The ancient rule of champerty cannot derail a conditional fee agreement (CFA), the Court of Appeal has ruled in a landmark case.
Sibthorpe and Morris v London Borough of Southwark [2011] EWCA Civ 25 concerned a council tenant who was pursuing the council for repairs to her flat and entered into a CFA in order to bring legal action. The CFA specified a 10% success fee and a term to the effect that the solicitor would indemnify the claimant against payment of costs in the event that she was unable to obtain an insurance policy.
The council contended the indemnity clause fell foul of the law of champerty, as it is unlawful for a solicitor to agree to conduct litigation on terms which give the solicitor a financial interest in the outcome unless specifically permitted by legislation. It was common ground that there is no legislation allowing a solicitor to underwrite a client’s liability for costs.
The court held that the CFA was binding. Lord Neuberger MR said: “We should accede to the argument that it would be inappropriate in the 21st century to extend the law of champerty...judicial observations strongly suggest that champerty should be curtailed not expanded, and, given that champerty is based on public policy, it is hard to see how arrangements such as the indemnity, at the very least in connection with litigation such as that in these cases, are against the public interest or undermine justice.”
