likely); and
• possibly, whether the remuneration is in whole or in part by reference to the proceeds (the former being more likely to offend).

It is worth noting that the case also underlines that the rules against champerty are concerned with the protection of the integrity of litigation in England and Wales. They do not allow an English court to refuse to enforce provisions relating to foreign litigation if the terms would not be contrary to public policy in that forum. The onus would be on a party seeking to assert illegality in the foreign jurisdiction to prove it.