Casehub Ltd v Wolf Cola Ltd [2017] EWHC 1169
The claimant in this case was a company that built consumer group actions online. It did this by entering into claim purchase agreements whereby it took an assignment of the consumers’ claims. It then aggregated the claims and brought them in its own name. As a business model, it was a model that could be suited to the commercial litigation funding industry. Naturally, therefore, funders were interested in the outcome.
As almost a test case of the claimant’s model, three claims were assigned (the claim being in aggregate £588) and, aware that the defendant disputed the claimant’s ability to bring the claim at all, the claimant sought various determinations from the Court.
The defendant’s position on the assignments was that they were void on the ground that they fell foul of the rules against champerty and maintenance. The assignments referred to the defendant as a debtor and the claims against it as debts. One variant of the assignment provided that in the event that the debt was recovered, 40% would be retained by the claimant. Another variant of the assignment provided that the debt was assigned in return for a payment of £40 and, in the event of a recovery, the sum recovered is retained in full by the claimant.
In either case, the defendant’s position was that the assignments were of a bare cause of action that were not conducive to the administration of justice and were champertous. There were also arguments made as to whether it was possible to assign a claim that may never exist and that the assignment was not of the whole claim.
The Court accepted that maintenance (the support by a person of litigation in which he has no legitimate concern without just cause of excuse) and champerty (when the person maintaining another stipulates for a share of the proceeds) survived as rules of public policy capable of rendering a contract unenforceable. It was, however, important to remember that the rules, at their heart, were principles of public policy designed to protect the purity of justice and the interests of vulnerable litigants. In the Court of Appeal, Lord Denning, in the leading case of Trendtex Trading stated that "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." The House of Lords broadly followed the Court of Appeal’s reasoning and stated, absent champerty, that “an assignee who can show that he has a genuine commercial interest in the enforcement of a claim of another and to that extent takes an assignment of that claim to himself is entitled to enforce that assignment”.
In this case the Court considered that the claimant acquired the right to the liquidated sum and the assignment of the right to bring a claim was incidental and subsidiary to that right and was not a bare cause of action. The fact that liability to repay the liquidated sum was disputed did not affect its assignability. Given that, could it be said that there was meddling by the claimant with the dispute between the defendant and its customers in which the claimant had no interest and where the assistance rendered was without justification or excuse? The Court held that the assignment would be valid if the claimant had a legitimate and genuine interest and that it needed to be considered whether the legal process was somehow impugned by the assignment. The Court was not persuaded that there were sufficient policy reasons for ruling that the assignment was invalid. To the contrary, there were strong public policy reasons in favour of upholding the assignments. The Court mentioned 11 reasons, including access to justice, the lack of any abuse of the legal process and the presence of a legitimate and genuine commercial interest. This last issue answers the taxing point as to whether it is acceptable to refer to the very agreement that is being challenged as being the foundation of the commercial interest.
In a sense, it is unfortunate that the case was not appealed and was argued by representatives of the litigants themselves in a case where small sums of money were at stake. The question is whether the result would have been different had the case been about liquidated sums in the millions, and had been argued by city solicitors and King’s Counsel up to the Court of Appeal. Given the limited nature of the caselaw, and its clarity, and the importance of public policy in the Court’s determination, it is tempting to think that the result would not have been different. Perhaps the more difficult issue is whether the result would have been the same had the causes of action alleged tortious wrongs, with damages to be assessed, such that there were no liquidated sums at stake. In principle, it is hard to see why a claimant cannot continue to have a genuine and legitimate interest in a piece of litigation if it is about damages at large, as against a liquidated sum, and time will tell as to whether similar cases are pursued. If a litigation funder were to take assignments of such claims, it would need to be prepared for a full on challenge on champerty grounds, but there are respectable arguments that the policy grounds that won the day for Casehub would continue to be persuasive. It remains an open question, though, as to how such claims would be case managed.