Barclays Wealth Trustees (Jersey) Ltd and Barclays Wealth Fund Managers (Jersey) Ltd v Equity Trust (Jersey) Ltd and Equity Trust Services Ltd

CourtRoyal Court
JudgeBirt, Bailiff
Judgment Date16 May 2013
Date16 May 2013
Birt, Bailiff

J. Harvey-Hills for the plaintiffs;

M.L.A. Pallot for the defendants.

Cases cited:

(1) Abraham v. Thompson, [1997] CLC 1370; [1997] 4 All E.R. 362, considered.

(2) Burt v. States, 1993 JLR 376, referred to.

(3) Faryab v. Smyth, 1998 WL 1042306, applied.

(4) Grovewood Holdings Plc v. James Capel & Co. Ltd., [1995] Ch. 80; [1995] 2 W.L.R. 70; [1994] 4 All E.R. 417; [1994] 2 BCLC 782, not followed.

(5) Macready v. Amy, 1950 J.J. 11, referred to.

(6) Martell v. Consett Iron Co. Ltd., [1955] Ch. 363; [1955] 2 W.L.R. 463; [1955] 1 All E.R. 481, considered.

(7) Morris v. Southwark L.B.C., [2011] 1 W.L.R. 2111; [2011] 2 All E.R. 240; [2011] C.P. Rep. 21; [2011] EWCA Civ 25, referred to.

(8) Ostroumoff (née Martland), In re, 1999 JLR 238, referred to.

(9) Overseas Ins. Brokers Ltd., Re, 1963 J.J. 325, referred to.

(10) Pinner v. Everett, [1969] 1 W.L.R. 1266; [1969] 3 All E.R. 257; (1969), 64 Cr. App. R. 160, dictum of Lord Reid applied.

(11) St. Helier (Constable) v. Baal, 1965 J.J. 503, referred to.

(12) Sarum Hotel Ltd. v. Select Agencies (Jersey) Ltd., 1987 88 JLR 343, referred to.

(13) Stocznia Gdanska SA v. Latreefers Inc., [2000] C.P.L.R. 65; [2001] 2 BCLC 116; [2001] BCC 174; [2001] CLC 1267, applied.

(14) Valetta Trust, In re, 2012 (1) JLR 1, applied.

Legislation construed:

Code of 1771 (Revised Edition, ch.15.120, 2009 ed.), Loix etablies par differens Ordres du Roi & du Conseil, & Actes de Parlement.

Ordinance of 1635.

Texts cited:

Halsbury's Laws of England, 5th ed., vol. 96, para. 1119, at 774.

Le Geyt, Manuscrits sur la Constitution, les Lois et les Usages de Jersey, vol. 1, at 188 192 (1846).

Pothier, Traité des Obligations, vol. 1, para. 43, at 42 (1821 ed.).

Contract — illegal contracts — agreements contrary to public policy — maintenance and champerty — provision in Code of 1771 that "personne ne pourra contracter pour choses ou matières en litige" prohibits assignment of matters in litigation — agreement for third party to fund litigation in return for share of proceeds not prohibited

The plaintiffs brought proceedings against the defendants for breach of trust, breach of fiduciary duty and breach of contract.

The defendants had been the trustee and manager respectively of certain funds. They had been removed by the court and the first and second plaintiffs had been appointed in their place. The plaintiffs commenced proceedings against the defendants for breach of trust, breach of fiduciary duty and breach of contract. The total amount of the claim was approximately EUR40m. plus interest.

The plaintiffs entered into a funding agreement with a third party under which the third party would fund the proceedings for the plaintiffs and meet any adverse costs orders made against them. The plaintiffs would have control of the litigation and the third party funder would merely have the right to be kept informed of the progress of the case. In return, the funder was entitled to a share in any damages awarded.

The defendants issued a summons seeking a strike-out or stay of the proceedings on the grounds that their continuance on the basis of the funding agreement was contrary to the law and/or an abuse of process. The Code of 1771 provided that "personne ne pourra contracter pour choses ou matières en litige" ("the provision"). An earlier 1635 Ordinance had provided that "ffor avoiding of maintenance & Champtie It is thought fitt that no man should buy or Contract for any debt or other thinge in Action." The Master dismissed the summons.

The defendants appealed, submitting that (a) the correct translation of the provision was "no person may make a contract in respect of any thing or matter in litigation"; a funding contract was a contract "in respect of" a matter in litigation; a party was therefore prohibited from entering into such an agreement; and it would be an abuse of process to permit the plaintiffs to litigate with the benefit of an agreement contrary to Jersey law; (b) when interpreting the provision, the court had to apply Jersey principles of statutory interpretation; (c) the Code was a codifying statute and the court must therefore ascertain the meaning of the provision without regard to the 1635 Ordinance; (d) alternatively, if regard were had to the legislative background, it would support their interpretation of the provision; (e) if the funding agreement were found to be contrary to the provision and thus unenforceable, the plaintiffs' claim should be stayed; (f) there was no customary law doctrine of champerty or maintenance in Jersey law; and (g) they would be prejudiced if the plaintiffs were permitted to fund litigation by entering a funding agreement which was ultimately held to be unenforceable, either because it breached the provision or because it was champertous.

The plaintiffs submitted that the correct interpretation of the provision of the Code was "no person may contract for things or matters in litigation."

Held, dismissing the appeal:

(1) The funding agreement was not contrary to the provision of the Code of 1771 and the appeal would therefore be dismissed. When interpreting the provision, reference could be made to English authorities on statutory interpretation because Jersey principles of statutory interpretation were, at present, the same as English principles. As the Code was a codifying statute, the court would ascertain the natural or ordinary meaning of the provision without regard to the 1635 Ordinance. The correct translation of "personne ne pourra contracter pour choses ou matières en litige" was that "no person may contract for things or matters in litigation," as the Master had correctly held (not, as the defendants submitted, "in respect of things or matters in litigation"). The natural meaning of the provision was therefore that it prohibited the assignment of a matter in litigation (not that it prohibited all contracts in relation to a matter in litigation, which would, for example, have included instructing an advocate). Consideration of the background to the provision supported this interpretation. The 1635 Ordinance, which had been introduced to prevent maintenance and champerty, had been concerned with prohibiting the assignment of matters in litigation, and the provision in the Code had been intended to replicate the effect of the Ordinance ( paras. 18 22; paras. 24 26; paras. 31 41).

(2) Even if the above conclusion were incorrect and the funding agreement were contrary to the provision of the Code, the proceedings would not be struck out or stayed. A third party funding agreement which breached the provision would be contrary to public policy to protect the purity of justice and thus unenforceable as between the parties to it. As a matter of customary law, the court could declare an agreement unenforceable if it were contrary to public policy on the grounds of champerty or maintenance. If a funding agreement were unenforceable, the proceedings would not, however, be struck out or stayed unless there were an abuse of the process of the court. It would be a matter of fact and degree in each case whether the continuation of proceedings with the benefit of such an agreement was an abuse of process. Public policy changed over time. The historical concerns that gave rise to the development of the doctrine of champerty, namely the risk of the corruption of justice if powerful people took over litigation, had diminished with the establishment of the modern, independent judiciary. Facilitating access to justice had, meanwhile, become an extremely important public policy objective. There was now a strong public interest in persons being able to obtain funding to enable them to bring proceedings to vindicate their rights. In the present case, the fact that the plaintiffs had entered into the funding agreement was not an abuse of the court's process. There was nothing in the present funding agreement - which provided that the plaintiffs would retain control of the proceedings and that the third party funder would meet any adverse costs order - that could adversely affect the purity of justice. On the contrary, it facilitated the important objective of access to justice. It would not therefore be an abuse of process for the proceedings to continue on the basis of the agreement. Furthermore, the defendants would not be prejudiced if the funding agreement were ultimately held to be unenforceable, either because it breached the provision of the Code or because it was champertous. If the proceedings were successful, justice would have been done. If the proceedings were unsuccessful, even if the plaintiffs were unable to enforce the agreement or to meet any adverse costs order, one could readily envisage the court ordering a third party who had funded proceedings on a commercial basis to pay the costs of the successful defendant ( paras. 42 63).

1 BIRT, BAILIFF: This is an appeal by the defendants against the refusal of the Master to strike out or stay the proceedings brought against them by the plaintiffs as an abuse of process. The basis of the application before the Master was that the plaintiffs have entered into a third party funding agreement in respect of this litigation and this is said to be contrary to the provisions of the Code of 1771 which provide: "Personne ne pourra contracter pour choses ou matières en litige."

2 The application requires me, as it did the Master, to consider the correct interpretation of this provision of the Code ("the provision").

Factual background

3 The nature of the proceedings is not relevant to the issue which I have to decide and can therefore be briefly summarized. The first plaintiff is the current trustee and the second plaintiff is the current manager of the R2R Funds and sub-funds. The R2R Funds are three unit trusts governed by Jersey law which hold minority interests in a number of underlying companies which in turn...

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