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The first is Ex p Bryant (1815) 1 Madd 49. PRE |
Vice Chancellor Plumer said: I do not wish to relax the doctrine as to lien, for it is to the advantage of clients, as well as solicitors; for business is often transacted by solicitors for needy clients, merely on the prospect of having their costs under the doctrine as to lien. PRE |
The Vice Chancellor also said, obiter, that knowledge of the solicitors lien on the part of the payer would be as effective as notice. PRE |
To the same effect is Gould v Davis (1831) 1 Cr & J 415. PRE |
The second case is In re Moss (1866) LR 2 Eq 345, although it was about a legal rather than equitable lien. PRE |
Lord Romilly MR said: I think it of great importance to preserve the lien of solicitors. PRE |
That is the real security for solicitors engaged in business. PRE |
It is also beneficial to the suitors. PRE |
It would frequently happen, but for the lien which solicitors have upon papers and deeds, that a client who is not able to advance money to enable them to carry on business would be deprived of justice, through inability to prosecute his claims in the suit. PRE |
Barker v St Quintin (1844) 12 M & W 441 shows, better than any other, that the equitable lien operates by way of security or charge. PRE |
Baron Parke said: The lien which an attorney is said to have on a judgment (which is, perhaps, an incorrect expression) is merely a claim to the equitable interference of the Court to have that judgment held as a security for his debt. PRE |
A similar analysis is provided by Lord Hanworth MR in Mason v Mason and Cottrell [1933] P 199, at 214. PRE |
The use of the concepts security and charge imply that there must be identified some fund over which it can operate. PRE |
This was described as a necessary condition of equitable interference under this principle in In re Fuld decd (No 4) [1968] P 727, per Scarman J at 736. PRE |
The requirement for a fund may be satisfied not just by a judgment debt or arbitration award, but also by a debt arising from a settlement agreement. PRE |
Provided that the debt has arisen in part from the activities of the solicitor there is no reason in principle (and none has been suggested) why formal proceedings must first have been issued, all the more so in modern times when parties and their solicitors are encouraged as a matter of policy to attempt to resolve di... |
The authorities on the solicitors equitable lien (including many of those summarised above) were recently reviewed by the Court of Appeal in Khans Solicitors v Chifuntwe [2014] 1 WLR 1185. PRE |
The fund in question consisted of a debt arising from the agreement of the Home Secretary to settle pending judicial review proceedings by a payment of a specific sum on account of the claimants costs. PRE |
The payment was made direct by the Treasury Solicitor to the claimant (by then acting in person) after express notice from the claimants former solicitors that they claimed a lien. PRE |
The Home Secretary was ordered to pay the settlement sum a second time to the solicitors, less an amount already paid by the client on account. PRE |
Sir Stephen Sedley provided this summary, at para 33: In our judgment, the law is today (and, in our view, has been for fully two centuries) that the court will intervene to protect a solicitors claim on funds recovered or due to be recovered by a client or former client if (a) the paying party is colluding with the cl... |
The form of protection ought to be preventative but may in a proper case take the form of dual payment. PRE |
I consider that to be a correct statement of the law. Ratio |
It recognises that the equity depends upon the solicitor having a claim for his charges against the client, that there must be something in the nature of a fund against which equity can recognise that his claim extends (which is usually a debt owed by the defendant to the solicitors client which owes its existence, at ... |
The outcome of the case also recognised that the solicitors claim is limited to the unpaid amount of his charges. Ratio |
Implicit in that is the recognition that the solicitors interest in the fund is a security interest, in the nature of an equitable charge. Ratio |
It remains to consider whether the decision of the Court of Appeal in the present case is either an application of that settled principle, or a legitimate extension of it, in the context of its finding that Edmondson had no contractual entitlement to its charges from any of the claimants, but only the expectation of re... |
But it is first necessary to determine whether or not Edmondson did have a contractual entitlement to its charges under the CFA. Ratio |
Construction of the CFA - Does the client have any contractual liability to pay the solicitors charges? Ratio |
At the heart of the Court of Appeals analysis lay a negative answer to that question. Ratio |
Like the trial judge, Lloyd Jones LJ identified a tension between the terms of the CFA itself (incorporating the Law Societys standard 2005 terms) and the last quoted passage in the Client Care Letter which, being labelled for the avoidance of any doubt, was held to prevail. Ratio |
At para 18 he said: The solicitor has no recourse against his client for the fees and is limited to what he can recover from the losing side. Ratio |
Later, at para 30, he continued: I consider that the effect of the client care letter is to override the general provisions in each CFA with the result that the underlying claimants were not under any personal liability to pay the fees of Edmondson. Ratio |
Rather, Edmondson has limited its fees to what may be recovered from the defendants in the underlying proceedings. Ratio |
In these circumstances, Edmondson would not have a lien over assets received on its clients account because there is no underlying liability of the clients to Edmondson for the lien to protect. Ratio |
I respectfully disagree. Ratio |
In my judgment, for the reasons which follow, the Client Care Letter did not destroy the basic liability of the client for Edmondsons charges expressly declared in the CFA and Law Societys standard terms. Ratio |
It merely limited the recourse from which Edmondson could satisfy that liability to the amount of its recoveries from the defendant. Ratio |
It both preserved and in my view affirmed that basic contractual liability, to the full extent necessary to form the basis of a claim to an equitable charge as security. Ratio |
The first question is whether the Client Care Letter had contractual effect at all. Ratio |
Both it and the two other documents sought to make it clear that the full terms of the retainer were to be found in the CFA document and in the incorporated Law Society terms. Ratio |
Nonetheless I am prepared to assume, in favour of the client, that the last quoted passage in the Client Care Letter was either part of the contract of retainer, or a collateral contract. Ratio |
I consider that the language of that passage does three things. Ratio |
First, it asserts a right for Edmondson to recover its fees and charges from the defendant. Ratio |
That affirms the equitable lien, since there would otherwise be no basis upon which Edmondson could do so. Ratio |
Secondly it states in clear terms that such a recovery is the means by which Edmondson can give effect to a continuing responsibility of the client for those fees. Ratio |
Thirdly it limits Edmondsons recourse for the fees to the amount recovered from the defendant. Ratio |
There is in my view a compelling parallel in a limited recourse secured loan agreement. Ratio |
A lender may lend a million pounds to a borrower, take valuable security, and then agree to limit his recourse to the amount recovered by enforcing that security. Ratio |
It would be absurd to say that the lender thereby deprived the security of all effect because the borrower would not have to put his hand in his pocket to pay anything in addition. Ratio |
The Client Care Letter was plainly intended to be read, so far as possible, in accordance with, rather than in opposition to, the CFA and Law Societys terms. Ratio |
Those two documents are, in the passages from them quoted above, shot through with clear assertions of the clients responsibility for the firms charges in the event of a win in the litigation, which is defined to include a settlement of the claim under which there is an agreement to pay the claimant damages. Ratio |
Full effect can be given to the objective stated in the Client Care Letter, that the client should not have to put his hand in his own pocket to pay the solicitors charges, without destroying the basic contractual responsibility of the client for their payment, if it is construed as I have described. Ratio |
Did Haven have Notice of Edmondsons Lien? Ratio |
The result of the above analysis is that there did exist, in each of the six cases, a sufficient contractual entitlement of Edmondson against its claimant clients to form the basis of a claim to an equitable lien over the agreed settlement debts payable by Haven on behalf of its insured drivers. Ratio |
The conventional analysis therefore requires the following questions to be answered: (1) did those settlement debts owe their creation, to a significant extent, to Edmondsons services provided to the claimants under the CFAs? and (2) in the absence of collusion did Haven have notice (or knowledge) of Edmondsons interes... |
There has been no challenge to an affirmative answer to the first question, save in the case of Mr Tonkin, to which I shall return below. Ratio |
Edmondson completed and lodged the CNFs onto the RTA Portal as the first step in its discharge of its duties under its retainers. Ratio |
Each CNF contained a sufficient description of the clients claims and an indication that, unless settled, they would in due course lead to litigation. Ratio |
Even though it did not involve Edmondson in much work, it was enough to trigger Edmondsons entitlement to its basic charge, disbursements and success fee under the CFA terms if there ensued a successful outcome to the claim, and enough to galvanise Haven into making a direct settlement offer to each of the claimants. R... |
The question of knowledge or notice is in dispute. Ratio |
Absence of notice was the main reason why the claims failed before the judge. Ratio |
In his view it was a fatal objection that Haven did not know the detailed terms of the CFAs. Ratio |
In the Court of Appeal it was held that Haven had both express notice, implied notice and the requisite knowledge in any event. Ratio |
The claim under the traditional principles of equitable lien failed, not because of absence of notice, but because there was no underlying responsibility of the clients to pay Edmondsons charges. Ratio |
It is common ground that, by the time that Haven paid the settlement sums direct to the claimants, it knew that each of them had retained Edmondson under a CFA, but not its detailed terms. Ratio |
This much was apparent from the CNFs which Edmondson placed on the Portal. Ratio |
Haven also knew, from the fact that Edmondson chose to initiate each claim by using the RTA Portal, that Edmondson was most unlikely to have been paid its charges up front, but rather that it expected, if successful, to obtain payment of its charges from monies paid by Haven under the terms of the RTA Protocol, if the ... |
Either way, Haven knew that Edmondson was looking to the fruits of the claim for recovery of its charges. Ratio |
Havens knowledge that, if the claim could not be settled direct, it would have to fund Edmondsons recoverable charges is also apparent from the recorded telephone conversations with Mr Tonkin and Mr Grannell set out above. Ratio |
The judge found that Haven had this knowledge, and intended by settling direct to avoid having to pay Edmondsons charges. Ratio |
The claim of collusion failed, not because Haven lacked the requisite intent, but because each of the claimants did. Ratio |
In my judgment the Court of Appeals approach to the question of notice is to be preferred to that of the judge. Ratio |
Once a defendant or his insurer is notified that a claimant in an RTA case has retained solicitors under a CFA, and that the solicitors are proceeding under the RTA Protocol, they have the requisite notice and knowledge to make a subsequent payment of settlement monies direct to the claimant unconscionable, as an inter... |
The very essence of a CFA is that the solicitor and client have agreed that the solicitor will be entitled to charges if the case is won. Ratio |
Recovery of those charges from the fruits of the litigation is a central feature of the RTA Protocol. Ratio |
The re-formulation of the Equitable Lien by the Court of Appeal Ratio |
This courts conclusion that the CFAs made between Edmondson and its clients did contain a sufficient contractual entitlement to charges to support the equitable lien on traditional grounds makes it strictly unnecessary to address this further question, because the sub-stratum upon which it is based is missing. Ratio |
There is simply no need, on these facts, to do more than apply the principles summarised in the Khans case, to reach the conclusion that Edmondson are entitled to have Haven pay them the charges identified in the CFAs as recoverable in the event of a win, to the extent that those charges did not exceed the settlement s... |
But the correctness or otherwise of the Court of Appeals reformulation of the principle has been extensively argued, and supported by the Law Society as intervener. Ratio |
The Court of Appeal rested its conclusion on two alternative grounds, both of which assumed that Edmondsons clients had no contractual responsibility of any kind for its charges. Ratio |
The first was that Edmondson had its own entitlement to recover its charges from Haven under the RTA Protocol. Ratio |
The second was that the clients had such an entitlement, and Edmondson had a right to sue Haven for its enforcement using the clients name for that purpose. Ratio |
There are in my judgment insuperable obstacles in the way of each of those alternatives. Ratio |
They stem mainly from the voluntary nature of the RTA Protocol. Ratio |
It is not contractual in nature (although participants do undertake certain irrelevant contractual obligations to PortalCo, which operates the RTA Portal). Ratio |
A failure to comply with some provisions, such as the requirement to lodge a CNF response within 15 days, automatically leads to the case leaving the scheme. Ratio |
Other breaches of its terms entitle, but do not oblige, the other party to take the case out of the scheme. Ratio |
True it is that, in a case where liability is not in issue, the solicitor participant has an expectation that it will receive its charges stage by stage under the scheme from the defendants insurer, but that is not a contractual or other legal right. Ratio |
Generally, breach of protocol terms may lead to adverse costs orders if the matter then becomes the subject of proceedings in court, but this lies in the discretion of the court. Ratio |
For this purpose I am prepared to assume that an offer of a settlement payment, made direct by the insurer to the claimant, which makes no provision for payment of Stage 2 fixed costs, disbursements and a success fee to the solicitor, at a time when a case has entered and not yet left the scheme, is a breach of paragra... |
But it creates no legal or equitable rights of any kind, if the client has no responsibility to the solicitor sufficient to support the solicitors lien. Ratio |
There is no legal entitlement of the solicitor direct against the insurer which the lien can support by way of security. Ratio |
As for suing in the name of the client, this is (as counsel agreed) a form of contractual subrogation. Ratio |
The solicitor can be in no better position than the client, as against the insurer. Ratio |
In the present case, all the clients contracted with Haven to receive settlement sums which did not include a costs element, and were paid in full. Ratio |
Any attempt by Edmondson to stand in their shoes by way of subrogation would be met by an unanswerable defence from Haven, based upon the settlement agreements. Ratio |
Counsel for Edmondson presented a detailed and vigorous submission to the effect that the flexibility of the equitable remedy for the protection of solicitors was apt to respond to any instance of unconscionable conduct by the insurer, including breach of the RTA Protocol, all the more so because of the strong public p... |
He sought to show, by reference to the cases which I have summarised, that this remedy had that flexibility from the outset. ARG |
I acknowledge that equity operates with a flexibility not shared by the common law, and that it can and does adapt its remedies to changing times. Ratio |
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