(COURT OF APPEAL)

GEORGE D. KIRIAZIS v. HEIRS OF JOHN OUSIF KATFAN

AC-REV-134-1966

Principles

Contract—Champerty—An agreement to supply funds for litigation in return for a share in the proceeds—Illegal and not enforceable

An agreement providing for the maintenance of Civil proceedings before the court in return for a share in the proceeds, champerty. is illegal and not enforceable.

Advocates: Fawzy El Tom for applicant

Au Mohamed Ibrahim for respondents

Judgment

Osman El Tayeb I. May 25, 1967:—This is a case in which applicant claimed the specific performance of a certain agreement- giving him half of the estate, the subject of litigatl9n, at that time—or its value amounting to £S.30,000; in the alternative a liquidated sum of £S.14,000m/ms together with interest by way of money advanced as a loan. Respondent in reply put forward certain defences, the most important of which, that is ‘coming for consideration in this revision, is that of champerty. The learned District Judge, after considering written submission made by the learned —advocates for both parties, decided that the agreement was champertous and so it - is illegal and not enforceable.. No evidence was heard, as advocate for applicant asked for, but the decision was on the facts shown in the statement of claim. The application for revision to the learned Province Judge was dismissed. It remains for us to see whether the agreement and the facts surrounding it as shown in the statement of claim constitute champerty within the meaning of the law.

Those facts run as follows:

1. Between the period November 4, 1949 up to March 19, 1953 Dimitn G. Kyriazis of Khartoum lent the defendant a total sum of £S.6,112, secured by seven promissory notes -made by defendant in favour of plaintiff’s father’ Dimitri G. Kyriazis.

2. On May 4, 1950 defendant acknowledged in writing all promissory notes made prior to that date which had amounted to £S.3,502

3. In April, 1955, since 5 years were about to e1a from the date of maturity of the said aforesaid notes D. Kyriazis requested the amount of the aforesaid bills In the alternative D. Kyriazis insisted that defendant secured the aforesaid debt, together with all - further stuns lent by him to defendant and interest due thereon, by making fresh notes by defendant renewing his debt.

4. Defendant expressed his inability to settle the aforesaid debt except on success of his claim as heir of S. M. Kattan in Estate/3/1955. There fore, in consideration of D. Kyriazis refraining to claim by legal process the money due to him by defendant, and further in consideration of his giving up all such claims in connection with these sums and all other sums that may be given by D. Kyriazis to defendant between the period 1955 up to termination of the claim of defendant in Estate/3/1955 defendant agreed in writing on April 7, 1955 to sell half his interest in his claim in EState/3/1955. This offer was accepted by D. Kyriazis who refrained both from suing and from renewing the bills or making new ones for the new debts he gave after that to defendant.

5. Since1949 defendant has not been working. He has been living on, married and was financed in his claim in Estate/3/ I 955 by D. Kyriazis in the following sums:

(i)Value of seven promissory notes as stated above £S.6,112

(ii)     Interest due thereon at 6% per annum up to institution

of the suit ...: £S.2,158

(iii) Sums lent by D. Kyriazis to defendant from July 1953

to 1957 £S.4,830

(iv) Interest thereon at 6% per annum up to institution of

the suit £S. 900

TOTAL £S.14,000

What is the meaning of champerty? The submissions of the learned advocates from both sides contained various quotations from English text books on the definition of champerty. It suffices here. to quote the statement of the law of maintenance and champerty from I Halsbury, Laws of England (3rd ed., 1952), pp. 39—41 respectively as follows:

“Maintenance may be defined as the giving of assistance or encouragement to one of the parties to an action by a person who has neither an interest in the action nor any other motive recognized by the law as justifying such interference.”

“Champerty is a particular kind of maintenance, namely, maintenance of an action in consideration of a promise to give to the maintainer a share in the subject-matter or proceeds thereof. Unlike other kinds of maintenance champerty is not excused by blood relationship.”

Looking at the facts of the case we find in the first place that there was litigation between respondent and others in respect of the estate of the deceased Salih Kattan: (Estate/3/1955) contesting against each other, their right to that estate. While that litigation was pending before the Court it seems  that respondent was out of funds for the. maintenance of that litigation. He restored to applicant to provide him with the necessary. funds. It happened that before the start of the litigation .respondent owed applicant certain sums of- money on promissory notes which respondent was unable to settle. In addition respondent needed further sums for the maintenance of the litigation. In these circumstances the above-mentioned agreement was-made. It clearly specifies that in consideration of reviving the .antecedent debt and forbearance to sue for its recovery and for advancing further loans, the respond agreed to give applicant half of the proceeds of that li1igation. The entitlement for half the estate was made dependent on the success of the litigation about that same  estate. The agreement clearly provided, for the maintenance of the civil proceedings  that were before the court and the advance of loans required to assist and support respondent to carry on with those proceedings until disposal. In the second place, the agreement provided for sharing the proceeds of the suit in other words the first debt and the other loans were not recoverable, according to the agreement,, as debts or loans but instead applicants were given half the estate. There is no doubt that this is a champertous agreement within the meaning of the definition of champerty as stated above Two things are clear:

1. The first one is the advance of loans to assist in carrying out the pending litigation and that applicant has no interest in the estate.

2. An agreement for sharing the proceeds of litigation; and therefore the agreement is illegal and unenforceable and the loans cannot be recovered.    

The learned advocate for applicant argued that the debt that was owed before the start of the litigation may be a subject of severance from the other loans provided during litigation. This might be possible had it not been included in the agreement which has been found to be champertous. By the revival of those antecedent debts by admission, and the promise not to claim them they were made part and parcel of the consideration of sharing The proceed of the litigation. As they so form part of the illegal agreement, it is difficult to see how severance can be made.

For these -reasons, this application has to be dismissed with costs.

El Rayah Al Amin C.J. May 25, 1967:- I agree.

Hassan Abdel Rahim J. May 25, 1967 :—I agree.