Hugh James Involegal LLP v Berrymans Lace Mawer LLP & Anor

A claim assigned by administrators is not necessarily champertous merely because the assignee is not itself a creditor. The relevant question is whether the assignment falls within the recognised insolvency exception and gives creditors a benefit that would otherwise be unavailable. An assignee may also have a sufficient commercial interest through connected persons.

On a summary judgment application, the court must assess whether the claim has a realistic prospect of success without conducting a mini-trial. Insolvency does not by itself establish that a company was bound to fail, particularly where contingent and prospective liabilities require evaluation. An ATE policy may provide adequate protection against adverse costs where the risk of non-payment is fanciful rather than real.

The claimant, as assignee of Transform Medical Group CS Limited, alleged that the defendants negligently advised Transform not to disclose that it lacked insurance for some claims arising from PIP breast implants. The defendants sought summary judgment, strike-out for abuse of process, and security for costs.

The defendants argued that the assignment was champertous, that Transform would have failed in any event, that the uninsured claimants would have pursued their claims regardless, and that the claimant’s ATE insurance was inadequate. The issues were whether the claim had a realistic prospect of success, whether it was abusive, and whether security for costs was just.

1. Summary judgment. The applicable question under CPR rule 24.2 was whether the claim had a realistic prospect of success. The court was not to conduct a mini-trial. The claim was more than merely arguable on each material issue.
2. Assignment and champerty. The rule against assignment of a bare right to litigate remains a fundamental principle, subject to recognised exceptions. The insolvency exception was capable of applying where administrators assigned a cause of action to a person willing to pursue it, in return for a fixed sum and a share of recoveries benefiting creditors. It was not necessary that the assignee itself be a creditor. The assignment therefore had a realistic prospect of falling within the exception. Alternatively, the claimant had a realistic prospect of proving a sufficient commercial interest through its members and the intended distribution of recoveries.
3. Abuse of process. The claim was not a further attempt by the uninsured claimants to recover from Transform or its insurers. It was a professional negligence claim by an assignee against different defendants and based on a different cause of action. It was not an abuse under CPR rule 3.4(2).
4. Causation and loss. Although Transform was insolvent and ultimately failed, the evidence gave the claimant a realistic prospect of proving that the uninsured liabilities were a key factor in the decision to place Transform into administration. The court could not conclude summarily that Transform was bound to fail in 2012. Contingent and prospective liabilities had to be assessed in the circumstances, rather than treated automatically at face value. There was also a realistic prospect that earlier disclosure would have led most or all uninsured claimants not to join, or to seek removal from, the group litigation.
5. Security for costs. The governing question was whether there was a real risk that the ATE policy would fail to protect the defendants if the claim failed. On the evidence, the policy cap was unlikely to be insufficient, pre-inception costs were likely to be met from the claimant’s assets, and non-compliance or cancellation for fraud or recklessness was fanciful rather than real. It was therefore not just to order security under CPR rule 25.13 or payment into court under rule 24.6.
6. The defendants’ applications were dismissed. Consequential matters were to be dealt with by draft order and written submissions if necessary.

First-instance decision. No appeal history is stated in the judgment.