Champerty and maintenance
Champerty and maintenance are doctrines in common law jurisdictions, that aim to preclude frivolous litigation. "Maintenance" is the intermeddling of a disinterested party to encourage a lawsuit. It is "A taking in hand, a bearing up or upholding of quarrels or sides, to the disturbance of the common right." "Champerty" is the "maintenance" of a person in a lawsuit on condition that the subject matter of the action is to be shared with the maintainer. Among laypersons, this is known as "buying into someone else's lawsuit."
In modern idiom maintenance is the support of litigation by a stranger without just cause. Champerty is an aggravated form of maintenance. The distinguishing feature of champerty is the support of litigation by a stranger in return for a share of the proceeds.
At common law, maintenance and champerty were both crimes and torts, as was barratry, the bringing of vexatious litigation. This is generally no longer so as during the nineteenth century, the development of legal ethics tended to obviate the risks to the public, particularly after the scandal of the Swynfen will case (1856–1864). However, the principles are relevant to modern contingent fee agreements between a lawyer and a client and to the assignment by a plaintiff of his rights in a lawsuit to someone with no connection to the case. Champertous contracts can still, depending on jurisdiction, be void for public policy or attract liability for costs.
The restrictions arose to combat abuses in medieval England. Unscrupulous nobles and royal officials would lend their names to bolster the credibility of doubtful and fraudulent claims in return for a share of the property recovered. Speaking extrajudicially in the early seventeenth century, Lord Chief Justice Coke described the origins of maintenance in this way:
- ‘Maintenance, manutenentia, is derived from the verb manutenere, and signifieth in law a taking in hand, bearing up, or upholding of quarrels and sides, to the disturbance or hindrance of common right.’
These comments were made in context of the court previously having been anxious to prevent a wide range of maintenance; the phrase ‘maintenance’ had been used to apply not just to those who gave support in civil claims, but also to those who sought to maintain robbers, heretics and even ‘a new sect coming from beyond the sea, clad in white garments’. Judicial independence was gradually established, however, and by the early 19th century Jeremy Bentham wrote:
A mischief, in those times it seems but too common, though a mischief not to be cured by such laws, was, that a man would buy a weak claim, in hopes that power might convert it into a strong one, and that the sword of a baron, stalking into court with a rabble of retainers at his heels, might strike terror into the eyes of a judge upon the bench. At present, what cares an English judge for the swords of a hundred barons? Neither fearing nor hoping, hating nor loving, the judge of our days is ready with equal phlegm to administer, upon all occasions, that system, whatever it be, of justice or injustice, which the law has put into his hands.
In Australia, champerty and maintenance as common law causes of action (as either a crime or a tort) have mostly been abolished by statute. In New South Wales, champerty and maintenance were abolished by the Maintenance, Champerty and Barratry Abolition Act 1993. In Victoria, champerty and maintenance was abolished as a tort by section 32 of the Wrongs Act 1958. and as a crime by section 332A of the Crimes Act 1958
England and Wales
For instance, in Re Oasis Merchandising Services Ltd the Court of Appeal reincarnated the tort against the assignment of a wrongful trading claim by a liquidator to a specialist litigation company to pursuing directors for wrongful trading. This has come under criticism given that claims against directors are enforced sub-optimally as company liquidators, typically accountants, are cautious to take on risks rather than save as much of the company as possible.
In Hong Kong, champerty and maintenance were long thought to be obsolete both as a crime and a tort, but these two principles have been revived in recent years in response to the prevalence of recovery agents which present problems quite different from the mischief which historically these rules intended to combat.
The recovery agents typically perform "ambulance chasing" on accident victims, offering to arrange lawyers to handles their claims on a "no win no fee" basis. If the claim succeeds the recovery agents share a portion of the damages. This is seen as deception on uneducated victims who are ignorant to the availability of legal aid. The division of the damages in effect deprives the victims of the just compensation that they are entitled to for their bodily injury. The intermeddling of recovery agents in the lawsuit also presents ethical problems to lawyers, who may have undermined impartiality in advising on settlement. In response, the Department of Justice and the Law Society of Hong Kong carried out a massive publicity campaign aiming at educating the public to refuse recovery agents, citing that maintenance and champerty are criminal offences under the laws of Hong Kong.
In 2008, 21 people were arrested for champerty, maintenance and conspiracy. They were recovery agents "helping" accident victims on a "no win no fee" basis. One of the people arrested was a lawyer. Champerty and maintenance carries a sentence of up to seven years in Hong Kong.
On 25 June 2009, Winnie Lo Wai Yan, a solicitor, was convicted for conspiracy to maintain and a recovery agent was convicted for conspiracy to champer. She was found to have agreed to share 25% from the damages paid to the next friend of an 18-year-old traffic accident victim who suffered from permanent total loss of earning capacity. On 10 July 2009, Lo was sentenced to 15 months' imprisonment and the recovery agent was sentenced to 16 months' imprisonment (Case number: DCCC 610/2008). Lo appealed in the same year and on 3 December 2010, her appeal was dismissed by the Court of Appeal (Case number: CACC 254/2009).
On 30 January 2012, Lo's conviction was quashed in the Court of Final Appeal (Case number: FACC 2/2011). The Reasons for Judgment, published on 23 February 2012, stated that there is a serious problem with the finding made and endorsed by the trial judge and the Court of Appeal respectively that Lo knew that there had been champerty involved. Although the judge found maintenance and champerty are constitutional, he questioned whether criminal liability for maintenance should be retained in Hong Kong as liability for both maintenance and champerty were abolished in places such as England and South Australia.
On 26 March 2013, Louie Mui Kwok-keung, a barrister, was sentenced to 3.5 years' imprisonment in the District Court. He pleaded not guilty to five counts of champerty and maintenance between 1999 and 2008 on 18 February 2013. He was the first barrister to be convicted of such crimes in the city (Case number: DCCC 890/2012).
Maintenance and champerty are torts, not crimes, under New Zealand law. Despite calls for their abolition, the New Zealand Law Commission recommended their preservation in a 2001 report titled Subsidising Litigation.
This concept exists in US jurisprudence but disdained by "fans of entrepreneurial lawyering in the academy and elsewhere." There has been recent common usage of the term in the media in Nevada and Ohio.
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- "VENTURE CAPITALISM FOR LAWSUITS? Why It Doesn't Exist, And What Alternatives For Financing Exist Instead"
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