Why Can't We Have Both? Solicitors' Liens In Equity And The Taking Of New Security

• Published date: 23 February 2023
• Subject Matter: Litigation, Mediation & Arbitration, Trials & Appeals & Compensation
• Law Firm: Gatehouse Chambers
• Author: Ms Emily Husain

Candey Ltd 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 litigation. As Lord Briggs explained in the recent case of Gavin Edmondson Solicitors Ltd v Haven Insurance Co Ltd [2018] UKSC 21 at [3]-[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. As stated in both Gavin Edmondson and Bott & Co Solicitors v Ryanair DAC [2022] UKSC 8, it also serves the important purpose of promoting access to justice by enabling 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.

This latest UKSC appeal concerning the solicitor's lien did not concern the way or the circumstances in which the 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.

Background

The dispute arose between appellant firm of solicitors ('Candey') and the respondent joint liquidators of a BVI company ('PHRL'). Candey had acted for PHRL between April 2014 and March 2016 in respect of worldwide litigation, including in proceedings in London, and various other matters.

By August 2015, PHRL was desperately short of funds. It was indebted to Candey for hundreds of thousands of pounds in overdue legal fees and it did not have the resources to pursue the litigation in which it was involved. This led PHRL and some of its backers to renegotiate the terms upon which Candey was retained, which ultimately resulted in the parties entering into a new fixed fee agreement ('the FFA'): Candey agreed to continue to act for PHRL in return for a fixed fee with interest, payment of which was deferred until the handing down of judgment on liability or settlement of the litigation in London, or PHRL entered an insolvency process, or PHRL had received other funds enabling it to pay. A Deed of Charge was further entered into, purporting to grant to Candey a fixed and floating charge over all of the assets and undertakings of PHRL, ranking behind a charge conferred on PHRL's litigation funder. It subsequently transpired, however, that the Deed of Charge conferred only a floating charge over PHRL's assets.

Liquidators were appointed over PHRL in Feb 2016, and the fixed fee under the FFA became payable. Candey lodged a proof of debt, referring to the Deed of Charge as the security it held for the fixed fee. Candey made no reference to any pre-existing solicitor's equitable lien.

Candey then sought payment of its outstanding...