Mastercigars Direct Ltd v Withers LLP

A court should not release money subject to a solicitor’s charging order where doing so would leave the solicitor without adequate security for fees which appear to be due. The security provided by a charge differs fundamentally from funds subject to a freezing order, since the charge creates a security interest. The court may have power to release money in an appropriate case, but the applicant must establish grounds for exercising it. A payment on account of costs should not be ordered where the parties’ ultimate financial positions remain substantially uncertain. A stay on enforcement should remain where it is unclear what sum, if any, is indisputably due and the proposed enforcement is insufficiently specified.

Mastercigars and Withers were involved in extensive costs litigation arising from earlier proceedings. A sum paid on account of Mastercigars’ costs was held in a joint account and was subject to a charge in favour of Withers under section 73 of the Solicitors Act 1974.

Mastercigars sought release of the remaining money in the account to fund its litigation and, alternatively, payment on account of costs said to be due from Withers. Withers sought to lift a stay on enforcement of interim costs certificates and to obtain payment of the money in the joint account. The central issues were whether the security should be released or transferred and whether the parties’ competing and largely unassessed liabilities justified payment or enforcement.

1. Mastercigars’ applications dismissed. The court refused to release £18,160.86 held in the joint account. Withers had a powerful argument that releasing the money would leave them without adequate security for fees which appeared to be due. The remaining potential value of the charge was uncertain, involved further pursuit and carried cost, delay and uncertainty.
2. The practice concerning funds subject to a freezing order did not guide the exercise of the jurisdiction. A freezing order does not confer a security interest in the frozen funds, whereas a charging order under section 73 of the Solicitors Act 1974 does create such an interest. The court did not decide that it was wholly powerless to release money subject to the charge, but found no grounds for doing so on these facts.
3. A payment on account under CPR rule 44.3(8) would not have been appropriate. The competing figures were disputed, several sums were unassessed, and pending appeals could alter the parties’ respective liabilities. The court could not predict with real confidence the ultimate balance between them.
4. Withers’ applications dismissed. The stay imposed on enforcement of interim costs certificates was not lifted. It remained far from clear what sum, if any, was indisputably due to Withers. Withers had sought removal of the stay in its entirety, had not proposed enforcement for a specified sum, and had not sufficiently identified the form of execution intended. The court also declined to fashion additional security which had not been sought in that form.

The applications were dismissed. Any consequential application, apart from dismissal of the applications, was to be made in writing by 19 June 2009.

The judgment was given in the High Court on applications transferred from the Supreme Court Costs Office. The court dismissed both Mastercigars’ and Withers’ applications.