IpsofactoJ.com: International Cases [2002] Part 5 Case 15 [QBD]


QUEENS BENCH DIVISION

Coram

Dal-Sterling Group Plc

- vs -

WSP SOUTH & WEST Ltd

JUDGE RICHARD SEYMOUR QC.

18 JULY 2001


Judgment

His Honour Judge Richard Seymour Q.C.

INTRODUCTION

  1. The Claimant, Dal-Sterling Group Plc, to which I shall refer in this judgment as "DSG", carries on business as a claims consultant in the construction industry. Kenchington Ford Plc ("KF"), the Second Defendant in this action, in about 1993 practised as consulting engineers. From the papers put before me it appears that sometime in 1994 KF became a member of the WSP Group of companies. Thereafter KF's practice was taken over by a company initially called WSP Kenchington Ford (South and West) Ltd., but now called WSP South & West Ltd. ("WSP"), the First Defendant.

  2. On 24 May 1991 KF entered into a contract with London Underground Ltd. ("LUL") under which KF agreed to undertake for LUL design work in connection with three stations required as part of the Jubilee Line Extension ("JLE"). The three stations were at Canning Town, West Ham and Stratford in London. In some of the documents to which I shall refer later in this judgment KF's client, LUL, was called by the name of the project, JLE. Disputes arose between KF and LUL concerning the fees to which KF was entitled in respect of the work which it had carried out under the contract to which I have referred. KF engaged the services of DSG to assist in pursuing claims against LUL. The matters which I have to decide arise out of that engagement and what followed from it. In this action DSG claims against KF and/or WSP payment of its fees for assisting KF and/or WSP with the claims against LUL. In the light of the Statements of Case served in this action on behalf of DSG and KF/WSP respectively H.H. Judge Humphrey Lloyd Q.C. ordered on 9 March 2001 so far as is presently material as follows:-

    1.

    There is to be a trial of preliminary issues which are to be agreed by the parties or in default defined by the Court and which are to cover the following:

    1.1

    Whether there was an agreement in 1997 as alleged in paragraphs 34.1 and 34.2 of the Amended Particulars of Claim.

    1.2

    Whether that agreement varied the 1993 Agreement as alleged in paragraph 34.3 of the Amended Particulars of Claim.

    1.3

    Whether the 1997 Agreement was in whole or in part (see paragraph 39 of the Amended Particulars of Claim) champertous or otherwise unenforceable as alleged in paragraph 36 of the Amended Defence.

    1.4

    If so, whether the Claimant can nevertheless recover on a quantum meruit for work or services required by the Defendants to be done pursuant to the 1997 Agreement as alleged in paragraphs 37.5 and 39 of the Amended Particulars of Claim.

    1.5

    Whether the Claimant is entitled to any fees under the 1993 Agreement even though there was no negotiated settlement.

    1.6

    If the 1997 Agreement is champertous in whole or in part whether there is any effect on the Claimant's accrued rights, if any, under the 1993 Agreement ....

    ....

    7.

    Parties to agree Statement of Facts by 4 May 2001 but if and to the extent facts cannot be agreed, signed statements of witnesses of fact to be served and filed by 4.30 pm on 11 May 2001.

    The parties have not in terms formulated and agreed any preliminary issues for trial, but each party has proceeded on the basis that the matters set out in Judge Lloyd's directions as to be covered by agreed issues constitute the agreed preliminary issues. The parties have agreed a Statement of Facts and neither side has sought to adduce evidence outside of the agreed Statement of Facts and a bundle of contemporaneous documents which was put before me.

  3. To render intelligible the issues mentioned at paragraph 1 of Judge Lloyd's order for directions dated 9 March 2001 it is necessary to refer both to the Statement of Facts which the parties have agreed and to the Statements of Case in this action.

    THE STATEMENT OF FACTS

  4. It is convenient to set out the agreed facts in their entirety.

    1.

    The Claimant ("DSG") is a construction industry claims consultant and was approached by the Second Defendant ("KF") in about March of 1993 with a view to assisting with a fee claim it had against London Underground Limited ("LUL").

    2.

    KF was later purchased by WSP South & West Limited, which is now part of WSP Group Plc. The identity of the company with whom DSG contracted at various points throughout the history of this dispute is not relevant to the preliminary issue and it is therefore sufficient to refer to both Defendants collectively as WSP.

    3.

    DSG presented its proposals for dealing with the claim to WSP in a document entitled "Proposals for Claims Development .... DRAFT". Representatives of the parties subsequently met on 5 May 1993 to discuss the proposal and DSG followed this up with a letter on 12 May 1993.

    4.

    In May 1993 (the exact date is not agreed but is not pertinent to the preliminary issue), DSG undertook to prepare a claim document for WSP to provide to LUL and DSG further agreed to seek a negotiated settlement of the dispute ("the 1993 Agreement") for reward. It was agreed that, if a negotiated settlement was achieved, DSG would be paid a contingency fee of a flat 22.5% of any recovery made by WSP above the contract value of 1.05 million excluding Stage IV Contract Sums.

    5.

    At the time of the 1993 Agreement, litigation was not anticipated, the parties' conscious decision being to negotiate with LUL.

    6.

    Following DSG's review and various meetings with WSP, the claim document was provided to WSP by DSG in April 1994.

    7.

    The claim document was forwarded by WSP to LUL in the same month. LUL subsequently sought further details of the claim and DSG was involved in the provision of such details, including the preparation of a revised claim, until, on 21 December 1994, WSP wrote to DSG stating "We require you to do nothing further at present. We will of course advise you when the position is clearer". There was no provision in the 1993 Agreement for such a course of action.

    8.

    The only agreement as to fees was the contingency fee agreement described above. However, in undertaking the preparation of WSP's claim and attending meetings with LUL, DSG recorded a total of 1,377 hours or 151 days' work carried out on behalf of WSP up to December 1994 which it has costed by reference to the rates in Alternative A in the April 1993 draft proposals at 65,565.00. All of this work was carried out under the scope of the 1993 Agreement. There was no negotiated settlement.

    9.

    There was various contact between the parties during June/July 1995 and throughout 1996 until 15 May 1997 (when DSG believed the 1997 Agreement came into existence) for which DSG recorded a total of 181 hours or 8.98 days work costed on the same basis at 8,254.90. For the purposes of the preliminary issue only it is agreed that all this work was carried out under the scope of the 1993 Agreement.

    10.

    During the early part of 1996 WSP did not adopt DSG's suggestions and ask DSG to attempt to obtain the negotiated settlement.

    11.

    In September 1996, LUL issued proceedings (numbered 1996 ORB 1268) against WSP alleging negligence ("the LUL action"). WSP subsequently counterclaimed for the same fees which had been the subject of the dispute in which DSG had had a preparation/negotiating role. The Court ordered that the counterclaim should be re-pleaded and in March 1997, WSP made contact with DSG to discuss whether they may be able to assist in the presentation of that counterclaim.

    12.

    Sometime during March or April 1997 Mr. Alexander of WSP telephoned Mr. de Moraes of DSG enquiring about the availability of Mr. Crawley of DSG to assist WSP in presenting the fees claimed in the LUL proceedings.

    13.

    On either 15 April or 15 May (the parties are unable to agree the date although it is not material), Mr. Alexander of WSP met with Mr. de Moraes of DSG to discuss the counterclaim. Subsequently (some time in the middle of May 1997), it was agreed by telephone that DSG would assist in presenting the counterclaim and the re-pleading of the counterclaim ("the 1997 Agreement"). In that conversation, it was agreed that the fee for the assistance was the same 22.5% contingency fee as originally agreed in 1993 save that the fee would apply in the event there was negotiated settlement or Judgment in WSP's favour.

    14.

    DSG recorded a total of 83.7 hours or 9.3 days work carried out for WSP from 15 May 1997 until November 1998, which it has costed at 3,766.50. There were no requests for this work/those services other than those enshrined under the scope of the 1997 Agreement.

    15.

    Judgment in the LUL action was given to WSP on 5 November 1998 in the sum of 448,567 plus 212,000 interest, totalling 660,567. 22.5% of the total awarded and the amount therefore due if DSG are contractually entitled to the fee under the 1993 or 1997 Agreement is 148,627.58 plus VAT.

  5. It is apparent from the terms of the agreed Statement of Facts that, despite the terms of paragraph 1.1 of Judge Lloyd's order dated 9 March 2001, it is not in dispute that some agreement was made between the parties in 1997. The real question in difference between them is as to the effect of the agreement made in 1997. On the respective Statements of Case of the parties to this action it is common ground that, as it was put at paragraph 9 of the Amended Particulars of Claim:-

    the terms of the 1993 Agreement were as set out at Alternative B of the April 1993 draft Proposals (Document 1), as amended in the manner contained in the 12 May 1993 letter (Document 2).

    The document identified as "Document 1" was that entitled "Proposals for Claims Development Jubilee Line Extension C069 & C082 Stratford Station West Ham Station Canning Town Station DRAFT", to which I shall refer in this judgment as "the Draft Proposals". The document referred to as "Document 2" was a letter dated 12 May 1993 written by Mr. de Moraes of DSG to Mr. Alexander of KF. Alternative B in the Draft Proposals was in the following terms:-

    We believe that the input we are able to bring to KF's problem will provide KF with an enhancement in its additional recovery of at least 25%. Therefore, the contingency fee we propose is intended to provide KF with a means of resolving its difficulties without cost. Hence, our proposal is:

    A contingency fee, calculated as a flat 25% of any recovery above a combined value for the two contracts of 1,500,000.

    This fee will include for all costs, expenses etc. in obtaining a negotiated settlement.

  6. The reference to two contracts is because, after the contract between LUL and KF was made, it was, for some reason which is not material to anything I have to decide, split into two. The letter dated 12 May 1993 written by Mr. de Moraes to Mr. Alexander included, so far as is presently relevant, the following:-

    Following our meeting on 5th May 1993, we have pleasure in confirming the agreement to undertake the Claims preparation and negotiation on the above station [Canning Town] and, as outlined in our Draft Proposal dated April 1992, [sic] subject to the following amendments relating to fees:

    Alternative B Percentage of Benefits was the preferred option. DSG to receive a contingency fee of a flat 22% on any recovery above a contract value of 1.05 million, excluding the Stage IV Contract Sums. Payment of fees to be made within 7 days of receipt of funds from JLE.

    The claims submission, negotiations and contingency fee recovery is to apply to the additional costs incurred by the Architect and the QS.

    In the event of having to employ outside experts to substantiate or progress the claims, the costs shall be borne in the same proportion as the recovery , i.e. 77% costs to Kenchington Ford and 22% costs to DSG. 

  7. In a facsimile transmission dated 21 December 1994 sent by Mr. Alexander of WSP to Mr. de Moraes of DSG, a copy of which was put before me, Mr. Alexander wrote in the following terms:-

    I have tried to contact you by telephone, but I understand you are out of the office.

    We have had discussions at board level and have decided to pursue the option of negotiating directly with LUL as a window of opportunity appears to be open.

    We therefore require you to do nothing further at present. We will of course advise you when the position is clearer.

    THE STATEMENTS OF CASE

  8. Omitting passages originally included but now deleted, paragraph 34 of the Amended Particulars of Claim is in the following terms:-

    34.

    It is DSG's primary case that a binding agreement (the "1997 Agreement") came into being on 15 May 1997 alternatively on or about 18 May 1997 between DSG and KF PLC and/or WSP by which, and without prejudice to the foregoing, the 1993 Agreement was rescinded by agreement on the basis that the new obligations as set out in the sub-paragraphs below were, (as pleaded at paragraph 22 above) substantially inconsistent with the obligations under the 1993 Agreement so as to be a fundamental change to the same:

    34.1

    the terms of the 1997 Agreement were that DSG would perform further services to assist KF PLC and/or WSP in the pursuit of the Contract Claim in the Court proceedings and the fee calculation provisions of the 1993 Agreement would now apply in the event of a negotiated settlement or Judgment on the Contract Claim; alternatively

    34.2

    DSG promised to perform services to assist KF PLC and/or WSP in the Court proceedings for a fee. The fee would be a sum equal to 22 % of the total recovery by KF PLC and/or WSP by negotiated settlement or Judgment in respect of KF PLC's entitlement under the Main Contract above 1.05m, excluding the Stage IV Contract Sums,

    34.3

    In the alternative and without prejudice to their primary case, the 1993 Agreement was varied in accordance with the terms set out at paragraph 34.1, alternatively 34.2 above. 

  9. A claim for payment of a reasonable sum in respect of the work done by DSG for KF and/or WSP in connection with the claims against LUL is pleaded at paragraphs 37.5 and 39 of the Amended Particulars of Claim, omitting words once included, but now deleted by amendment, as follows:-

    37.5

    Further and in the yet further alternative and without prejudice to the foregoing if, which is denied, the 1997 Agreement is unenforceable by reason of champerty, alternatively, the 1993 Agreement as varied is unenforceable by reason of champerty, DSG claims the sums referred to at paragraphs 37, 37.1, 37.2 and 37.4 above on a quantum meruit basis pursuant to requests made by KF PLC and/or WSP.

    39.

    Further or in the alternative and without prejudice to the foregoing and DSG's contention that the 1997 Agreement related, at least in part, to work necessary for the negotiation and settlement of the claims, the 1997 Agreement can be treated as severable such that all works carried out prior to that date are properly recoverable either as sums due under the original 1993 Agreement, alternatively, pursuant to a quantum meruit.

  10. The essence of the defence of KF and WSP to DSG's claims for fees for assistance in relation to the claims of KF and/or WSP against LUL is set out in paragraph 36 of the Amended Defence, which is in the following terms:-

    36.

    Paragraph 37 of the Particulars of Claim is denied.

    36.1

    The 1997 Agreement (whether as set out at paragraphs 34.1 or 34.2 or 34.3 of the Particulars of Claim or paragraph 33 above) was an agreement pursuant to which the Defendants agreed to pay to DSG a contingency fee representing a percentage of the Defendants' recovery in litigation, in which DSG otherwise had no interest.

    36.2

    Such an agreement was champertous and, accordingly, unlawful and unenforceable.

    36.3

    In any event, as set out above, DSG failed to perform the 1997 Agreement substantially or at all.

    36.4

    The Defendants' case is that on its true construction and/or on the basis that the Agreement was an entire contract, DSG are, accordingly, not entitled to be paid.

    36.5

    In the premises and in the alternative:

    36.5.1

    The Defendants are entitled to abate such sum as would otherwise be due to DSG; or

    36.5.2

    DSG's failure to perform amounted to a breach of the 1997 Agreement in respect of which the Defendants are entitled to claim damages for breach of contract which the Defendants will set-off to the extent necessary to extinguish DSG's claim.

    36.6

    The Defendants will contend that an appropriate amount by which DSG's fee should be abated and/or the sum to which they are entitled by way of damages is a sum representing the value of the time spent by WSP's employees in re-pleading the Defendants' counterclaim, which would not have been incurred had DSG provided the assistance which they undertook to provide. Particulars of the calculation of that amount are set out in Schedule 1 hereto.

    THE SUBMISSIONS OF THE PARTIES

  11. As the argument unfolded before me it became clear that the real point in issue between the parties was the effect of the agreement which it was accepted had been made in 1997. It is common ground that, to quote again from the Agreed Statement of Facts:-

    On either 15 April or 15 May (the parties are unable to agree the date although it is not material), Mr. Alexander of WSP met with Mr. de Moraes of DSG to discuss the counterclaim. Subsequently (some time in the middle of May 1997), it was agreed by telephone that DSG would assist in presenting the counterclaim and the re-pleading of the counterclaim ("the 1997 Agreement"). In that conversation, it was agreed that the fee for the assistance was the same 22.5% contingency fee as originally agreed in 1993 save that the fee would apply in the event there was negotiated settlement or Judgment in WSP's favour. 

    The Defendants' case was that the agreement so made was illegal and unenforceable because it was champertous. DSG's case was that the agreement was not tainted with champerty and was valid and binding. The matters set out at paragraph 1.3 of the order made by H.H. Judge Lloyd Q.C. on 9 March 2001 were intended to cover this question. However, as against the possibility that the 1997 Agreement might be held to be illegal and unenforceable on the ground of champerty, DSG sought to advance a variety of analyses of the agreed facts which would, in the submission of Mr. Simon Lofthouse, who appeared as Counsel on its behalf, lead to the conclusion that DSG was entitled to payment for the services which it had provided to KF and/or WSP. As Mr. Lofthouse emphasised, none of these analyses needed to be considered unless he was wrong in his submission that the 1997 Agreement was not tainted with champerty. It is these other analyses which have given rise to the preliminary issues covering the matters set out at paragraph 1.1, 1.2, 1.4, 1.5 and 1.6 of Judge Lloyd's order of 9 March 2001. It is, I think, convenient to start by considering the 1993 Agreement and its effect, on proper construction, and then to move on to an assessment of the effect in law of later events, including the making of the 1997 Agreement. This involves dealing with the various matters raised in paragraph 1 of Judge Lloyd's order of 9 March 2001 in an order different from that which was followed in that order.

  12. It is, I consider, plain that the 1993 Agreement contemplated that DSG would provide assistance to KF in relation to the production of a claim document and in conducting negotiations with LUL in return for payment of a fee calculated as 22.5% of whatever was paid in settlement by LUL to KF, other than in respect of Stage IV Contract Sums, to the extent that the sums paid exceeded 1,050,000. Payment of any fee was thus subject to two contingencies, namely, first, that there should be a settlement, and, second, that the sum paid in settlement should exceed the floor level of 1,050,000. Obviously the amount of the fee also depended upon the amount of the settlement. In my judgment it is important to notice that the first contingency was simply the fact of a settlement, and did not depend upon DSG having played any particular role in achieving such a settlement. It is also important to notice that under the 1993 Agreement it was for KF to decide whether any particular offer of settlement, assuming one was made, was acceptable. I consider that it was entirely up to KF to evaluate whether a particular offer of settlement was acceptable, notwithstanding that, by rejecting an offer which might, objectively viewed, be a good one, it could in effect deprive DSG of fees. The arrangement, therefore, from the point of view of DSG, did involve real risks that ultimately nothing would be paid in respect of its efforts. It was not simply a question of what precise fee DSG obtained depending upon what recovery KF made. It is also right to say that DSG had to bear the cost of funding its own costs of doing the work which KF and/or WSP wanted done until any eventual settlement.

  13. Mr. Lofthouse sought to characterise the request made by Mr. Alexander in his facsimile transmission dated 21 December 1994 in a number of ways, each of which was said to have an impact on the 1993 Agreement. The object of the exercise seems to have been to justify a conclusion that after the sending of that facsimile transmission DSG had a vested claim for damages against KF and/or WSP which was unaffected by the making of the 1997 Agreement. The 1997 Agreement was, on DSG's case, to be viewed as free-standing. Whether that was correct or not was the matter intended to be addressed by the first sub-paragraph of paragraph 1 of Judge Lloyd's order dated 9 March 2001.

  14. Mr. Lofthouse submitted, first, that the sending of the facsimile transmission amounted to a repudiation of the 1993 Agreement, which repudiation DSG accepted by ceasing to carry out any further work for KF and/or WSP. He went on in his written "Claimant's Note of Submissions":-

    19.

    Further and in the further alternative DSG contends the suspension of performance amounted to a frustration of the 1993 Agreement. The basis of the frustration is that the actions by WSP, for which there was no provision under the 1993 Agreement, made it commercially impossible for DSG to fulfil the contract.

    20.

    DSG also contends that the requirement that they do nothing (and indeed the consequential change of approach by WSP) constituted a breach of the admitted implied term that WSP would not hinder or prevent DSG from performing their services. As such the damages claimed are to be calculated on the basis of the "loss of a chance".

  15. Miss Nerys Jefford, who appeared on behalf of KF and WSP, submitted that the facsimile transmission sent by Mr. Alexander on 21 December 1994 did not amount to a repudiation of the 1993 Agreement, but was simply a request as part of a working out of the policy of negotiation contemplated by the 1993 Agreement. She further submitted that, if, contrary to her basic submission, the facsimile transmission was capable of being a repudiation, such repudiation was not accepted by DSG. She relied on the fact that it was recorded in the Agreed Statement of Facts that work in June/July 1995 and throughout 1996 until 15 May 1997 "was carried out under the scope of the 1993 Agreement". Miss Jefford submitted that the issue of frustration did not arise. Either, she said, the sending of the facsimile transmission dated 21 December 1994 was a breach of the 1993 Agreement, in which case the point added nothing to the alleged case on repudiation, or, if it was not a breach, being an action by one of the parties to the 1993 Agreement, it could not be a frustrating event. Miss Jefford answered the reliance which Mr. Lofthouse sought to place upon alleged breach of an implied term of the 1993 Agreement that KF and WSP would not hinder or prevent DSG from performing its services by saying that it was not clear whether the alleged breach was itself a further repudiation, in which case it seemed to add nothing to the alleged repudiation to which I have already referred, or was a mere breach, in which case nothing seemed to follow because there was no pleaded claim for damages consequent upon it.

  16. In my judgment, Mr. Lofthouse's analyses of the alleged consequences in law of the sending by Mr. Alexander of his facsimile transmission dated 21 December 1994 are contrived and artificial. While the 1993 Agreement did not in terms provide for the possibility that KF might itself take over negotiations with LUL directly, I cannot see that doing so amounted to any sort of breach on the part of KF of the 1993 Agreement or in any way frustrated the achievement of its objectives. As I have pointed out, the fee for which the 1993 Agreement provided was payable no matter who was the immediate instrument by which a negotiated settlement was brought about. Thus if, as a result of the direct negotiations envisaged by Mr. Alexander in his facsimile transmission dated 21 December 1994, KF or WSP had reached a settlement with LUL, DSG would, in my judgment, have been entitled to payment of its agreed fee, provided only that the recovery was sufficient to trigger the obligation to make payment. I accept the submissions of Miss Jefford that the sending of the facsimile transmission dated 21 December 1994 was not a repudiation of the 1993 Agreement or a breach of the implied term upon which Mr. Lofthouse sought to rely. I also accept her submission that only an external event can be a frustrating event for the purposes of the law of contract. An act of one of the parties can only be either a breach of the contract or of no legal effect.

  17. Mr. Lofthouse submitted, as his primary case, that the 1997 Agreement was not merely a variation of the 1993 Agreement, but operated in law as a rescission of it. What followed, he said, if this submission were well-founded, was that DSG had a claim for payment on a quantum meruit basis for work done under the 1993 Agreement before it was deemed to have been rescinded. Miss Jefford submitted that the 1997 Agreement was but a variation of the 1993 Agreement, in effect providing that DSG would assist KF and/or WSP in presenting and re-pleading its claims against LUL as counterclaims in the action commenced on behalf of LUL, and that the agreed fee would be calculated by reference to whatever sum was paid to KF and/or WSP as a result of a settlement with, or a judgment against, LUL. It seems to me that, as a matter of construction of the facts agreed between the parties for the purposes of the hearing of preliminary issues before me, Miss Jefford's analysis is correct. The natural interpretation of what is agreed to have happened is that the scope of the 1993 Agreement was simply extended and modified to take account of the new situation which arose as a result of the commencement of legal proceedings on behalf of LUL. It is, of course, possible in law for parties who have made an agreement to make a further agreement the terms of which indicate that it is intended to replace the previous agreement. In such circumstances it would be right to infer that the previous agreement has been rescinded or discharged by the fresh agreement. However, in deciding whether such is the correct inference, it seems to me that one of the important matters to which to have regard is whether the parties in the new agreement have addressed the question what consequences should follow in respect of rights and obligations which had arisen under the previous agreement prior to the making of the new agreement. If one finds, as one does in the present case, that the further agreement is silent as to rights and obligations arising under the previous agreement, that in my opinion indicates that the parties do not intend that the previous agreement should be treated as rescinded. I regard it as almost inconceivable that it would be correct as a matter of law in a case in which parties making a second agreement have said nothing about the consequences of the making of that agreement on an earlier agreement which they had made, to contemplate that, if it were right to draw the inference that the parties intended to rescind the earlier agreement, such inference should be drawn on any basis other than that each renounced all rights as against the other arising under the earlier agreement.

  18. On the footing, which as matters have turned out is correct, that I accepted her submissions as to the 1997 Agreement being simply a variation of the 1993 Agreement, Miss Jefford submitted that the 1997 Agreement was illegal and unenforceable as being champertous. The effect of that, Miss Jefford said, was that, although KF and/or WSP had actually made a recovery in the action with LUL of an amount sufficient to trigger the obligation to make a payment if the 1997 Agreement were enforceable in law, her clients were not bound to pay DSG anything. Mr. Lofthouse contested that conclusion and submitted that the 1997 Agreement was not objectionable on the ground of champerty. In order to evaluate these submissions it is necessary to consider the state of the authorities as to champerty. Champerty is a species of maintenance, so I begin with a consideration of authorities relating to maintenance.

  19. The crimes of maintenance and champerty are of very ancient origin in the common law of England. As crimes and independent torts both maintenance and champerty have been abolished by Criminal Law Act 1967 s.14. In my judgment, for reasons which I shall explain hereafter, maintenance as a civil wrong is no longer of any significance, although conceptually it probably still exists. However, an understanding of what maintenance is, or was, is necessary for a consideration of champerty. For the purposes of this judgment it is only necessary, so far as maintenance is concerned, to go back to what the modern position was considered to be in 1843. In Findon v Parker (1843) 11 M & W 675 at page 682 Lord Abinger said:-

    The law of maintenance, as I understand it upon the modern constructions, is confined to cases where a man improperly, and for the purpose of stirring up litigation and strife, encourages others either to bring actions, or to make defences which they have no right to make.

    In Neville v London "Express" Newspaper Ltd [1919] AC 368 at page 390 Lord Haldane said:-

    .... the broad rule remains unrepealed by any statute that it is unlawful for a stranger to render officious assistance by money or otherwise to another person in a suit in which that third person has himself no legal interest, for its prosecution or defence.

    The essence of maintenance, therefore, was the rendering of assistance, financial or otherwise, to a party to litigation. However, it was not the mere rendering by a stranger of assistance to a person involved in litigation that constituted the wrong. Solicitors and barristers render such assistance to clients with whose affairs they have no concern other than a professional one. Something more was involved before it could be said that there had been maintenance.

  20. In British Cash and Parcel Conveyors Ltd. v Lamson Store Service Co. Ltd. [1908] 1 KB 1006 Fletcher Moulton LJ said, at page 1014:-

    That there is still such a thing as maintenance in the eye of the law and that it constitutes a civil wrong and perhaps a crime is undoubted, and the general character of the mischief against which it is directed is familiar to us all. It is directed against wanton and officious intermeddling with the disputes of others in which the defendant has no interest whatever, and where the assistance he renders to the one or the other party is without justification or excuse. But in my opinion it is far easier to say what is not maintenance than to say what is maintenance. One point is clear. No transaction can constitute maintenance if the Court treats it as valid and enforces obligations under it. Maintenance is certainly a turpis causa, and therefore a contract of maintenance is incapable of being enforced, and if, as in the present case, it is clear from the settled practice of the Courts that the contracts are valid and enforceable, we may feel satisfied that they do not infringe the law against maintenance.

    From that passage it emerges that maintenance was the provision of assistance, financial or otherwise, by a third party to a party engaged in litigation in circumstances which the law regarded as illegitimate. What the law regards as illegitimate is a question of public policy. It is also important, in my judgment, to notice the consequences of maintenance as a civil wrong following the abolition of the tort of maintenance. They were simply that a contract to provide assistance in litigation which the law regarded as illegitimate was unenforceable. For practical purposes so far as maintenance was concerned, therefore, a litigant could not compel a person who had entered into a contract to provide financial or other assistance for the purposes of the action in which he was involved actually to provide what he had promised.

  21. The requirements of public policy, and in particular the public policy underlying maintenance and champerty, are not fixed and immutable, but evolve over time, as was pointed out by Danckwerts LJ in Hill v Archbold [1968] 1 QB 686 at page 697 and by Lord Mustill in Giles v Thompson [1994] 1 AC 142 at page 164. Lord Mustill in the latter case identified the public policy involved in the law of maintenance and champerty as:-

    a principle of public policy designed to protect the purity of justice and the interests of vulnerable litigants.

  22. Champerty is maintenance to which, as Lord Mustill put it in Giles v Thompson at page 161, "there must be added the notion of a division of the spoils". Mr. Lofthouse submitted that, in the light of the facts in Giles v Thompson itself, that reference must be understood as meaning that as a result of the relevant agreement the champertous maintainer must obtain an interest by way of charge or assignment in the proceeds of the litigation itself. That submission seems to be to lack substance and to demonstrate an ignorance of the fundamental nature of champerty. In Re Trepca Mines Ltd. (No.2) [1963] 1 Ch. 199 at pages 219 to 220 Lord Denning M.R. said this about champerty:-

    But there is one species of maintenance for which the common law rarely admits of any just cause or excuse, and that is champerty. Champerty is derived from campi partito (division of the field). It occurs when the person maintaining another stipulates for a share of the proceeds: see the definitions collected by Scrutton LJ in Haseldine v Hosken. The reason why the common law condemns champerty is 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;

    Miss Jefford relied heavily upon Lord Denning's statement of the vices at which champerty was aimed. She submitted that the mischief at which champerty was directed was the risk of the contamination of public justice if third parties with no legitimate interest in a particular piece of litigation participate by providing assistance, financial or otherwise, in return for a share of the proceeds of the litigation if it is successful.

  23. The whole question of the role of maintenance and champerty in the common law in the latter part of the twentieth century was considered by the House of Lords in Giles v Thompson. The decision actually concerned two separate cases in each of which a company the ordinary business of which consisted in hiring out motor cars hired cars to the victims of road accidents in which the victims' own cars had been damaged. So far as is relevant for the purposes of the present judgment, the terms of the hire may be taken to be that no hire charge was payable unless damages were recovered against the person who had damaged the victim's own car. As part of the overall arrangement the hire company financed the taking of proceedings in the name of the victim against the person alleged to be responsible for the damage to the victim's car. The provision of such finance could be regarded as maintenance, but it was not so treated by the House of Lords, and in my judgment the position now at common law is that mere maintenance, as it were, that is to say, simply funding the litigation of another or providing material help in the form of some sort of service without payment or at a concessionary rate or on terms as to deferment of the obligation to make payment until some future date or the happening of some future event, is not considered objectionable. For practical purposes, therefore, maintenance has been abolished unless combined with that additional element which makes it champerty. This analysis is supported, in my judgment, by the comment of Chadwick LJ in the unreported case of Farhad Faryab v Naz Smyth [1998] EWCA 3503 at paragraph 30, referring to a citation by Lord Mustill in Giles v Thompson at page 161 of part of the passage from the judgment of Fletcher Moulton LJ in British Cash and Parcel Conveyors Ltd. v Lamson Store Service Co. Ltd. which I have set out earlier in this judgment:-

    The description of maintenance to which Lord Mustill refers in that passage is, as it seems to me, indistinguishable from the description given by Jenkins LJ at the top of page 400 in Martell v Consett Iron. That conduct, of itself, has not been regarded as an abuse of process.

  24. The only substantive speech in the House of Lords in Giles v Thompson was that of Lord Mustill. His speech began with what it seems to me was a brief historical introduction to the law of maintenance and champerty. In the course of that introduction, at page 153, Lord Mustill said:-

    As the centuries passed the courts became stronger, their mechanisms more consistent and their participants more self-reliant. Abuses could be more easily detected and forestalled, and litigation more easily determined in accordance with the demands of justice, without recourse to separate proceedings against those who trafficked in litigation. In the most recent decades of the present century maintenance and champerty have become almost invisible in both their criminal and their tortious manifestations. In practice, they have maintained a living presence in only two respects. First, as the source of the rule, now in the course of attenuation, which forbids a solicitor from accepting payment for professional services on behalf of a plaintiff calculated as a proportion of the sum recovered from the defendant. Secondly, as the ground for denying recognition to the assignment of a "bare right of action." The former survives nowadays, so far as it survives at all, largely as a rule of professional conduct, and the latter is in my opinion best treated as having achieved an independent life of its own.

    Mr. Lofthouse submitted that the passage just quoted, the second paragraph in a speech which, as printed, runs to some16 pages, encapsulates the grounds of the decision. Consequently, he submitted, DSG not being solicitors and not having taken any assignment of any cause of action from KF or WSP, the 1997 Agreement could not be champertous. I do not consider that the matter is quite as straightforward as that.

  25. In my judgment the test to be applied in determining whether an agreement is champertous was set out by Lord Mustill in a passage from his speech in Giles v Thompson at pages 163 to 164:-

    Against this background I turn to the defendant's submission that the agreement is unlawful. This posits an inquiry in three stages. At the first the agreement is analysed to see whether the company, a stranger to the dispute between the motorist and the defendant, agrees to involve itself in the litigation in a way which yields a financial benefit from a successful outcome. If so, the agreement is champertous and prima facie unlawful. At the second stage it is considered whether the third party has an interest in the transaction which legitimates what would otherwise be unlawful. Finally, it is asked whether, aside from special rules concerning champerty, the relationship has features which make it contrary to public policy, and hence unenforceable.

    For my part I prefer to approach the question more directly. I accept that, as Steyn LJ expressed it in the course of his valuable historical analysis, there have evolved crystallised policies in relation to solicitors' contingent fees and the assignment of bare rights of action for tortious wrongs. I also accept that in relation to these aspects of the law of champerty it is necessary first to consider whether the transaction bears the marks of unlawful champerty and then to inquire whether it is validated by the existence of a legitimate interest in the person supporting the action distinct from the benefit which he seeks to derive from it. For this purpose close regard must be paid to Trendtex Trading Corporation v Credit Suisse [1982] AC 679, and to the considerations which led to a difference of analysis between the members of the Court of Appeal in the present case. But the tests there laid down were addressed to transactions of the kind then before the House; they are not to be understood as if they had statutory force; and I see no reason to impose the procedure thus evolved on situations which are entirely different. As Steyn LJ has demonstrated, the law on maintenance and champerty has not stood still, but has accommodated itself to changing times: as indeed it must if it is to retain any useful purpose: see per Danckwerts J in his important judgment in Martell v Consett Iron Co. Ltd. [1955] Ch. 363, 382. It is possible, although I believe rather unlikely, that new areas of law will crystallise, with their own fixed rules which are invariably to be applied to any case falling within them. Meanwhile, I believe that the law on maintenance and champerty can best be kept in forward motion by looking to its origins as a principle of public policy designed to protect the purity of justice and the interests of vulnerable litigants. For this purpose the issue should not be broken down into steps. Rather, all the aspects of the transaction should be taken together for the purpose of considering the single question whether, in the terms expressed by Fletcher Moulton LJ in the passage already quoted from in British Cash and Parcel Conveyors Ltd. v Lamson Store Service Co. Ltd. [1908] 1 KB 1006,1014, there is wanton and officious intermeddling with the disputes of others in [circumstances] where the meddler has no interest whatever, and where the assistance he renders to one or other party is without justification or excuse.

  26. Miss Jefford submitted that I should approach the present case on the footing that the issue was whether a claims consultant could lawfully provide his services in the context of litigation in return for a contingent fee. I do not think that that is correct. Lord Mustill in the passage just quoted seems to have focused on the need to look at each case individually, and with respect I think that that must be right. It is no longer the case that the mere fact that a stranger to litigation provides financial or material 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. It seems to me that in the circumstances of the present case the nature of the original involvement of DSG with KF is important. What, it is common ground, was contemplated at the time the 1993 Agreement was made, was that DSG would prepare a claim document and undertake negotiations with LUL on behalf of KF with a view to achieving a settlement of KF's claims against LUL. It is also accepted that DSG did quite a lot of work in performance of that agreement, both immediately and later in June/July 1995 and in 1996 and 1997 up to 15 May. It is further accepted that the 1993 Agreement was not, when made, champertous and that, had a settlement resulted prior to the making of the 1997 Agreement, DSG would have been entitled to its contingency fee as long as the trigger level of recovery had been made. By the time the 1997 Agreement was made KF and/or WSP had instructed solicitors to act on their behalf in the action commenced on behalf of LUL. The tasks which DSG was 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. Having regard to all these circumstances in my judgment the 1997 Agreement was not tainted with champerty but gave rise to obligations binding upon, and enforceable against, KF and/or WSP.

  27. The issues for my decision include three which arise only if I had come to the conclusion that the 1997 Agreement was unenforceable on the ground of champerty. The first is whether, if the 1997 Agreement was unenforceable, DSG could nonetheless recover on a quantum meruit basis for work for which payment would have been due on a contingency fee basis if the agreement were enforceable. Mr. Lofthouse submitted that DSG could recover a reasonable sum in respect of the services which it provided. He relied on the decision of the Court of Appeal in Mohamed v Alaga & Co. [2000] 1WLR 1815. In that case a member of the Somali community in England made an agreement with a firm of solicitors under which he agreed to introduce potential clients, who sought asylum in the United Kingdom, to the solicitors and to assist in the preparation of the claims of such clients in return for a half share of the fees obtained by the solicitors by way of legal aid. Such an agreement contravened Rules 3 and 7 of Solicitors' Practice Rules 1990, made under Solicitors Act 1974 s. 31, and was unlawful. The claimant sought to enforce the agreement by action. It was held by the judge, on appeal from an order of a master refusing to strike out the claim, that the agreement was unlawful, and he struck out the claim and dismissed the action. On the claimant's appeal to the Court of Appeal the finding that the agreement was unlawful was upheld. However, Lord Bingham CJ, giving the leading judgment, went on to say, at pages 1824 to 1825, in a passage upon which Mr. Lofthouse relied:-

    If, contrary to his first submission, the contract between the parties was illegal and unenforceable, Mr. McCombe contended that the plaintiff was entitled to pursue a claim in quasi-contract or restitution. In the pleading, and before the judge (and initially before this court), that claim was pursued as a ground for claiming 50 per cent of the legal aid fees earned by the defendant, namely the same reward as would have been recovered under the alleged agreement if it had not been illegal or unenforceable. In response to questions by the court, however, Mr. McCombe accepted that if recovery under the contract was precluded on the grounds of public policy, the plaintiff could scarcely hope to recover exactly the same relief by re-labelling his ground of claim. He would, as was acknowledged, have no ground for claiming 50 per cent, save by reference to the contract which the court has held to be illegal and unenforceable.

    Fortunately for him, however, Mr. McCombe had another string to his bow. Reference has already been made to the pleaded allegation in paragraph 8 of the statement of claim that the plaintiff carried out translations and interpretations, wrote letters and attended meetings. In paragraph 15 a claim in quasi-contract was made for remuneration for those services, which had also featured as the fourth head of claim at the end of the pleading as a quantum meruit claim for services rendered. It is further a matter of agreement between the parties that the plaintiff has been paid what the defendant says were fees for interpretation and translation. Mr. McCombe accordingly claims that, even if the alleged agreement is discarded as illegal and unenforceable, and without making any reference to that agreement at all, the plaintiff is entitled to be paid a reasonable sum for professional services rendered by him to the defendant on behalf of the defendant's clients, the surrounding circumstances being such as to show that such services were not rendered gratuitously.

    Sir Godfray Le Quesne, representing the defendant, resisted that argument. It was, he submitted, only because of the unlawful fee-sharing agreement that the introductions were made by the plaintiff to the defendant at all. Accordingly, he suggested that the plaintiff was in effect seeking to recover part of the consideration payable under an illegal and unenforceable agreement. That is, I think, a possible view of the case. But the preferable view in my judgment is that the plaintiff is not seeking to recover any part of the consideration payable under the unlawful contract, but simply a reasonable reward for professional services rendered. I accept that as an accurate description of what on this limited basis the plaintiff is in truth seeking. It is furthermore in my judgment relevant that the parties are not in a situation in which their blameworthiness is equal. The defendant is a solicitors' firm and bound by the rules. It should reasonably be assumed to know what the rules are and to comply with them. If, in truth, it made the agreement as alleged, then it would seem very probable that it acted in knowing disregard of professional rules binding upon it. By contrast the plaintiff, on the assumption made (which I have no difficulty in accepting), was ignorant that there was any reason why the defendant should not make the agreement which he says was made. In other commercial fields, after all, such agreements are common.

  28. Miss Jefford drew to my attention the decision of the Court of Appeal in the later case of Awwad v Geraghty & Co. [2000] 3 WLR 1041. In that case a firm of solicitors made an agreement to act for a claimant in libel proceedings on the basis that he would be charged at one rate if the litigation was successful and at a lower rate if unsuccessful. The litigation was settled by the acceptance by the claimant of a sum paid into court by the defendant in the libel action. The firm of solicitors rendered a bill which the client challenged as being unenforceable as the fee agreement was a differential fee arrangement, in contravention of Rules 8(1) and 18(2)(c) of Solicitors' Practice Rules 1990. The fee agreement was held to be unlawful and unenforceable and an appeal on that point was unsuccessful. Counsel for the solicitors sought in the Court of Appeal to rely on the decision in Mohamed v Alaga & Co and to seek to recover a reasonable sum for the work done by the firm. About that submission, Schiemann LJ, who delivered the leading judgment, said at page 1064:-

    Mr. Dutton attempted to make use of that part of the decision in the Mohamed case [2000] 1 WLR 1815 which ruled that the interpreter was entitled to be paid a fair fee for his work as interpreter notwithstanding that his agreement to work as such was part of a champertous agreement which the court refused to enforce. In my judgment this attempt should fail. If the court, for reasons of public policy refuses to enforce an agreement that a solicitor should be paid it must follow that he cannot claim on a quantum meruit. The position in the Mohamed case was totally different. The interpreter was blameless and no public policy was infringed by allowing him to recover a fair fee for interpreting; the public policy element in the case only affected fees for the introduction of clients. In the present case, what public policy seeks to prevent is a solicitor continuing to act for a client under a conditional normal fee arrangement. That is what Miss Geraghty did. That is what she wishes to be paid for. Public policy decrees that she should not be paid.

    Miss Jefford submitted that, if it was unlawful for DSG to recover payment under a contingency fee agreement, the consequence was, as in Awwad v Geraghty & Co., that no payment at all could be recovered.

  29. Miss Jefford also drew to my attention the decision of the Court of Appeal in Wild v Simpson [1919] 2 KB 544 in support of her submission that the consequence of the variation of a non-champertous agreement, such as the 1993 Agreement, so as to make it champertous and unenforceable, was that no payment could be recovered even for work done under the original non-champertous agreement. The case was one in which a solicitor was retained by a client originally on the terms of a perfectly lawful retainer, but subsequently agreed to vary that retainer so as to include terms which were champertous. After the conclusion of the litigation to which the retainer related the solicitor sought to sue for his costs in reliance on the original retainer. The first judgment in the case was that of Bankes LJ. He said at pages 550 to 551:-

    In the present case the plaintiff sues on his original retainer. It is the defendant who sets up the agreement as an answer to the claim. The original retainer still continued after, and in spite of, the agreement of October 23,1911. I have already stated that, in my opinion, in the events which happened, the plaintiff's right to profit costs under his original retainer was not extinguished by the agreement of October 23,1911. The original retainer, though still subsisting, may, however, be so varied by that agreement that the plaintiff's cause of action may not be complete without reference to that agreement. It is here, I think, that the plaintiff's difficulty lies. After the making of the agreement it became an essential part of the plaintiff's cause of action that he should negative the event in which he was to get no costs namely, the event of John Simpson winning the action .... The original retainer is therefore to that extent varied by the subsequent agreement of October 23,1911, and the plaintiff cannot recover without its aid. For these reasons I consider that the plaintiff's claim, so far as it relates to the costs in Simpson v Simpson, is tainted with illegality, and that the plaintiff is not entitled to recover. 

  30. In my judgment, after the 1997 Agreement had been made varying the 1993 Agreement the entitlement of DSG to payment for services provided whether before or after the making of the 1997 Agreement depended upon the terms of the 1997 Agreement. It was not open to DSG to revert to the position as if the 1997 Agreement had never been made. Moreover, prior to the making of the 1997 Agreement the event upon the occurrence of which DSG was entitled to payment under the 1993 Agreement if the trigger level of recovery by KF and/or WSP was met, namely a settlement with LUL, had not occurred. Thus it seems to me clear that on no view did DSG have any entitlement to fees under the 1993 Agreement at any time. Had I found that the 1997 Agreement was unenforceable by reason of being tainted with champerty I should have held, in the light of the decision in Awwad v Geraghty & Co, that no sum was recoverable by DSG on a quantum meruit basis. It seems to me that where services are provided under a champertous agreement the public policy which prevents enforcement of the agreement prevents any alternative means of, in effect, enforcing the agreement. The circumstances in Mohamed v Alaga & Co were, it seems to me, rather special, and depended to an extent upon the statements of case in that action and the allegations pleaded in those statements of case. Certainly the robust statement of principle by Schiemann LJ in Awwad v Geraghty & Co at page 1064 seems to me, with respect, sound.

  31. A remaining issue which does not, in the circumstances, need to be answered but which is one of the issues which I have been asked to determine is what, if anything, was the effect on the 1993 Agreement and any rights accrued thereunder, if the 1997 Agreement was champertous. Mr. Lofthouse submitted that the fact that the 1997 Agreement was, on this hypothesis, unlawful was something to be taken into account in deciding whether the 1997 Agreement was intended to vary the 1993 Agreement rather than be a free-standing agreement with no effect on the 1993 Agreement as such. The flaw in this submission was identified by Miss Jefford, who referred me to the judgment of Atkin LJ in Wild v Simpson at page 561 where the Lord Justice said:-

    Moreover, in order to determine whether the parties intended to make a new contract on fresh consideration one has to disregard the question of illegality; and the agreement on both sides to vary the original terms of the retainer would in itself form sufficient consideration to support the mutual promises. For these reasons I conclude that a new contract of retainer was made for which, if otherwise legal, there was ample consideration, and that the new contract superseded the old. 

    In my judgment it is necessary, in addressing the question of whether parties intend to make a contract which supersedes or varies an existing contract, to leave wholly out of account the fact that the new contract is in fact unenforceable by reason of illegality.

    CONCLUSIONS

  32. In the light of my findings set out earlier in this judgment my answers to the preliminary issues as set out in paragraph 1 of the order for directions of Judge Lloyd Q.C. dated 9 March 2001 are as follows:-

    • Issues 1.1 and 1.2:

      An agreement was made in 1997 which varied the agreement between the parties made in 1993.

    • Issue 1.3:

      The 1997 Agreement was not champertous or otherwise unenforceable in whole or in part.

    • Issue 1.4:

      This issue strictly does not require an answer, but had it done so the answer would have been negative.

    • Issue 1.5:

      This issue strictly does not require an answer, but had it done so the answer would have been negative.

    • Issue 1.6:

      This issue strictly does not require an answer, but had it done so, the answer would have been that the 1997 Agreement, even if champertous, extinguished any rights of DSG under the 1993 Agreement.


Cases

Findon v Parker (1843) 11 M & W 675; Neville v London "Express" Newspaper Ltd [1919] AC 368; British Cash and Parcel Conveyors Ltd. v Lamson Store Service Co. Ltd. [1908] 1 KB 1006; Hill v Archbold [1968] 1 QB 686; Giles v Thompson [1994] 1 AC 142; Re Trepca Mines Ltd. (No.2) [1963] 1 Ch. 199; Farhad Faryab v Naz Smyth [1998] EWCA 3503; Mohamed v Alaga & Co. [2000] 1 WLR 1815; Awwad v Geraghty & Co. [2000] 3 WLR 1041; Wild v Simpson [1919] 2 KB 544.

Legislations

Criminal Law Act 1967 s.14.

Solicitors' Practice Rules 1990: Rule 8, Rule 18

Representations

Simon Lofthouse for the Claimant (instructed by Masons)

Nerys Jefford for the Defendants (instructed by CMS Cameron McKenna)


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