Withers LLP v Langbar International Ltd
| Jurisdiction | England & Wales |
| Judge | Sir Robin Jacob,Lord Justice Kitchin,Lord Justice Lloyd |
| Judgment Date | 05 December 2011 |
| Neutral Citation | [2011] EWCA Civ 1419 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2011/1435 |
| Date | 05 December 2011 |
[2011] EWCA Civ 1419
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH
COURT OF JUSTICE
CHANCERY DIVISION
MR JUSTICE MORGAN
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Lloyd
Lord Justice Kitchin
and
Sir Robin Jacob
Case No: A3/2011/1435
Andrew Fletcher Q.C. and Ms Charlotte Eborall (instructed by Jones Day) for the Appellant
Joanna Smith Q.C. and Sebastian Allen (instructed by Withers LLP) for the Respondent
Hearing date: 8 November 2011
INTRODUCTION
By his judgment and order of 9th May 2011 Morgan J held, [2011] EWHC 1151 (Ch), that Withers (a firm of solicitors) had a common law lien over money ("the Money") held in its client account ("the Account") pursuant to a court order. He rejected Withers' alternative claim that it had an equitable charge over the Money.
I must explain briefly how and why the Money came into the Account. Morgan J gives a fuller account at [4–32]. Withers' clients (collectively "Rybak" —for details see the judgment of Morgan J at [2]) had been sued for a substantial sum by the Respondents, Langbar. In April 2008 the proceedings were settled by an agreement by which Rybak agreed to pay about £30m to Langbar. The £30m was warranted by Rybak to equate to nearly all their worldwide assets. These included a Monaco apartment owned by SCI Atol, the 4th defendant and a member of "Rybak" as defined.
The agreement contained a provision about the payment to Langbar of a sum of money which would be raised by a sale or mortgage of the apartment. The agreement was varied by an agreement of September 2008. This provided that in the event of a sale before the end of the year, Rybak would pay €7,588,000 from the net proceeds of the sale, regardless of the actual price achieved.
In December 2008 Rybak found a potential purchaser and wished to proceed. Langbar wished to prevent the transaction going through and to that end had lodged letters of opposition with a notary in Monaco which would have prevented the sale.
Rybak applied in the original proceedings for an order preventing Langbar from interfering with the sale. Morgan J heard the application on notice on 19th December 2008. He granted the order sought subject to conditions about what was to happen to the proceeds of sale. Langbar objected to these being paid into the account of Rybak's Monegasque lawyer. It suggested that the money should be paid into a client account of Rybak's solicitors who were then Withers. The money would thereby be safeguarded within the jurisdiction. Morgan J acceded to that proposal, saying in his judgment that the proceeds were to be paid into "the relevant escrow account." He made an order ("the Morgan order") to which I shall have to return in detail.
The sale went through for a sum exceeding €13m. In accordance with the Morgan order the money was paid into the Account. Pursuant to a provision of the Morgan order €7.588m was paid over to Langbar, leaving a sum in excess of €5m in the Account.
Rybak then started a new action against Langbar and Langbar counterclaimed. The dispute was about whether Rybak had complied with the settlement agreement and whether Rybak were liable for misrepresentation. By the counterclaim Langbar were claiming a lot more than was in the Account.
In August 2009 Rybak applied for release of the money held in the Account, doing so pursuant to a provision of the Morgan order. Shortly thereafter, in early September, HHJ Gordon in the Central Criminal Court on the application of the SFO made a general freezing order over Mr Rybak's assets. The order expressly included the funds held in the Account.
Rybak's application for release of those funds came before HHJ Waksman Q.C. sitting as a High Court Judge. Following a disputed hearing (which he treated as an application to vary a freezing order) he made an order dated 11th September 2009 varying the Morgan order ("the Waksman order").
Later in October HHJ Gordon varied his earlier order so as to prevent the sum in the Withers account being diminished below €2m. In April 2010 the Gordon order was wholly discharged.
In May 2010 Withers, acting for Rybak, applied for an order that £456,166 should be released from the Account to pay the legal costs of Rybak up to that date. The application was adjourned to the trial of the new action and counterclaim. That came on before Morgan J in July. In the event there was no trial on the merits because he held that Rybak were in breach of an unless order, that the consequence of that was that the defence and counterclaim were struck out and that relief against that consequence should not be granted.
The result was a judgment for Langbar against Rybak in the sum of €3,852,000 plus interest, and an order for an assessment of damages for a claim included in the counterclaim. Rybak were ordered to pay €1m interim damages in respect of that, the costs of the proceedings on an indemnity basis and to pay €900,000 on account of those costs.
Morgan J made specific provision as what was to happen to the money in the Account. Langbar wanted all of it transferred to it but by now Withers was claiming a retaining lien or equitable charge over the Money. To hold the ring until the validity of that claim could be decided, Morgan J's order contained the following provision:
9. All of the money in the Account shall be paid forthwith by Withers LLP to Langbar's solicitors in partial discharge of the Rybaks' liabilities under this order. Provided however that if Withers LLP give to Langbar a cross-undertaking in damages in the usual form then they may retain the amount of £410,000 in the Account until close of business on 14th July 2010. Withers LLP shall have liberty to apply on 24 hours notice to Langbar for an order extending the time for payment of the £410,000.
Time under the order was extended and on 21st July 2010 Withers applied for an order that the £410,000 in the account (the balance having been paid to Langbar) could be retained whilst their reasonable legal expenses were assessed and that when they had been assessed Withers could be paid the assessed sum out of that money, any balance to go to Langbar.
In August Rybak assigned to Langbar all its rights in the money in the account on the basis that any money recovered would be applied to reduce its debt to Langbar.
Thus the upshot as it came before Morgan J to decide the lien/equitable charge point is that there was €410,000 in Withers' client account. It had got there pursuant to the Morgan order which had been varied by the Waksman order.
The Two Orders
The Morgan order provided:
1. The injunction granted in paragraph 2 below shall be conditional upon the Applicants [i.e. Rybak] agreeing and undertaking forthwith to transfer or to procure the transfer of the net proceeds of any sale on or before 31 December 2008 of the apartment in Monaco owned by the Seventh Defendant/Applicant [i.e. SCI] ("the apartment") to a client account of their solicitors Withers LLP ("the account") on terms that:
1.1 subject to paragraph 1.2 below, the monies will be held in and not withdrawn from the account until further Order by the Court;
1.2 the Applicants may direct payments to be made from the account to the Respondent [i.e. Langbar] in discharge of or on account of sums due from the Applicants to the Respondent under the settlement agreements scheduled to the Tomlin Orders in these proceedings dated 21st April 2008 and 23rd October 2008.
2. [The injunction ordered by the court]
3. The Applicants and the Respondent shall each have permission to apply, and in particular (but without limitation) the Applicants shall have permission to apply for an Order permitting payments for their living and legal expenses to be made from the account pending the resolution of any dispute that may exist as to who is entitled to the monies in the account.
The Waksman order provided:
2. Subject to paragraph 3 below, the monies in the Account shall be held in and not withdrawn from the Account until further Order by the Court.
3. Subject to the terms of a Restraint Order made by His Honour Judge Gordon in the Central Criminal Court on 11th September 2009, the [Morgan order] is varied so as to permit the Claimants [i.e. Rybak] to direct payments to be made from the Account, as follows:
i) all legal expenses incurred by the Claimants in relation to these proceedings shall be notified by Withers LLP to Jones Day [Langbar's solicitors] and, upon confirmation from Jones Day that the Defendant [i.e. Langbar] consents to the reasonableness of those expenses (such consent being presumed in default of a response within seven days), the Claimants may direct that sufficient monies shall be released from the Account to fund those legal expenses;
ii) the Claimants shall be entitled to monthly living expenses payable from the Account on the first day of each month in the sum of €25,000. Payment of these expenses is to commence immediately with the first payment for September 2009 to be made as soon as reasonably practicable.
iii) [t]he Claimants shall be entitled to an immediate payment from the Account of €90,180 to cover outstanding expenses.
4. ..
5. The Claimants and the Defendant shall have permission to apply, and in particular (but without limitation) the Claimants shall have permission to apply for an Order permitting additional payments for their living expenses and/or for any legal expenses not consented to under paragraph 3 above and/or for any...
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