Withers LLP v Langbar International Ltd

A solicitor’s retaining lien over money in a client account depends on the terms on which the money is held. The decisive question is whether those terms are compatible with a lien, not simply whether the money remains the client’s property or is held on a purpose trust.

Money paid into a solicitor’s account under a court order to preserve it for the court’s directions and potential satisfaction of another party’s claim is held for a purpose incompatible with a lien. A later order permitting legal expenses only with the opposing party’s consent or a further court order does not make the money generally available for the solicitor’s fees.

An equitable charge also requires a binding agreement imposing an obligation to pay the creditor from the identified fund.

Withers LLP held proceeds of the sale of its clients’ Monaco apartment in its client account under a court order. The order required the money to remain in the account pending further order, while later variations permitted specified living expenses and legal expenses subject to conditions.

After Langbar obtained judgment against the clients, Withers claimed a common-law retaining lien over the remaining money for its unpaid fees. In the alternative, it claimed an equitable charge. Morgan J held that Withers had a lien but rejected the equitable-charge claim: [2011] EWHC 1151 (Ch).

Langbar appealed against the lien. Withers cross-appealed on the equitable-charge issue. The central question was whether the court-ordered terms on which the money was held were compatible with either proprietary claim by Withers.

1. Appeal allowed unanimously; cross-appeal dismissed. The money was not subject to a retaining lien in favour of Withers, and there was no equitable charge.

2. A solicitor’s retaining lien may attach to money held for general purposes. The inquiry is why the money is in the client account and whether the terms of its retention are compatible with a lien. A purpose trust is one, but not the only, circumstance that prevents a lien.

3. The Morgan order required the proceeds to be held in England so that they would remain available for the court to direct their disposition, including possible satisfaction of Langbar’s claim. That was the sole purpose of the payment into Withers’ account. It was incompatible with Withers acquiring a prior claim by lien. The absence of a purpose trust or other security interest in Langbar’s favour did not mean that a lien arose automatically.

4. The later Waksman order did not alter that conclusion. Payment of legal expenses required a direction by the clients, consent by Langbar’s solicitors as to reasonableness, or a successful application to the court. Those were substantive restrictions, not merely administrative steps before enforcement of an existing lien. The court’s power to vary the arrangements, and the continuing purpose of protecting Langbar against dissipation, remained.

5. On the cross-appeal, an equitable charge required a contract, supported by valuable consideration, imposing an obligation to pay Withers’ fees from the identified fund. The relied-on email exchange did not create one: the clients’ response was a counter-offer which Withers never accepted. The claim to an equitable charge therefore failed.

• Court of Appeal (Civil Division) — Allowed Langbar’s appeal and dismissed Withers’ cross-appeal: [2011] EWCA Civ 1419.
• High Court of Justice, Chancery Division — Morgan J held that Withers had a common-law lien over the money in its client account, but rejected its alternative claim to an equitable charge: [2011] EWHC 1151 (Ch).