KA-2025-000017 - [2025] EWHC 2311 (KB)

On Issue 1, I consider in turn (A) the meaning of “payment”; (B) “ultimately”; (C) “recovery”; before identifying the ratio in Candey Ltd v Tonstate Group Ltd [2022] EWCA Civ 936 (“Candey”); and (E) reaching the court’s conclusion on the issue.

The parties dispute the meaning of key terms in the Act and Regulations. Among them are “financial benefit” and “payment”. Financial benefit is not defined in the Act, nor in the Regulations. Payment is defined in both the Act and the Regulations. The term payment is defined using different words in the two provisions. The Judge’s decision about DBA validity rested on questions of hard-edge law: what financial benefit means; whether contingent benefits are permitted financial benefits for DBAs; the meaning of payment in the DBA Rules. I consider all this in turn. However, the determination of meanings must be made in the context of the statutory objectives under the Act and the underlying law of champerty. Section 17 of the Act provides:

“17 The statutory objective and the general principle

(1)

The general objective of this Part is the development of legal services in England and Wales (and in particular the development of advocacy, litigation, conveyancing and probate services) by making provision for new or better ways of providing such services and a wider choice of persons providing them, while maintaining the proper and efficient administration of justice.”

This was considered by Lady Rose (while dissenting) in R (on the application of PACCAR Inc and others) v Competition Appeal Tribunal and others [2023] UKSC 28 at para 149:

“The parties drew our attention to two recent cases considering the application of section 58AA. They illustrate, in my view, the courts’ awareness that provisions enacted to enable “new or better ways” for legal services to be provided should not be used either by the client to avoid paying their own lawyers for successful work done pursuant to the retainer or by the opponent to disrupt the proceedings and avoid the adverse costs consequences that normally follow from having fought and lost.”

These “new or better ways” were developed by Parliament against a wide historic prohibition contained in the law of champerty. The common law concept of champerty has not been abolished, but exists as an indispensable legal context to this case. In Sibthorpe v Southwark LBC [2011] 1 WLR (CA), Lord Neuberger of Abbotsbury MR addressed the underlying law on champerty (paras 15-17):

“The law relating to champertous agreements with those conducting litigation

15 As Lord Phillips of Worth Matravers MR said, when giving the judgment of the Court of Appeal in R (Factortame Ltd) v Secretary of State for Transport, Local Government and the Regions (No 8) [2003] QB 381, 399, para 31, although no longer a crime, “champerty survives as a rule of public policy capable of rendering a contract unenforceable”. He went on to explain in the next paragraph of his judgment, quoting from the then current edition of Chitty on Contracts, 28th ed (1999), vol 1, para 17-050: “A person is guilty of maintenance if he supports litigation in which he has no legitimate concern without just cause or excuse.” It has also been described as “wanton and officious intermeddling with the disputes of others . . . where the assistance [the maintainer] renders to the one or the other party is without justification or excuse” by Fletcher Moulton LJ in British Cash and Parcel Conveyors Ltd v Lamson Store Service Co Ltd [1908] 1 KB 1006, 1014.

16 In Factortame (No 8) [2003] QB 381, 399, para 32, Lord Phillips MR went on to say, quoting again from Chitty, op cit that “Champerty occurs when the person maintaining another stipulates for a share of the proceeds of the action or suit”. It will be necessary to examine that definition of champerty a little more closely in para 52 and following below, but it is to be noted that Lord Phillips MR added: “Because the question of whether maintenance and champerty can be justified is one of public policy, the law must be kept under review as public policy changes.”

17 A type of contract which has relatively often given rise to an allegation of champerty or maintenance is one between a claimant in a piece of litigation and the person conducting the litigation (almost always a solicitor or barrister) on the claimant’s behalf. At any rate until the recent past, the law had set its face against those who conduct litigation placing themselves in a position where they could profit from their clients’ success. As Lord Denning MR put it in Wallersteiner v Moir (No 2) [1975] QB 373, 393, “English law has never sanctioned an agreement by which a lawyer is remunerated on the basis of a ‘contingency fee’, that is he gets paid the fee if he wins, but not if he loses”, describing this as champerty. He relied at p 394 on a dictum of Lord Esher MR in Pittman v Prudential Deposit Bank Ltd (1896) 13 TLR 110, 111:

“In order to preserve the honour and honesty of the profession it was a rule of law which the court had laid down and would always insist upon that a solicitor could not make an arrangement of any kind with his client during the litigation he was conducting so as to give him any advantage in respect of the result of that litigation.”

So much for the historical legal context. Lord Neuberger went on to consider more recent developments that have modified or created exceptions to the underlying prohibition.

“28 Having explained the facts, Lord Phillips of Worth Matravers MR turned to “the nature of the services provided”, and began by saying, at para 23, that “When we come to consider the law of champerty we shall find that its application requires an analysis of the facts of the particular case. Special principles apply to those who are entitled to have the conduct of litigation, and in particular to solicitors”. He then went on to consider whether Grant Thornton had “been providing services which are customarily provided to litigants by solicitors”, and after saying at para 27 that they had “done nothing for which they required authority under section 28 of the 1990 Act or which offended against section 20 of the [Solicitors Act 1974]”, he concluded that “Their services have been ancillary to the conduct of the litigation by [the applicants’ solicitors]”.

29 After a little further discussion about Grant Thornton’s role in that litigation, Lord Phillips MR turned to “the law of champerty”, and began with the passage quoted in para 15 above, and, after citing what Oliver LJ said in the Trendtex case [1980] QB 629, 663, as to the “clear requirement” that officers of the court should not put themselves in a position of potential conflict with their duties to the court, he continued at paras 34-36:

“34.

The introduction of conditional fees shows that even this requirement of public policy is no longer absolute. This case raises the question of whether the requirement extends to expert witnesses or others in a position to influence the conduct of litigation and, if it does, whether on the facts of the present case the agreements concluded by Grant Thornton can be justified.

More recently, in Diag Human v Volterra [2023] EWCA Civ 1107 (“Diag Human”) Stuart-Smith LJ, giving the lead judgment of the court, said at paras 17-18:

“17.

Until 1990 it was axiomatic that contingency fee agreements entered into by lawyers with their clients were illegal and contrary to public policy, because they gave lawyers an interest in the outcome of the litigation that could create conflicts between the lawyer’s interests and those of their client. That axiomatic position was authoritatively restated by Buckley LJ in Wallersteiner v Moir (No. 2) [1975] 1 QB 373 at 401D-E.

18.

Because one of the foundations for the public policy rule was the need to avoid conflicts of interest, what is prohibited at common law is not merely entering into an agreement tainted by maintenance or champerty but also acting in accordance with such an agreement. “If anything is against public policy it is the solicitor undertaking or continuing to act for a party in litigation in circumstances where the solicitor stands to gain more from the action if it is won than if it is lost.”: see Awwad v Geraghty & Co [2001] QB 570, 594B–C per Schiemann LJ (emphasis added).”

Stuart-Smith LJ continued at para 26:

“26.

Even if it were open to us in the light of these authoritative statements to enter the choppy waters of public policy, which in my view it is not, I can detect nothing other than the solicitors’ speculative hope upon which it would be possible to base an assertion that public policy has changed since either Wallersteiner v Moir (No. 2) or the more recent cases of Awwad, Sibthorpe and Farrar which reaffirmed it. Any further modification of public policy in this area is for Parliament to establish and define: it is not for this court to attempt. This must be borne in mind when considering the issue of severance, not least because many of the authorities about severance are cases about restrictive covenants in contracts of employment, where the nature and scope of public policy are not the same as in the field of champertous retainers of solicitors.”

For my part, it is helpful to set out these authoritative decisions of the higher courts. CFAs and DBAs are closely defined and regulated exceptions to the still-existing champerty prohibition. Great effort has been taken by Parliament to delimit the scope of the statutory exceptions. As Lewison LJ memorably put it in Lexlaw Ltd v Zuberi [2021] 1 WLR 2729 (“Zuberi”) at para 26, the legislation created

“… “islands of legality in a sea of illegality”, carefully balancing difficult and sensitive competing policy considerations”

I would add that beside the authorities that confirm this point, the framing of the words of the statute reinforces the default position. The Act says at section 58AA(1) that a DBA is “not unenforceable” simply by reason of being a DBA. By implication, a DBA needs something more. As we will see, whether it is enforceable depends on its satisfying not just the statutory conditions but the requirements in the Regulations. It is noteworthy that the same formulation is used for CFAs under section 58(1). The policy behind the legal authorisation of DBAs (and indeed earlier CFAs) is to promote access to justice by enabling new models for clients to fund legal representation. This was to be accomplished, as the now-repealed section 17 of the Act stated,

“by making provision for new or better ways of providing such services and a wider choice of persons providing them, while maintaining the proper and efficient administration of justice”

In any event, this overarching objective has been confirmed in Lewison LJ’s judgment in Zuberi at para 276 (proposition 9), where it is described as being to “promote access to justice”. Although the choice by the appellants here was to use DBAs, they could have instructed solicitors under CFAs. That was their clear choice.