Solicitors’ Equitable Lien over Compensation: Promotion of Access to Justice?

Judgment in Bott & Co Solicitors Ltd v Ryanair DAC [2022] UKSC 8.

Summary

On 16 March 2022, the Supreme Court handed down its judgment in Bott & Co Solicitors Ltd v Ryanair DAC [2022] UKSC 8.The decision confirmed by a 3-2 majority (Lord Burrows, Lady Arden and Lord Briggs all found in favour of the appellant Bott; Lord Leggatt and Lady Rose dissented) the Court’s earlier approach taken in Gavin Edmondson Solicitors Ltd v Haven Insurance Co Ltd [2018] UKSC 21 which decided that a solicitor's equitable lien can arise where no proceedings have been started.

Facts

The pertinent facts are that Bott undertakes a large volume of passenger compensation claims against airlines pursuant to Regulation(EC) No 261/2004. It is not necessary to consider this regulation in detail; suffice it to say that it provides a mechanism for compensation where there has been a flight cancellation/delay. A significant number of instructions which Bott receives from clients concern the low-cost carrier Ryanair.

Prior to 2016, when a claim for compensation in the pre-action stage was admitted by Ryanair, the monies would be paid to Bott which then in turn would pay out the compensation to its clients after having deducted its fees. In 2016, Ryanair changed its practice and started paying out compensation directly to the passengers despite the involvement of Bott. Consequently, Bott would now have to pursue its clients for payment of its fees.

Bott brought proceedings against Ryanair seeking to establish an equitable lien over the fees owed to it by its clients and for an injunction to be granted restraining Ryanair from paying compensation directly to its clients.

High Court

The single judge found that a solicitor's equitable lien arose only once proceedings had actually been started i.e. after Bott had started a legal claim against Ryanair seeking compensation for its client. As a result, there could be no equitable lien in circumstances where compensation is paid out by Ryanair without passengers having commenced legal proceedings.

It is noteworthy that the matter in the High Court was decided shortly before the decision in Gavin Edmondson Solicitors Ltd v Haven Insurance Co Ltd [2018] UKSC 21

Gavin Edmondson Solicitors Ltd v Haven Insurance Co Ltd [2018] UKSC 21

In this case, it was unanimously decided by the Supreme Court with Lord Briggs giving the sole judgment that the test for recognising a solicitor’s equitable lien does not turn on whether or not a dispute has a risen. In that case no proceedings had been issued, no real dispute had yet a risen, and the solicitors who claimed the lien had done little in the way of progressing the legal claim beyond entering it in an online portal. Despite all of this, Gavin Edmondson was found to be entitled to the enforcement of the traditional equitable lien against Haven, as the client owed a contractual duty to pay the solicitors’ charges.

Court of Appeal [2019] EWCA Civ 143

Bott appealed the decision of the High Court. Not withstanding the fact that the Supreme Court decision in Gavin Edmondson had already been promulgated by the time that the appeal in Bott was heard by the Court of Appeal, the Court of Appeal dismissed Bott’s appeal on the basis that unless and until Ryanair disputed a claim for compensation, Bott was not providing a litigation service in the promotion of access to justice.

Issues

The legal principle which gave rise to the appeal can succinctly be put as thus: can solicitors’ firms, which successfully obtain compensation for its clients without instituting legal proceedings, seek to exercise an equitable lien over the compensation in respect of its costs where the compensation is sought to be paid out directly to the clients by the third party?

Decision

Lord Burrows (with whom Lady Arden and Lord Briggs agree) sets out the relevant test for a solicitor's equitable lien at paragraph 88 of the judgment as:

whether a solicitor (within the scope of the retainer with its client) provides services in relation to the making of a client's claim (with or without legal proceedings) which significantly contribute to the successful recovery of a fund by the client?

On the facts, it was held that Bott had provided services to its clients in relation to the making of claims for compensation for flight cancellation and delay provided for by Regulation 261,which significantly contributed to the recovery of compensation. Lord Burrows therefore found that Bott was entitled to a lien over that compensation for its costs and allowed the appeal.

Comment

The decision affirms the principle as espoused by Lord Briggs in Gavin Edmondson and provides further guidance on the approach to be taken towards solicitors’ equitable liens as against clients. However, it goes further as it widens the scope of solicitors’ equitable liens beyond circumstances involving an actual or reasonably anticipated dispute; rather the test is now based on whether the client is ‘making a claim’.

Perhaps most importantly, Lord Burrows makes clear that allowing Bott’s appeal promotes access to justice because the vindication of a client's rights, through the making of claims, is more likely to be effective if solicitors know that they have the security of alien to recover their fees. In similar vein, Lord Briggs considered that the disproportionate cost of engaging solicitors for relatively low–value claims is a significant obstacle to access to justice in England and Wales and that Bott's scheme allows consumers to benefit from professional assistance to recover compensation at a low cost, with no cost at all in the absence of recovery.

The fact that there was dissent casts some doubt on the authoritativeness of the decision. Lady Rose questions for example the status of transactional work at paragraph 68 of the judgment deploying the following hypothetical:

where a solicitor writes on behalf of a client to remind a contractual counterparty that a payment instalment under the contract will shortly fall due or where a solicitor at the end of a contract negotiation writes to the counterparty asking them to pay the consideration just agreed.”

Her Ladyship then goes on to conclude that: “On our view, there is no lien attaching to that money if it is then paid directly to the client because there is no dispute or anticipated dispute”. It remains to be seen to what extent the uncertainty as envisaged by the minority will materialise in real cases.

See the full judgment.

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