Clifford Harris & Company v Solland International Ltd and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice David Richards,Mr Christopher Nugee QC |
| Judgment Date | 12 February 2005 |
| Neutral Citation | [2004] EWHC 2488 (Ch),[2005] EWHC 141 (Ch) |
| Docket Number | Case No:HC04C02248,Case No: HC 04 C 02248 |
| Court | Chancery Division |
| Date | 12 February 2005 |
[2004] EWHC 2488 (Ch)
The Honourable Mr Justice David Richards
Case No:HC04C02248
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Sarah Harman (instructed by Clifford Harris & Co) for the Claimant
Phillip Marshall QC and Benjamin Elkington (instructed by Bird & Bird) for the Defendants
Hearing dates: 19 and 20 October 2004
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
There are two applications before the court which arise in an application made under CPR Part 8 by Clifford Harris & Co, a firm of solicitors, against four former clients. The former clients are Mr and Mrs Solland and two companies controlled by them (the defendants). By their claim Clifford Harris & Co seek orders pursuant to section 73 of the Solicitors Act 1974, including a declaration that they are entitled to a charge on a sum of £497,000 (the settlement sum) recovered under the terms of a settlement agreement relating to proceedings in which they acted for the defendants. The settlement sum is currently held to the order of the defendants in the client account of their current solicitors Bird & Bird.
On 5 October 2004, on a without notice application, Patten J made an order restraining the defendants from demanding, receiving, disposing of or dealing with any money received by them or Bird & Bird pursuant to the settlement agreement. At that time it was not known precisely how much had been paid pursuant to the settlement agreement. The first application before me is an application by Clifford Harris & Co for a continuation of this injunction until trial of the Part 8 claim or further order in the meantime. The second is an adjourned application for directions on the Part 8 claim itself. On that application the defendants seek an order summarily dismissing the Part 8 claim on the grounds that it has no reasonable prospect of success. In making that application they rely on CPR Part 1.4(2)(c) and the decision of the Court of Appeal in Peppin v Taylor [2002] EWCA Civ 1522. It is not suggested for Clifford Harris & Co that, if appropriate, an order dismissing the Part 8 claim cannot be made at this stage.
The defendants were four out of seven defendants in proceedings brought in the Chancery Division by Daraydan Holdings Limited and other claimants (the Chancery action). It was commenced in July 2002 and involved serious allegations against all the defendants. Clifford Harris & Co were retained as solicitors for Mr and Mrs Solland and their two companies, but not the other defendants. They were very substantial proceedings. Leading and junior counsel were engaged for the defendants at an early stage and advised throughout the preparation for trial, which commenced before Lawrence Collins J on 19 January 2004. On 17 February 2004, before judgment had been given, the claimants entered into a settlement agreement with Mr and Mrs Solland and their two companies. Under the terms of the agreement the claimants undertook to seek recoveries from the other defendants and agreed to pay 50% of the net recoveries to Clifford Harris & Co or other solicitors acting on behalf of Mr and Mrs Solland and their two companies, subject to a limit of £500,000. On 26 March 2004 Lawrence Collins J gave judgment in favour of the claimants against the remaining defendants. On 15 June 2004 Clifford Harris & Co's retainer was terminated and Bird & Bird were appointed in their place. At some point between mid-July and early October the settlement sum was paid to Bird & Bird.
The Chancery action was undoubtedly a substantial piece of litigation and the costs of defending it and pursuing the defendants' counterclaim were clearly heavy. On any footing a significant amount of solicitors' costs, counsels' fees and other disbursements were incurred both in the preparation for trial and in the trial itself. There is at present a great deal of dispute about what bills have at any stage been rendered by Clifford Harris & Co and how much may be found to be due to them. The only common ground is that at least £415,000 was paid on account to Clifford Harris & Co, mainly between July 2002 and January 2004 but with a final payment of £45,000 in April 2004, and that Clifford Harris & Co had rendered no bills for their profit costs for any work done after 30 July 2003 until October this year. Clifford Harris & Co allege, but the defendants deny, that five bills totalling some £214,727 for profit costs, counsel's fees and other disbursements were rendered between August 2002 and July 2003, with a further bill for miscellaneous disbursements of £8,012 in December 2003. Clifford Harris & Co also allege, and again the defendants deny, that counsel's fee notes for further fees totalling at least £164,000 were handed to Mr or Mrs Solland during the early months of 200Clifford Harris & Co say that these bills and fees have been met out of the sums paid to them on account and, together with some other disbursements, have exhausted those sums. Mr Sunil Varma, a partner in Clifford Harris & Co, has exhibited a detailed bill of costs for the period August 2003 to June 2004 showing an unpaid total of £655,477 comprising £484,150 profit costs and £171,327 disbursements, principally counsel's fees (although it now appears that this latter figure erroneously includes £40,000 of fees which had already been paid). Whatever the precise amount found to be due on an assessment of this bill, it seems likely that a substantial amount of costs and disbursements will be due.
On 31 January 2004 Mr and Mrs Solland executed in favour of Clifford Harris & Co a legal charge over their freehold house in London (the legal charge), which was subject to a prior charge in favour of a bank. Putting it shortly, it secured the present and future costs and disbursements of the Chancery action and interest. I will come back to the terms of the charge and the allegations regarding the circumstances of its creation.
On 13 July 2004, following some correspondence, Clifford Harris & Co issued the Part 8 claim form in which they seek pursuant to section 73 of the Solicitors Act 1974 (i) a declaration that they are entitled to a charge on the settlement sum for their taxed costs in relation to the Chancery action and (ii) orders for taxation and payment of the costs out of that sum. There were no unpaid bills for profit costs at that time, and there may not have been any outstanding fee notes for counsel's fees which had actually been delivered to the defendants. However, as mentioned above, it seems likely that a substantial amount will be found due in respect of unpaid costs and it is not suggested that an application under section 73 could not be made in advance of the delivery of bills.
Evidence was filed in support of the Part 8 claim and in opposition to it. A first hearing for directions was fixed for 6 October 2004.
On 4 October 2004, Bird & Bird for the defendants wrote to Clifford Harris & Co with a view to agreeing directions for a substantive hearing of the claim. They also wrote a separate letter, faxed to Clifford Harris & Co at about 5.15pm, stating that they had received the settlement sum and inviting Clifford Harris & Co "by the close of business on Tuesday 5 October to explain (if it is your position) why we should not pay these monies over to our client, failing which we intend to do so." In the circumstances, with the directions hearing fixed for 6 October 2004, this was a surprising threat to make, particularly on such short notice. The defence intimated in Mr Solland's witness statement in opposition to the Part 8 claim was that the defendants wished to receive detailed bills and to have them assessed. If any sum was found due, Mr Solland stated that he would pay it. On 30 September 2004 Clifford Harris & Co had informed Bird & Bird that a detailed bill of costs was being prepared by a costs draftsman.
On 5 October 2004, with little time to prepare, Clifford Harris & Co applied, without notice, for an injunction restraining the defendants from demanding, receiving, disposing of or dealing with any of the settlement money received by them or by Bird & Bird. Patten J made the order in those terms.
The principal issue which arises on the applications before me is whether Clifford Harris & Co have no reasonable prospect of success in their Part 8 claim so that it should be summarily dismissed and, if not, whether they have a seriously arguable case, sufficient for the purposes of the grant of an interim injunction. As will appear, my decision will not turn on any difference between these two tests. The defendants submit in the alternative that there was material non-disclosure on the application to Patten J, with the result that the injunction should not in any event be continued.
The defendants accept that the settlement sum is property recovered through Clifford Harris & Co's instrumentality in the Chancery action for the purposes of section 73(1) of the Solicitors Act 1974. However, they submit that Clifford Harris & Co have no reasonable prospect of success on the grounds that the grant of the legal charge by Mr and Mrs Solland on 30 January 2004 constituted a waiver by Clifford Harris & Co of their right to any lien or charging order, at common law or under section 73, on any proceeds of the Chancery action, including the settlement sum.
A solicitor has three sources of security for his costs arising by operation of law. First, at common law he has a possessory or retaining lien over documents and other property in his possession. Secondly, also at...
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