EVER heard of champerty?

THE word is from the Anglo-Norman French “champartie”, from the Old French “champart” (feudal lord’s share of produce), which in turn is from the Latin “campus pars”, meaning field part.

According to the Oxford English Dictionary (OED), it is an agreement in which a person with no previous interest in a lawsuit finances it with a view to sharing the disputed property if the suit succeeds.

Black’s Law Dictionary defines it as an agreement between an officious intermeddler in a lawsuit and a litigant by which the intermeddler helps pursue the litigant’s claim as consideration for receiving part of any judgment proceeds.

It is an agreement to divide litigation proceeds between the owner of the litigated claim and a party unrelated to the lawsuit who supports or helps enforce the claim.

Black’s adds as follows: “In England and many other countries, the contingent fee is prohibited as a form of champerty because it permits a client to carry on litigation in exchange for a promise to the lawyer of a share in the recovery.”

It is a common law misdemeanour which was abolished by the English Criminal Law Act 1967 (section 13).

The English judge Lord Denning explained why the common law misdemeanour in the following words: “The reason why the common law condemns champerty is because of the abuses to which it may give rise. The common law fears that the champertous maintainer might be tempted, for his own personal gain, to inflame the damages, to suppress evidence, or even to suborn witnesses. These fears may be exaggerated; but, be that so or not, the law for centuries has declared champerty to be unlawful, and we cannot do otherwise than enforce the law.”

Champerty offends public policy. It is a subspecies of maintenance which is defined in OED as “the action of wrongfully aiding and abetting litigation; spec. sustentation of a suit or suitor at law by a party who has no interest in the proceeding.”

The difference is simply this: maintenance is helping another prosecute a suit; champerty is maintaining a suit in return for a financial interest in the outcome. (See the United States case of In re Primus [1978])

However, as the authoritative Black’s Law Dictionary duly notes as well, as far back as more than half a  century ago, “the rule as to champerty has been generally relaxed under modern decisions and a majority of courts now recognize that an agreement by which the attorney is to receive a contingent fee, i.e., a certain part of the avails of a suit or an amount fixed with reference to the amount recovered, is valid as long as the attorney does not agree to pay the expenses and costs of the action.” (See Walter Wheeler Cook, “Quasi-Contracts” 1952 1 Am. Law and Proc. 129)

The more modern term for champerty now used is third party litigation funding (TPLF), or simply third party funding , which is highlighted in the Sulu heirs’ claim against Malaysia. The funder of the purported eight Sulu heirs is believed to be in the United States, according to “notes” received by the Malaysian government and views on the official Malaysia v Sulu case website.

Law and Institutional Reform Minister Azalina Othman Said said the government has evidence that Therium Capital Management Ltd is behind the British global litigation fund backing the purported heirs.

It is said that TPLF “is very much a mainstay across the legal landscape in the UK, Australia and a number of other jurisdictions, especially in the context of arbitration, class actions and litigation arising from breaches of competition law.” (Simon Latham, The Third Party Litigation Funding Law Review, 6th edition, The Law Reviews 2017)

Spain, France, Luxembourg and the Netherlands – jurisdictions where the Sulu heirs have foraged into – are not common law jurisdictions. The concepts of maintenance and champerty are not part of their legal cultures; thus, there is no prohibition on litigation funding.

Even so, the common law public policy rationale regarding champerty has been said to have turned full circle. While originally the prohibition was justifiable as a means to help secure the rule of law, the exact reverse of the prohibition is now justified for the same reason. (See Lord Neuberger, “From Barretry, Maintenance and Champerty to Litigation Funding”, Harbour Litigation Funding First Annual Lecture, May 2013)

Litigation funding, actually, had been observed two decades ago by Prof. Michael Zander as being “in the throes of a revolution”. (See M. Zander, “Will the Revolution in the Funding of Civil Litigation in England eventually lead to Contingency Fees?” [2002] 52 DePaul Law Review 259)

Five years ago, TPLF was little known. It is not so now, particularly in Europe and the US. 

That the Sulu heirs have a funder is of little surprise. Be that as it may, Malaysia must hit back at them to enforce the Dutch and French courts’ order to pay the cost of the proceedings. – July 3, 2023.

* Hafiz Hassan reads The Malaysian Insight.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.