England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE TECHNOLOGY AND CONSTRUCTION COURT
(Judge Richard Seymour QC)

		Royal Courts of Justice Strand London WC2 Wednesday 14 November 2001

Wednesday 14 November 2001

1. LORD JUSTICE KEENE: This is a renewed application for permission to appeal against a decision of his Honour Judge Seymour QC in the Technology and Construction Court, dated 18 July 2001. The applicant, WSP, was the defendant in the action. It had sought to resist a claim by a company (to which I will refer as "DSG") for fees on the basis that the contract under which the fees were due was champertous or otherwise unenforceable. The judge concluded that the contract was not champertous and it is on that one issue it is now sought to appeal.
2. The claimant, DSG, is a claims consultant in the construction industry. It is, we are told, an area of activity which is growing. WSP are consulting engineers who in 1991 contracted with London Underground Ltd ("LUL") to do design work in respect of three Jubilee Line stations. Disputes arose between WSP and LUL over the fees due to WSP and the latter sought the help of DSG in pursuing their claim. There was an agreement in 1993 between WSP and DSG, an agreement which, it is accepted, was not champertous. Under it DSG would prepare a claim document for WSP to provide to LUL to try to reach a negotiated settlement in return for 22.5 per cent of any amount recovered over the contract value of £1.05m. DSG duly prepared a claim and it was sent to LUL. DSG also prepared a revised claim in 1994. Things were then put on hold for a time. Up to then, it seems, DSG had done work for WSP costed at over £65,000.
3. Then in September 1996 LUL began legal proceedings against WSP and in its turn WSP counterclaimed for its fees. In connection with presenting the counterclaim WSP again turned to DSG for assistance. Thus it was that in mid-May 1997 it was agreed that DSG would assist in presenting the counterclaim and the repleading of the counterclaim. It was agreed that their fee would be the same 22.5 per cent as agreed in 1993, except that it would apply in the event of judgment in the litigation or a negotiated settlement. DSG then did work for WSP on the counterclaim. WSP received judgment in the litigation in November 1998 for just over £660,000 including interest.
4. Judge Seymour held, as had been submitted by WSP, that the 1997 agreement was a variation of the 1993 agreement which had not been rescinded. He dealt at some length with the leading authorities on the topic of champerty which, as he rightly observed, is a form of maintenance, the extra ingredient in champerty being that the person maintaining another's litigation stipulates for a share in the proceeds. The judge, to my mind, seems to have recognised that under the 1997 agreement DSG were providing material support to WSP in the litigation in return for a share in the proceeds of the action. But he stressed that DSG had done quite a lot of work under the 1993 agreement which was not champertous and for which they had not been paid. He added in respect of the position in 1997 (paragraph 26):

"The tasks which DSG were asked to perform at that time essentially related to re-working what it had done previously so as to adapt it for use in the litigation. The modification of the event upon which the previously agreed contingency fee was to be payable, if at all, simply reflected the fact that a disposal of the claims of KF and/or WSP other than by means of a settlement had become a real possibility and the likelihood of a settlement had receded. DSG had, by the date of the 1997 Agreement, already borne the cost of funding its own costs of the work done for KF and WSP for up to four years."

5. So he held that the agreement was not champertous in its condition as varied in 1997.
6. On behalf of the applicant this morning, Miss Jefford relies on a passage from a judgment in Re Trepca Mines [1963] Ch 199 which is set out in her skeleton argument at paragraph 5, where Lord Denning identified the reason why the common law condemns champerty. He said it was:

". . . because of the abuses to which it may give rise. The common law fears that the champertous maintainer might be tempted, for his own personal gain, to inflame the damages, to suppress evidence, or even to suborn witnesses. These fears may be exaggerated; but, be that so or not, the law for centuries has declared champerty to be unlawful, and we cannot do otherwise than enforce the law".

7. Miss Jefford draws attention to that objective of the law on champerty. She stresses that in the leading case of Giles v Thompson the House of Lords said one had to look at the harmfulness of the arrangement - see [1994] 1 AC 142 at 164E. She also stresses the need for the growing activity of claims consultants in the construction industry to be looked at by the full court.
8. For my part I can see that there is an arguable point that this agreement does contain within it the very problem referred to in the Trepca Mines case. This agreement, as varied in 1997, could give DSG an incentive to distort the counterclaim by WSP. It matters not whether they responded to that incentive: the basic position is that an agreement is champertous if it meets the legal tests whether or not the party involved does actually distort the claim (or counterclaim, as it is here) in the way described by Lord Denning.
9. I do not find the distinction drawn by the judge below necessarily persuasive where he refers to the fact that this was a reworking of what had been done under the previous 1993 agreement. The position was that DSG had not been paid for that earlier work. They wanted to be paid but they still had no legal relationship with LUL and so no legal status in the litigation. It seems to me that it is arguable that that did not solve the problem of potential abuse which is the object of the law on champerty.
10. I am not sure that the applicant has much in the way of merit, given that DSG has apparently done this work and not been paid, but, as a matter of law, I can see that there is here a properly arguable point. Moreover, I can see the advantage of the full court looking at this growing area of activity.
11. For my part, I would grant permission to appeal to the full court.
12. THE PRESIDENT: I agree with my Lord's judgment and that this is a case where there is an interesting and arguable case for consideration by the Court of Appeal. Therefore we give permission to appeal.
ORDER: Application allowed. Appeal to be heard before a three judge court with a time estimate of one day. (Order not part of approved transcript)