The Future of Champerty in Singapore?

The exception created in The Law Society of Singapore v Kurubalan S/O Manickam Rengaraju

Reynard Chua

INTRODUCTION

Maintenance is defined as “officious intermeddling in litigation”.¹ What this seems to suggest is that a third party to a lawsuit is “support[ing] litigation in which he has no legitimate interest without just cause or excuse”.²

Champerty is a particular form of maintenance “where one party agrees to aid another to bring a claim on the basis that the person who gives the aid shall receive a share of what may be recovered in the action”.³ A prime example comes in the form of contingency agreements, whereby a person agrees to fund the lawsuit in return for an agreed proportion of the damages obtained, if the lawsuit is successful.

At common law, maintenance, which includes champerty, is both a crime and a civil wrong, i.e. a tort.⁴ Although many jurisdictions, including England itself, has since abolished this common law rule,⁵ this particular rule still appears to stand in Singapore given that Parliament has not yet intervened on this issue.

The scope of this article, however, lies in the rules of champerty in its application as part of the professional regulatory framework. The doctrine of champerty, as applied specifically to lawyers, is stated clearly in the Legal Professions Act:⁶

107.—(1) No solicitor shall —

(a) purchase or agree to purchase the interest or any part of the interest of his client or of any party in any suit, action or other contentious proceeding brought or to be brought or maintained; or

(b) enter into any agreement by which he is retained or employed to prosecute any suit or action or other contentious proceeding which stipulates for or contemplates payment only in the event of success in that suit, action or proceeding.

…

(3) A solicitor shall, notwithstanding any provision of this Act, be subject to the law of maintenance and champerty like any other person.

The Legal Profession (Professional Conduct) Rules⁷ also provides for this issue, stating that:

Contingency fees prohibited

An advocate and solicitor shall not enter into any negotiations with a client —

(a) for an interest in the subject matter of litigation; or

(b) except to the extent permitted by any scale of costs which may be applicable, for remuneration proportionate to the amount which may be recovered by the client in the proceedings.

THE POLICY BEHIND CHAMPERTY: TRACING ITS HISTORY

It has long been recognised that the law of maintenance and champerty are founded upon considerations of public policy and needs to be changed and shaped by the societal norms of the time.⁸ In Hill v Archbold⁹, Danckwerts LJ stated that “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 … must be alterable by the passage of time”.

While the history of maintenance and champerty are too old to be easily traced, Lord Mustill in Giles v Thompson adequately explained their historical significance in medieval times. The justice system of the time did not have the strength to “resist the oppression of private individuals through suits fomented and sustained by unscrupulous men of power”. Champerty was worse, as the purchase of a financial interest in the litigation created the “temptation to the suborning of justices and witnesses and the exploitation of worthless claims which the defendant lacked the resources and influence to withstand”.¹⁰

As early as 1787, however, famed philosopher Jeremy Bentham posited that the doctrines of maintenance and champerty were no longer needed, as judges on the bench had become independent enough to not fear the influence of high-ranking individuals, such as barons and their ilk.¹¹ Lord Mustill corroborates this, highlighting that the courts have become stronger, with consistent mechanisms and self-reliant participants. Abuses can be easily detected and forestalled, and thus litigation better determined in accordance with justice.¹²

It appears then that the focus nowadays lies more within the realm of professional conduct regulation. Menon CJ, in Kurubalan¹³, recognised that while the justice system itself may be more resistant to interference by “unscrupulous” individuals, it remains that “a lawyer with a personal economic state in the litigation … faces a potential and often acute conflict of interest”.¹⁴ This may surface as a loss of professional objectivity, or even a temptation to pervert the course of justice, on the part of the lawyer.¹⁵ The considerations as highlighted by the Court of Three Judges are chiefly the administration of justice, and the safeguarding of confidence and honour in the legal profession.¹⁶

THE EXCEPTION CREATED

While the decision in Kurubalan plainly reaffirmed the applicability of the law of champerty to the regulation of legal professionals (having ordered a six-month suspension on the lawyer in breach), it also appeared to have created an exception, albeit in obiter dicta. The Court of Three Judges stated that:¹⁷

[I]t would be permissible and even honourable for an Advocate and Solicitor to act for an impecunious client in the knowledge that he would likely only be able to recover his appropriate fees or disbursements if the client were successful in the claim and could pay him out of those proceeds or if there was a costs order obtained against the other side.

[emphasis in original]

On its face, this is indeed a classic situation whereby champerty should be made out. The lawyer in this case would be making an agreement with the client such that he would get paid based on the results of the litigation. In this sort of situation, it is submitted that the public policy against champerty still triggers, as the lawyer indeed has an economic stake in the litigation (since he only gets paid if the results are favourable), one which may present a conflict of interest in the way he acts for the client. The Court’s explanation that such an arrangement would not be caught by s. 107 of the Legal Profession Act because it “would not amount to acquiring an interest in the fruits of litigation” ¹⁸ is not entirely satisfactory, as the lawyer is still personally and economically interested in the outcome of the litigation, which determines whether he gets any remuneration from the work rendered.

However, this exception has arguably been rightly created. In this particular scenario, the Court of Three Judges appeared to have had in mind an overriding policy reason in the form of “ensuring access to justice”.¹⁹ As stated previously, the policy considerations driving the enforcement of the law of maintenance and champerty are not immutable. It changes based on the development of the society. The concern for equal access to the justice system (regardless of the ability to pay) is one that has been raised in recent times. This is likely because of skyrocketing legal costs, leaving the less well off of the society unable to even contemplate legal action. While the call for more pro bono work on the part of lawyers has been repeatedly sounded, this exception provides an alternative route for lawyers to render aid to people who would otherwise not be able to afford legal representation.

It can thus be said that the policy consideration of equal access to justice is of overriding importance, only, as emphasised by the Court, in the case of an impecunious litigant. In such situations, the law of maintenance and champerty should not apply to limit lawyers who are genuinely acting in the best interests of the client, so that the client is not denied the opportunity to seek justice simply because of the lack of financing.

On the other hand, whether such an exception to the law of maintenance would stifle pro bono work remains to be seen. This could be an unforeseen consequence of the exception. Since both lawyers and clients would see the situation envisioned by the exception as a win-win situation, there is no stopping all pro bono work (which often involves impecunious clients in any case) from turning into a advocate-client relationship with an arrangement where the lawyer only recovers his fees or disbursements if the claim is successful or if costs are ordered against the other party. However, this development could still prove to be an advantageous one, especially for litigants stuck between the means-testing threshold of pro bono agencies and the reality of being able to afford good legal representation.

GOING FORWARD As the Court of Three Judges emphasised, outside of this narrow exception, lawyers who enter into champertous agreements can still expect a “substantial period of suspension”, “until and unless there is a change in the law”.²⁰ The decision should not be seen as having changed any law in relation to the law of champerty, but rather as a harbinger of changes to come. The laws prohibiting champerty still remains good law in Singapore.

With the focus drawn towards the consideration of providing access to justice for all, it may be that the laws of champerty are due to change. Many other jurisdictions, including the UK and Australia, have recognised that a regime allowing contingency agreements, i.e. arrangements of payment based on the success of the litigation, or the amount of damages, may facilitate access to justice.²¹ In fact, contingency fee arrangements have already been suggested to the Parliament in 2007, particularly as a means to increase access to justice for plaintiffs who are impecunious, but do not qualify for legal aid.²²

Changing the law of champerty is a balancing exercise between the policy considerations that act as push and pull factors. This is a role best played the Parliament, who has the resources to undertake the required research into the social impacts as well the mandate of the people. Moreover, as mentioned by the Chief Justice, any reform would require “carefully drawn parameters that regulate the extent to which such fee arrangements would be permitted and this makes it a subject more suited for the legislature rather than for the courts to develop”.²³

For now, we should laud the creation of the exception. It provides, in the interim, an alternative route, that while not so extreme as allowing contingency fee arrangements, provides access to justice for impecunious clients. It stands apart from pro bono, and is an alternative avenue for lawyers to give back to society.

[1] The Law Society of Singapore v Kurubalan S/O Manickam Rengaraju [2013] SGHC 135 [Kurubalan] at [40]; Hill v Archbold [1968] 1 QB 686 [Hill] at 693.

[2] Camdex International Ltd. v Bank of Zambia [1998] 1 QB 22 at 29.

[3] Kurubalan at [40]; Otech Pakistan Pvt Ltd v Clough Engineering Ltd [2007] 1 SLR(R) 989 at [32].

[4] Hill at 693.

[5] Criminal Law Act 1967 (UK), c 58, s 13(1)(a).

[6] Cap 161, 2009 Rev Ed Sing.

[7] Cap 161, Section 71, 2010 Rev Ed.

[8] Stevens v Keogh (1946) 72 CLR 1 at 28.

[9] Hill at 697.

[10] Giles v Thompson [1994] 1 AC 142 [Giles] at 153.

[11] Jeremy Bentham, Defence of Usury, 4th ed (London: Payne and Foss, 1818) at XII.7, online: Library of Economics and Liberty < http://www.econlib.org/library/Bentham/bnthUs2.html#LETTER XII. Maintenance and Champerty>.

[12] Giles at 153.

[13] The Law Society of Singapore v Kurubalan S/O Manickam Rengaraju [2013] SGHC 135

[14] Kurubalan at [43].

[15] Thai Trading (A Firm) v Taylor [1998] EWCA Civ 370 at [28].

[16] Kurubalan at [45].

[17] Kurubalan at [82].

[18] Kurubalan at [83].

[19] Kurubalan at [89].

[20] Kurubalan at [81].

[21] Chua Thye Tan & Justin Yip, “Champerty: For the Promotion or the Subversion of Justice?” (2013) 19 Stamford Law Chronicle 5.

[22] Sing, Report of the Committee to Develop the Singapore Legal Sector (Final Report) (September 2007) at 30 – 31, online: Ministry of Law (Singapore) <http://www.mlaw.gov.sg/content/dam/minlaw/corp/assets/documents/linkclicke1d7.pdf>.

[23] Kurubalan at [46].