Flaherty v Girgis

The High Court of Australia considered the appeal in *Flaherty v Girgis*. The dispute concerned the enforceability of a guarantee given by the appellant, Mr. Flaherty, to the respondent, Mr. Girgis, in relation to a loan made by Mr. Girgis to a company. Mr. Flaherty sought to avoid liability under the guarantee, alleging it was void for champerty.

The central legal issue before the High Court was whether the guarantee was void for champerty. Champerty, a form of maintenance, involves an agreement where a person without a legitimate interest in a lawsuit provides financial assistance to a party in litigation in return for a share of the proceeds of the action. The court had to determine if the guarantee, which was linked to the repayment of a loan that was itself intended to fund litigation, constituted champerty and was therefore unenforceable.

The High Court held that the guarantee was not void for champerty. The majority reasoned that the loan and the guarantee were not tainted by champerty because Mr. Girgis had a legitimate commercial interest in the repayment of the loan, irrespective of the outcome of the litigation the loan was intended to fund. The principle applied was that champerty requires an agreement to assist litigation in which the assisting party has no legitimate interest, and that was not the case here. The loan was a genuine commercial transaction, and the guarantee secured that debt.

Consequently, the High Court dismissed the appeal and upheld the enforceability of the guarantee.