No win no fee arrangement in Hong Kong

First prosecution in Hong Kong on champerty and maintenance

On 8 July 2008, the Department of Justice spokesman said that the activities of recovery agents in personal injuries cases may constitute offences of champerty and maintenance.

In a recent prosecution, which is a first of its kind in Hong Kong, 21 people including a solicitor were charged with offences including conspiracy to commit champerty.

The facts – recovery agent shared 25% compensation

• A recovery agent approached a woman at a hospital to persuade her to lodge a claim of compensation for her son who was seriously injured in a traffic accident.
• It was agreed that the agent would not charge any fees to assist the mother in the claim but would get 25% of the compensation ultimately if the claim was successful. The claim was settled out of court for HK$3.5 million.
• The champertous agreement was revealed when the mother made an application to be appointed head of the committee administering her son’s estate.

Charges against the solicitor

• The solicitor handling the claim was charged with conspiracy to maintain the claim and perjury in relation to preparing a sworn statement.
• The recovery agent was further charged with champerty for making the deal with the mother to lodge the claim and was also charged with theft in relation to the sum she obtained from the mother.

The Law

• Maintenance is a common law crime of assisting and encouraging a party in litigation by a person who has neither an interest in the litigation nor lawful justification. It usually takes the form of providing financial assistance in exchange for the purported assignment of the cause of action. This common law offence is applicable to Hong Kong.
• Champerty is an aggravated form of maintenance in which the consideration given for the maintenance of a suit is part of anything gained as the result of the proceedings. The doctrine does not extend to private consensual system such as arbitration.
• Under the current laws, criminal offences of champerty and maintenance are subject to a fine and up to 7 years’ imprisonment.

The leading authority on the law of champerty and maintenance

• The leading authority in Hong Kong is the Court of Final Appeal decision in Unruh v Seeberger [2007] 10 HKCFAR 31 by Mr Justice Ribeiro.
• It was held that the common law rules making maintenance and champerty criminal offences, torts and a ground of public policy for invalidating tainted contracts were part of Hong Kong law prior to 1997 and remained applicable by virtue of Article 8 of the Basic Law.
• Maintenance was still directed at “officious intermeddling” in someone else’s litigation. Champerty, a form of maintenance, still involved the notion of a division of the spoils, which might encourage perversion of justice and trafficking in litigation.
• It is not enough simply to say that an agreement is the type of agreement which “savours of” champerty.
• The court will consider the totality of the facts to ask whether they pose a genuine risk to the integrity of the court’s process and will consider countervailing public policies.
• The court will weigh the traditional public policies (against intermeddling in litigation) against competing values. If the balance is in favour of the latter, the conduct complained of will not be regarded as contrary to public policy.

Exceptions

• The judge also dealt with various instances where conduct which would otherwise constitute maintenance or champerty has been excluded from the sphere of liability.
• One category is “common interest” category, ie persons with a legitimate common interest in the outcome of litigation sufficient to justify one of them in supporting the litigation conducted by another without engaging the prohibition against maintenance and champerty.
• A second excluded category was cases involving “access to justice” considerations. An attack on an arrangement said to constitute maintenance or champerty could well result in a claim which is perfectly good in law being stifled where the plaintiff, deprived of the support of such an arrangement, is unable to pursue it. The judge thinks this is a powerful argument for such cases to be excluded from the ambit of maintenance and champerty.