Case Review is a publication by the Litigation and ADR Department of Perchstone & Graeys, a leading commercial law firm based in Lagos, Nigeria. The publication analyzes decisions of the Supreme Court and Court of Appeal on various aspects of the Law as they impact on contemporary issues.
A review of the decision in KESSINGTON EGBOR & ANOR v. PETER O. OGBEBOR (2015) LPELR-24902(CA)
Facts of the case
The facts of the case are not long-winded. Mr. Egbor and a corporate body he maintained an interest in (Eksol Paint Nigeria Limited) engaged the services of Mr. Ogbebor, to give expert testimony on their behalf in an action for the recovery of a debt owed to them by Union Bank Plc. They alleged to have agreed to pay Mr Ogbebor the sum of N100, 000.00 for his services. Whilst agreeing that his services were secured for a fee, Mr. Ogbebor contended that the agreement was that he would be entitled to 15% of the amount to be recovered in the event it is recovered. According to him, it was on these terms, that he agreed to assist Mr. Egbor and Eksol Paints Nig. Ltd (herein referred to as the ‘appellants’) in the said recovery by giving evidence in court as an expert witness.
At the end of the action for recovery, Union Bank PLC eventually paid the appellants the sum of N65 million for which Mr. Ogbebor (the ‘respondent’) demanded that he be paid the sum of N9.7 million being 15% of the amount. The appellants contested the respondent's demand, on grounds that the money paid by Union Bank was by virtue of the judgment of the Court. In a bid to recover his entitlements, the respondent instituted an action at the State High Court, Benin, wherein he sought amongst other reliefs, his 15% entitlement and other ancillary reliefs. After listening to the submissions of counsel representing both parties, the trial court found in favour of the respondent and ordered the appellants to pay the respondent his entitlements. In addition, the court awarded in favour of the appellant cost of N30, 000.00 and 5% interest on his entitlement calculated over a period of time.
Dissatisfied with the decision of the trial Court, the appellants appealed to the Court of Appeal, Benin Judicial Division.
Decision of the Court of Appeal
The arguments at the Court of Appeal turned on a number of issues. However, the central issue as deducible from the facts of the case and for the purpose of this review is:
‘Whether the Respondent's action was competent and maintainable in law’
On this issue relating to the competence of the respondent’s action, the appellants argued that the respondent cannot recover the sum he claimed under the agreement he had with the appellants as the said agreement was “champertous”. The appellants further maintained that mere testifying in court does not amount to recovery of the debt as the said debt was awarded further to an order of court in favour of the appellants. In response, the respondent argued that the context of the case does not constitute or fall within the purview of a champertous agreement as he (respondent) acted within the scope of operation of his profession to recover debt for the appellants. He further maintained that champerty applies to a situation where a lawyer maintains an action for account without fees hoping to recover his fees from the proceeds of the trial, if successful; but, that the respondent not being a solicitor acted as a chartered accountant in accordance with his professional ethics and that what he did was consultancy and not champerty.
After a painstaking review of the evidence before the trial court, and submissions of both counsel, the court resolved the issue against the appellants. In arriving at the decision under reference, the court the noted that the Appellants' assertion that they merely wanted the respondent as an expert witness does not change the character of the case presented by the respondent who has adduced evidence in his pleadings to the effect that he was engaged to recover the debt and not only to testify as a witness.
Addressing the issue of champerty in the instant case, the Court of Appeal noted that the determination of whether a relationship is champertous or contrary to public policy is to be ascertained, not on the basis of the assertions of the defence, but on the basis of the facts on which the plaintiff founded his cause of action. According to the appellate court facts are the fountainhead of law.
In what appears a passing remark but telling/undisguised chastisement of the appellants conduct, the Court drew the curtains in this eloquent choice of words:
“It seems that the Appellants grouse with paying the Respondent the agreed 15% of the amount recovered arose from the appreciation of the US Dollar against the Naira. As the rate of exchange appreciated between 1990 when the Appellants instituted the action against Union Bank and 1998 when Union Bank paid up the debt, so did the Naira equivalent which was paid to the Appellants appreciate and so correspondingly did the 15% of the amount due to the Respondent increase. The position of the Appellants in failing to pay up without the resort to litigation lends credence to the statement in the book: "The Terrible Truth About Lawyers - What Every Business Person Needs to Know" by Mark H. McCormack that: "As the pie gets bigger, people start thinking less about their slice of it than the other guys." As the Appellants' US $566,250.00 with accrued interest appreciated to N65Million, the Appellants thought less of their own slice of the pie but preoccupied themselves more with the Respondent's slice of the pie, which, based on the agreed 15% had suddenly become N9.7m. Equity and a fair sense of justice will not allow that!”
Commentary/Review of Judgment
Even as the Court of Appeal commendably distinguished the facts of the instant case from champertous relationships which the law -or more appropriately, public policy considerations- frown at, it appears that the general statement of the law might have been stated too widely in the obiter of the Court (per Ogakwu JCA) that ‘ It is no doubt settled law that a situation where a person elects to maintain and bear the costs of an action for another in order to share the proceeds of the action or the suit is champertous.’
Generally, champerty is an illegal agreement in which a person with no previous interest in a lawsuit finances it with a view to sharing the disputed property if the suit succeeds. Most times this relationship arises where the party instituting the action in court do not have sufficient funds to pay for the services required in such circumstance. A long line of Nigerian authorities is to the effect that champertous relationships are illegal and contrary to public policy.
However, it is worthy of note that this position, traceable to the common law appears to have slightly changed in other jurisdictions. For instance in England and Wales, the prohibition on champerty has been de-crimed by the enactment of certain local enactments. Also in some other jurisdictions (for example, New Zealand) champerty amounts only as a tortuous liability and not a crime. The pragmatic approach of the courts today in foreign jurisdictions is that third party funding is capable of promoting access to justice, and the mere fact that litigation services have been provided in return for a promise of the share of the proceeds is not enough to produce the evils against maintenance and champerty. The growing trend is that it must be shown that third party funding of litigation is purely for commercial gain to make such agreements unenforceable.
In the South Africa’s decision of Price Waterhouse Coopers Inc and Others v . National Potato Co-operative Ltd (2004) ZASCA 64 the court held that “ an agreement in terms of which a person provides a litigant with funds to prosecute an action in return for a share of the proceeds of the action is not contrary to public policy or void” . The plaintiff, National Potato
Co-operative Ltd (“NPC”) had entered into an agreement with Farmer Indemnity Fund (Pty) Ltd (“FIF”) through which FIF agreed to provide financial assistance to NPC to enable it to pursue its claim against the defendant, PricewaterhouseCoopers, in exchange for 45 percent of the proceeds derived from the action. The court found in favour of upholding the agreement and commented that the need for the rules of maintenance and champerty had diminished, if not entirely disappeared. Put simply, what is now clear is that the courts will look at the transaction as a whole in determining the public policy issues.
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Case Review-Kessington Egbor & Anor v. Peter Ogbebor