In Beijing Tong Gang Da Sheng Trade Co Ltd v Allen & Overy [2015] 3 HKLRD 247, the Court of Appeal maintained the lower court decision that a litigation funding agreement and assignment of a cause of action were champertous.

Background

The Defendants, a solicitors’ firm and a barrister respectively, were alleged to have provided negligent advice to a company (the Company) in about 2005 or 2006. The Plaintiff and the Company entered into a funding agreement whereby the Plaintiff agreed, inter alia, to lend $3.4 million to the Company at an interest rate of 25% for a term of 2 years for an intended litigation against the Defendants, guaranteed by the proceeds that the Company would recover from the Defendants, and entitling the Plaintiff to 20% of such proceeds. After the Company issued writs against the Defendant, the Company assigned to the Plaintiff the cause of action against the Defendant and, inter alia, the right to the proceeds arising from such action for $100,000 and 10% of the net proceeds of the action. The Defendants challenged that the assignment was champertous. The Plaintiff argued that it was a major creditor of the Company and its controlling shareholder and so had a genuine commercial interest in the enforcement of action.

Ruling

The Court of Appeal disagreed with the Plaintiff’s contention and upheld the court of first instance’s finding that both the funding agreement and the assignment were champertous. It was held that the Judge below had examined the totality of the facts in forming the views that the transactions would pose a genuine risk to the integrity of the court’s processes. The vastly disproportionate potential returns for the outlay in the funding agreement and the assignment created a serious doubt into the genuineness of the assertions of the Plaintiff.

General Principles on Maintenance and Champerty (as enunciated in the CFA decision Unruh v Seeberger [2007] HKLRD 414)

The core concepts of maintenance of champerty are as follows:
› Maintenance involves a person’s “officious intermeddling” in litigation in which he has no legitimate interest.
› Champerty is a particular kind of maintenance and involves a person taking a share of the proceeds of the litigation maintained.

There are several categories of exceptions:
› The common interest category which justified certain persons with a legitimate common interest in the outcome of litigation in funding it.
› Case involving access to justice considerations.
› A miscellaneous category of practices accepted as lawful including sale and assignment by a trustee in bankruptcy of an action commenced in the bankruptcy and the doctrine of subrogation as applied to contracts of insurance.

In considering whether a contract will be vitiated on the grounds of maintenance and champerty, public policy considerations shall be evaluated in light that:
› The fact that an arrangement may be caught by the broad definition of maintenance of champerty is not in itself sufficient to impose liability. It is necessary to examine the “totality of the facts” and ask whether they pose a genuine risk to the integrity of the court’s processes.
› Countervailing public policies must be taken into account, especially policies in favour of ensuring access to justice and of recognizing, where appropriate, legitimate common interests of a social or commercial character in the litigation.

The disciplinary inquiry in question was held in relation to a medical practitioner (“W”) in public. The initial sentence for a warning letter to be served on W was substituted by an order that W’s name be removed from the General Register for a period of 1 month after the Council was alerted by the media that W did not have a clear record. In the written decision given by the Council on the same day, the Council stated that they would expect legal representatives of a defendant to be frank with the Council in respect of the defendant’s disciplinary record in the future.

Enquiries on the identity of members sitting at the inquiry, the Legal Adviser of the Council and the defence counsel were made by a member of the public (“N”) who is unconnected with the case. N did not explain his purpose of the inquiry despite being repeatedly asked by the Council. N then applied for judicial review to quash the Council’s decision in refusing to disclose the requested information (“the Decision”). The Council relied on the Data Protection Principle 3 (“the Principle”) in Schedule 1 of the Personal Data (Privacy) Ordinance (Cap. 486) (“the PDPO”) to restrict disclosure to N.

The Court of First Instance allowed N’s application and quashed the Decision. Godfrey Lam J found that the Council had irrelevantly taken into account the Principle in making the Decision and failed to consider the requirements of the principle of open justice, which if applicable, would invoke section 60B(a) of the PDPO for exemption to the Principle.

Godfrey Lam J in his obiter stated that the principle of open justice was not limited to physical access to the court room where a judicial hearing is taking place and applied to all tribunals exercising the judicial power of the state. The public interest in the administration of justice and the accountability of the judicial process required basic information about the identities of the key persons who have taken part in a public judicial hearing should normally be published. If the information was not disclosed in the written decision of the tribunal, then it should be disclosed upon inquiry made at a time reasonably close to the hearing.

On 12 August 2015, our senior consultant Mr. Angus Forsyth and associate Ms. Hazel Wong delivered a presentation on Trade Descriptions and Marketing at the office of Clarins Limited.

Mr. Forsyth introduced the Trade Descriptions Ordinance (Cap. 362) and the applicable guidelines in relation to enforcement by the relevant authorities.

He then gave a presentation on the Code of Practice issued by the Communications Authority followed by a discussion of the relevant decided court cases to illustrate the application of the guidelines and Codes.

Please contact our Mr. Forsyth or Ms. Wong for any enquiries or further information about this event.

On August 12 2015, SW Head of Business Development (China), Ms. Connie Yeung was invited to attend offshore trusts training by one of the largest PRC IFAs, Credit Ease. More than 40 financial planners together with their high net worth clients participated in the training. Ms. Yeung introduced the legal concept of a family trust in a user friendly way and demonstrated how to achieve different clients’ objectives with a case study. After the meeting, Ms. Yeung interacted with all the senior financial planners and engaged in fruitful discussions.

Please contact our Connie Yeung for any enquiries or further information about this event.

We are delighted to announce that Stevenson, Wong & Co. has been shortlisted as a finalist by Asian Legal Business at the 14th annual Macallan ALB Hong Kong Law Awards in the award categories of “Arbitration Law Firm of the Year”, “Deal Firm of the Year” and “Litigation Law Firm of the Year”.

Awards will be presented on 11 September 2015.

The ALB Awards recognise the industry and excellence of people behind the great deals, tremendous projects and matters and cases that overturned landmark decisions to set an entirely new jurisprudence.

Please contact our Mr. Lui or Ms. Chui for any enquiries or further information about this article.

The UK Supreme Court delivered a decision on 29 July 2015 overturning a refusal of student loan to an overseas student for higher education. The subject overseas student came to the UK at the age of 6, attended primary and secondary schools there and recently secured a place at a UK university. She was refused a student loan under the Government backed scheme but the Supreme Court has now held that such refusal, which stops anyone apart from UK citizens and people with indefinite leave to remain status in the UK from obtaining a student loan, was disproportionate and unjustified and was thus overturned.

Source: http://www.workpermit.com/news/2015-08-06/court-overturns-refusal-of-student-loan-based-on-uk-immigration-status