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Legal Update

Hong Kong Case Report : Recovery Agent and PI Lawyer Convicted of Maintenance and Champerty

30 June 2009
Mayer Brown JSM Legal Update

Summary

A solicitor and a recovery agent were recently found guilty in Hong Kong's first-ever criminal convictions for maintenance and champerty. Maintenance is the common law offence of third parties supporting litigation by others, and champerty, being a specific species of maintenance, occurs when a person funds a case to win a portion of the compensation. These convictions against the defendants send a clear message to recovery agents and solicitors of the illegality of litigation funding in return for a fee and this is a welcome decision.

Full Update

A solicitor and a recovery agent were found guilty in Hong Kong's first-ever criminal convictions for maintenance and champerty.

On 25 June 2009, District Court Deputy Judge Albert Wong Sung-hau found recovery agent Cheung Oi-ping guilty of one count each of maintenance and champerty, while solicitor Winnie Lo Wai-yan was found guilty of one count of maintenance. He acquitted Cheung of one count each of theft and attempting to commit champerty, and both Cheung and Lo of aiding and abetting someone to commit perjury.

Maintenance is the practice of third parties supporting litigation by others, and champerty, being a specific species of maintenance according to the prosecution, occurs when a person funds a case to win a portion of the compensation.

Mr. Eric Kwok S.C., who defended Cheung, said it was unclear what actions were illegal under the charges and that guidelines on what constituted a breach did not exist until the Law Society consulted legal experts and issued a circular in 2005. He further urged the Judge to consider that maintenance was no longer considered to be a very serious offence and that recovery agents have long existed.

Lacking local case law in this area, Judge Wong held that according to a Court of Final Appeal judgment in a 2007 civil action, he had to evaluate whether the acts of the defendants were without justification and may have encouraged the perversion of justice and endangered the integrity of the judicial process, and whether they posed a genuine risk to the integrity of the court.

Cheung and Lo helped the mother of a man who became mentally incapacitated after a car crash in March 2001 to win a HK$3.5 million out-of-court settlement in September 2003. Cheung first approached the mother, Wong Siu-ying, at a hospital and said she could help her sue for damages. Cheung proposed a "no win, no fee" deal but Wong would have to give her 25% of any damages successfully obtained as a "service charge". Cheung then signed a contract with Wong and introduced her to Lo. Cheung and Lo never told Wong that she could apply for legal aid. When Wong eventually obtained her settlement, Cheung took HK$861,652 as her fees. In her defence, Lo maintained that she had no knowledge of Cheung's deal with Wong, a defence which the Judge found incredible and far-fetched.

After the conviction, Lo can no longer practice as a solicitor and will soon face disciplinary proceedings by the Law Society. Sentencing is scheduled for 9 July, pending background reports for both Lo and Cheung and a Community Service Order Report for Lo. Counsel said there were no previous convictions for maintenance and champerty to give guidance on the level of sentencing.

The conviction against Cheung and Lo sends a clear message to recovery agents and solicitors of the illegality of litigation funding in return for a fee and this is a welcome decision.

For inquiries related to this Client Alert, please contact:

Angela Yim ( )

Learn more about our Hong Kong office, Insurance & Reinsurance and Litigation & Dispute Resolution practices.

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