Candey Ltd v Crumpler & Anor

Recognition of a foreign insolvency proceeding does not make the foreign representative an English liquidator or confer an English office-holder’s statutory capacity. A recognised representative applies under the Model Law, so the success-fee exemption for English liquidators does not apply. A solicitor waives an equitable lien when new security is materially inconsistent with it and the solicitor does not reserve the lien. Independent legal advice on the new security does not remove the solicitor’s duty to explain the combined effect of both securities. Security covering the same litigation proceeds and giving a third-party funder priority was inconsistent. The lien did not revive merely because the security was floating rather than fixed.

Candey acted for Peak Hotels & Resorts Ltd in extensive litigation. Following Peak’s liquidation in the British Virgin Islands, its liquidators replaced Candey and brought proceedings in England concerning Candey’s security and fees.

Candey claimed that a conditional fee success fee was recoverable as part of costs and sought to enforce an equitable solicitors’ lien over settlement proceeds under the Solicitors Act 1974. The Deputy High Court Judge rejected both arguments, holding that the proceedings were outside the relevant success-fee exemption and that the lien had been waived by a later fixed fee agreement and deed of charge: [2019] EWHC 282 (Ch). The appeal concerned both issues, together with alternative arguments in the Respondents’ Notice.

The Court of Appeal unanimously dismissed the appeal.

1. Success-fee exemption. The recognition order under the Cross-Border Insolvency Regulations 2006 did not cause the BVI liquidators to act as, or in the capacity of, English liquidators. Their right to seek relief arose under Article 21(1)(g) of Schedule 1, not under section 168 of the Insolvency Act 1986. Recognition preserved their status as foreign representatives. The saving provision in the LASPO Order therefore did not apply, and section 58A(6) of the Courts and Legal Services Act 1990 prevented recovery of the success fee.
2. Waiver of the equitable lien. A solicitor waives the lien where new security is materially inconsistent with it and the lien is not reserved. The solicitor’s duty is to explain the totality of the solicitor’s claims against litigation proceeds. Independent advice on the new security does not discharge that duty.
3. The fixed fee agreement and deed of charge covered the same litigation proceeds as the lien and gave Campion Maverick priority over those proceeds. Those were clear inconsistencies. The new arrangement also introduced interest which had not been payable under the prior retainer. Candey did not reserve the lien. The fact that the deed created a floating rather than fixed charge did not revive it; Candey obtained the security actually granted, not the security it had expected.
4. The Court did not need to determine whether a lien existing before a fund came into sight was a security interest requiring disclosure in a proof of debt. It nevertheless indicated that failure to rely on a security interest in the proof would be a separate omission with the statutory consequence of surrender if the provision applied. The Court also observed that, if a lien exists, it should ordinarily be enforced under section 73 unless there is good reason not to do so.

• Court of Appeal (Civil Division) dismissed Candey’s appeal on both the success-fee exemption and lien issues: [2020] EWCA Civ 26.
• High Court (Chancery Division) held that the exemption did not apply and that Candey had waived its equitable lien: [2019] EWHC 282 (Ch).