Key Facts
- •Claimants (Next and Ambon) obtained judgments against Defendants (Alec and Robert) for £6,124,430.02 plus interest, totaling £8,333,743.43.
- •Claimants applied for a third-party debt order against Ward Hadaway LLP (Ward Hadaway), Alec's solicitors, for monies in Ward Hadaway's client account originating from the sale of Alec's Italian property.
- •Ward Hadaway claimed a lien and/or set-off against the monies for unpaid legal fees (£450,665.36).
- •A worldwide freezing order was in place, preventing Alec from disposing of assets up to £10,000,000, with an exception for the sale proceeds of the Italian property which were to be paid into Ward Hadaway's client account.
Legal Principles
Monies in a solicitor's client account, where the solicitor's only obligation is to pay them to the client, constitute a debt owed to the client and can be subject to a third-party debt order.
Case law (implicitly referenced throughout the judgment)
A solicitor's lien is confined to fees due before service of the interim third-party debt order. Subsequent fees are subject to the order.
Case law (implicitly referenced and conceded by Ward Hadaway)
A solicitor's lien has priority over a third-party debt order if established. The court cannot override this priority.
BCS Corporate Acceptances Ltd v Taylor [2018] EWHC 2349 (QB) and Implicit in the judgment
To determine if a lien exists, the key question is whether the monies in the account are for general purposes or a particular purpose inconsistent with the lien. If the latter, no lien arises.
Withers LLP v Rybak and others [2012] 1 WLR 1748
A solicitor has a right of set-off over money in a client account for services rendered and for which a bill has been delivered.
BCS Corporate Acceptances Ltd v Taylor [2018] EWHC 2349 (QB)
A freezing order does not displace existing proprietary or other rights, including contractual or common law rights of set-off.
Implicit in the judgment and referenced in relation to Withers
Outcomes
Ward Hadaway has a lien over £47,000 (deposit) paid into their client account before the freezing order.
The money was paid without restrictions on its use, and the purpose was not inconsistent with a solicitor's lien.
No further lien exists over the balance of the Italian property proceeds.
The freezing order, once in place, made the funds held for a purpose inconsistent with a lien.
Ward Hadaway has a set-off of £386,417.36 against the proceeds in its client account for unpaid fees.
The retainer letter and terms of business established a contractual right of set-off, and a common law set-off exists, unaffected by the freezing order.
The interim third-party debt order is made final for £109,529.69.
This amount represents the remaining funds after accounting for the lien and set-off, and considering that funds paid into the account after the service of the interim order are not caught by it.