13 The grant of a stay in this case must therefore be seen as a measure which would certainly have an immediate effect of halting the plaintiffs' capacity to pursue the litigation and, according to their protestations, would do so permanently. Although not persuaded that that would be the case for all the plaintiffs, I ought to proceed, I think, upon the basis that the position is sufficiently uncertain that I should only grant a stay if, in my view, the circumstances clearly warrant it.
14 The grounds upon which the stay of proceedings may be granted are not closed. They may generally be described as cases "in which the processes and procedures of the court, which exist to administer justice with fairness and impartiality, may be converted into instruments of injustice or unfairness": Walton v Gardiner (1993) 177 CLR 378, 393. That case followed the early decisions of the High Court in Jago v District Court of New South Wales (1989) 168 CLR 23 and Williams v Spautz (1992) 174 CLR 509. The latter was a case where proceedings were held to have been brought for an improper purpose, not to prosecute them to a conclusion and to obtain a remedy provided by the law, but to use the proceedings as a means of obtaining a collateral advantage beyond that which the law offers. It was held that a stay was properly granted in that case, even though nothing improper had been done in the course of the proceedings and even though the party stayed should be taken to have a prima facie case to pursue.
15 In Walton examples given included where the proceedings were seen to be foredoomed to fail, where the court in which they are brought is clearly an inappropriate forum, where the proceedings seek to litigate anew a case which has already been disposed of and matters of that kind.
(Page 10)However, the Court made it clear that the remedy of a stay might be available wherever the Court is satisfied that the continuation of the proceedings would involve unacceptable injustice or unfairness, and such cases were certainly not limited to those where the proceedings were brought for an improper collateral purpose. In this case the defendants rely upon the unfairness which they say is inherent in their exposure to litigation funded and maintained by what is asserted to be a champertous agreement. In a proper case such an agreement might constitute good grounds for staying a piece of litigation: cfIn re Oasis Merchandising Ltd [1998] Ch 170.
16 I should commence by considering the present day concept of champerty, upon which the applicants rely. Champerty is a form of maintenance. Both concepts are creatures of the common law. They are of very respectable antiquity, but being doctrines of the common law, they have evolved over time. In In re Trepca Mines Ltd (No 2) [1963] Ch 199 at 219 - 220 Lord Denning MR said:
"Maintenance may, I think, nowadays be defined as improperly stirring up litigation and strife by giving aid to one party to bring or defend a claim without just cause or excuse. … Champerty is derived from campi partitio (division of the field). It occurs when the person maintaining another stipulates for a share of the proceeds. The reason why the common law condemns champerty is because of the abuses to which it may give rise. The common law fears that the champertous maintainer might be tempted, for his own personal gain, to inflame the damages, to suppress evidence, or even to suborn witnesses."
17 To maintain another in litigation for a share of the proceeds will not constitute champerty unless the maintenance is of a kind which would attract the interference of the common law, whether as a crime or as a tort. That will not be so unless the litigation is improperly stirred up, because maintenance was a concept developed to protect the system of justice administered by the courts from abuse. Therefore, to support another in litigation for a proper motive will not constitute maintenance. Such a motive might simply be to support another in the capacity to pursue a legitimate claim, particularly where there is a statutory or other legitimate interest, which is not derived from any agreement to provide the maintainer with a share of the proceeds of the litigation. (Page 11)18 There are many examples of conduct which will not attract the interest of the common law. Common examples include the activities of insurers, the provision of funding by trade unions or professional associations, the actions of those to whom a chose in action is lawfully assigned or who exercise statutory authority under corporations law or insolvency laws and the activities of lawyers who provide their services pro bono or who forbear to render bills of their costs until their client has the means to pay, provided, of course, in the latter case that the legal practitioner does not breach s 63(1) of the Legal Practitioners Act1893 (WA) which prohibits the purchase by a practitioner of an interest in litigation and an agreement by a practitioner for payment of a fee only in the event of success in litigation. 19 I digress to observe that the defendants' arrangements with their solicitors, as discussed in the various submissions made to me, seem to me to have no relevance to the defendants' applications for stays of the proceedings brought by the plaintiffs, but, in any event, I can see nothing in them which carries any implication of maintenance or champerty. For Mrs Siglin it is said that she is supported by the "forbearance" of her solicitors and for Mr Hayles it is said that he is supported by the Law Society's professional indemnity insurance scheme conducted pursuant to the Legal Practitioners Act, s 85, and the relevant regulations. I certainly do not propose to enter into any consideration of the lawfulness of that scheme, having regard to the provisions of the Insurance Act 1973 (Cth) and s 109 of the Commonwealth Constitution.
20 Whatever may have been the position prior to the enactment of the Criminal Code (WA), it is clear that since that enactment neither maintenance, nor that form of it which would constitute champerty, are crimes in this jurisdiction. The former common law offences have been replaced in their criminal manifestations by offences within ch 16 of the Code relating to the administration of justice, including such conduct as suborning justices and witnesses, fabricating and destroying evidence and the forms of conspiracy or attempts to pervert or defeat the course of justice.
21 The tort, however, would seem to be still in existence in this jurisdiction. In Newton v Gapes (1910) 12 WALR 86 the existence of the tort in respect of which, if damage was caused, an action could be brought was upheld. At 89 McMillan J, with whom Parker CJ and Rooth J agreed, said of champerty that it was the species of maintenance "most commonly found in modern times". Speaking before the enactment of the Criminal
(Page 12)Code, his Honour mentioned that the criminal law was at one time applied with great severity, but continued:
"In modern times we only hear of it in civil actions; there is nothing to suggest that the law which is to be applied to civil proceedings has in any way fallen into disuse. … The cases proceed upon the real object and policy of the law, which … is to repress 'the traffic of merchandise in quarrels, of huckstering in litigious discord'. Of course, the Courts have not only disallowed transactions which would have fallen within the old definitions of maintenance and champerty, but even those which, as the phrase runs, savour of maintenance - if the transaction tends to the same kind of mischief which has always been aimed at by the law."
22 I am content, of course, to accept that binding statement of the law and it follows that an agreement which savours of maintenance or which is, frankly, champertous is one which is illegal, as being contrary to public policy. Subject to the ordinary rules governing such cases, a champertous agreement will be unenforceable and the party which might otherwise have had the benefit of it will not be able to sue upon it to recover the share of the proceeds agreed upon. That public policy consideration continues to be the relevance of maintenance and champerty, even in those jurisdictions where both the criminal offence and the tort have been abolished, eg, in the UK in 1967 and in NSW, Vic and SA, at least, of the various Australian jurisdictions: Stocznia Gdanska SA v Latreefers Inc [2000] EWCA Civ 36; 9 February 2000 per the Court of Appeal at [59]. 23 It was held that the tort of maintenance and champerty is not actionable per se, but requires loss or damage before the cause of action is made out. In Magic Menu Systems Pty Ltd & MMS Franchising Pty Ltd v AFA Facilitation Pty Ltd, Janus Kobble Creek Pty Ltd & Simon (1997) 72 FCR 261 the Full Court of the Federal Court discussed maintenance and champerty at 267 - 269. What I have written thus far is, I think, consistent with their Honours' discussion of the law. Their Honours noted the expression of views to the effect that the tort of maintenance, and particularly that version of it known as champerty, might now be regarded as obsolete, given the Court's power to regard agreements of the character mentioned as being contrary to public policy and, therefore, unenforceable and given the power to control, by the remedy of a stay, the pursuit of litigation in a manner which makes it an instrument of oppression and unfairness, or has a real tendency to do so. Their Honours observed that these days, "Concerns expressed earlier this
(Page 13)century, as to the potential for the maintenance of actions to give rise to an increase in litigation, might now be considered of lesser importance than the problems which face the ordinary litigant in funding litigation and gaining access to the Courts." Their Honours referred to the unsatisfactory situation wherein the tort has been abolished in some Australian jurisdictions but not in others. They observed that they were not to be taken as questioning the court's willingness to act "where an abuse of process has occurred, or is likely to".
24 That theme was taken up recently by the Full Court of the Federal Court in Gore v Justice Corp Pty Ltd (2002) 189 ALR 712 when, at 733 [59], their Honours remarked:
"There are ongoing concerns about the high costs of litigation; there are risks that citizens with justifiable causes of action may be kept out of courts because of their inability to pay the costs of litigation or because they fear the financial risks of litigation. If, in such circumstances, a business house, openly and reasonably, wishes to engage in the business of funding litigation and is prepared to meet the costs of the opposing party should that party be successful, we see no cause for instant alarm. The cases, particularly the English cases that we have reviewed, have shown for some years now, a receding tide in the torts of maintenance and champerty."
25 I am indebted in the researches which have led me to write the above to the judgments of Templeman J in Bandwill Pty Ltd v Spencer-Laitt (2000) 23 WAR 390 and, most recently, to the judgment of Scott J in Treacy v Rylestone Pty Ltd [2002] WASC 178; 4 July 2002. I have, I think, written nothing inconsistent with any part of those judgments. 26 In particular, neither of their Honours was moved by the facts of the cases before them to grant a stay. There is little, I think, as will appear, to distinguish Treacy from this case, and Scott J took the view that although, as his Honour put it at par 74, "There is a prima facie case that the litigation lending agreement is tainted with champerty in this case," his Honour declined to grant a stay on the ground that nothing appeared which showed that there was in fact any feature of the litigation which made its continuation unjust or oppressive or involved an abuse of process such as to require that the proceedings be stayed.
27 It is important to remember that the grant of a stay is a matter of discretion and a stay will not be granted except in the most exceptional
(Page 14)case. In Freehill Hollingdale & Page v Bandwill Pty Ltd [2000] WASCA 150 the Full Court so held and expressed its conclusion at [25] in this way:
"It must, we think, be borne in mind that there is a distinction between a finding that a champertous agreement, or one providing for maintenance of an action, is against public policy and therefore unenforceable as between the parties to it, and a finding that an action which has been funded pursuant to the terms of an agreement of that kind is an abuse of process. A finding of the first kind should by no means automatically result in a finding of the second kind. The question whether a particular action has been brought, or is being continued, in abuse of the Court's process is one which depends upon all of the material circumstances, of which the fact of maintenance or champerty may be only one."
28 In Bandwill Pty Ltd v Spencer-Laitt, at 403 [97], Templeman J said:
"Given the reluctance of the courts to pre-judge in satellite or interlocutory proceedings, an issue which does not afford a substantive defence in any event, it seems to me that an applicant for a stay must demonstrate that the circumstances so clearly give rise to an abuse of process as to make that proposition almost unarguable."
29 To my mind, in that passage his Honour was doing no more than emphasise the exceptional nature of the remedy of a stay and the clarity of the case which must be demonstrated before it was granted in the exercise of the court's discretion. It follows also that, as was held in Freehill at [30], to the extent that the decision in Carob Industries Pty Ltd v Simto Pty Ltd, unreported; SCt of WA (Anderson J); Library No 970692; 11 December 1997 may be taken as authority for the proposition that a stay would be ordered by the court merely upon the establishment of the champertous nature of the arrangements to fund the litigation, it should not now be followed. 30 I would summarise my conclusions in the following way: maintenance is the improper support or promotion of litigation. There would seem to be no closed category of cases where relevant impropriety of that kind might be established, but maintenance will not lie merely in the support of litigation for a party by a stranger to the litigation. It will lie in some wrongful intermeddling, some interference with the processes
(Page 15)of the courts, some oppression or attempt at a collateral advantage. Champerty is the employment of such impropriety for a share of the spoils by way of reward. In a grave or clear case such an arrangement may amount to an abuse of the processes of the court of sufficient gravity by reason of the unfairness or injustice involved, to warrant a stay of the proceedings, at least until the abuse is remedied, even in a case where it is recognised that the plaintiff has a legitimate claim which may be stifled, even permanently, by the grant of a stay.
31 Is this then a case requiring the provision of that remedy? I have mentioned that the plaintiffs had instructed their present solicitors in the ordinary way and had pursued the litigation up to the point of the Full Court decision in February 2002, after which they sought to take advantage of funding provided by a company called ILF. 32 However, prior to that, on 31 July 2001, the solicitors had already entered into an agreement with the parent company of ILF, known as Insolvency Management Fund Pty Ltd, but to which, for ease of reference, I shall refer as ILF. By that agreement, ILF had retained the solicitors to represent clients who had engaged that company "to assist with recovery of debts and investigation and recovery of losses associated with investments made through finance brokers". The terms of engagement were those commonly applied by the solicitors with variations, including a reduction of 20 per cent in the solicitors' standard professional fees initially. However, when ILF has recovered its costs and expenses incurred, then from the time when the solicitors commenced to act in a particular matter the fees payable would be adjusted retrospectively to 25 per cent above the standard rates. ILF assumes the responsibility to pay the solicitors' professional costs and disbursements, but is entitled to reimburse itself from moneys successfully recovered on behalf of the client.
33 Importantly, in the context of this tripartite arrangement between the solicitors, the client and ILF, ILF is described as the client's agent. The client retains the sole entitlement to give instructions to the solicitors, including for the settlement or discontinuance of claims. The arrangement is clearly one whereby the client receives the benefit that there is no liability to pay anything either to ILF or the solicitors, except out of moneys recovered, although they retain the capacity to control the litigation and its progress and to instruct the solicitors as required. On the other hand, in a case where the costs and disbursements of the solicitors and ILF is exceeded by recovery, a substantially increased rate of calculation of the solicitors' costs is applied. It is of no moment, for
(Page 16)present purposes, to consider how that agreement might stand in the context of s 63(1) of the Legal Practitioners Act.
34 The critical document, for present purposes, is the funding agreement entered into by each of the plaintiffs with ILF in respect of the recovery of the claimed mortgage debt of $400,000, interest and legal costs, all collectively described by the document as the debt claimed by the client, in respect of which it is recited that the client, described as the appointor:
"… wishes to appoint ILF to collect the Debt, to investigate the facts and circumstances surrounding the Debt and the Transaction and to receive any monies agreed or adjudged to be due to the Appointor in relation to the Debt and/or the Transaction."
35 In the recitals to the agreement, but nowhere in its operative parts, there is a reference to a separate agreement made by ILF with the Real Estate Consumer Association Inc to retain the services of the Association to assist ILF with its work under the agreement on the basis that ILF will pay the Association $30 per hour and one-seventh of its commission and fees. As set out in cl 9 of the agreement, they are to be paid from and up to the limit of the amount collected or received by the client. The client is to reimburse actual out-of-pocket expenses, the professional costs and disbursements to be paid by ILF to the solicitors and a fee of 35 per cent of the monies collected or received. In effect, therefore, the Real Estate Consumer Association is to be paid what seems to me to be a potentially handsome fee in excess of 5 per cent of the monies collected or received by ILP over and above the charge of $30 per hour for its work to assist ILF. 36 There is an affidavit filed on behalf of the plaintiffs by a Ms Brailey who deposes that she is the president of the Association. She gives the background of the formation of the Association which, she says, was:
"… formed as a support group for those who had suffered substantial loss as a result of dishonest real estate agents, settlement agents, valuers and other persons who held licences to operate in industries related to real estate."
37 Presumably the dishonesty of which she speaks refers to a judgment made by her Association. She then discusses her contact and arrangements with the plaintiffs' present solicitors and there is general discussion of difficulties in funding litigation. (Page 17)38 She discusses her introduction to a Mr McLernon who, in affidavits filed on behalf of the plaintiffs, is described as the managing director of ILF. She refers to the agreement made with ILF and deposes that her Association "intends to use the funds it receives to carry on operations as a community watchdog and support group for persons who suffer loss from dishonesty or improper practices". It appears that Ms Brailey does all the work for which her Association is contracted. She says she answers queries from clients of ILF. She provides information to them. She assists ILF to obtain documents from them. She reports to them on the progress of litigation and she provides information relevant to its work to ILF, particularly "relating to the conduct of finance brokers".