Trendtex Trading Corp. v. Credit Suisse, [1989] Q.B. 629
Papadillos
[COURT F APPEAL]
TRENTEX TRADING CORPORATION AND ANOTHER v. CREDIT SUISSE
[198 T No. 626]
See also: House of Lords judgment at [1982] A.C. 679
1980 arch 25, 26, 27, 8, 31; April 1; May 2
Lord Denning M.R., Bridge and Oliver .JJ.
Mainteance of Suit - Champerty - Assignment of cause of action - Swiss
ank's finncing of commercial contract and litigation - Whether sufficient
iterest or assignment of suit to be valid - Criminal Law Act 1967 (c.
58), s.14 (2) 1
Practice- Stay of proceedings - Jurisdiction - Swiss contract wih
exclusive Swiss urisdiction clause - Assignment of English cause of action
- English cton claiming contract void - Whether action to be stayed -
Exerise of judg's discretion
The first plaintiff, Trendtex, a Swiss corporatio whose sharecapital was
owned by the second plaintiff, Temo, a Liechtestein corpration, contracted
to sell 240,000 tons of cement to an Engish company or shipment to
Nigeria. The purchase price and demurrage were o be paid undr a
1 Criminal Law Act 1967, s. 14 (2): see post, p. 653D.
1980]
630
Q.B.
Trendtex Trading v. Credit Suisse (C.A.)
letter of credt issued y a Nigerian bank, C.B.N, which subsequently
failed to honour the leter of credit. Trendtex climed damages amounting to
$14,000,000 in proceeding in England against C.BN. whose plea of sovereign
immunity succeeded at irst instance. In January 977 the Court of Appeal
allowed Trendtex's appea but C.B.N. was gien leave to appeal to the House
f Lords.
Credt Suisse, the defendant Swiss bank, was a substanial creditor of
Trendtex who had other creditors and could not have undertaken it
contracual duties without the finanial help of Credit Suisse, who had
garanteed the legal costs and fees icurred by Trendtex's English
solicitor n the action against C.B.N.
Following agreements by which Trendtex purportd o assign to Credit Suisse
its cause of action against C.B.N. by way of ecrity, an agreement between
Trendtex and Credit Suisse was signed in Geneva nJanuary 4, 1978. The
agreement recited that an offer had been received fm a third party to buy
Trendtex's right of action against C.B.N. for $800,00 andprovided that
Trendtex (1) released to Credit Suisse, who arranged fo the other creditors
of Tredtex to be satisfied, all its residual rghts against C.B.N. and
acknowldged that it had no further interest in the ction against C.B.N.,
(2) gae a power of attorney to a representative o Credit Suisse to enable
the ation to be settled and (3) deposited 90 per cnt. of its shares with
the repesentative The agreement was expressly tated to be "governed by
Swiss law" and also stated that any dispute arisin from i was to be
"judged by the Court of Geneva, exclusive of any other juridicton."
On January 9, 1978, Credit Suisse's representative assigned Trendtx's cuse
of action against C.B.N. to a third party for $1,000,000. In Februay 197
that action was settled by a payment by C.B.N. of $8,000,000. In Marc 197
an action in England was commenced in the name of Trendtex an Temo aginst
Credit Suisse claiming that the purported assignments of Trendte' cause of
action against C.B.N. to Credit Suisse and the agreement of Janur 4, 1978,
were void and of no effect or alternatively that the agreemnt hould be set
aside, an account of all moneys received in settlement ofthe ation against
C.B.N., damages for breach of duty and the return of all share held in
Trendtex.
On Credit Suisse's claim for a stay of the action nder te exclusive
jurisdiction clause and the inherent jurisdiction of the curt, nd the
plaintiffs' submission that the purported assignment of a bar cause o
action was illegal and unenforceable as savouring of maintennce and
champety, Robert Goff J. held that effect should be given to the excusive
jurisdction clause and, having regard to the "overwhelming strong Swis
connection" f the case, granted a stay.
On the plaintiffs' appeal:-
Hld, dismissing he appeal, (1) that since Credit Suisse had financed the
tranaction givig rise to Trendtex's right of action against C.B.N. ad was
justified in mintaining the suit it had a legitimate, genuine and
suffcient interest in thesuit and, accordingly, the assignment of the
cause ofaction to Credit Susse was valid (post, pp. 655A, 658A-B,
659A-B,669A-C, 74F-G).
Guy v. Curchill (1888) 40 Ch.D. 481; Glegg v. Bromley[1912] 3 K.B.474,
C.A.; Martell . Consett Iron Co. Ltd.
[1980]
631
Q.B.
Trendtex Trding v. Credit Susse (C.A.)
[1955] Ch. 363, C.A. and dicta of Lord Dennig M.R. in Hill v. Achbold
[1968] 1 Q.B. 686, 694, C.A. applied.
Dawson v. reat Northern andCity Railway Co. [1905] 1 K.B. 260, C.A. and
County Hoteland Wine Co. Ltd v. London and North Western Railway Co.
1918] 2 K.B. 251 considered.
Pe curiam. Officers of the court must not put themselves in a position
where heir owninterests may conflict with their duties to the court by
agreeing "cotigency fees"; and personal rights of action for tort should
not in generabe assigned (post, pp. 654-B, 657H, 663E-F).
Observations on "cases in whch a contract isto be treated as contrary to
public policy r otherwise illegal" for maintenance and champrty consequent
uon section 14 (2) of the Criminal Law Act 1967 (post, p. 653B-E, 657G,
663C-D,668G-H, 669F-G 674E-F).
(2) That the proper law o the agreement of January 4, 1978, was Siss law
(post, p. 658B); that (pr Bridge and Oliver L.JJ.) if and in so faras the
agreement of January 4, 978, contemplated the future assignment ofTrendtex's caus of action against C.B.N. to a third party who had no
legitimte interest uder English law it did not follow that the agreement
as a whoe was void by wiss law; that the question whether the agreement
gave rise o enforceable rigts and duties was within the exclusive
jurisdiction clause nd fell to be detrmined by Swiss law, that it was a
matter for the judg's discretion whether o not to give effect to the
exclusive jurisdictin clause by granting a stay; ad that, sine the judge
had not erred in principle in the exercis of his discrtion in regard to
the issues before him, the court ough not to interfere withthe exercise of
his discretion (post, pp. 659A-B,65D-F, 675G - 676C).
MacShanon v. Rockware Glas Ltd. [1978] A.C. 795, H.L.(E.) applied.
Per Lord DenningM.R. In accordance with MacShannon v. Rockware Glass Ltd.
everythingpoints to Switzerland as being the forum cnveniens and, although
there is no rocess for compelling discovery of documnts in Swiss civil
courts, the plaintffs' claims should be tried in Switzeland and not in
England (post, p 658D).
Per Bridge and Oliver L.J. When consdering the appropriate forum fr thehearing of a given dispute a judge is entitled to take account of the fct
that parties to that dspute have agreed upon a suitable forum in relationto a closely allie matter (post, pp. 659A-B, 676E-F).
Judgment of Robert GoffJ. affirmed.
Te following cases are referred to in the judgments:
BritishCash and Parce Conveyors Ltd. v. Lamson Store Service Co. Ltd.
[1908] 1 K.B. 006, C.A.
Chparral, The [1972] 2 Lloyd's Rep. 315.
Compania Colombiana deSeguros v.Pacific Steam Navigation Co. [1965] 1 Q.B.
101; [1964] 2 W.LR. 484; [1964] All E.R. 216.
County Hotel and Wine Co. Ltd. v. Londonand North Western Ralway Co.
[1918] 2 K.B 251.
Dawson v. Great Northern nd City Railway Co. [1905] 1 K.B. 260, C.A.
Defries v. Milne [1913] 1 Ch 98,C.A.
Dickinson v. Burrell (1866) L.R. 1 Eq. 337.
[190]
632
Q.B.
Trentex Trading v. Credit Suisse (C.A.)
Eleftheria, The 1970] P. 94; [1969] 2 .L.R. 1073; [1969] 2 All E.R. 641.
Ellis v. Torrington[1920] 1 K.B. 399, C..
Fitzroy v. Cave [1905] 2 K.B. 364, C.A.
Glegg v. Brmley [1912] 3 K.B. 474, .A.
Grell v. Levy (1864) 16 C.B.N.S. 73.
Guy v. Churhill (1888) 40 Ch.D 481.
Heyman v. Darwins Ltd. [1942] A.C. 356; [194] 1 All E.R. 337, H.L.(E..
Hill v. Archbold [1968] 1 Q.B. 686; [1967] 3 W.L.R. 1218; [1967] 3 l E.R.
110, C.A.
Holden v. Thompson [1907] 2 K.B. 489.
Hughes v. PupHouse Hotel Co. Ltd. [1902] 2 K.B. 190, C.A.
Kemp v. Baerselmn [1906] 2 K.B 604, C.A.
Laurent v. Sale & Co. [1963] 1 W.L.R. 829; [1963] 2 All E.R.63.
Macender v. Feldia A.G. [1967] 2 Q.B. 590; [1967] 2 W.L.R. 119; [166] 3
AllE.R. 847, C.A.
MacShannon v. Rockware Glass Ltd. [1978] A.C.795; [1978] W.L.R. 362;
[1978] 1 All E.R. 625, H.L.(E.).
Martell v. ConsettIron Co. Ld. [1955] Ch. 363; [1954] 3 W.L.R. 648; [1954]
3 All E.R. 331; [195] Ch. 63; [1955] 2 W.L.R. 463; [1955] 1 All E.R. 481,
C.A.
May v. Lane(1894) 64 L.J.Q.B. 236, C.A.
Neville v. London "Express Newspaper Ltd. [1919 A.C. 368, H.L.(E.).
Ogdens Ltd. v. Weinberg (1906 95 L.T. 567, H.L.E.).
Plating Co. v. Farquharson (1881) 17 Ch.D. 49, C.A
Prosser v. Edmonds (1835) 1 Y. & C.Ex. 481.
Seear v. Lawson (1880) 15 Ch.D 426, Bacon V.-C. and C.A.
Torkingtn v. Magee [1902] 2 K.B. 427, D.C.
Trendex Trading Corporation v. Central Bak of Nigeria [1977] Q.B. 529;
[1977] 2W.L.R. 356; [1977] 1 All E.R. 881, C.A.Trepca Mines Ltd., In re [1960] 1 W.LR. 1273; [1960] 3 All E.R. 304 C.A.
Trepca Mines Ltd. (No. 2), In re [1963] Ch. 199; 1962]3 W.L.R. 955; [1962]
3 All E.R. 351, C.A.
Wallersteiner v. Moir (No. ) [1975]Q.B. 373; [1975] 2 W.L.R. 389; [1975] 1
All E.R. 849, C.A.
Wiliams v. rotheroe (1829) 5 Bing. 309
The following additonal cases were cited in argument:
Castellain v. Preston(1883) 11 Q.B.D. 30, C.A.
Earle's Shipbuilding and Engineering Co. v. Atlantc Transport Co.(199) 43
S.J. 691.
Fehmarn, The [1958] 1 W.L.R. 159; [1958] All E.R. 33, C.A.
Hispano Americana Mercantil S.A. v. Central Bank of Nieria [1979] Lloyd's
Rep. 277, C.A.
Hutley v. Hutley (1873) L.R. 8 Q.B. 11.
Intersea Shipping Co. S.A. v. Banco de Bilbao, May 26, 1978; Court of
Appel (Civi Division) Transcript No. 329 of 1978.
Joachimson v. Swiss Bank orporatin [1921] 3 K.B. 110, C.A.
Kislovodsk, The [1980] 1 Lloyd's Rep. 183.
ao Onv. Lau Yiu Long [198] A.C. 614; [1979] 3 W.L.R. 435; [1979] 3 All
E.R. 5, P.C.
[1980]
633
Q.B.
Trendtex Trading v. Credit uisse (C.A.)
Whitorth Street Estates (Manchester) Ltd. v. James Miller & Prtners Ltd.
[197] A.C. 583; [1970] 2 W.L.R. 728; [1970] 1 All E.R. 796, H..(E.).
INTERLOCUTRY APPEAL from Robert Goff J.
By writ of November 4, 195, the first plaintff, Trendtex Trading
Corporation (a company incorporatd in accordance with he laws of
Switzerland) ("Trendtex") claimed against he Central Bank of Nigera
("C.B.N.") damages for repudiation of a letter of redit of July 24, 195,
and for payments due. Donaldson J. set aside the writ on the groun of
sovreign immunity but the Court of Appeal on January 13, 1977, alowed
Trendte's appeal: see Trendtex Trading Corporation v. Central Bank o
Nigeria [197] Q.B. 529. C.B.N. was granted leave to appeal to the House of
ords.
The heaing of C.B.N.'s appeal to theHouse of Lords was expected to
commence in Apil1978. On January 4, 1978, an agreement was made in
Switzerland beeen Trendtex, Dr. Vital Hauser, its sole director, and the
defendant bank Creit Suisse (a company incorporated in accordance with the
laws of Switerlan). The agreement recited earlier agreements of July 1975
and November 7, 977,and that "whereas Credit Suisse has received an offer
from a third party to uy Trendtex's ights against C.B.N. - such rights
having been assigned by Trndtex toCredit Suisse on November 26, 1976 in
guarantee of Credit Suisse'sclaim for an amount of U.S. $800,000." In
general terms the agreement provied,as held by Robert Goff J., "for an out
and out assignment by Trendtex o redit Suisse of all its rights against
C.B.N." Credit Suisse were to pa 388,000 to Trendtex to obtain releases
from Trendtex's creditorsand commtted itself to pay a further $72,000 to a
Nigeriancompany if that cmpany established a valid claim against Trendtex.
Dr. Hauser undertook, iter alia, to deposit 90 pe cent. of Trendtex's
shares with Maitre Jean Patr, a Swiss lawyer wo acted on behalf of Credit
Suisse. Article 6 of the agrement read: "This areement is governed by
Swiss lw. Any dispute regarding its conclusion, nterpretation, or
fulflment shall be judged by the Court of Geneva, exclusve of any other
jurisdiction."
By wri of March 29, 1978, as subsequently aended, Trendtex and the second
plaintiff Temo Anstalt (a corporation establshed in accordance with the
laws of te Principality of Liechtenstein) ("Tmo") claimed against Credit
Suisse declartions that (1) Trendtex's causeof action against C.B.N. was
and at all ties remaned the sole property of Trendtex; (2) the assignment
or purported asignmentof the cause of action to Credit Suisse on September
6, 1976, andor November26, 1976, and/or January 4, 1978, was void and of
no effect; (3)the agreemen of January 4, 1976, was void and of no effect,
or alternativly, 4) an order that it be set aside; (5) all moneys received
by Credit Suiss as the proceeds of ny settlement of Trendtex's action
against C.B.N.were the property of Tredtex; orders that (6) an injunction
be grated to restrain Credit Suisse fom disposing of any such moneys; (7)
an acount of such moneys; (8) Credit Susse pay Trendtex such sum as was
found de on the stating of such account; (9 damages for breach of duty by
[1980
634
Q.B.
Trendtex Trading v. redit Suisse (C.A.)
Credit Suisse to Trendtex as bankrs and/or agent; and (10) delivery up to
Temo of all the shares in Trendte held by Maitre Ptry on behalf of Credit
Suisse.
By summons of October 20, 978, Credi Suisse, sought orders, inter alia,
that under R.S.C., Ord. 15, r. and/or under the nherent jurisdiction of
the court the name of Trendtex bestruck out and tht the action so far as
brought by Trendtex be stayed on te ground that either Trendtex nor the
persons authorised to act on its behlf authorised th action to be brought
by Trendtex; that the claims in theamended writ and th statement of claim
be stayed on the ground that theyconstituted diputes regarding the
conclusion, interpretation or fulfilment ofthe agreemen of January 4,
1978, by article 6 of which the parties agreed tha any suc dispute should
be judged by the Court of Geneva, exclusive of an othe jurisdiction; and
hat the amended writ and statement of claim should be struck out under
R.S.C, Ord. 18, r. 19 and/or underthe inherent jurisdiction of the court
on the gound that the claims were rivolous and/or vexatious and/or an
abuse of the prcess of the court (aground which was not pursued).
In his judgment of March 0, 1979, Robert Gff J. said that there was much
fore in the submission that the assignmen to Credit Suisse by Trendtex of
its ause of action against C.B.N. was uenforceable by English law; that
the quesion whether the agreement of Janury 4, 1978, gave rise to any
legally enforcable rights and duties under Swis law was a dispute
regarding the onclusion, nterpretation and/or fulfilment of the agreement
and as such waswithin the xclusive jurisdiction clause; that even if the
assignmentwas "invalid" uder Swiss law, it did not follow that the
cotract was oid by Swiss law; that if effect was given to the clause and
he Cour of Geneva decided that by English law Trendtex's cause of action
wa no "assignable" in accordance with he meaning of that expression as
undrstood in Swiss law that court would havto decide in accordance with
Swiss lw what effect was to be given to the ageement itself; and that
ccordingly he had to consider on ordinary principes whether he should or
should not in th exercise of his jurisdiction grat a stay. Having
considered the priniples laid down in MacShannon v. Rockwae Glass Ltd.
[1978] A.C. 795 and all elevant circumstances includin "the advantage to a
plaintiff of discovery this country," Robert Goff J. ordered that the
proceedings be stayed.
The plintiffs appealed on the grounds that (i) the jdge in the exercise of
his dscretion was wrong in law to order that the ation sould be stayed;
(ii) he was wron to hold that, if Trendtex showed tha the declaration of
surrender dated Novmber 26, 1976, and the contract datd January 4, 1978,
whereby Trendtex purpored to assign to Credit Suisse itsbare right of
action arising in England aainst the C.B.N. (which was then th subject of
proceedings in the High Cort of Justice and of an appeal to te House of
Lords) was tainted with illegalty on the grounds of champertyand
maintenance, such illegalit would not be determinative of the principal
laims of te plaintiffs; (iii) the judge, having held that there was much
frce in the laintiffs' submission that
[1980]
635
Q.B.
Trendtex Tradingv. Credit uisse (C.A.)
the assignment was tainted by illegaliy, failed to give any or any
ufficient weight to the principle that the Eglish court would not nforce
an agreement, whatever its proper law, ifit was contrary to English law;
(iv) he failed properly or at all todistnguish between a valid contract
which one of the parties sought to erform unlwfully (as in Mackender v.
Feldia A.G. [1967] 2 Q.B. 590) and a ontract unlwful ab initio on the
grounds of public poicy (as the plaintiffs submited was the instant case).
Alternaively, the judge should not have soughtto make the distinction
between "an agreement" and "a cotract"; (v) in consdering the validity of
the contract by which rendtex'scause of action was assigned to Credit
Suisse, the judge shold have hel (in the absence of expert evidence to the
contrary) that Swiss awwas to be presumed to be the same as English law
and that the consequenes o illegality of the assignment of the cause of
action would be the same inoth countries; or alternatively he should have
held that there was no maeial evidence before him to suggest that the
application of relevant prncipls of Swiss law in respect of the validity
of the contract would ause any ifficulty to the English court at the trial
of the action; (vi) th judg failed to hold that, in an action in which
there were a number of cases ofaction, some of which arose from the
contract dated January 4, 1978(which ncorporated an exclusive jurisdiction
clause conferring jurisdiction pon te Court of Geneva) and some of which
did not, and where as a result thre might be competing principles upon
wich the court might exercise itsdiscretion whether or not to grant astay
of the action, the court should eercise its discretion upon whichever o
the competing principles most favoued the party seeking to invoke the
jursdiction of the English court; (vi) in applying the principles of The
Elefthria [1970] P. 94 and having held tt the natural forum of the
litigation lay in Switzerland, the judge was wrng in law to hold that the
plaintifs had not shown a sufficient cause for he refusal of a stay of the
action (viii) in particular, the juge: (a) failed to give sufficient
weight to te fact that the subject matter of the conract of assignment was
proprty situated in England, namely, a cause of actio arising in England
and the the subject of proceedings before the English curts; (b) failed to
give ufficient weight to the fact that the issue of Enlish law, namely,
wheher the contract of assignment was tainted by illeglity, was a
substantial ne and one which was likely to give rise to dificulties if it
had to be trid in a foreign jurisdiction; (c) failed properl or at all to
consider te extent, if any, to which the relevant principles ofSwiss law
were shown aterially to differ from English law. The judge should ave held
that in respct of the issues to which he referred as establishinga
connection with Swis law, there was no evidence showing that any
differenes between Englishand Swiss law were maerial; or alternatively he
shouldhave held that such differences as might exist were not such a to be
lkely to cause difficulty to a judge of the Commercial Court assiste by
expet evidence at the trial of the action; (d) in the context of litigatinbetween international trading and banking corporations, the judge place too
reat a weight upon the fact that a number of witnesses were in Switzerlnd,
hat some of the documentary evidence was in Switzerland and that soe of
the dcuments were in French and German. The judge failed to take
[1980]
63
Q.B.
Trendtex Trading v. Crdit Suisse (C.A.)
properly or at all ino account the fact tht the principal Swiss witnesses
all spoke good Englis, as well as French or German; (e) shold not have
held that upon the evidene before him Credit Suisse genuney desired that
the action should be tried in Switzerland. If the jdge was etitled to make
any finding upon the affidavits before him, he should have hel that by its
conduct Credit Suisse ad so acted as to seek to prevent a tria taking
place both in Switzerland ad in England and therefore did not desie a
trial of the action in either contry; (f) failed to take properly or a all
into account the several disavantages to the plaintiffs of proceedins in
Switzerland. He should have expessly held that by reason of each of thedisadvantages the plaintiffs woud be substantially prejudiced if the action
ws ordered to be stayed; (g) ws wrong to hold that, notwithstanding any
pejudice and procedural disadvntages which the plaintiffs had shown thatthey would suffer if the action inEngland was stayed the court was bound togive effect to the exclusive jursdiction clause contained in the contract
(h) the judge failed to give any r any sufficient weight to the plaintiff'
contention that the contract of asignment (if not otherwise void for
ilegality) was void or should be set side on the grounds of undue
influence, eonomic duress and commercial pressure arising out o the
unequal bargaining poition of the parties; (ix) in applying th rationes
decidendi of MacShanon v. Rockware Glass Ltd.[1978] A.C. 795, thejudge was
wrong in law not to aply the test that a stay of the action would be
granted unless the plaintiffs howed that a stay would depive them of a
legitimate personal or juridica advantage available to the in England; (x)
the judge, having held that t grant a stay would deprivethe plaintiffs of
a real juridical advantage was wrong to order that the ction should be
stayed; and (xi) in the exercie of his discretion underthe inherent
jurisdiction of the court in respect o matters falling outsidethe contract
dated January 4, 1978, the judge should ot have given any weigh r should
not have given such weight as he did give to the existnce of the xclusive
jurisdiction clause contained in the contract.
By a respondnt' notice Credit Suisse contended that the judge's order
should beafirmed on the following grounds additional to those relied on by
the court blow, namely, (i) that, contrary to the decision ofthe judge,
the exclusive juisdiction clause contained in the agreement datedJanuary
4, 1978, was ide enough to embrace all the disputed claims in he present
case and in partcular (a) Temo's claim to the return of theshares in
Trendtex and damages fo their detention, and (b) Trendtex's claim or
damages for breach of fiduciar duty; (ii) that the chose in action in
quetion (whether or not it was a bar right of action) was in English law
assignble; (iii) that Credit Suisse ha a proprietary interest in the chose
i action in the case; (iv) that, ontrary to the opinion of the judge that
there was much substace in the plantiffs' submissions to the opposite
effect, any legitimate commercial interet n the part of the assignee was
sufficient to uphold the assignment of a bre ight of action and that such
interest need not be a proprietary interest and(v) that, contrary to the
judge's decision a trial in England of the preent ction would not offer
the plaintiffs a real advantage.
[1980]
637
Q.
Trendtex Trading v. Credit Suisse (C.A.)
The facts are stated in the jdments of Lord Denning M.R. and Oliver L.J.
Stanley Brodie Q.C. and Stepen athan for the plaintiffs. The appeal is a
sequel to Trendtex Trading Crporaton v. Central Bank of Nigeria [1977]
Q.B. 529 where Stephenson L.J. ai at p. 561 that there was "apparently no
answer to the [plaintiff's] clam except the plea of sovereign immunity."
The question s: to what extent an rights under that action be assigned?
All the contractul documents are n English and the crux of the case is
whether the plainiffs' action should e brought in England. The agreement
of January 4, 1978 was an assignment o a bare cause of action in England.
The lex situs is Engand. The subject atter of the contract is English and
the subject matter ofthe dispute was cause of action in England which was
pending in the Houseof Lords. The fiancial arrangements between Trendtex
and Credit Suiss concerned the cause o action in England. There was an
exclusive jurisdicton clause but he courts will not enforce a contract
which is void and conrary to pblic policy. It is common ground that the
question whether the cas of action is capable of being assigned is
governed by English law. The judeought to have decided the issue of
champerty and maintenance and thn the conract would have gone. A bare
right to litigate was assigned. That was void a contrary to ublic policy
and the exclusive jurisdiction clause does notapply.
One imporant factor governing the aw is the place of performance of the
contract. Te experts in Swiss law acept that the law governing the
validity of theassignment is governed by th lex situs. So the question
whether the cause f action is capable of beng assigned is governed by
English law - both unerEnglish and Swiss law. The judge held that Credit
Suisse genuinely wantd rial in Switzerland but it wants no trial at all.
It is submitted: (1) The poper law of a chose in action is the lex situs,
England. The breach took plae in England, at the Midland Bank in London on
the refusal to implement the ltter of credit.
Richard Yorke Q.C. and David Hunt for Credit Suisse intervenig. It is
conceded that the proper law is English law.
Brodie Q.C. continuing.The writ in respect of the right of action was
issued in Englad. Whether the cause of action for damages here in England
can be lawfullyassigned depends on the lex situs in England: Dicey &
Morris, The Confict of Laws, 9th ed. (1973), rules 78 (1) and 73, see
paragraph (6) on p. 51. (2) The proper law of the cause of action against
C.B.N. was English law an it cannot lawfully be assigned because it offends
against the law of champety and maintenance. Therefore the assignment is
ineffective and invalid and thecontract for such assignment is void ab
initio in English law as unlawful and contrary to public policy. (3) The
sae result follows under Swiss law. The lex situs, England, would be
applie by Switzerland. If the lex situs determines that the cause of action
is inapable of assignment, then under Swiss law both contract and
assignment are nll and void.
[1980]
638
Q.B.
Trendtex Trading v. Credit Suisse (C.A.
Yorke Q.C. Swiss law is not agreed.
Brodie Q.C. Further affidavits ave been put in on Swiss law and not ben
challenged.
(4) Credit Suisse cannot rely on the agreement of January 4, 1978, either
(a) to resist th plaintiffs' claim or (b) to assert that the plaintiffs are
bound by the hoice of foreign law under the exclusive jurisdiction clause:
so the plantiffs are entitled to judgment because there is no other defence
open toCredit Suisse. There is no law as to champerty and maintenance in
Switzerland and the assignment of causes of action is permissible.
(5) Commercial pressre and duress: (a) under both Swiss and Englis law the
plaintiffs would be entitled to avoid the agreement of January 4, 198, on
such grounds if established: under Swiss law the contract was void unil it
was affirmed but affirmation would be assumed if there was no disclaier
within one year. (b) Here there is a dispute as to the existence and/or he
validity of the contract: see Heyman v. Darwins[1942] A.C. 356, 60, per
Viscount Simon L.C. The dispute here is whether or not a valid areement
even came into existence and that dispute is not within the jurisdition
clause. (c) There is no material difference between Swiss and English la as
to the principles to be applied in dealing with this issue.
(6) The lawin relation to breach of fiduciary relationship is much the same
in Switerland as in England. The claim here arises out of a contract of
agency in respect of which there ws a fiduciary duty. The performance of
the agent's duty consisted ofattempting to negotiate for Trendtex and
settling an English cause of acion in respect of which C.B.N. had lodged an
English fund of $14,000,000. Thre is no prima facie reason why the Swiss
court should be the more appopriate court to determine that dispute
(7) (a) The lex situs of bearer shaes is where they happen to be: see Dicey
& Morris, The Conflict of Laws, 9th d., p. 509, para. (4). Ninety of
Tredtex's 100 bearer shares are in Maître Patry's office in Switzerland.
(b) Tmo was not a party to the agreement of January 4, 1978, and so is not
boun by the choice of jurisdiction clause. (c) If the contract was void,
Creit Suisse cannot rely on it as a reason or retaining the shares. (d)
The purpose for which Trendtex held the shars was fulfilled by the end of
March 1978, so i has no ground for holding them. (e) The shares were
deposited with Creit Suisse for the purposes of Trendtex's English
litigation so it is plainthat the issue of the shares should be litigated
in England. (f) Temo would e entitled to judgment under R.S.C., Ord. 14,
for its shares hed by Credit Suisse. (g) Temo's claim is an integral partof Trendtex's claim because it solves the problem of authority:if Temo gets
judgment under R.S.C., Ord. 14, there would be no impediment to Trendtex
gettingjudgment under Ord. 14 if the agreement was void for champerty. If a
stayis refused the plaintiffs would proceed uder R.S.C., Ord. 14, and Ord.
33, r. 3, but the court is asked to determine te issue whether the
agreements were void for maintenance and champerty.
(8 Features which connect the subject-matter of te dispute with the
English forum are: (i) it was a cause of action pending i the House of
[1980]
639
Q.B.
Trendtex Trading v. Credit Suisse (C.A.)
Lords, the proceeds of settlement of which were to be paid to an Englih
bank, which was done; (ii) the financial agreement between Credit Suisse an
Trendtex related to litigation in England and recoupment was to come from
he cause of action in England; (iii) negotiations between Trendtex and
Credt Suisse took place both in London and Switzerland; (iv) the
subject-matter o the agreement of January 4, 1978, related to a cause of
action in England: te heart of the contract was subject to English law; (v)
Credit Suisse and Trndtex both carry on business in England; (vi) the
agreement was in English; vii) the currency of the contract was U.S. $. The
fundamental issues of lw which arise on the contract, whether or not the
assignment of a bare cause f action may be made and whether the contract is
affected by champerty an maintenance, are ones of English law.
(9) The features connected with witzerland are that both Trendtex and
Credit Suisse are Swiss corporations,the proper law of the contract is
Swiss, the contract was made in Sitzerland and shares in a Swiss company
are in issue.
(10) As to the"legitimate personal or juridical advantage" within the
principle of Machannon v. Rockware Glass Ltd. [1978] A.C. 795, 796, 812, to
be lost by theplaintiffs if the action goes to Switzerland: (a) Switzerland
has no R.S.C, Ord. 14, procedure; (b) Switzerland has no procedure for
discovery of dcuments, or only very limited discovery [Reference was made
to Interses Shipping Co. S.A v. Banco de Bilbao, May 26, 1978; Court of
Appeal (CivilDivision) Transcript No. 329 of 1978]; (c) Switzerland has no
interrogatries; (d) there is no procedure for cross-examination in
Switzerland. The jridical advantages of the action being tried in England
are (i) the advantae of having an English point of law determined by an
English court and ii) the cost of litigation is less in England than in
Switzerland.
(11 On the balance of convenience, where a choice of jurisdiction clause
exiss in a contract, prima facie the court will give effect to it unless
theplaintiff can show strong cause or just and proper reasons why the court should disregard it, the onus of proof being on the plaintiff. When
considring the relevant circumstances of the case the court will not
exercise jursdiction in favour of the plaintiff if the circumstances are
equally balaned; the plaintiff must show that the circumstances are so
overwhelmingly in favour of Enland as to displace the clause. These
propositions apply where there is no dispute as to the existence or validity
of the contract or as to whether the dispute arises under the contract or
within the clause. Where the contract itself is under attack as having been
entered into under duress, fraud, illegality or inequality of bargaining
power and there is evidence that the dispute is not within the contract or
clause, then prima facie the presumption is displaced. The circumstances
here displace the prima facie presumption in favour of the choice of
jurisdiction clause.
As to MacShannon v. Rockware Glass Ltd. [1978] A.C. 795, where the
defendants applied for a stay because justice could be more conveniently
done elsewhere, (i) the onus is on Credit Suisse to show that it would be
unjust for all concerned for the actions to be continued in England and that
there is another forum with which the dispute had a
[1980]
640
Q.B.
Trendtex Trading v. Credit Suisse (C.A.)
more real connection; (ii) if Credit Suisse succeeds under (i), the court
must be satisfied in exercising its discretion to grant a stay that the
plaintiff would not suffer a juridical disadvantage. Here, England is the
natural forum, or at the highest it is evenly balanced between England and
Switzerland. But the choice of law clause is irrelevant to this appeal. As
Lord Simon L.C. said in Heyman v. Darwins Ltd. [1942] A.C. 356, 366, "if one
party to the alleged contract is contending that it is void ab initio... the
arbitration clause cannot operate...." That applies to duress,
misrepresentation and, as here, illegality making the agreement void ab
initio.
In Mackender v. Feldia A.G. [1967] 2 Q.B. 590 the action had actually been
started in Belgium. Lord Denning pointed out at p. 598C that "if the issue
was whether there even had been any contract at all ... the foreign
jurisdiction clause might not apply ...": and see perDiplock L.J. at pp.
600-601 and Russell L.J. at p. 605. In that case it was not alleged that the
contract itself was void ab initio as is alleged in the present case where
the proper law of the chose in action is English law and apart from the
foreign jurisdiction clause the proper law would have been English law.
As to maintenance and champerty and the effect of section 14 (2) of the
Criminal Law Act 1967, see Chitty on Contracts, 24th ed. (1977), paras.
937-938 and 946-950, pp. 433-435 and 437-438. Paragraphs 946-949 contain
correct and concise statements of law and this case comes within the general
law. Glegg v. Bromley [1912] 3 K.B. 474, 489 (perFletcher Moulton L.J.)
shows clearly the distinction between the assignment of a cause of action
and of the fruits of a cause of action. In the present case what was being
assigned was the right to litigate. In re Trepca Mines Ltd. (No. 2) [1963]
Ch. 199, 224-225 (per Donovan L.J.), is a modern application of the
principle that a champertous agreement is contrary to English law and
illegal.
As to the authorities on discretion, see The Fehmarn [1958] 1 W.L.R. 159;
The Eleftheria [1970] P. 94; The Chaparral [1972] 2 Lloyd's Rep. 315 and
MacShannon v. Rockware Glass Ltd. [1978] A.C. 795. If the plaintiffs can
discharge the heavy onus of displacing the choice of jurisdiction clause it
would be odd if Credit Suisse was to succeed on discretion. Interseas
Shipping Co. S.A. v. Banco de Bilbao, May 26, 1978; Court of Appeal (Civil
Division) Transcript No. 329 of 1978 shows that the importance of discovery
and obtaining of a fair trial are recognised juridical advantages.
The action should not be stayed if there is no defence to the plaintiffs'
claim. The plaintiffs seek the removal of the stay and a direction from the
court as to the champerty position. The judge gave too much weight to the
choice of law clause.
Richard Yorke Q.C. and David Hunt for Credit Suisse. The court should
affirmatively determine the law as to champerty and maintenance. Trendtex's
only certain claim was if it was successful on the appeal against the
decision of the Court of Appeal [1977] Q.B. 529 in the House of Lords. The
issue of C.B.N.'s claim to sovereign immunity is due to be heard in the
House of Lords about the end of the year on the appeal against the Court of
Appeal's decision in Hispano Americana Mercantil
[1980]
641
Q.B.
Trendtex Trading v. Credit Suisse (C.A.)
S.A. v. Central Bank of Nigeria [1979] 2 Lloyd's Rep. 277. Credit Suisse was
not just lending money to Trendtex; it was wholly involved in the letter of
credit transaction. There was a pre-existing commercial interest to which
the principle of subrogation applies.
Champerty is a form of, and arises from, maintenance. You must have a
maintenance position before you get to champerty. See Hill v. Archbold
[1968] 1 Q.B. 686, 694-695, 700, per Lord Denning M.R. and Winn L.J., a case
not cited to Robert Goff J. Even before Martell v. Consett Iron Co. Ltd.
[1955] Ch. 363, Credit Suisse would have won.
The concept of champerty and maintenance which is very ancient became
progressively modified in the 19th century when it was decided that a cause
of action could be assigned provided that there was some other interest with
it. You could always assign a cause of action ancillary to a property
interest, or a cause of action for damages to an estate. By the end of the
19th century you could assign a cause ancillary to the sale of a chattel.
The legitimate defence of commercial interests was held not to be
maintenance in British Cash and Parcel Conveyors Ltd. v. Lamson Store
Service Co. Ltd. [1908] 1 K.B. 1006, a case which got submerged until
Danckwerts J. resurrected it in Martell's case [1955] Ch. 363, 383-386, and
reformulated the whole law. The test is whether there is a legitimate
interest. Each case depends on the financial situation.
Credit Suisse was out of pocket by millions. It is most common for a banker
to take control of litigation, as when insurers take over the conduct of the
insured's litigation. In such cases there is no material difference between
maintaining an action and taking an assignment of the proceeds on the one
hand, and taking an assignment of the cause of action on the other.
The modern rule is that no plaintiff can sue upon a cause of action acquired
by assignment unless at the time of assignment he already had a legitimate
and genuine interest in the result of the action. The ambit of the inquiry
is the "legitimate and genuine interest." The evil is the officious
intermeddler. Champerty is merely a more heinous form of maintenance. A
trade union has an interest in advancing the benefit of its members.
As to the cases, see Williams v. Protheroe (1829) 5 Bing. 309, 314; Earle's
Shipbuilding and Engineering Co. v. Atlantic Transport Co. (1899) 43 S.J.
691, where no one took the point that it was an assignment of a bare cause
of action, and the British Cash case [1908] 1 K.B. 1006, 1012 (per Sir H. H.
Cozens-Hardy M.R.), 1013-1014 (per Fletcher Moulton L.J.), 1019 (per Buckley
L.J.), definitions which are miles away from the facts of this case. The
British Cash case, in which what was being protected was the defendants'
commercial motive to protect their own interests is profound authority on
the question whether the indemnifier has a proper interest in the cause of
action or whether he is intermeddling. Third party insurance has been
recognised for a long time. An assignment of a cause of action can be taken
to protect a legitimate trade interest.
In Martell v. Consett Iron Co. Ltd. [1955] Ch. 363, 369, Sir Andrew Clark
Q.C. was arguing that the law of maintenance was crystallised and
[1980]
642
Q.B.
Trendtex Trading v. Credit Suisse (C.A.)
"will not now be extended"; but this was firmly rejected by Danckwerts J. at
pp. 375-376 and 386-387. Charity is a well established, and difficult,
exception to the rule. No case has proceeded on the basis that there can be
champerty without maintenance which is what the plaintiffs are seeking to
say. The Court of Appeal's decision in Martell's case [1955] Ch. 363, 415,
421, shows how very wide the word "legitimate" is interpreted. In Defries v.
Milne [1913] 1 Ch. 98 the Court of Appeal held that the assignment of a
right of action for tort in respect of waste was invalid; the case turned on
a cause of action in tort.
In Compania Colombiana de Seguros v. Pacific Steam Navigation Co.[1965] 1
Q.B. 101 the plaintiff insurance company had taken a standard form of
assignment and it was held that they had a legitimate and genuine interest:
see per Roskill J. at pp. 119-121. The logic of Roskill J.'s judgment should
be followed. There is no distinction to be drawn between the right of an
insurer under a policy and the right of a banker under a letter of credit.
Credit Suisse had a legitimate interest in taking the assignment.
Subrogation gives the insurer the right to take a pound for a pound, but
assignment gives the whole right.
[BRIDGE L.J. Why is a banker in a different position to any other creditor?]
In this case the bank holds the documents. It always has a legitimate and
genuine interest in the fate of any transaction which it has specifically
financed. It was conceded that the proper law of the letter of credit was
English law, but in many cases the letter of credit prescribes the proper
law. Here the lex situs of the chose in action is also English.
It is proper to purchase debts in order to make a man bankrupt: Fitzroy v.
Cave [1905] 2 K.B. 364. As to the measure of damages for breach of
obligation under a confirmed credit, see Gutteridge and Megrah, The Law of
Bankers' Commercial Credits, 6th ed. (1979), pp. 202-204, citing Trans Trust
S.P.R.L. v. Danubian Trading Co. Ltd. ([1952] 2 Q.B. 297).
The relationship of banker and customer is not that of debtor and creditor:
Joachimson v. Swiss Bank Corporation [1921] 3 K.B. 110. It is totally
foreign to modern banking law and practice to consider that the relationship
of banker and customer is one of debtor and creditor in commercial
transactions. A letter of credit implies a contract for the sale of goods
from seller to buyer. The banker is only concerned with documents. The
application for the letter states the documents that are required and the
banker sends a copy to the correspondent bank for the seller who is told
that on presentation of all those documents he will be paid the invoiced
price. The documents remain in the hands of the banker until he is paid or
arrangements for payment are made. Here Credit Suisse presented the
documents to the Midland Bank relying on C.B.N.'s letter of credit. When
Credit Suisse was not paid by C.B.N., it kept the documents and debited its
customer; it had the bill of lading and was liable to pay demurrage. Credit
Suisse has not lent money; the concept of lending money does not arise;
there is an obligation to indemnify the bank for money paid on the
customer's behalf. The transaction could have been effected by merchants and
not by banks. If a merchant acted in such a way in order to help out a
friend in another country it
[1980]
643
Q.B.
Trendtex Trading v. Credit Suisse (C.A.)
would be impossible to say that he had not got sufficient interest to
maintain the debt.
The judge failed to support his correct conclusion by the right reasoning
because of the way the cases were presented to him. He thought that he had
to find a proprietary interest. Hill v. Archbold[1968] 1 Q.B. 686, 697, was
not cited to him. The law as to commercial credits comes under the law
merchant and not the English common law. The bank may have a possessory lien
on the documents if they have not parted with them. The bank always has a
legitimate and genuine interest in the fate of any transaction which it has
specifically financed; a legitimate interest to enforce the right of action.
The validity of the agreement of January 4, 1978, must be determined at that
date and not at any later date: Whitworth Street Estates (Manchester) Ltd.
v. James Miller & Partners Ltd. [1970] A.C. 583. Trendtex put up no money.
Credit Suisse put up all the money.
[LORD DENNING M.R. Why should Credit Suisse get back more money than they
put up?]
The bank made a loss of over $2,000,000. A suggestion has been made of fraud
but it has not been pleaded.
Brodie Q.C. intervening. No allegation of fraud is made against the bank. It
is said that they are vicariously liable for Dr. Patry.
Yorke Q.C. continuing. The rule is that fraud is not to be implied; "it is
not allowable to leave fraud to be inferred from the facts": The Supreme
Court Practice, 1979, vol. 1, p. 290, note 18/12/11, "Fraud."
"Champerty... is only a particular form of maintenance": Glegg v. Bromley
[1912] 3 K.B. 474, 490. The objections to the sharing of the proceeds of
litigation, in that it might lead to the suborning of witnesses, is in
regard to solicitors, ambulance chasing and contingency fees.
A banker's morality does not change according to whether he will get more or
less in the assigned action than the customer owes to him. Trendtex might
have decided not to go on with the litigation or C.N.B. might have won in
the House of Lords. It was perfectly proper for Credit Suisse to take an
assignment: it took a chance. It has always been assumed that, if you have a
business which includes chose in action, you can sell it.
Illogicalities, like charity financing, show that the law of champerty and
maintenance should not be expanded. [Reference was made to Wallersteiner v.
Moir (No. 2) [1975] Q.B. 373.] The real vice in the 20th century is the
speculative financing of personal injury claims.
There is no maintenance here and so no question of champerty arises. If that
be wrong and there be no maintenance no question of champerty can arise in a
commercial transaction. Champerty is an archaic concept and businessmen can
look after themselves. This is a commercial transaction which comes within
R.S.C., Ord. 72.
Duress: it is pleaded that Credit Suisse exerted pressure. It is not duress
for a bank to enforce their rights. The agreement of January 4, 1978, was
not an assignment at all, but an agreement to release the "equity of
redemption" (although the whole concept of trust is foreign to the civil
law). The effective assignment was on November 26, 1976. The agreement of
January 4, 1978, cannot be read as an assignment, its
[1980]
644
Q.B.
Trendtex Trading v. Credit Suisse (C.A.)
intention was to settle disputes which had arisen and not to assign. The law
of champerty and maintenance has not been applied to any document other than
an assignment and if there is no assignment there is no champerty and no
maintenance.
The agreement of January 4, 1978, was a Swiss agreement: the most that can
be said against it, is that it cannot be sued upon in England. Reliance is
put on how Robert Goff J. put it (ante, p. 634C-F) and see Heyman v. Darwins
Ltd. [1942] A.C. 356, 366, per Lord Simon L.C., which was dealing with
whether there was a contract or not.
If fraud had been properly alleged and it were not possible to get discovery
in Switzerland, the plaintiffs would have a strong case. But fraud is a
crime and if fraud had been alleged in the pleadings Trendtex could have
obtained discovery under Swiss law.
If the choice of law clause stands Trendtex cannot complain of the
application of Swiss law to which they agreed: The Kislovodsk [1980] 1
Lloyd's Rep. 183. "... in the light of present-day commercial realities ...
the forum clause should control" in the absence of "a strong showing that it
should be set aside": The Chaparral [1972] 2 Lloyd's Rep. 315, 321.
Discovery in England is the most rigorous in the world, but here the parties
have agreed to Swiss jurisdiction.
Going back to 1958, the Court of Appeal has never reversed the single judge
on the exclusive jurisdiction point because it is a matter of discretion.
The judge was right in concluding that he had to consider on ordinary
principles whether in the exercise of his jurisdiction he should grant a
stay and in applying principles laid down in MacShannon v. Rockware Glass
Ltd. [1978] A.C. 795: what the court in its discretion considered that
justice demanded (per Lord Salmon at p. 819), whether there was another
jurisdiction which was clearly more appropriate than England, the burden
being on the defendant to prove the existence of such other jurisdiction and
if trial in England offered the plaintiff a real advantage then a balance
had to be struck (Lord Salmon at p. 819 and Lord Keith of Kinkel at p. 829).
The court will not interfere if the judge exercised his discretion on the
right principles.
The Swiss law of secrecy was developed during the persecution of the Jews
under the Nazis. Swiss secrecy is a very useful international vehicle. It is
much better that, if a professional man is to be charged with misconduct, he
should be charged before his own courts.
As in Pao On v. Lau Yiu Long [1980] A.C. 614, there is no duress. You can
have duress in a commercial case so long as it vitiates consent. A bank
cannot be accused of duress for applying pressure or putting in a receiver.
Hunt following. Credit Suisse's principal submission before the judge was
that everything was within the exclusive jurisdiction clause. The
application for a stay in accordance with the principles of MacShannon v.
Rockware Glass Ltd. [1978] A.C. 795 was included in Credit Suisse's summons
in case the judge were to hold as he did hold, that some of the plaintiffs'
pleaded causes of action did not fall within the terms of the exclusive
jurisdiction clause itself. On such a clause, the Court of Appeal has not
previously interfered with the discretion of a single judge.
[1980]
645
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Trendtex Trading v. Credit Suisse (C.A.)
Brodie Q.C. in reply. The fundamental error in the submissions on behalf of
Credit Suisse has been to seek to equate maintenance and champerty, and the
interest which would justify maintenance with the kind of property interest
the assignment of which the court would recognise.
The present case shows the difference between champerty and maintenance.
There was an agreement that Credit Suisse would finance the action against
C.B.N., a clear case of maintenance. See Neville v. London "Express"
Newspaper Ltd. [1919] A.C. 368. Before 1967 C.B.N. would have had a right of
action in maintenance against Credit Suisse if special damage could have
been shown. Lack of special damage would have been a defence as a legitimate
interest in the success of the action. Credit Suisse had a legitimate
commercial interest but only so far as a defence to an action by C.B.N. was
concerned. Credit Suisse could have taken a mortgage or a charge on the
proceeds of the action but they could not take an assignment.
Champerty is essentially an agreement between the plaintiff and another
person to divide the proceeds of the litigation. A bare cause of action,
that is, one that is not appurtenant to an interest in property cannot be
assigned. Champerty goes further than maintenance because it is taking a
share of the proceeds of an action. An assignment of a cause of action can
be taken provided that there is some proprietary interest to which it is
attached: see the headnote to Glegg v. Bromley [1912] 3 K.B. 474 and per
Fletcher Moulton L.J. at pp. 487-488. What had been assigned in that case
was an interest in the future proceeds of a sum of money to be obtained in
litigation; not a cause of action but a sum of money.
One looks to see whether a maintainor has a legitimate interest in the
outcome of a suit that is available as a defence to an action for
maintenance; for before 1967 legitimate interest could be used as a defence.
If before the Act of 1967 C.B.N. had brought an action against Credit Suisse
for maintenance, the latter's defence would have been based on financial
interest. But the legitimate interest would only be available as a defence
to an action of maintenance and not to an action of champerty. It is
perfectly lawful to mortgage the future proceeds of an action (Glegg v.
Bromley [1912] 3 K.B. 474) but it is unlawful if one does not mortgage the
proceeds of an action but assigns a bare right to litigate. Champerty is
separate and distinct from maintenance and usually consists of an agreement
to share in the proceeds of a suit. The assignment of a bare right to
litigate is likely to lead to or "savour of" champerty and the law has set
its face against the assignment of bare rights of action. It is against
public policy for a person to take an investment in a suit. There are never
any defences against champerty. The anglers in the Martellcase [1955] Ch.
363 could not have taken a share in the proceeds.
Hutley v. Hutley (1873) L.R. 8 Q.B. 112 shows the distinction between
champerty and maintenance. In Martell v. Consett Iron Co. Ltd. [1955] Ch.
363, 387, Danckwerts J. pointed out that "there can be abuses which the law
must check" and he instanced the remedy of champerty. Laurent v. Sale & Co.
[1963] 1 W.L.R. 829, 831, shows the effect of a champertous assignment.
Those cases show that champerty differs from
[1980]
646
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Trendtex Trading v. Credit Suisse (C.A.)
maintenance and that you cannot take an assignment of a cause of action or
speculate for a share of the proceeds.
Grell v. Levy (1864) 14 C.B.N.S. 73 is very similar to this case; an
agreement to be carried into effect in England but void for champerty if
made in England was "not the less void because made in a foreign country
where such a contract would be legal." A champertous agreement made abroad
will not be enforced here.
Following the rule against champerty there is the further rule that the
courts will not enforce the assignment of a bare right to litigate; except
that the courts will recognise the assignment of a bare cause of action (1)
if it is an assignment of a right to property (2) if there is some statutory
exception as under the Bankruptcy Acts (3) in the case of subrogation which
arises from the special position of the insurer who is entitled to be
subrogated to all rights of the assured by way of subrogation. See
Castellain v. Preston (1883) 11 Q.B.D. 380 which emphasises the fundamental
principle of indemnity. A "contract of insurance... is a contract of
indemnity" which means that the assured shall be fully indemnified "but
shall never be more than fully indemnified": per Brett L.J. at pp. 386-387.
Compania Colombiana de Seguros v. Pacific Steam Navigation Co. [1965] 1 Q.B.
101 does no more than deal with a point of procedure because the insurers
already had their rights by way of subrogation: see per Roskill J. at p.
121. Equity was always against the assignment of a bare cause of action. In
the case of insurance that which would otherwise be champertous would not be
champertous because the insurer has a legitimate interest by subrogation. It
is an exception to the rule and it is the insurer's right of subrogation
which distinguishes his position from that of the banker.
The Law Commission "Proposals For Reform of the Law Relating To Champerty
and Maintenance" (October 25, 1966) were particularly concerned with the
evil of contingency fees and recommended (paragraph 20 (3)) that
"Champertous agreements (including contingency fee arrangements between
solicitor and client) should, for the present, continue to remain unlawful
as contrary to public policy."
A debt is capable of assignment because it is property: see Fitzroy v. Cave
[1905] 2 K.B. 364, 369, 371, per Collins M.R. and Cozens-Hardy L.J. Defries
v. Milne [1913] 1 Ch. 98, 106 (argument), shows the distinction between
assigning a cause of action in tort (which is champertous) and maintaining
an action (Glegg v. Bromley [1912] 3 K.B. 474) which may be justified if a
legitimate interest can be shown. Maintenance cases like Martell's case
[1955] Ch. 363 cannot be used to justify champerty.
The rules of maintenance derive from one rule of public policy and that of
champerty from another. The essence of maintenance is not a sharing of the
proceeds but the provision of assistance to allow the action to be pursued.
There are exceptions to maintenance but none to champerty: see Ellis v.
Torrington [1920] 1 K.B. 399, 405-406, 410, 412, and In re Trepca Mines Ltd.
(No. 2) [1963] Ch. 199, 219-220, per Lord Denning M.R. In the Trepca Mines
case there was an agreement for the sharing of the proceeds; in the instant
case, an assignment with a 100
[1980]
647
Q.B.
Trendtex Trading v. Credit Suisse (C.A.)
per cent. share of the proceeds. Once a person takes an assignment of a
cause of action he obtains a right to intervene in the action and the
plaintiff is supplanted: see per Fletcher Moulton L.J. in Glegg v. Bromley
[1912] 3 K.B. 474, 488-489. If there is an assignment of a bare cause of
action, there is the "right to intervene in the action" and it is
champertous.
There are three possible effects of the two documents of November 26, 1976,
and January 4, 1978, when read together: (1) there was an assignment of
rights of action or the footing of the agreement of November 1976 as varied
by that of January 1978; (2) both documents are to be read together as
amounting to an assignment of a bare right to litigate; (3) Credit Suisse
with the consent of Trendtex were to sell Trendtex's right of action against
C.B.N. for $800,000 to a third party who had no prior "interest" at all. It
was a contract for an illegal purpose. Given the plaintiffs' clear rights
against Credit Suisse, champerty totally vitiates both documents and the
agreement with the exclusive jurisdiction clause goes. Mackender v. Feldia
A.G. [1967] 2 Q.B. 590 differs from this case because there no one attacked
an insurance policy with the exclusive jurisdiction clause as such and it
could not be said that the policy was void ab initio. Diplock L.J. at p. 601
said that if a contract was void and illegal by English law, effect would
not be given to it by English law. So the court will not give effect to the
choice of law clause. Swiss law will recognise English law so far as
assignability is concerned. The choice of law clause is ancillary to the
assignment.
This case is about a stay, whether the case should proceed in England or
Switzerland. One cannot imagine a Swiss court successfully grappling with
the question of champerty.
Yorke Q.C. intervening. Both sides ask this court finally to decide the
question of champerty.
Brodie Q.C. As to the relationship of the parties, Trendtex was the customer
of Credit Suisse at the latter's Lausanne branch. The ordinary principles of
principal (Trendtex) and agent (Credit Suisse) applied. When Credit Suisse
opened a letter of credit in favour of the German suppliers it would debit
it to Trendtex's account and receive the bills of lading entitling Trendtex
to the cargoes. At all times Credit Suisse would be acting as agent for
Trendtex. Credit Suisse never had any property interest in the shipping
documents or the letter of credit. There was no property interest in this
commercial transaction. The only interest that Credit Suisse had was as
creditor to its debtor. It is not tenable to suggest that Credit Suisse had
any property interest. It is no different from the case of a man who has an
accident, goes to his bank where he has an overdraft and gets an advance on
an assignment of his cause of action.
As to the "veiled claim of fraud," it was thought to be improper to plead
fraud before discovery. The evidence as to an inference that at the time the
representation was made Maitre Patry knew that Trendtex's claim would be
settled for more than $800,000 was considered, but although there may be a
suspicion of fraud - for the action was settled for a very much larger sum -
the claim was limited to non-disclosure of
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material fact. Undue influence, economic duress and commercial pressure all
fall to be considered when applying the principles of MacShannon v. Rockware
Glass Ltd. [1978] A.C. 795 and it is wrong to take the choice of law clause
into account.
Yorke Q.C. in reply on the cases. Fitzroy v. Cave [1905] 2 K.B. 364 is the
most useful authority cited: see per Sir Richard Collins M.R. at pp. 368-369
showing that it is the substance and not the form that matters.
Brodie Q.C. referred to a trustee in bankruptcy's statutory powers to deal
with the bankrupt's policy under section 55 of the Bankruptcy Act 1914 and
Guy v. Churchill (1888) 40 Ch.D. 481.
Yorke Q.C. The legitimate and genuine business interest must exist at the
commencement of the cause of action, a mere creditor-debtor relationship is
not sufficient. "Champerty is only a particular form of maintenance":
Scrutton L.J. in Ellis v. Torrington [1920] 1 K.B. 399, 412. As to Grell v.
Levy, 16 C.B.N.S. 73, a solicitor is an officer of the court and could never
have a legitimate interest both on behalf of his client and for himself
because of his duty to the court. The real vice of the contingency fee lies
in the fact that the solicitor is an officer of the court. The British Cash
and Parcel Conveyors case [1908] 1 K.B. 1006 was not cited in Glegg v.
Bromley [1912] 3 K.B. 474. Martell'scase [1955] Ch. 363 opened a new chapter
in the law of maintenance.
If Credit Suisse was entitled to take a charge on Trendtex's claim against
C.B.N., it could take an assignment. "When the person who assists is himself
interested in the subject matter of the suit before its commencement there
is neither champerty nor maintenance": perScrutton L.J. in Ellis v.
Torrington [1920] 1 K.B. 399, 412. A solicitor being an officer of the court
cannot, as such, have a legitimate interest in the result of the action
(which is the answer to the Law Commission's recommendation). In the British
Cash and Parcel Conveyors case [1908] 1 K.B. 1006 the test of proprietary
interest was not satisfied but the court held that there was no maintenance.
In subsequent cases a proprietary interest was sought. Ellis v. Torrington
[1920] 1 K.B. 399, 410-412, shows that the nature of the interest can be of
the most shadowy kind.
The position of the trustee in bankruptcy is fascinating. A trustee in
bankruptcy can sell what would otherwise, if the plaintiffs were correct, be
an unassignable right; so can a liquidator. Thus, since 1883, Parliament has
not thought that the mischief of assignment was all that great. Champerty is
out of place in the law today.
[OLIVER L.J. referred to County Hotel and Wine Co. Ltd. v. London and North
Western Railway Co. [1918] 2 K.B. 251, 258-262, per McCardie J.]
Liquidators in France and Switzerland can sell bare rights of action and Guy
v. Churchill, 40 Ch.D. 481, shows that a trustee in bankruptcy or liquidator
can do so here. That case is not cited in the standard textbooks on company
law like Buckley on the Companies Acts, 13th ed. (1957), Palmer's Company
Law, 22nd ed. (1976) and Halsbury's Laws of England, 4th ed. vol. 7 (1974).
It shows that an assignment by a trustee in bankruptcy is free of champerty
and maintenance and (see pp. 487 and 490) that champerty is an aggravated
form of maintenance. Williams
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and Muir-Hunter on Bankruptcy, 19th ed. (1979), p. 407, cites Guy v.
Churchill under "Compromise." The exception of kinship under the old rule
can be explained by Chitty J.'s analysis (40 Ch.D. 481, 489-490); the law
excused the disinterested or charitable supporter.
As to Neville v. London "Express" Newspaper Ltd. [1919] A.C. 368, see what
Danckwerts J. said about it in Martell's case [1955] Ch. 363, 376, 379-382.
In Hutley v. Hutley, L.R. 8 Q.B. 112, the maintainor had no interest by
Danckwerts J.'s test. In Laurent v. Sale & Co. [1963] 1 W.L.R. 829 the
plaintiff had no interest in the subject-matter of the action; it was a
straightforward maintenance case where the counsel in the case were
outstanding practitioners at the landlord and tenant bar and the champerty
aspect was unnecessary for the decision. Grell v. Levy, 16 C.B.N.S. 73,
cannot stand with Diplock L.J.'s judgment in Mackender v. Feldia A.G. [1967]
2 Q.B. 590, 599-604. All that Castellain v. Preston, 11 Q.B.D. 380, was
concerned with was preventing the plaintiff from making a profit by fraud.
Brodie Q.C. referred to Brett L.J. at p. 387 on the doctrine of notice of
abandonment.
Yorke Q.C. Compare Roskill J. in Compania Colombiana de Seguros v. Pacific
Steam Navigation Co. [1965] 1 Q.B. 101. Robert Goff J. followed Brandon J.
in The Eleftheria [1970] P. 94 where the right test in law was applied.
Cur. adv. vult.
May 2. The following judgments were read.
LORD DENNING M.R. Trendtex Trading Corporation ("Trendtex") is elusive. It
is a Swiss corporation with 100 bearer shares all held by Temo Anstalt
("Temo"), a Liechtenstein corporation, the first and second plaintiff
respectively. Trendtex has emerged from obscurity. It has provided us with
much food for thought - and much material for the law reports. Last time it
was the international law on sovereign immunity. This time it is the common
law of champerty and maintenance.
The first part of the story is told in Trendtex Trading Corporation v.
Central Bank of Nigeria [1977] Q.B. 529. You should read it there so as to
be able to follow the second part which I will recount now. It concerns the
way in which Trendtex financed its dealings. It did it through the
well-known bank, Credit Suisse, the defendant.
Trendtex as creditors of the Central Bank of Nigeria
At the end of the first part, Trendtex was in a strong position. It was the
beneficiary under a letter of credit which had been issued by the Central
Bank of Nigeria ("C.B.N."). C.B.N. had defaulted. Trendtex had a good cause
of action against C.B.N. for damages. Trendtex put it as $14,000,000. C.B.N.
had raised a plea of sovereign immunity but that had been rejected by the
Court of Appeal [1977] Q.B. 529. There was an appeal pending to the House of
Lords. So Trendtex was not home and dry. It might lose all if the House
upheld the bank's
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plea of sovereign immunity. Even if the appeal to the Lords failed, Trendtex
had still a long way to go. It had to prove the amount of damage it had
suffered. It might fall far short of the $14,000,000 it had claimed. The
legal position was simply that Trendtex had a cause of action for damages
which it had reduced into possession by bringing proceedings in the English
courts.
Credit Suisse as creditors of Trendtex
Now in all its transactions Trendtex had been financed by Credit Suisse.
When Trendtex bought the 240,000 tons of cement, it asked Credit Suisse to
issue a letter of credit for the price. Credit Suisse honoured its letter of
credit and debited Trendtex with the amount. When the ships were delayed off
Lagos - and demurrage accrued - Credit Suisse paid the amounts and debited
Trendtex accordingly. When Trendtex brought proceedings in the English
courts against C.B.N. - and instructed Theodore Goddard & Co., English
solicitors, to act for them - Credit Suisse guaranteed the payment of the
costs. There was some controversy as to the amount which Trendtex owed
Credit Suisse: but it seems to have been somewhere between $3,000,000 and
$5,000,000.
Credit Suisse seek an assignment of Trendtex's cause of action
Trendtex had some other creditors too. These had to be reckoned with some
time or other. But Credit Suisse was by far the largest creditor. It had its
eyes on the one asset of Trendtex - on its chose in action against C.B.N.
Credit Suisse wanted to get it assigned to it for its own benefit. It
appointed a lawyer, Maître Patry of Geneva, to act for it in relation to all
Trendtex matters. He brought pressure to bear on Trendtex by threatening to
make it bankrupt unless it assigned to Credit Suisse the benefit of its
chose in action against C.B.N. He also opened up negotiations with C.B.N. to
see what they would pay to settle Trendtex's claim against them.
The negotiations were long and complex. But they came to a climax on January
4, 1978, at a meeting in Geneva. Maître Patry of Geneva represented Credit
Suisse. Dr. Hauser of Zurich represented Trendtex. There was an important
representation made by Maître Patry to Dr. Hauser which can be interpreted
as follows. I have got an offer from a third party. He will buy the right of
action (of Trendtex against C.B.N.) for $800,000. I cannot get more. But I
must ask Trendtex to assign the right of action outright to Credit Suisse:
and allow Credit Suisse to make its own terms with the third party. Unless
you agree to this, I will force Trendtex into liquidation.
The assignment is made to Credit Suisse
On the faith of that representation, an agreement was drawn up in writing
and signed in Geneva on that very day, January 4, 1978. It was long and
detailed. But its principal terms were: (1) Trendtex assigned to Credit
Suisse all its rights of action against C.B.N. - not as security - but out
and out for the sole and exclusive benefit of Credit Suisse
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(or the third party purchaser): and Trendtex acknowledged that it had no
further interest in the legal action conducted in London. (2) Credit Suisse
paid off all the other creditors of Trendtex or put money at their disposal
to pay them. (3) Trendtex gave Maître Patry a power of attorney to enable
him to settle its claim against C.B.N. (4) Dr. Hauser deposited 90 per cent.
of Trendtex's shares with Maître Patry so as to give him full control over
Trendtex. (Note: Trendtex was a Swiss corporation. It has a capital of 100
bearer shares of 1,000 Swiss francs each. Those 100 bearer shares were owned
by Temo, a Liechtenstein corporation. Temo had bearer shares which were
owned by Mr. London of New York. Under the assignment 90 of Trendtex's
shares were deposited with Maître Patry).
Finally, there was this important clause, article 6:
"This agreement is governed by Swiss law. Any dispute regarding its
conclusion, interpretation or fulfilment shall be judged by the Court of
Geneva, exclusive of any other jurisdiction."
The first surprise
That agreement was signed on Friday, January 4, 1978. Then on Wednesday,
January 9, 1978, Maître Patry on behalf of Credit Suisse assigned to a third
party all the rights of action (of Trendtex against C.B.N.) for $1,100,000.
So over the weekend Credit Suisse (or Maitre Patry) had got an increase of
$300,000 - over and above the $800,000 which they had said was the uttermost
offer. An increase of 37 per cent.
The second surprise
A bigger surprise was yet to come. Five weeks later, on February 12 or 13,
1978, Maître Patry went out to Nigeria. He took with him the power of
attorney authorising him to act on behalf of Trendtex. He also took his 90
bearer shares to support it. He negotiated with the Nigerians a settlement
of the action of Trendtex against C.B.N., who paid $8,000,000 to settle the
case. Presumably Maître Patry handed it over to the third party. So the
third party made a profit of $6,900,000. He only paid $1,100,000 on January
9, 1978, for the rights of action: and here he was in February 1978 getting
$8,000,000 for them.
The mysterious third party
Who was this mysterious third party who made this huge profit? Maitre Patry
refuses to disclose his identity. In an affidavit he says:
"... It was agreed and stipulated with the purchaser that the identity of
the purchaser should not be disclosed. That stipulation was and continues to
be binding upon me as the person who acted on behalf of [Credit Suisse] in
relation to the transfer and I am not, therefore, at liberty to disclose the
purchaser's identity without permission of the purchaser which is not
forthcoming."
London is furious
Now, apart from Dr. Hauser in Switzerland, Trendtex had other
representatives, Mr. London and Dr. Kennedy. They had participated
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in all the negotiations. When they discovered that the Nigerians had paid
$8,000,000 to settle the claim, they were furious. They felt that Maitre
Patry had played a dirty trick on Trendtex. They thought that he must all
along have had - hidden up his sleeve - this settlement of $8,000,000. And
yet he had put forward the offer by a third party of $800,000 as all that
could be obtained.
The English proceedings
So Mr. London and Dr. Kennedy went to Herbert Oppenheimer Nathan & Vandyk,
solicitors, in London and issued a writ in the High Court of Justice in
England. They named as plaintiffs Trendtex and its holding company, Temo.
They named Credit Suisse as defendants. They claimed that the assignment of
January 4, 1978, was invalid and should be set aside. They claimed that the
$8,000,000 belonged to them and asked for an account of what had become of
it. Temo asked for the return of the 90 per cent. of the shares which Maitre
Patry had kept.
Credit Suisse retaliated by an application to strike out the name of
Trendtex on the ground that Mr. London and Dr. Kennedy had no right to use
it: and also to stay the proceedings on the ground that the parties had
agreed to the exclusive jurisdiction of the Swiss courts.
On March 30, 1979, Robert Goff J. stayed the proceedings. He was influenced
considerably by the exclusive jurisdiction clause. On the appeal before us,
two points of law were argued. First - was the assignment of January 4,
1978, valid or invalid? If it was invalid, that was decisive of the whole
case. The exclusive jurisdiction clause fell with it. There was no bar to
the proceedings continuing in England. Second - even if the assignment of
January 4, 1978, was valid, it was submitted that the proceedings should
continue in England, because discovery of documents could be had here, but
not in Switzerland.
The validity of the assignment
The right of action of Trendtex against C.B.N. was a chose in action. It was
reduced into the possession of Trendtex by the issue of the writ in the High
Court in England. It was situate in England. The question - whether it was
assignable at all - is governed by the law of England. That is clear from
the private international law as enunciated in our text books in England:
see Dicey & Morris, The Conflict of Laws, 9th ed. (1973), rules 78 and 83:
and it is acknowledged by the Swiss lawyers. Dr. Baechi of the University of
Zurich says:
"... the assignability of the rights has to be examined by the Swiss court
in the light of the law of the foreign jurisdiction (see Schnitzler,
Handbuch des Internationalen Privatrechtes, 3rd ed. (1950) p. 580). If the
right cannot be lawfully assigned under the law of that foreign jurisdiction
the assignment is invalid under Swiss law."
M. Perret of the Bar of Geneva agreed, saying:
"... the Swiss court would look to English law to decide whether
[Trendtex's] claim against C.B.N. could be assigned at all. It would not
look to English law to decide whether the agreement actually had assigned
those rights."
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Lord Denning M.R.
We must therefore turn to English law to decide whether the chose in action
(the right of action by Trendtex against C.B.N.) was capable of being
assigned at all. It was submitted by Mr. Brodie that it was incapable of
being assigned at all. It was, he said, the assignment of a bare right to
litigate - which has for centuries been held to be bad - as offending
against the law of maintenance and champerty. He admitted that there were
many exceptions to that rule: but he submitted that this case did not come
within any of the exceptions hitherto recognised.
The effect of the Criminal Law Act 1967
Now this is the first case, I believe, in which we have been called upon to
consider the effect on assignments of the Criminal Law Act 1967. It
abolished the crime of maintenance, including champerty: so that no one can
be punished for it. It did away with the tort of maintenance, including
champerty: so that no one can be made liable for it. By striking down both
the crime and the tort, it seems to me that the statute struck down our old
cases as to what constitutes maintenance, including champerty: in so far as
they were based on an out-dated public policy. But it did not strike down
our modern cases in so far as they carry out the public policy to today.
These are preserved by section 14 (2) which says:
"The abolition of criminal and civil liability under the law of England and
Wales for maintenance and champerty shall not affect any rule of that law" -
that is the law of England and Wales "as to the cases in which a contract is
to be treated as contrary to public policy or otherwise illegal."
Maintenance today
So far as maintenance itself is concerned (without champerty), the modern
public policy is to be found in British Cash and Parcel Conveyors Ltd. v.
Lamson Store Service Co. Ltd. [1908] 1 K.B. 1006; Martell v. Consett Iron
Co. Ltd. [1955] Ch. 363 and Hill v. Archbold [1968] 1 Q.B. 686 (decided just
before the passing of the Act of 1967). It is perfectly legitimate today for
one person to support another in bringing or resisting an action - as by
paying the costs of it - provided that he has a legitimate and genuine
interest in the result of it and the circumstances are such as reasonably to
warrant his giving his support. As I said in Hill v. Archbold, at pp.
694-695:
"Much maintenance is considered justifiable today which would in 1914 have
been considered obnoxious. Most of the actions in our courts are supported
by some association or other, or by the state itself. Comparatively few
litigants brings suits, or defend them, at their own expense. Most claims by
workmen against their employers are paid for by a trade union. Most defences
of motorists are paid for by insurance companies. This is perfectly
justifiable and is accepted by everyone as lawful, provided always that the
one who supports the litigation, if it fails, pays the costs of the other
side."
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Champerty today as affecting lawyers
So far as champerty is concerned, there is need for some up-dating.
Champerty is a species of maintenance: but it is a particularly obnoxious
form of it. It exists when the maintainer seeks to make a profit out of
another man's action - by taking the proceeds of it, or part of them, for
himself. Modern public policy condemns champerty in a lawyer whenever he
seeks to recover - not only his proper costs - but also a portion of the
damages for himself: or when he conducts a case on the basis that he is to
be paid if he wins but not if he loses. As I said in In re Trepca Mines Ltd.
(No. 2) [1963] Ch. 199, 219-220:
"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."
This reason is still valid after the Act of 1967. In Wallersteiner v. Moir
(No. 2) [1975] Q.B 373, 394, I said:
"It was suggested to us that the only reason why 'contingency fees' were not
allowed in England was because they offended against the criminal law as to
champerty: and that, now that criminal liability is abolished, the courts
were free to hold that contingency fees were lawful. I cannot accept this
contention. The reason why contingency fees are in general unlawful is that
they are contrary to public policy as we understand it in England."
They are contrary to modern public policy.
Champerty in former times as affecting assignments
Now I come to another aspect of champerty. It is when a man has a "bare
right to litigate." Can it be lawfully assigned to a purchaser? Under the
old notions of public policy, such an assignment was always unlawful. It was
said by all: "a chose in action is not assignable.... No case can be found
which decides that such a right can be the subject of assignment, either at
law or in equity": see Prosser v. Edmonds (1835) 1 Y. & C. Ex. 481, 499. The
only exception was where property of some kind or other was assigned, and
there was attached, as incidental to it, a right to bring an action: see
Dawson v. Great Northern and City Railway Co. [1905] 1 K.B. 260, 270-272 and
Ellis v. Torrington [1920] 1 K.B. 399; or an undisputed debt was assigned,
because this was regarded as a piece of property: see Fitzroy v. Cave [1905]
2 K.B. 364, 373.
Apart from these exceptions it was unlawful to assign a right of action for
a disputed debt or for damages for breach of contract or for tort.
Champerty today as affecting assignments
That old rule has not been able to survive into modern times. Just as the
old law about maintenance (without champerty) was brought up to date by
Martell v. Consett Iron Co. Ltd. [1955] Ch. 363, so the time has come when
we should bring the law about assignments up to date.
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Just as in maintenance, it is sufficient if the maintainer has a legitimate
and genuine interest in the subject matter, and the circumstances are such
as reasonably to warrant his support of the action or defence: so in an
assignment of a chose in action, it is valid if the assignee has a
legitimate and genuine interest in the subject matter and the circumstances
are such as reasonably to warrant the assignment of it to him. I realise
that, like in maintenance and in champerty, this new policy will give rise
to questions such as: What is a legitimate and genuine interest? What
circumstances are such as reasonably to warrant the assignment? These
questions are only to be solved in our English way - by case to case as the
judges come to decide them. Thus there will be built up a body of case law
to guide practitioners for the future. But meanwhile I will take from the
books some instances when the assignment of a chose in action should be held
to be valid:
(i) Incidental to property
Just as in former times, so in modern times, an assignment of a chose in
action is assignable when it is incidental to an assignment of other
property: or when an undisputed debt is assigned. In such cases the assignee
has a legitimate and genuine interest - in the shape of the property which
he is acquiring - and the circumstances do reasonably warrant the assignment
of that which is incidental to it.
(ii) Assignment to a creditor
Take now a man who brings an action for damages for breach of contract - and
becomes bankrupt whilst the action is still going on. His trustee can sell
the chose in action to one of the creditors of the bankrupt - on the terms
that the creditor can take the fruits of the action for himself. The
creditor is not limited to the amount of the debt owing to him, but can take
the whole proceeds: see Guy v. Churchill (1888) 40 Ch.D. 481. Now suppose
that the man who brings the action does not become bankrupt, but is in
financial difficulty - and to save his business assigns the chose in action
to one of his creditors. Is there any ground of public policy why he should
not do so? If the trustee in bankruptcy could do so, why should not he?
Cannot the creditor likewise take the fruits of the action, not limited to
the amount of his debt? And does not the same apply even when the man is not
in financial difficulty? At any rate when the creditor does not take undue
advantage of the debtor, and is able and willing to pay the costs of the
action, if he loses.
(iii) Assignment to an insurer
Take next a man who has insured his goods against loss or damage and he
suffers the loss of or damage to them by the fault of a wrongdoer. He has a
right of action in tort. The insurance company can, of course, pay him
compensation and be subrogated to his claim against the wrongdoer - to
recoup themselves, but no more. But as an alternative the man can assign his
right of action to the insurance company out and out; and the insurance
company can take the fruits of the action for themselves. They are not
limited to the amount which they have paid
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to their customers: see Compania Colombiana de Seguros v. Pacific Steam
Navigation Co. [1965] 1 Q.B. 101. They have a legitimate and genuine
interest and the circumstances are such as reasonably to warrant the
assignment.
(iv) Assignment of the proceeds
Take next a case where the plaintiff, Mrs. Glegg, brought an action against
another lady for damages for slander. The plaintiff owed a large sum to her
husband: and wanting to borrow more from him - so as to pay her solicitor's
costs in the action - she assigned to him "all that the interest, sum of
money, or premises to which she is or may become entitled" in the action or
by settlement of it. That assignment was held to be good and not against
public policy: see Glegg v. Bromley[1912] 3 K.B. 474. But, suppose she had
used different words and assigned "all the right of action for damages,"
would that have made any difference? On principle, I should think not. There
is no reason in public policy why the law should permit the assignment of
the proceeds of a right of action and refuse to allow the assignment of the
right of action itself. In either case the assignee is the one concerned to
bring the action to trial or settlement. He promotes the litigation - and
not the assignor.
But Glegg v. Bromley was an exceptional case. The cause of action was for
slander - a personal tort. Such a cause of action is not in general
assignable. Hence the need to say that it was only the proceeds which could
be assigned.
(v) Assignments in the case of personal torts
Torts can be divided into two broad classes. Those relating to persons: and
those relating to property. So far as personal torts are concerned, like
damages for libel or slander, or for assault, or for personal injury, the
judges have often said that they cannot be assigned. This, I think, still
holds good. There are good reasons of public policy for not allowing an
assignment: because of the danger that the assignee may buy up the claim at
a small figure and use it to get a big profit for himself. In short, all the
evils which our forefathers saw in champerty. In such cases the assignee has
no legitimate and genuine interest in the chose in action - and the
circumstances are not such as reasonably to warrant the assignment.
(vi) Assignment of damages for breach of contract
Take next a case where a man sells goods on an instalment basis: and after a
time the buyer repudiates the contract: and the repudiation is accepted. The
seller is left with a claim for the price of the unpaid instalment and
damages for repudiation. The seller can certainly assign the debt to a
purchaser. Can he not also assign the chose in action for damages? The point
was discussed by McCardie J. in County Hotel and Wine Co. Ltd. v. London and
North Western Railway Co. [1918] 2 K.B. 251. He saw nothing in public policy
to prevent the assignment. Nor do I. Just as a party to a contract can
assign the benefit of it before
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there is a breach: see Hughes v. Pump House Hotel Co. Ltd. [1902] 2 K.B.
190; so also he should be able to assign the benefit of the right to sue for
damages after there is a breach. Provided always that he is able and willing
to pay the costs of the action if he loses; and that it is not a contract of
a personal nature which is not assignable at all: see Kemp v. Baerselman
[1906] 2 K.B. 604. And provided also that it is made for good and sufficient
consideration such as reasonably to warrant the assignment. If the assignee
takes three-quarters of the damages, the circumstances may not be such as to
warrant the assignment: see Laurent v. Sale & Co. [1963] 1 W.L.R. 829.
(vii) Assignments in the case of torts to property
In many cases of loss of or damage to property, the cause of action can be
framed either as damages for breach of contract or as damages for tort. If I
am right in thinking that damages for breach of contract are capable of
assignment - for good and sufficient consideration - so also it would seem
that damages in tort - for loss of or damage to property - can be assigned -
provided the assignment is for good and sufficient consideration. Dawson v.
Great Northern and City Railway Co. [1905] 1 K.B. 260 and Defries v. Milne
[1913] 1 Ch. 98 are often cited to show that damages for tort are not
assignable. But they were decided on the footing that the damages were not
for tort but in respect of claims for compensation and breach of contract
respectively. But nowadays they would be valid even if they were regarded as
an assignment of damages for tort. There is no reason in public policy for
making any difference. We must do away with all that hair-splitting.
(viii) Assignee's name
There has been much discussion as to the scope of the words "debt or other
legal thing in action" in section 25 of the Supreme Court of Judicature Act
1873, now section 136 of the Law of Property Act 1925. It seems to me that
in modern times the words "legal thing in action" should be given their
proper legal significance. They include a right to sue for a disputed debt
or for damages for breach of contract or in tort for loss of or damage to
property. At one time they were given a restricted interpretation because of
the old law of champerty and maintenance: see May v. Lane(1894) 64 L.J.Q.B.
236, 238, per Rigby L.J., as explained in Torkington v. Magee [1902] 2 K.B.
427, 434. But now that the old law of champerty and maintenance has gone, it
seems to me that, whenever a legal thing in action can lawfully be assigned,
the assignee can sue in his own name provided he gives proper notice: and is
able and willing to pay the costs of the action, if he loses.
The old saying that you cannot assign a "bare right to litigate" is gone.
The correct proposition is that you cannot assign a personal right to
litigate, that is, which is in its nature personal to you yourself. But you
can assign an impersonal right to litigate, that is, which is in its nature,
a proprietary right: provided that the circumstances are such as reasonably
to warrant it.
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The present case
Returning now to the present case, it is clear to my mind that Credit Suisse
had a legitimate and genuine interest in the right of action by Trendtex
against C.B.N. It had financed the transaction which had given rise to the
right of action. It was a creditor of Trendtex for large amounts arising out
of those transactions. Its interest was such as reasonably to warrant the
assignment to it. So the right of action was capable of assignment in
English law. The assignment was valid.
The effect of the assignment
The assignment being valid, the effect of it depends on the proper law of
the contract of assignment: see Dicey & Morris, The Conflict of Laws,9th
ed., rule 84. That was Swiss law. At once we come upon the clause which
gives exclusive jurisdiction to the Court of Geneva. That clause must be
given full effect unless its enforcement would be unreasonable and unjust or
that the clause was invoked for such reasons as fraud or over-reaching: see
The Chaparral [1972] 2 Lloyd's Rep. 315, 321.
The claims of Trendtex do not rest upon the contract of assignment. They are
based on the suggested invalidity of the assignment itself or on breach of
fiduciary duty; the claim of Trendtex for the return of the 90 shares does
not depend on the assignment. So I do not think the clause about choice of
jurisdiction really applies here. We have to see what is the forum
conveniens for the decision of this dispute: see MacShannon v. Rockware
Glass Ltd. [1978] A.C. 795. In this case everything points to Switzerland.
All the impugned transactions took place in Switzerland: Trendtex and Credit
Suisse are Swiss corporations: Swiss lawyers took a leading part - coupled
with an excursion by a Swiss lawyer to Nigeria. The forum conveniens is
Switzerland.
Discovery
The dispute should clearly be tried in Switzerland except for one matter
which does give rise to concern. There is no process for compelling
discovery of documents in the civil courts of Switzerland. But I cannot
believe that this means that justice cannot be had in Switzerland. I should
expect that, if a defendant in a commercial case does not produce the
documents in his possession - or, for instance, does not disclose the name
of the third party here - the Swiss court would draw inferences against him.
Maitre Patry says in his affidavit:
"Under the Swiss civil litigation system the judge not only questions the
witnesses first (having already seen the detailed statements of facts and
law prepared by both parties) but also takes an independent interest in
establishing the truth of a situation."
In other words, not an adversarial system, but an investigative system.
Moreover, Maître Patry says in his affidavit:
"The most important witnesses (Dr. Hauser and myself) are resident in
Switzerland and available to the Swiss courts... We are both professional
persons acting in such capacity and it is proper that our actions should be
judged in the light of our professional as well as our general
responsibilities before the courts of our own country."
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Those reasons are quite sufficient to my mind to show that the claims of
Trendtex and of Temo should be tried in Switzerland, and not in England.
I would dismiss the appeal, accordingly.
BRIDGE L.J. I have had the advantage of reading in draft the judgment to be
delivered by Oliver L.J. I agree with it and for the reasons expressed in
that judgment I too would dismiss this appeal.
OLIVER L.J. This appeal arises out of an extremely complicated background,
the facts of which have been set out in detail in the judgment of the judge.
The salient facts have already been summarised in the judgment of Lord
Denning M.R., and I will not take up time by repeating them. In considering,
however, the validity and effect of the agreement of January 4, 1978, upon
which Credit Suisse's application for a stay was based there are, I think,
two particular aspects of the matter which are of some importance. The first
is the very close commercial involvement which Credit Suisse had, right from
the inception, with the contract entered into by the plaintiff Trendtex and
with the letter of credit issued by the Central Bank of Nigeria ("C.B.N.").
Trendtex had, in 1974, bound itself by contract to supply to Pan African
Import Co. Ltd. a quantity of 240,000 metric tons of cement c.i.f. Lagos and
the letter of credit was issued to Trendtex by C.B.N. under the terms of
that contract to cover the price payable by Pan African and demurrage.
Trendtex could never have undertaken those contractual obligations without
the financial assistance of Credit Suisse, for it was not itself a
manufacturer or supplier of cement. It relied, for fulfilment of its
contract with Pan African, upon procuring supplies to be shipped from a
German supplier at a rather lower price than that which was payable under
the contract with Pan African. To enable that to be done it was necessary
for a letter of credit to be issued in favour of the German suppliers to
cover each shipment, and this was done by Credit Suisse at Trendtex's
request. Credit Suisse also issued guarantees to certain shipowners, among
them a German company called Intermare Transport, through whom Trendtex
chartered the ships. So far the transaction represented a perfectly normal
international commercial dealing with Credit Suisse providing back-to-back
financing. Upon each consignment of cement being shipped by the German
suppliers, the latter presented the shipping documents and invoices to
Credit Suisse's corresponding bank and received payment under a letter of
credit issued by Credit Suisse to cover the shipment, and Credit Suisse
debited Trendtex's account accordingly. The documents received by Credit
Suisse would then be presented to the Midland Bank (C.B.N.'s corresponding
bank in London) and the payments received by Credit Suisse under the letter
of credit issued by C.B.N. would then be credited to Trendtex account with
Credit Suisse.
When C.B.N. suspended payment under the letter of credit issued by them,
Credit Suisse had, of course, already paid to the German suppliers at
Trendtex's request the price of the cargoes shipped, on presentation of the
shipping documents, under its letter of credit and this, together with
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demurrage payable under its guarantees to the shipowners, was duly and
properly debited to Trendtex's account. This left Trendtex in a serious
financial position.
It had treated C.B.N. as being in repudiation of its contract constituted by
the letter of credit and had, on November 4, 1975, commenced proceedings
against C.B.N. in this country claiming a sum of some U.S. $14,000,000 by
way of damages. It had also succeeded in obtaining an injunction freezing a
sufficiency of C.B.N.'s assets in this country to meet that claim. But it
had not the resources for prolonged litigation. Thus when, on March 26,
1976, an order was made setting aside the writ and dissolving the injunction
on the ground of C.B.N.'s sovereign immunity, Trendtex found itself with a
heavy indebtedness to Credit Suisse and the prospect of some prolonged and
expensive litigation in an appellate court, with no certainty of a
successful outcome, before it could raise the money to meet its obligations.
Credit Suisse's own position, however, was not much more enviable. It had
financed Trendtex's purchase in the comfortable knowledge that its
possession of the shipping documents would enable it to recoup itself under
the letter of credit issued by C.B.N. and it now found itself in a position
where its only substantial prospect of payment lay in the success of the
litigation which Trendtex was conducting in England. It would be difficult
to find more closely interwoven commercial interests and it is not,
therefore, surprising to find Credit Suisse agreeing to support Trendtex in
pursuing the matter to the Court of Appeal and beyond if necessary. Not to
have done so would have been disastrous for it. In November 1975 a Mr.
Kostner, the manager of Credit Suisse's Lausanne branch, committed Credit
Suisse to guaranteeing all the legal fees and costs incurred by Trendtex's
English solicitors, Messrs. Theodore Goddard, in the proceedings against
C.B.N.
But Credit Suisse was not Trendtex's only creditor and it became desirous of
obtaining some security not only for its debt but also for the not
insubstantial investment which it was being called upon to make in the
litigation, and it was the effecting of and the progressive improvement in
Credit Suisse's security which ultimately gave rise to the present
proceedings.
That brings me to the other matter which seems to me to be of some
importance, and that is that the agreement of January 4, 1978, was merely
the culmination of a series of agreements between Credit Suisse and Trendtex
under which Trendtex had already purported to assign to Credit Suisse its
cause of action against C.B.N. On September 6, 1976, Dr. Hauser, Trendtex's
sole administrator and director, had sent to Mr. Kostner what was described
as a general declaration of assignment by Trendtex of the six specified
contracts for the shipment of cement which had taken place before C.B.N.'s
repudiation of their obligations. There were, so far as appears at any rate,
no pending proceedings against Pan African but this document authorised
Credit Suisse to pursue in Trendtex's name all claims arising out of the
contracts and bound Trendtex to supplement the agreement with individual
documents. This agreement did not mention the claim against C.B.N. but on
November 26, 1976, Dr. Hauser sent a further "Declaration of Surrender"
expressed to
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be in fulfilment of the September 6 agreement and surrendering to Credit
Suisse all claims arising from the Pan African contract and the letter of
credit "to the full extent of the indebtedness to the transferee" and
empowering Credit Suisse to enforce all claims arising from C.B.N.'s letter
of credit either in its own name or in that of Trendtex. It was on the basis
of this document that Credit Suisse financed Trendtex's appeal to the Court
of Appeal, which was successful.
Yet a further document was prepared on November 7, 1977, and signed by Dr.
Hauser on November 14, 1977, purporting to record an agreement reached at a
meeting held on September 21, 1977, at which Trendtex's indebtedness to
Credit Suisse was reduced from $3,400,000 to $1,500,000 on agreed terms
which included an authority to Credit Suisse to settle the proceedings
against C.B.N. for not less than $3,000,000 and a further total and
irrevocable cession of Trendtex's rights against C.B.N. by way of guarantee
of Trendtex's debt.
Thus the position at January 4, 1978, was that Trendtex's claim, if
assignable at all, had already been effectively assigned to Credit Suisse
but only by way of security for the amount owing. The agreement of January 4
in fact recited the previous assignment of November 26, 1976; that an offer
to buy Trendtex's rights for $800,000 had been received from a third party;
and that a sale had been opposed by Trendtex because of its position
vis-à-vis its other creditors. It went on to recite that Credit Suisse was
ready to advance a part of the anticipated proceeds of sale in satisfaction
of the claims of such other creditors in order to treat them substantially
in the same way as Credit Suisse itself was being treated.
The operative provisions of this agreement have already been summarised by
Lord Denning M.R. and I need not further refer to them save to notice that
there was no express assignment of Trendtex's right of action against C.B.N.
as such - it being assumed that that had already taken place - but, in
effect, a release of any residual interest which Trendtex had. Trendtex
agreed not to oppose a sale of its rights for such consideration as Credit
Suisse might determine and irrevocably recognised that it had no further
interest in the proceedings.
Having regard to the wide discrepancy of the sum received in settlement and
the sum for which Trendtex had been told that the claim was about to be sold
and also to the relatively short time which elapsed between the agreement of
January 4 and the ultimate settlement it is not altogether surprising that,
when Mr. London heard about it in March, a query was raised in his mind
whether at the date of the agreement, Credit Suisse or its representative
might not have been aware that there existed a possibility of settling for a
very much larger sum than the $800,000 referred to in the agreement. Thus
the present action was commenced on March 29, 1978, by Trendtex and Temo
Anstalt ("Temo"). the Liechtenstein Anstalt which claims to be beneficially
entitled to the shares in Trendtex, claiming first that the agreements of
January 4, 1978, and November 26, 1976, were void as constituting
assignments of a bare cause of action and a declaration that the cause of
action against C.B.N. remained vested in Trendtex; secondly, that Trendtex
was induced to
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enter into the agreement of January 4 by illegal pressure; thirdly, that
Maitre Patry was in breach of a fiduciary duty to Trendtex for which Credit
Suisse was vicariously liable and liable to account accordingly to Trendtex
for moneys received and, fourthly, the return of the shares to Temo. On
Credit Suisse's summons to stay the proceedings, it was strenuously argued
before the judge that the assignment of Trendtex's cause of action against
C.B.N. was champertous and incapable of enforcement in England. The judge
did not in terms decide that question, although he expressed the view that
there were very strong arguments in favour of the plaintiffs' contention. He
held, however, that even if the argument were correct, that did not conclude
the matter, since the question whether the agreement itself (assuming it to
be inoperative as an assignment) gave rise to legally enforceable duties
under Swiss law was a dispute which fell within the exclusive jurisdiction
clause. He then considered on the evidence before him and in accordance with
the principles set out in the judgment of Brandon J. in The Eleftheria
[1970] P. 94, whether Trendtex had discharged the onus of showing that it
would be unjust to give effect to that clause by granting a stay. He
concluded that it had not. He also considered, in relation to Temo's claim
and to the claims based on breach of fiduciary duty, whether, in accordance
with the principles laid down by the House of Lords in MacShannon v.
Rockware Glass Ltd.[1978] A.C 795 there was a more appropriate forum for the
trial of the issues between the parties and whether trial in England would
offer to the plaintiffs some real advantage of which they would be deprived
if the dispute were tried in the appropriate forum. He concluded that
everything pointed to Switzerland as a more appropriate forum and that the
advantages of trial in England were not such as to outweigh what he
described as "the overwhelmingly Swiss connection"; and he granted the stay
accordingly.
In this court Mr. Brodie's main thrust has been a challenge to the view
which the judge expressed that the issue of maintenance and champerty, which
he expressly avoided deciding, did not constitute a short cut which
effectively concluded the matter, and indeed the court has been pressed by
both sides to decide in terms whether the relevant agreements were void for
maintenance or champerty since, whether the dispute is tried in England or
in Switzerland, that is a matter which will in any event have to be
determined. Mr. Brodie puts it higher, as he did before the judge. He
contends that, if the point is decided in his favour, it is conclusive of
the matter, at any rate so far as concerns Credit Suisse's reliance upon
article 6 of the agreement of January 4.
The judge was, he contends, wrong to treat the assignment as something
separable from the agreement. The agreement was, he submits, an assignment
and nothing but an assignment. As such, its validity falls to be determined
by the lex situs of the chose in action, that is to say, England, where the
action against C.B.N. was being litigated. By English law it was illegal and
void as a whole and the invalidity extends to the exclusive jurisdiction
clause itself: see Heyman v. Darwins [1942] A.C. 356.
Whether Mr. Brodie is right or wrong about this, the question of the
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champertous nature of the agreement is one which lies at the threshold of
his argument and it does, as it seems to me, require to be resolved
conclusively before one ever gets to the ulterior question of the effect,
supposing the assignments to be champertous, which that has on the agreement
as a whole. Nor, indeed, is it inappropriate that concepts having their
origins in the ancient fear entertained by English lawyers of the abuse of
legal process, which was endemic in mediaeval times, should once again be
reappraised in the light of current notions of public policy and of
international trading practices. The judge in the instant case said:
"I must confess to being unhappy that a transaction which business men in
Switzerland may well regard as so unobjectionable that they would enter into
it without appreciating that there was any possibility of its being
ineffective, should be held to be contrary to public policy in this
country."
I share that unhappiness. Maintenance and champerty, which once attracted
criminal penalties and founded claims for tortious damage, have, since 1967,
ceased to do so: Criminal Law Act 1967, sections 13 (1) and 14 (1). Only in
the field of contractual right and duties do they still cast their shadow
(section 14 (2)) and even in this field the trend of all the recent
authorities has been to foreshorten the shadow. Danckwerts J. in Martell v.
Consett Iron Co. Ltd. [1955] Ch. 363, 382, observed that "unless the law of
maintenance is capable of keeping up with modern thought, it must die in a
lingering and discredited old age"; and in Hill v. Archbold [1968] 1 Q.B.
686, 697, Danckwerts L.J. said:
"... the law of maintenance depends upon the question of public policy, and
public policy... is not a fixed and immutable matter. It is a conception
which, if it has any sense at all, must be alterable by the passage of
time."
There is, I think, a clear requirement of public policy that officers of the
court should be inhibited from putting themselves in a position where their
own interests may conflict with their duties to the court by the agreement,
for instance, of so-called "contingency fees"; and there may well be valid
reasons why personal rights of action for tortious damage should not, in
general, be the subject matter of assignment or partition.
But outside these categories, and speaking only for myself, I question
whether, in the year 1980, our jurisprudence ought still to have room for
distinctions, which owe more to sophistry than to logic, between choses in
action and what are described as "bare" rights of action or between strictly
proprietary and purely commercial or financial interests. Maintenance is a
very ancient concept and its history is one of a progressive alleviation of
a strictness which at one time even forbade the giving of evidence except
under subpoena. It may be defined as the rendering by one person,
improperly, of assistance to another in prosecuting or defending proceedings
in which the person so rendering assistance has no legitimate interest.
Champerty was merely an aggravated form of maintenance and was constituted
by an agreement between the maintainer and the maintained for the division
of the proceeds of the suit. Apart
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from the additional element of partition it was, in its essentials, no
different from maintenance, although it does seem clear that at least some
of the exceptional circumstances (for instance, kinship between maintainer
and maintained) which came to be recognised as justifying maintenance would
not necessarily be recognised as justifying champertous agreements.
As regards these the law was particularly strict, the reason being said to
be that the champertous interest of a maintainer might lead him to abuse the
process of the court by suborning witnesses, suppressing evidence and so on.
What endowed champerty with particular importance in the development of the
law was the extension of the suspicion entertained in cases of maintenance
in consideration of the division of the spoils (campus partitio) to cases of
outright transfer of the whole benefit of a cause of action not necessarily
involving maintenance - an extension which had a profound effect upon the
law relating to the assignability of choses in action. Equity, it was said,
refused to lend its assistance to certain assignments, not because they were
in fact champertous, but because they "savoured of maintenance and
champerty."
It would not, I think, be helpful to seek to trace the historical
development of the doctrines through a maze of contradictory cases and
sometimes over-subtle distinctions which merely illustrate changing views of
public policy. The line of recent authorities starts with the judgment
(subsequently affirmed on appeal) of Danckwerts J. in Martell v. Consett
Iron Co. Ltd. [1955] Ch. 363 which is the locus classicus of the modern law
on the subject and it is really unnecessary to go behind this save to the
extent of illustrating the two streams of development which are visible,
that is to say, first, the extension of the type of interest which the law
regards as justifying the maintenance by one man of another's action and,
secondly, the broadening of the category of interests which are treated by
the law as capable of assignment, both matters of critical importance in the
instant case in the light of Mr. Brodie's submissions.
I hope that I do not do injustice to these submissions if I summarise them
as follows:
First, it is said that, however far the law may have progressed, it has not
yet gone so far as to permit the maintenance of an action by a person who
has anything less than a proprietary interest in the subject matter of the
proceedings unless he can bring himself within one or other of the
established exceptions such as close relationship, charity or membership of
a group or association of persons having a common interest in the outcome.
Secondly, it is submitted that even if, contrary to Mr. Brodie's first
submission, a purely financial or commercial interest is sufficient to
entitle a person to maintain proceedings - in the sense that, at the time
when maintenance was an actionable wrong, such interest would have afforded
a defence to an action in tort - nothing short of a proprietary interest in
the subject matter can justify an agreement which involves the receipt by
the maintainer of any part of the proceeds of the action. Thirdly, it is
said that even were it permissible for a person having only a financial
interest in the solvency of a party to the action to maintain the action and
to take a charge on the future proceeds for what is due to him, it is never
permissible for such a person to take
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an assignment, either outright or by way of charge, of the cause of action,
and any agreement under which he purports to do so will be illegal and void.
As regards Mr. Brodie's first submission, the judge expressed the view that
on the authorities as they stand, the interest which justifies a third party
in maintaining an action must be either a proprietary interest, that is to
say either an interest in property to which the cause of action is
ancillary, or an interest in the cause of action itself in the sense that
the assignor was under some pre-existing duty to enforce it for the benefit
of the assignee. It is not, however, clear how far, in reaching that
conclusion, the judge had had the benefit of the numerous authorities cited
in this court. Even in the 19th century the courts seem to have been aware
of and anxious to avoid the inconvenience of a doctrine which hampered
normal and legitimate commercial transactions and although originally the
tendency was to avoid the inconvenience by attaching the cause of action to
some often quite illusory proprietary interest, the tendency of the later
cases was towards a franker recognition of commercial realities. In Williams
v. Protheroe (1829) 5 Bing. 309 it was held that there was no objection, on
the sale of certain customary hereditaments, to an assignment of the benefit
of a pending action between the vendor and one of the tenants of the estate
for arrears of rent due and dilapidations accrued prior to the date of the
sale. In 1866 a similar principle was applied in quite different
circumstances in Dickinson v. Burrell (1866) L.R. 1 Eq. 337. Here the
plaintiffs were the trustees of a voluntary settlement executed in 1864 the
only property in which was in fact the settlor's claim in equity to have set
aside two conveyances of his share in a certain estate. The deed recited
those conveyances and that the settlor disputed their validity but proceeded
to convey the settlor's share of the estate to the plaintiffs "upon trust to
recover the same." In fact, therefore, the "property" in the settlement
existed only if and so far as the claim to set aside the earlier conveyances
could be pursued and succeeded. Nevertheless Lord Romilly M.R. held that the
deed was not champertous saying, at p. 342:
"The distinction is this: if James Dickinson had sold or conveyed the right
to sue to set aside the indenture... without conveying the property, or his
interest in the property, which is the subject of that indenture, that would
not have enabled the grantee, A.B., to maintain this bill; but if A.B. had
bought the whole interest of James Dickinson in the property, then it would.
The right of suit is a right incidental to the property conveyed;..."
Since the property could not be obtained without proceeding with the suit
and had, therefore, no practical existence unless the suit succeeded, this
seems to me, I am bound to say, to be a distinction without a difference and
the case is an illustration of the somewhat shadowy nature of the interest
which, even in those days, the court would entertain as justifying the
maintenance of an action.
In Plating Co. v. Farquharson (1881) 17 Ch.D. 49 the common interest which
manufacturers in a particular industry had in resisting an action by a
patentee against one of them was recognised as a sufficient
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interest to justify the maintenance of his defence and this was carried one
stage further by the Court of Appeal in British Cash and Parcel Conveyors
Ltd. v. Lamson Stores Service Co. Ltd. [1908] 1 K.B. 1006. This is an
important case in the present context and it is surprising that, apart from
a brief reference in Neville v. London "Express" Newspaper Ltd.[1919] A.C.
368, it does not seem to have been referred to in any of the subsequent
decisions in this branch of the law prior to Martell's case [1955] Ch. 363.
It was an action for the tort of maintenance in which the plaintiffs'
complaint was that the defendants who were rival manufacturers had installed
their equipment in premises of certain customers of the plaintiffs
indemnifying those customers against any claims which the plaintiffs might
make against them for breach of contract. Pursuant to those indemnities the
defendants had in fact maintained the defences of certain actions by the
plaintiffs. The Court of Appeal [1908] 1 K.B. 1006 unanimously reversed the
trial judge and held that the defendants were not liable for maintenance
since they were acting in the legitimate defence of their own commercial
interests. Cozens-Hardy M.R., at p. 1012, was content to say:
"The defendants had a business interest, a commercial interest which fully
justified the indemnities or guarantees which they gave. And on this short
ground I think the appeal must be allowed..."
Fletcher Moulton L.J. in his judgment observed at p. 1013 that the old
common law of maintenance was, even then, "to a large extent obsolete." He
said, at pp. 1013-1014:
"Speaking for myself, I doubt whether any of the attempts at giving
definitions of what constitutes maintenance in the present day are either
successful or useful. They suffer from the vice of being based upon
definitions of ancient date which were framed to express the law at a time
when it was radically different from what it is at the present day, and
these old definitions are sought to be made serviceable by strings of
exceptions which are neither based on any logical principle nor in their
nature afford any warrant that they are exhaustive. These exceptions only
indicate such cases as have suggested themselves to the mind of the court,
and it is impossible to be certain that there are not many other exceptions
which have equal validity."
and he referred to Holden v. Thompson [1907] 2 K.B. 489 as an example - a
case in which community of religion was accepted as a justification for
assisting a co-religionist in a dispute relating to religious matters. That
maintenance as a civil wrong still existed he did not doubt but it was
directed at what he described, at p. 1014, as:
"... wanton and officious intermeddling with 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."
The "legitimate defence of their own business interests" was, he held at p.
1016, a sufficient ground for the indemnity which gave rise to the action.
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Buckley L.J. was to the same effect. He said, at pp. 1020-1021:
"The cases, I think, divide themselves into two classes - the one where the
person accused of maintenance has a common interest with the party to the
litigation (an instance of which is Plating Co. v. Farquharson), and the
other where the party charged with maintenance has no such interest, in
which case he is guilty of maintenance unless his case falls within certain
exceptions which have from early times been specifically allowed. The
respondents pressed us with an argument which I think was fallacious, that
the party accused of maintenance is guilty of an offence unless he falls
within some one of these exceptions, relying for that purpose upon the
judgment of Lord Esher M.R. in Alabaster v. Harness [1895] 1 Q.B. 339, 343.
The point in Alabaster v. Harness was that the action as to which the
question arose was an action for libel, and Lord Esher M.R. commenced his
judgment by pointing out that that was a personal action which in point of
law concerns only the person who brings it. In other words it was one of the
class of cases in which there was no common interest and in which
maintenance was established if the case did not fall within one of the
specific exceptions. That does not in any way affect the proposition, which
I think is true, that it is not maintenance to uphold a party in litigation
in whose result the party accused of maintenance has a real and bona fide
interest."
I have already referred to the classic judgment of Danckwerts J. in Martell
v. Consett Iron Co. Ltd. [1955] Ch. 363. Before coming to the judge's
conclusion in that case it is worth noting, on the way, the citation (which
he adopted at p. 382) from the speech of Lord Shaw of Dunfermline in Neville
v. London "Express" Newspaper Ltd. [1919] A.C. 368, 414 where he said:
"What remains of the doctrine deserves, in these circumstances, a scrupulous
examination; and I am of opinion that the test of maintenance is the test of
the quality of the act itself as it bears upon the attainment of justice in
the particular case, and that the test either of tort or of offence is
primarily whether it contains that quality which is essential both by the
statute and the common law of England."
Danckwerts J. stated what I take to be the correct principle when he said
[1955] Ch. 363, 387:
"Support of legal proceedings, based on a bona fide community of pecuniary
interest or religion or principles or problems, is quite different and, in
my view, the law would be wrong and oppressive if such support were to be
treated as a crime or a civil wrong. But I do not believe that the law is in
that condition." (emphasis added)
Danckwerts J.'s judgment was affirmed by the Court of Appeal [1955] Ch. 363
and, although his judgment is itself treated as the classical exposition of
the law on the subject, it is worth referring in the context of the
submissions in the instant case to a passage from the judgment of Jenkins
L.J. At p. 414 he had pointed out that the cases, which had been
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cited by counsel for the appellants, indicating that the interest required
to rebut an allegation of maintenance must be one of a proprietary nature,
had all been cases where the actions concerned had been of an essentially
personal nature and that the observations as to the common interest required
had to be considered in that context. He continued, at pp. 415-416:
"Be that as it may... It seems to me that the British Cash case at all
events shows that it is not illegal maintenance for a person to support the
defence of an action in respect of a claim against which he has, as part of
a legitimate business transaction, agreed to indemnify the defendant, and I
cannot reconcile this with a strict application of the principle that
maintenance can only be justified on the ground of common interest where the
maintainer has some interest recognised by the law in the subject matter of,
or some issue in, the action. In such a case, the maintainer no doubt has a
financial interest in the result of the action, but only because he has
chosen to give the indemnity. The mere fact that he has given the indemnity
surely cannot suffice to give him a common interest within the meaning of
the principle. Otherwise, every maintainer who effected the maintenance of
an action by giving an indemnity against damages and costs to the defendant,
or against costs to the plaintiff, could plead by way of justification the
common interest thus acquired, which is clearly not so. In my view,
therefore, the true justification in cases such as the British Cash case
must be that the maintainer having given the indemnify in the course of a
legitimate and genuine business transaction, has a legitimate and genuine
business interest in the result of the action which suffices to justify him
in maintaining the defendant (as in the British Cash case itself) or, as it
might equally well be, the plaintiff. This leads me to conclude that a
person who has a legitimate and genuine business interest in the result of
an action must be taken for the purposes of the rule against maintenance to
have an interest recognised by the law in the subject matter of the action."
Finally there is Hill v. Archbold [1968] 1 Q.B. 686 which again stresses the
need to look at the doctrine in the light of modern conditions and the
altered considerations of public policy which those conditions require. As
Lord Denning M.R. said, at p. 694:
"A person is still guilty of maintenance if he supports litigation in which
he has no legitimate concern without just cause or excuse. But the bounds of
'legitimate concern' have been widened: and 'just cause or excuse' has been
readily found."
Now it is not necessary for present purposes to seek any exhaustive
definition of what now constitutes a "just cause or excuse," although for my
part I would be disposed to hold that such just cause at least exists
wherever the maintainer has a genuine pre-existing financial interest in
maintaining the solvency of the person whose action he maintains. In Guy v.
Churchill, 40 Ch.D. 481, 489, Chitty J. treated it as beyond question that
creditors under a bankruptcy or in a liquidation had a sufficient interest
to enable them to maintain an action
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Oliver L.J.
or defence by the trustee or liquidator. Granted that this is explicable on
the ground that a bankruptcy or liquidation produces in the creditors a
proprietary interest in the assets of the estate, it is difficult to see
why, commercially, a creditor does not have at least as great an interest in
preserving the solvency of his debtor and preventing him from becoming
bankrupt. It is not, however, necessary, in my judgment, to go so far
because it seems to me that, however defined, a sufficient interest existed
in the instant case where, from the inception, the defendant had been
intimately concerned with the transactions in respect of which C.B.N.'s
letter of credit was issued and where, as is perfectly plain, it had relied
and had been led to rely upon that letter of credit in making its own
considerable outlay on behalf of Trendtex. I entertain no doubt whatever
that this gave it a sufficient interest in maintaining Trendtex's action,
and it follows that I would reject Mr. Brodie's first submission (ante, p.
664F).
Turning then to Mr. Brodie's second submission (ante, p. 664G), I am unable
to follow why, once it is established that there is a sufficient interest in
a third party to justify his supporting another's action, that interest
should not equally justify his participating in the proceeds of the action,
for instance by taking a charge on such proceeds for what is due to him and
for expenses incurred in supporting the litigation. It is perfectly true
that in In re Trepca Mines Ltd. (No. 2) [1963] Ch. 199, 219, Lord Denning
M.R. observed that champerty was a species of maintenance for which the
common law rarely admits of any just cause or excuse, but that was in the
context of an agreement under which the third party who supported the
litigation had no conceivable interest in it beyond that which he had
acquired by purchasing a share in it. All the authorities concur in
pronouncing that champerty is merely a species of maintenance and it is
clear from Glegg v. Bromley [1912] 3 K.B. 474 that the mere agreement to
participate in the proceeds of an action without maintaining it does not
constitute champerty. If, therefore, the supporting of the action is itself
justified by a sufficient interest in the person lending support, so that he
does not (or did not prior to 1967) commit the offence of maintenance, the
fact that he participates in the proceeds cannot logically render him guilty
of an offence which, by definition, depends upon his also being guilty of
maintenance.
In any event, the law, as it seems to me, must again take account of the
changes in public policy which have occurred during the past half-century,
for the whole of our system of legal aid is founded upon the principle that
the Law Society's legal aid fund has a first charge on any property
preserved or recovered as a result of the litigation which it has been
called upon to support. In my judgment the quality of interest required to
justify an agreement otherwise champertous is no different from that
required to justify an agreement otherwise void for maintenance. This seems,
if authority be needed for the proposition, to have been the view of
Scrutton L.J. in Ellis v. Torrington [1920] 1 K.B. 399, 412, where he says:
"Champerty is only a particular form of maintenance, namely, where the
person who maintains takes as a reward a share in the property recovered.
When the person who assists is himself interested
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in the subject matter of the suit before its commencement there is neither
champerty nor maintenance."
Furthermore, Guy v. Churchill, 40 Ch.D. 481, is an authority directly
contrary to Mr. Brodie's proposition.
But if it is permissible for a person who has a legitimate interest in the
proceedings to maintain them and to take a charge on the proceeds to the
extent of his interest, is it also permissible for him to take an assignment
of the cause of action itself, whether by way of charge or outright? Mr.
Brodie submits that it is not and cites Glegg v. Bromley[1912] 3 K.B. 474
for the proposition that such an assignment is illegal and void. I do not,
for my part, think that Glegg v. Bromley is authority for any such
proposition and the very fact that it has been cited as such is indicative
of the confusion of thought which surrounds the subject. What Glegg v.
Bromley decided was that whilst a cause of action in tort was incapable of
assignment (as it always has been in English law) there was no legal
objection to the granting, without any question of the grantee maintaining
the action, of a charge on the future proceeds even of an action in tort. It
did not decide, and did not purport to decide, that causes of action other
than strictly personal claims in tort were not assignable, much less that a
purported assignment was void on the ground of illegality. One cannot read
the cases without a growing sense of bewilderment at the apparent
contradictions and I cannot help feeling that there is some confusion at the
base of Mr. Brodie's submission. To say, as he was constrained to say, that
even though an action might legitimately be supported and even though a
charge might be taken in the proceeds yet nevertheless the law will strike
down as illegal an assignment of the cause of action itself seems to me to
confuse the form with the substance. As Collins M.R. observed in Fitzroy v.
Cave [1905] 2 K.B. 364, 369: "So long as the real transaction is the same,
the form in which it is carried out ought not to alter the legal effect..."
Mr. Brodie's argument is based essentially upon two propositions, viz: (1)
the law does not permit the assignment of a right to litigate and (2) any
agreement purporting to include or constitute such an assignment is not only
ineffective as an assignment but is illegal and void ab initio as being
champertous. Implicit in the first of these propositions is the further
proposition that once it has become clear that a particular chose can be
recovered only by a resort to litigation it ceases to be assignable. None of
these propositions is universally true. No doubt the ancient notions of
maintenance and champerty lie at the root of the non-assignability of
certain causes of action, but the immediate reason why an assignment of what
was described as a "bare" right of action was ineffective was that equity
refused to lend its aid to enforcing the assignment. Such an assignment was
therefore inoperative and the reason why it was inoperative was that it
"savoured of or was likely to lead to maintenance": see per Parker J. in
Glegg v. Bromley [1912] 3 K.B. 474, 490. But it does not follow from the
fact that a court of equity would not, on this ground, lend its assistance
to an assignment that any transaction of which the assignment forms part was
itself illegal and void. Thus in Glegg v. Bromley itself Fletcher Moulton
L.J. observed, at p. 488:
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"We are all agreed that you cannot assign a cause of action for a personal
wrong, and I am not sure that some of the words here might not bear a
meaning which would cover such an assignment. But if this be so the only
effect would be that those particular words would be inoperative. Their
presence would not invalidate the whole deed, because there is nothing in
the way of maintenance or champerty in this assignment."
The reluctance of equity to lend assistance to the assignment of a right
which was essentially no more than a right to carry on litigation survived
the general statutory assignability of choses in action in section 25 of the
Supreme Court of Judicature Act 1873, which was construed as excluding from
the ambit of the expression "chose in action" rights the assignment of which
would not, prior to the Act, have been enforced in equity (see Torkington v.
Magee [1902] 2 K.B. 427, 430, per Channell J.), but it is impossible to read
the cases without discerning a measure of inconsistency and illogicality. On
one point all the authorities agree, namely, that a personal cause of action
in tort never was and still is not generally assignable, although even here
exception has, commercially, had to be made in the case of insurance
contracts, where the insurer is subrogated to the rights of the insured: see
Compania Colombiana de Seguros v. Pacific Steam Navigation Co. [1965] 1 Q.B.
101, 121, per Roskill J. But where, as here, what is in issue is the
assignability of the right to recover damages for breach of contract, the
position is far less clear. What is it (if anything) that distinguishes the
assignment of the benefit of a subsisting contract from the assignment of a
right to enforce a contract the performance of which has been withheld? What
logical dividing line is there between the innocent assignee of a contract
and the champertous assignee of the right to sue for damages for its breach?
Why is it to be assumed that the former will behave with total rectitude
whilst the latter may suppress evidence, suborn witnesses and advance
inflated and unsustainable claims? Authority gives no certain answer.
Originally claims for damages for breach of contract appear to have been
treated as no different, as regards assignability, from personal claims for
damages in tort. An exception was, however, made at an early stage in the
case of an assignment by a trustee in bankruptcy. Seear v. Lawson (1880) 15
Ch.D. 426 was a case of an assignment after action commenced, by a trustee
in bankruptcy. The argument, which prevailed both before Bacon V.-C. and the
Court of Appeal, was that the right of action - a claim to set aside a
conveyance on the ground that it was, in fact, a mortgage - was "property"
of the bankrupt which it was the trustee's duty to realise under the
Bankruptcy Act 1869, and the dichotomy between "personal" claims and
"property" claims appears most clearly in the argument. Looked at in terms
of the danger of maintenance and champerty it is difficult to see why,
logically, a purchaser from the trustee in bankruptcy of the original
claimant should be less prone to misconduct than a purchaser from the
claimant himself before the bankruptcy; and it is not without interest that
both Sir George Jessel M.R. and James L.J. at pp. 432 and 434 respectively,
although content to assume that the right of action would not have been
assignable but for the bankruptcy, were by no means convinced that this was
so.
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Passages, however, in the judgments of Rigby L.J. and Lord Esher M.R. in May
v. Lane, 64 L.J.Q.B. 236, show nevertheless that the view remained that a
right, for instance, to recover damages for breach of contract (which might
have been thought to be truly, on analysis, a right of property) was equated
with a truly personal right such as a right to sue for damages for
defamation or for assault. Lord Esher M.R. said, at p. 237:
"But, even assuming he could have been sued, an action could only have been
brought to recover damages for breach of contract, and such a right of
action is not assignable."
It is difficult, if I may say so respectfully, to see why not. It is a right
not in essence personal, except in a case of a purely personal contract: it
is a right having a value of its own which depends not at all even upon the
continued existence of the owner of the right. It passes to his personal
representatives. It passes to his trustee in bankruptcy and can be sold by
him. On what basis, one may ask, does it fall to be equated with a personal
right to sue for personal injury? The subsequent cases appear to me to
demonstrate a movement away from this concept, a movement sometimes achieved
by the perhaps somewhat artificial device of attaching the right of action,
as had been done over half a century earlier in Dickinson v. Burrell, L.R. 1
Eq. 337, to a more or less notional property right. The same distinction
between the assignment of the benefit of a contract prior to breach and the
assignment of the right to sue on a breach which pre-dated the assignment
was drawn by Channell J. in Torkington v. Magee [1902] 2 K.B. 427. Shortly
afterwards, however, in Dawson v. Great Northern and City Railway Co. [1905]
1 K.B. 260 the Court of Appeal upheld an assignment of a right to claim
compensation for injury under section 68 of the Lands Clauses Consolidation
Act 1845 on the ground that, contrary to counsel's argument, it was not a
claim for "damages for a wrongful act" (and therefore not assignable) but
was the price payable for the exercise of statutory powers and thus itself a
property right. It is, I think, important to note that although the court
attached great weight to the circumstances that the assignment was
incidental and subsidiary to a conveyance of the land, they were prepared to
hold that it was good "even if... regarded apart from [that] conveyance":
see p. 271. Again in Ogdens Ltd. v. Weinberg (1906) 95 L.T. 567 the House of
Lords upheld an assignment by a trustee in bankruptcy as part of the assets
of the bankrupt's business of a claim for damages for a breach of contract
which had occurred prior to the bankruptcy. Lord Loreburn L.C. said at p.
567 that the contract "although unperformed, was nevertheless not annulled,
so as to prevent any person entitled to sue on it from bringing his action
for damages for the breach of it." In Compania Colombiana de Seguros v.
Pacific Steam Navigation Co. [1965] 1 Q.B. 101, 119, Roskill J.
distinguished this case from the assignment of a "bare" cause of action on
the ground that the House of Lords were there dealing with "an executory
contract unperformed by breach, the contractual rights whereunder survived
sufficiently to be susceptible of assignment." This, as it seems to me, is
another way of saying that the right to enforce
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the contract in the only way which the law provided - that is, by an action
for damages for breach - was itself a property right and not a "bare" right.
That interpretation seems to me to be reinforced by the decision of the
Court of Appeal in Fitzroy v. Cave [1905] 2 K.B. 364 where the plaintiff had
taken from the defendant's trade creditors an absolute assignment of the
amounts due to them, undertaking to pay to the creditors whatever might be
realised after payment of the necessary costs of recovery. The plaintiff
frankly avowed that he had no interest in the matter beyond that of making
the defendant bankrupt and so removing him as a director of a company in
which he was interested. On the face of it, this seems about as plain a case
of maintenance as there could well be. It is interesting to note the
argument of the plaintiff's counsel which is reported, at p. 366:
"There are authorities no doubt which show that an assignment of a mere
right of action... for damages for defamation, is invalid as amounting to
maintenance... But an assignment of anything in the nature of property is
valid:..."
Collins M.R. observed at p. 369 that "unless actions to recover debts" were
"incapable of being the subject of maintenance," this was a clear case of
the assignment of a bare right of litigation. The court held, however, that
the effect of section 25 (6) of the Supreme Court of Judicature Act 1873 was
to make any debt assignable and that to use the words of Cozens-Hardy L.J.
at p. 373 "henceforth in all courts a debt must be regarded as a piece of
property capable of legal assignment in the same way as a bale of goods."
But what, it may be asked, is it that segregates a "debt" from any other
contractual right save that the sum due is liquidated? What in fact was
assigned in Fitzroy v. Cave was the right to sue for the price of goods sold
and delivered for which the defendant had failed to pay - that is to say the
right to enforce a contract of sale which had already been broken at the
time of the assignment.
Again, in Defries v. Milne [1913] 1 Ch. 98 the Court of Appeal held that an
assignment of a claim for damages for waste was a claim in tort and was not
assignable, but both Farwell and Hamilton L.JJ. seem to have considered that
the assignment of the right to sue on the contract (the pre-existing breach
of which was recited in the assignment) was valid.
In this state of the authorities, McCardie J. in County Hotel and Wine Co.
Ltd. v. London and North Western Railway Co. [1918] 2 K.B. 251 was prepared
to hold that in a case where a contract creates a property right capable of
assignment the mere fact that the other contracting party has repudiated his
obligation cannot affect assignability. Having referred to the recognition
of the assignability of debts by section 25 (6) of the Supreme Court of
Judicature Act 1873 he observed, at p. 258:
"Such being the state of things, it would seem strange indeed to hold that a
debt could not be assigned after the debtor had repudiated the debt by
refusing to pay. Can a debtor destroy the assignability of a debt by
repudiating his obligation of payment?"
A little later he said, at p. 259:
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"I can well understand that causes of action strictly founded on tort, for
example, libel or assault, should not on grounds of public policy be
assignable. So, too, there are contractual causes of action of a particular
character, for example, breach of promise of marriage, which may not, for
obvious reasons, be assignable. But much of the law of champerty is coloured
by the mediaeval notion that choses in action were not assignable because
they amounted to sales of a right to litigate:..."
Then, he continued, at p. 260:
"I can see no reason why damages for breach of contract should not in some
cases be capable of assignment without infringement of the public interests.
Take, for example, a case where the contract admittedly fixes the damages
for breach at a liquidated sum and provides that it may be sued for as a
debt. What reason of public policy should prevent the assignment of such sum
if public policy permits the assignment of a disputed debt?"
McCardie J. concluded by holding in terms, at p. 261:
"... a defendant cannot destroy the assignability of a right of property.
whether it be a contract or other form of property, by committing a breach
of contract by repudiation prior to the assignment."
His decision was affirmed by the Court of Appeal but on quite different
grounds and I cannot trace that it has been referred to in any of the
subsequent cases bearing on assignment of choses in action. If correct,
however, McCardie J.'s view was in line with what had been said by the House
of Lords in Ogdens Ltd. v. Weinberg, 95 L.T. 567, and it suggests that the
true dichotomy is not between contractual rights and "bare" rights to
litigate, but between strictly personal claims such as claims in tort or
under personal and non-assignable contracts and claims to enforce what may
properly be described as proprietary rights.
This, I am bound to say, appears to me to be a much more logical and
practical distinction, and it has the additional merit in the year 1980 of
absolving the court from striking down, on the basis of archaic doctrine
which, if not entirely obsolete, is at least obsolescent, transactions which
are perfectly familiar and accepted by lawyers in continental countries
where much of the modern business of this nation is conducted. For my part,
I would be prepared to hold that where a cause of action arises out of a
right which was itself assignable, the cause of action equally remains
assignable or, if one must use the language of the older cases, that it is
not a "bare" right to litigate but itself a right of property. So to hold
does not, I think, violate current notions of public policy. It does not,
for instance, follow that because a particular right may be generally
assignable there may not still be circumstances in which on grounds of
public policy the law would refuse to enforce an assignment. Such a case,
for instance, as Grell v. Levy (1864) 16 C.B.N.S. 73 which turned to some
extent on the special position of an English solicitor would equally, I
think, be decided in the same way today not on the ground that the cause of
action to which it related is not assignable - it plainly would be in the
light of Fitzroy v. Cave [1905] 2 K.B. 364 - but because an English court
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will not permit one of its own officers to put himself in a position in
which his interest and duty may conflict. It may be questioned whether such
a dichotomy is not irreconcilable with the decision of this court in In re
Trepca Mines Ltd. (No. 2) [1963] Ch. 199. I do not think that it is. That
case was concerned with the effect of a solicitor's participation in an
agreement held to be champertous, but the argument as to champerty was
addressed to the question of whether a proof in a liquidation could be the
subject matter of a champertous agreement. No argument was addressed to, nor
did the court consider, the nature or assignability of the claim upon which
the proof in the liquidation was based which, in any event, was of a most
shadowy nature and seems, in so far as it could be pursued at all, to have
been a claim for damages for tort and not for breach of contract: In re
Trepca Mines Ltd. [1960] 1 W.L.R. 1273, 1282, per Harman L.J.
It is not, however, necessary to go to this extent for the purposes of the
present case. So far as the agreement of January 4 falls to be treated as an
assignment to Credit Suisse, the short answer to Mr. Brodie's contention is,
in my judgment, this, that just as in Guy v. Churchill, 40 Ch.D. 481, 488,
Chitty J. found it inconceivable that an interest which would have supported
an "out and out" assignment would not also support an agreement for the
division of the proceeds, so it is to me equally inconceivable that an
interest which would justify Credit Suisse in maintaining the suit and in
taking a charge on the proceeds does not equally justify the assignment to
it of the whole cause of action.
But there is an alternative submission which must be noted, for it is said
that whatever interest Credit Suisse itself might have had, the agreement of
January 4, 1978, was one which, if it did not itself effect an assignment,
was at least made in contemplation of, and indeed for the express purpose
of, procuring an assignment in the future of the Trendtex cause of action
against C.B.N. to a third party who might not have and in the event - at
least so it may be assumed - did not have, on any analysis, any interest in
the matter at all beyond that which was generated by paying the price of the
assignment. Thus it is said the agreement was one which, however it was
expressed, was in fact for a purpose illegal under English law and was
therefore one which an English court will not enforce. There seem to me to
be a number of answers to this. In the first place, if I am right in the
views which I have expressed regarding assignability, the submission does
not start. But secondly and assuming that I am wrong, it is necessary to
look at the agreement to see what in fact it does. As Mr. Yorke has pointed
out in his analysis, it does not in fact assign anything. It starts from the
postulate that Trendtex's cause of action had already been effectively
assigned in November 1976 by way of security and provides that Trendtex will
not object to an assignment by Credit Suisse to a third party. It contains a
number of other provisions which are designed to clear accounts between
Trendtex and Credit Suisse and to enable Trendtex to deal with its other
creditors. I agree with the judge that, assuming that the contemplated
transaction with the third party was in fact one to which English law does
not give effect and which therefore would be treated equally as ineffective
by the Swiss court, it does not follow that the agreement as a whole is void
by Swiss law. There was
[1980]
676
Q.B.
Trendtex Trading v. Credit Suisse (C.A.)
Oliver L.J.
nothing ex facie necessarily illegal in the agreement. Whether any
assignment under it fell foul of the English rules with regard to
maintenance or champerty would depend upon the identity and interest of the
unidentified third party, and in my judgment the judge was right in applying
to the exclusive jurisdiction clause the reasoning of Diplock L.J. in
Mackender v. Feldia A.G. [1967] 2 Q.B. 590, 601-604 and in holding that the
question whether the agreement gave rise to "enforceable rights and duties"
was a dispute regarding the conclusion, interpretation or fulfilment of the
agreement, was within the clause and fell to be determined according to the
proper law of the agreement. Once that was determined, it was a matter for
the judge's discretion whether or not to give effect to the exclusive
jurisdiction clause by granting the stay sought by Credit Suisse and I can
see no ground upon which it could be said that the judge erred in principle
in exercising his discretion. Much has been made of the superiority of the
English process of discovery and particular emphasis has been given to the
desirability of this by obliquely tendentious references to the conduct and
state of knowledge of Maitre Patry who, be it noted, has not been made party
to the action and against whom fraud has not been alleged. Mr. Brodie has
told us that this was considered but that it was thought improper on the
evidence to plead fraud. I wish to say no more about that than to repeat
what was once said by Scrutton L.J. (quoted by Lord Denning M.R. in In re
Trepca Mines Ltd. (No. 2) [1963] Ch. 199, 221): "I object to dealing with
charges of fraud or dishonesty unless they are distinctly alleged and as
distinctly proved." The judge dealt with the question of discovery in his
judgment and I would not differ from his reasoning or from his conclusion.
In relation to that part of the claim which lies outside the agreement of
January 4 the judge analysed and applied the principles laid down in the
House of Lords in the MacShannon case [1978] A.C. 795. Criticism has been
directed at this part of the judgment because, it is said, the judge took
into account an impermissible factor, namely, that the parties had already
agreed, in the agreement of January 4, upon the Swiss court as an
appropriate forum. This, of course, was not a factor present in the
MacShannon case, but speaking for myself I would not consider it
inappropriate, when weighing in the balance what is an appropriate forum for
the hearing of a given dispute, to take account of the fact that two of the
parties to that dispute have already in relation to another matter which is
not merely closely allied with it but is inextricably involved with it,
themselves agreed upon a suitable forum.
None of the arguments so strenuously advanced on behalf of the plaintiffs
have persuaded me that this court ought to interfere with the exercise of
the judge's discretion and accordingly I too would dismiss the appeal.
Appeal dismissed with costs to be paid by Temo.
Leave to appeal granted on condition that security for costs be given.
Liberty to apply.
Solicitors: Herbert Oppenheimer Nathan & Vandyk; Theodore Goddard & Co.
A. H. B.
Papadillos
TRENDTEX TRADING CORPORATION AND ANOTHER, APPELLANTS
AND
CREDIT SUISE, RESPONDENTS
[1982] A.C. 679
COUNSEL: Stanley Brodie Q.C. and Stephen Nthan for the plaintiffs.
Richard Yorke Q.C. and David Hunt for the defendants
SOLICITORS: Herbert Oppenheimer Nathan & Vandyk; Theodore Goddard & Co.
JUDGES: Lord Wilberforce, Lord Edmund-Davies, Lord Fraser of Tllybelton,
Lord Keith of Kinkel and Lord RoTES: 1981 July 20, 21, 22, 23; Oct. 22
HEADNOTE: Maintenance of Suit - Champety - Assignment of cause of action -
Swiss bank's financing of commercial cotract and litigation - Whether
sufficient interest for assignment ofsuit to be valid - Assignment to third
party with no genuine commercial interest- Whether void for champerty
Practie - Stay of proceedings - Jurisdiction - Swiss contract with
exclusive Swss jurisdiction clause - Assignment of English cause of action
- English actin claiming contract void - Whether action to be stayed -
Exercise of judge's discretion
The first plaintiff, Trendtex, a Swiss corporation hose share capital was
owned by the second plaintiff, Temo, a Liechtenstein orporation, contracted
to sell 240,000 tons of cement to an English compan for shipment to
Nigeria. The purchase price and demurrage were to be paidunder a letter of
credit issued by a Nigerian bank, C.B.N., which subsequenly failed to
honour the letter of credit. Trendtex claimed damages amouting to U.S.
$14,000,000 in proceedings in England against C.B.N. whose pla of sovereign
immunity succeeded at first instance. In January 1977 the ourt of Appeal
allowed Trendtex's appeal but C.B.N. was given leave to appea to the House
of Lords. Credit Suisse, the defendant Swiss bank, was a substntial
creditor of Trendtex who had other creditors and could not have undertaen
its contractual duties without the financial help of Credit Suisse whohad
guaranteed the legal costs and fees incurred by Trendtex's English
solicitors n the action against C.B.N. Following agreements by which
Trendtex purported to assign [*680] to Credit Suisse is cause of action
against C.B.N. by way of security, an agreement between rendtex and Credit
Suisse was signed in Geneva on January 4, 1978. The agreemnt recited that
an offer had been received from a third party to buy Trendte's right of
action against C.B.N. for U.S. $800,000 and provided that Trendex (1)
released to Credit Suisse, who arranged for the other creditors of rendtex
to be satisfied, all its residual rights against C.B.N. and acknowleded
that it had no further interest in the action against C.B.N., (2) gave a
ower of attorney to a representative of Credit Suisse to enable the action
t be settled and (3) deposited 90 per cent. of its shares with the
repreentative. The agreement (by article 6) was expressly stated to be
"governedby Swiss law" and that any dispute arising from it was to be
"judged by the Curt of Geneva, exclusive of any other jurisdiction." On
January 9, 1978, Crdit Suisse's representative assigned Trendtex's cause of
action against C.B.. to a third party for U.S. $1,100,000. In February 1978
that action was setled by a payment by C.B.N. of U.S. $8,000,000. In March
1978 an action in England was commenced in the name of Trendtex and Temo
against Credit Suisse claiming that the purported assignmentsof Trendtex's
cause of action against C.B.N. to Credit Suisse and the agreemet of January
4, 1978, were void and of no effect or alternatively tht the agreement
should be set aside, an account of all moneys received in setlement of the
action against C.B.N., damages for breach of duty and the eturn of all
shares held in Trendtex. On Credit Suisse's claim for a stay f the action
under the exclusive jurisdiction clause and the inherent jurisdction of the
court, and the plaintiffs' submission that the purported assignent of a
bare cause of action was illegal and unenforceable as savouring of
maintenance and champerty, Robert Goff J. held that effect should begiven
to the exclusive jurisdiction clause and, having regard to he "overwhelming
strong Swiss connection" of the case, granted a stay. Te Court of Appeal
dismissed an appeal by the plaintiffs.
On appeal by the paintiffs:--
Held, dismissing the appeal, (1) that, while Credit Suisse had ha a genuine
and substantial interest in the success of the C.B.N. litigatin, the
agreement of January 4, 1978, as entered into had manifestly involvedthe
possibility, and indeed the likelihood, of a profit being made, eitherby
the third party or possibly also by Credit Suisse, out of the causeof
action, that that manifestly "savoured of champerty" as involving
traficking in litigation; and that, accordingly, any such assignment of the
English cause of action as was purorted to be made by the agreement for the
purpose stated was, under English lw, void (post, pp. 694, 695, 696-697,
703-704, 705).
Martell v. Consett Irn Co. Ltd. [1955] Ch. 363, Danckwerts J. and C.A.; In
re Trepca Mins Ltd. (No. 2) [1963] Ch. 199, C.A. and Laurent v. Sale & Co.
[1963] 1W.L.R. 829 applied.
Per Lord Edmund-Davies, Lord Fraser of Tullybeltn, Lord Keith of Kinkel and
Lord Roskill. It remains a fundamental principleof English law that one
cannot assign a bare right to litigate. If, hoever, the assignment is of a
property right or interest, or if the assigee has a genuine commercial
interest in taking the assignment and in enforcng it for his [*681] own
benefit, there is no reason why the assignment should be struck down as an
assignment of a bare cause ofaction or as savouring of maintenance (post,
pp. 696-697, 703).
(2) That, hwever, the proper law of the agreement of January 4, 1978, being
Swiss, it as for the Swiss court to determine what effect the invalidity of
the asignment under English law had on the agreement as a whole; that there
wer other questions in issue between the parties besides the validity of
theassignment and, accordingly, there was room for the operation of article6 in spite of the champertous element in the agreement; and that, on the
fact, since matters arose on which the Swiss courts would be better
qualified todecide than the English courts, the decision to stay the
proceedings had been rightand the proceedings ought to be tried in
Switzerland (post, pp. 695-697 704-705).
Decision of the Court of Appeal [1980] Q.B. 629; [1980] 3 W.L.R.367; [1980]
INTERLOCUTORY APPEAL from the Court of Appeal.
This was an apeal by the plaintiffs, Trendtex Trading Corporation (a
company incorporate in accordance with the laws of Switzerland) and Temo
Anstalt (a corporation stablished in accordance with the laws of the
Principality of Liechtenstein), by leave of the Court of Appeal (Lord
Denning M.R., Bridge and Olier L.JJ.) from their decision on May 2, 1980,
affirming the judgment of Robet Goff J. [1980] 3 All E.R. 721 on March 30,
1979. By his judgment, Robert off J. ordered that proceedings by the
plaintiffs against the defendants Credit Suisse (a company incorporated in
accordance with the laws of Switzrland), be stayed pursuant to a clause in
an agreement between Trendtex ad Credit Suisse which stated that the
agreement was "governed by Swiss law and that any dispute arising from it
was to be "judged by the Court of Geeva, exclusive of any other
jurisdiction." The Court of Appeal gave the, plantiffs leave to appeal on
condition that security for costs be given.
The facts are se out in their Lordships' opinions.
Stanley Brodie Q.C. and Stephen Natha for the plaintiffs. There is a
distinction between a case where there isa contract for services and an
action for damages connected with it and a ase where the contract has gone
(e.g., by repudiation) and the claim i for damages for the repudiation or
breach. The lawful way for the defendnts to have proceeded here would have
been to take a charge on the proceds of the litigation, which even a
solicitor can do to secure his costs. The nlawful way was to take a
purported assignment of a bare cause of action, wich is what the agreement
of January 4, 1978, on its face is. Not only is ita bare assignment, but it
is champertous in any event, because it purports togive the defendants
power to enforce the claim: actively to conduct the liigation, uncontrolled
by the plaintiffs in any way. The existence of this agrement does not
affect the plaintiffs' claim for breach of fiduciary duty. rima facie,
there has been such a breach.
At the hearing bfore the Court of Appeal, the defendants expressly invited
the court to dtermine the issues of law relating to the assignability of a
bare cause of acion, maintenance and champerty. They thereby accepted that
the English court as the more suitable forum for the determination of those
issues, and adopted a position inconsistent with their application for a
stay of prceedings. The Court of Appeal erred in exercising their
discretion and ranting a stay of proceedings when the defendants themselves
had by their onduct recognised the desirability of litigating those issues
in the instant ase before the English court. When the case started, the
plaintiffs were ofthe opinion that, although the case for trial in
Switzerland was substantial the action should nevertheless be brought in
England for the following reasns. (1) The central issue was whether a bare
right to litigate could e assigned. That was plainly a question to be
decided by English law. Englan must be the natural forum. It is preferable
to the Swiss court, which wouldhave to rely on the assistance of an expert
in English law, the whole doctrne being alien to them. (2) The subject
matter of the agreement of January 4, 1978, related to an English cause of
acion. (3) The defendants carried on business in England. So, it occurred
t the plaintiffs that, at least for those reasons, the defendants [*683]
ight decide in their own interests to have the matter tried in England The
plaintiffs wanted it tried in England, because if the central issue wer
decided in their favour the defendants would have no case.) Reference ma be
made to the judgment of Robert Goff J. [1980] 3 All E.R. 721, 733bc; to the
submissions for the defendants in the Court of Appeal [1980] Q.B. 69,
640G-H, 644G-H, and for the plaintiffs in reply, at p. 647D-E; and to the
judgment of Oliver L.J., at p, 662F-G. The action should, therefore,be
tried in England. Whether it is a matter of waiver, or of estoppel, or of
ariation, by inviting the court to determine this simple issue in the case
te plaintiffs cannot put forward a case that the whole case should be heardin Switzerland. [Reference was made to In re Dulles' Settlement (No. 2
[1951] Ch. 842; and Henry v. Geoprosco International Ltd. [1976] Q.B. 726
748-749.] The defendants having in the Court of Appeal invited the court to
etermine the case on the merits, they cannot do that on the one hand and
potest the jurisdiction on the other. The conclusions to be drawn are: ()
so far as the exclusive jurisdiction clause is concerned, the court ill
enforce an exclusive jurisdiction clause unless the plaintiff can show
strong case why the court should exercise its discretion to disregard it.
Oce the defendants have asked the court to determine the case on the
merits, it is difficult to say that the plaintifs have not discharged that
onus. (2) The first thing that the defendant, on wom the onus is, has to
show is that there is another more appropriate forum or the determination
of the issues in the case. Once the defendants say tht the English courts
are more appropriate on the main issue, it is dfficult to say that
Switzerland is more appropriate.
Neither thecommon law nor equity has ever given effect to an assignment of
a bare rightto litigate. While the courts of equity have for long
recognised and giveneffect to the assignment of choses in action, such as
an equity of redemtion, a bond, a contract or a debt (which was regarded as
assignable propery), an assignment of a bare right to litigate has always
been regarded as llegal and contrary to public policy by the courts both at
common law and equity. Claims for damages for breach of contact or for tort
and claims to set aside conveyances on the ground of fraud o duress have
been treated as bare rights to litigate incapable of assignment.The reason
for the rule is said to be that such assignments savour of or tendtowards
maintenance or champerty or both: see De Hoghton v. Money (186) L.R. 2
Ch.App. 164; May v. Lane (1894) 64 L.J.Q.B. 236; Torkington v. cGee [1902]
2 K.B. 427; Ellis v. Torrington [1920] 1 K.B. 399 and Glegg v. romley
[1912] 3 K.B. 474. What the law will not countenance is traffickng or
speculating in causes of action. A cause of action is not a maretable
commodity: De Hoghton v. Money L.R. 2 Ch.App. 164. Although there ma be
cases in which an assignment of a bare right to litigate may not invove
maintenance or champerty, in most instances such an assignment would invlve
one or both of them; obviously someone who takes an assignment of a causeof
action will usually intend to take control and intermeddle in the
litigaion, and the most likely reason for taking an assignment of a cause
of actionis that the assignee either has agreed to finance or take a
financial intrest in the litigation or has bought the cause of action
outright, or a sare in it, at a discount. Speculation in causes of action
is just as objctionable in modern times as it ever [*684] was, and the mere
fact that an ssignment of a cause of action may be effective and
unobjectionable under th laws of a foreign jurisdiction such as Switzerland
is no ground for relaxng the rule of public policy under the law of
England. Furthermore, whilst he Criminal Law Act 1976 abolished the crimes
and torts of maintenance and hamperty, by section 14 (2) of that Act
Parliament expressly preserved the rle of law as to cases in which a
contract affected by maintenance or champety is to be treated to be
contrary to public policy or otherwise illega: see per Scarman L.J. in
Wallersteiner v. Moir (No. 2) [1975] Q.B. 373, 408.
There are exceptions to the rule against the asignment of a bare cause of
action. These are as follows. (i) An assignmet of a cause of action
incidental to enjoyment of property transferred or assgned to the assignee
is effective and enforceable. This is because the court regards the cause of
action as incidental to the transfer of the propert, for example, an estate
or land and buildings, as part of the property ransferred and necessary for
its proper enjoyment. Thus, if an assinee can show that he has a legitimate
property interest in the subject mater of the cause of action, the court
will give effect to an assignment of i: Ellis v. Torrington [1920] 1 K.B.
399. Effect is also given to the assignmnt of a debt, which equity regards
as property capable of assignment: Fitzroyv. Cave [1905] 2 K.B. 364. (ii) A
trustee in bankruptcy always took and take an assignment of all causes of
action vested in the bankrupt by virtue of he provisions of the Bankruptcy
Acts. Under the same statutes the trustee cold and can assign a bare cause
of action to a third party or creditor o the bankrupt in order to realise
as fully as possible the assets of the bankrupt for the benefit of
reditors: see Guy v. Churchill (1888) 40 Ch.D. 481. The reason for the
satutory exceptions to the rule against the assignment of a bare cause f
action is that the legislature regards the public policy in favour of
realiing as fully as possible a bankrupt's estate as outweighing the public
polcy preventing such assignments. (iii) An insurer who pays out his
insurance caim has a right of subrogation to any claim that the insured may
have agaist third parties in respect of the loss indemnified. The law
therefore allowsand gives effect to an assignment of such causes of action
by the insured o the insurer. This is plainly justified by the pre-existing
right of subroation: see Compania Colombiana de Seguros v. Pacific Steam
Navigation Co. [195] 1 Q.B. 101.
An assignee who lawfully takes an assignment of a case of action because an
assignment is within one of the exceptions cannot lwfully sub assign the
cause of action to a subassignee unless that subassigee can similarly bring
himself within one of the excepted categories.
The law distinguishes between an assignment of a bare right to litgate and
an assignment of the future proceeds of litigation by way of carge. The
court will give effect to the latter, which is not regarded as ending
towards maintenance or champerty. This is because the futureproceeds of
litigation are regarded as property capable of being assigne and, further,
because such an assignment does not result in the assignor losing contol of
the litigation. He may pursue it or discontinue it, or compromise it ashe
wishes. Not only may an ordinary creditor take an assignment of the fruit
of a cause of action (Glegg v. Bromley [1912] 3 K.B. 474), so also my a
solicitor as security for his costs. A convenient statement of the [*85]
relevant principles is to be found in Snell's Principles of Equity,27th e.
(1973), p. 83. The distinction between an assignment of a bare right to
litgate and an assignment of the proceeds of an action is not merely one of
form There is a very real likelihood that an assignee of a bare right to
litgate is speculating in litigation, because he would need to have control
of the litigation to protecthis speculation, whereas a creditor who does no
more than take an assignent of the proceeds of the action as security for a
debt is prima facie seking to protect the debt and not a speculation.
Thus far, the appellant' submissions have been directed towards assignments
that ex-hypothesi may i fact be completely free of maintenance or
champerty. It is only because thy savour or tend towards maintenance or
champerty that the law does not giv effect to assignments of bare rights to
litigate. However, an assignmen of a right to litigate or of the future
proceeds of litigation will undoubtdly be illegal and unenforceable if it
forms part of a contract which itsel expressly provides for the unlawful
maintenance of an action or for a campertous arrangement and is therefore
illegal and contrary to public policy:see Criminal Law Act 1967, s. 14 (2)
and Wallersteiner v. Moir (No. 2) [1975 Q.B. 373.
There are material distinctions between the offences of mantenance and
champerty and the principles of law relating to them. (a) aintenance
consists of assisting, or intermeddling in, or stirring up, the itigation
of another. However, the law recognises that there are cases in which itis
proper for one person to assist another in litigation, financially orotherwise. Where a person can establish that he has a legitimate interst in
the outcome of the suit, he may lawfully support it. The relationships of
master and servant, kinship, charity, a common commrcial or financial
interest in the subject matter of the suit, a trade union' support for its
members, have all been held to constitute sufficient iterest to warrant
maintenance of a suit. At the time when maintenance as a tort and a crime,
such an interest would afford a complete defenceto a prosecution or a claim
based on alleged maintenance: see British Cas and Parcel Conveyors Ltd. v.
Lamson Store Service Co. Ltd. [1908] 1 K.B. 100; Neville v. London
"Express" Newspaper Ltd. [1919] A.C. 368; Martell v. onsett Iron Co. Ltd.
[1955] Ch. 363 and Hill v. Archbold [1968] 1 Q.B. 686. () It has been said
that champerty is merely a species of maintenance. In asense, this is so,
but champerty has always been and still is regarded as pernicious offence
of greater seriousness than maintenance: see per LordDenning M.R. in In re
Trepca Mines Ltd. (No. 2) [1963] Ch. 199. It consists of an areement to
divide the proceeds of the litigation (campi partitio) and henc of
speculation in litigation. A legitimate interest in the outcome of the uit
that might justify maintenance will not justify champerty: see Hutley v
Hutley (1873) L.R. 8 Q.B. 112. Champerty can never be justified; there can
e no exception to its unlawfulness, and there is no authority to thecontrary.
The distinction between lawful maintenance and champery can best be
illustrated as follows. The plaintiff may nowadays be maintaind in his suit
by the legal aid authorities, and they may take a chargeon the proceeds or
the subject matter of the suit as security for costs. Itwould be
unthinkable for a legal aid certificate to be granted on terms tat the
plaintiff should divide the proceeds of the litigation with the lgal aid
[*686] authorities, or that the plaintiff should sell his cause of acion to
them. Similarly, in the case of a trade union giving financial aid to a
membr in support of litigation, its legitimate interest in the outcom of
the suit could not justify it in taking an outright assignment of the cause
of action of a share in any damages. The same reasoning applies to anyone
who has a legitimate inteest in maintaining a suit, be it kinship, charity,
master and servant or a cmmercial and financial interest; such an interest
can never justify the outriht purchase of the cause of action or a share in
the fruits of the litigation. There is no authority that supports the
contrary proposition.
The plaintiffs make three principal criticisms of the judgments of the Curt
of Appeal. (1) It is of the utmost importance to keep clearly in ind the
distinction between (i) assignment of a bare cause of action for damges;
(ii) maintenance; (iii) champerty. The first principal error into whih the
Court of Appeal fell was in failing to keep that distinction clear an in
eliding those three matters, at some points actually equating maintenance
and champerty. Champerty is a speciesof maintenance, but the two things are
not the same. (2) The Court of Appea confused the different meanings of the
interest that will justify assinment of a cause of action with the interest
that would justify a third pary in maintaining the litigation of another.
The two are distinct andseparate. Both Lord Denning M.R. and Oliver L.J.
regarded the kind ofinterest that would justify assignment and the kind of
interest hat would justify maintenance as the kind of interest that would
justify chamerty. It is clear from authority that there is no kind of
interest at all that would justify champerty. Chaperty can never be
justified on any basis at all, save for certain specifiedexceptions, e.g.
where a trustee in bankruptcy disposes of a cause of action to a creditor on
the basis that there is a division of the proceeds between the trustee and
the purchasing creditor (Guy v. Churchill 40 Ch.D. 481). (3) Even if the
Court of Appeal did not like the state of the existing law, it had no
jurisdiction to change it. Perfecting legislation is not a judicial
function. Scarman L.J. in Wallersteiner v. Moir (No. 2) [1975] Q.B. 373,
409, said that the Court of Appeal could not do it; neither can the House of
Lords. Merely because other countries have different rules, that is no
reason to change our own. If there is not sufficient unhappiness in
Parliament to change the law as regards solicitors, there is no reason to
change it for bankers.
Robert Goff J. was right at [1980] 3 All E.R. 721, 732f - 733c, esp. at
732h. There is an example of the elision referred to in the judgment of Lord
Denning M.R. [1980] Q.B. 629, 655A. What Oliver L.J. says at p. 664F does
not do justice to the plaintiffs' submissions. What he says at pp. 668G-669A
is not the basis of Guy v. Churchill.
Torkington v. Magee [1902] 2 K.B. 427 provides the answer to the view of
Oliver L.J. [1980] Q.B. 629, 671 that he could not see any distinction
between an assignment of a contract and assignment of a cause of action for
damages. The passages in Ellis v. Torrington [1920] 1 K.B. 399 do not
support Oliver L.J.'s propositions as he thought they did. Hutley v. Hutley
L.R. 8 Q.B. 112, supports the proposition that the kind of interest that
might justify maintenance (e.g. kinship) will not justify champerty. It also
shows that there is no authority that remotely suggests [*687] that that is
the position. [Reference was made to De Hoghton v. Money, L.R. 2 Ch.App.
164; May v. Lane, 64 L.J.Q.B. 236; Glegg v. Bromley [1912] 3 K.B. 474.]
Those are the primary authorities. There are "special" cases. Fitzroy v.
Cave [1905] 2 K.B. 364 is another case where. because it was property that
was being assigned, the assignment was unobjectionable. Collins M.R. had,
however, some misgivings about that. It is difficult to find any case that
advances the proposition beyond a property interest. [Reference was made to
Laurent v. Sale & Co. [1963] 1 W.L.R. 829; Guy v. Churchill, 40 Ch.D. 481;
Compania Colombiana de Seguros v. Pacific Steam Navigation Co. [1965] 1 Q.B.
101 and In re Trepca Mines Ltd. (No. 2) [1963] Ch. 199.] In Wallersteiner v.
Moir (No. 2) [1975] Q.B. 373 the bank was not in extremis and not in a
different position. It is difficult to see, having regard to section 14 (2)
of the Criminal Law Act 1967, how Lord Denning M.R. could have regarded that
Act as having swept away all the old law. As to the textbooks, see Pollock
on Contracts, 13th ed. (1950), p. 321 (edited by Professor Winfield, but
that part appears to be by Sir Frederick Pollock); Snell's Principles of
Equity, 27th ed., p. 83.
The House may consider it desirable to consider the law, but the law is
plain: a banker cannot take an assignment of a bare cause of action, though
obviously for the security of an overdraft he can take a mortgage to which a
cause of action is attached. If the House were to decide that there were
circumstances of interest that would justify what would otherwise be a bare
assignment, one would end in the present case with, possibly, a valid
assignment (just as there could be a valid assignment of a debt). That does
not help the defendants, because they are still in the difficulty of facing
the circumstances in which the agreement of January 4, 1978, came to be
obtained. The circumstances are the same as those in In re Trepca Mines Ltd.
(No. 2) [1963] Ch. 199. The agreement has all the incidents of a champertous
agreement: the defendants are ceding control completely. That is without the
third party. If one goes further, the agreement is struck down because its
object was the ultimate assignment of the cause of action to a third party,
who was, of course, to get the benefit of the express terms of the
agreement. Since the agreement itself contains all the elements of
champerty, that is sufficient, since the House is unlikely to give any
licence to champerty.
Then, on the question of whether the House would extend the ambit of
property interest that would justify the assignment of a cause of action,
the House would do that only if there was clear evidence that the practice
of bankers was being impeded in some way because the law did not give
licence to the assignment of causes of action in cases such as the present.
There is no evidence of this at all, apart from the view of Robert Goff J.
It it were the case, then In re Trepca Mines Ltd. (No. 2) [1963] Ch. 199 and
Laurent v. Sale & Co. [1963] 1 W.L.R. 829 would have been decided the other
way. There are possible abuses, which the old law was intended to check. On
consideration, the submission that there should be an extension of the law
to assist bankers does not bear examination: no bank would lend money on the
security of this cause of action in the House of Lord. [*688]
On the assumption that the plaintiffs are wrong in their submissions so far
and that the House upholds what Oliver L.J. said, the question is whether
the agreement of January 4, 1978, was assignable. (If it was not, then, on
Oliver L.J.'s view, the cause of action was not assignable.) Was the letter
of credit ever assignable to the defendants? It was not: see Trendtex
Trading Corporation v. Central Bank of Nigeria [1977] Q.B. 529. Oliver L.J.
was not entitled to take it for granted that the letter of credit was
transferable, or that this was a transfer. If there is a dispute on this
issue, it should be determined in England. The plaintiffs are not sure
whether, if the case went to Switzerland, they would be able to get the
letter of credit from the Midland Bank. "Transfer," Chitty on Contracts,
24th ed. (1977), vol. II, para. 2604 means an assignment, in the sense in
which that term was used by Oliver L.J.; see also para. 2605. Moreover, see
per Oliver L.J. [1980] Q.B. 629, 675: the identity of the third party will
become material, and on that issue issues of fact and law will arise.
The champertous nature of the agreement of January 4, 1978, renders it
illegal in the eyes of the law of England; it is, therefore, void ab initio.
It is also void ab initio under the law of Switzerland because of the
invalidity of the assignment: see the affidavit evidence, which was not
challenged, and per Robert Goff J. [1980] 3 All E.R. 721, 733. If the
plaintiffs are wrong on that, and Robert Goff J. and Oliver L.J. are right
that, even if the assignment is void, the contract would survive, it is
highly artificial to regard the exclusive jurisdiction clause as having the
same force as it did when the parties made the agreement: see Mackender v.
Feldia A.G. [1967] 2 Q.B. 590.
As to discretion, the principle is the importance of discovery.
Richard Yorke Q.C. and David Hunt for the defendants. The plaintiffs have
not read any of the leading cases on maintenance and champerty. The
defendants' case before the Court of Appeal (and to a lesser extent before
Robert Goff J.) was that the law of maintenance and champerty in 1980 was
not complicated and difficult and not a fearful monster before which the
Swiss courts would quail.
The matter has been considered exhaustively by the Court of Appeal twice
this century, in British Cash and Parcel Conveyors Ltd. v. Lamson Store
Service Co. Ltd. [1908] 1 K.B. 1006 and Martell v. Consett Iron Co. Ltd.
[1955] Ch. 363; each time, it modernised and recast the law. It is
unfortunate that Robert Goff J. did not look at Hill v. Archbold [1968] 1
Q.B. 686, or at the locus classicus, the judgment of Danckwerts J. in
Martell v. Consett Iron Co. Ltd. [1955] Ch. 363.
The question is: does the assignee have a sufficient interest in the subject
matter of the suit at its commencement? This is clear from British Cash and
Parcel Conveyors Ltd. v. Lamson Store Service Co. Ltd. [1908] 1 K.B. 1006,
which seems to have been largely overlooked. It was noted only in Neville v.
London "Express" Newspaper Ltd. [1919] A.C. 368, but was not cited, nor
referred to in the judgments, in Glegg v. Bromley [1912] 3 K.B. 474 and
Ellis v. Torrington [1920] 1 K.B. 399, which were thus per incuriam on this
point. Pollock on Contracts, 13th ed., p. 321 would have been written
differently if the author had had the British Cash case in mind. It was
written before Martell v. Consett [*689] Iron Co. Ltd. [1955] Ch. 363.
Although, however, British Cash was not cited in Ellis v. Torrington, the
judgment of Scrutton L.J. would have been exactly the same if it had been.
Ellis v. Torrington is the law. Hutley v. Hutley, L.R. 8 Q.B. 112, is an
anomalous case, relying on the exception of kinship. It may be that the
whole concept of champerty and maintenance has gone, but it is not necessary
for the defendants to go that far. From the cases, with the exception of
Hutley v. Hutley, it appears that champerty now is merely an aggravated form
of maintenance. The Court of Appeal in Hill v. Archbold [1968] 1 Q.B. 686
accepted that Martell v. Consett Iron Co. Ltd. was the locus classicus. The
defendants' argument in the Court of Appeal was, therefore, that the law was
straightforward: the Swiss courts would have no difficulty in applying it.
Hutley v. Hutley, L.R. 8 Q.B. 112, is an oddity. It is the only case of
which the defendants are aware in which it was found that what had been done
would be champerty but not maintenance. That is contrary to what Chitty J.
said in Guy v. Churchill, 40 Ch.D. 481. The explanation of Hutley v. Hutley
can only be that it is obviously a historical anomaly, Kinship was one of
the recognised exceptions to maintenance and champerty from the very early
days. The ratio of the exception is that the kinsman is disinterested; he
becomes interested when he takes part of the proceeds, When Chitty J. in Guy
v. Churchill said, at p. 490: "I know of no case ..." that must have
included Hutley v. Hutley, so he did not regard that case as saying that one
could have champerty without maintenance. In six cases, the judges have said
that champerty was a form of maintenance (see, e.g., per Lord Finlay L.C. in
Neville v. London "Express" Newspaper Ltd. [1919] A.C. 368, 382). It would
be impossible to have champerty without maintenance, and the legal concept
is not available.
The plaintiffs' formulation starts in the wrong place with assignment of a
bare cause of action. That is not the true position in law. The general
rule, at any rate since 1873, is that all choses in action are assignable.
To that general rule there are a very small number of exceptions. Those fall
into only three main categories: (i) personal torts; (ii) allegations of
fraud; (iii) assignments that savour of maintenance or champerty. There are
dicta that support (ii). If necessary, one may say that there may be some
doubt about it. [Reference was made to Ellis v. Torrington [1920] 1 K.B.
399, per Warrington L.J.]
In Glegg v. Bromley [1912] 3 K.B. 474 (as also in Fitzroy v. Cave [1905] 2
K.B. 364), the judge was looking for something in the nature of property,
but by then British Cash and Parcel Conveyors Ltd. v. Lamson Store Service
Co. Ltd. [1908] 1 K.B. 1006 had been decided: a right of property was not
necessary to prevent champerty or maintenance. What was being said in Glegg
v. Bromley was that a bare right of action was not assignable because it
savoured of champerty or maintenance. [Reference was made to R.S.C., Ord.
12, note 12/7-8/2 and Compania Colombiana de Seguros v. Pacific Steam
Navigation Co. [1965] 1 Q.B. 101, 119.] There are 14 decided cases where an
assignment of a bare [*690] cause of action was not struck down for
maintenance or champerty, and in all except two or three of them the point
was taken.
It is important to look at the nature of the agreement. It is unfortunate
that before Robert Goff J., and to some extent before the Court of Appeal,
at least until a late stage, the true position was not appreciated. It was
assumed before Robert Goff J. that the agreement of January 4, 1978, was
itself the assignment. That document proceeds, however, on the basis that
there had already been an assignment on November 14, 1977, when the
defendants' reversionary right was released. There was no champerty as at
November 14, because the bank had a sufficient interest: see perOliver L.J.
[1980] Q.B. 629, 675G. Alternatively, if the assignment did not take place
until January 4, 1978, it was not maintenance or champerty, for the reasons
already given (see per Oliver L.J., at p. 675C-D). If the assignment of
January 4 was good, it was not vitiated by the subsequent assignment to the
third party. There is no evidence whatever as to whether the third party had
an interest. It is not right to make assumptions on an interlocutory appeal.
As to discretion, there are two matters: discovery, and the difficulty of
application of the English law of maintenance and champerty. As to
discovery, its value is important in an accusatory system where the
plaintiff has to establish his case. In an investigatory system, the court
itself has an interest in investigating the case. If documents are not
provided, or information not given, it will draw adverse conclusions. The
two courts below are in the defendants' favour on this matter; the House of
Lords will not interfere unless they went wrong in law.
Hunt following. If the House is minded to reformulate the law regarding
assignments of causes of action along the lines suggested by the defendants,
that is something that it can do in its judicial capacity as opposed to
requiring legislation.
The dictum of Scarman L.J. in Wallersteiner v. Moir (No. 2) [1975] Q.B. 373,
408D et seq., was made in the context of, and in relation to, what Lord
Denning M.R. had said, at p. 395F. He said it in relation to contingency
fees. It is no part of the defendants' case to by-pass that process of
public debate recommended in the Law Commission's report ("Proposals for
Reform of the Law Relating to Maintenance and Champerty," October 25, 1966)
in relation to contingency fees, which represent an important area of
professional conduct; but there is no need to extend that reservation to the
general area of maintenance or champerty. The dictum of Scarman L.J. is thus
not relevant for the purposes of the present appeal.
It is important to note the context in which section 14 of the Criminal Law
Act 1967 appears. Section 13 abolishes the old offences, including
maintenance and champerty. By section 14 (1) the tort of maintenance is
abolished. All that section 14 (2) does is to make it clear, that, although
the criminal law and the tort are abolished, the rules are to remain in
force so far as they affect the validity of contracts. There is no
suggestion whatever that Parliament is attempting to crystallise the law of
maintenance and champerty as at 1967. It would be a wrong construction to
say that it was doing it by implication. It is deliberately leaving it open
to the [*691] courts to say from time to time what maintenance and champerty
are. Martell v. Consett Iron Co. Ltd. [1955] Ch. 363 was decided only some
12 years before the Act of 1967 was passed. It is inconceivable that,
notwithstanding that from time to time the judges had brought maintenance
and champerty up to date and restricted the scope of its operation, the
legislature was saying: "enough is enough." Section 14 (2) does not prevent
the House from saying what the law of maintenance and champerty now is. It
is also open to the House to say that what the legislature may have thought
was the law in 1967 was not.
On the general point as to whether the House should reformulate the law in
its judicial capacity, see Miliangos v. George Frank (Textiles) Ltd. [1976]
A.C. 443, 449-450 (Leggatt Q.C. arguendo); 469 (Lord Wilberforce), 479 (Lord
Simon of Glaisdale). Two matters make it easier to reformulate the rule than
it was in Miliangos: (i) it is a less serious exercise; (ii) there is no
previous decision of the House from which the defendants are inviting the
House to depart. Reformulating the rule is not changing the law.
Yorke Q.C. When the defendants said that the House should not extend the
ambit of the law that had been circumscribed in a series of decisions, they
should have added that in no case has the court struck down an agreement on
the ground of maintenance or champerty where the alleged maintainor was not
a party.
Brodie Q.C. in reply. There is a fundamental error in the defendants'
submissions, and it found expression in the judgments in the Court of
Appeal. It is important to keep separate assignment, maintenance and
champerty. The defendants' error is that they confuse the two. They say that
there can be no champerty without maintenance (that is right) and then that,
if one finds no champerty, there cannot be maintenance. The fallacy (see
Martell v. Consett Iron Co. Ltd. [1955] Ch. 363) is that that does not mean
that there is no maintenance, merely that the maintenance is lawful. One can
have maintenance justified by kinship, etc., but at the same time one may
find matters rendering otherwise lawful maintenance unlawful, e.g. an
agreement to divide the proceeds. Many of the cases cited by the defendants
are relevant to maintenance but not to champerty. British Cash and Parcel
Conveyors Ltd. v. Lamson Store Service Co. Ltd. [1908] 1 K.B. 1006 was a
case of maintenance from start to finish. There was not a word in it about
champerty (though Hutley v. Hutley, L.R. 8 Q.B. 112 and Guy v. Churchill, 40
Ch.D. 481, were referred to in argument by Shearman K.C.). When considering
whether there is champerty, only a property interest will justify what
otherwise would be a champertous agreement: see Ellis v. Torrington [1920] 1
K.B. 399, 411 and Guy v. Churchill, at p. 489. The defendants described
Hutley v. Hutley as an "oddity," but there is no answer to it if it was
correctly decided, and the defendants do not say that it was not.
If there is sufficient interest, maintenance becomes lawful maintenance. If,
however, it is supported by a share in the proceeds without a property
interest, it becomes champerty. If it is champerty, it is also unlawful
maintenance. The answer to Chitty J.'s statement in Guy v. Churchill, 40
Ch.D. 481, 490: "I know of no case ..." is that when he uses the [*692] word
"interest" he must mean a property interest; it is in the context of
property interest that his whole judgment proceeds.
The United States practice regarding the assignment of causes of action
varies from state to state. It was wrong for the Court of Appeal to assume
that some countries allow speculation in causes of action. [Reference was
made to Hutley v. Hutley, L.R. 8 Q.B. 112 and Laurent v. Sale & Co. [1963] 1
W.L.R. 829.] The primary purpose of the agreement in the present case was
the assignment to a third party.
The plaintiffs accept that the House has power to adapt principles of law to
bring them into line with modern conditions, but there must be a limit
beyond which it cannot go. If the defendants are asking it radically to
alter the principle of law, that ought to be dealt with by the legislature;
the House cannot do so. If, however, it is simply a matter of changing the
kind of property interest that may justify an assignment of a cause of
action, then it might do that, but should not unless there is a real need to
do so. [Reference was made to the Law Commission's "Proposals for Reform of
the Law Relating to Maintenance and Champerty," paras. 16, 17.]
Their Lordships took time for consideration.
October 22. LORD WILBERFORCE. My Lords, this is a further episode in the
world-wide litigation which followed from the Nigerian cement débâcle. Its
history has been told with characteristic lucidity by Lord Denning M.R. in
Trendtex Trading Corporation v. Central Bank of Nigeria [1977] Q.B. 529
("the C.B.N. case") and in his judgment in the present case.
The situation which gave rise to this particular action was that Trendtex,
having a claim situated in England against the Central Bank of Nigeria
("C.B.N.") for damages, put at U.S. $14,000,000, had difficulty in financing
the litigation necessary to recover it. It therefore sought and obtained
assistance from the respondents, Credit Suisse, which guaranteed its costs
in the C.B.N. case. This was perfectly legitimate since Trendtex, in respect
of the relevant trading in cement, owed Credit Suisse a large sum of money
which Credit Suisse had no hope of recovering unless Trendtex succeeded in
its claim against C.B.N.
Trendtex failed at first instance in the C.B.N. case on the ground that
C.B.N. had state immunity, but succeeded (January 1977) in the Court of
Appeal. Leave was given to appeal to this House and a petition of appeal was
lodged (April 1977). So the position at that stage was that Trendtex had a
cause of action in this country of uncertain value: Trendtex might fail in
the House of Lords and even if it succeeded there might be subsequent
obstacles to be overcome before it recovered any money.
The present case arises out of a series of transactions between Trendtex and
Credit Suisse, the third of which was designed to make room for a settlement
of Trendtex's claim against C.B.N. A Swiss lawyer, Maître Patry, was engaged
to act for Credit Suisse. On Trendtex's side, the main representative was
Dr. Hauser, its Swiss director, Trendtex itself - as was also Credit Suisse
- being a Swiss company. There were three critical [*693] documents: 1. On
September 6, 1976, Trendtex assigned to Credit Suisse all its claims arising
out of the cement contracts "until the claims of the assignee are covered."
Credit Suisse was given power to bring actions in its own name or that of
Trendtex. (The C.B.N. litigation had started in November 1975.) 2. On
November 26, 1976, Trendtex surrendered to Credit Suisse all its claims
(which must have included claims against C.B.N.) arising from the cement
contracts and from a specified letter of credit issued by C.B.N. "to the
full extent of the indebtedness to the transferee." I do not think that,
whatever is the governing law of these documents, there can be much doubt
that they were normal assignments by way of security from a debtor to its
creditor bank. 3. A further agreement appears to have been reached at a
meeting held on November 14, 1977, but the terms of this are the subject of
dispute. However, on January 4, 1978, a formal and fairly elaborate
agreement was entered into between Trendtex (acting by Dr. Hauser), Dr.
Hauser personally and Credit Suisse (acting by Maître Patry). It commenced
by some recitals, the third of which stated that Trendtex was indebted to
Credit Suisse for U.S. $1.5m., and the fourth of which recited an agreement
that Credit Suisse would attempt to recover its claim against Trendtex by
negotiating with C.B.N. The fifth recital was that Credit Suisse had
received an offer from a third party to buy Trendtex's claim against C.B.N.
for U.S. $800,000. The agreement then provided (article 1) that Trendtex did
not oppose the sale by Credit Suisse to a purchaser of its choice of all
Trendtex's claims against C.B.N. and recognised that it had no further
interest in the C.B.N. case. Subsequent articles contained some elaborate
arrangements for the satisfaction, out of money to be provided by Credit
Suisse, of Trendtex's other creditors, authorisations to Maître Patry to
conduct the C.B.N. case on behalf of Trendtex or to settle it by
negotiation, and security for Credit Suisse through transfer to Maitre Patry
of the controlling shares of Trendtex (then owned by the second appellant
Temo Anstalt) and resignation of Dr. Hauser as director of Trendtex. Article
6 was as follows:
"This agreement is governed by Swiss law. Any dispute regarding its
conclusion, interpretation or fulfilment shall be judged by the Court of
Geneva, exclusive of any other jurisdiction."
Soon after this, in February 1978, it is alleged that Maître Patry went to
Nigeria and settled the C.B.N. case for a payment of U.S. $8m. No part of
this has been paid to Trendtex. The greater part of it, so it is said, has
been paid to a third party who negotiated the settlement, whose identity
Maitre Patry refuses to disclose.
Thereupon two persons claiming to be able to issue instructions for Trendtex
commenced this action in Trendtex's name, with Trendtex's parent company
Temo Anstalt as joint plaintiff, claiming that the agreement of January 4,
1978, is void as contrary to public policy and offending against the law of
champerty and maintenance. It is further asserted that Trendtex was induced
to enter into the agreement by undue influence and economic duress, that
Maître Patry acted in breach of fiduciary duty and that Credit Suisse was
vicariously liable for the loss thereby caused. The claim is for appropriate
declarations, accounts and damages, and Temo Anstalt claims the return of
the controlling shares in Trendtex. Upon this Credit Suisse [*694] applied
to the court for the action to be stayed on the ground (inter alia, but this
alone is relevant at the present stage) that the parties had agreed to the
exclusive jurisdiction of the Swiss court. This depends, as I see it, upon
two questions: (1) Whether the agreement of January 4, 1978 - and so the
exclusive jurisdiction clause - is void as offending the law against
champerty and maintenance. (2) Whether the court in its discretion should
stay the action on the ground that the issues raised ought properly to be
tried in Switzerland.
In the courts below an examination in some depth was conducted into the
English law of maintenance and champerty and in this House learned arguments
in these matters were deployed. I wish to acknowledge indebtedness to the
treatment in the judgments of the Court of Appeal and to the submissions of
counsel. However, I do not think it necessary to pronounce upon such areas
of this still obscure subject as remain in dispute, for in my opinion the
appeal can and should be decided on fairly simple grounds, essentially those
which appealed to Robert Goff J. and, in part, to Oliver L.J., and on this
basis of the law laid down so clearly by Danckwerts J. and the Court of
Appeal in Martell v. Consett Iron Co. Ltd. [1955] Ch. 363.
If no party had been involved in the agreement of January 4, 1978, but
Trendtex and Credit Suisse, I think that it would have been difficult to
contend that the agreement, even if it involved (as I think it did) an
assignment of Trendtex's residual interest in the C.B.N. case, offended
against the law of maintenance or champerty. As I have already shown, Credit
Suisse had a genuine and substantial interest in the success of the C.B.N.
litigation. It had, and I do not think that the legitimacy of its action was
challenged, guaranteed the previous costs. It had by the documents of
September 6 and November 26, 1976, taken a security interest in the
litigation or its proceeds. To carry this a stage further by a surrender of
Trendtex's residual interest (if this was the effect of the agreement of
January 4, 1978) would, in my view, have been lawful, though a question
might have arisen (and indeed may arise) whether, after Credit Suisse had
been satisfied as creditors, Trendtex could claim the return to it of any
surplus. The possibility of this could not invalidate the agreement; it
would arise under it, and clearly fall within the exclusive jurisdiction
clause.
The vice, if any, of the agreement lies in the introduction of the third
party. It appears from the face of the agreement not as an obligation, but
as a contemplated possibility, that the cause of action against C.B.N. might
be sold by Credit Suisse to a third party, for a sum of U.S. $800,000. This
manifestly involved the possibility, and indeed the likelihood, of a profit
being made, either by the third party or possibly also by Credit Suisse, out
of the cause of action. In my opinion this manifestly "savours of
champerty," since it involves trafficking in litigation - a type of
transaction which, under English law, is contrary to public policy. I take
the definition of "champerty" (etymologically derived from "campi partitio")
from Halsbury's Laws of England, 4th ed., vol. 9 (1974) para. 400:
"Champerty is a particular kind of maintenance, namely maintenance of an
action in consideration of a promise to give the maintainer a share in the
proceeds or subject matter of the action." [*695]
Although ancient in origin, and so no doubt encrusted with disposable
obsolescences, it has been given statutory recognition by the Criminal Law
Act 1967, sections 13 and 14, which, while abolishing criminal and tortious
liability for champerty, expressly preserves any rule of law as to the cases
in which a contract involving champerty is to be treated as contrary to
public policy and/or otherwise illegal.
Two modern cases in which agreements have been held void for champerty are
In re Trepca Mines Ltd. (No. 2) [1963] Ch. 199 (Court of Appeal) and Laurent
v. Sale & Co. [1963] 1 W.L.R. 829. In re Trepca Mines Ltd. was concerned
with an agreement governed by French law which contained provisions
remarkably similar to those of the agreement of January 4, 1978: it involved
the participation by a third party, M. Teyssou, in contemplated litigation
to the extent of 25 per cent. and M. Teyssou was given power to conduct the
litigation. The Court of Appeal held this agreement to be champertous.
In Laurent v. Sale & Co. there was an assignment to Laurent of debts due
from a finance house, which it was known would have to be sued for, in
consideration of the payment by Laurent of a proportion of the amount
recovered, the litigation to be conducted by Laurent. It was held that this
agreement and the assignment of the debts were champertous and
unenforceable. I think that these decisions are sound in law and that the
principle of them should be applied in the present case. In my opinion
accordingly any such assignment of the English cause of action (Trendtex
Trading Corporation v. Central Bank of Nigeria [1977] Q.B. 529) as was
purported to be made by the agreement of January 4, 1978, for the purpose
stated was, under English law, void.
However, this does not conclude the matter. It remains to be decided what
effect this has upon the agreement as a whole. The proper law of the
agreement is Swiss and it is for the Swiss court to decide that question. In
fact the agreement contains other provisions, of some of which Trendtex has
had the benefit, upon which article 6 can certainly operate. Moreover other,
and serious, questions are in issue between the parties as to the position
of Maitre Patry which, I say with all proper reserve since the matter will
have to be tried, appears equivocal. These latter questions may not fall
within the exclusive jurisdiction clause but they must, in any event, be
tried under Swiss law, as the law governing Maitre Patry's duties to
Trendtex and his professional responsibilities. They are closely connected
with the questions which arise strictly under the agreement of January 4,
1978.
There is therefore room for the operation of article 6 in spite of the
champertous element in the agreement so far as concerns any assignment of
the claim against C.B.N. In these circumstances, while it is a matter of
discretion whether a stay should be granted, some strong reason must be
shown by Trendtex why the article should not be given effect in accordance
with the parties' contractual intentions. All the relevant factors,
including the procedural benefit to Trendtex of obtaining discovery under
English law, were meticulously examined and balanced by Robert Goff J. who
decided to grant a stay. After a further examination in the Court of Appeal,
the same result was reached. Concurrent decisions of this [*696] character
in any event carry great weight, but I am satisfied, after my own balancing
of the arguments, that the decision to stay was right, and that this
litigation ought to be tried in Switzerland. I would accordingly dismiss the
appeal.
LORD EDMUND-DAVIES. My Lords, I am in respectful agreement with the speeches
prepared by my noble and learned friends, Lord Wilberforce and Lord Roskill,
which I have had the advantage of reading in draft. I therefore concur in
holding that this appeal should be dismissed.
LORD FRASER OF TULLYBELTON. My Lords, my noble and learned friends, Lord
Wilberforce and Lord Roskill, whose speeches I have had the privilege of
reading in advance, have explained the issues in this appeal and I
respectfully agree with them that the assignment by Trendtex of its cause of
action against C.B.N., purported to be made by the agreement of January 4,
1978, was, under English law, void.
What is the result so far as the present proceedings are concerned? The
respondents seek to have them stayed in order that effect may be given to
the provision in article 6 of the agreement of January 4, 1978, that "any
dispute regarding its conclusion, interpretation or fulfilment shall be
judged by the Court of Geneva, exclusive of any other jurisdiction." Robert
Goff J. decided that the proceedings ought to be stayed, and the Court of
Appeal affirmed his judgment. I have reached the same conclusion and I can
state my reasons quite shortly as follows.
The agreement contains provisions about several other matters besides the
assignment or conveyance of the appellants' rights against C.B.N. to the
respondents. I respectfully agree with Oliver L.J. in the Court of Appeal
that, even if the assignment was invalid, it is possible that the parts of
the agreement relating to other matters ought to receive effect. The
agreement being governed by Swiss law, it would in my opinion be appropriate
that the effect of the invalidity of the assignment upon the agreement as a
whole should be considered by a Swiss court rather than by an English court.
It is also relevant that both parties to the appeal are Swiss corporations
and that the natural persons principally concerned in the negotiations that
led up to the agreement, Maitre Patry and Mr. Hauser, are both Swiss
nationals. This appeal is an interlocutory stage in an action which raises
other questions, including questions as to whether a fiduciary duty was owed
by Maître Patry, a Swiss avocat, to the appellants, a Swiss corporation, and
if so as to the standard of legal duty (and perhaps of professional ethics)
incumbent upon such an avocat. These are matters upon which the Swiss courts
are evidently better qualified to decide than the English courts. The whole
agreement and the circumstances which led up to it are closely associated
with Switzerland, and, the parties having agreed that the Court of Geneva
was to have exclusive jurisdiction in all matters arising out of the
agreement, I am of opinion that no sufficient reason has been shown for
departing from the decisions of the judge and the Court of Appeal in favour
of giving effect to that provision of the agreement.
For these reasons I would dismiss the appeal. [*697]
LORD KEITH OF KINKEL. My Lords, I have had the benefit of reading in draft
the speeches of my noble and learned friends, Lord Wilberforce and Lord
Roskill. I agree that, for the reasons which they give, the appeal should be
dismissed.
LORD ROSKILL. My Lords, this appeal arises out of an application by the
respondents (Credit Suisse) to stay an action brought against them by the
two appellants, Trendtex Trading Corporation ("Trendtex"), a corporation
incorporated in Switzerland and carrying on business in Zurich, and Temo
Anstalt ("Temo"), a corporation incorporated in Liechtenstein, which was the
beneficial owner of the entire share capital (100 bearer shares) of
Trendtex. Temo was at all material times controlled by a Mr. London who was
and still claims to be one of the two joint general managers of Trendtex,
the other being a Dr. Kennedy. Temo has no separate interest in this appeal
from that of Trendtex and for convenience I shall treat Trendtex as the sole
appellants, as indeed they were treated in argument before your Lordships'
House. Though other grounds for seeking the stay were advanced in the
summons, the sole ground relied upon in these proceedings was the presence
of an exclusive jurisdiction clause in an agreement dated January 4, 1978,
between Trendtex and Credit Suisse, which by article 6 provided:
"This agreement is governed by Swiss law. Any dispute regarding its
conclusion, interpretation or fulfilment shall be judged by the Court of
Geneva, exclusive of any other jurisdiction."
My Lords, on March 30, 1979, Robert Goff J. [1980] 3 All E.R. 721 granted
Credit Suisse's application and stayed the action. With the leave of the
learned judge Trendtex appealed to the Court of Appeal (Lord Denning M.R.,
Bridge L.J., as he then was, and Oliver L.J.) who on May 2, 1980, dismissed
the appeal but gave leave to appeal to your Lordships' House. Though the
Court of Appeal was unanimous in dismissing the appeal, the reasons given in
the judgment of Oliver L.J., with whom Bridge L.J. agreed, differ from
certain of the reasons given by the learned Master of the Rolls.
My Lords, the factual background to this appeal is extremely complex. It is
fully set out in the judgment of Robert Goff J. and I shall do no more than
gratefully borrow from his judgment so much of his statement of the facts as
is necessary for the understanding of the principal issues involved in this
appeal.
On July 24, 1975, Trendtex sold 240,000 metric tons of cement to Pan-African
Export & Import Co. Ltd., c.i.f. Lagos/Apapa. Pan-African Export & Import
Co. Ltd., as buyers, were to be responsible for discharging port demurrage.
Payment of the purchase price and that demurrage was to be made under a
letter of credit to be opened by the Central Bank of Nigeria (C.B.N.). The
letter of credit was duly opened. Trendtex was notified of that fact by the
Midland Bank in London. The Midland Bank was the corresponding bank of
C.B.N. but it did not confirm the letter of credit. The first four shipments
of cement were made and duly paid for. But there was great congestion at
Lagos and large sums became [*698] payable in respect of those four
shipments for demurrage. Trendtex made two more shipments. C.B.N. refused to
accept the document presented for the fifth shipment or liability for any of
the demurrage claimed on two of the earlier shipments. Trendtex thereupon
treated C.B.N. as having repudiated the contract contained in the letter of
credit, and on November 4, 1975, began proceedings in England claiming some
U.S. $14,000,000. On December 16, 1975, C.B.N. issued a summons to set aside
those proceedings on the ground of sovereign immunity. On March 26, 1976,
Donaldson J. upheld that claim to immunity. But on January 13, 1977, the
Court of Appeal [1977] Q.B. 529 reversed that decision, at the same time
granting C.B.N. leave to appeal to your Lordships' House.
My Lords, this repudiation of the letter of credit by C.B.N. gave rise to
grave financial problems for Trendtex, for Credit Suisse had financed
Trendtex's purchases of the cement from German suppliers. As a result
Trendtex became heavily indebted to Credit Suisse who had anticipated
recoupment from the letter of credit which C.B.N. had repudiated. Credit
Suisse in November 1975 agreed to guarantee the costs incurred by Trendtex
in the action against C.B.N. which I have already mentioned. It was in this
connection that on September 6, 1976, Trendtex executed in favour of Credit
Suisse a document in German of which your Lordships have both a translation
and a copy of the original, headed (in translation) "Assignment." The
"assignment" provides inter alia that Trendtex hereby
"assigns all its claims from the contracts which it had made with
Pan-African ... to the Credit Suisse; this until the claims of the assignee
are covered. ..."
On November 26, 1976, a further document was executed in favour of Credit
Suisse, also in German, of which your Lordships have both a translation and
a copy of the original, headed (in translation) "Declaration of Surrender."
This provides inter alia that Trendtex
"in fulfilment of its declaration of surrender of September 6, 1976, ...
surrenders all its claims arising from the said contract and from the letter
of credit issued by the Central Bank of Nigeria ... to the full extent of
the indebtedness to the transferee. ..."
My Lords, it will be convenient to observe at this juncture that the letter
of credit upon which C.B.N. defaulted was payable in London. Trendtex's
cause of action against C.B.N. was thus situate in London and was governed
by English law. This has been common ground throughout all these
proceedings.
My Lords, following upon the grant to C.B.N. of leave to appeal against the
reversal of Donaldson J.'s judgment upholding their claim to immunity,
C.B.N. on April 20, 1977, presented a petition to your Lordships' House. But
around this time, Messrs. Theodore Goddard & Co., who were then on the
record as solicitors for Trendtex. received an indication that C.B.N. wished
to enter into negotiations for the settlement of this claim. At this
juncture Credit Suisse appointed a Swiss lawyer, Dr. Patry, to act on their
behalf. This gentleman, who plays a prominent part in the remainder of the
story, thereupon took a very strong line on behalf of Credit Suisse [*699]
vis-à-vis Trendtex, making it plain that the purpose of Credit Suisse was to
recover the sum owing by Trendtex to Credit Suisse. The detail of what
followed will be found in the judgment of Robert Goff J. [1980] 3 All E.R.
721 and I do not repeat it. Clearly, Credit Suisse and Dr. Patry on their
behalf were in an extremely strong negotiating position vis-à-vis Trendtex.
On December 21, 1977, Dr. Patry in a telex - the original was in French but
your Lordships have a copy both of the original and of a translation - to
Trendtex mentioned that he had informed them several times that "Credit
Suisse has a possibility of realising Trendtex's rights with regard to the
Central Bank of Nigeria for a substantial sum. The sum in question is U.S.
$800,000."
On January 4, 1978, the all-important agreement, out of which the present
litigation arises, was concluded between Trendtex acting by Dr. Hauser, its
sole director in Switzerland, and Credit Suisse acting by Dr. Patry. I quote
only from the third and fifth recitals, noting as respects the third that in
the letter of November 7, 1977, there referred to that debt had been
described as "reduced" to U.S. $1,500,000.
Recital 3. "Where as a result T.T.C." (that is Trendtex) "became indebted to
C.S." (that is Credit Suisse) "and the amount of such indebtedness has been
agreed upon by T.T.C. and C.S. as being U.S. $1.5m. as per a letter
agreement dated November 7, 1977, and;"
Recital 5. "Whereas C.S. has received an offer from a third party to buy
T.T.C.'s rights against the Central Bank of Nigeria - such rights having
been assigned by T.T.C. to C.S. on November 26, 1976, in guarantee of C.S.'s
claim - for an amount of U.S. $800,000, and;"
Article 1 provided as follows:
"Subject to the terms and conditions of this agreement, T.T.C. is not
opposed to the sale by C.S., to a purchaser of C.S.'s choice, of all rights
and claims of any sorts originally held by T.T.C. against Central Bank of
Nigeria and/or against the Permanent Secretary Ministry of Defence of the
Federal Republic of Nigeria and/or Pan-African Import & Export Co. Ltd. of
London (Great Britain), for a consideration and terms of payment to be
determined only by C.S. Consequently T.T.C. hereby irrevocably recognises
that it has no further interest of whatsoever nature in the legal action
conducted in London in its sole name but for the sole and exclusive benefit
of C.S. (or the above mentioned purchaser) against Central Bank of Nigeria,
in which claim T.T.C. is represented by the law firm Theodore Goddard & Co.,
solicitors, in London and which claim is now pending before the House of
Lords."
Robert Goff J. summarised the remaining provisions of this agreement as
follows [1980] 3 All E.R. 721, 729:
"Credit Suisse were to pay $388,000 to Trendtex on (i) a statement by Dr.
Hauser to Credit Suisse that, by collecting that sum, he had been able to
obtain a release from Trendtex's creditors and (ii) releases from Trendtex's
creditors. In addition, Credit Suisse committed themselves to pay a further
$72,000 to a certain Nigerian company ... if [*700] it established a valid
claim against Trendtex. To give Credit Suisse 'proper control of the good
fulfilment by [Trendtex] of its obligations and undertakings hereunder,' Dr.
Hauser undertook three things: (i) to deposit 90 per cent. of the shares of
Trendtex with Dr. Patry, to be kept by Dr. Patry 'in escrow until such time
that Dr. Patry thinks he can return the shares to Dr. Hauser'; (ii) to
complete the formalities necessary to enable Dr. Patry, as long as he held
the shares in escrow, to exercise the voting rights appertaining to them, as
he deemed fit; (iii) to hand over to Dr. Patry his resignation as director
of Trendtex to be used by Dr. Patry at the time of Dr. Patry's sole choice.
Apparently the remaining 10 per cent. of the shares in Trendtex had already
been pledged to Temo as security for a loan."
I have already quoted article 6, the exclusive jurisdiction clause.
My Lords, on January 20, 1978, Trendtex, acting by Dr. Hauser, gave Dr.
Patry a full power of attorney. Dr. Patry then pursued negotiations with the
Nigerian authorities. In a letter dated February 14, 1978, to their
negotiating committee, Dr. Patry asserted that Trendtex's total claim in the
House of Lords and in other proceedings was U.S. $24,913,460.38 and was
increasing. Whence this figure emanated is not made plain in any document
before your Lordships' House. On February 24, 1978, Trendtex, acting by Dr.
Patry, settled with C.B.N. and the Nigerian authorities for U.S. $8m. which
your Lordships were told was paid to the Midland Bank, New York.
When Mr. London and Dr. Kennedy became aware of what had happened they were,
perhaps understandably, suspicious of what had occurred.(Further
correspondence followed to which it is not necessary to refer in detail
beyond observing that in a telex dated March 30, 1978, from Dr. Patry to Dr.
Hauser, the former stated that the claim against C.B.N. had been assigned to
a third party on January 9, 1978, for U.S. $1,100,000. Who the fortunate
third party was, who seemingly made a profit of U.S. $6,900,000 (i.e., $8m.
less $1,100,000) within a few weeks, is not known. Credit Suisse have not
revealed it and Dr. Patry, claiming that it is not relevant, has also
declined to reveal it. In an affidavit sworn by Dr. Patry on October 22,
1979, he deposes as follows:
"2. I am informed by Messrs. Theodore Goddard & Co., and I verily believe,
that the non-disclosure of the identity of the purchaser of Trendtex's claim
was the subject of adverse comment by counsel for the plaintiffs during the
hearing before the Honourable Mr. Justice Goff. I regret that this
non-disclosure may have conveyed a wrong impression. Accordingly, and
despite my continuing belief that in the circumstances of the present
action, and in particular in the light of the agreement of January 4, 1978,
the identity of the purchaser is not relevant, I consider that in the
interests of the defendants I should explain the circumstances in which
Trendtex's claim was sold to the unidentified purchaser and why I continue
to be unable to disclose the purchaser's identity.
"3. The sale was to a subsidiary of a Swiss trading corporation, not a bank
or finance house. The subsidiary concerned is not a subsidiary or associated
or affiliated company of Credit Suisse. I was [*701] convinced at the time
of the sale that it was the best commercial settlement possible for the
defendants. I was entirely satisfied from my general experience in other
matters of attempting to negotiate with the Nigerian authorities that no
higher figure than the sale price could have been obtained before or in
early January 1978 nor, in my view, was there any prospect of the defendants
themselves negotiating any settlement direct with the Nigerian authorities.
...
"6. ... I was entirely satisfied that there was no other potential purchaser
either in Switzerland or elsewhere. Nor could I have obtained a higher
price; if I could have, I would have been under a duty to have done so and I
would have done so. Of course, I appreciated that the purchasers expected to
make a profit on the transaction, otherwise they would not have agreed to
pay $1,100,000. But the amount which they did make, and the speed with which
they made it, I did not and had not grounds to foresee."
Beyond this sparse information your Lordships have no knowledge of the terms
upon which the benefit of Trendtex's claim against C.B.N. which, on January
4, 1978, Trendtex had assigned to Credit Suisse was sold to this anonymous
third party, save that a large profit was apparently made by that third
party. But your Lordships may think it obvious that one object, and indeed
the principal object, of the agreement of January 4, 1978, was to enable
Credit Suisse to resell the benefit of the assignment which they had that
day obtained from Trendtex, their purchaser entering into the transaction
with the avowed object of making a profit upon it if he possibly could from
his purchase.
My Lords, it is Trendtex's purpose in these proceedings brought in this
country to seek to set aside these transactions and if possible to obtain
the benefit of this $8m. for themselves. Credit Suisse having issued the
summons to stay the action on the ground (inter alia) of the existence of
the exclusive jurisdiction clause, Trendtex's first task must, in the
circumstances, be to show that the English courts should entertain these
proceedings and not insist upon whatever proceedings may be appropriate
being heard and determined in accordance with article 6 by the court sitting
in Geneva. Trendtex seeks to displace article 6 by contending that English
law, which is already stated as the proper law of the chose in action which
was the subject of the assignment to and reassignment by Credit Suisse, does
not permit assignment of what is sometimes called a bare cause of action.
This assignment and reassignment were not merely assignments of a bare cause
of action against C.B.N. but also were void for maintenance and champerty
and were thus illegal and this illegality extended to the exclusive
jurisdiction clause itself: see the decision of your Lordships' House in
Heyman v. Darwins Ltd. [1942] A.C. 356. Alternatively, it was argued that as
a matter of discretion this action should be allowed to proceed here for the
several reasons considered by Robert Goff J. in his judgment.
My Lords, learned counsel for Trendtex put in the forefront of his attack on
the judgment of Oliver L.J. with which, as already stated, Bridge L.J.
agreed, the contention that the learned Lord Justice had failed [*702] to
distinguish between the different nature of the interest required to support
an assignment of a cause of action and an interest which would justify the
maintenance of the cause of action by a third party and had considered that
if there were a sufficient interest to support the one it would be, without
more, sufficient to support the other. Further, he contended that no
interest could justify a champertous agreement save in the specific case of
a sale by a trustee in bankruptcy to a creditor of a cause of action on the
basis of a division of any proceeds, this being authorised by statute: see
Guy v. Churchill (1888) 40 Ch.D. 481.
My Lords, before considering these submissions in any detail it is necessary
to recall that the Criminal Law Act 1967 by section 13 (1) abolished the
crimes of maintenance and champerty and by section 14 (1) provided that
neither should any longer be actionable as a tort. But section 14 (2)
further provided that these provisions should not affect any rule of law as
to the cases in which a contract was to be treated as contrary to public
policy or otherwise illegal. It therefore seems plain that Parliament
intended to leave the law as to the effect of maintenance and champerty upon
contracts unaffected by the abolition of them as crimes and torts.
My Lords, it is clear, when one looks at the cases upon maintenance in this
century and indeed towards the end of the last, that the courts have adopted
an infinitely more liberal attitude towards the supporting of litigation by
a third party than had previously been the case. One has only to read the
classic judgment of Danckwerts J. affirmed by the Court of Appeal, in
Martell v. Consett Iron Co. Ltd. [1955] Ch. 363 to see how this branch of
the law has developed and how the modern view of sufficiency of interest has
come about. My Lords, learned counsel cited to your Lordships many of the
cases on maintenance which are there discussed. For my part I think no
further review of them is necessary today. I would only emphasise the
importance when reading them of distinguishing between the use of the word
maintenance to denote lawful maintenance and the use of that word to denote
what was then both a crime and a tort.
My Lords, one of the reasons why equity would not permit the assignment of
what became known as a bare cause of action, whether legal or equitable, was
because it savoured of maintenance. If one reads the well known judgment of
Parker J. in Glegg v. Bromley [1912] 3 K.B. 474, 490, one can see how the
relevant law has developed. Though in general choses in action were
assignable, yet causes of action which were essentially personal in their
character, such as claims for defamation or personal injury, were incapable
of assignment for the reason already given. But even so, no objection was
raised to assignments of the proceeds of an action for defamation as in
Glegg v. Bromley, for such an assignment would in no way give the assignee
the right to intervene in the action and so be contrary to public policy:
see Fletcher Moulton L.J., at pp. 488-489.
My Lords, just as the law became more liberal in its approach to what was
lawful maintenance, so it became more liberal in its approach to the [*703]
circumstances in which it would recognise the validity of an assignment of a
cause of action and not strike down such an assignment as one only of a bare
cause of action. Where the assignee has by the assignment acquired a
property right and the cause of action was incidental to that right, the
assignment was held effective. Ellis v. Torrington [1920] 1 K.B. 399 is an
example of such a case. Scrutton L.J. stated, at pp. 412-413, that the
assignee was not guilty of maintenance or champerty by reason of the
assignment he took because he was buying not in order to obtain a cause of
action but in order to protect the property which he had bought. But, my
Lords, as I read the cases it was not necessary for the assignee always to
show a property right to support his assignment. He could take an assignment
to support and enlarge that which he had already acquired as, for example,
an underwriter by subrogation: see Compania Colombiana de Seguros v. Pacific
Steam Navigation Co. [1965] 1 Q.B. 101. My Lords, I am afraid that, with
respect, I cannot agree with the learned Master of the Rolls [1980] Q.B.
629, 657 when he said in the instant case that "The old saying that you
cannot assign a 'bare right to litigate' is gone." I venture to think that
that still remains a fundamental principle of our law. But it is today true
to say that in English law an assignee who can show that he has a genuine
commercial interest in the enforcement of the claim of another and to that
extent takes an assignment of that claim to himself is entitled to enforce
that assignment unless by the terms of that assignment he falls foul of our
law of champerty, which, as has often been said, is a branch of our law of
maintenance. For my part I can see no reason in English law why Credit
Suisse should not have taken an assignment to themselves of Trendtex's claim
against C.B.N. for the purpose of recouping themselves for their own
substantial losses arising out of C.B.N.'s repudiation of the letter of
credit upon which Credit Suisse were relying to refinance their financing of
the purchases by Trendtex of this cement from their German suppliers.
My Lords, I do not therefore think that My. Brodie is correct in criticising
the judgment of Oliver L.J. on the ground that the learned Lord Justice
failed to distinguish between the interest necessary to support an
assignment of a cause of action and the interest which would justify the
maintenance of an action by a third party. I think, with respect, that this
submission involves over-analysis of the position. The court should look at
the totality of the transaction. If the assignment is of a property right or
interest and the cause of action is ancillary to that right or interest. or
if the assignee had a genuine commercial interest in taking the assignment
and in enforcing it for his own benefit, I see no reason why the assignment
should be struck down as an assignment of a bare cause of action or as
savouring of maintenance.
But, my Lords, to reach that conclusion and thus to reject a substantial
part of My. Brodie's argument for substantially the same reasons as did
Oliver L.J. does not mean that at least article 1 of the agreement of
January 4, 1978, is not objectionable as being champertous, for it is not an
assignment designed to enable Credit Suisse to recoup their own losses by
enforcing Trendtex's claim against C.B.N. to the maximum amount recoverable.
Though your Lordships do not have the agreement between Credit Suisse and
the anonymous third party, it seems to me obvious, as [*704] already stated,
that the purpose of article 1 of the agreement of January 4, 1978, was to
enable the claim against C.B.N. to be sold on to the anonymous third party
for that anonymous third party to obtain what profit he could from it, apart
from paying to Credit Suisse the purchase price of U.S. $1,100,000. In other
words, the "spoils," whatever they might be, to be got from C.B.N. were in
effect being divided, the first U.S. $1,100,000 going to Credit Suisse and
the balance, whatever it might ultimately prove to be, to the anonymous
third party. Such an agreement, in my opinion, offends for it was a step
towards the sale of a bare cause of action to a third party who had no
genuine commercial interest in the claim in return for a division of the
spoils, Credit Suisse taking the fixed amount which I have already
mentioned. To this extent I find myself in respectful disagreement with
Oliver L.J.
My Lords, in English law, at least as I think, contrary to My. Yorke's
submission which Oliver L.J. [1980] Q.B. 629, 675 accepted, the agreement of
January 4, 1978, does assign the cause of action. By English law I doubt if
the two earlier documents do have that effect. The language of those
documents is that of security rather than of out-and-out assignment. But
however this may be, if my view as to the effect in English law of article 1
is correct, I nevertheless respectfully agree with Oliver L.J. that it by no
means follows that the whole agreement, including the exclusive jurisdiction
clause, is void by Swiss law. I agree with the following passage in his
judgment, at pp. 675-676:
"I agree with the judge that, assuming that the contemplated transaction
with the third party was in fact one to which English law does not give
effect and which therefore would be treated equally as ineffective by the
Swiss court, it does not follow that the agreement as a whole is void by
Swiss law. There was nothing ex facie necessarily illegal in the agreement.
Whether any assignment under it fell foul of the English rules with regard
to maintenance or champerty would depend upon the identity and interest of
the unidentified third party, and in my judgment the judge was right in
applying to the exclusive jurisdiction clause the reasoning of Diplock L.J.
in Mackender v. Feldia A.G. [1967] 2 Q.B. 590, 601-604 and in holding that
the question whether the agreement gave rise to 'enforceable rights and
duties' was a dispute regarding the conclusion, interpretation or fulfilment
of the agreement, was within the clause and fell to be determined according
to the proper law of the agreement. Once that was determined, it was a
matter for the judge's discretion whether or not to give effect to the
exclusive jurisdiction clause by granting the stay sought by Credit Suisse
..."
In reaching this conclusion I have not lost sight of the two affidavits of
M. Bachi; but this evidence, in my judgment, affords far too insecure a
foundation on which to reach the conclusion that the whole agreement,
including the jurisdiction clause, is void by Swiss law.
On this view it became a matter for the discretion of the learned judge
whether or not this action should be stayed. He dealt with this matter fully
and at considerable length in his judgment. The Court of Appeal [*705]
agreed with his reasoning. Like Oliver L.J., I see no reason for your
Lordships' House to interfere with the learned judge's exercise of his
discretion which seems to me, if I may respectfully say so, to have been
entirely correct in principle. I would only add that I do not think that the
obvious advantages to Trendtex of obtaining an order for discovery which
would not be available to them in Switzerland can be allowed to outweigh the
other reasons for leaving the parties to the forum of their own choosing,
especially those mentioned by my noble and learned friend, Lord Fraser of
Tullybelton, in his speech, which I have had the advantage of reading in
draft.
It remains only to deal with one short point which My. Brodie took at the
outset of his submissions to your Lordships' House. This was founded upon
the report of My. Yorke's argument in the Court of Appeal [1980] Q.B. 629,
640, 647, when he invited that court to decide the question of maintenance
and champerty. From this My. Brodie argued that My. Yorke had submitted the
whole question to the jurisdiction of the English courts within the
principle enunciated by the Court of Appeal in Henry v. Geoprosco
International Ltd. [1976] Q.B. 726, 749. It is a striking fact that no such
submission was made to the Court of Appeal. My Lords, in my view this
submission is untenable. My. Yorke was simply inviting the Court of Appeal
to express their view as to the effect of English law of maintenance and
champerty upon the assignment for such help as it might be to any Swiss
court thereafter dealing with the matter. In the result I would dismiss this
appeal.
I would add that since preparing this speech I have had the advantage of
reading in draft the speech of my noble and learned friend, Lord
Wilberforce, with which I find myself in respectful agreement.
Appeal dismissed with costs.
November 19. The plaintiffs petitioned for amendment of the draft judgment
of the House dated October 22, praying that it might be amended as to costs
and that the defendants might be ordered to pay the plaintiffs' costs in the
House of Lords and Court of Appeal.
Nathan for the plaintiffs.
[LORD WILBERFORCE. The plaintiffs should have notified this application at
the time, but the House will entertain the petition. The point that was
argued at great length, possibly at greater length, was the point of
champerty. The plaintiffs are entitled to say that, although they failed in
the result, they had some success on a point which took up quite a lot of
time but which is of considerable importance in regard to what will be the
ultimate relations between the parties.]
Hunt for the defendants opposed the petition. The discretion which your
Lordships' House has to entertain an application for costs after the event
is a discretion which is very rarely exercised. The classic example is
Broome v. Cassell & Co. Ltd. (No. 2) [1972] A.C. 1136: but there there was
an unexpected turn of events; in the present case the judgments are
comparatively short and certainly could have been read and the point
understood in time to argue the matter in the usual way. [*706]
[LORD WILBERFORCE. It is not a jurisdiction to be exercised every day, but
requires something unusual.]
Their Lordships ordered that the draft order dated October 22 be discharged
and that in lieu thereof the appeal should be dismissed with no order as to
costs in the House of Lords or Court of Appeal.
Order accordingly.
Plaintiffs to pay defendants' costs of petition to amend draft judgment.