Candey Ltd v Crumpler and one other (as Joint Liquidators of Peak Motels and Resorts Ltd (In Liquidation)) [2022] UKSC 35 – UKSC Weblog

Candey Ltd, the appellant, acted as a solicitor for Peak Motels & Resorts Ltd (“PHRL”) between April 2014 and March 2016 in respect of worldwide litigation and numerous different issues. One such matter was an motion within the Excessive Court docket in London, known as “the London Litigation”.

On 21 October 2015, PHRL entered into a set price settlement (the “FFA”) with the appellant, underneath which the appellant agreed to proceed to behave for PHRL in return for a set price (the “Fastened Payment”). Fee of the Fastened Payment was deferred till the handing down of judgment on legal responsibility or settlement of the London Litigation, PHRL getting into an insolvency course of, or PHRL receiving funds. A deed of cost (the “Deed of Cost”) was entered into on the identical day because the FFA, which was granted a floating cost (a type of safety) over PHRL’s property.

PHRL was positioned into liquidation within the British Virgin Islands (“BVI”) on 8 February 2016. The Respondents (the “Liquidators”) have been appointed by the BVI court docket as liquidators of PHRL. The Fastened Payment turned payable and the appellant lodged a proof of debt.

The London Litigation was settled by PHRL shortly earlier than trial and the appellant was dis-instructed by the Liquidators on 3 March 2016. The monies PHRL acquired in relation to the settlement are referred to collectively because the “Settlement Proceeds”.

The appellant contended that its excellent charges have been payable in precedence to sums payable to different collectors in PHRL’s liquidation and asserted an equitable lien over sums of cash recovered or preserved in the midst of the London Litigation. This lien is a type of safety that arises by the operation of fairness for solicitors to be paid their correct charges for the profitable conduct of litigation out of the consumer’s cash recovers or preserves by means of that litigation (or its settlement). The appellant additionally argued that the lien should be transformed to a cost over that cash underneath part 73 of the Solicitors Act 1974 (the “1974 Act”).

The deputy choose, amongst different issues, discovered that the appellant had waived its entitlement to an equitable lien when it renegotiated its retainer and accepted extra safety for its charges in October 2015. The Court docket of Attraction agreed with the deputy choose on this level.

HELD: The Supreme Court docket unanimously dismissed the enchantment.

Whether or not a solicitor’s equitable lien has been waived is determined by the intention of the events. The query is whether or not it’s to be inferred that it was the intention of the events that the lien ought to now not exist. The intention have to be assessed objectively within the gentle of all of the circumstances. The place solicitors take extra safety, a related issue can be to what extent the taking of recent safety is inconsistent with the lien. An extra related issue is whether or not, contemplating the skilled relationship between solicitors and their shoppers, the solicitors defined to the shoppers that they have been reserving their rights to an equitable lien. The authorities illustrate that if solicitors take extra safety which is inconsistent with the lien and don’t clarify that the lien is being retained, then it’s more likely to be affordable to deduce that the lien is surrendered. That is notably so the place the solicitors take new safety over the identical property that the lien would apply to.

Making use of these ideas to the current case, the FFA and the Deed of Cost kind a bundle of rights and obligations and new safety preparations that are inconsistent with the equitable lien. That is for 2 causes. First, the brand new safety created by the Deed of Cost extends over the identical property because the equitable lien would do (being the Settlement Proceeds). That is no matter the truth that the Deed of Cost additionally covers different properties. Second, the FFA and the Deed of Cost expressly confer precedence, within the occasion of insolvency, to considered one of PHRL’s backers, and subsequently create totally different priorities than that of an equitable lien which might rank first. Nonetheless, the provisions within the FFA for the incomes and securing of curiosity on the Fastened Payment aren’t inconsistent with an equitable lien.

The skilled obligation on solicitors to offer specific discover in the event that they intend to retain an equitable lien the place the brand new safety is inconsistent with the lien just isn’t displaced by the consumer acquiring unbiased authorized recommendation. Subsequently, the truth that the appellant required PHRL to take unbiased authorized recommendation in relation to the FFA and the Deed of Cost doesn’t change the court docket’s conclusion.

There is no such thing as a specific or implied assertion within the FFA or the Deed of Cost that the appellant reserved its lien, and proof of communications between the appellant and PHRL take the matter no additional.

The Court docket of Attraction was subsequently entitled to seek out that the appellant’s equitable lien was waived when the events entered into the FFA and the Deed of Cost.

For the judgment, please see:

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To look at the listening to:

2 March 2022 Morning session Afternoon session

3 March 2022 Morning session Afternoon session