The Commercial Law Practice Limited & Anor v Atkinson Wheller Limited

On an application for summary judgment, the court should determine a short point of law where the evidence is sufficient and no realistic prospect exists that further evidence would affect the outcome.

An assignment by a solicitor of a client’s contentious cause of action to the solicitor, with the solicitor entitled to share in the proceeds, is champertous and void. The genuine commercial interest test applicable to non-lawyer assignments does not govern such a transaction. The assignment is not converted into a permitted conditional or damages-based fee arrangement merely because it was made before proceedings began.

Where a claim is defective because the claimant lacked title to sue when proceedings were issued, the court may nevertheless permit an amendment relying on a later assignment, unless the proceedings constitute an incurable nullity. The discretion is governed by the overriding objective and justice.

The claimants brought a professional negligence claim against a patent, trademark and design attorney. The second claimant had assigned his causes of action to the first claimant, his solicitors, shortly before his bankruptcy. The assignment provided that the first claimant would pursue the claim and retain 20 per cent of any recovery.

The defendant applied for summary judgment or strike out, arguing that the assignment was champertous and void and that neither claimant could maintain the declaratory claims. The first claimant sought permission to amend to rely alternatively on a fresh assignment made by the second claimant’s trustees in bankruptcy.

The central issues were whether the first assignment was valid, whether the first claimant could amend to plead the later assignment, and whether the second claimant’s claim for declaratory relief had reasonable grounds.

1. Summary judgment. The validity of the First Assignment raised a short question of law. The court had the evidence necessary to decide it, and there was no suggestion that further evidence at trial could affect the outcome.
2. The First Assignment could not be severed so as to treat the first claimant’s 20 per cent entitlement as something less than a right to share in the proceeds. In substance, it transferred the second claimant’s contentious cause of action to his solicitors, who undertook to pursue it in their own right and to profit from it.
3. The arrangement was neither a conditional fee agreement nor a damages-based agreement sanctioned by the Courts and Legal Services Act 1990. Nor was it a non-contentious business agreement under the Solicitors Act 1974. The transaction fell within the lawyer side of the distinction explained in Farrar v Miller, and the genuine commercial interest test had no relevance.
4. The First Assignment was therefore champertous and void. The first claimant had no title to sue. The second claimant’s title had passed to his trustees in bankruptcy. Summary judgment was granted against the first claimant.
5. The proposed amendment relying on the Second Assignment was permitted. The cases concerning incurable nullities involved administrators who lacked the grant of representation necessary to institute proceedings. This case fell within the modern discretionary approach to post-issue assignments. The facts concerning the assignments were brief and substantially undisputed; no trial date or directions timetable was imperilled; and allowing amendment best served the overriding objective.
6. The alternative pleading that the First Assignment was valid was refused. The second claimant’s separate claim for declaratory relief was struck out because it added nothing to the claim which the first claimant could pursue after amendment.