England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
IN THE APPEAL COURT
QUEEN'S BENCH DIVISION

		Royal Courts of Justice Strand, London. WC2A 2LL
		30 January 2007

Mr Justice Underbill:

1. This is an appeal from a decision of a Judge in the County Court striking out the Claimant's claim on the basis that it was champertous. The background can be summarised as follows:

(1) The Claimant is a freelance financial journalist. In 2002 he got to know a gentleman called Vernon Williams who had in the 1990s been involved in substantial but wholly unsuccessful litigation in the Chancery Division against the Time Warner Group of companies about the rights to the commercial exploitation of the Batman comic strip. Mr Williams was convinced that he was the victim of a miscarriage of justice and was attempting to find ways to right the wrongs that he believed had been done to him. He was at the time being given support by the Defendant, in the form both of rent-free accommodation and of financial contributions to his expenses in investigating and pursuing his claim. It is not clear what the nature of the Defendant's commercial relationship with Mr Williams was, and the point does not matter for the purpose of this appeal; presumably, there was some agreement between them (formal or informal) under which the Defendant would receive a share of the proceeds.

(2) It is the Claimant's case that in August 2002 he agreed with Mr Williams and the Defendant to supply his services as an investigator in order to assist in the furtherance of Mr Williams's claim. Although the agreement was oral, he recorded what he said were its terms in a manuscript memo dated 30 August 2002 addressed to Mr Williams and the Defendant in the following terms:

As discussed and agreed at our recent meeting, I set out the basis on which we have agreed for me to assist Vernon Williams in his "Batman" dispute with Time Warner:

(A) In reviewing and re-examining the events leading up to and surrounding the dispute,

(B) In making further inquiries about the circumstances surrounding the dispute,

(C) In identifying appropriate issues that could be of public interest and to assist in the preparation and distribution of news stories about these issues.

in return Vernon Williams and Bob Robinson agreed to pay for the services set out above a sum equal to one per cent of the amount paid to settle or otherwise bring to a conclusion his claims in the "Batman" dispute plus £250 in respect of each week during which services of the sort set out above are carried out together with out of pocket expenses.

(3) The Claimant claims that over the next two years he did a great deal of work under the agreement for which he has not received full payment. On 21^st April 2004 he issued proceedings in the West London County Court claiming payment from the Defendant of over £15,000. The Particulars of Claim on the Claim Form are as follows:

In August 2002 I entered into an agreement with Mr Robinson to undertake an extensive financial investigation into a long running dispute in which he and an associate were engaged against Warner, the entertainment group. It was envisaged that this would be a protracted investigation involving inquiries both in the UK and in USA. Mr Robinson wanted me to deploy the investigatory skills I had developed as a financial journalist for the Investors Chronicle, Accountancy Age and The Guardian. It was agreed that I should be paid a retainer of £250 a week plus expenses and one per cent of any sums eventually recovered. Payments under the agreement have been erratic, but Mr Robinson expressed himself pleased with the results of my investigations and periodically urged that I continue my work. He blamed his erratic payments on temporary financial problems. I have received some payment since last September in the form of accommodation. But the amount owing has grown further. I claim appropriate interest.

(4) In due course the Claimant produced Amended Particulars of Claim quantifying the amount due as at 1^st November 2004 as £24,883.69. Para (f) of the Amended Particulars was in the following terms:

The agreement for my services was made in mid-August 2002 between Robert Owen Robinson, Vernon Williams, then of 5 Cranley Place, London SW7 and myself at a meeting of the three of us at 5 Cranley Place. Mr Williams had asked whether I would undertake extensive research to assist in perusing a substantial claim that he intended to make against the Warner Group of companies in respect of merchandising rights to use the "Batman" name going back many years. I knew he was impecunious from my previous casual acquaintance with him, and he explained that he was pursuing his claim in partnership with Mr Robinson, a wealthy property developer who I had not met previously and who was financing work on the claim. A meeting was arranged at which I explained the sort of work I anticipated undertaking. This included reviewing and re-examining the events leading up to and surrounding the dispute, making further enquiries about the circumstances surrounding the dispute, identifying appropriate issues that would be of public interest and assisting in the preparation and distribution of news stories about these issues when the time was appropriate and with their approval. As this was bound to involve protracted and very extensive work I suggested a modest retainer of 250 pounds sterling per week plus one per cent of any settlement of the claim. Robert Robinson agreed that he would pay that retainer. It is clear from the particularisation that the sums claimed consist entirely of amounts claimed by way of the "retainer" or expenses. There is no claim for any share of the proceeds of Mr Williams' claim: as I understand it, nothing has been recovered from Time Warner.

(5) The trial of the action was apparently originally fixed for 6^th February 2006. On 4^th January 2006 the Defendant's solicitors issued an application notice seeking an order that "(1) the claim be dismissed; (2) the claim be struck out; ... [or] ... (3) permission be granted to the Defendant to amend the Defence to include the defence of champerty, on the grounds that "the alleged agreement upon which the Claimant's claim is predicated is champertous". Part C of the Application Notice was in the following terms:

The Claimant alleges through his Claim that he, one Vernon Williams and the Defendant were parties to a contract the purpose of which was to render assistance to Vernon Williams in litigation in which Vernon Williams aione had an interest. The assistance was to be rendered through journalistic investigation on the part of the Claimant and financed on the part of the Defendant. The investigative work and finance was to be directed solely at prospective litigation that Vernon Williams was to prosecute against Time Warner Inc concerning alleged intellectual property rights of Vernon Williams. The consideration was alleged by the Claimant to have been £250 per week plus expenses plus a one percent stake in the figure of damages or settlement monies recovered by Vernon Williams from Time Warner in any prospective intellectual property claim.

The said alleged agreement was, in the premises, plainly champertous. It is accordingly unenforceable. Alternatively, it is illegal or contrary to public policy and, in the premises, void.

Therefore: (1) The claim should be dismissed under rule 24.2/CPR as the Claimant has no reasonable prospect on succeeding on the Claim and there is no other compelling reason why the Claim should be disposed of at a trial. (2) Further or alternatively, the Claim and Particulars of Claim should be struck out pursuant to Rule 3.4(2) (a) and/or (b) /CPR, namely on the grounds that the Statements of Case disclose no reasonable grounds for bringing the Claim and/or that the Claim is otherwise likely to obstruct the just disposal of the proceedings. (3) Further or alternatively, the Defendant should be granted permission to amend his Defence in order to pursue the defence of champerty ....

(6) It appears to have been envisaged that the application would be heard at the start of the trial. In the event the trial was re-fixed for 20^th April 2006 and came on before H.H. Judge Walker in the Wandsworth County Court. The Claimant was unrepresented. The Defendant was represented by counsel. By agreement, the Defendant's application was heard first, and Judge Walker struck out the claim on the basis that the agreement was champertous. I need not set out his reasoning in detail here; but the broad basis of the decision was simply that the agreement, on the Claimant's case, that he should be remunerated for his services, in part, by the payment of 1% of the proceeds was enough to render the agreement contrary to public policy; and that it was impossible to sever that provision because ... the remuneration package seems to me to have been conceived as a package as a whole for the carrying out of this very simply expressed agreement. The two matters of remuneration - the £250 a week and the 1% -... are totally intertwined.

2. What is now before me is the Claimant's appeal against Judge Walker's decision. The appeal is brought by permission of Teare J. The grounds for appeal, which were drafted by the Claimant himself, take a variety of points, but Teare J's permission was limited to "the question whether the agreement relied upon was champertous and should therefore be struck out, also on the severance issue". The Claimant has again appeared in person. The Defendant has been represented by Mr Michael Roberts of counsel (who did not appear below). Although the Claimant is not a lawyer, he is intelligent and articulate and has made his points courteously and effectively. Indeed, I should note that in the hearing before Judge Walker it was - to his credit and counsel's shame - he, and not counsel, who referred the Judge to the most relevant of the recent authorities on the issue of champerty - R (Factortame Ltd) v Secretary of State for Transport Local Government and the Regions (no. 8) [2003] QB 381.
3. By way of preliminary to his substantive submissions, the Claimant took the point that it was wrong that the Judge should have decided the champerty issue without hearing evidence. I am not sure that that point is, strictly speaking, open to him since it was not clearly taken in the grounds for appeal and, even if it can perhaps be construed from them, it was not one of the grounds in respect of which he was given permission. But he may not be seriously disadvantaged by this. The application was dealt with as an application to strike out his claim, rather than by way of a preliminary issue, ft follows that the Judge was obliged to proceed on the basis of the evidence adduced by the Claimant. It is true that the Claimant had not sought to put in evidence specifically directed to the champerty issue; and, since he took no objection at the time, he cannot now complain that he did not have the opportunity to do so. However, his witness statement prepared for the purpose of the substantive issues was before the Judge, and it contains, so far as I can tell, most of the points on which he would wish to rely as relevant as to the question of champerty. It is not expressly alluded to by the Judge, but the Claimant tells me that it can be inferred from his observations in the course of argument (of which, somewhat unusually, I have a full transcript) that he had read it; and, whether he had read it or not, I believe that I am entitled to do so.
4. I take separately the two issues on which the Claimant was given permission to appeal - (1) whether the agreement was champertous; and (2) if so, whether the offending provision can be severed.

(1) Was the Agreement Champertous ?

5. I consider below to what extent the Claimant's services under the alleged agreement were in truth rendered in connection with litigation, actual or proposed. But, on the assumption that they were, it is plain that an agreement of the kind relied on by the Claimant is potentially vulnerable to being held to be champertous because of the provision for him to be remunerated (in part) by means of a share of the proceeds. However, the now fairly numerous modern authorities on the issue have 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 justify that promise being held to be unenforceable. In Factortame (above) the Court of Appeal held that an agreement under which a firm of chartered accountants rendered litigation services to the claimants in return for 8% of the sums recovered was enforceable. The Court 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. At para. 36 of the judgment of the court, Lord Phillips of Worth Matravers MR said:

Where the law expressly restricts the circumstances in which agreements in support of litigation are lawful, this provides a powerful indication of the limits of public policy in analogous situations. Where this is not the case, then we believe one must today look at the facts of the particular case and consider whether those facts suggest that the agreement in question might tempt the allegedly champertous maintainer for his personal gain to inflame the damages, to suppress evidence, to suborn witnesses or otherwise to undermine the ends of justice.

At para. 38 Lord Phillips cited with approval the observation of Steyn LJ in Giles v. Thompson [1993] 3 All ER 321 to the effect that, in considering whether an agreement is unlawful on grounds of maintenance or champerty

... [t]he question is whether the agreement has the tendency to corrupt public justice. And this question requires the closest attention to the nature and surrounding circumstances of a particular agreement.

After having referred to the speech of Lord Mustill in the same case in the House of Lords Lord Phillips said (at para. 44):

This decision abundantly supports the proposition that, in any individual case, it is necessary to look at the agreement under attack in order to see whether it tends to conflict with existing public policy mat is directed to protecting the due administration of justice with particular regard to the interests of the defendant.

And at para. 71 he referred to the case of Hamilton v. Fayed (no. 2) [2003] QB 1175, in which Chadwick LJ pointed out that impecunious litigants may only be able to obtain access to justice if they can, in effect, promise to pay lawyers or experts or others whose services they require out of the proceeds of the litigation.

6. In addition to Factortame, there are at least three other recent cases in which the Court, applying a similar flexible approach, has declined to hold that an agreement under which a party provided assistance with litigation in return for a share of the proceeds was unenforceable:

In Stocznia Gdanska SA v. Latreefers Inc. (no. 2) [2001] 2 BCLC 116 a third party had agreed to fund the costs of a party to litigation in return for a 55% share of the proceeds. The Court of Appeal expressed a strong provisional view that in the particular circumstances of the case the agreement was not champertous-. see para. 63 of the judgment of the Court delivered by Morritt LJ (at p. 153).

In Dal-Sterling Group plc v. WSP South & West Ltd. (unreported, 18th July 2001) the Claimant, which operated as a claims consultant in the construction industry, agreed to provide consultancy services to a contractor pursuing claims against London Underground Ltd. in return for 22.5% of any recovery above a specified level. Judge Seymour QC, sitting in the Technology and Construction Court, held that the agreement was enforceable. He observed (at para. 23) that:

It is no longer the case that the mere fact that a stranger to litigation provides financial or materia] support to a party in return for a share in the proceeds of the action means that inevitably the agreement under which this is, done must be champertous.

In Papera Traders Co. Ltd v. Hyundai Merchant Marine Co. Ltd. (no. 2) [2002] 2 Lloyd's Rep 692 Cresswell J. held that an agreement under which salvage contractors were paid 5% of recoveries in respect of various "recovery services" which included various elements closely related to litigation was enforceable. (I was not taken to this authority in argument, but the passage in Chitty on Contracts in which it is cited was relied on by the Claimant.)

Although the facts of those cases were very different from those of the present case, they are a further illustration of the fact that it is wrong to apply any kind of blanket rule.

7. I should add that the decision in Papera also confirms that the rules against champerty, so far as they survive, are primarily concerned with the protection of the integrity of the litigation process in this jurisdiction. An English court should not refuse to enforce provisions relating to foreign litigation if the terms in question would not be regarded as contrary to public policy in the forum in question, even if they would be objectionable if they related to proceedings here. It may be that the English court would refuse to enforce the agreement if it were shown to be contrary to public policy also in the foreign forum; but on ordinary principles it seems to me that it must be for the party asserting such illegality to prove it.
8. I turn therefore to consider whether the agreement on which the Claimant sues in the present case can realistically be said to have a "tendency to corrupt public justice" in England and Wales. For the reasons given below I do not believe that it can.
9. The starting-point is that there was no direct or necessary relationship between the services which the Claimant contracted to supply and any potential litigation, still less litigation in this jurisdiction. Of the roles identified in the memorandum of 30th August 2002, (C) was concerned with potential press publicity. As to those identified under (A) and (B), which essentially involved research and the supply of information, it was of course plainly contemplated that one use to which the information which the Claimant might obtain might be put - though not necessarily the only use - was that it might be deployed, in some form, for the purposes of litigation; but whether such litigation would occur, and if so in what forum, was highly speculative. There were at the time no proceedings on foot and no immediate prospect of any. The problems of reviving the litigation in the Chancery Division in which Mr. Williams had failed ten years before, or of starting fresh proceedings in the High Court designed to revive the selfsame claims, were self-evidently formidable. If any proceedings were to be viable, they were as likely to be in the United States, where the Time Warner group is based, as in England. In that connection, the Claimant referred me to his witness statement, which showed that one of the most fruitful lines of inquiry in the work which he claims to have undertaken pursuant to the agreement concerned possible misfeasance by a U.S. company and its lawyers, which would be justiciable (if at all) in New York. That of course was not known when the agreement was made, but it illustrates the point. There was no evidence before me that an agreement of the kind on which the Claimant sues would be regarded as contrary to public policy in New York.
10. Even if litigation in England were to ensue, the Claimant's role, so far as provided for in the agreement, would simply have been to seek for and supply information. That information was not necessarily of a kind which might be used as evidence and thus be liable to be tainted by the Claimant's interest in the outcome. Again, the point can be illustrated by reference to the Claimant's witness statement. One discovery which he says that he made is that as a matter of New York law the liabilities of a particular Time Warner subsidiary which had been dissolved had passed to another Time Warner entity. Information of that kind does not afford any real scope for "corruption of public justice" on the part of the person providing it: it would have to be confirmed (or not) by a New York lawyer and/or from the relevant corporate records. What the Claimant was essentially doing in this regard was not so much supplying evidence suggesting a line of inquiry which might produce evidence. He was himself under no obligation to act as a witness (either as an expert witness or as a witness of fact) and it does not appear to have been envisaged that he would do so. Nor was there any question of his supplying litigation services of any more direct kind (such, for example, as drafting witness statements or managing disclosure) or of having a role in the conduct of any litigation that might ensue. The evidence is that the Defendant had retained solicitors who it was well understood were to be instructed if English litigation were to be undertaken. It would have been he and Mr. Williams who would have instructed those solicitors. (Indeed the Claimant took the point that solicitors would necessarily have had to be instructed, because any claim would have been vested either in Mr. Williams's trustee in bankruptcy or in a company owned by him; but that is an aspect which I need not pursue.)
11. If that were the entirety of the services contemplated by the agreement I should have found the question straightforward. But there is one aspect which comes nearer to the line. The scope of the research to be undertaken by the Claimant was wide enough to cover not just the kind of investigation illustrated above but his making inquiries directly with potential witnesses of fact; and indeed it appears from his witness statement that he did approach at least one ex-Time Warner employee who might have become a witness- It is not difficult to see why it might be undesirable for a non-professional researcher or inquiry agent tasked with interviewing witnesses to have a direct pecuniary interest in their giving evidence that favoured the case of the party employing him. But I am not persuaded that the theoretical risk of the Claimant being tempted in that way justifies holding the agreement in the present case to be contrary to public policy. Contacting potential witnesses was not central to the agreement; and in any event, for the reasons given in the previous paragraphs, the relationship between the services which the Claimant might provide under the agreement and any potential (English) litigation seems to me simply too indirect and contingent to engage the rule against champerty.
12. I reach that conclusion without regret. An absolute rule preventing a skilled researcher or inquiry agent whose services were sought by a person with a potential claim from making an enforceable contract under which he would be partly remunerated by reference to the sums recovered could in some meritorious cases be a real barrier to access to justice. (I say nothing about whether this is in fact a meritorious case; but the issue is important as a matter of principle.) I am not to be taken as saying mat such an arrangement would always be unobjectionable. As the recent authorities emphasise, it is necessary to examine the circumstances of each case. All that I need say is that the agreement with which I am concerned here has not been shown to be objectionable on public policy grounds.
13. A factor which appears to have influenced Judge Walker in reaching his decision is that the Claimant, unlike the accountants in Factortame, was not subject to professional regulation. That is no doubt an important consideration in a case where the party in question is performing services with a direct impact on the litigation. But I do not believe that it is significant in the circumstances of the present case as analysed above.
14. I was referred to several eighteenth- and nineteenth-century cases in which parties in possession of information which might assist another party to pursue a claim volunteered to supply that information in return for a share in the proceeds, and where the Courts held the resulting agreement to be champertous - see Strachan v. Brander (1759) 1 Eden 103; Sprye v. Porter (1856) 7 E & B 58; Stanley v. Jones (1833) 7 Bing. 369; and Rees v. De Bernardy [1896] 2 Ch 437. Mr. Roberts submitted that in these cases the agreements in question were held to be champertous on the straightforward basis mat the party in question had supplied his information in return for a share of the spoils, and that mat principle should apply equally in the present case. It would be easy to discount these cases on the basis that the recent authorities emphasise that the law relating to maintenance and champerty requires to be adapted to modem conditions, so that old cases of this kind are no longer of any value. That might however be unduly superficial I should not want to hold, at least without much consideration, that conduct of the kind considered in those cases should no longer be regarded as contrary to public policy. I prefer to distinguish them on the basis that whatever principle they may establish has no application to the case where a litigant takes the initiative to engage a researcher or inquiry agent to look for information on his behalf.
15. I therefore hold that the agreement on which the Claimant sues was not champertous. It follows not only that the claim should not have been struck out but that the third limb of the Defendant's application, namely for permission to amend to allege champerty, should be dismissed (though I make no such order myself since that aspect is not strictly before me).

(2) Severance

16. My conclusion on the first question means that it is unnecessary for me to deal with the severance issue. But I do so briefly in case I am wrong. In a case where the beneficiary of two promises, one good and one bad, seeks to sue on the good promise the fact that the contract also contains the bad promise cannot prevent him enforcing the good. The position is very clearly stated by Denning LJ in Bennett v. Bennett [1952] 1 KB 249, at p. 260:

The party who is entitled to the benefit of the void covenant, or rather who would have been entitled to the benefit of it if it had been valid, can sue upon the other covenants of the deed which are in his favour; and he can even sue upon the void covenant, if he can sever the good from the bad —

(See also the exposition to the same effect by Lord Esher MR in Kearney v. Whitehaven Colliery Company [1893] 1 QB 700 , at p. 711.) This seems to me to be plainly a case of the kind described by Denning LJ in the first part of the passage cited (i.e. up to "in his favour")- The covenant for payment of 1 % of the proceeds is in my view a distinct covenant from that to pay the £250 p.w. retainer for which the Claimant sues; and the question of "severance" of the kind that Denning LI refers to in the second part of the passage, which commonly has to be considered in restrictive covenant cases, does not arise. The fact that the two covenants may commercially have formed part of a single "package" does not matter. Such a result would in no way prejudice the Defendant by leaving him with a fundamentally different bargain than that which he entered: it would simply mean that he was liable to a pay a lesser price than he had bargained for. Nor would it be contrary to public policy, since once the stipulation for payment of a share of the proceeds were removed there would be nothing left in the agreement which offended public policy.

Conclusion

17. It follows from the foregoing that the Judge's order striking out the Claimant's claim should be reversed. The case will need to be re-listed for trial, unless either party applies for a further directions hearing. In order to save the parties the cost of attending the handing-down, I heard submissions on costs from both parties covering either possible outcome. In the event, the Claimant is entitled to his costs of this appeal, and also of the hearing before the Judge. He invited me, in the event that the appeal was successful, to assess his costs, and he supplied me with a schedule showing his hours spent. However, that schedule gives rise to questions which I am reluctant to try to resolve without a hearing, and I think it better if the costs in question are assessed, with whatever costs fall for assessment, at the conclusion of the proceedings.