ON APPEAL FROM THE HIGH COURT OF JUSTICE
MR JUSTICE MORGAN
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE KITCHIN
SIR ROBIN JACOB
| WITHERS LLP
|- and -
|LANGBAR INTERNATIONAL LTD
Joanna Smith Q.C. and Sebastian Allen (instructed by Withers LLP) for the Respondent
Hearing date: 8 November 2011
Crown Copyright ©
Sir Robin Jacob:
9. All of the money in the Account shall be paid forthwith by Withers LLP to Langbar's solicitors in partial discharge of the Rybaks' liabilities under this order. Provided however that if Withers LLP give to Langbar a cross-undertaking in damages in the usual form then they may retain the amount of £410,000 in the Account until close of business on 14th July 2010. Withers LLP shall have liberty to apply on 24 hours notice to Langbar for an order extending the time for payment of the £410,000.
The Two Orders
1. The injunction granted in paragraph 2 below shall be conditional upon the Applicants [i.e. Rybak] agreeing and undertaking forthwith to transfer or to procure the transfer of the net proceeds of any sale on or before 31 December 2008 of the apartment in Monaco owned by the Seventh Defendant/Applicant [i.e. SCI] ("the apartment") to a client account of their solicitors Withers LLP ("the account") on terms that:
1.1 subject to paragraph 1.2 below, the monies will be held in and not withdrawn from the account until further Order by the Court;
1.2 the Applicants may direct payments to be made from the account to the Respondent [i.e. Langbar] in discharge of or on account of sums due from the Applicants to the Respondent under the settlement agreements scheduled to the Tomlin Orders in these proceedings dated 21st April 2008 and 23rd October 2008.
2. [The injunction ordered by the court]
3. The Applicants and the Respondent shall each have permission to apply, and in particular (but without limitation) the Applicants shall have permission to apply for an Order permitting payments for their living and legal expenses to be made from the account pending the resolution of any dispute that may exist as to who is entitled to the monies in the account.
2. Subject to paragraph 3 below, the monies in the Account shall be held in and not withdrawn from the Account until further Order by the Court.
3. Subject to the terms of a Restraint Order made by His Honour Judge Gordon in the Central Criminal Court on 11th September 2009, the [Morgan order] is varied so as to permit the Claimants [i.e. Rybak] to direct payments to be made from the Account, as follows:
i) all legal expenses incurred by the Claimants in relation to these proceedings shall be notified by Withers LLP to Jones Day [Langbar's solicitors] and, upon confirmation from Jones Day that the Defendant [i.e. Langbar] consents to the reasonableness of those expenses (such consent being presumed in default of a response within seven days), the Claimants may direct that sufficient monies shall be released from the Account to fund those legal expenses;
ii) the Claimants shall be entitled to monthly living expenses payable from the Account on the first day of each month in the sum of €25,000. Payment of these expenses is to commence immediately with the first payment for September 2009 to be made as soon as reasonably practicable.
iii) [t]he Claimants shall be entitled to an immediate payment from the Account of €90,180 to cover outstanding expenses.
5. The Claimants and the Defendant shall have permission to apply, and in particular (but without limitation) the Claimants shall have permission to apply for an Order permitting additional payments for their living expenses and/or for any legal expenses not consented to under paragraph 3 above and/or for any other payments arising in the ordinary and proper course of business to be made from the Account pending resolution of the proceedings. Applications for living expenses other than those identified herein at paragraph 3(ii) may be made in writing to HHJ Waksman QC where appropriate.
The Lien Point
The general rule is that the retaining solicitor's lien extends to any deed, paper or personal chattel which has come into the solicitor's possession in the course of his employment and in his capacity as solicitor with the client's sanction and which is the client's property. …
The lien does not extend to ... (d) documents which did not come into the solicitor's hands in his capacity as solicitor for the person against whom the lien is claimed … but as … trustee.
Moreover, where … money is paid to the solicitor for a particular purpose so that he becomes a trustee of the money, no lien arises over … that money unless subsequently left in the solicitor's possession for general purposes.
The passage was cited by Evans-Lombe J in Euro-Commercial Leasing v Cartwright and Lewis  2 BCLC 618 at pp.621-2.
"the real question in this case is whether [the orders] produced the result that Withers held the monies in their client account for a particular purpose which was incompatible with [a retaining lien]."
The law as to equitable assignment, as stated by Lord Truro in Rodick v. Gandell 1 D.M. & G. 763, is this:
"The extent of the principle to be deduced is that an agreement between a debtor and a creditor that the debt owing shall be paid out of a specific fund coming to the debtor, or an order given by a debtor to his creditor upon a person owing money or holding funds belonging to the giver of the order, directing such person to pay such funds to the creditor, will create a valid equitable charge upon such fund, in other words, will operate as an equitable assignment of the debts or fund to which the order refers."
An agreement for valuable consideration that a fund shall be applied in a particular way may found an injunction to restrain its application in another way. But if there be nothing more, such a stipulation will not amount to an equitable assignment. It is necessary to find, further, that an obligation has been imposed in favour of the creditor to pay the debt out of the fund. This is but an instance of a familiar doctrine of equity that a contract for valuable consideration to transfer or charge a subject matter passes a beneficial interest by way of property in that subject matter if the contract is one of which a Court of equity will decree specific performance.
The Rybak parties stopped short of taking on a specific obligation to pay Withers' reasonable fees out of the money in the client account.
We have asked repeatedly for your consent to make an application to the court for the discharge of your outstanding legal fees from the Frozen Account..
Please will you now consent to Withers making an immediate application to court for the discharge of all outstanding fees excluding [a disputed bill] from the Frozen Account.
I have no problem of you discharging the fees as we have suggested in your previous emails …
At the same time by granting you permission to discharged (sic) I would ask you and instruct you ..
There then followed a list of requirements such as advice as how to obtain an extension of time, to return all personal documents, help and assistance to the new lawyer, to provide all files from April 2008 to the present and so on.
Lord Justice Kitchin
Lord Justice Lloyd