What Is the Difference Between the Torts of Maintenance and Champerty?

The Tort of Maintenance Involves Nefarious Encouragement or Assistance to Another Person In Pursuing Legal Rights. The Tort of Champerty Is Similar to Maintenance Except That the Maintainer Also Shares In the Monies Received.

A Helpful Guide for How to Identify the Elements Distinguishing Tortious Champerty and Tortious Maintenance

Lawsuit document containing allegations of tortious champerty and tortious maintenance The torts of champerty and maintenance both involve elements of wrongful intermeddling in the legal proceedings of other people; essentially, sticking a nose in where it doesn't belong and doing so with nefarious intentions or an illicit purpose or otherwise without a legitimate and reasonably justified reason for doing so.  The tort of maintenance involves the providing of wrongful encouragement of litigative proceedings as well as some form of support, usually financial assistance with legal costs, among other things, which is generally arising from a desire within the person engaged in the maintenance to inflict disruption, disturbance, or other form of harm, via the litigative proceeding.  In short, the person encouraging or supporting the litigation, the maintainer is without party status to the litigation and is providing the assistance with nefariously intentions.  Champerty is almost the same as maintenance; however, champerty involves the additional element of sharing in the proceeds of the litigation if successful.  Accordingly, maintenance may occur without champerty; however, champerty occurs with maintenance.

The Law

Both champerty and maintenance are age old torts and were historically treated as common law crimes.  Additionally, champerty is also addressed by the An Act Respecting Champerty, R.S.O. 1897, c. 327, as an old statute that remains on the current books.  Interestingly, in more recent times, where champerty concerns arise the allegations are frequently pointed towards lawyers who offer to support a case through a contingency retainer agreement whereby the lawyer pays upfront expenses required to bring and advance litigation in exchange for a significant portion of the proceeds should the case be successful and produce a rewarding outcome.  The elements required to prove a case alleging champerty and maintenance were well articulated within the case of Ali v. Datta, 2011 ONSC 2496 wherein it was said:

[53]  Officious intermeddling in another’s lawsuit by assisting one of the parties to prosecute or defend the claim is the tort of maintenance: R.  v. Goodman, 1939 CanLII 21 (SCC), [1939] S.C.R.  446; McIntyre Estate v. Ontario (Attorney General) (2002), 2002 CanLII 45046 (ON CA), 61 O.R.  (3d) 257 (C.A.).  Champerty is a form of maintenance that adds the ingredient that there is an agreement to give the intermeddler a share of the proceeds or some other profit from the subject matter of the action: Trendtex Trading v. Credit Suisse, [1982] A.C.  679 at 694 (H.L.).  An action that involves maintenance or champerty may be dismissed as an abuse of process: Operation 1 Inc.  v. Phillips, 2004 CanLII 48689 (ON SC), [2004] O.J.  No.  5290 (Ont.  S.C.J.).

[54]  In Morden and Perell, The Law of Civil Procedure in Ontario (1st ed) (NexisLexis: Toronto, 2010) at p.  73, I discuss the nature of champerty and maintenance as follows:

The focus of attention of maintenance is on the officious intermeddler and the profiteer in another’s litigation.  The element of officious intermeddling — which is encouraging litigation that the parties would not otherwise pursue — must be present to constitute the tort: Buday v. Locater of Missing Heirs Inc (1993), 1993 CanLII 961 (ON CA), 16 O.R.  (3d) 257 (C.A.); Operation 1 Inc.  v. Phillips, 2004 CanLII 48689 (ON SC), [2004] O.J.  No.  5290 (S.C.J.); R.  v. Goodman, 1939 CanLII 21 (SCC), [1939] S.C.R.  446.  There is no maintenance unless there is an improper motive: Lorch v. McHale (2008), 2008 CanLII 35685 (ON SC), 92 O.R.  (3d) 305 (S.C.J.); S.  v. K., (1986), 1986 CanLII 2789 (ON SC), 55 O.R.  (2d) 111 (Ont.  Dist.  Ct.), and there is no maintenance if the alleged maintainer has a legitimate reason or justification for assisting the litigant: Lorch v. McHale, [2008] O.J.  No.  2807, 92 O.R.  (3d) 305 (Ont.  S.C.J.); Morgan v. Steffanini, [2005] O.J.  No.  1606 (S.C.J.); Ingle v. ACA Assurance, 2005 CanLII 39682 (ON SC), [2005] O.J.  No.  4653 (S.C.J.).  The objection to the assistance is that the person providing it is doing so without a proper purpose and is acting maliciously or to stir up strife.  If there is an allegation of maintenance, the court must carefully examine the conduct of the parties and the propriety of the motive of the alleged maintainer: McIntyre Estate v. Ontario (Attorney General), (2002), 2002 CanLII 45046 (ON CA), 61 O.R.  (3d) 257 (C.A.); Morgan v. Steffanini, [2005] O.J.  No.  1606 (S.C.J.). 

Over the years various decided case established what is reasonably justified assistance within litigation following cases brought against insurers supporting subrogation litigation against tortfeasors whose actions resulted in losses to both the insurer as well as policyholder (see: Simpson & Co. v. Thomson (1877), 3 A.C.  279), trade unions whose efforts and funds expended on behalf of union members were alleged as tortious maintenance (see: Ali v. Datta, 2011 ONSC 2496), and legal representatives acting within a contingency retainer agreement (see: McIntyre Estate v. Ontario (Attorney General), 2002 CanLII 45046).

Actions Involving Assigned Rights

Interesting, some may argue, that maintenance or champerty occurs when a cause of action, which means a reason to litigate, and which includes legal issues such as breach of contract for payment default, is bought and sold.  The buying and selling of past due accounts receivables, among other debts, is big business within the financial services industry and is allowable in law.  This issue was addressed within the Court of Appeal decision of Clark v. Werden, 2011 ONCA 619 wherein it was said:

[10]  In Ontario, champerty is also prohibited by the “Champerty Act” (An Act Respecting Champerty, R.S.O. 1897, c. 327), an unrepealed statute of Ontario. Despite the fact that the Act makes no reference to motive, this court has held, both in McIntyre and earlier in Buday v. Locator of Missing Heirs Inc. (1994), 1993 CanLII 961 (ON CA), 16 O.R. (3d) 257 (C.A.), at p. 267, that the Act was intended to reflect the common law concept of champerty and therefore must be read to include improper motive as a component.

[11]  However, where the assignee of a cause of action, either in tort or contract, possesses a sufficient pre-existing financial interest in the cause of action that has been assigned, that negates the suggestion of maintenance and such assignments are viewed as valid. Similarly, it is recognized that a cause of action in debt can be validly assigned and that such an assignment does not violate the rule against champerty and maintenance: See Fredrickson v. I.C.B.C.1986 CanLII 1066 (BC CA), [1986] 3 B.C.L.R. (2d) 145 (C.A.), at p. 160, affirmed with reasons adopted by the Supreme Court of Canada, 1988 CanLII 38 (SCC), [1988] 1 S.C.R 1089. See recently Plant Software Inc. v. 9123 Investments Ltd. (1999), 14 P.P.S.A.C. (2d) 281 (B.C.S.C.).

[12]  In Fitzroy v. Cave, [1905] 2 K.B. 364 (C.A.), one of the cases relied upon by McLachlin J.A. in Fredrickson, Cozens-Hardy L.J. held at p. 373-74, that “[h]enceforth in all Courts a debt must be regarded as a piece of property capable of legal assignment in the same sense as a bale of goods.… It is not easy to see how the doctrine of maintenance can be applied to a case like the present [concerning the assignment of a debt].

[13]  The ability to assign a debt or legal chose in action is codified in s. 53 of the Conveyancing and Law of Property Act, which provides that a debt is assignable subject to the equities between the original debtor and creditor and reads as follows:

53. (1)  Any absolute assignment made on or after the 31st day of December, 1897, by writing under the hand of the assignor, not purporting to be by way of charge only, of any debt or other legal chose in action of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to receive or claim such debt or chose in action is effectual in law, subject to all equities that would have been entitled to priority over the right of the assignee if this section had not been enacted, to pass and transfer the legal right to such debt or chose in action from the date of such notice, and all legal and other remedies for the same, and the power to give a good discharge for the same without the concurrence of the assignor.  R.S.O. 1990, c. C.34, s. 53 (1).

[14]  In this case, the debt was assigned in accordance with s. 53.

[15]  The appellant submits that this is a case where the court should apply the five-part test for the indicia of champerty and maintenance set out in the British Columbia Supreme Court case of NRS Block Brothers Realty Ltd. v. Minerva Technology Inc. (1997), 1997 CanLII 1274 (BC SC), 145 D.L.R. (4th) 448, as follows: element of officious intermeddling; no previous commercial connection; the assignee is speculating on a personal gain from the lawsuit; there is a stirring up of strife; the assignee initiates or promotes the commencement of the lawsuit. He asserts that there is evidence that Muller would not have pursued Werden on the debt, and that it was Clark who sought the assignment and the commencement of the lawsuit with no previous interest other than bad feeling toward him.

[16]  The trial judge did not address these concerns directly, because she found that this was a valid assignment of a debt in accordance and in compliance with s. 53 of the Conveyancing and Law of Property Act. In my view, she made no error in her legal conclusion. The case law is clear that an assignment of a debt is not a champertous transaction and the otherwise applicable criteria do not apply to such an assignment. In Fitzroy similar arguments were made. In concluding that the assignments of debts were valid and not champertous, Cozens-Hardy L.J. commented:

It is said that the plaintiff does not really desire to be paid and can take nothing for his own benefit under the judgment. For the reasons above stated, I think this is of no moment. It is further urged that his only object is to obtain a judgment which may serve as the foundation of bankruptcy proceedings, the ultimate result of which will be the removal of the defendant from his position as director of a company in which the plaintiff is largely interested. But I fail to see that we have anything to do with the motives which actuate the plaintiff, who is simply asserting a legal right consequential upon the possession of property which has been validly assigned to him.[Emphasis added.]

[17]  The appellant also submits that the trial judge erred in finding that the assignment constituted an absolute assignment because Clark and Muller intended to agree after the fact on the division of the proceeds. I do not agree. I infer from the decision of the trial judge and her thorough reasons that she was satisfied that the assignment was a valid absolute assignment in accordance with the documents.

Disposition

[18]  I would dismiss the appeal with costs to the respondent fixed at $3,000 as agreed at the conclusion of oral argument.

Another example of maintenance occurring legitimately involves the assignment of rights of members of organizations where associations may act on behalf of the collective members who, individually, would be unable to afford, and therefore proceed, in a genuine concern as a legal cause shared by the collective members.  This was stated in Fredrickson v. Insurance Corporation of British Columbia, 1986 CanLII 165 where it was said:

Other cases illustrate that a cause of action may be assigned even where the assignee has no ancillary property interest.  Assignment of the right to sue for infringement of copyright to a society formed to protect the interests of its members was upheld in Performing Rights Society (Limited) v. Thompson (1918), 34 TLR 351.  In an action for infringement, the defendants alleged the assignment violated the rules against champerty and maintenance and that the business of the society was that of "breedbates" and "trafficking in litigation".  Atkin J. rejected that contention.  He found at p. 352 that the assignment constituted a "bona fide business arrangement" for "legitimate business reasons".  The society and its members, he said, both had a "real and bona fide interest in the result of the litigation".

Similarly, in Martell v. Consett Iron Co. Ltd., [1955] Ch. 363, Danckwerts J. followed a "genuine interest in the litigation" test, in upholding maintenance by an association for the prevention of pollution to rivers of an action brought by owners and occupiers of fisheries.

Martell was approved in the House of Lords in Trendtex, supra.  In the latter case, Lord Wilberforce at p. 524, held that, apart from subsequent dealings, an assignment of a cause of action would have been valid, because it did not offend the law of maintenance or champerty.  This was so because the assignee had a "genuine and substantial interest" in the success of the litigation.

Remedies

In addition to the usual array of damages available for tortious conduct that may be awarded within a case brought by a Plaintiff, who would be the 'victim' within the separate proceeding that was wrongfully supported, the wrongfully supported separate proceeding itself may be stayed as an abuse of process.  This view was stated within Operation 1 Inc.  v. Phillips, 2004 CanLII 48689 as follows:

[54]  This, in my view, was not merely a case of officious intermeddling by persons who had no pre-existing interest in the right of action, it was an egregious attempt to "traffic" in litigation in the sense in which the English courts - and the Court of Appeal in McIntyre Estate - used the term.  If it is not, I am unable to conceive of any reasonable meaning that could be given to the notion of trafficking unless – which, unless constrained by authority, I would not accept - it is confined to transactions that are part of a practice, or business, of buying rights to litigate.  Mr Lewis, or Mr Lewis and Mr Newbury, did not merely attempt to purchase a piece of the action in a literal sense - they were complete strangers to the events that gave rise to it, and to the parties involved, and having instigated, and not merely encouraged it, they seek to conduct it through the instrumentality of Operation 1 with a view to their own profit and without risk to Del Corporation - the only person or entity with a genuine interest in the subject matter of the litigation.  Whether or not the circumstances are to be considered to be aggravated by the fact that Mr Newbury was an officer of the court who obtained the information on which the action is based when acting as such in litigation with the present defendants and whether, as Mr Carr opined in correspodence with corporate counsel for Del Corporation, Mr Newbury was also "clearly actuated by an extreme dislike of Mr Phillips and his counsel", the facts, including the absence of any other motive - except profit - are, I believe, enough to make the commencement and prosecution of the proceedings an abuse of process.  Accordingly, I will grant the stay requested by the defendants.

Summary Comment

Both champerty and maintenance involve elements of wrongful supporting of legal proceedings.  In maintenance, the person providing the support, a maintainer is without party status to the litigation, thus a stranger (although obviously somehow familiar) to the proceedings involving other persons and is lending support to a party with some illegitimate purpose such as a desire to assist in inflicting troubles upon the other party.  In champerty, the additional element of expecting to receive a share of the proceeds from the illicitly maintained proceedings is required.  Of course, some maintainers do so with purposes deemed legitimate in law such as insurance subrogation, collection of debts by assignees, trade unions acting on behalf of union members, among others.


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