Trendtex Trading Corporation Ltd -v- Credit Suisse SA (1982)

Background
 
In 1975, the Government of Nigeria ordered 20mn tonnes of cement, 10 times their needs and 10 times the capacity of the port to handle it. The contracts were “unorthodox, imprudent or inequitable.” The chaos led to the government being replaced and contracts varied or cancelled. Trendex sued for breach of contract against the Central Bank of Nigeria (CBN). The case failed and Credit Suisse who provided finance to Trendex were out of pocket. What happened next was that Credit Suisse offered to buy Trendtex's right to sue CBN at a later stage.
 
Ratio
 
It was held that Credit Suisse could not acquire the right to sue CBN. Striking down the assignment as champertous the Court found that it created:
 
 “ the possibility, and indeed the likelihood, of a profit being made [by a third party with no genuine interest in the transaction] out of the cause of action [which] manifestly savours of champerty since it involves the trafficking in litigation
 
The case also cited Re Trepica Mines (No 2) [1962] where Lord Denning MR said:
 
"The reason why the common law condemns champerty is because of the abuses to which it may give rise. The common law fears that the champertous maintainer might be tempted, for his own personal gain, to inflame the damages, to suppress evidence, or even to suborn witnesses. These fears may be exaggerated, but, be that so or not, the law for centuries had declared champerty to be unlawful, and we cannot do otherwise than enforce the law, and I may observe that it has received statutory support, in the case of Solicitors, in Section 65 of the Solicitors Act 1957."

 

What is the application

Where there has been an assignment of debt, a challenge should be made of the basis of the assignment. Almost all the cases seen so far fail the test set in Trendex and Simpson and Trepica.

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