Re Trepca Mines Ltd (No. 2)

JurisdictionEngland & Wales
CourtCourt of Appeal
JudgeTHE MASTER OF THE ROLLS,LORD JUSTICE DONOVAN
Judgment Date30 Jul 1962
Judgment citation (vLex)[1962] EWCA Civ J0730-7

[1962] EWCA Civ J0730-7

In The Supreme Court of Judicature

Court of Appeal

Before:

The Master of The Rolls (Lord Denning)

Lord Justice Donovan and

Lordjustice Pearson

In The Matter of Trepca Mines Limited
and
In The Matter of the Companies Act. 1948

(Application of Radomir Nicola Pachitch (Pasic)

Mr GERALD GARDINER. Q. O. and Mr JOHN RANKIN (instructed by Messrs Chamberlain & Co.) appeared on behalf of the Appellant

Mr OVEN STABLE (instructed by Messrs Holt, Beever & Kinsey) appeared on behalf of the Respondent (Applicant)

THE MASTER OF THE ROLLS
1

The question in this case is whether Mr Sidney Pearlman, a Solicitor of the Supreme Court, is entitled to recover his fees and disbursements from his client, M. Radomir Pasic. The client disputes the bill on the ground that it is tainted with champerty

2

The facts are very unusual. A company called Trepca Mines Limited was in voluntary liquidation. It had very large assets which the Liquidator wished to distribute amongst the shareholders. But a man named Radomir Pasic, a Yugoslav citizen, claimed that the company owed him £2,616,486 and lodged a proof for that sum. His claim has since been described in this Court by Lord Justice Harman as of "the most shadowy nature": (see 1960 1 Weekly Law Reports, at page 1282). The Liquidator rejected his proof. M. Pasic took out a summons to have his proof admitted in full. He appeared in person before Mr Justice Roxburgh. The Judge upheld the decision of the Liquidator: (see 1960 1 Weekly Law Reports, page 24). The proceedings were reported in the Times newspaper on the 22nd October, 1959. Ten days later, on the 2nd November, 1959, the Solicitor Mr Sidney Pearlman came into the matter for the first time. A telephone message from Paris asked him to obtain a copy of the Times of the 22nd October, 1959, and intimated that he might be instructed to lodge an appeal. Thereafter there were many comings and goings between Paris and London. Several people came from Paris to see Mr Pearlman in London and he went to Paris to see them. The reason was because M. Pasic wanted to appeal but could not find the money himself to finance it. A M. Teyssou came to his aid and agreed to find £4,000 for the costs on the terms that he, M. Teyssou, was to have 25 per cent of any sums recovered and that he, M. Teyssou, was alone to have the right to conduct the proceedings in England. They agreed that Mr Pearlman was to be the Solicitor to conduct the appeal and the £4,000 was to be paid to him for his costs. Those terms were written down in French in anagreement to be made between M. Pasic and M. Teyssou. But the agreement was not signed until the 18th November, 1959, and then it was signed by those two gentlemen in Mr Pearlman's office in London. It contained two statements which were wrong. It said that it was executed in Paris, whereas it was in fact executed in London in the Solicitor's office. It said it was made on the 14th October, 1959 (before Mr Justice Roxburgh's decision), whereas it was in fact executed on the 18th November, 1959. I have said it was executed in the Solicitor's office, and so it was; but, in fairness to Mr Pearlman, I must say it was not executed in his physical presence.

3

In pursuance of the agreement, M. Teyssou paid Mr Pearlman £4,000; and M. Pasic wrote on the 18th November, 1959, this letter to Mr Pearlman, which shows that M. Teyssou was taking control: "This letter is to authorise you to act in all respects on my behalf in such manner and according to such instructions as M. Roger A, F. Teyssou may from time to time direct in relation to the appeal and all matters connected therewith"; and on the 19th November, 1959, the Solicitor replied saying: "I now write to report that having been put in funds I am pleased to accept your instructions to act on your behalf in relation to your proposed appeal".

4

Having received those instructions and funds, on the 22nd November, 1959, the Solicitor served notice of appeal from Mr Justice Roxburgh's decision and took the necessary steps in the matter. But he was anxious to have something more than the French agreement to regulate the position. In February, 1960, therefore, he submitted instructions to Counsel to settle an agreement in English between H. Pasic and M, Teyssou, covering the self-same ground as the French agreement. He sent the original French text to Counsel, and in his instructions he made it clear that he desired that M. Teyssou's interests should be protected. Perhaps I may read part of the instructions: "Counsel will please settle the form of agreementto "be entered into between the parties for the purpose of affording to the parties all such protection as they may reasonably require in connection with the agreement and the division of such sum as M. Pasic might recover in these proceedings. … It is desired to ensure that whatever eventuality shall occur, that M. Teyssou will be entitled to receive his agreed share of the moneys payable to him as a result of this agreement. It is also desired to avoid the possibility that M. Pasic might withdraw his instructions from the instructing Solicitor (although there is no intimation of this at the moment) or alternatively he might endeavour to make a separate bargain behind the back of the instructing Solicitor so that M. Teyssou would not know what bargain was made and might be deprived of any interest in the moneys or possibility of recovering his share"; and the instructions contained this conclusion: "The agreement in question should be made capable of being enforced in England".

5

Counsel thereupon settled an agreement in English between M, Teyssou and M. Pasic, and it was executed on the 9th April, 1960. I need not go into the details. It made it clear that M. Teyssou provided £4,000 in return for 25 per cent of the proceeds, and that any money recovered was to be paid to Mr Pearlman for him to distribute. Both the French agreement and the English agreement are set out in full in the report of this case before Mr Justice Pennycuick, 1962 2 Weekly Law Reports, page 800.

6

I pause here to say that they were both clearly champertous agreements. If they had concerned French litigation, they might have been lawful, because I understand champerty is lawful in France. But these agreements concerned English litigation against an English company to recover sums in England. They were clearly unlawful and not capable of being enforced in England. Nevertheless, both Solicitor and Counsel seem not to have been aware of this; and Mr. Pearlman went on with his appeal,as he had been instructed to do.

7

In July, 1960, the appeal was heard by this Court. It was allowed and the case remitted to the Companies Court for the value of M. Pasic's claim to be ascertained. It is reported in 1960 1 Weekly Law Reports, page 1273. The matter was, however, never considered by the Companies Court, because on the 4th November, 1960, a compromise was reached under which the Liquidator agreed to pay a total sum of £70,000 in settlement of the claim. This enabled the Liquidator to distribute the balance of the assets in his hands to the shareholders.

8

Shortly before this compromise was finally effected, however, M. Pasic had withdrawn his instructions from his Solicitor Mr Pearlman, and Mr Pearlman was fearful that M. Pasic would not provide for his costs out of the £70,000 he received from the Liquidator. So he applied for, and obtained by consent on the 19th December, 1960, a charge on £6,000 (being part of the £70,000) for his costs, charges and expenses, "such costs charges and expenses to be taxed if not agreed".

9

On the 30th January, 1961, Mr Pearlman submitted his bill of costs against M. Pasic, which came to a total of £4,615. 3s. 3d. It was not agreed and was referred to the Master to be taxed. When the Master proceeded to tax, M. Pasic by his Counsel objected to the whole bill on the ground that the work to which it related was done pursuant to a champertous agreement to which Mr Pearlman was accessory. The Master thereupon desired to obtain the opinion of the Court, and the matter came before Mr Justice Pennycuick for decision. The Judge held (and it forms part of the formal Order of the Court) that "the French and English agreements respectively are champertous and that the Solicitor's retainer having been accepted by him with the knowledge of the existence of the first of the said agreements is void and that the Solicitor is not entitled to any profit costs but only his disbursements".

10

Was this ruling correct? It cannot be understood without some inquiry into our law as to maintenance and champerty. Maintenanco 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. At one time, the limits of "just cause or excuse" were very narrowly defined. But the law has broadened, them very much of late: see Martell v. Consett Iron Company, 1955 1 Chancery, 363. And I hope they will never again be placed in a strait waistcoat. But there is one species of maintenance for which the common law rarely admits of any just cause or excuse, and that is champerty. Champerty is derived from campi partitio (division of the field). It occurs when the person maintaining another stipulates for a share of the proceeds: see the definitions collected by Lord Justice Scrutton in Haseldine v. Hosken, 1933 1 King's Bench, at page 831. 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. These fears may be exaggerated; but, be that so or not, the law for centuries has declared champerty to be unlawful, and we cannot do otherwise than enforce the law; and I may...

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