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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> DLA Piper Uk LLP v Henshaws Farming LLP & Ors [2025] EWHC 542 (Ch) (17 March 2025) URL: https://www.bailii.org/ew/cases/EWHC/Ch/2025/542.html Cite as: [2025] EWHC 542 (Ch) |
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BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Fetter Lane, London, EC4A 1NL |
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B e f o r e :
____________________
| DLA PIPER UK LLP |
Claimant |
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- and - |
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(1) HENSHAWS FARMING LLP(2) BENJAMIN DEAN (3) STUART MICHAEL MELIA (4) LISA HENSHAW(5) LEE HENSHAW (6) JAMES ALFRED DAVIDSON & (7) MYERSON TRUST CORPORATION LIMITED (as administrators of the estate of the late Cyril Ford Middleton Henshaw) |
Defendants |
____________________
Martin Budworth (instructed by JMW LLP) for the 2nd & 3rd Defendants
Neil Berragan (instructed by Pannone Corporate LLP) for the 1st, 4th & 5th Defendants
Richard Wilson KC & Sparsh Garg (instructed by Myerson Limited) for the 6th & 7th Defendants
Hearing dates: 11 & 12 November 2024
____________________
Crown Copyright ©
Master Clark:
Factual background, the parties and the claim
The Land
The parties
Henshaw
Farming
LLP ("the 2nd LLP"), is a limited liability partnership. Its members at the relevant times were the second to fifth defendants, and the late Cyril (Joe)
Henshaw,
who died on 3 January 2021. Mr
Henshaw's
business was skip hire and waste disposal. The sixth and seventh defendants, James Davidson and Myerson Trust Corporation Limited, are the administrators of Mr
Henshaw's
estate ("the administrators").
Henshaw.
Henshaw
("the
Henshaw
children"), are the adult children of Mr
Henshaw.
They worked for him in his business, though they deny that they held management positions in it. They and the 2nd LLP are represented by the same solicitors and counsel. I refer to them together as "the
Henshaw
parties".
Factual background
Henshaw.
However, an incident occurred, after which the trustees decided not to sell to him.
Henshaw,
but his interest in it was not disclosed to the trustees. Its members at or immediately after its incorporation were Mr Dean and Mr Melia, and Silk Park
Farming
Limited (of which Mr Melia was the director and shareholder). DLA and the first to fifth defendants allege that Mr
Henshaw
controlled the 1st LLP.
Henshaw.
The TR1 ("the Transfer") included an overage agreement (in clause 11.3). This provided that overage (referred to as "Clawback") would be payable to the trustees in specified circumstances, including the granting of planning permission in respect of the Land and the further sale of part of the Land (not to be sold without the trustees' approval) within 40 years. The Transfer included:
"11.3.7 [The 1st LLP] and [the trustees] will act in good faith with one another in relation to the application of this clause 11.3 and while this clause remains in force all transactions entered into between [the 1st LLP] and any third party shall be conducted in good faith and at arm's length and [the 1st LLP] will reply promptly to requests for information concerning the use, development or disposal of [the Land] …
11.3.8 [The 1st LLP] will not structure the Development or disposal of [the Land] in any manner where the principal purpose is to avoid or reduce payment of Clawback."
"By this provision the parties apply to the Land Registry for a restriction to be entered in the proprietorship register of the Registered Title, such restriction to follow form N as set out in schedule 4 to the Land Registration Rules 2003 and being worded as follows: …"
Henshaw
children became members of the 1st LLP.
Henshaw.
Henshaw
died.
Henshaw
children, pursuant to undertakings.
"3.2 Without prejudice to paragraph 3.1, [DLA] shall be entitled to claim and retain any sum it is awarded by the Court in respect of its costs and expenses incurred prior to and in connection with or arising out of any proceedings it brings in respect of the Rights and the enforcement of any judgment in any such proceedings regarding the Rights.
3.3 In the event of a settlement being reached before or after any such proceedings are taken, notwithstanding paragraph 3.2, the Assignors shall first be entitled to a sum from all Damages received by the Assignee equal to the amount to which the Original Trustees would have been entitled under the First Transfer, plus a reasonable amount in respect of interest thereon for the period since they would have been paid from the Vistry Sale. For the avoidance of doubt any surplus thereafter shall be retained by the Assignee for the purpose of its costs and expenses in accordance with paragraph 3.2."
"[DLA] shall be solely responsible for the management and conduct of any proceedings initiated by it in respect of the Rights (if any and including as to terms on which such proceedings may be brought to an end). [DLA] shall in its absolute discretion be entitled to instruct lawyers and to manage and control all proceedings (including as to their progression and termination) in relation thereto."
Claim
Henshaw
procured the 1st LLP's breaches of the Transfer and/or conspired to injure the trustees by unlawful means.
(1) the claim is barred by limitation;
(2) the Assignment is unenforceable by reason of maintenance and/or champerty.
(1) relies upon section 32 of the Limitation Act 1980 as postponing the commencement of the limitation period from 1 April 2015 (the date of the 2015 Transfer) to 9 January 2018 (the date when the trustees first knew of it);
(2) denies that the doctrine of maintenance applies to the Assignment because DLA has a legitimate commercial interest in the trustees' claims;
(3) denies that the doctrine of champerty applies to the Assignment because DLA does not stand to receive a "division of the spoils";
(4) denies that the Assignment is invalidated by either the statutory or common law rules applying to solicitor-client relationships.
Summary judgment – legal principles
"The court may give summary judgment against a claimant … on the whole of a claim or on an issue if—
(a) it considers that the party has no real prospect of succeeding on the claim, … or issue; and
(b) there is no other compelling reason why the case or issue should be disposed of at a trial."
"(i) The burden of proof is on the applicant for summary judgment;
(ii) The court must consider whether the claimant has a 'realistic' as opposed to a 'fanciful' prospect of success: Swain v Hillman [2001] 1 All ER 91;
(iii) The criterion 'real' within CPR r 24.2(a) is not one of probability, it is the absence of reality: Lord Hobhouse of Woodborough in Three Rivers District Council v Bank of England (No 3) [2003] 2 AC 1, para 158;
(iv) At the same time, a 'realistic' claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED & F Man Liquid Products v Patel [2003] CP Rep 51, para 8;
(v) The court must be astute to avoid the perils of a mini-trial but is not precluded from analysing the statements made by the party resisting the application for summary judgment and weighing them against contemporaneous documents (ibid);
(vi) However disputed facts must generally be assumed in the claimant's favour: James-Bowen v Comr of Police of the Metropolis [2015] EWHC 1249 (QB) at [3];
(vii) An application for summary judgment is not appropriate to resolve a complex question of law and fact, the determination of which necessitates a trial of the issue having regard to all the evidence: Apovdedo NV v Collins [2008] EWHC 775 (Ch);
(viii) If there is a short point of law or construction and, the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it: ICI Chemicals & Polymers Ltd v TTE Training Ltd [2007] EWCA Civ 725;
(ix) However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial. The court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] Lloyd's Rep PN 526; Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 3;
(x) The same point applies to an extent to difficult questions of law, particularly those in developing areas, which tend to be better decided against actual rather than assumed facts: TFL Management Services Ltd v Lloyds TSB Bank plc [2014] 1 WLR 2006, para 27."
"The general rule is that it is not normally appropriate in a summary procedure (such as an application to strike out or for summary judgment) to decide a controversial question of law in a developing area, particularly because it is desirable that the facts should be found so that any further development of the law should be on the basis of actual and not hypothetical facts: e g Lonrho Plc v Fayed [1992] 1 AC 448, 469 (approving Dyson v Attorney General [1911] 1 KB 410, 414: summary procedure ought not to be applied to an action involving serious investigation of ancient law and questions of general importance . . .); X (Minors) v Bedfordshire County Council [1995] 2 AC 633, 740—741 (Where the law is not settled but is in a state of development . . . it is normally inappropriate to decide novel questions on hypothetical facts); Barrett v Enfield London Borough Council [2001] 2 AC 550, 557 (strikeout cases); Home and Overseas Insurance Co Ltd v Mentor Insurance Co (UK) Ltd [1990] 1 WLR 153 (summary judgment). In the context of interlocutory injunctions, in the famous case of American Cyanamid Co v Ethicon Ltd [1975] AC 396, 407 it was held that the court must be satisfied that the claim is not frivolous or vexatious, in other words, that there is a serious question to be tried. It was no part of the court's function to decide difficult questions of law which call for detailed argument and mature consideration."
Striking out – legal principles
"Power to strike out a statement of case
(2) The court may strike out a statement of case if it appears to the court–
(a) that the statement of case discloses no reasonable grounds for bringing …the claim;"
Limitation – legal principles
"Postponement of limitation period in case of fraud, concealment or mistake.
(1) … where in the case of any action for which a period of limitation is prescribed by this Act, … —
…
(b) any fact relevant to the plaintiff's right of action has been deliberately concealed from him by the defendant; or
…
the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it.
References in this subsection to the defendant include references to the defendant's agent and to any person through whom the defendant claims and his agent.
(2) For the purposes of subsection (1) above, deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty."
Deliberate concealment
Fact relevant to the claimant's right of action
Concealment
(1) a positive act of concealment - taking active steps to hide, or
(2) a withholding of the relevant information - failing to disclose it: [98].
"Deliberately"
"[The law] should return to the clarity and simplicity of Lord Scott's authoritative explanation in Cave (para 60):
'A claimant who proposes to invoke section 32(1)(b) in order to defeat a Limitation Act defence must prove the facts necessary to bring the case within the paragraph. He can do so if he can show that some fact relevant to his right of action has been concealed from him either by a positive act of concealment or by a withholding of relevant information, but, in either case, with the intention of concealing the fact or facts in question.'
What is required is (1) a fact relevant to the claimant's right of action, (2) the concealment of that fact from her by the defendant, either by a positive act of concealment or by a withholding of the relevant information, and (3) an intention on the part of the defendant to conceal the fact or facts in question."
Reasonable diligence
(1) The claimant must establish that they could not have discovered the concealment of the relevant facts without exceptional measures which they could not reasonably have been expected to take. The test is how a person carrying on a business of the relevant kind would act if he had adequate but not unlimited staff and resources and were motivated by a reasonable but not excessive sense of urgency: Gresport Finance v Battalagia [2018] EWCA Civ 540 at [41] approving Millett LJ's statement in Paragon Finance v Thakerar [1999] 1 All ER 400 at 418.
(2) Section 32 assumes that the claimant desires to discover whether or not a wrong has been committed, and that there must therefore be an anterior "something" to put a claimant on notice of the need to investigate if there has been a concealment of the wrong: Law Society v Sephton [2004] EWCA Civ 1627, [2005] QB 1013 at [116]; Gresport Finance v Battalagia [2018] EWCA Civ 540 at [41].
(3) Although the question what reasonable diligence requires may have to be asked at two distinct stages:
(i) whether there is anything to put the claimant on notice of a need to investigate, and
(ii) what a reasonably diligent investigation would then reveal,
there is a single statutory issue, which is whether the claimant could with reasonable diligence have discovered (in this case) the concealment of the relevant facts: OT Computers v Infineon Technologies AG [2021] EWCA Civ 501 at [47].
(4) At the first stage, the claimant must be reasonably attentive so that he becomes aware (or is treated as becoming aware) of the things which a reasonably attentive person in his position would learn. At the second stage, he is taken to know those things which a reasonably diligent investigation would then reveal. Both questions are questions of fact and will depend on the evidence. To that extent, an element of uncertainty is inherent in the section: OT Computers v Infineon Technologies AG [2021] EWCA Civ 501 at [47].
(5) The words "could with reasonable diligence" refer to an objective standard (i.e. what the claimant could have learned/done, not merely what s/he in fact did learn/do). That objective standard is informed by the position of the actual claimant, and not by reference to some hypothetical claimant: OT Computers v Infineon Technologies AG, [2021] EWCA Civ 501 at [48].
(6) The test as to when the claimant has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered the same must be referable to what is needed properly to plead out the claim: Peconic Industrial Development Ltd v Lau Kwok Fai [2009] WTLR 999 at [56]; FII Group Test Claimants v HMRC [2020] UKSC 47 at [184] to [192].
(7) What is required is an ability in the claimant to plead a complete cause of action: Arcadia Group Brands v Visa [2015] EWCA Civ 883 at [48] to [49]. By this is meant an ability to plead a viable claim, that is, one that will not be struck out because a necessary element of the cause of action cannot be asserted or because the necessary particularity cannot be pleaded. A viable claim does not require the claimant to need to know or have been able to discover all of the evidence which it later decides to plead. But it does require the putative claimant to be able to plead the precise case that is ultimately alleged: Barnstaple Boat Co v Jones [2007] EWCA Civ 727. In a case of fraud, discovery of the alleged fraud means knowledge of the "essential facts constituting the alleged fraud": Cunningham v Ellis [2018] EWHC 3188 Comm at [87].
"… there will be cases… where discovery of the relevant facts involves a process over a period of time as pieces of information become available. In such cases it may be difficult to identify the precise point of time at which a claimant exercising reasonable diligence could have discovered enough, either to plead a claim or (as the case may be) to begin embarking on the preliminaries to the issue of proceedings. In some cases identification of that point of time may be critical. In others, such as the present, it may be unnecessary to identify it with precision. Nevertheless the uncertainty to which this exercise may give rise is inherent in the section."
"[69] … The question of whether there was something to put the claimants on notice had to be determined on an objective basis, but as Lord Hoffmann explained in Peconic that "leaves open to argument the extent to which the personal characteristics of the plaintiff are to be taken into account in deciding what diligence he could reasonably have been expected to have shown". As Henderson LJ agreed in Gresport Finance, whether the claimant could with reasonable diligence have discovered the relevant concealment is a question of fact in each case.
[70] In this case, the Tribunal considered some of the things that the claimants might have known about the alleged infringement, but did not ask itself what precisely had put the claimants on notice of the need to investigate a potential claim against Mastercard. … The Tribunal wrongly assumed that the claimants were aware of important press articles as I have already explained. As it seems to me, the question of whether or not the claimants in this case had reason to investigate and whether they could with reasonable diligence have discovered the relevant concealment requires disclosure and factual evidence to be fairly determined. In particular, I think Mr Pickford was right to point out that, in an internet age, huge numbers of documents are in the public domain; it does not follow that, even objectively judged, a potential claimant was on notice of a particular claim, or that it could with reasonable diligence have seen particular documents."
Summary judgment and section 32: overview
"The question whether a claimant has sufficient information to know that they have a worthwhile… claim, is dependent upon a factual investigation which is quintessentially inapposite for summary judgment. So too is the issue of reasonable diligence, which requires a two-stage enquiry as to whether there was anything to put a claimant on notice of a need to investigate and, if so, what a reasonably diligent claimant would have discovered upon some investigation." (emphasis added).
Limitation - issues
(1) whether the defendants deliberately concealed the 2015 Transfer from the trustees;
(2) whether the trustees could with reasonable diligence have discovered the concealment before 8 November 2017 (6 years before the issue of the claim).
Deliberate concealment
Henshaw)
did not inform the trustees of the 2015 Transfer, although they knew of it.
(1) the defendants' failure to disclose the 2015 Transfer was a concealment;
(2) it is to be inferred that the defendants did not disclose the 2015 Transfer with the intention of concealing it;
(3) in any event, in all the circumstances, the fact of the 2015 Transfer was unlikely to be discovered by the trustees for some time (and was therefore deliberate within the meaning of s.32(2) of the 1980 Act).
(1) the fact that the 2015 Transfer was concealed; or
(2) that the defendants intended to conceal it i.e. that the defendants considered whether to inform the trustees but chose not to do so (see [108] in Canada Square).
Henshaw
parties' pleaded position is no facts have been pleaded by DLA which would support any postponement or extension of the limitation period. In his oral submissions, their counsel sought to rely upon an article in the local press (Macclesfield Today- February/March 2016) as being inconsistent with an intention to hide the 2015 Transfer. However, the article is pleaded as publicising that Mr
Henshaw
had a "controlling interest" in the Land (not the fact of the 2015 Transfer), is not pleaded in relation to limitation (as to which no positive case is pleaded by the
Henshaw
parties). In any event, DLA have, in my judgment, a real prospect of showing that its terms do not disclose the 2015 Transfer.
"98. …the word conceal means to keep something secret, either by taking active steps to hide it, or by failing to disclose it. A person who hides something can properly be described as concealing it, whether there is an obligation to disclose it or not. For example, an elderly lady who was afraid of burglars might conceal her pearls before going to bed, without any implication that she was obliged to leave them lying in plain sight. Some people use cosmetics (concealer) to conceal blemishes in their skin, without any implication that they are under an obligation to reveal the imperfections.
99. The position seems to me to be the same, as a matter of ordinary English, where concealment takes the form of the withholding of information with the intention of keeping it secret. For example, Samuel Pepys concealed the contents of his diary by writing it in code; but that does not imply that he was under an obligation to reveal what he had written. Someone who decides not to tell anyone that he has been diagnosed with cancer can properly be described as concealing his illness, without any implication that he is under an obligation to share the information."
"In many cases the requisite proof of intention might be difficult to provide. The standard of proof would be the usual balance of probabilities standard and inferences could of course be drawn from suitable primary facts but, nonetheless, proof of intention, particularly where an omission rather than a positive act is relied on, is often very difficult."
"But assuming that point in his favour I find it hard to see how concealing the resolution to wind up or the intention to dissolve the company can be the concealment of a fact relevant to Mr Harrison's right of action. Nor, given the publicity required by [the] Insolvency Act to be given to the resolution to wind up and the final meeting and accounts of the liquidator, is a case of deliberate concealment likely to be made out. In my view this point is more ingenious than sound."
"Even if it could be said that there was a claim against Mrs Bhandari based on the registration of the transfer in 2009, which there cannot as there is no reason at all to think that she was involved in the transfer or the registration in a way that was improper, such a claim is time-barred by reason of sections 2 and 21(3) of the Limitation Act 1980, which provide that a claim in tort or for breach of fiduciary duty must be brought within six years of the accrual of the cause of action. The conditions for the postponement of the running of the limitation period under section 32 of that Act cannot apply. No fraud is alleged on the part of Ms Bhandari (and I am satisfied there was none) and a plea of deliberate concealment cannot succeed given that the share ownership was a matter of public record and could be seen on the records maintained at Companies House."
"Other than not positively informing Investors, no steps were taken in 2008 to hide the Annex Lease Scheme. As noted in paragraph 159, the Lease and the Underlease were registered at HM Land Registry."
Section 32(2)
Henshaw
was not aware until May 2018 that the 2015 Transfer might amount to a breach of the provisions of the Transfer, and at all times until his death intended the trustees to receive the overage to which they were entitled under the Transfer. This is denied by DLA[5]. Plainly, the issues raised there are fact sensitive and unsuitable for summary determination.
(1) the defendants knew the purchaser would breach its obligations: §17.1;
(2) they intended to induce the purchaser's breach of the transfer: §17.2; and
(3) they did so "wrongfully and with intent to injure the trustees": §18.
and at §8 of its Reply that
(1) the true reason for the 2015 Transfer was to avoid the obligations to the trustees under the Transfer (referring back to §§17 and 18 of the particulars of claim);
(2) Mr
Henshaw
intended at all times before the Transfer to cause the transfer of the Land to another party;
(3) that intention was inconsistent with the obligations which the 1st LLP freely undertook to the trustees by the transfer i.e. the payment by the 1st LLP of overage;
(4) this evidences his intention that any contractually enforceable payment of overage be avoided.
Henshaw
did not know he was committing a breach of duty. Implicit in this is the allegation that he was committing a breach of duty.
Reasonable diligence
(1) ensured that the Restriction was entered on the registered title to the Land, as provided for by clause 11.3.19 of the Transfer;
(2) undertaken periodic checks of the Land Registry to check that there was no disposition of the Land in breach of the Transfer;
(3) set up an online property alert notifying them of any change to the registered title to the Land.
(Defence, §15)
Whether DLA should have exercised reasonable diligence
"[T]he defendant must have considered whether to inform the claimant of the relevant fact and decided not to. So construed, section 32(1)(b) strikes a balance between the interests of the claimant and the defendant, as Parliament intended. If the defendant has concealed a fact from the claimant, and has done so deliberately, that is to say knowingly, then he has the means to start the limitation period running by disclosing the fact. If he does not do so, but chooses to keep the claimant in ignorance of a fact which she requires to know in order to plead her claim, then it is just that the defendant should be deprived of a limitation defence."
(emphasis added)
Whether the trustees were on notice or should have been on notice of the need to investigate
(1) included Mr Anderson who was experienced in construction and property development; and who liaised with BNP Paribas with respect to the development of the Land even after the 2015 Transfer;
(2) formed a "steering committee" dedicated to focussing on the sale and development of the Land;
(3) instructed BNP Paribas as a land agent, who knew that they could access the Land Registry and in fact did so within minutes in January 2018;
(4) instructed DLA as its solicitors.
Henshaw.
"the timetable would most likely see the plan adopted next summer (2017) and if an application followed on [the Land] this might be determined by the start of 2018. So a way to go yet but I would remain positive that there will be a good outcome in the next 24 months"
Ensuring registration of the Restriction
Checking the Land Register and/or setting up alert
Documents in the public domain
"ought to have concluded that…those issues could not be fairly decided without disclosure and evidence, because, as the authorities make clear, the claimants' position may have some relevance to the way in which the objective test is applied. This is particularly true where questions arise as to whether specific public domain documents and newspaper articles could with reasonable diligence have been obtained. Here, there will also be, in due course, issues as to the availability of documents, and the claimants' actual knowledge of them."
(emphasis added)
(1) "Any reasonably attentive investor would have been aware of the published information of the Defendant": [64(iii)] and
(2) "the Claimants could and would (acting with reasonable diligence) at least have conducted regular internet searches in relation to the Irish misconduct announced in 2013 and/or set up an automatic alert in relation to the Irish misconduct.": [64(vi)] (emphasis added)
These arguments were both held to be not properly amenable to summary determination ([81]) and matters on which the claimants had at least a 'real' prospect of success ([84]).
"It cannot be simply assumed, without further evidence, both that the reasonably diligent investor could then have been expected to make further inquiries, for example at the Land Registry or at Companies House, and that such inquiries would have unravelled the fraud. These questions too will be more reliably decided at trial."
Characteristics of the trustees
(1) They are not property professionals running a property business; they are private individuals who acted as unremunerated trustees of the Land for the benefit of a number of charitable objects.
(2) Given that the sole asset of the Trust was the Land, the best analogy for the position of the trustees following its sale is that of a company which has, like the claimant in OT Computers, ceased business. In those circumstances, the court should be slow to impose particularly onerous requirements to police dealings with the Land lasting for years after selling it.
Conclusions on limitation
Validity of the Assignment
Legal principles
(1) the rule against maintenance: a bare cause of action can only be assigned where the assignee has a "genuine commercial interest" in enforcing the claim: Trendtex Trading Corp v Credit Suisse [1982] AC 679, 703C-D per Lord Roskill;
(2) the rule against champerty: this prohibits the supporting of litigation in return for "a division of the spoils": Giles v Thompson [1994] 1 AC 142 at 161C;
(3) the rule against a solicitor taking an assignment of their client's cause of action during the litigation but before judgment: see Farrar at [23] to [28].
Rule against maintenance: "genuine commercial interest"
"Anything recovered from Cossor [the other co-defendant] would to that extent have relieved EMR [the assignee]. It follows that EMR had a pre-existing interest in the success of Man's [the assignor] cause of action against Cossor. It cannot in my view be doubted that such an interest was a 'genuine commercial interest' within the principles established by Trendtex".
"the court should not be looking to find the absence of commercial interest, but be more focused on ensuring that transactions which are genuinely contrary to public policy are weeded out."
Rule against champerty: "division of the spoils"
"In Sibthorpe v. Southwark LBC, [2011] EWCA Civ 25, the Court of Appeal explained that, when considering an allegation of champerty in relation to an agreement to which the person conducting the litigation (or providing advocacy services) is not a party, the modern approach was for the court to decide whether the agreement would undermine the purity of justice or would corrupt public justice which is a question to be decided on a case-by-case basis ([35] to [36]). It formulated that approach given the views expressed by Steyn LJ in Giles v. Thompson (Court of Appeal decision), Lord Mustill in Giles v. Thompson in the House of Lords and Lord Phillips in Factortame. In Davey v. Money [2019] EWHC 997 (Ch), Snowden J held that, in determining whether an agreement with a non-party as regards the conduct of litigation would tend to undermine or corrupt the process of justice, "the crucial issue appears to be whether the non-party can exercise excessive control or influence over the conduct of the proceedings in such a way as, for example, to suppress evidence, influence witnesses, or procure an improper settlement" (at [78])."
Evolution of the law of maintenance and champerty
"the law of maintenance depends upon the question of public policy, and public policy…is not a fixed and immutable matter. It is a conception which, if it has any sense at all, must be alterable by the passage of time".
"In the most recent decades of the present century, maintenance and champerty have become almost invisible in both their criminal and their tortious manifestations. In practice, they have maintained a living presence in only two respects. First, as the source of the rule, now in the course of attenuation, which forbids a solicitor from accepting payment for professional services on behalf of a plaintiff calculated as a proportion of the sum recovered from the defendant. Secondly, as the ground for denying recognition to the assignment of a 'bare right of action.'"
Rule against assignment to solicitors
"Contentious business agreements.
(1) Subject to subsection (2), a solicitor may make an agreement in writing with his client as to his remuneration in respect of any contentious business done, or to be done, by him (in this Act referred to as a "contentious business agreement") providing that he shall be remunerated by a gross sum or by reference to an hourly rate, or by a salary, or otherwise, and whether at a higher or lower rate than that at which he would otherwise have been entitled to be remunerated.
(2) Nothing in this section or in sections 60 to 63 shall give validity to—
(a) any purchase by a solicitor of the interest, or any part of the interest, of his client in any action, suit or other contentious proceeding;"
Rule against conditional fee agreements
"(1) A conditional fee agreement which satisfies all of the conditions applicable to it by virtue of this section shall not be unenforceable by reason only of its being a conditional fee agreement; but (subject to subsection (5)) any other conditional fee agreement shall be unenforceable.
(2) For the purposes of this section and section 58A—
(a) a conditional fee agreement is an agreement with a person providing advocacy or litigation services which provides for his fees and expenses, or any part of them, to be payable only in specified circumstances;"
"Section 59(2) merely provides that nothing in the Act shall give validity to arrangements of the kind there specified. It does not legitimise such arrangements if they are otherwise unlawful, but neither does it make them unlawful if they are otherwise lawful"
or, as it was put in Candey Ltd v Tonstate Group [2022] EWCA Civ 936, [2022] 1 WLR 4653, the 1990 Act created "islands of legality in a sea of illegality".
Other agreements between client and solicitor
"The abolition of criminal and civil liability under the law of England and Wales for maintenance and champerty shall not affect any rule of that law as to the cases in which a contract is to be treated as contrary to public policy or otherwise illegal."
"As Lord Neuberger has made clear, there is now a very hard distinction between potentially champertous transactions between non-lawyers and potentially champertous transactions involving a lawyer. The former cases are considered according to the broad and flexible standard articulated in paragraph 34(1) above. The latter cases are assessed according to an altogether different standard: they are either sanctioned by statute or they are not; and if they are not, the common law does not ride to the rescue. In this case, the Assignment is not sanctioned by the 1990 Act and – assuming it to stand alone – clearly fails as a champertous transaction."
"So an agreement between a lawyer and a client to act in return for a share in the proceeds of an action or for a fee the amount of which depends on the outcome of the action has generally been void. The prohibition applied even if the lawyer was only to receive his ordinary fee if the action succeeded."
"II. The legislation
The Solicitors Act 1974 contains the following relevant section:
'31(1) . . . the Council [of the Law Society] may . . . make rules, with the concurrence of the Master of the Rolls, for regulating in respect of any matter the professional practice, conduct and discipline of solicitors ...'
The Solicitors' Practice Rules 1990, rule 8(1), provided in 1993:
'A solicitor who is retained or employed to prosecute any action, suit or other contentious proceeding shall not enter into any arrangement to receive a contingency fee in respect of that proceeding.'
That rule has since been amended to add the following words:
'A solicitor who is retained or employed to prosecute or defend any action, suit or other contentious proceeding shall not enter into any arrangement to receive a contingency fee in respect of that proceeding, save one permitted under statute or by the common law.'
Rule 18(2) is a definitions rule and defines "contingency fee" under rule i8(z)(c) as meaning:
'any sum (whether fixed, or calculated either as a percentage of the proceeds or otherwise howsoever) payable only in the event of success in the prosecution of any action, suit or other contentious proceeding . . .'
Section 58 of the Courts and Legal Services Act 1990 … as originally enacted provided: "(1) In this section 'a conditional fee agreement' means an agreement in writing between a person providing advocacy or litigation services and his client which —
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"(b) provides for that person's fees and expenses, or any part of them, to be payable only in specified circumstances;
…
(2) Where a conditional fee agreement provides for the amount of any fees to which it applies to be increased, in specified circumstances, above the amount which would be payable if it were not a conditional fee agreement, it shall specify the percentage by which that amount is to be increased. (3) Subject to subsection (6), a conditional fee agreement which relates to specified proceedings shall not be unenforceable by reason only of its being a conditional fee agreement. (4) In this section 'specified proceedings' means proceedings of a description specified by order made by the Lord Chancellor for the purposes of subsection (3)." —No proceedings were so specified until the Conditional Fee Agreements Order 1995 (SI 1995 No 1674). That Order did not specify libel proceedings. The Conditional Fee Agreements Order 1998 (SI 1998 No 1675) specifies all proceedings — "(5) Any such order shall prescribe the maximum permitted percentage for each description of specified proceedings. (6) An agreement which falls within subsection (2) shall be unenforceable if, at the time when it is entered into, the percentage specified in the agreement exceeds the prescribed maximum permitted percentage for the description of proceedings to which it relates."
"The Solicitors' Practice Rules are made under section 31 of the Solicitors Act 1974 by the Council of the Law Society with the concurrence of the Master of the Rolls. They are secondary legislation having the force of statute, as was decided in Swain v The Law Society [1983] 1 AC 598. The Rules regulate professional practice, but breach of the Rules is unlawful in addition to being a breach of professional practice. This court in the Thai Trading case unfortunately did not consider the Swain case. A necessary part of the decision in the Thai Trading case was the proposition [1998] QB 781, 78 5H that "the fact that a professional rule prohibits a particular practice does not of itself make the practice contrary to law". This means, in my judgment, that Millett LJ's conclusion, at p 790H, cannot be correct for a breach of rule 8(1) of the Solicitors' Practice Rules 1990 as they stood in 1993."
"A contingency fee, that is, an arrangement under which the legal advisers of a litigant shall be remunerated only in the event of the litigant succeeding in recovering money or other property in the action, has hitherto always been regarded as illegal under English law on the ground that it involves maintenance of the action by the legal adviser. Moreover, where, as is usual in such a case, the remuneration which the adviser is to receive is to be, or to be measured by, a proportion of the fund or of the value of the property recovered, the arrangement may fall within that particular class of maintenance called champerty."
"Although the decision itself [in Thai Trading] was per incuriam, the judgment represents the considered view of Millett LJ and two other members of this court. Millett LJ said at p 788:
'It is understandable that a contingency fee which entitles the solicitor to a reward over and above his ordinary profit costs if he wins should be condemned as tending to corrupt the administration of justice. There is no reason to suppose that Lord Denning MR in Trendtex Trading Corpn v Credit Suisse [1980] QB 629 or any of the members of the court in Wallersteiner v Moir (No 2) [1975] QB 373 had in mind a contingency fee which entitles the solicitor to no more than his ordinary profit costs if he wins. These are subject to taxation and their only vice is that they are more than he will receive if he loses. Such a fee cannot sensibly be described as a 'division of the spoils'. The solicitor cannot obtain more than he would without the arrangement and risks obtaining less'"
Issues
Henshaw
parties, is that the Assignment:
(1) does not comply with ss.58 and 58AA of the 1990 Act;
(2) is in breach of s.59(2)(a) of the Solicitors Act 1974;
(3) is a transfer of a cause of action by a client to its solicitors;
(4) is champertous;
(5) is in breach of the common law rule against maintenance.
(1) in breach of the common law rule against maintenance;
(2) in breach of s.59(2)(a) of the Solicitors Act 1974;
(3) an abuse of process because "DLA is conducting the claim of its clients which has been assigned to it after the parameters of the claim were understood and already formulated in the draft Particulars of Claim".
(1) Whether the Assignment is in breach of the rule against maintenance;
(2) Whether the Assignment is champertous;
(3) Whether the Assignment contravenes the solicitor rule.
Discussion and conclusions
Maintenance – "genuine commercial interest"
Henshaw
parties did not rely on the rule against maintenance.
Champerty – "division of the spoils"
(1) the recovery of DLA's profit costs is contingent on the outcome of the claim;
(2) DLA has exclusive control of the claim to eliminate/mitigate its liability in professional negligence;
(3) DLA is enabled to incur profit costs without the possibility of any challenge or review by a client.
Recovery of profit costs contingent on outcome
Excessive control of the litigation
"Thirdly, I remind myself that not only is it permissible for legal representative to require clients to give security for unpaid fees, but such practices are commonplace. I can see nothing inherently wrong—and certainly nothing 'wanton' or 'officious'—with solicitors having a degree of control over a client's affairs in this regard. The Claimant's claim was in respect of an estate, and I can fully understand why in those circumstances (where life- changing amounts of money may be involved) the solicitors demanded a greater degree control over matters than, for example, they would have asked for had they been representing a client in a modest personal injury claim. The way they have achieved this may have been excessive and possibly even objectionable, but on the facts of this case, I am unable to say that they went so far as to offend against public policy."
"To my mind, a division of the spoils means something other than a solicitor merely taking steps to ensure recovery of his or her fees and disbursements."
Absence of challenge or review by a client
The solicitor rule
(1) The public policy considerations which underpin the prohibition on a solicitor taking an assignment of a cause of action from a client – which were described in Pittman v Prudential Deposit Bank Ltd (1896) 13 TLR 110 at 111 as being founded upon "the fiduciary relation between the solicitor and the client", and the "precise rules of honour" regulating the conduct of legal representatives – are not engaged where no relationship of solicitor and client exists and no claim is on foot.
(2) This, it said, is borne out by the fact that the reported cases in which an assignment of a cause of action to a solicitor has been held to be void all appear to have involved the assignment by an existing client of an issued claim. Most cases have concerned the assignment of damages in litigation to the solicitors acting for the claimant client, presumably in order that they will continue to act for a client otherwise unable to pay for those legal services – in other words, they have really been alternative forms of remuneration. That is not the case with, as here, a genuine assignment.
(3) It also relied on the language used in the leading cases:
(i) In Simpson v Lamb (1857) 7 EL & BL 84, Lord Campbell held that it was "against the policy of the law to permit such a dealing by an attorney with the subject of a suit of which he has the conduct as the attorney, whilst the case is still undetermined by judgment".
(ii) In Pittman at 111, the rule was described as follows: "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 the litigation" (emphasis added).
(iii) In Farrar v Miller, Arnold LJ referred at [22] to "a solicitor who has the conduct of litigation" being unable to take an assignment "prior to judgment" (emphasis added).
(4) Whilst there does not appear to be any reported case expressly discussing the validity of an assignment by a former client to a solicitor, the obverse situation arose in Davis v Freethy [1890] QB 519 in which the validity of an assignment which pre-dated the solicitor-client relationship was upheld by the Court of Appeal. Lord Coleridge said at 521, in remarks that ought to apply by parity of reasoning to the present fact-pattern:
"The objection to its validity is founded on the decision in Simpson v Lamb. It is said that, inasmuch as at the time the deed came into operation the relation of solicitor and client had been established between the plaintiff the assignee and Marks the assignor, the principle of that case applies – that the purchase of the subject-matter of a suit by an attorney having the conduct of the suit is void, as against the policy of the law. The learned judge who tried this case was of the opinion that the principle was sound, but he pointed out the distinction which prevents it from applying to the present case. That distinction is that here, when the deed was made, the relation between the parties to it was not that of solicitor and client."
Termination of the retainer
Henshaw
parties' solicitors (Pannone Corporate – "Pannone") by a letter dated 22 August 2023 seeking to extend an undertaking given by them to hold part of the sale proceeds of the Land. The letter is carefully worded and does not refer to the trustees as "clients". DLA's explanation is that it was written in order to maintain the status quo of the protection in place, that sum being similar to the value of the claim.
"19-154 Assignment of causes of action between solicitor and client
The assignment of a cause of action to the ex-solicitor of a client
would also be champertous. In Farrar and Candey Limited v Miller
proceedings had been commenced …"
19-165 Assignment of rights to solicitors. A solicitor cannot lawfully
purchase anything in litigation of which he has had the management,
nor can he purchase the fruits of such litigation before judgment, but
an assignment of an action to a solicitor preceding his employment
as such is good unless it would have been unenforceable as between
strangers."
"A solicitor may lawfully take from his client a security upon property which is the subject matter of an action for advances already incurred in the action, and he may take security from his client for his costs to be ascertained by taxation or otherwise."
"no attorney can take any thing for his own benefit from his client pending the suit, save his demand; and I add that, as a guardian cannot take any thing from his ward pending the guardianship, or at the close of it, or at any period until his influence has ceased to exist, the obligation upon an attorney to refrain from taking an extraordinary benefit is at least as strong.
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It is not denied in any case that, if the relation has completely ceased, if the influence can be rationally supposed also to cease, a client may be generous to his Attorney or Counsel, as to any other person; but it must go so far."
"Where the court's intervention is sought by a former client, however, the position is entirely different. The court's jurisdiction cannot be based on any conflict of interest, real or perceived, for there is none. The fiduciary relationship which subsists between solicitor and client comes to an end with the termination of the retainer. Thereafter the solicitor has no obligation to defend and advance the interests of his former client. The only duty to the former client which survives the termination of the client relationship is a continuing duty to preserve the confidentiality of information imparted during its subsistence."
Assignment before claim commenced
"The validity of the First Assignment must be considered in the context of the law of champerty as explained in Farrar v Miller. It is undoubtedly an agreement by which the solicitor first claimant has endeavoured to acquire the cause of action of its client the second claimant. That it was entered into before proceedings were issued or a letter before action was sent cannot be material to whether it falls foul of the law of champerty. It falls on the lawyer side of the hard distinction referred to by Marcus Smith J in Farrar v Miller and the genuine commercial interest test has no relevance."
"I have observed, that this case appears to me to be regarded in two points of views; the transaction liable to objections of two kinds: first, as bringing forward the consideration of the effect of a bargain between an attorney and his client, for the benefit of the attorney, before, pending, and after, suit; and not only for his benefit, but connected with the very article and subject in contest in a suit, in which he was about to be engaged."
(emphasis added)
(1) Farrar (at [22]) refers to a solicitor who has the conduct of litigation i.e. an existing claim;
(2) Hall v Hallett (at 146, 1099) refers an attorney not being permitted to "buy in things in a course of litigation, of which litigation he has the management".;
(3) In Wood v Downes (at 27, 265-66), Lord Eldon states: "no attorney can take anything from his client pending the suit";
(4) In Simpson v Lamb, the rule is again stated as being "no attorney can be permitted to purchase any thing in litigation, of which litigation he has the management" citing Hall v Hallet, Wood v Downes and the authorities cited in those cases.
Conclusion on the Assignment
Final conclusion
Note 1 by notices dated 17 April 2024 (D6 & D7), 3 May 2024 (D1, D4 & D5) and 14 May 2024 (D2 & D3) [Back] Note 2 Defence, [26]. The administrators’ case is that they are qualified chartered surveyors, who advised Mr Note 3 See Reply to Note 5 Reply to the administrators’ Defence, §11 [Back] Note 6 which concerned the validity of an assignment to a solicitor of their client’s cause of action [Back] Note 8 R (Factortame Ltd) v Secretary of State for Transport, Local Government and the Regions (No 8) [2003] QB 381, 399 at [32] [Back]
Henshaw
and acted on his behalf in the purchase of properties – D6 & D7 Defence [13.1] [Back]
Henshaw parties’ Def, §21, Reply to D2 & D3’s Defence, §5, Reply to administrators’ Defence, §9 [Back]