Trendtex Trading Corporation v Credit Suisse

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeLord Wilberforce,Lord Edmund-Davies,Lord Fraser of Tullybelton,Lord Keith of Kinkel,Lord Roskill
Judgment Date22 Oct 1981
Judgment citation (vLex)[1981] UKHL J1022-1

[1981] UKHL J1022-1

House of Lords

Lord Wilberforce

Lord Edmund-Davies

Lord Fraser of Tullybelton

Lord Keith of Kinkel

Lord Roskill

Trendtex Trading Corporation and Others
(Appellants)
and
Credit Suisse
(Respondents)
Lord Wilberforce

My Lords,

1

This is a further episode in the world-wide litigation which followed from the Nigerian cement debacle. Its history has been told with characteristic lucidity by Lord Denning M.R. in Trendtex Trading Corporation v. Central Bank of Nigeria 1977 Q.B. 529 ("The CBN Case") and in his judgment in the present case.

2

The situation which gave rise to this particular action was that Trendtex, having a claim situated in England against the Central Bank of Nigeria ("CBN") for damages, put at $ U.S.14m., had difficulty in financing the litigation necessary to recover it. It therefore sought and obtained assistance from the respondents, Credit Suisse, which guaranteed its costs in the CBN case. This was perfectly legitimate since Trendtex, in respect of the relevant trading in cement, owed Credit Suisse a large sum of money which Credit Suisse had no hope of recovering unless Trendtex succeeded in its claim against CBN.

3

Trendtex failed at first instance in the CBN case on the ground that CBN had state immunity, but succeeded (January 1977) in the Court of Appeal. Leave was given to appeal to this House and a petition of appeal was lodged (April 1977). So the position at that stage was that Trendtex had a cause of action in this country of uncertain value: Trendtex might fail in the House of Lords and even if it succeeded there might be subsequent obstacles to be overcome before it recovered any money.

4

The present case arises out of a series of transactions between Trendtex and Credit Suisse, the third of which was designed to make room for a settlement of Trendtex's claim against CBN. A Swiss lawyer, Maître Patry, was engaged to act for Credit Suisse. On Trendtex's side, the main representative was Dr. Hauser, its Swiss Director, Trendtex itself—as was also Credit Suisse—being a Swiss Company. There were three critical documents:

1. On 6th September 1976, Trendtex assigned to Credit Suisse all its claims arising out of the cement contracts "until the claims of the Assignee are covered". Credit Suisse was given power to bring actions in its own name or that of Trendtex. [The CBN litigation had started in November 1975].

2. On 26th November 1976 Trendtex surrendered to Credit Suisse all its claim (which must have included claims against CBN) arising from the cement contracts and from a specified letter of credit issued by CBN "to the full extent of the indebtedness to the transferee". I do not think that, whatever is the governing law of these documents, there can be much doubt that they were normal assignments by way of security from a debtor to its creditor bank.

3. A further agreement appears to have been reached at a meeting held on 14th November 1977 but the terms of this are the subject of dispute. However, on 4th January 1978 a formal and fairly eleborate agreement was entered into between Trendtex (acting by Dr. Hauser), Dr. Hauser personally, and Credit Suisse (acting by Maître Patry). It commenced by some recitals, the third of which stated that Trendtex was indebted to Credit Suisse for $ U.S.1·5m., and the fourth of which recited an agreement that Credit Suisse would attempt to recover its claim against Trendtex by negotiating with CBN. The fifth recital was that Credit Suisse had received an offer from a third party to buy Trendtex's claim against CBN for $ U.S.800,000. The agreement then provided (Article 1.) that Trendtex did not oppose the sale by Credit Suisse to a purchaser of its choice of all Trendtex's claims against CBN and recognised that it had no further interest in the CBN case. Subsequent articles contained some elaborate arrangements for the satisfaction, out of money to be provided by Credit Suisse, of Trendtex's other creditors, authorisations to Maître Patry to conduct the CBN case on behalf of Trendtex or to settle it by negotiation, and security for Credit Suisse through transfer to Maître Patry of the controlling shares of Trendtex (then owned by the second appellant Temo Anstalt) and resignation of Dr. Hauser as director of Trendtex.

Article 6 was as follows:

"This Agreement is governed by Swiss Law. Any dispute regarding its conclusion, interpretation or fulfilment shall be judged by the Court of Geneva, exclusive of any other jurisdiction."

5

Soon after this, in February 1978, it is alleged that Maître Patry went to Nigeria and settled the CBN case for a payment of U.S. $8·0m. No part of this has been paid to Trendtex. The greater part of it, so it is said, has been paid to a third party who negotiated the settlement, whose identity Maître Patry refuses to disclose.

6

Thereupon two persons claiming to be able to issue instructions for Trendtex, commenced this action in Trendtex's name, with Trendtex's parent company Temo Anstalt as joint plaintiff, claiming that the agreement of 4th January 1978 is void as contrary to public policy and offending against the law of champerty and maintenance. It is further asserted that Trendtex was induced to enter into the agreement by undue influence and economic duress, that Maître Patry acted in breach of fiduciary duty and that Credit Suisse was vicariously liable for the loss thereby caused. The claim is for appropriate declarations, accounts and damages, and Temo Anstalt claims the return of the controlling shares in Trendtex. Upon this Credit Suisse applied to the court for the action to be stayed on the ground (inter alia, but this alone is relevant at the present stage), that the parties had agreed to the exclusive jurisdiction of the Swiss Court. This depends, as I see it, upon two questions:

(1) Whether the agreement of 4th January 1978—and so the exclusive jurisdiction clause—is void as offending the law against champerty and maintenance.

(2) Whether the court in its discretion should stay the action on the ground that the issues raised ought properly to be tried in Switzerland.

7

In the courts below an examination in some depth was conducted into the English law of maintenance and champerty and in this House learned arguments in these matters were deployed. I wish to acknowledge indebtedness to the treatment in the judgments of the Court of Appeal and to the submissions of counsel. However, I do not think it necessary to pronounce upon such areas of this still obscure subject as remain in dispute, for in my opinion the appeal can and should be decided on fairly simple grounds, essentially those which appealed to Goff J. and, in part, to Oliver L.J., and on this basis of the law laid down so clearly by Danckwerts J. and the Court of Appeal in Martell v. Consett Iron Company Ltd. [1955] 1 Ch. 363.

8

If no party had been involved in the agreement of 4th January 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 CBN 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 CBN 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 6th September and 26th November 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 (if this was the effect of the agreement of 4th January 1978) 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.

9

The vice, if any, of the agreement lies in the introduction of the third party. It appears from the face of the agreement not as an obligation, but as a contemplated possibility, that the cause of action against CBN 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. I take the definition of "champerty" (etymologically derived from " campi partitio") from Halsbury's Laws of England, 4th Edition, Volume 9 (Contract), paragraph 400.

"Champerty is a particular kind of maintenance, namely maintenance, of an action in consideration of a promise to give the maintainer a share in the proceeds or subject matter of the action."

10

Although ancient in origin, and so no doubt encrusted with disposable obsolescencies, it has been given statutory recognition by the Criminal Law Act 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.

11

Two modern cases in which agreements have been held void for champerty are In re Trepca Mines Ltd. [1963] Ch. 199 (C.A.), and Laurent v. Sale & Co. [1963] 1 W.L.R. 829.In re Trepca Mines Ltd. was concerned with an agreement governed by French law which contained provisions remarkably similar to those of the agreement of 4th January 1978: it involved the participation by a third party, M. Teyssou, in contemplated litigation to the extent of 25%, and M....

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2 firm's commentaries
  • The Role of the Doctrines of Champerty and Maintenance in Arbitration
    • United Kingdom
    • Mondaq United Kingdom
    • 18 June 2010
    ...[1993] 3 All E.R. 321 at 332. 18 Bevan Ashford [1999] Ch. 239 at 251C-D; [1998] 3 W.L.R. 172. 19 Trendtex Trading Corp v Credit Suisse [1982] A.C. 679 at 702; [1981] 3 W.L.R. 20 Coondoo v Mukerjee (1876–77) L.R. 2 App. Cas. 186 at 210. The copyright of this article remains with the Chartere......
  • Supreme Court Has The Final Say On Litigation Trafficking
    • Ireland
    • Mondaq Ireland
    • 7 August 2018
    ...interest in the litigation remain off limits in Ireland for the foreseeable future. Footnote 1 Trendtex Trading Corp v Credit Suisse [1982] AC 679 2 Matheson represented the successful Defendants. The factual and legal issues raised in these proceedings are complex and go beyond the scope o......
2 books & journal articles
  • The Trendtex Principle in Australian Law: Context and Recent Developments
    • Australia
    • University of Western Australia Law Review Nbr. 40-2, September 2016
    • 1 September 2016
    ...111 * BA (Hons) BA/LLB (Hons) PhD (Macq), Lecturer, Newcastle Law School, University of Newcastle, Australia. 1[1982] AC 679; [1981] 3 All ER 520. 2(2012) 246 CLR 498, 525 (French CJ, Crennan and Kiefel JJ), 533 (Gummow and Bell JJ), 558 (Heydon JJ). 86 The University of Western Australia L......
  • IS A CAUSE OF ACTION A CASTLE? STATUTORY CHOSES IN ACTION AS PROPERTY AND S 51 (XXXI) OF THE CONSTITUTION.
    • Australia
    • Melbourne University Law Review Vol. 42 Nbr. 1, August 2018
    • 1 August 2018
    ...(92) Though there may be a slight divergence between the modern House of Lords approach in Trendtex Trading Corporation v Credit Suisse [1982] AC 679 and the earlier High Court authority of Poulton v Commonwealth (1953) 89 CLR (93) JD Heydon, MJ Leeming and PG Turner, Meagher, Gummow and Le......

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