R (Factortame Ltd) v Secretary of State for Transport, Local Government and the Regions (No 8)

An agreement by a person providing services ancillary to litigation is not champertous merely because payment is contingent on success or calculated as a percentage of the recovery. The decisive question is whether, in its nature and surrounding circumstances, the agreement tends to undermine the due administration of justice.

Courts and Legal Services Act 1990, section 58 regulates conditional-fee agreements made by advocates and those conducting litigation. It does not extend to ancillary services supplied by persons without rights of audience or a right to conduct litigation. A contingent fee for an expert witness is highly undesirable and will rarely be acceptable, but an interest in the outcome does not automatically make expert evidence inadmissible.

The Secretary of State appealed from Master Wright, Costs Judge, who held on 24 October 2001 that agreements between the claimants and Grant Thornton were not champertous.

The agreements required Grant Thornton to prepare and support complex damages claims arising from the wider Factortame litigation. Their remuneration was fixed at 8% of the final settlement. Grant Thornton undertook forensic accountancy and administrative work, assisted independent experts, and advised on settlement, while the claimants' solicitors retained conduct of the litigation.

The central issue was whether the contingent, percentage-based remuneration made the agreements unenforceable as contrary to public policy, either under the law of champerty or by analogy with statutory conditional-fee regulation.

1. Appeal dismissed. The court upheld the Costs Judge's conclusion that the 1998 agreements were not champertous and were enforceable.
2. Maintenance and champerty survive after the Criminal Law Act 1967 as rules of public policy capable of invalidating a contract. The modern inquiry is fact-sensitive. The court must assess the agreement's tendency to impair the administration of justice, including whether it creates a real incentive to inflate damages, suppress evidence, suborn witnesses, or otherwise distort the litigation.
3. Courts and Legal Services Act 1990, section 58 applied only to conditional-fee agreements for advocacy or litigation services supplied by persons exercising a right of audience or a right to conduct litigation. Grant Thornton supplied ancillary services and had neither right. Section 58 therefore did not itself invalidate their agreements, although it informed the relevant public-policy context.
4. The court distinguished the position of expert witnesses. An expert's overriding duty to the court makes outcome-contingent remuneration highly undesirable; permission for such an arrangement would be exceptional. Yet an interest in the result does not automatically exclude an otherwise qualified expert. The interest should be disclosed and admissibility managed by the court. Grant Thornton had not acted as expert witnesses, having engaged independent experts instead.
5. The agreements did not put the purity of justice at risk. The claimants required assistance to establish exceptionally complex damages and had little alternative funding. The 8% fee was not extravagant. Grant Thornton did not conduct the litigation, had no role in the pending liability appeal, worked transparently with the opposing experts on the damages model, and remained subject to the control of experienced solicitors and counsel. The arrangements promoted access to justice without creating an unacceptable risk of abuse.

The appeal was dismissed with costs, subject to detailed assessment if not agreed, and the defendant was ordered to pay £100,000 on account of the costs of the appeal and preliminary issue.

• Court of Appeal: dismissed the Secretary of State's appeal in [2002] EWCA Civ 932.
• Supreme Court Costs Office: Master Wright, Costs Judge, held on 24 October 2001 that the agreements were not champertous.