Justice Corporation, Champerty and Maintenance

Justice Corporation is a new company that promises to revolutionize access to justice in Australia. It is a specialist financier which will provide money to people who cannot afford to fund their own legal actions in exchange for a percentage of any verdict. While this might seem like a simple enough matter there are historical legal impediments to it. This activity, technically called champerty, has long been held to be illegal.

While there was never a writ of champerty at common law it was the subject of much statutory regulation.

One of the reasons for such regulation was that powerful nobles would use champerty to enrich their estates at the expense of their vulnerable neighbours. Coupled with the fact that many judges and sheriffs were often the beneficiaries of champertous practices, this caused the legal system to become an engine of oppression. Champerty was prohibited to prevent people who might influence the administration of justice from acquiring an interest in the subject of suits.

In the United Kingdom, Victoria and New South Wales champerty is no longer a crime or a tort, but it is still a matter for contract law. The critical issue here is whether Justice Corporation’s funding agreement would be found to be contrary to public policy. We argue that the only way this question can be answered properly is for the courts to revisit the question of champerty in light of modern circumstances.

Traditionally, Australian courts have not reconsidered the rationale for holding champertous contracts void as against public policy: see for example Newtown v. Grapes (1910) 12 WALR 86. It is well established, however, that , ‘...the determination of what is contrary to the so-called ‘policy of law’ necessarily varies from time to time. Many transactions are upheld now by our courts which a former generation would have avoided as contrary to the supposed policy of the law." - Judicial Committee in Evanturel v. Evanturel

It is arguable that the court should receive evidence as to the prevailing public policy circumstances of the time.

There are not many authorities which deal with the specific reasons why champerty is against public policy in the modern context. Many of the cases refer to it as evil without particular reference to reason or simply cite old cases decided during the currency of some form of statutory prohibition.

In Roux & Ors v. Australian Broadcasting Commission [1992] 2 VR 577, Byrne J, sets out some reasons champerty is contrary to public policy in a modern sense as follows:

This public policy is not that of medieval times, but a modern public policy which must have regard to litigation and its funding in the contemporary world (Stevens v. Keogh (1946) 72 CLR 1 at 28 per Dixon J.). … Any modern formulation must have regard to currently accepted notions at a time when much private litigation is funded by the state, by insurance companies or by trade unions; where class actions may involve the introduction of outside funding; where book debts are assigned or factored; where contingency fees are not looked upon with unqualified dismay: Sheehan v. Sheehan (1990) FLC 92-129. … On the other hand, there is an obvious difficulty where an impecunious nominal plaintiff is funded by a wealthy supporter which has an interest in the outcome of the litigation without any risk of paying costs if the maintained plaintiff fails. Furthermore, such a maintainer is not easily amenable to the ordinary processes of the court, such as discovery or interlocutory directions…

No reason is given by his Honour for this final point that the court would be astute to prevent trafficking in litigation or speculation on causes of action

We have addressed all of the concerns raised in Byrnes J’s judgement. Justice Corporation is responsible for the payment of any costs order made against the Claimant and it agrees with the Claimant that any document in its possession is discoverable by the Claimant. In relation to concerns about amenability to interlocutory directions, Justice Corporation is not involved with the conduct of the matter therefore the need to make interlocutory orders in respect of it is obviated.

In a more recent case, Magic Menu Systems Pty Ltd & Anor v. AFA Facilitation Pty Ltd & Ors. (1997) 142 ALR 198, the full Federal Court expressed concerns of a different nature. There the court was concerned with an agreement whereby the funding party had control over settlement, access to discovered or subpoenaed materials, the choice of lawyers, and the content of instructions given in the litigation generally. Moreover, the funding party did not make itself responsible for adverse costs in the litigation were the claim to fail. None of these difficulties arise in our Litigation Agreement.