Candey Ltd v Crumpler and another (as Joint Liquidators of Peak Hotels and Resorts Ltd (In Liquidation))

This appeal concerned when a solicitor's equitable lien (and the related remedy under section 73 of the Solicitors Act 1974) is taken to have been waived by agreement with the client. The Court applied an objective test: whether, from all the circumstances, a reasonable observer would infer that the parties intended the new security arrangements to replace the lien. The Court held that the fixed fee agreement and annexed deed of charge were inconsistent with the continued operation of the lien because they (i) covered the same property as the lien, (ii) altered the priority of claims by recognising an earlier charge for the litigation funder, and (iii) formed part of a single package that superseded prior fee arrangements. The solicitors had not expressly reserved their lien and the giving of independent legal advice to the client did not relieve the solicitors of their duty to make such a reservation if they wished to retain the lien.

This appeal arose from a dispute between Candey Ltd, the solicitors who had acted for Peak Hotels and Resorts Ltd (PHRL), and the joint liquidators of PHRL. Candey sought a declaration under section 73 of the Solicitors Act 1974 that it was entitled to a charge over settlement monies recovered in London to secure unpaid fees. The respondents alleged, inter alia, that Candey had waived any equitable lien by entering a fixed fee agreement (the FFA) and accepting a deed of charge in October 2015, and alternatively that any lien had been surrendered by lodging a proof of debt without mention of it or that the application was an abuse of process.

The issues framed were: (i) whether the equitable lien had been waived pre-liquidation by the FFA and Deed of Charge; (ii) whether Candey had abandoned the lien post-liquidation by its proof of debt; (iii) whether the funds were recovered through Candey's instrumentality; and (iv) whether it was an abuse of process to raise the lien at the stage it did. The case had proceeded through a deputy High Court judge ([2019] EWHC 282 (Ch)) and the Court of Appeal ([2020] EWCA Civ 26) before reaching this Court.

The Supreme Court restated that waiver of an equitable lien is to be determined objectively from all the circumstances. It explained the recurring factors relevant to inference of waiver: taking new security, inconsistency between the new security and the lien (including the same assets being charged, altered priorities and new rights to interest), and the professional duty of a solicitor to inform a client if the solicitor intends to retain a lien when taking inconsistent security. Applying those principles, the Court concluded that the FFA and Deed of Charge formed a single transaction which superseded earlier arrangements; they covered the same assets as the lien and altered priority in favour of the litigation funder, and there was no express reservation of the lien. Independent legal advice taken by PHRL did not displace Candey's duty to make any reservation clear. As a result the lien was inferred to have been waived. The Court did not need to decide the alternative post-liquidation, instrumentality or abuse arguments.

Appeal dismissed. The Supreme Court held that the equitable lien was waived when Candey and PHRL entered into the fixed fee agreement and the Deed of Charge because those documents formed a single package inconsistent with the continued existence of the lien (they covered the same property, altered priority by recognising the funder’s charge and supplanted earlier fee arrangements), and there was no express reservation of the lien; the objective test and the solicitor’s duty to make any reservation clear governed the outcome.

The case was heard at first instance by a deputy High Court judge who dismissed Candey's section 73 application on the basis that the lien had been waived [2019] EWHC 282 (Ch). Candey appealed to the Court of Appeal which affirmed the finding of pre-liquidation waiver and also held that a post‑liquidation waiver argument succeeded [2020] EWCA Civ 26. Candey's appeal to the Supreme Court was dismissed [2022] UKSC 35.