IESC 44 · Supreme Court

AN CHÚIRT UACHTARACH

THE SUPREME COURT

S:AP:IE:2017:000062

Clarke C.J.

O’Donnell J.

McKechnie J.

Dunne J.

Finlay Geoghegan J.

Between/

SPV Osus Limited

Plaintiff/Appellant

AND

HSBC Institutional Trust Services (Ireland) Limited,

HSBC Security Services (Ireland) Limited,

Optimal Investment Services S.A. and

Banco Santander S.A.

Defendants/Respondents

Judgment of O’Donnell J. delivered on the 31st day of July 2018

1 The complex facts in this case are set out in the lucid judgment of the High Court, which was reviewed comprehensively in the

judgment of Ryan P. for a unanimous Court of Appeal in SPV Optimal Osus Ltd. v. HSBC Institutional Trust Services (Ireland) Ltd.

[2017] IECA 56, (Unreported, Court of Appeal, 2 March 2017). What follows is a compressed account which will be sufficient, I hope,

to allow the legal issues arising to be addressed. Those seeking greater detail should have recourse to the High Court judgment: SPV

Osus Ltd. v. HSBC Institutional Trust Services (Ireland) Ltd. [2015] IEHC 602, (Unreported, High Court, Costello J., 5 October 2015).

2 The funds industry is a major part of the financial services sector, and, consequently, of international commerce. Billions of euro are

transmitted and invested through such funds. UCITS funds (Undertakings for Collective Investment in Transferable Securities) are

recognised and regulated under the law of the European Union, which requires compliance with a set structure, involving (among

other things) the establishment of an administrator and a custodian. This country has built up significant expertise in this area, and a

number of funds operate through custodians and administrators based in Ireland, even though the funds may both originate and be

invested in very different locations around the globe. In this case, funds originating with clients of the fourth defendant, Banco

Santander S.A. (“Santander”), were invested through New York, but the custodian appointed was the first defendant, HSBC

Institutional Trust Services (Ireland) Limited. The second defendant, HSBC Security Services (Ireland) Limited, was appointed an

administrator. It is due to the location of these two Irish-incorporated companies that this international litigation occurs here.

3 Optimal Multi Advisors Limited (“OML”) is an investment company incorporated in the Bahamas. The first and second defendants

contend that it is a collective investment scheme offered to external investors. The plaintiff describes OML as an indirect subsidiary of

Santander. Nothing appears to turn on this for present purposes. Certainly, OML offered investors who were or became clients of

Santander an opportunity to have access to investment in funds, whether directly or indirectly. One such fund was described as the

Strategic Series. OML formed a number of companies to hold assets linked to the Strategic Series, which had the capacity to invest

the assets and realise the investment in due course. In this case, Optimal Strategic US Equity Limited (“Optimal Strategic”) was the

vehicle used in respect of the Strategic Series of shares. I infer from the description given by both parties and from the judgments of

the High Court and the Court of Appeal that investors did not obtain any direct interest in Optimal Strategic. However, for present

purposes it is sufficient, I think, to understand Optimal Strategic as the company representing the interests of the individual

investors, while recognising that, as a matter of law and structure, the situation may have been much more complex. If this litigation

proceeds in any jurisdiction, it may become necessary to explore these issues further.

4 As of 30 November 2008, nearly all of the assets of Optimal Strategic were invested in Bernard L Madoff Investments LLC (“BLMIS”

or “Madoff”) which had been appointed sub-custodian by HSBC Institutional Trust Services (Ireland) Limited. The net asset value of

the investments, which I understand to be the paper value of the investments as of November 2008, was US$2.9 billion. The net

equity value (that is, the amount invested less the amount withdrawn) was US US$1.5 billion. On the face of it, the investment in

BLMIS had been very profitable.

5 On 11 December 2008, BLMIS collapsed due to a long running and very large-scale Ponzi-type fraud. The liquidation of BLMIS

commenced in the US Bankruptcy Court of the Southern District of New York. In practical terms, the assets of Optimal Strategic

became whatever value could be extracted from the collapse of the Madoff business. While the Madoff enterprise was, by the time of

its collapse, an enormous Ponzi scheme, its nature was such that BLMIS retained control of significant assets (even if those assets

were insufficient to pay all creditors in full). Therefore, there was a possibility of a substantial recovery of the monies invested

through the liquidation of BLMIS.

6 The administration of a large bankruptcy of an investment business can be a very detailed and complex task. In simplified terms, the

procedure in New York in respect of funds invested provided for what were known as “Allowed Customer Claims” (“ACCs”), which

carried an entitlement to be paid in priority in the liquidation. In the Madoff bankruptcy, there was a substantial dispute as to the

correct valuation of such claims, and, in particular, whether they should be valued by net asset value or net equity value. As the

figures set out at paragraph 4 above demonstrate, the resolution of that dispute would have a significant impact on the amount

recovered by claimants on the one hand, and the assets available for unsecured claims on the other. In the event, that issue was

resolved in favour of the trustee in bankruptcy, and the ACCs were to be valued by reference to net equity value. In the case of

Optimal Strategic, this meant that its ACC was valued in the region of US$1.5 billion. This was, of course, a very substantial sum,

which represented a significant recovery. The balance of the claim of approximately US$1.3 billion was, however, also a claim in

bankruptcy, albeit unsecured and without any priority. Whether there would be any recovery in this regard would depend on many

factors, including the amounts recovered by the trustee and the number of claimants. It is also important to note that there were

also some other forms of recovery for investors, which, although small in relative terms, are nonetheless potentially significant for the

purposes of the legal argument. There was a Securities Investor Protection Corporation (SIPC), which provided a fixed amount of

US$500,000. There was also the possibility of a victim remission scheme specific to Madoff investors. Finally, of course, there was the

possibility of private law claims in contract and/or tort against other parties involved in the investment. As it happens, and perhaps

not irrelevantly, one such claim by another fund had been litigated in Ireland and a settlement reached after a number of days at

hearing.

7 The ACC was clearly the most substantial and also assured form of recovery for investors, but it did not amount to immediate

recovery of a fixed, certain amount. There was the possibility of variation in terms of the total payment, and, moreover, some time

could elapse before final payment. However, in New York there is a market in distressed investments, and a secondary market

developed for Madoff ACCs. This meant that Madoff investors could crystallise their losses, and receive an immediate payment to

realise their investment. In return, purchasers obtained the right to recovery in due course, with the expectation of some profit,

particularly if the recovery was greater or more expeditious (or both) than anticipated.

8 A procedure for assignment of the claims was recognised by the Trustee in Bankruptcy and permitted by the court supervising the

bankruptcy. For reasons of practice, apparent administrative convenience, and perhaps clarity, the scheme required that any

assignment of the claim in relation to Madoff be an assignment of all connected claims held by the investor. However, in the case of

Optimal Strategic, this route was not readily available for (as I understand it) at least two reasons. Optimal Strategic and its

investors were not able to avail of the process directly; first, because the structure of Optimal Strategic was such that the investors

could not make a separate decision to realise their individual claims or await payment in due course, and second, because even if a

collective decision could be arrived at to assign the ACC, a claim for US$1.5 billion or more was not readily marketable, since few

potential investors would have the appetite, or the necessary capacity, to acquire such a large claim. Accordingly, a relatively

sophisticated structure was devised to allow Optimal Strategic investors to participate in the opportunity presented by the existence

of the secondary market, and the possibility of assignment of claims recognised by the Madoff bankruptcy.

9 The transaction involved four related steps. The first was the assignment of the allowed claim to SPV Optimal Osus Limited (“SPV

Optimal Osus”), as the plaintiff was then known, which, as the name suggests, was a special purpose vehicle set up for this sole

purpose. The second step was to afford the holders of the Strategic Series shares an option to either (i) exchange their shares for

SPV Optimal Osus shares; (ii) exchange their strategic shares for shares in SPV Optimal Osus and for those shares to be sold; or (iii)

to retain their existing shares. The third step was the compulsory redemption of the Strategic Series shares of those investors who

had elected to exchange them for Osus shares under options (i) or (ii). The final step was then the sale of Osus shares by electing

investors (those in option (ii)) on the secondary market by way of auctions which were held in May 2011, 2012, and 2013

respectively. It was not certain that after 2011 any further auction would be held, and there was no guarantee that any auction

would result in a successful sale of the shares. In the event, however, (as might have been anticipated) the initial auction was

successful and was followed by two more. By this process, distressed debt investors eventually held approximately 93% of the shares

in SPV Optimal Osus.

10 A key step in this transaction, which is now the focus of these proceedings, was an assignment by Optimal Strategic to SPV

Optimal Osus, executed on 6 May 2011. That assignment was in the following terms:-

“Optimal Strategic US Equity Ltd. … in consideration of the transfer of 100% of the outstanding shares of SPV Optimal

SUS Ltd. … hereby unconditionally and irrevocably sells, transfers and assigns to Assignee, and Assignee hereby

purchases, as of the date hereof, (a) an undivided 100% interest (the “Purchased Claim”) in Assignor’s right, title, and

interest in and to the allowed claim filed by Assignor (the “Proof of Claim”) in the proceedings under the Securities

Investor Protection Act of 1970 in the United States Bankruptcy Court for the Southern District of New York, (the

“Court”), concerning Bernard L. Madoff Investment Securities, LLC ( in liquidation) (“Debtor”), case number 08-01789

(BRL) (the “Proceedings”), (b) all rights and benefits of Assignor related to the Purchased Claim, including (i) any right to

receive cash, securities, instruments, interest, penalties, fees or other property that may be paid or distributed with

respect to the Purchased Claim, (ii) any action or claim (including any “claim”) (as defined in 11 U.S.C. and §101(5)) of

any nature whatsoever, whether against the Debtor or any other party, arising out of or in connection with the Purchased

Claim, (iii) voting rights, but only to the extent related to the Purchased Claim, (c) all rights of Assignor under paragraph

13 of the Agreement dated as of May 22, 2009 by and among Irvine Pickard, Trustee for the liquidation under the

Securities Investor Protection Act of 1970, as amended, for Bernard L. Madoff Investment Securities, LLC (the “Trustee”),

Assignor and Optimal Arbitrage Limited (the “Settlement Agreement”), (d) any other rights, action or claim arising out of

the Assignor’s investment in Debtor including, but not limited to, any claim the Assignor may have with respect to any

current or future victim remission proceedings developed by the United States Department of Justice and (e) any and all

proceeds of any of the foregoing (collectively, as described in clauses (a), (b), (c), (d) and (e) the “Transferred Rights”).

This Assignment of Claim (this “Assignment”) is an absolute and unconditional assignment of the Transferred Rights for the

purpose of collection and shall not be deemed to create a security interest.”

Two things might be noted about this assignment. First, the clear context (and perhaps the primary object) was the assignment of

the ACC (the “Purchased Claim”). Second, the assignment also appeared to purport to assign “any other rights, action or claim arising

out of the of the Assignor’s investment in Debtor”.

11 While the terms of this assignment were the subject of dispute in the courts of New York, for the purposes of these proceedings

and of this application it is to be assumed that the assignment extended to all claims that the investor might have, that it assigned

the entitlement of Optimal Strategic to bring any claim against the present defendants, and that the assignment of all such claims

was part of the procedure approved by the New York Bankruptcy Court. Furthermore, it is important to note that, as of the date of

the assignment, SPV Optimal Osus was 100% owned by Optimal Strategic, and the directors were common. It appears clear that the

purpose of the assignment and the transaction at this point was merely to put the ultimate investors in the Strategic Series shares in

Optimal Strategic in a position to realise the benefit of their investment if they wished, insomuch as it had now become the right to

obtain the benefit under the ACC procedure in the bankruptcy. The plaintiff accepts that the evidence establishes the primary

purpose of the assignment was the assignment of the Allowed Claim, and that there was no intention on the date of the assignment

to institute any proceedings. However, by the same token, the assignment of “any other rights, action or claim” was an integral part

of the assignment, and it has not been suggested that the assignment was a device to conceal the bare assignment of a cause of

action.

12 In 2014, however, things changed. The distressed debt investors held approximately 93% of the shares in the plaintiff. They took

control of the company, and the board of directors which had been appointed by Optimal Strategic/Santander was replaced by new

directors. These proceedings were commenced thereafter. I infer that the distressed debt investors saw at that point (or, more likely

perhaps, when acquiring the shares) that there was an opportunity to maintain these proceedings (against, it should be noted, not

just the HSBC entities but also OML and Santander) in relation to the loss suffered by SPV which had not been recouped by the ACC.

While such proceedings may be complex and costly, the fact remained that, if successful, or even if compromised for a fraction of the

claim, the potential amount involved was so substantial that it could result in a very significant return for the new shareholders in the

plaintiff.

13 These proceedings were commenced in December 2014. The statement of claim expressly pleaded the assignment. The first and

second defendants then brought this application to have the proceedings dismissed in limine on the basis that the assignment of 6

May 2011 was “contrary to public policy, void and unenforceable as a matter of Irish law”. The High Court (Costello J.) held that the

assignment was void as the assignment of a bare right to litigate, and the Court of Appeal (Ryan P., Peart and Irvine JJ.) upheld that

decision.

14 This court granted leave to appeal to pursue the following issues:-

(a) The circumstances in which, as a matter of Irish law, an assignment of a cause of action will be recognised as

valid (insofar as potentially relevant to the circumstances of this case); and

(b) The application of the principles identified in the answer to (a) to the facts of this case for the purposes of

determining whether the Court of Appeal was correct to determine that the assignment on which Osus relies should

not be recognised as a matter of Irish law.

15 This case involves a consideration of the law relating to the old torts (and crimes) of maintenance and champerty, but it is

accepted that the plaintiff is not guilty of either tort (or crime). Rather, the defendants say that the assignment is void because, in

the antique language of this area of the law, it “savours of champerty”. In essence, what is said is that, quite apart from conduct

which amounts to a tort (of champerty or maintenance) giving rise to claims for damages, it is well established that public policy also

requires that effect should not be given to a transaction which constitutes either tort. Therefore, an agreement amounting to

maintenance or champerty will be void and unenforceable. It is also accepted that certain assignments of causes of action offend the

self-same public policy, and therefore that the court should not give effect to any such assignment, but should rather treat it as

void. Maintenance is the unjustifiable provision of financial support for litigation in which the maintainer has no legitimate interests.

Over time, the common law has greatly relaxed the prohibition on third party support for litigation, recognising that there are a

number of legitimate reasons for such support. Champerty is a particular form of maintenance which involves a person providing

financial support for the action in return for a share of the proceeds. Champerty was always regarded as more offensive to public

policy than simple maintenance because it contemplated the possibility of pecuniary benefit for the person financing the litigation.

Assignments of a bare cause of action can therefore be seen as almost the obverse of champerty: whereas in champerty support for

litigation is provided in return for payment, in assignment payment is made in return for the action itself. As such, assignment is

perhaps if anything more offensive to public policy: in its purest form, an assignment of a bare cause of action involves the outright

sale of a cause of action which is then pursued by the assignee (who has no interest or connection to the action other than that

created by the assignment itself) to the exclusion of the assignor.

Irish law

16 The parties do not differ significantly on the case law relevant to this issue. They do, however, disagree on the question of the

appropriate conclusions to be drawn from it. I consider that this issue is best addressed by attempting to analyse a number of

decisions which are not only complex and nuanced decisions in themselves, but which must also be read with an appreciation that the

public policy considerations involved are acknowledged to have developed and altered over time. It may therefore be useful to set out

the relevant legislation and case law at this point, before considering the arguments made by the parties in respect thereof.

17 A starting point is the provisions of s. 28(6) of the Supreme Court of Judicature Act (Ireland) 1877, mirroring in this respect the

provisions of s. 25(6) of the Supreme Court of Judicature Act 1873 applicable in England and Wales, which in that jurisdiction are now

to be found in s.136(1) of the Law of Property Act 1925. Section 28(6) provides:-

“Any absolute assignment, by writing under the hand of the assignor (not purporting to be by way of charge only),

of any debt or other legal chose in action, of which express notice in writing shall have been given to the debtor

trustee or other person from whom the assignor would have been entitled to receive or claim such debt or chose in

action, shall be and be deemed to have been effectual in law (subject to all equities which would have been entitled

to priority over the right of the assignee if this Act had not passed,) to pass and transfer the legal right to such

debt or chose in action from the date of such notice, and all legal and other remedies for the same, and the power

to give a good discharge for the same, without the concurrence of the assignor”.

18 The plaintiff/appellant argues that s. 28(6) is a statutory recognition of the lawfulness of assignments of choses in action, i.e.

assignments of claims recoverable by way of litigation. The plaintiff suggests, therefore, that this is an important point of distinction

with the law on maintenance and champerty, since for much of their history in the common law world maintenance and champerty

were both criminal and tortious (and remain so in Ireland), and therefore are wrongful per se. It is therefore suggested that, given the

statutory recognition of the possibility of assignments of choses in action contained in s.28(6), the legal analysis should start from a

presumption of validity unless precluded by considerations of public policy, rather than the reverse. However, the defendants cite the

observations of Stirling L.J. in Dawson v. Great Northern and City Railway Co. [1905] 1 K.B. 260 at pp. 270 to 271, to the effect that

the Supreme Court of Judicature Act 1873 (the equivalent of the Supreme Court of Judicature Act (Ireland) 1877) effected a

procedural change only, permitting the assignment in law of what hitherto had only be assignable in equity. The Act did not purport to

alter in any way the distinction between the classes of assignments which were lawful and those which were void as contrary to

public policy, being those constituting maintenance or champerty or savouring of champerty. While it is not in any way decisive in this

case, I consider that the defendants are correct in this regard at least. The Judicature Acts represented the procedural fusion of law

and equity rather than the statutory regulation for the first time of the substantive law relating to the assignment of choses in

action. Prior to the Judicature Acts, equity did not permit assignments savouring of champerty and the Acts did not make any change

in that regard. However, the very existence of s.28(6) is relevant in one respect. It illustrates the fact that there is no absolute rule

against the assignment of rights of action. In some cases, such as assignment of debts, assignment is permissible, and arguably to be

encouraged. There are, therefore, some permissible and legitimate assignments of a right to litigate, and other assignments which are

impermissible and void. The distinctions made between the two classes are sometimes excessively refined and difficult to follow. That

difficulty is compounded by the fact that, as with any question of public policy, it is recognised that the approach is one which has

changed over time, sometimes quite significantly. Nevertheless, some clear themes do emerge.

The Irish cases

19 Most of the Irish case law is relatively recent in origin and concerns the law of maintenance and champerty rather than assignment

of choses in action. Fraser v. Buckle [1994] 1 I.R. 1 concerned the validity of heir-locator agreements. In a careful judgment in the

High Court, Declan Costello J. quoted with approval the observations of Lord Denning M.R. made in In re Trepca Mines Ltd. (No. 2)

[1963] Ch. 199 at pp. 219 to 220 to the effect that champerty was more obnoxious to the law than maintenance (the law relating to

which had itself undergone considerable liberalisation), because of the abuses in relation to litigation to which it could give rise.

Champerty was unlawful and champertous agreements treated as void not because it was necessarily the case that all such

agreements could give rise to the abuses envisaged (such as payments to witnesses, suppression of evidence, and other evils which,

of course, could also occur in litigation without any champertous agreement), but rather because the law treated all such agreements

as void on the basis that the risk alone of such abuse was enough. To that extent, an agreement, once considered champertous, was

void without inquiry as to whether the risk of abuse which underpinned the law of champerty was likely to occur in the particular

case. In Fraser v. Buckle, Costello J. also held that it was irrelevant whether it could be shown that the agreement was permissible

by the law of the country in which it was made, or otherwise by the proper law of the contract. The rule was a rule of public policy,

and therefore if the performance of the agreement required resort to an Irish court, Irish public policy could and did apply. In doing so

he adopted the statement in Binchy, Irish Conflicts of Law (1st ed., Butterworth, 1988) at p. 549:-

“Under the Irish internal law of contract, a contract may be invalid as being opposed to public policy. The fact that

application of a foreign law would be contrary to Irish public policy is a reason for holding it invalid, not because it

offends against the public policy of some foreign law (such as its proper law) but because it offends against our

own.”

20 It is noteworthy that the same rule was to be found in the then extant edition of Dicey and Morris on the Conflict of Laws, (11th

ed., Stevens & Sons, 1987, pp. 801 to 802):-

“The validity or invalidity of a contract must be determined in accordance with English law, independently of the law

of any foreign country whatever, if and so far as the application of foreign law would be opposed to the public

policy of English law.”

21 Costello J. also adopted the approach of the United Kingdom courts in more recent cases such as Giles v. Thompson [1994] 1 A.C.

142, in which the House of Lords had held that an agreement to provide replacement cars for persons involved in road traffic

accidents on the basis that payment would be made from the successful claim (which would include the car hire charges) was not

contrary to public policy as “trafficking in litigation” and was not “wanton and officious meddling” in the disputes of others because

there was a legitimate business and commercial interest involved. The decision of Costello J. that the agreement in Fraser v. Buckle

[1994] 1 I.R. 1 was champertous and void was upheld by the Supreme Court: see Fraser v. Buckle [1996] 1 I.R. 1. The decision

illustrates a number of important aspects of the law. The law particularly in relation to maintenance has undergone considerable

development over time. The development has been towards a greater tolerance of agreements to support litigation and a narrowing of

the scope of maintenance. Champerty has always been regarded as more offensive than maintenance. Agreements amounting to

maintenance or champerty are to be treated as void, and, as a matter of common law, are unenforceable in Irish law even if valid by

the law of the place the agreement was made, and/or the governing law of the agreement. (No reference has been made to the Rome

I Regulation, and accordingly I do not address any issues arising thereunder here.) Finally, while the decision of the High Court and

Supreme Court make it clear that agreements are judged by present day considerations of public policy, the language used is the

well-worn idiom of “wanton and officious intermeddling” or “trafficking in litigation”.

22 A decision illustrating the other side of the line was O’Keeffe v. Scales [1998] 1 I.R. 290. There a solicitor (“the first solicitor”)

acted for clients who were suing another solicitor (“the second solicitor”) for professional negligence. Among the heads of damages

claimed, however, were substantial costs owed to the first solicitor in respect of which the first solicitor had obtained judgment

against the clients who were plaintiffs in the present proceedings. The circumstances were therefore open to an interpretation that

the proceedings against the second solicitor were being pursued with the involvement of the first solicitor either wholly or in part to

recover a benefit for him. The Supreme Court, upholding the decision of the High Court on appeal, refused to dismiss or stay the

proceedings, holding that if the second solicitor established in the proceedings that there was a champertous agreement, it would be

open to him to sue the person who had been established as maintaining the action. The principle remained that a person who assisted

another to maintain or defend proceedings without having a bona fide independent interest in the proceedings acted contrary to

public policy, and could not enforce the agreement for any benefit from the proceedings. That principle was not breached on the

facts of the case, as they stood as of the time of the court’s decision.

23 Subsequently, in Thema Intl. Fund v. HSBC Inst. Trust Services (Ireland) [2011] IEHC 357, [2011] 3 I.R. 654, the High Court had

to consider an issue arising in the same circumstances as have given rise to the present circumstances, in which a fund claimed

damages in Ireland against HSBC Institutional Trust Services (Ireland) Limited in respect of losses incurred as a result of an

investment through HSBC Institutional Trust Services (Ireland) Limited with the Madoff businesses in New York. The High Court (Clarke

J.) was satisfied, however, that the only reasonable conclusion on the evidence was that the plaintiff did not itself have sufficient

funds to maintain proceedings, and that there was a third party funder or funders assisting the plaintiff (which seems on the facts to

have been shareholders or investors in the fund, although that is not stated explicitly). However, Clarke J. was also satisfied that any

such funder had a “sufficient connection with the plaintiff” so as to take the funding outside the scope of maintenance and/or

champerty. In those circumstances, the High Court had to consider whether to order disclosure of the identity of the funder at the

outset in order (inter alia) to facilitate an application for costs against the funder in the event that the claim failed. The High Court

refused that order, while affirming that there was a jurisdiction to order costs against such a person if warranted in the proceedings.

The case accordingly did not involve a direct claim of maintenance and/or champerty, and still less a claim of assignment of a bare

right to litigate. However, in addressing the question of disclosure of the identity of the funder, the judgment necessarily contained a

number of observations on the policy considerations.

24 Clarke J. observed that it was possible and permissible under Irish law for a party with a legitimate interest as a shareholder or

creditor to fund litigation. At p. 662 of the report, the relevant principles were discussed, as follows:-

“[22] In Ireland it is unlawful for a party without an interest (or some other legitimate concern including charity) to

fund the litigation of another at all and, in particular, it is unlawful to fund litigation in return for a share of the

proceeds. The only form of third party funding which is, therefore, legitimate in Ireland is one which comes within

the exceptions to maintenance and champerty. Charitable intent, where the funder does not hope to benefit

personally, would, of course, take the case outside the third party funder costs order jurisdiction identified in

Moorview Developments Ltd. v. First Active plc. [2011] IEHC 117, [2011] 3 I.R. 615, for that jurisdiction is confined

to persons who fund litigation which they hope will indirectly benefit them in capacities such as shareholders and

creditors.

[23] That such parties are, even though they may not be guilty of maintenance or champerty, exposed to potential

orders for costs is clear from Moorview Developments. However such parties are not, in my view, in the same

category as professional third party funders who make a commercial decision to “invest” in litigation in the hope of

making a profit. After all, if the litigation is well founded then the shareholder or creditor is only getting their due. If

an insolvent company has a good cause of action, then the shareholders or creditors who might benefit by any

recovery on foot of that cause of action are getting no more than their entitlements. If the proceedings are bona

fide progressed, then such parties are simply funding an entity in which they have a legitimate interest in the hope

that that entity will be able to pay them monies due (in the case of creditors) or dividends or capital distributions

(in the case of shareholders). The law of maintenance and champerty always made a distinction between such

parties and professional third party funders.”

25 The distinction made between third party funders who, on the one hand, had a legitimate interest (whether as shareholders or

creditors), in the litigation and those who had merely made a commercial decision to invest in litigation was important in the Thema

case, because it was the basis upon which Clarke J. distinguished authority from both the United Kingdom and Australia (cited by the

defendant) that a defendant was entitled to know the identity of any third party funder. Clarke J. considered that this was logical in a

jurisdiction which permitted commercial arrangements and commercial third party funding, but that it did not necessarily follow where,

as in Ireland, the only form of third party funding which was legitimate was by parties with a legitimate independent interest in the

proceedings, and not merely an interest in a commercial venture.

26 In Greenclean Waste Management Limited v. Leahy [2014] IEHC 314, (Unreported, High Court, Hogan J., 5 June 2014), Hogan J.

had to consider the question of so-called after the event (“ATE”) insurance. This is insurance which provides funding to allow

proceedings to be brought on the basis of a substantial “premium”, payable on successful recovery of costs. This type of arrangement

is permissible in the United Kingdom, where the torts and crimes of maintenance and champerty were abolished in 1967, and where

after the restriction of legal aid, which had supported litigation for most of the latter part of the 20th century, a number of other

funding models became popular. In this case, what was proposed was a “no win, no fee” agreement coupled with ATE insurance. The

question which arose in Greenclean was whether such an agreement was to be regarded as champertous in Ireland and thus

unenforceable. Again, the issue arose only indirectly in the case. If the agreement was valid, it would remove any question of security

for costs. Nevertheless, the judgment contains some valuable comments on the jurisprudence.

27 Hogan J. reviewed the law, placing some emphasis on the observations of Cozens-Hardy M.R. in British Cash and Parcel Conveyors

Ltd. v. Lamson Store Service Co. Ltd. [1908] 1 K.B. 1006, where, even at the outset of the 20th century, it was noted that “the law

has been modified in accordance with modern ideas of propriety”. Hogan J. also quoted extensively from the judgment of Clarke J. in

Thema Intl. Fund v. HSBC Inst. Trust Services (Ireland) [2011] IEHC 357, [2011] 3 I.R. 654 and observed that “the principle

expounded by Clarke J in Thema was really about trafficking in litigation”. He also saw this as the explanation of the unusual case of

Simpson v. Norfolk and Norwich University Hospital NHS Trust [2012] Q.B. 640. In that case, a plaintiff claimed to have suffered an

infection as a result of the negligence of a hospital. He purported, however, to assign his claim for damages to the widow of another

patient who had caught the same infection. That patient had died from cancer, but his widow maintained that his last days had been

more difficult as a result of the infection. There was, however, no claim which she could pursue in respect of her husband’s

treatment, so the assignment to her of the plaintiff’s claim was designed to allow her to ventilate her complaints against the hospital.

The Court of Appeal of England and Wales considered that, notwithstanding the statutory removal of the crimes and torts of

champerty and maintenance, there remained a public policy which provided that assignment of bare causes of action was unlawful,

contrary to public policy, and accordingly void. Moore-Bick L.J. recognised that an assignment of a cause of action would not be

unlawful if supported by a “sufficient interest”, and, moreover, that it was not possible to state definitively what did or did not

constitute such an interest. However, he did consider that Mrs. Simpson’s desire to pursue her campaign against the hospital could

not be considered a sufficient interest for these purposes, observing, at p.652:-

“It would be damaging to the administration of justice and unfair to defendants for the law to recognise an interest

of that kind as sufficient to support the assignment of a cause of action for personal injury, because the conduct of

the proceedings, including aspects such as a willingness to resort to mediation and a readiness to compromise,

where appropriate, is entirely in the hands of the assignee and is liable to be distorted by considerations that have

little if anything to do with the merits of the claim itself.”

The agreement (in the well-worn phrase) was one which savoured of champerty, and was an assignment of a bare right of action, in

the sense that it was an assignment of a claim in which the assignee had no legitimate interest and was therefore void.

28 Hogan J. in Greenclean Waste Management Limited v. Leahy [2014] IEHC 314, (Unreported, High Court, Hogan J., 5 June 2014)

recognised that this principle had to be viewed against modern developments and (inter alia) the constitutional right of access to a

court. He discerned a common thread in the case law:-

“Against this background it can be said that agreements which involve the trafficking in litigation or – as in Simpson

- which concern the assignment of a bare cause of action for purposes which the law does not recognise as

legitimate, will be held to be void as contrary to public policy on the ground that they savour of champerty. That, in

my opinion, is true leitmotif which runs through all of this case-law in this area.”

29 In the event, Hogan J identified the issue relating to ATE as follows:-

“In truth, the real objection to ATE insurance is to the size of the premium and the fact that it is normally payable

only after a positive court decision or settlement. At one level it is easy to represent this as simply a disguised

method of investing in litigation and recovering a share of the proceeds of the action under the guise of a handsome

premium. If ATE coverage was confined to this, then I think the argument that it savoured of champerty and was

therefore void as contrary to public policy would be almost unanswerable.”

Hogan J. nevertheless concluded that, when viewed in the light of modern developments, ATE insurance was not unlawful, and

therefore refused to make an order for security for costs. It is important to note, however, that this conclusion was not subject to

appeal, and I offer no observations upon its correctness either on the particular facts or more generally. I have considered the case

for the light the judgment casts on the general law and public policy in a field in which there are few decided cases in this jurisdiction.

30 Finally, in Persona Digital Telephony Ltd. v. Minister for Public Enterprise [2017] IESC 27, (Unreported, Supreme Court, 23 May

2017), the plaintiff had sought to bring proceedings against the State arising out of the award of a mobile phone licence. The

plaintiffs entered into agreements with a professional funder of litigation (HF3), which was licensed and regulated in the United

Kingdom. HF3 and its predecessors funds (HF1 and HF2), had funded extensive litigation in the United Kingdom, Jersey, Australia,

Bermuda, British Virgin Islands, Canada, Hong Kong, and the U.S.A. The Supreme Court delivered a number of wide-ranging judgments,

expressing unease with the scope of the existing law of champerty and concern relating to the funding of litigation more generally.

However, it concluded that as the law stood the agreement was champertous and thus unenforceable in Irish law. In the course of a

concurring judgment, Clarke J. made references to the types of modern policy considerations that justified continued caution in

relation to third party funding agreements. At para. 1.2 of his judgment, he said:-

“However, … I would observe that, in my view, one of the most powerful arguments put forward against a radical

change in the law of champerty (in the absence of legislation) was that advanced by … counsel for the third party.

Counsel argued that there were strong, and importantly modern, considerations which lay against permitting third

party funding not least what he described as the potential risks inherent in the commoditisation of litigation. While

those who have sought to disparage the law on champerty have frequently referred, correctly so far as it goes, to

its medieval origins, those arguments demonstrate that there are important current and modern considerations

which would need to be balanced very carefully in any analysis which might lead to a change in the law in this

area.”

Observations on the Irish case law

31 It is important to repeat that none of the Irish cases cited required direct consideration of the law relating to the assignment of a

cause of action, still less one found to be unenforceable. First, the observations made on the law on that topic are indirect insomuch

as they arise in cases which touch themselves somewhat indirectly on the law of maintenance and champerty. It is important,

therefore, not to draw too hard and fast a conclusion as to the law applicable to a purported assignment such as that in this case

from observations made in a somewhat different context. Second, almost inevitably, the cases have adopted the somewhat archaic

language of earlier case law in which what is offensive is described variously as “trafficking litigation” and “officious intermeddling” in

litigation. It is also desirable, in my view, to approach these terms with some caution. The antiquated language obscures the fact

that in all the cases in which the terms apply to transactions it is because there is discerned, at present, an existing public policy

which is found to justify the invalidity of the arrangements in certain circumstances. The language used is emphatic but it is useful to

appreciate that it is descriptive rather than prescriptive. It is normally applied after a transaction has been found offensive to public

policy, and does not explain, at least directly, why it is so offensive. The defendants for their part seek to characterise the

arrangements here pejoratively as “trafficking” while the plaintiff would wish to describe it in more complimentary and modern terms as

merely “monetising” the shareholders’ interest in a claim. In each case, however, this says little more than that the plaintiff approves

of the transaction and the defendants for their part disapprove. Insomuch as it is possible to discern from the language used any

element which is common in those cases which are still considered to be contrary to public policy, it seems to me that the more

modern references to “investing in litigation” and “commoditisation of litigation” capture an important element of what is considered

both dubious and offensive.

32 Finally, while the cases acknowledge that the law in the United Kingdom is now significantly different because of the effect of the

abolition in 1967 of the crimes and torts of champerty and maintenance, there still remains a principle of law recognised in England

and Wales that finds some assignments of causes of action offensive to public policy. Moreover, the Irish cases have found the case

law of England and Wales of some assistance in identifying the public policy considerations applicable. Indeed, that case law provides

some examples which directly address the question of the assignment of causes of action, and which illustrate the approach of the

common law and its development.

The case law of England and Wales

33 The earliest case cited is Williams v. Protheroe (1829) 3 Y. & J. 129. A purchaser of an estate agreed to take over a pending claim

for arrears of rent against a tenant and the right to commence a claim for dilapidations against the same tenant. The purchaser was

to be entitled to recover anything received from the proceedings. The purchase of the estate was clearly bona fide and the

assignment of these claims was ancillary to it. Notably, it was agreed (even in 1829) that the “ancient law of champerty has been

relaxed in modern times”. The judgment of Best L.C.J. is mercifully brief. At p.135 of the report he said:-

“…here [the agreement] is by a bona fide purchaser to recover rent due and in respect of injuries committed

previously to the purchase. That applies to the agreement respecting the bygone rents to which it is said without

the agreement, the vendor would be entitled. To say that the agreement respecting the dilapidations is champerty,

would be carrying the law of maintenance and champerty further than it was ever carried, in times when that law

was necessary for the then state of society. In my opinion the agreement is legal …”

34 This case is an early illustration of the principle that a simple agreement to assign a right of action to sue will normally be void as

savouring of champerty, but will be upheld if it is part (although not a necessary part) of a larger transaction (in this case the

conveyance of property) to which the cause of action related.

35 Williams v. Protheroe (1829) 3 Y. & J. 129 was applied in Dawson v. Great Northern and City Railway Co. [1905] 1 K.B. 260. The

defendant was exercising statutory powers to construct a railway, and built a tunnel under and near certain houses in which the

plaintiff carried on business as a draper. Under s. 68 of the Land Clauses Consolidation Act 1845 there was a right to compensation in

respect of injurious affection and damage caused by construction of any railroad. The plaintiff’s business was carried on in a number

of buildings held under at least three different titles. In respect of the first building described as the “freeholds”, the plaintiff was

initially a tenant. The owner of the fee simple had agreed with the company that the tunnel could be constructed under the lands,

and in turn received £850 in compensation for all damages, loss and inconvenience, except for any structural damage. The plaintiff

subsequently acquired the fee simple interest, but the former owner retained the £850. The plaintiff obtained any other rights under

the agreement, and therefore, in effect, the right to seek compensation for structural damage. A further portion of the property was

held under leaseholds described as the “Berry and Vickery leaseholds”. After damage was done to the houses, both Berry and Vickery

assigned their respective leases to the plaintiff, together with the right to recover any claim for structural damage. A final portion of

the property was held under different leaseholds, described as “the Hewitt leaseholds”. The plaintiff had been an underlessee of

Hewitt with 13 years of her lease remaining at the time the works were carried out, and had lodged a claim for compensation as such

an underlessee. Subsequently, she surrendered the lease and took a new underlease for almost the entirety of the Hewitt term, to

expire in 1936. The claim for compensation was made on that basis. Wright J., at first instance, held that the plaintiff was not entitled

to make a claim in respect of structural damage under the assignments of the freeholds and the Vickery and Berry leases, but was

entitled to make a claim in respect of the Hewitt leaseholds, because at the time the damage was caused she was an underlessee

with a vested right, and was therefore entitled after the assignment to claim the entire compensation.

36 The Court of Appeal reversed the decision in respect of both the freeholds and the Berry and Vickery leaseholds, and, subject to

an adjustment in respect of the facts which is not relevant to the principle we are considering, dismissed the defendant’s cross-

appeal in respect of the Hewitt leaseholds. The effect was the plaintiff was entitled to recover compensation in respect of all the

property. Stirling L.J. delivered the judgment. First, and importantly, he considered that a claim for compensation under the 1845 Act

was not a cause of action. It was instead a form of statutory purchase price for the acquisition of rights. While observing that a

benefit of a contract is assignable, Stirling L.J. noted that “…a Court of Equity is as much bound as a Court of Common Law by the

law relating to champerty and maintenance, and if an assignment of a chose in action is obnoxious to that law it is bad in equity no

less than at law”. He continued:-

“An assignment of a mere right of litigation is bad: Prosser v. Edmonds...; but an assignment of property is valid

even though that property may be incapable of being recovered without litigation: see Dickinson v. Burrell... It was

said in argument that the right which Blake purported to assign was simply a claim to damages for a wrongful act

and therefore incapable of assignment. With this contention we do not agree. It was in our opinion, a right, arising

directly under the notice to treat served by the defendants, to compensation for damage which might be done in

the lawful exercise of powers conferred on them by the Legislature. The compensation was a sum to be ascertained

in a way prescribed by the Legislature, and payment thereof by the defendants was imposed on them as one of the

terms of the exercise of those powers. The payment may be regarded as the price payable for the exercise of the

powers, and in our judgment was property.”

37 The assignment was not therefore to be treated as an assignment of a cause of action. However, the court then went on to

consider the more general question, as follows:-

“Even if the assignment be regarded apart from the conveyance of the lands and buildings comprised in the deed of

August 17, 1901, it appears to us it that it is good; but we think that great weight must be given to the

circumstance that this assignment is incidental and subsidiary to that conveyance, and is part of a bona fide

transaction the object of which was to transfer to the plaintiff the property of Blake with all the incidents which

attached to it in his hands. Such a transaction seems to be very far removed from being a transfer of a mere right

of litigation. This conclusion appears to be in accordance with the decision in Williams v. Protheroe…”

38 This reasoning led to the same conclusion in relation to the Berry and Vickery leaseholds. At p. 275 Stirling L.J. said this:-

“For the reasons already stated, we think that the claim was in substance for the price payable by the defendants

for the exercise of the legal right conferred on them by statute. To this price Berry and Vickery were legally

entitled, and in our judgment no objection can be taken to the assignments of their rights as on the ground of

maintenance or champerty for the reasons already stated with reference to the assignment by Blake of a similar

right. Therefore these assignments would have been valid in equity if made prior to the Judicature Act, 1873; and

the compensation assigned is, in our opinion, a legal chose in action within the meaning of s. 25 sub-s. 6, of that

Act. We think, therefore that as to this part of the claim, the appeal ought to be allowed.”

39 These cases illustrate the principle (with which both parties agree) that an assignment of a bare right to litigate is void, but where

an assignment is more than a bare right to litigate it may be valid and enforceable. The cases also illustrate the essential flexibility of

the law in this regard. It cannot be said that the assignments of the claim in any of the cases was necessary or essential to the

larger interest the purchaser had obtained in Williams v. Protheroe, and which the plaintiff already had in Dawson v. Great Northern

and City Railway Co., although undoubtedly it was convenient to have all the relevant interests in one ownership. In Dawson,

furthermore, the railway company’s argument had little merit, since if successful it may have resulted in the railway company avoiding

payment of compensation to anyone for the undoubted structural damage caused by the construction of the tunnel. However, what

is heavily disputed about these cases is the extent of the principle they illustrate. The defendant maintains (and the High Court and

the Court of Appeal agreed) that the legitimate interest for an assignment must be something external to the assignment itself. In

Williams v. Protheroe, therefore, it was the sale of the estate, and in Dawson it was the acquisition of the respective freehold and

leasehold interests. The plaintiff, however, argues for a broader view, contending that it is sufficient that the assignment of the right

to litigate is part of a bona fide larger transaction: in the present case provided by the assignment of the claim under the bankruptcy

code of Optimal Strategic’s ACC.

40 Glegg v. Bromley [1912] 3 K.B. 474 established a further limitation on the prohibition of assignments, holding that an assignment of

the fruits of an action was an assignment of property, and not void. The plaintiff had executed an assignment to her husband of any

damages recovered against the defendants for false representation and slander. The principal significance of the case is perhaps the

fact that it was one of the cases invoked by Lord Denning M.R. in Trendtex v. Credit Suisse [1980] Q.B. 629, in which he sought to

radically reshape the principle. In Glegg v. Bromley, Vaughan Williams L.J. said at p. 484:-

“First, it is said that the consideration for the assignment was a cause of action, and that the cause of action was

a tort, namely a slander. I think that all that was assigned was the fruits of an action. I know no rule of law which

prevents the assignment of the fruits of an action. Such an assignment does not give the assignee any right to

interfere in the proceedings in the action. The assignee has no right to insist on the action being carried on; in fact,

the result of a compromise is actually included as a subject of the assignment. There is in my opinion nothing

resembling maintenance or champerty in the deed of assignment.”

41 Ellis v. Torrington [1920] 1 K.B. 399 is a somewhat complicated case following Williams v. Protheroe (1829) 3 Y. & J. 129 and

Dawson v. Great Northern and City Railway Co. [1905] 1 K.B. 260. Here the plaintiff was a tenant of the defendant and had a

repairing obligation. The defendant was in turn the assignee of a sub-underlease which was due to expire on 15 December 1917. The

underlease itself was due to expire three days later on 18 December 1917, and the headlease expired on Christmas day of the same

year. The headlease, the underlease, and the sub-underlease all contained more onerous covenants to repair than the plaintiff’s

obligation to the defendant. The plaintiff had taken a conveyance of the fee simple with the benefit of the repairing covenant under

the headlease. The plaintiff, who was being threatened by the defendant in respect of the covenant to repair, took a further

assignment of the covenants to repair contained in the underlease, and then commenced proceedings against the defendant as the

assignee of the underlease. The Court of Appeal held that the assignment was free from objection on grounds of maintenance or

champerty, concluding that the right of action on the covenant was so connected with the enjoyment of the property as to be more

than a bare right to litigate. Bankes L.J. said at p. 408:-

“The respondent is seeking to enforce a right incidental to property, a right to a sum of money which theoretically is

part of the property he has bought. I see nothing material in the fact that, owing to the various dealings with this

property, he had to take the assignment from an underlessee. His position is in the eye of the law the same as if he

had been able to bring this action under the assignment which he took from the original freeholder.”

42 Laurent v. Sale & Co. [1963] 1 W.L.R. 825 illustrates the other side of the line - albeit a line which cannot be said to be

particularly clear, or to have remained in the same location over the years. The plaintiff in that case obtained an assignment of an

amount alleged to be due from the defendant, but in circumstances where it was clear it would require litigation to enforce. In return

for the assignment, the plaintiff agreed to pay the original parties a quarter of the sum which was alleged to be due. Megaw J., while

agreeing that the doctrine of champerty “is one which it is not right to extend beyond the limits it already has”, nevertheless

concluded that the agreement was champertous. At p. 832 Megaw J. said:-

“In a matter of this sort it must be within the clear contemplation of the parties, and probably also within the

purpose and intent of the parties, that the transfer of liability is to result in and to be the purpose of enabling the

transferee or assignee to start legal proceedings which he knows, or shrewdly expects, would be necessary

because there is a bona fide dispute as to the liability.”

43 In re Trepca Mines (No. 2) [1963] 1 Ch. 199 contains the vivid observations of Lord Denning M.R. as to the policy justification for

the continued existence of a rule of public policy which treats transactions which are champertous or savour of champerty as void,

which were cited in turn by Costello J. in Fraser v. Buckle. As a matter of law however , the case is principally significant for the

determination that the law of maintenance and champerty is not confined to actions or suits: it extended to proof in a liquidation and

to any contentious proceedings where property was in dispute which became the subject of an agreement to share the proceeds.

Trendtex

44 Trendtex Trading Corporation v. Credit Suisse [1980] 1 Q.B. 629 (C.A.); [1982] A.C. 679 (H.L.) is a case which was considered in

Fraser v. Buckle [1994] 1 I.R. 1., and which was the subject of very detailed argument in this case. It came a significant time after

the statutory change in 1967 in England and Wales, and is perhaps particularly significant, therefore, in demonstrating the continued

vitality at common law of the public policy against champerty and assignments of bare rights to litigate.

45 The facts in the case are particularly complicated. Nevertheless, it represents a very important junction in the law and is

significant in the specific context of this case. The decision of the House of Lords overruled that of a strong Court of Appeal, but it

seems, has broadly been accepted in subsequent case law in the UK and other common law countries and in commentary, since. It is

not easy to appreciate what was, and was not, decided in that case without some consideration of the complex facts.

46 The particular assignment in issue in Trendtex Trading Corporation v. Credit Suisse [1980] 1 Q.B. 629 (C.A.); [1982] A.C. 679

(H.L.) was only part of a complex series of transactions involving Credit Suisse and Trendtex who had a longstanding commercial

relationship and in particular considerable prior dealings in relation to the relevant transaction. Trendtex was a trading company. It did

not manufacture or produce the cement which it had agreed to sell to a Nigerian customer, Pan African Imports. Trendtex had

sourced the cement from German suppliers and had arranged its shipment to Nigeria. The payment to the German suppliers was itself

backed by a letter of credit issued by Credit Suisse as bankers to Trendtex. Furthermore, Credit Suisse provided guarantees to a ship

owner from whom Trendtex chartered the vessels to deliver the cement. When the ship was delayed, Credit Suisse paid the

demurrage and debited Trendtex. The sale to Pan African and the demurrage was backed by a letter of credit issued by the Central

Bank of Nigeria (“CBN”) in favour of Trendtex. Accordingly, when CBN defaulted on the letter of credit, it created a very serious

situation for Trendtex, but also for Credit Suisse to whom Trendtex owed in excess of US$3 million. As Oliver L.J. observed in his

judgment in the Court of Appeal, it would be difficult to find more closely interwoven commercial interests than those between Credit

Suisse and Trendtex in this transaction. As a result, Credit Suisse provided financial support for the bringing of the proceedings in the

UK in respect of the CBN letter of credit. Indeed, it went further and provided a guarantee of the legal costs involved to the solicitors

acting for Trendtex. None of this, it should be observed, was to be regarded as invalid as savouring of maintenance, since Credit

Suisse clearly came within the category of supporter of litigation which had a legitimate interest in the pursuit of the claim. Trendtex

had also assigned to Credit Suisse the benefit of certain contracts with Pan African Imports prior to the repudiation by CBN.

Subsequently, in November 1976 Trendtex “surrendered” to Credit Suisse all claims from its contracts with Pan African Imports, and

also its claim under this letter of credit, but only to the full extent of the indebtedness of Trendtex to Credit Suisse. This was treated

as an assignment of the debt by way of security. A year later, in a further development, it was apparently agreed that the liability of

Trendtex to Credit Suisse would be reduced from US$3.4 million to US$1.5 million, and it was also agreed that Credit Suisse could

settle the proceedings against CBN for not less than US$3 million. If such a settlement was made, Trendtex would be entitled to the

balance once the indebtedness of Credit Suisse was satisfied.

47 This was the background against which the critical agreement of the 4th of January 1978 was made between Credit Suisse and

Trendtex. The agreement provided for the payment to other creditors of Trendtex. In return, Credit Suisse agreed to the credit

transaction which was sought to be impugned in the proceedings. That was not so much an assignment of the claim (since that had

already occurred in November 1976 by the surrender agreement) but rather a release of any residual claim Trendtex might have.

Whereas the November 1976 agreement permitted Credit Suisse to sue CBN, it could only retain so much of the proceeds as would

satisfy its indebtedness. After the January 1978 agreement, if valid, Credit Suisse could pursue the action, and if it recovered more

than Trendtex owed it, it would be entitled to retain the surplus for its own benefit. Finally (and, as it transpired, critically), the

agreement expressly contemplated that Credit Suisse could assign the claim against CBN to an unconnected third party.

48 In January 1978 it was represented to Trendtex that Credit Suisse had investigated the possibility of settlement of the claim and

believed it was possible to do so for a figure of only US$800,000, a fact which was recited in the January agreement. In the event,

the agreement was made on the 4th of January 1978, and five days later, Credit Suisse assigned it for US$1.1 million to a third party

who was not identified and remained anonymous for the duration of the proceedings. Five weeks later, that party managed to settle

the claim against CBN for a total of US$8 million. While it is not directly relevant to the issues of law arising in the case, and for which

it is now cited, one further unusual feature of the case should perhaps be noted. The lawyer who acted for Credit Suisse in

negotiating the January 1978 agreement with Trendtex was involved in the assignment to the third party, and acted on its behalf

when in due course he negotiated the US$8 million settlement.

49 It was hardly surprising that Trendtex was extremely suspicious of, and aggrieved by, the course of these events. It commenced

proceedings in London seeking to have the assignment of January 1978 set aside (that is, the assignment from Trendtex to Credit

Suisse). The claim was complicated by the fact that the agreement contained a jurisdiction clause purporting to confer exclusive

jurisdiction on the courts of Switzerland. An application was brought to stay the proceedings in favour of the Swiss courts, and the

argument in that regard brought in to focus the question of the validity of any assignment, since it was contended that if the

assignment was void, the jurisdiction clause would fall as well.

50 In the High Court, Goff J. granted a stay of the proceedings. That decision was upheld by the Court of Appeal, but the decision on

the stay was almost incidental to the legal significance of the observations of that Court on the question of public policy. A strong

Court of Appeal (Lord Denning M.R., Bridge and Oliver L.JJ.) upheld the validity of the assignment. However, a unanimous House of

Lords disagreed and held that the assignment was contrary to public policy and void.

51 In these proceedings, and indeed in some subsequent cases and commentary, attention has tended to focus on the judgment of

Lord Denning M.R., who was then coming towards the end of a distinguished career. The judgment is undoubtedly expressed in vivid

and clear terms. However, it is notable that Bridge L.J. agreed with the judgment of Oliver L.J., which was accordingly the majority

judgment, and which was given in somewhat narrower terms. It is important therefore to consider both judgments.

52 Lord Denning M.R. succinctly identified the developments in the law of maintenance, and the great expansion of the circumstances

in which a third party would be regarded as having a legitimate and genuine interest in the outcome of proceedings so as to be

justified in providing funding for them. He considered that the law of champerty also required some updating but was a “particularly

obnoxious” form of maintenance and that certain agreements, such as contingency fee agreements, remained contrary to modern

public policy. In relation to assignments of causes of action he proposed a sweeping new principle:-

“That old rule has not been able to survive into modern times. Just as the old law about maintenance (without

champerty) was brought up to date … so the time has come when we should bring the law about assignments up to

date. Just as in maintenance, it is sufficient if the maintainer has a legitimate and genuine interest in the subject

matter, and the circumstances are such as reasonably to warrant his support of the action or defence: so in an

assignment of a chose in action, it is valid if the assignee has a legitimate and genuine interest in the subject

matter and the circumstances are such as reasonably to warrant the assignment of it to him. I realise that, like in

maintenance and in champerty, this new policy will give rise to questions such as: What is a legitimate and genuine

interest? What circumstances are such as reasonably to warrant the assignment? These questions are only to be

solved in our English way – by case to case as the judges come to decide them.”

53 He then sought to show how the decided cases could be reanalysed as merely examples of this broader principle. He concluded, at

p. 657, that the true distinction was between personal claims and all other causes of action:-

“The old saying that you cannot assign a “bare right to litigate” is gone. The correct proposition is that you cannot

assign a personal right to litigate, that is, which is in its nature personal to you yourself. But you can assign an

impersonal right to litigate, that is, which is in its nature, a proprietary right: provided that the circumstances are

such as reasonably to warrant it.”

On this basis the assignment to Credit Suisse of the right of action against CBN was valid and enforceable.

54 As already observed, Lord Denning sought to show that some of the decided cases could be seen as consistent with the test he

proposed. It is, I think, necessary to observe at this point that, in my view, the attempt was not entirely successful, for reasons

which may be relevant to the approach to be taken in this case. Thus, for example, he endorsed the decision in Glegg v. Bromley

[1912] 3 K.B. 474, and suggested that since the assignment of proceeds of a cause of action was permissible, there should be no

objection to the assignment of the cause of action itself:

“There is no reason in public policy why the law should permit the assignment of the proceeds of a right of action

and refuse to allow the assignment of a right of action itself.”

55 However, this sweeping approach raises a number of issues. First, there is arguably a very significant difference in law and legal

consequences between the assignment of the proceeds of a cause of action, and the assignment of a cause itself. If a cause of

action is assignable, then a new plaintiff is entitled to pursue the proceedings who will have control of the conduct of the

proceedings, including the decision on whether they are to be pursued or compromised. This involves a much greater (or indeed total)

involvement in the litigation process by the assignee, in contrast to a person who has simply an entitlement to an assignment of such

proceeds as are obtained by a person in pursuit by that person of their own litigation. Furthermore, if this reading of Glegg v. Bromley

is correct, it raises a different difficulty, since if there is no difference between the assignment of the proceeds of the cause of action

and the cause of action itself, then that ought logically to have led to a conclusion that Glegg v. Bromley was incorrectly decided,

since the underlying causes of action in that case were for slander and misrepresentation, which would have been treated as personal

causes of action and not capable of assignment under the principle proposed at p. 657 of the judgment.

56 The judgment also sought to explain the outcome of Laurent v. Sale & Co., where, it may be recalled, it had been held that an

assignment of a claim (which was commercial and could not be described as personal to the assignor) was invalid. Lord Denning M.R.

explained this case as giving rise to a proviso to the principle, so that an assignment would only be valid “if made for good and

sufficient consideration such as reasonably to warrant the assignment. If the assignee takes three-quarters of the damages, the

circumstances may not be such as to warrant the assignment: see Laurent v. Sale & Co. [1963] 1 W.L.R. 829”. If this approach to

Laurent v. Sale & Co. is correct, then it would suggest a very significant (if ill-defined) exception to the principle of general

assignability of non-personal actions, in circumstances where it seems difficult to square the logic of any such exception with the

logic asserted to justify the new approach.

57 As already observed, the less eye-catching judgment of Oliver L.J. deserves closer analysis. It contains, at pp. 663 and 664, some

expressions of frustration which could be repeated today:-

“I question whether, in the year 1980, our jurisprudence ought still to have room for distinctions which owe more to

sophistry than to logic, between choses in action and what are described as “bare” rights of action between strictly

proprietary and purely commercial or financial interests.”

“It would not, I think, be helpful to seek to trace the historical development of the doctrines through a maze of

contradictory cases and sometimes over-subtle distinctions which merely illustrate changing views of public policy.”

58 At p. 670, it is again noted that:

“One cannot read the cases without a growing sense of bewilderment at the apparent contradictions …”

59 Oliver L.J. approached the case through the lens of the development of the law of maintenance, and the gradual shrinking of the

grounds upon which an agreement would be held as void on that ground. He considered that a clear analogy could be drawn and, at

p. 669, that “the quality of interest required to justify an agreement otherwise champertous is no different from that required to

justify an agreement otherwise void for maintenance.” He was further disposed to hold that a just cause or excuse to maintain

proceedings could exist at least where the maintainer had a “genuine pre-existing financial interest in maintaining the solvency of the

person whose action he maintains”.

60 Crucially, Oliver L.J. could not see any justification for distinguishing between a legitimate interest sufficient to permit a party to

maintain proceedings and take a charge on the proceeds to the extent of his interest, and an outright assignment of the cause of

action itself. He considered that in all cases “the true dichotomy is not between contractual rights and “bare” rights to litigate, but

between strictly personal claims such as claims in tort or under personal and non-assignable contracts and claims to enforce what

may be properly described as proprietary rights”. He continued:-

“This, I am bound to say, appears to me to be a much more logical and practical distinction, and it has the

additional merit in the year 1980 of absolving the court from striking down, on the basis of archaic doctrine which, if

not entirely obsolete, is at least obsolescent, transactions which are perfectly familiar and accepted by lawyers in

continental countries where much of the modern business of this nation is conducted. For my part, I would be

prepared to hold that where a cause of action arises out of a right which was itself assignable, the cause of action

equally remains assignable, or if one must use the language of the older cases, that it is not a “bare” right to

litigate but itself a right of property. So to hold does not, I think, violate current notions of public policy.”

In the particular case, he considered that it was inconceivable that an interest which would justify Credit Suisse in maintaining the

suit and in taking a charge on the proceedings does not equally justify the assignment to it of the whole cause of action. In its own

way this judgment was quite radical in suggesting that the law of maintenance, champerty and assignment could be understood as

reflecting a single principle, and therefore, in effect, if the relationship between the parties did not offend the law of maintenance, it

would also permit an agreement to also participate in the proceeds of the claim, and/or an outright assignment of it.

61 Before considering the decision of the House of Lords, it is worth pausing to consider the case in the light of this judgment. The

underlying transactions showed that Credit Suisse had a good commercial reason to take the assignment, and Trendtex had an

equally good reason to give it. Furthermore, the agreement appeared unobjectionable as a matter of Swiss law and commercial

practice. Both Lord Denning M.R. and Oliver L.J. took a robust approach, which would have substantially removed any public policy

objection to assignments of causes of action, either by adopting a principle that a legitimate interest for maintenance would also

suffice to justify an assignment, or that only personal actions were not assignable, or perhaps both.

Decision of the House of Lords in Trendtex

62 The House of Lords unanimously reversed the decision of the Court of Appeal. It is significant that the judgment found decisive a

factor that had not been much (if at all) discussed in the Court of Appeal, where the debate had focused upon the validity of the

assignment from Trendtex to Credit Suisse. The House of Lords considered however that that assignment was void not because of

any incident of the legal or factual relationship between Trendtex or Credit Suisse, but rather because the assignment which

contemplated the possibility of profit by Credit Suisse provided for onward assignment to an unconnected third party. It is important

that both Lord Wilberforce and Lord Roskill considered that if the assignment had been to Credit Suisse alone, there would have been

no question that there was a sufficiently genuine commercial relationship which would justify such an assignment. At p. 694 Lord

Wilberforce said:-

“If no party had been involved in the agreement of January 4, 1978, but Trendtex and Credit Suisse, I think that it

would have been difficult to contend that the agreement, even if it involved (as I think it did) an assignment of

Trendtex’s residual interest in the C.B.N. case, offended against the law of maintenance or champerty. As I have

already shown, Credit Suisse had a genuine and substantial interest in the success of the C.B.N. litigation. It had,

and I do not think that the legitimacy of its action was challenged, guaranteed the previous costs. It had by the

documents of September 6 and November 26, 1976, taken a security interest in the litigation or its proceeds. To

carry this a stage further by a surrender of Trendtex’s residual interest … would, in my view, have been lawful,

though a question might have arisen (and indeed may arise) whether, after Credit Suisse had been satisfied as

creditors, Trendtex could claim the return to it of any surplus. The possibility of this could not invalidate the

agreement; it would arise under it, and clearly fall within the exclusive jurisdiction clause.”

63 Lord Roskill, for his part, noted that the courts had taken an infinitely more liberal attitude to the supporting of litigation by a third

party, and similarly the law had become more liberal in its approach to the circumstances in which it will uphold the assignment of a

cause of action. He did not consider that the cases showed that it was necessary to show a property right to support an assignment,

and if Credit Suisse had taken an assignment “to themselves” of the claim, he could see no reason why that would not have been

enforced (see p.703 of the report).

64 Pausing at this point, it can be observed that, in this respect at least, the House of Lords decision in Trendtex was a significant

liberalisation of the law: the question was no longer whether there is a separate property interest, but rather whether there is a

genuine commercial interest in taking the assignment. However, the House of Lords nevertheless considered that the assignment was

invalid. The critical feature was the contemplated possibility (which occurred in fact) that the cause of action could be assigned on

to a third party unconnected to the relationship between Credit Suisse and Trendtex, and accordingly not having the same

commercial interest which would have justified the assignment to Credit Suisse. At pp. 694 to 695, Lord Wilberforce said:-

“The vice, if any, of the agreement lies in the introduction of the third party. It appears on the face of the

agreement not as an obligation, but as a contemplated possibility, that the cause of action against C.B.N. might be

sold by Credit Suisse to a third party for a sum of U.S.$800,000. This manifestly involved the possibility, and indeed

the likelihood, of a profit being made, either by the third party or possibly also by Credit Suisse, out of the cause of

action. In my opinion this manifestly “savours of champerty” since it involves trafficking in litigation – a type of

transaction which, under English law, is contrary to public policy … Although ancient in origin, and so no doubt

encrusted with disposable obsolescences, it has been given statutory recognition by the Criminal Law Acts 1967,

sections 13 and 14, which, while abolishing criminal and tortious liability for champerty, expressly preserves any rule

of law as to the cases in which a contract involving champerty is to be treated as contrary to public policy and/or

otherwise illegal.”

65 Again, Lord Roskill spoke to the same effect. At p. 704, he said:-

“In other words the “spoils”, whatever they might be, to be got from C.B.N. were in effect being divided, the first

U.S.$1,100,000 going to Credit Suisse and the balance, whatever it might ultimately prove to be, to the anonymous

third party. Such an agreement in my opinion, offends for it was a step towards the sale of a bare cause of action

to a third party who had no genuine commercial interest in the claim in return for a division of the spoils, Credit

Suisse taking the fixed amount which I have already mentioned. To this extent I find myself in respectful

disagreement with Oliver L.J.”

66 It is also significant in my view that Lord Wilberforce endorsed and reaffirmed the decision in In re Trepca Mines Ltd. (No. 2)

[1963] Ch. 199 and Laurent v. Sale & Co. [1963] 1 W.L.R. 825, both of which involved the participation of a third party in litigation

under agreements “remarkably similar” to that in question in Trendtex Trading Corporation v. Credit Suisse [1980] 1 Q.B. 629 (C.A.);

[1982] A.C. 679 (H.L.). Lord Wilberforce considered that both decisions were sound in law “and that the principle of them should be

applied in the present case”. The outcome, therefore, of the decision of the House of Lords is very clear, and in my view illuminating.

In the first place, it is clear that an assignment to Credit Suisse for its own purposes would have been valid. Second however, the

assignment was in fact void because it contemplated and permitted the onward assignment of the cause of action to an unconnected

third party who would have control of the litigation. Such a transaction was considered to be contrary to modern public policy.

67 Subsequent cases are perhaps interesting further examples of circumstances in which courts have permitted transactions which in

an earlier era might have been considered to constitute or savour of maintenance or champerty. Brownton Ltd. v. Edward Moore

Inbucon Ltd. [1985] 3 All E.R. 499 concerned a complex situation which is nevertheless familiar to lawyers involved in any multi-party

litigation in any court. The plaintiff sued the defendants, a firm of consultants who had advised them on the installation of a computer

system. The plaintiff claimed that the system installed never worked. The defendants, in turn, joined the manufacturer as a third

party. The plaintiff, no doubt prudently, took the opportunity of joining the third party as a defendant. In the event, the plaintiffs and

the consultants were willing to settle the claim, but the second defendant (the manufacturer) refused to settle and was insistent on

receiving its costs from the plaintiff. The plaintiff then agreed to assign its cause of action against the manufacturer to the

consultants in turn for an indemnity as to its costs. The manufacturer then contended that this agreement was champertous and

void. The trial judge agreed, but the Court of Appeal considered that looking at the totality of the transaction the consultants had a

sufficient commercial interest in the plaintiff’s claim against the manufacturer, since any amount recoverable against the manufacturer

would reduce the claim against the consultants. Although technically this involved the assignment of the cause of action, it occurred

in a scenario very familiar to the courts, where, for example, rights of subrogation are regularly involved, and gives rise to a practical

solution which can often facilitate the resolution of proceedings, and does not give rise, therefore, to the broader concerns which

underpin the laws of maintenance and champerty.

68 The case is interesting, however, for its analysis of Trendtex Trading Corporation v. Credit Suisse [1980] 1 Q.B. 629 (C.A.);

[1982] A.C. 679 (H.L.). Lloyd L.J. concluded that the rule against a bare assignment was still a fundamental rule of the common law,

but was now much narrower, in that the validity of the assignment was not dependent on establishing that it was ancillary to the

transfer of a property right or interest. He saw the fundamental element of the Trendtex transaction which rendered it void as “the

absence of any genuine commercial interest on the part of the anonymous third party in enforcing the claim against CBN.”. The fact

that Credit Suisse might profit was not itself dispositive (although Lord Wilberforce had raised the possibility of the assignor recouping

any such profit). If the profit was excessive, that might cast doubt on the question of any genuine commercial interest. However, in

Trendtex, the assignee’s intention was not to pursue the action himself, but to sell on to a stranger at a higher price, and it was that

which clearly savoured of champerty.

69 Giles v. Thompson [1994] 1 A.C. 142 again involved a problem familiar in routine litigation. In road traffic accidents, it is common

that an injured party will suffer the loss of use of a car while it is being repaired. Ultimately, that may be recovered if a successful

claim for damage (and perhaps personal injuries) is made against the defendant. However, in the meantime, the plaintiff will be out of

pocket. A business was established which specialised in hiring cars to persons whose own cars had been rendered unroadworthy by

accidents which were not their fault while their own vehicles were being repaired. The agreements provided that the company should

have the right to pursue actions against the defendants in the plaintiff’s name. In one such proceeding, a defendant raised the

argument that the hire agreements were champertous and unlawful. The House of Lords held that the policy underlying the prohibition

of champertous agreements was to prevent “wanton and officious intermeddling with the disputes of others in which the intermeddler

had no interest and where his assistance was without justification or excuse and with a view to division of the spoils”. The House of

Lords held that there was nothing offensive in the transaction.

70 Camdex International Limited v. Bank of Zambia [1998] Q.B. 22 involved the deposit by the Central Bank of Kuwait of 15,000,000

Kuwaiti Dinars with the defendant, the Bank of Zambia. When it became apparent that the defendant would not pay the debts due

without ligation, the Central Bank of Kuwait assigned absolutely to the plaintiff the debts due under the deposit agreements. The

plaintiff brought the proceedings, and the defendants sought to stay the action on the ground that it had been bought pursuant to a

champertous arrangement. It was asserted that the right of action had been acquired at a substantial discount, and that the plaintiff

could therefore profit if it obtained judgment and was able to enforce it. The decision of the Court of Appeal is summarised in the

headnote:-

“[A]n assignment of a bona fide debt in accordance with the provisions of section 136 of the Law of Property Act

1925 was valid and no question of maintenance or champerty arose even if the necessity for litigation to recover

the assigned debt was contemplated, or even if the assignor retained an interest in some or all of the proceeds of

the litigation to recover the assigned debt; that an agreement which had maintenance or champerty as its object

would be contrary to public policy and ineffective, and such a consequence could not be avoided by dressing up the

champertous transaction as an assignment of a debt; that since the assignment of a debt itself included no

maintenance and was sanctioned by statute, any objectionable element alleged to invalidate the assignment had to

be proved independently and distinctly; and that, since the defendant could not show any arguable case that the

assignment of the debt was anything other than a bona fide purchase of a debt, the plaintiff was entitled to

judgment in default.”

Hobhouse L.J. observed that:-

“It is a normal, and for many in business an essential, incident of modern commercial life that debts are bought and

sold, and it would be highly unfortunate if such everyday transactions were to be held to be impugnable as

champertous, save in wholly exceptional circumstances not present here.”

71 Stocznia Gdanska SA v. Latreefers Inc. [2000] All E.R. (D) 148, [2001] C.L.C. 1267 concerned a judgment obtained by a Polish

shipyard (Stocznia) against a Liberian company (Latreefers) which had been incorporated for the purposes of entering into six

contracts for the design, building and completion of six refrigerated vessels. Latreefers defaulted, and the yard obtained a judgment

of US$11 million in London. Subsequently, the yard entered into a funding agreement with a third party for the payment by the third

party of the costs incurred by the former in the prosecution of a petition to wind up Latreefers. Latreefers became aware of this fact

from an anonymous telephone call and sought to stay the winding up proceedings on the grounds that they were being pursued under

a champertous agreement. The commercial court dismissed this application, and the Court of Appeal upheld that decision. The

decision of Morritt L.J. adopted observations of Toulson J. at first instance as to the underlying public policy behind the modern law of

champerty. Those were identified by Lord Mustill in Giles v. Thompson [1994] 1 A.C. 142 as being “the protection of the purity of

justice and protection of the interests of the vulnerable litigants”. There is a public interest that impecunious litigants with genuine

claims should be able to bring them before the courts, and a public interest that vulnerable litigants are protected from opportunistic

exploitation. Toulson J. considered however, that if a funder has been over-greedy in the bargain for which he had stipulated, it would

hardly protect the litigant to stay his action from proceeding at all. The question in this case was whether the action should be

stayed to protect the purity of justice. There remained a public interest in preventing the development of an unlicensed and

unregulated market in litigation for fear of the abuses to which that might lead in the hands of the unscrupulous. It was a legitimate

concern if the funder’s interest in the litigation was tenuous by comparison with his prospective share of the spoils. The court

concluded, however, that there was nothing in the particular agreement which should give rise to a concern of abuse of process. At

para. 61 of the judgment, Morritt L.J. made some further general observations which are useful:-

“Abuse of the court’s process can take many forms and may include a combination of two or more strands of abuse

which might not individually result in a stay. Trafficking in litigation is, by the very use of the word “trafficking”,

something which is objectionable and may amount to or contribute to an abuse of the process. We think that it is

undesirable to try to define in different words what would constitute trafficking in litigation. It seems to us to

connote unjustified buying and selling of rights to litigation where the purchaser has no proper reason to be

concerned with the litigation. “Wanton and officious intermeddling with the disputes of others in which they [the

funders] have no interest and where that assistance is without justification or excuse” may be a form of trafficking

and litigation. Lord Mustill’s words quoted by Simon Brown L.J. in the context of an application to stay, are

powerfully descriptive of the kind of plain and obvious champerty of which Chadwick LJ considered Faryab v Smyth

itself not to be an example. A large mathematical disproportion between any pre-existing financial interest and the

potential profit of funders may in particular cases contribute to a finding of abuse but is not bound to do so.”

72 Here the relevant facts were that the third party funder was identified as an overseas broker who had arranged the shipbuilding

contracts which were the subject of the underlying procedures. The agreement provided that the funders would cover all the

expenses of the legal proceedings, and, in the event that the proceedings were not successful, would not make a claim against the

yard for reimbursement. Furthermore, the funders would pay any costs awarded to any successful defendants against the yard. In

return, the proceeds of any successful claim were to be split 45/55 between the yard and the funders. A firm of solicitors were to be

in charge of legal proceedings and any negotiated settlement. The case did not involve an assignment, but the Court of Appeal had to

consider whether the agreement was champertous, and if so, and in any event, whether pursuit of the proceedings would amount to

an abuse of process. It concluded that there was no abuse of process, and was strongly inclined to the view that the agreement was

not champertous. At para. 62 of the judgment, Morritt L.J. observed:-

“The real chances of the yard actually receiving the full amount of their pleaded claim must have been seen as

doubtful. Meanwhile, the funders were themselves undertaking to be responsible for the costs of what was likely to

become (and has in fact obviously become) very expensive litigation. They had an obvious and substantial pre-

existing interest in the subject matter of the litigation. Their commission agreements had entitled them to very

substantial payments if the shipbuilding contracts had been fully performed. It is also, we think, significant both

that the funders agreed to cover all costs awarded against Latreefers in favour of all or any of the defendants, and

that the conduct of all legal proceedings and settlement negotiations was to be in the hands of experienced

solicitors. The funders therefore had no opportunity to influence the conduct of any proceedings abusively. These

features, in our judgment, make it plain that this funding agreement was not trafficking in litigation and came

nowhere near being wanton and officious intermeddling with the disputes of others …”

73 Particular reliance has been placed by the appellant on the decision of the Judicial Committee of the Privy Council in Massai

Aviation Services v. Attorney General of the Bahamas [2007] UKPC 12, [2007] All E.R. (D) 329. In that case, a company (“CAASL”)

had begun an action against the government and Bahamasair (the state airline) for damages for loss of profits caused by an asserted

delay in establishing its own operation at an airport at Nassau International Airport owned by the Commonwealth of the Bahamas.

After the proceedings had begun, the shareholders in CAASL decided to sell the business for what they could get. However, they

decided to maintain the lawsuit. As Baroness Hale observed, the purchasers may have been unwilling to buy the lawsuit with the

business, or to pay a price for the business which included what the shareholders believed the lawsuit to be worth. Accordingly, a

new company Aerostar Limited (“Aerostar”) was formed with a shareholding that exactly mirrored the shareholding in CAASL, and

CAASL assigned its entire interest in the claim to Aerostar, its sole shareholder, for US$10. Aerostar then sold its shareholding in

CAASL to the intended purchaser. CAASL changed its name to Massai Aviation Services Limited (the first plaintiff) (“Massai”) and the

pleadings were amended to add Aerostar as the second plaintiff. The first issue which the Judicial Committee of the Privy Council had

to consider (and the only relevant issue for present purposes) was whether the assignment of the cause of action was void for

champerty. As Baroness Hale observed, normally this might make little difference to the outcome. If the assignment was void the

assignor could simply continue the action, which had already been begun before the assignment took place. However, in this case the

first plaintiff (Massai, formerly CAASL) did not wish to continue the action. Accordingly, if the assignment was void, the defendants

could, if the cause of action was otherwise good, have had a fortunate escape. This, the court observed, was not an attractive

proposition. These initial observations may have framed the court’s subsequent consideration and decision. In the event, the court

concluded that the identity of interest between the shareholders meant that the transaction should not be treated as void. At para.

13 some of the broader policy considerations were outlined:-

“The original object of the law was to protect vulnerable Defendants, who might be unable to resist unmeritorious

claims which were being pursued against them with the help of the rich and powerful… A later object was to protect

vulnerable Plaintiffs, who might be induced to part with some of the proceeds of their action in return for assistance

in pursuing it: hence both contingency and conditional fee arrangements with legal advisers were prohibited.

However, just as the need to protect vulnerable Defendants has receded, so too have we come to appreciate that

‘treating such arrangements as criminal was also, before the introduction of legal aid, an effective way of

preventing poor people from obtaining legal redress’”

74 The decision in Trendtex Trading Corporation v. Credit Suisse [1980] 1 Q.B. 629 (C.A.); [1982] A.C. 679 (H.L.) was seen as

establishing that a core question was the existence of a genuine pre-existing commercial interest, something which had been

developed further in later cases. Baroness Hale observed:-

“[18] The buying and selling of choses in action is, of course, commonplace. Debts are regularly traded at a

discount so that the creditor can obtain some of what he is entitled to while passing on the risks of litigation to

others. Businesses are regularly sold with the benefit of their claims as well as their liabilities. Had CAASL sold all its

business, including this claim, to Executive, no one could have objected. What raised eyebrows was the sale of the

business to Executive while Aerostar retained the claim. Eyebrows were raised even higher when it emerged that

Aerostar had paid only $10 for the claim. This began to look like a very substantial profit, or “trafficking in litigation”.

[19] But “trafficking” is a pejorative term which takes the debate no further: it simply means trading in something

(be it drugs or people) in which it is not permissible to trade. In order to decide whether the particular transaction is

permissible, it is essential to look at the transaction as a whole and to ask whether there is anything in it which is

contrary to public policy. When one looks at this transaction as a whole, it is clear that there was nothing

objectionable about it at all.”

75 Baroness Hale considered that there was no wanton or officious intermeddling in another person’s litigation for no good reason:-

“It was simply the original owners retaining part of what they owned while disposing of the rest. There is nothing

contrary to public policy in allowing Aerostar to pursue the claims against these defendants and no good reason

why these defendants should be permitted to escape any liabilities which they may have. This is not, of course, to

say that a shareholder will always have a genuine and substantial commercial interest in taking assignment of the

company’s claims. To take an extreme example, for a minority shareholder to buy a substantial claim for a nominal

sum and now but making a substantial profit may well be contrary to public policy. But that is not this case.

Aerostar owned all the shares in CAASL and taken as a whole the transaction was a perfectly sensible business

arrangement.”

In the event, the plaintiff succeeded in obtaining damages.

76 The significance of this decision is perhaps in its interaction with the law relating to the fact that a limited company is a separate

legal entity from its individual shareholders. Here, as a matter of law, it could be said that there was an intermeddling in the

proceedings brought by one legal person (CAASL, and subsequently Massai) by another person (Aerostar). Clearly they were

connected in the sense that they were at, one time, in common shareholding. However, as a matter of law they were separate legal

persons, and by the time of the litigation, had different shareholders. In any event, it is normally a fundamental rule that incorporation

creates a separate legal entity distinct from its shareholders. One question, therefore, is whether this decision should be expanded

upon, or whether it represents no more than the pragmatic recognition that the fact that the claim was being pursued by parties

who, as a matter of fact, if not strict law, had always been involved in the underlying transaction giving rise to the claim, meant that

the assignment should not be treated as void.

77 Simpson v. Norfolk and Norwich University Hospital NHS Trust [2012] 1 All E.R. 1423, [2012] Q.B. 640 is the case referred to in the

judgment of Hogan J. in Greenclean Waste Management Limited v. Leahy [2014] IEHC 314, and concerns the somewhat unusual

circumstances of the assignment of a claim brought for bacterial infection in a hospital. It is an example of a case in which an

assignment was held void. The principle underpinning the decision of the Court of Appeal is set out in the headnote in the All England

Reports:-

“Authority establishes that the law would not recognise on grounds of public policy an assignment of a right to

litigate unsupported by an interest of a kind sufficient to justify the assignee’s pursuit of proceedings for his own

benefit; moreover the assignment of a cause of action with the purpose of enabling the assignee or a third party to

make a profit out of the litigation would generally be void of savouring champerty. The assignment of a bare cause

of action in tort for personal injury remained unlawful and void. The law on maintenance and champerty was open to

further development and it was not possible to state definitively what did and did not constitute a sufficient

interest to support the assignment of a cause of action in tort for person injury. However it is not in the public

interest to encourage litigation whose principal object was not to obtain a remedy for a legal wrong but to pursue a

logic of an altogether different kind. In the incident case, despite her honourable motives, the plaintiff did not have

an interest in C’s claim of a kind that law should or did recognise as sufficient to support an assignment of what

would otherwise be a bare right of action. If the assignment involved the outright purchase of a claim which, if

successful, would lead to the claimant recovering damages in respect of an injury which she had not suffered, the

assignment plainly savoured of champerty.”

78 Finally, in considering the case law it is worth observing that the decision of the House of Lords in Trendtex Trading Corporation v.

Credit Suisse [1982] A.C. 679 (H.L.) has been adopted with approval in Australia in Equuscorp Pty Ltd. v. Cunningham's Warehouse

Sales Pty Ltd. [2012] HCA 7, (2012) C.L.R. 498, and in New Zealand in B.C. 160361 (Fleetwood Apartments) v B.C. 2004 and B.C.

2009 Ltd. [2014] NZHC 1514, [2014] 3 NZLR 758. At para. 26 of the latter case, Fogarty J. stated:-

“The leading case on whether assignments are void by reason of maintenance and champerty is Trendtex Trading

Corporation v Credit Suisse. This decision is regarded as the leading case in the United Kingdom, in New Zealand

and in Australia. It is common ground that the Trendtex decision sets the current standard for judging maintenance

and champerty by examining whether the assignee had “a genuine commercial interest in taking the assignment and

in enforcing it for his own benefit”.

In a footnote it is suggested that this standard is also applied in Canada.

79 Fleetwood Apartments itself involved a variation on the Brownton Ltd. v. Edward Moore Inbucon Ltd. [1985] 3 All E.R. 499

situation, where a defendant counsel sought to take an assignment of the plaintiff’s claim against itself and the other defendants on

the basis of an agreement that could result in an alteration of the recovery between co-defendants which might ultimately be

determined by the court. Fogarty J. held that this was contrary to public policy and void, and in doing so made a number of

interesting observations. One significant feature of the case was that (echoing in this respect the approach of Morritt L.J. in Stocznia

Gdanska S.A. v. Latreefers Inc.) he considered it was necessary to identify a pre-existing commercial interest other than that created

by the litigation itself. At para.142, having considered Australian case law, he said:-

“At the very least, a prior pre-existing commercial interest in the matters that give rise to the cause of action is, at

the very least, a powerful consideration in support of the assignment being legitimate and not contrary to public

policy as being champertous.”

At para. 115 he stated:-

“There is a general common law hostility to enable causes of action to be a tradable commodity. There is a

longstanding reluctance of common law judges to allow assignment of claims, particularly tort claims. This is

particularly so when the damage is to individuals. …”

At para. 145 he concluded:-

“The common law has long been hostile to assignments of causes of action. It has identified the tort of

maintenance and its most vicious form champerty, as wrongs contrary to public policy, by reason of being a trade in

causes of action. Judges have an instinctive hostility to surrogates bringing claims, taking advantage of the

misfortune of others.”

Discussion

80 Returning to the facts of this case, counsel for the appellant advanced a number of ingenious arguments which sought to draw

points of comparison between what occurred in this case and some of the decided cases, in order to suggest that the assignment

here could either be found to fall within the principle of some one or more of the decided cases, or, if not, could be treated as so

clearly analogous to them that it could not be said to offend public policy, or that it would at most represent a small and entirely

justified extension of principle if the assignment here was held to be valid. In particular, counsel for the appellant pointed to some of

the distinct features of this transaction: most notably, that at the time of the assignment, the assignee had a common shareholding

with the assignor, and in that sense the transaction was analogous to that which occurred in Massai Aviation Services v. Attorney

General of the Bahamas. It could therefore be argued that, like Massai, the shareholder in SPV had a legitimate interest in pursuing

the action which justified the assignment. If so, counsel argued, how could the fact that the shareholding subsequently changed as a

result of the auction process make any difference? If anything, this case was stronger again, since not all the shareholding had

changed, and 7% of the shareholding were original investors who had decided not to sell their shares at auction. I understand the

merit, from the appellant’s point of view, in approaching the case in this way. However, for the purpose of this analysis, I think it is

useful to start to strip this case down to the core transaction. The issue here is created by the fact that the investors in BLMIS

could assign their claim in the BLMIS bankruptcy, and in particular the ACC, to unconnected third parties in order to realise their

investment. That was approved by the Trustee in Bankruptcy and the courts supervising the bankruptcy. The form of the approved

assignment provided for an assignment of all claims, which by definition must be understood, at least for the purpose of this

argument, to include the claim which is the subject matter of these proceedings. The legitimate purpose of the assignment was to

allow the investors to salvage something from their investments without having to wait for the outcome of a number of variables in

the bankruptcy process. It is not necessary to consider whether it would have been permissible in New York law to assign the ACC

alone: it is an important feature of this case that the comprehensive assignment at issue here was required by the Trustee in

Bankruptcy and approved by the court. Accordingly, if an assignment would permit such an investor, who was otherwise unconnected

to this matter, to prosecute these proceedings, then it could hardly be argued that the additional step provided for here – the

assignment to a connected company, and then the auction of shares in the company – could make any difference. If, however, a

direct assignment to a third party by an investor in BLMIS would be unlawful, then it might be necessary to consider if this additional

layer could make a critical difference. Accordingly, I consider that in the first place it is easiest to take the relatively simple, or at

least simpler, example of an assignment of all claims to an unconnected third party as contemplated and authorised in the bankruptcy

process and consider whether such an assignment is void and ineffective as a matter of Irish law insomuch as it purported to assign

the right to bring these proceedings.

81 In the first place, the appellants have sought to argue that the Court of Appeal should have preferred the approach of the Court

of Appeal of England and Wales in Trendtex Trading Corporation v. Credit Suisse [1980] Q.B. 629 (C.A.); [1982] A.C. 679 (H.L.) to

that taken by the House of Lords in that case. The respondents observe, however, that the plaintiff had argued in the High Court

that there was no difference between the two tests, and that both the Court of Appeal and the House of Lords had adopted a test of

“legitimate interest” and cannot now argue that the Court of Appeal test is both different and preferable. Whether or not this is an

accurate account of the argument below, I do not think in any event that the Court should adopt the Court of Appeal’s approach in

Trendtex in preference to that of the House of Lords. First, as observed by Lord Neuberger in Patel v. Mirza [2017] A.C. 467 at p.

519, there is a general interest, particularly in commercial matters which may have international components, in having a similar

approach to public policy in common law countries insofar as possible. The fact that the decision of the House of Lords in Trendtex

was broadly accepted in New Zealand, Australia and elsewhere is an indication, at least, that this court should be slow to adopt a

different approach derived from the Court of Appeal judgment in that case unless convinced that it is indeed preferable. Second,

insomuch as this argument might suggest that the Court of Appeal approach in Trendtex is broader i.e. that there would be a

narrower scope for determining that an assignment was void as contrary to public policy, that would appear if anything more difficult

in Ireland, where champerty and maintenance remain both crimes and torts. That was an important feature of the decision of the

Supreme Court in Persona Digital Telephony Ltd. v. Minister for Public Enterprise [2017] IESC 27, (Unreported, Supreme Court, 23 May

2017). It is difficult to explain how public policy in Ireland could therefore be less hostile to assignments savouring of champerty than

the public policy of the United Kingdom, where such torts and crimes were abolished half a century ago. It is also difficult in my view

to adopt the Court of Appeal judgment in preference to that of the House of Lords in circumstances where the Court of Appeal

judgments do not address the component of the transaction considered to be decisive by the House of Lords. Finally, and perhaps

most importantly, while I sympathise with the apparent desire of the Court of Appeal to modernise the law , for reasons already

touched on, I do not think that the broad approach adopted by Lord Denning M.R. in particular is completely successful even on its

own terms, insomuch that it seeks to explain the decided cases (specifically, the decisions in Glegg v. Bromley [1912] 3 K.B. 474, In

re Trepca Mines Ltd. (No. 2) [1963] Ch. 199, and Laurent v. Sale & Co. [1963] 1 W.L.R. 825). I consider in any event that the

decision of the House of Lords, insomuch that it is different from that of the Court of Appeal, is preferable in a matter of law and

logic. It liberalises the law in expanding the circumstances in which an assignment will be permitted, while maintaining a principle that

causes of action can be void for considerations of modern public policy. In doing so, it gives, in my view, a clear indicator of the

features of an assignment which may make it void and unenforceable. Accordingly, I would not accept the invitation to simply adopt

the Court of Appeal judgment in Trendtex in preference to that of the House of Lords. For reasons of comity, policy, and most

importantly because I consider that the reasoning is persuasive, I would prefer the analysis of the House of Lords in Trendtex.

82 Second, the appellant invites this court to adopt its own test (formulated at para.16 of the written submissions) that an

assignment will be void if it is established that “(a) the assignment has an improper purpose; and (b) the assignment poses an

identifiable and real risk to the administration of justice”. I do not consider that this is a desirable course for the Court to adopt. First,

even if persuaded to adopt a broader approach, I see no reason why an assignment must be both for an improper purpose and also

pose an identifiable and real risk to the administration of justice in order for it to be found void. Even if the test was reduced to one

or other limb, it would still create a significant expansion of the existing law. By way of example only, it would mean, it seems, that

even those causes of action which Lord Denning M.R. in Trendtex Trading Corporation v. Credit Suisse [1980] 1 Q.B. 629 (C.A.);

[1982] A.C. 679 (H.L.) considered could not be assigned would in principle be assignable subject only to either impropriety of purpose

or risk to the administration of justice. Furthermore, this would by definition become a case-by-case assessment, which would involve

every court confronted with the issue in what would perhaps be lengthy and unpredictable assessments prior to any litigation

advancing. Such an approach would also be inconsistent with the law, pursuant to which (as applied hitherto) it has never been

necessary to demonstrate that any of the harmful features of maintenance, champerty or assignment should arise in the particular

case: rather, it is sufficient that there is a perceived risk in the type of transaction which justifies the invalidation of any agreement

of the particular type. Furthermore, a case-by-case test would by definition be ex-post. It would not be possible to tell at the date

of any assignment if it was valid or not. Whatever the uncertainties of the present law, it is at least possible to be clear on what type

of transaction would be enforceable, and, where there is doubt, to identify the features likely to affect the outcome. If the court

were to adopt even a modified version of the test put forward by the appellant (which, it should be said, is not supported by any

authority) it would lead to considerable uncertainty, with the additional risk of putting the law of Ireland at odds with other common

law countries, for no self-evident or persuasive reason. Accordingly, and not least because I consider it represents the most accurate

approach to the public policy of the common law towards assignments of causes of action, I propose to apply the test adopted by

the House of Lords in Trendtex: that is, that an assignment of the right to litigate is unenforceable unless the assignee had a genuine

commercial interest in the assignment. I accept, furthermore, that the trend for the law identified in Trendtex and subsequently has

been towards a more liberal identification of interests which can be described as genuine, whether commercial or not. Accordingly, in

my view, this case resolves itself into a question of whether the fact that the assignment here purported to permit the claim brought

by the plaintiff was part of a larger comprehensive assignment of claims (and, moreover, in a form required by the Trustee in

Bankruptcy and approved by the court supervising it) represents a sufficiently genuine commercial interest to permit the assignment

to be enforceable in these proceedings.

83 In order to address that specific question, I think it necessary to identify the public policy considerations at issue. It has been

observed that maintenance, champerty and the assignment of a bare right to litigate are closely aligned and to some extent overlap.

The cases on each area can therefore illuminate the general field, but it is in my view necessary to draw some distinctions between

them. Maintenance is the supporting of an action (normally by paying the costs) in which the maintainer has no legitimate interest.

Champerty is a “more obnoxious” form of maintenance, in that it involves an agreement to support litigation in which the party

providing the support has no legitimate interest in return for some division of the spoils. Both maintenance and champerty remain torts

and crimes in Ireland. Agreements providing for maintenance or champerty will also be unenforceable and void. Assignments of a right

to litigate are void as savouring of champerty or maintenance (which perhaps means that they offend the same public policy which

underpins the prohibition of maintenance and champerty and the avoidance of contracts which constitute maintenance or champerty)

unless they are justified by a genuine [commercial] interest. Since public policy underpins this area, the attitude of the courts has

changed over the years towards a much greater tolerance of agreements, arrangements, and assignments of a right to litigate which

might hitherto have been considered to involve maintenance or champerty or as savouring of champerty In the field of maintenance,

the development of the law has been particularly marked. As observed by Hogan J. in Greenclean Waste Management Limited v.

Leahy [2014] IEHC 314, (Unreported, High Court, Hogan J., 5 June 2014), the torts of maintenance and champerty were first created

at a time when the legal system was weak, and “[d]iverse concepts such as legal aid, representative actions, pro bono work, “no

foal, no fee” arrangements and the involvement in litigation of community and voluntary groups and trade unions in support of their

members all lay far into the future”. The law in relation to champerty is also subject to a developing public policy. In countries where

civil legal aid is not broadly available, or where it has been restricted, attention has turned to the question whether it is permissible to

have a regulated process whereby funding can be supplied for litigation in return for fixed and limited returns. These are the public

policy considerations which were sufficient to lead Hogan J. to find that the ATE insurance in Greenclean was not offensive to public

policy, and with which the Supreme Court struggled in Persona Digital Telephony Ltd. v. Minister for Public Enterprise [2017] IESC 27,

(Unreported, Supreme Court, 23 May 2017). I agree that there may be a significant public interest in making legal proceedings

accessible to litigants of ordinary means insofar as might be possible, whether by reducing the cost of litigation, or by providing for

some limited and regulated form of third party funding. However, no such scheme exists at the moment. I observe, however, that

even that public policy consideration, if it exists, cannot have much weight when considering the validity of assignments of a cause of

action. Following Persona, if it is offensive to public policy to permit a person to fund a plaintiff’s litigation in return for some part of

the proceedings, then the same public policy must apply a fortiori where the third party purchases the claim outright, removes the

party from his or her proceedings, and converts them into a mere witness at best .

84 Finally in this regard, while it is not central to this case, I respectfully doubt the broad statement made in Brownton Ltd. v.

Edward Moore Inbucon Ltd. [1985] 3 All E.R. 499 (following, in this respect, the approach of Oliver L.J. in Trendtex Trading

Corporation v. Credit Suisse [1980] 1 Q.B. 629 (C.A.)) that “[t]here is no difference between the interest required to justify

maintenance of an action and the interest required to justify the taking of a share in the proceeds, or the interest required to support

an out-and-out assignment”. It is certainly the case that an interest required to support an out-and-out assignment would be

sufficient to justify the taking of a share in the proceeds and the maintenance of an action, but it may not be the case that the

reverse holds true in every case. Champerty is accepted to be a more obnoxious form of maintenance because it involves not merely

the support by third parties of litigation, but also the taking of some part of the proceeds in return, and, quite possibly, the obtaining

of a right to make decisions in relation to the progress of the litigation. On this scale of offensiveness to public policy, it may be said

that an out-and-out assignment may in many cases be, if anything, more obnoxious to public policy. Whereas a champertous

agreement will allow the plaintiff to remain in the proceedings (and normally in control of them), an assignment removes the plaintiff

entirely and substitutes the assignee. Furthermore, in champerty, the interests of the parties to the agreement are at least aligned:

the more successful the plaintiff’s claim is, the better both parties may do. On the other hand, in the case of an assignment, a

plaintiff receives only what is paid in return for the assignment, and obtains no benefit from the litigation which is based upon his or

her cause of action. I appreciate that this may not hold true in all cases. For example, an agreement to split the proceeds of a

potential claim for €100,000, giving to the funder the right of maintaining the litigation, may not in practice be any different to an

out-and-out assignment of the claim in return for a payment of €50,000. Indeed, in some cases where recovery is doubtful, a plaintiff

may prefer the fixed recovery that the sale of the claim brings, rather than run the risk of the proceedings. However, in general, I

consider that an out-and-out assignment of a bare right to litigate which has no redeeming feature, is, if anything, more obnoxious to

underlying public policy than champerty and maintenance respectively. If this is so, it follows that the type of genuine interest which

may be sufficient to justify a person maintaining another person’s cause of action may not itself justify a champertous agreement ,

and still less an outright assignment. For example, the relationship of a plaintiff to a trade union will certainly justify the trade union

funding a personal injuries action, but it would not normally justify the trade union insisting on a percentage of the proceeds of that

claim, and still less the out-and-out assignment of the claim. This observation is not academic in this case. The fact that some form

of maintenance may remain impermissible, that champerty is more obnoxious to public policy, and that assignments are perhaps more

obnoxious again is important in identifying the factors of public policy which still have vitality today.

85 The next steps are to consider (i) what are the contours of public policy underpinning the principle of invalidity of assignment of

bare rights to litigate; (ii) whether that public policy still remains valid; (iii) even if so, whether it should be modified in some way; and

(iv) whether the transaction at issue, whether viewed as the core assignment permitted under the New York bankruptcy

arrangement, or the more elaborate transaction entered into here, falls outside any condemnation of assignments on grounds of public

policy, whether as coming within some exemption already recognised in the case law, or some logical or desirable extension thereof.

Public policy

86 There are a range of public policy concerns which have been articulated as justifying the invalidity of agreements constituting

maintenance, champerty, or amounting to an assignment of a bare right to litigate. Initially, the policy underpinning the crime and tort

of maintenance was the prevention of intermeddling by third parties in the litigation of others. A number of developments in society

over the succeeding centuries have led to a recognition that there can be a range of legitimate interests for the support of litigation

by parties otherwise unconnected to the dispute. Nevertheless, the continued existence of the crime and tort of maintenance in

Ireland, and the continued vitality in the common law world of the principle that contracts involving maintenance (albeit much more

narrowly defined) will not be enforced, shows that the concept of litigation as a dispute between individual parties of matters which

have arisen between them remains an important value in the law. This view was well expressed in the judgment of Heydon J.

(dissenting) in the High Court of Australia in Jeffrey and Katauskas Pty. Ltd. v SST Consulting Pty. Ltd. [2009] HCA 43, (2009) 239

C.L.R. 75 when he said at para. 61:-

“If the court system is ‘primarily there’ to enable rights to be vindicated rather than to enable commercial profits to

be made, it follows that a non-plaintiff who funds the plaintiff with the primary purpose of making commercial profits

out of the litigation is behaving extraneously to the proper function of litigation, at least where the funder avoids

responsibility for the costs of the defendant. It is behaviour outside the purpose which the process is supplied to

serve. It is not making a legitimate use of that process. Rather it abuses that process.”

87 The idea of the administration of justice carries with it, normally at least, the belief that the resolution of disputes should be the

business of the parties themselves, and should be brought to the court because there is no other way of resolving it. Litigation is not

a desirable activity in itself, although preferable to the alternative. The administration of justice is a public service which is justified

by the necessity of providing a method a fair resolution of disputes between parties. In civil cases, it involves the awarding of

remedies by way of compensation for a wrong to the person who has been determined to have suffered that wrong. Indeed, this can

be seen perhaps as a performance of the State’s obligation to vindicate the rights of the citizen in the case of injustice done. The

intervention of third parties, unless justified, distorts that pattern and the process.

88 Champerty has always been regarded as more obnoxious than maintenance, because it involves not merely the involvement in the

proceedings of a third party, but also the possibility that the party will recover some proportion of any award of damages if the claim

is successful. The law has always viewed this with suspicion, primarily because it necessarily involves depriving a successful plaintiff

of the full amount calculated by the court as necessary to compensate him or her in the circumstances for a wrong he or she has

suffered, and for which it is the function of the administration of justice to provide a remedy. However, the law also considers it

suspect because the third party funder recovers a portion of the award not as damages for an injury done or for a right breached, but

rather as a profit in a commercial transaction, by definition at the expense of the wronged plaintiff. There may be cases where it

might be said that this is preferable to no recovery at all, but, as the extract from the judgment of Heydon J. illustrates, third party

profit is regarded, in principle at least, as offensive to the common law unless justified, and - even when capable of justification -

unless controlled and regulated.

89 Viewed in this way, it is clear why assignments of so-called bare rights to litigate were treated by the common law as invalid, at

least as a matter of history. Absent some justification, such an assignment offends in at least two ways against important values of

the system. First, the litigation loses its character as one brought between parties to vindicate their rights to seek to recover

compensation for wrongs done. The original, wronged plaintiff is removed from the proceedings, and their claim converted into a

conduit for financial recovery by the assignee. Furthermore, the structure of the transaction envisages (and in most cases will be

driven by) the prospect of a profit being made by the assignee, with the assignor recovering less, on this hypothesis, than they are

properly entitled to as a matter of justice.

90 It may be true that the term ‘trafficking’ is merely a description applied to a transaction of which the speaker disapproves, but in

this context that disapproval stems from the belief the subject matter of the trading, whether children, drugs, adults, body parts or

litigation, is a matter which should not properly be the subject of a commercial transaction. The fact that the commercialisation or

commodification of the litigation is intrinsically offensive emerges from dicta in a number of the cases, but perhaps most clearly from

that feature of the decision in Trendtex Trading Corporation v. Credit Suisse [1980] 1 Q.B. 629 (C.A.); [1982] A.C. 679 (H.L.) which

gave rise to the difference in outcome between the Court of Appeal and the House of Lords. Indeed, that element is highlighted by

the fact that, while the decision of the House of Lords can be and has been understood as considering that the assignment of the

Trendtex claim to Credit Suisse for its own purposes would have been valid, the particular assignment to Credit Suisse was, however,

invalid because it contemplated the onward assignment of a claim to a party with no connection to the transaction which had given

rise to the cause of action. The possibility (which in the event materialised) that the cause of action could be treated as a

commodity and freely traded was fatal. The fact that the claim could be “commoditised”, “commodified” (Thema) “trafficked” or

“traded”, or that there could be “an unlicensed and unregulated market in litigation” (Stocznia) “unjustified buying and selling of a

right in litigation “ (BC 160361 (Fleetwood Apartments)) “the consequent interference by a third party in litigation” (Glegg ) with “ the

consequent opportunity to influence the conduct of proceedings abusively” (Stocznia) was central to the decision in Trendtex, and

the subsequent decisions. Furthermore, the acceptance of the decision of the House of Lords in Trendtex in Australia and New

Zealand suggests, at a minimum, that there remains a fundamental objection to the trading of claims, stigmatised in the jurisprudence

as “trafficking in litigation”. The importance of the decision of the House of Lords was to recognise that, while an assignment of a

claim is presumptively undesirable and at risk of invalidity, there could be a legitimate justification for such an assignment of which the

decided cases were only illustrations. Thus debts, although enforceable by action, have always been regarded as assignable even if in

some cases when contested they can give rise to contentious litigation. Other assignments ancillary to bona fide transactions,

particularly in relation to property, have also been regarded as legitimate. Assignments to parties with a pre-existing legitimate

interest in the transaction giving rise to the claim (such as the provision of a letter of credit by Credit Suisse to the cement suppliers

and the funding of the shipments and demurrage), or even the prior involvement as a shareholder in the company, or the fact that

the shareholders and the assignee had been shareholders in the assignor at the time of the transaction giving rise to the claim (see

Massai Aviation Services v. Attorney General of the Bahamas [2007] UKPC 12, [2007] All E.R. (D) 329), can all be seen as examples of

a legitimate interest justifying the assignment of a right to litigate. However, the commercial trading of a claim to an unconnected

third party with the possibility of profit (e.g. the potential assignment by Credit Suisse to an anonymous third party) was not

legitimate and was, and remains, unenforceable.

91 The assignment here (at least the basic assignment of the claim in bankruptcy and any other claim on a secondary market) very

clearly involved trading in claims. It is not surprising, therefore, that it was challenged in these proceedings. Nevertheless, such an

assignment appears at least in principle to be capable of being permissible under the law of New York. Accordingly, before considering

whether the particular features of this case can render the assignment here one which the law would consider as effected for a

legitimate purpose, it is in my view necessary to consider whether the public policy contrary to such trading in claims remains justified

or should now be held to have been modified or perhaps to no longer exist.

92 The cultural differences between the common law system in the United States, and that in some other common law jurisdictions in

this regard is perhaps also reflected in the prevalence of contingency fees in the United States, which were up until relatively

recently regarded as absolutely impermissible in other common law jurisdictions, as illustrated by the condemnation of the practice in

the decision of the Court of Appeal in Trendtex Trading Corporation v. Credit Suisse [1980] 1 Q.B. 629 (C.A.). As I understand it,

since the significant restriction of legal aid in the United Kingdom, it has been permitted to seek a significant uplift in fees when a

successful claim has been brought on a “no foal, no fee” basis or to enter a conditional fee agreement, but a simple percentage

contingency, and moreover one taken from the successful plaintiff, remains improper, certainly in this jurisdiction. However, to US

lawyers, and indeed their clients, the contingency fee system facilitates access to justice and, moreover, serves to align the interest

of lawyer and client, since it incentivises the lawyer to maximise recovery for the client (and thereby the lawyer). By the same token,

it might be argued that the assignment of a cause of action simply recognises commercial realities and promotes efficiency. A

potential plaintiff, who, although wronged, may also be unwilling to engage in long running and expensive litigation, might very well

consider that the assignment of a claim at the outset to a party with greater resources and appetite for litigation, even if at a

substantial discount for potential recovery, is still to be preferred to a prolonged, uncertain and costly action, in which he may

possibly fail to recover anything at all from the claim. On this view, the objections of other common law systems to out-and-out

assignments of a right to litigate may seem like doomed Victorian priggishness which cannot survive in the face of modern commercial

reality.

93 We should consider this objection seriously, because if it has merit (even if not hitherto expressly articulated) it would not only

explain the development of the law in this area towards the greater tolerance of funding by third parties and assignments of claims,

but would also suggest that such developments should be encouraged and accelerated. In my view, however, the objections of the

common law to the commodification of litigation retain force and vitality. Commercialisation of an activity is justified in principle on the

basis that it maximises efficiency. Claims which might not have been advanced will be advanced. Claims which might not have justified

the risks involved may be bundled together and advanced. The provision of evidence might also have to be placed on a more

commercially efficient basis. If it is possible to trade a claim, it must be possible to make collateral agreements in relation to the

evidence to be provided, which is necessary to deliver the benefit of the claim being purchased. However, the common law in this and

other jurisdictions had not traditionally regarded litigation as a social good to be encouraged. It is not necessary to regard litigation as

a positive evil (see Lord Sumption J.S.C, ‘Abolishing personal injuries law: a project’, (2018) 1 J.P.I. Law 1) to consider that it is an

activity which society should not encourage. The considerable costs, both financial and in resource terms, which the community

incurs in providing a court system is not justified on the basis of facilitating a commercial activity, but rather because it is necessary

for the administration of justice. This, at its core, involves the resolution of disputes between citizens and others because those

parties consider that they have been wronged, and have no other method of vindicating their rights. It would be foolish not to

recognise that the practice of law is a business, but the administration of justice is not. Commercial considerations can and should

have a significant impact on litigation, whether relatively minor claims in the District Court or massive litigation in the High Court.

However, the justification for the court and the system of litigation in this and other jurisdictions is not the stimulation of economic

activity: rather, it is the administration of justice, however imperfect, inefficient and frustrating that may be on occasions. If so, in

my view, the public policy which views with suspicion the acquisition of claims by unconnected third parties and their pursuit in order

to recover profits remains valid, as indeed the case law demonstrates. It is inevitable that, if it is possible to freely assign claims in a

market, it must also be possible to make collateral agreements in relation to the giving of evidence to support such claims, since

otherwise it would not be possible to maintain the value of the claim which has been traded. Yet the concept of witnesses entering

into agreements in relation to the evidence which they are to give on oath is plainly undesirable. Furthermore, the distance that is

created between the nominal plaintiff and the factual controversies giving rise to the dispute is capable of causing difficulties, both

for the plaintiff in marshalling evidence, and for the defendant in seeking to compel discovery in respect of the original transaction.

Depending on the circumstances of each case, these difficulties may either hinder or help individual plaintiffs, but neither outcome is

inherently desirable from the point of view of the administration of justice and seeking the truth. Commoditisation of claims runs

counter therefore to important interests in the administration of justice. Therefore, while there may be choses in action that can be

properly assigned, and of which assignment should be encouraged (for example, in the case of commercial debts), the general

suspicion and antipathy of the common law to the trading in claims remains, in my judgment, well founded.

94 This case falls to be dealt with, therefore, on the basis that the common law remains hostile to the assignment of causes of action

generally, and is supportive only of certain limited and permissible assignments. The question which arises here is whether this claim

can be fitted within the existing case law, or within some plausible and permissible extension thereof. It is clear, in my view, that the

case cannot be accommodated within the existing case law. Therefore, the issue becomes whether the claim can be treated as

permissible on the basis that it is close to some of the decided cases and consistent with principle that can be deduced from them. In

this case, it is possible to argue, for example, that the assignment occurs in the context of a general assignment of all claims

(specifically, the ACC) which must be assumed to be permissible, in circumstances where the form of the assignment in question

which runs the transactions together is both required by the trustee in bankruptcy, and approved by the court supervising the

bankruptcy. This association, it is said, can be considered to constitute a legitimate commercial interest in taking the assignment of

the claim of the cause of action.

95 In this regard, it may be said that it is true that the assignment does not take place in circumstances of any pre-existing

commercial interest, but rather that the connection is created by the self-same transaction relied on as the assignment founding this

cause of action. It is also the case that it cannot be said that the assignment takes effect as part of a property interest such as

that which arose in Williams v. Protheroe (1829) 3 Y. & J. 129. But, it might be said, these are not fundamental objections: rather,

this court, looking at the transaction in the round, should conclude that the taking of the assignment of the ACC in the particular

circumstances of this case constitutes a legitimate interest sufficient to make the assignment of the cause of action permissible. It

might also be argued in this regard that, in effect, the same outcome could be achieved perfectly legitimately by a series of

agreements whereby the original investor of a company with separate legal personality transfers all other claims and liabilities to

another company, leaving any potential claim against the defendants in this case as the only asset in the original company, and

subsequently permitting the shares to be sold to persons who wished to see the claims pursued. If this can be done, the argument

runs, then it is impossible to contend that public policy prevents the same objective being achieved directly.

96 I see the force of these arguments. However, in the first case, the possibility of manipulation of a series of agreements taking

advantage of the separate legal personality of a limited company is something which I think should be discounted significantly as an

argument for recognising and enforcing an assignment which would otherwise be regarded as impermissible. Such a theoretical

possibility is a feature of the concept of the separate legal personality of a corporate entity, which is something which has both

benefits and disadvantages. There may indeed be reasons why parties do not structure transactions as a sale of shares in a

company, most often because of potential liabilities of the company which cannot necessarily be anticipated or warranted against in

advance. It should not, therefore, be too readily assumed that the same outcome could have been achieved indirectly.

Fundamentally, the separate legal personality of a company may allow different persons to benefit indirectly, as shareholders, from a

claim that company may have, but that in itself is no reason to extend that outcome to persons who are in law different and distinct.

97 While the present transaction can be presented as, at most, a small extension of the existing law, and, if so, simply a further

limited exception to a rule which is both difficult to comprehend in theory and to police in practice, I find it hard to see how the

assignment here can be permitted to take effect in Irish law without substantially undermining the logic of the principle altogether. In

such circumstances, it would be more honest to simply remove the rule altogether, rather than to leave it to operate unpredictably

and haphazardly as a trap for the unwary, and a recipe for endless appeals. It is, in my view, irrelevant that the assignor here may

not have placed a particular value on these claims. If the argument on behalf of the plaintiffs holds good, then it would have been

equally permissible for the assignors here to have advertised the potential claim against these defendants as a significant feature of

the assignment, and something which should be highly valued by any assignee. If that was to occur, then it would be perhaps the

most obvious example of trading in litigation and creating a market for claims that could be imagined. I cannot see how such trading in

claims would then become permissible, simply because they were linked to or part of an assignment of other claims or debts which

were regarded by the law as permissible. Such an outcome would make what was asserted to be a principle of the law a matter of

random and unpredictable occurrence, which would invalidate a transaction if occurring on its own, but permit it if it was part of a

larger transaction. Hitherto, the law has regarded it as critical that the interest claimed to be legitimate and sufficient to justify an

assignment should exist prior to and independently of the assignment or the transaction of which it forms part. That is not mere

formalism, and to remove it would, in my judgment, undermine the principle to the point where it would be inevitable that the

exceptions would eventually devour the rule.

98 If so, I cannot see that simply because of matters related to structure of the original investor here, or the size of the investment,

or that the assignments here were an assignment to SPV Osus, which was, at the time, a connected party involving a common

shareholding, can make a difference. The purpose of the assignment to SPV Osus, in much the same way as the assignment in

Trendtex Trading Corporation v. Credit Suisse [1980] 1 Q.B. 629 (C.A.); [1982] A.C. 679 (H.L.), was designed and intended to permit

onward transactions (which indeed occurred) and, on this view, involved trading in claims. If it is true that Irish law would not enforce

the assignment of this claim under the format of assignment approved by the Trustee in the New York court if the assignee was an

unconnected third party, it cannot, in my view, uphold an assignment to a connected party with a view to facilitating third parties

obtaining control of, and ultimately benefitting from, the cause of action. Assuming for the moment that Massai Aviation Services v.

Attorney General of the Bahamas [2007] UKPC 12, [2007] All E.R. (D) 329 also represents the law in Ireland, it provides for an

exception in the case of an assignment of a claim to a party where the shareholding is the same as that in the assignor at the time

the cause of action accrued. That rationale would not have been available if the shares in Massai had been owned by, or were sold

to, an unconnected third party, particularly if done with a view to prosecuting the claim. In those circumstances, I would dismiss this

appeal from the decision of the Court of Appeal, and uphold the decision of the High Court.