Candey Ltd v Crumpler & Anor

The Court of Appeal dismissed the appellant's challenges on two principal issues: (1) whether a success fee payable under a conditional fee agreement could be recovered from the respondents pursuant to the LASPO saving in article 4 of the commencement order; and (2) whether the solicitors' equitable lien over litigation recoveries survived entry into a contemporaneous fixed-fee agreement and Deed of Charge. On the Exemption Issue the court held that the recognition order under the Cross-Border Insolvency Regulations 2006 did not render the foreign liquidators "in the capacity of" English liquidators for the purpose of the LASPO saving; Article 21 of Schedule 1 to the Regulations confers specified powers but does not transform a foreign representative into an English liquidator and the section 58A(6) prohibition therefore applies to preclude recovery of the success fee. On the Lien Issue the court applied established authorities on solicitors' liens (including Re Taylor, Re Morris and subsequent cases) and concluded that the FFA and Deed of Charge were inconsistent with the prior equitable lien (they covered the same assets and accorded priority to a funder), that Candey did not adequately reserve the lien and that the lien did not revive when it became clear the Deed created only a floating charge. The appeal was therefore dismissed on both issues.

This appeal concerned two discrete disputes between an English solicitor company, Candey Limited (Candey), and the joint liquidators of Peak Hotels & Resorts Ltd (Peak): (i) whether a success fee payable by Candey to its English solicitors under a conditional fee agreement (CFA) could be recovered from the liquidators as part of a costs order (the Exemption Issue); and (ii) whether Candey retained an equitable solicitors' lien over the settlement proceeds of litigation (the Lien Issue).

• Procedural posture: The appeal came from the High Court (Business and Property Courts) decision of Andrew Hochhauser QC ([2019] EWHC 282 (Ch)). Earlier interlocutory and substantive rulings at first instance and in the Court of Appeal on related points are described in the judgment, including recognition under the CBIR, and prior decisions on the nature and value of the security.
• Reliefs sought / nature of applications: Candey sought (a) declaration or order that any costs award in its favour could include payment by the Liquidators of the success fee payable under its CFA with Candey LLP; and (b) enforcement of an equitable lien and a charging order under section 73 of the Solicitors Act 1974 over settlement monies recovered in the London litigation.

The court addressed three interlinked areas of legal analysis:

• Exemption Issue: The judgment analysed the LASPO amendments (section 44) and the Commencement No.5 and Saving Provision Order 2013 (SI 2013/77) which preserved recoverability of success fees in specified proceedings. The court construed the saving narrowly: a foreign representative recognised under Schedule 1 to the CBIR does not thereby act "in the capacity of" an English liquidator for article 4(c) of the LASPO commencement order. Article 21 gives access to relief available to British insolvency officeholders but does not convert the foreign representative's status into that of an English liquidator. Consequently, section 58A(6) of the Courts and Legal Services Act 1990 (as inserted by LASPO) precludes a costs order requiring payment by one party of a success fee payable by another.
• Lien Issue: The court reviewed the historical and modern authorities on solicitors' liens and waiver. It applied the test that a solicitor will be treated as having waived an equitable lien if the new security taken is inconsistent with the lien and no clear reservation is made. The Fixed Fee Agreement (FFA) and Deed of Charge covered the same funds as the equitable lien and expressly subordinated priority to a third-party funder; the new arrangements also provided for interest and other features not present under the prior retainer. The court found these features incompatible with the continued existence of the lien and that Candey had not made an adequate reservation. The court rejected the submission that independent advice to the client absolved the solicitor from the duty of explaining the combined effect of the new security and the pre-existing lien. The lien did not revive when it became clear the Deed created only a floating charge.

The court therefore dismissed the appeal on both the Exemption and Lien issues, concluding that (i) the court is precluded from ordering the Liquidators to pay the success fee, and (ii) Candey's equitable lien was waived by the October 2015 security arrangements and was not revived.

This was an appeal from the High Court. The Court of Appeal dismissed the appeal in full. On the Exemption Issue the court held that recognition under the Cross-Border Insolvency Regulations does not make a foreign representative "in the capacity of" an English liquidator for the LASPO commencement saving; section 58A(6) therefore precludes ordering the Liquidators to pay Candey's success fee. On the Lien Issue the court held that Candey waived its equitable lien when it entered into the Fixed Fee Agreement and contemporaneous Deed of Charge because those arrangements were inconsistent with the lien, Candey did not adequately reserve the lien and the lien did not revive when the charge proved to be floating rather than fixed. Appeal dismissed for the reasons given.

The proceedings originated in the Business and Property Courts (High Court). Key prior rulings included HHJ Davis-White QC ([2017] EWHC 1511 (Ch)) on the nature of the Deed of Charge and the "new monies" point, HHJ Raeside QC ([2017] EWHC 3388 (Ch)) on valuation of services, and a Registrar's recognition order under the Cross-Border Insolvency Regulations 2006 dated 24 February 2016. The Court of Appeal previously dismissed an appeal on the New Monies Point ([2018] EWCA Civ 2256) and allowed an appeal on valuation leading to remittal ([2019] EWCA Civ 345). The decision below was [2019] EWHC 282 (Ch) from which this appeal was taken.