Supreme Court upholds solicitors’ lien in ‘uncontested’ cases

Supreme Court: 3:2 majority

A law firm handling uncontested flight delay claims did have an equitable lien over the compensation, the Supreme Court has ruled, overturning the Court of Appeal.

Lord Burrows said a solicitor could claim an equitable lien when they provided services in relation to making a client’s claim – with or without legal proceedings – “which significantly contribute to the successful recovery of a fund by the client”.

Bott & Co Solicitors Ltd v Ryanair DAC [2022] UKSC 8 concerned the airline dealing directly with the Cheshire law firm’s flight delay clients, including paying them compensation.

The Court of Appeal ruled in 2019 that the firm was not conducting litigation when the claims were not contested, and so did not have an equitable lien over the compensation. The court said 30% of clients did not pass on the fees due to Bott.

The Supreme Court overturned this by a majority of three to two, with the majority – Lords Burrows and Briggs and Lady Arden – each reaching the same conclusion by different jurisprudential routes. Lord Leggatt and Lady Rose gave a joint dissenting judgment.

Lord Briggs described the issue which divided the court as “whether it matters that there is an ‘actual or reasonably anticipated dispute’ about the claim, at the time when the solicitors agree to act”.

He said: “For Lady Arden and Lord Burrows what matters is that the solicitors agree to act in furtherance of a claim. They point out that neither the client nor (a fortiori) the solicitors may know whether the claim will be disputed when the solicitors are asked to act…

“For Lord Leggatt and Lady Rose, the automatic conferral of the lien whenever solicitors are pursuing a claim fails adequately to reflect the animating principle, that it should serve access to justice.

“If all that a solicitor does is write a letter on behalf of a client asking for payment of a sum of money about which there can be no reasonable possibility of a dispute, or likelihood of refusal to pay once demanded, then that activity is unconnected with access to justice.”

The Supreme Court reviewed its 2018 decision in Gavin Edmondson Solicitors Ltd v Haven Insurance Co, which Lord Burrows said was “best interpreted as supporting a clear, principled and easy-to-apply test” on the equitable lien “that does not turn on whether there was a dispute”.

This case could not be distinguished from Gavin Edmondson, he went on. The test for a solicitor’s equitable lien was “whether a solicitor provides services (within the scope of the retainer with its client) 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”.

He explained: “That seems to me to be the best interpretation of what Gavin Edmondson laid down. It is a clear and simple test to apply. Solicitors (and potential defendants) will know exactly where they stand.”

This approach promoted access to justice: “The vindication of a client’s legal rights, through the making of claims, is more likely to be effective if solicitors know that they have the security of a lien to recover their costs.”

A year after Bott & Co launched its largely automated flight compensation system in 2013, Ryanair developed its own system for its customers to use.

The question, Lord Burrows said, was whether Bott’s service then provided “no added value to what a reasonably competent customer of Ryanair can sort out for himself or herself without incurring any legal costs”.

He decided: “However, if one looks at this question in the context of Bott’s services generally in relation to flight compensation claims, it can fairly be said that Bott has made a significant contribution to the recovery of compensation by its clients.”

This linked to the question of whether it was acceptable for solicitors to charge fees where a person could very easily make a claim and recover compensation without incurring any legal fees.

Lord Burrows said: “Clearly it is important that people are not misled by solicitors and, in certain situations, it may be strongly argued that any reputable solicitor would first advise a prospective client that he or she should utilise an online claims procedure without incurring any legal costs.

“In so far as it is thought that a system of online compensation is being abused by solicitors to charge unnecessary fees, this would be a matter for the Solicitors’ Regulation Authority to investigate.

“In relation to an equitable lien, there is a well-established equitable doctrine that could be invoked to prevent any abuse, namely that the solicitor asserting the lien would need ‘to come to equity with clean hands’.”

Lady Arden said the equitable lien needed to be extended to cover costs incurred in the wider range of processes now available to resolve complaints and claims.

“Accordingly, it seems to me that the equitable lien can and should be held to arise where there is no dispute as such, but the client has a claim which has not been admitted and which must be formulated and communicated to the service provider or other prospective defendant in order to elicit whether there is a dispute.”

The justice observed that trying to keep a client out of court was “an important aspect of the role of the solicitor these days in contentious matters”.

She agreed with Lord Burrows that the solicitors’ services must have significantly contributed to the recovery of money or property: “The paying party is protected by the rule that he will not have to pay twice if he did not have the requisite notice and did not collude with the client.”

Lady Arden added: “I have borne in mind the concern that solicitors should not be in a privileged position as regards other professionals providing legal services, but on the information available at this time I take the view that that is probably a matter for Parliament perhaps when reviewing the provisions of the Solicitors Act 1974 in relation to costs.”

Lord Briggs, who gave the lead judgment in Gavin Edmondson, admitted that he had changed his mind about the present case “more than once”.

But he noted that any methods by which solicitors could reduce the disproportionate cost of taking action to pursue a small claim “are in principle likely to serve the cause of access to justice”, while “the need for reasonable certainty as to the existence of the lien” was important.

“I recognise that the simple test proposed by Lady Arden and Lord Burrows may occasionally involve the recognition of the equitable lien in wider circumstances than is strictly justified by its animating access to justice principle.

“It may also confer upon solicitors a proprietary security for payment for services with no very sophisticated legal content which other providers of the same services do not enjoy, simply because they are not solicitors. The facts of this case illustrate both those concerns…

“But it by no means follows that a lien which in most cases will continue to promote access to justice should now be withdrawn or restricted in its scope merely because there are others who do the same in competition with solicitors.

“An obvious alternative might be to extend the lien to them as well. But that is not a matter capable of being addressed in this case. It would in all probability best be left to legislation.”

The dissenting judgment argued that “for a lien to arise, there must be a dispute, existing or reasonably anticipated, in connection with which the services of the solicitor are sought” – which was not the case in the vast majority of claims handled by Bott.

But the majority warned that this would place solicitors in a very difficult position. Lord Burrows said: “The solicitor needs to know in advance of providing particular services (or developing a business model) whether or not it will be entitled to an equitable lien if there is a successful outcome. The solicitor cannot know whether claims will or will not be disputed by the other side.”

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