High Court: law firm “sufficiently well-funded” to cope with freezing order over £2m in fees in its client account

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4 April 2017

High Court: dispute over ownership of money

Leading litigation firm Stewarts Law is “sufficiently well-funded” to cope with £2m intended to pay its fees and disbursements sitting frozen in its client account, while the true owner of the money is identified, the High Court has ruled.

Mr Justice Popplewell last month dismissed the firm’s attempt to discharge a freezing order over the money, which it has held since September 2016, so it could be transferred to office account.

He said the adverse consequences to Stewarts Law of maintaining the freezing order for the time being were “relatively minor and easily compensated for”. There is no suggestion that the firm has done anything wrong.

In Phoenix Group Foundation v Cochrane & Anor [2017] EWHC 418 (Comm), James Drake QC had argued on behalf of the firm that there was no risk of Stewarts, “a well-funded and established firm of solicitors”, being unable to repay the £2m if it were unfrozen.

The judge said that, if this was the case, “it is difficult to see how Stewarts Law would be significantly prejudiced in the conduct of its business if it is forced to forego the use of that £2m between now and trial.

“What is being said in either eventuality is that the firm is and will be sufficiently well funded to be able to absorb the loss of £2m in respect of unpaid fees and paid disbursements. Loss of use of the money is readily quantifiable by an interest calculation which can be adequately secured under the cross-undertaking.”

By contrast, Popplewell J said there was “real and substantial risk of prejudice” to the claimant, a Panamanian company, if the freezing order was not continued.

The judge said the £2m represented the proceeds, or part of them, from a development site in Prandoty Street, Kracow, Poland. There are other claimants to the money as well.

“The true owner’s claim for return of the £2m, which is likely to be a proprietary one, may very well be prejudiced by Stewarts Law now being permitted to move the money from its present location and spend it.

“A proprietary claim to what is now a sum which is identifiable and frozen as that received from the sale of Prandoty Street would be destroyed and some basis for a personal claim would need to be established against Stewarts Law.”

The High Court heard that the £2m was paid to Stewarts Law by Litigation Capital Limited (LCL), which had committed to funding the law firm’s fees in linked but “lengthy and hard-fought” commercial litigation.

Stewarts Law received the money in “part payment” of fees and disbursements totalling over £4.3m. 

The freezing order was made by Mr Justice Newey before the end of September, and continued by Mrs Justice Rose the following month.

With the circumstances in which the money was paid to Stewarts “opaque”, Popplewell J said there were triable issues before him, including whether LCL had any entitlement to the money, while there was a “good arguable case” that Stewarts was not entitled to receive the money from the true owner for the stated purpose.

Stewarts declined to comment as proceedings were ongoing.

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