Dal-Sterling Group Plc v WSP South & West Ltd & Anor

An agreement under which a claims consultant assists in pursuing litigation in return for a percentage of any judgment or settlement may be champertous. The issue turns on the legal characteristics and potential harmfulness of the arrangement, including whether it creates an incentive to distort the claim. Actual distortion is unnecessary: an agreement may be champertous if it satisfies the applicable legal tests, even though the feared abuse does not occur. Earlier non-champertous work and unpaid fees do not necessarily remove the potential abuse created by a later litigation-support agreement. Permission to appeal should be granted where the point is properly arguable and merits consideration by a full court.

WSP, consulting engineers, engaged Dal-Sterling Group Plc to assist with a claim against London Underground Ltd concerning fees arising from Jubilee Line design work. A 1993 agreement provided for a percentage of sums recovered through negotiation and was accepted to be non-champertous.

After litigation began, WSP entered into a further agreement in 1997 under which Dal-Sterling would assist with presenting and repleading WSP’s counterclaim. The same percentage fee would be payable if WSP obtained judgment or reached a settlement. WSP subsequently recovered judgment.

The Technology and Construction Court held that the 1997 agreement was a variation of the earlier agreement and was not champertous. WSP sought permission to appeal. The central issue was whether the later agreement arguably created the type of incentive or potential abuse addressed by the law of champerty.

1. Application allowed. Permission to appeal to a three-judge court was granted. The Court of Appeal did not finally determine whether the agreement was champertous.
2. Per Lord Justice Keene, an agreement may be champertous where a person provides material support for litigation in return for a share of its proceeds. The relevant concern is the potential for the maintainer to distort the litigation for personal gain, including by inflating the claim, suppressing evidence or influencing witnesses, as discussed in Re Trepca Mines [1963] Ch 199.
3. Actual distortion is not required. The legal character of the agreement depends on whether it satisfies the applicable tests, rather than on whether the feared abuse in fact occurs.
4. The judge’s reliance on the fact that the 1997 work reworked earlier non-champertous work was not necessarily persuasive. The earlier work remained unpaid, and Dal-Sterling had no legal relationship with London Underground or legal status in the litigation. It was therefore properly arguable that the earlier work did not remove the potential abuse.
5. The harmfulness of the arrangement was a relevant consideration, consistently with the reference to Giles v Thompson [1994] 1 AC 142 at 164E. The growing use of claims consultants in construction disputes also justified consideration by a full court.

The application was allowed, with the appeal directed to be heard by a three-judge court within one day.

• Court of Appeal (Civil Division): permission to appeal granted from the Technology and Construction Court decision of Judge Richard Seymour QC dated 18 July 2001. The proposed appeal was to be heard by a three-judge court.
• Technology and Construction Court: held that the 1997 agreement was not champertous.