Candey Ltd v Crumpler and another (as Joint Liquidators of Peak Hotels and Resorts Ltd ((in Liquidation)))
| Jurisdiction | England & Wales |
| Judge | Lord Kitchin,Lord Reed,Lord Briggs,Lord Hamblen,Lord Stephens |
| Judgment Date | 21 December 2022 |
| Neutral Citation | [2022] UKSC 35 |
| Court | Supreme Court |
[2022] UKSC 35
Lord Reed, President
Lord Briggs
Lord Kitchin
Lord Hamblen
Lord Stephens
Appellant
David Lord KC
Daniel Saoul KC
Stephen Ryan
(Instructed by CANDEY LLP)
Respondents
David Holland KC
Stephen Robins KC
(Instructed by Stephenson Harwood LLP (London))
Heard on 2 and 3 March 2022
Lord Kitchin ( with whom Lord Reed, Lord Briggs, Lord Hamblen and Lord Stephens agree):
This appeal concerns the circumstances in which solicitors may be taken to have waived their equitable lien, that is to say, in its most traditional form, the means by which equity provides a form of security for the recovery by solicitors of their agreed charges for the successful conduct of litigation out of the fruits of that litigation.
The nature of the solicitor's equitable lien was explored in the decision of this Court in Gavin Edmondson Solicitors Ltd v Haven Insurance Co Ltd [2018] UKSC 21; [2018] 1 WLR 2052. As Lord Briggs explained, at paras 3 and 4, the solicitor's equitable lien is a security interest and is enforceable against the proceeds of the litigation up to the amount contractually due to the solicitor, in priority to the interest of the successful client, or anyone claiming through the client. The interest is in the nature of an equitable charge and, as such, may be enforced in personam against anyone whose conscience is affected by having notice of it, either to prevent him from dealing inconsistently with it, or by holding him to account if he does.
There can be no doubt that an important purpose of the solicitor's equitable lien is to promote access to justice. It enables a client to obtain legal representation in cases and in circumstances where it is likely that payment can only be made out of the proceeds of litigation. Indeed, Lord Briggs made this clear in the first paragraph of his judgment in Gavin Edmondson.
This same point emerges from the more recent decision of this Court in Bott & Co Solicitors v Ryanair DAC [2022] UKSC 8; [2022] 2 WLR 634. There Lord Burrows emphasised, at para 87, that the vindication of clients' legal rights, through the making of claims, is more likely to be effective if solicitors know that they have the security of a lien to recover their costs. Similarly, Lord Briggs reiterated, at para 154, that the animating principle which lies behind the equitable lien is that it promotes access to justice for potential claimants with insufficient means to pay their lawyers in the usual way, by enabling their solicitors to act for them in pursuit of their claims on credit, with reasonable security for their fees, against recoveries.
The issue which divided this Court in Bott was whether it is a requirement for the creation of an equitable lien that there be a dispute, either existing or reasonably anticipated, in connection with which the services of the solicitor are sought. The majority decided that it was not and that, assuming the solicitor is acting for a potential claimant, the appropriate test for a solicitor's equitable lien is whether the solicitor provides services (within the scope of the retainer) in relation to the making of the client's claim, with or without legal proceedings, which significantly contribute to the recovery of a fund by the client.
The particular questions which must be answered in this appeal were not addressed in Gavin Henderson or in Bott, however. We are not concerned here with the way or the circumstances in which the solicitor's equitable lien is created but rather with the circumstances in which it may be inferred that the solicitor has waived or surrendered the lien to which he or she would otherwise have been entitled.
The appeal arises in proceedings between Candey Ltd (“Candey”), an English company, and the respondent liquidators of Peak Hotels and Resorts Limited (“PHRL”), a company registered in the British Virgin Islands (“the BVI”). Candey acted for PHRL between April 2014 and March 2016 in respect of worldwide litigation and various other matters. PHRL is now being wound up in insolvency proceedings brought in the BVI, and the respondents (“the Liquidators”) were appointed by the BVI court as the liquidators of PHRL on 8 February 2016. One of the matters in relation to which Candey acted for PHRL was an action proceeding in the High Court in London. This action, referred to by the parties to this appeal as “the London Litigation”, was settled shortly before the trial and Candey was dis-instructed by the Liquidators on 3 March 2016.
Candey then sought payment of its outstanding fees, contending that, as PHRL's legal representative, these fees were payable in priority to sums payable to other creditors in PHRL's liquidation, and it asserted for this purpose an equitable lien over sums of money recovered or preserved in the course of the London Litigation. Candey also argued that this lien ought to be converted to a charge over that money under section 73 of the Solicitors Act 1974 (“the 1974 Act”) to secure the unpaid fees which it had incurred in the London Litigation in priority to the Liquidators' expenses and all other claims in PHRL's liquidation.
In broad terms, section 73 of the 1974 Act provides a mechanism for giving effect to a solicitor's equitable lien in respect of proceedings in this jurisdiction, subject to any limitation issue. It provides, in subsection (1) and so far as relevant, that:
“… any court in which a solicitor has been employed to prosecute or defend any suit, matter or proceedings may at any time –
(a) declare the solicitor entitled to a charge on any property recovered or preserved through his instrumentality for his assessed costs in relation to that suit, matter or proceeding; and
(b) make such orders for the assessment of those costs and for raising money to pay or for paying them out of the property recovered or preserved as the court thinks fit;
and all conveyances and acts done to defeat, or operating to defeat, that charge shall, except in the case of a conveyance to a bona fide purchaser for value without notice, be void as against the solicitor.”
The Liquidators responded that Candey had waived or in some other way surrendered its right to the equitable lien in accepting additional security for its fees when its retainer was renegotiated in October 2015, or when it submitted a proof of debt in PHRL's liquidation without referring to the lien. The parties have referred to these two arguments as the “pre-liquidation waiver argument” and the “post-liquidation waiver argument”, respectively.
The Liquidators also gave two other answers to Candey's case. They contended, first, that the funds over which Candey sought a charge under section 73 of the 1974 Act had not been recovered or preserved through Candey's instrumentality; and secondly, that it was an abuse of process for Candey to have raised its lien argument when it did and that, in exercising its discretion under section 73 of the 1974 Act, the court should for that further reason decline to make the declaration that Candey sought.
These and other arguments were developed before Mr Andrew Hochhauser QC, sitting as a deputy judge of the Chancery Division, in July 2018. He gave judgment on 15 February 2019 [2019] EWHC 282 (Ch); [2019] Bus LR 1901, accepting the pre-liquidation waiver argument and finding that Candey had indeed waived its entitlement to an equitable lien when renegotiating its retainer and accepting additional security for its fees in October 2015. That was sufficient to dispose of Candey's application. But the deputy judge went on to reject the other arguments advanced by the Liquidators, holding that the post-liquidation argument would have failed; that there was no basis for denying Candey any rights under section 73 of the 1974 Act on the basis of a lack of instrumentality; and that Candey's application under section 73 did not amount to an abuse of process.
On appeal to the Court of Appeal, Candey contended that the deputy judge was wrong to accept the pre-liquidation waiver argument but that his approach to the other issues before him was broadly correct. The Liquidators responded that the deputy judge decided the pre-liquidation waiver argument correctly but that he ought also to have accepted their post-liquidation waiver argument and found that Candey's application was an abuse of process. The Liquidators did not pursue the lack of instrumentality argument before the Court of Appeal and I need say no more about it.
The Court of Appeal (McCombe, Moylan and Rose LJJ) gave judgment on 23 January 2020 [2020] EWCA Civ 26; [2020] Bus LR 1452 agreeing with the deputy judge on the first point and upholding his finding as to pre-liquidation waiver. The Court of Appeal went on to hold that the deputy judge had been wrong to reject the post-liquidation waiver argument. In relation to abuse of process, the court would have been minded to agree with the deputy judge, but the Liquidators having succeeded on the first two points, either of which was sufficient to dispose of Candey's appeal, it was not necessary to express a final view upon it.
Candey now appeals to this Court against these findings and the consequential order of the Court of Appeal. I will return to the particular issues arising on this appeal in a moment but first I must say a little more about the context in which they arise.
The proceedings have a long and complicated history. Fortunately, however, there is no longer any dispute as to the factual background relevant to the issues to be decided in this appeal.
PHRL was incorporated in the BVI in January 2014. Its purpose was to hold...
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Why Can't We Have Both? Solicitors' Liens In Equity And The Taking Of New Security
...v Crumpler & Anor, Re Peak Hotels and Resorts Ltd [2022] UKSC 35 Abstract The equitable lien is the traditional means by which equity provides a form of security for the recovery by solicitors of their agreed charges for the successful conduct of litigation, out of the fruits of that litiga......