Once upon a time conditional fee arrangements for court cases were unenforceable. Things are changing, but we are not yet in America
Maintenance and champerty. The words certainly sound like lawyers' gobbledegook. They are of ancient origin in the common law of England. Maintenance means the giving of assistance or encouragement to a litigant by a person who has no legitimate interest in so doing. Champerty is a form of maintenance, but with the added feature that the agreed reward for assisting in the litigation is a share of the proceeds of the action.

Until 1967 maintenance and champerty were criminal offences and both could result in tortious liability. Although these forms of criminal and tortious liability have been abolished, it remains the law that a contract involving maintenance or champerty is contrary to public policy and illegal. Such a contract cannot be enforced.

However, the concept of public policy changes. What once may have been thought of as champertous may no longer be so. It is now possible for conditional fee agreements to be made in relation to court actions. So long as such agreements comply with the requirements of the Courts and Legal Services Act 1990, they will not be held to be unenforceable for champerty and maintenance. Despite these changes, however, English lawyers are still not permitted to conduct litigation in exchange for a percentage of the proceeds.

In the recent case of Dal-Sterling Group Plc vs WSP South and West Limited and Kenchington Ford Plc (July, 2001, unreported), Judge Seymour had to consider the doctrine of champerty in relation to an agreement made by a claims consultant. In 1993 it had agreed to help engineers pursue claims for fees against London Underground. Its services included producing a claim document and conducting negotiations. Payment was to be 22.5% of any settlement sum. The agreement did not cover assisting in court proceedings. However, no settlement was reached and litigation began. The engineers were sued by London Underground but wanted to claim their fees in the action.

As a result the agreement was varied, so the claims consultant was to provide litigation services, including pleading the engineers' claims in the action, in exchange for 22.5% of any sum received by way of judgment or settlement. The engineers contended that the claims consultant had not performed the agreement and that it was champertous.

The claims consultant argued that the doctrine of champerty only applied to solicitors. The judge appears to have rejected this. However, he also said that this agreement was not champertous.

His reasoning was that the original agreement was not champertous, as it did not relate to a court action but to negotiations. The agreement was then varied, so that assisting in the court proceedings was to be rewarded with a share of the proceeds, but much of that assistance consisted of reworking what had been done under the original agreement. As a result the judge decided that, as amended, the agreement was not tainted with champerty but enforceable.

The reasoning is debatable. If the test is whether assistance is agreed to be given in litigation in exchange for a cut of the proceeds, it is difficult to see why this agreement was not champertous.

Even if the work provided in support of the litigation was a recast of work done before, it is not clear how this could change the essential nature of the agreement; namely getting a percentage of the litigation proceeds in exchange for help. It is not known whether an appeal is planned.

It is clear that the doctrine of champerty applies to court proceedings. However, there is judicial disagreement as to whether it applies to English arbitration. In Giles vs Thompson [1993] 3 AELR 321 Steyn LJ expressed the view that it did not. In Bevan Ashford vs Yeandle Ltd. [1998] 3 AELR 238 Sir Richard Scott held that it did. His view was that if a contingent fee agreement was unenforceable in the case of litigation it ought also to be so in the case of arbitration.

In the United States, of course, lawyers are allowed to provide litigation services in exchange for a cut of the proceeds. English law may be moving in this direction but it has not arrived there yet.