Candey Ltd v Crumpler & Anor, Re Peak Hotels and Resorts Ltd [2022] UKSC 35

Candey, a law firm, sought to enforce an equitable lien over settlement proceeds recovered in litigation for their insolvent client PHRL. The Supreme Court held Candey had waived its lien by entering into a fixed fee agreement and deed of charge without expressly reserving the lien, despite inconsistencies between the new security arrangements and the original lien.

Facts

Candey Ltd acted as solicitors for Peak Hotels and Resorts Ltd (PHRL) from April 2014 in worldwide litigation. By August 2015, PHRL was in financial difficulty and unable to pay Candey’s fees. On 21 October 2015, the parties entered into a Fixed Fee Agreement (FFA) and a Deed of Charge, providing Candey with security over PHRL’s assets including monies in court. PHRL entered liquidation in February 2016. Following settlement of the London Litigation, Candey sought to enforce both the Deed of Charge and a pre-existing solicitor’s equitable lien over the settlement proceeds under section 73 of the Solicitors Act 1974.

The New Arrangements

The FFA stated it ‘supersedes and replaces any previous agreement between CANDEY and PHRL in respect of fees’. The Deed of Charge covered all PHRL assets including the settlement proceeds, and expressly ranked Candey’s security below a prior charge in favour of Campion Maverick, a litigation funder.

Issues

The principal issue was whether Candey had waived its equitable lien by entering into the FFA and Deed of Charge in October 2015, or whether the lien continued alongside these new arrangements.

Judgment

The Supreme Court unanimously dismissed the appeal, holding that Candey had waived its equitable lien.

Legal Principles on Waiver

Lord Kitchin, delivering the judgment, confirmed that whether a solicitor’s equitable lien has been waived depends on the objectively ascertained intention of the parties:

Whether a lien is waived or not by taking a security depends upon the intention expressed or to be inferred from the position of the parties and all the circumstances of the case.

Lord Kitchin endorsed the principle from In re Morris [1908] 1 KB 473:

if solicitors take any security which is in any degree inconsistent with the retention of the lien, it is their duty to give express notice to the client if they wish and intend to retain the lien, and that if they do not do so, it is very likely that the lien will be taken to have been abandoned.

Application to the Facts

The Court identified two key inconsistencies: (1) the Deed of Charge extended over the same property as the equitable lien (the settlement proceeds); and (2) the Deed of Charge ranked Candey’s security below Campion Maverick’s charge, whereas the equitable lien would rank first. The Court noted:

There would have been an obvious inconsistency between the creation of consensual security over certain property and the retention of a statutory right to ask the court to impose non-consensual security over that same property.

The Court rejected Candey’s argument that requiring PHRL to obtain independent legal advice absolved Candey of its duty to expressly reserve the lien if that was its intention.

Implications

This judgment clarifies the circumstances in which solicitors may inadvertently waive their equitable lien. Solicitors taking additional security that is inconsistent with an existing lien must expressly notify clients of their intention to retain the lien. The case reaffirms that the equitable lien promotes access to justice by enabling solicitors to act on credit with security for their fees, but confirms that this protection can be lost through entering into replacement security arrangements without express reservation.

Verdict: Appeal dismissed. The Court of Appeal was entitled to find that Candey’s equitable lien was waived when the parties entered into the Fixed Fee Agreement and Deed of Charge in October 2015.

Source: Candey Ltd v Crumpler & Anor, Re Peak Hotels and Resorts Ltd [2022] UKSC 35