England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ON APPEAL FROM MASTER CAMPBELL, COSTS JUDGE

		Royal Courts of Justice Strand, London, WC2A 2LL
		24/07/2012

Mr Justice Mackay:

1. This is an appeal against the order of Master Campbell sitting as a costs judge on 17 February 2012 when he refused declaratory relief sought by the appellants ("the solicitors") in a Part 8 claim. The declaratory relief sought was a declaration that the amount of costs and disbursements in a claim in which the solicitors had acted for the first defendant had not been agreed, and a declaration that the solicitors were entitled to a charge securing their interests in the defendant's unpaid fees regarding any sums paid and/or any sums to be assessed as due with regard to those costs.
2. The form of the application below was important. It being a Part 8 claim no evidence was led nor was there any witness statement from any party. The matter proceeded by agreement on the basis of the facts pleaded in the document entitled "Details of Claim".
3. The background was that the solicitors had acted for the first defendant in judicial review proceedings against the second defendant ("the SSHD") which were compromised. The chronology relevant to the claim was, as the judge found, as follows.
4. On 29 April 2011 the proceedings were settled. There was a term of settlement that the SSHD would pay the first defendant his reasonable costs. On 2 June the solicitors served notice of commencement for assessment of those costs and submitted a bill seeking £9,497 odd. On 13 July the SSHD through her costs draftsmen offered £6,000 in settlement of the bill.
5. On 2 August the first defendant wrote a letter of some importance, as follows;-

"This notice confirms that with effect from 2 August 2011 I have withdrawn consent from Khans Solicitors and chambers of Mr Sibghat Kadri QC to be my representatives and they have ceased representing my interests regarding this matter and any related issues to the same matter.

I further confirm that upon considering your letter dated 13 July 2011 I have accepted your clients (TSOL) offer of £6000 equivalent to my recoverable money save any costs that may arise due to your clients future delays from t he date of this notice. Please make payment in my name… and send cheque including future correspondence directly to me on the above address" (original emphasis)

This letter, which was attached to the claim, was copied to among others the solicitors and the first defendant's counsel.

6. On 4 August 2011 the solicitors wrote to the first defendant saying;-

"Please do not involve yourself with legal costs since this has nothing to do with you. Also these are technical matters and certain rules and regulations apply. You as a client have no say so please do not spoil things by contacting [the draftsmen]. These are our costs and only reasonable costs based on the rules can be claimed…"

7. On 17 August the draftsmen on behalf of the second defendant offered the claimant £7,125 to settle the costs. They wrote again on 19 August stating that as the first defendant had purported to accept the offer of £6,000 and the court had by that time indicated the solicitors were no longer on the record. On SSHD's instructions the offer of £7,125 was withdrawn.
8. Thereafter in August or September the solicitors wrote to the SSHD in an effort "….to prevent £6,000 in costs being released to the defendant as it was the claimants position that no valid compromise on the question of costs had been reached and that sum regarding the costs … should be paid to the firm … as these had arisen as a result of the claimant's instrumentality …"
9. On 21 September the solicitors issued an application in the Administrative Court which was struck out on 19 October by Thirlwall J on the ground that it was not a public law claim. On 9 November the second defendant paid £6,000 to the first defendant. It is the claimant's case argued through counsel, and set out in the Details of Claim, though not part of the judge's findings, that the solicitors only discovered that the Administrative Court application had been struck out on 4 November, five days before the payment out was made.
10. There were technical objections to the position of the second defendant below. Neither defendant had filed an acknowledgment of service and the first defendant did not attend the hearing. The second defendant needed permission to be heard. Quite evidently the Master did hear the second defendant and therefore it was at the very least to be implied that he had given it. There is really nothing in this point.
11. The main grounds of substance are based on the effect of the solicitors' lien over their costs. The primary argument before me, though the case was not argued below, is based on the authority of Ross v Buxton [1889] LR 42 Ch D 190, that provided the paying party knew of the existence of the lien and the claimant's intention to exercise it the lien is in play even if the money has now disappeared with the first defendant who has gone abroad. Secondly it is argued there is an additional jurisdiction to set aside the compromise agreement between the two defendants to settle the issue of costs for £6,000 and thereby permit the claimant to proceed to an assessment of costs and payment of those costs from the paying party. It appeared to be the position that Mr Biggs for the claimant was conceding that in that exercise the claimant would have to give credit for the £6,000 paid over to their client under the agreement to be set aside.
12. The argument in favour of the existence of the first of these bases, where only knowledge on the part of the paying party has to be proved, is based on the decision in Ross expressed in the head note that the paying party -

"… is not at liberty after express notice by the plaintiff solicitor of his claim to a lien for his costs to pay that sum over to the plaintiff in disregard of such notice"

Stirling J at 199 said

"The party should not run away with the fruits of the cause without satisfying the legal demands of his attorney, by whose industry, and in many instances at whose expense, those fruits were obtained. If indeed the money had been paid over bona fide to the plaintiff before notice from his attorney of his lien such payment would have been good; but here the payment was made in violation of the notice which cannot be suffered."

The learned judge proceeded to identify another class of case where it is made out that there is some collusion or fraudulent conspiracy between the parties to cheat the solicitor of his costs. But absent notice or collusion or fraudulent conspiracy the lay client can compromise with the other party and give him a release.

13. The only authority cited to the judge below and relied on by the claimant was re Margaretson and Jones [1897] 2 Ch 314. Ross v Buxton was cited in argument. Kekewich J said at 319:-

"If the one solicitor meeting the party on the other side, or the two parties compromise knowing of the lien of the solicitor and intending to defeat it that shall not be allowed and the only question, therefore, is whether that was the intention. That runs through all these cases, as in the The Hope where Lindley LJ says "There is no rule that the parties may not compromise an action without the intervention of their solicitors. They must, however, do so honestly and not intend to cheat the solicitors of their proper charges." The word "cheat" is not a bit too strong: the Master of the Rolls also uses it"

14. The findings that the judge made here, and in my judgment was entitled to make given the form of the proceedings before him, were these. There was no suggestion, he said, that the first defendant had tried to cheat by compromising the cost aspect of the claim in order to defeat any interest. He said that he had made no secret of what he was doing by copying his letter of 2 August to those to whom he copied it nor did the second defendant keep quiet about his proposal to settle. He was satisfied that they took prior steps to check with the court that the solicitors were no longer on the court record and the payment itself was not made until after the attempted proceedings in the Administrative Court had been dismissed. There was no collusion, therefore, as he found between the defendants to deprive the solicitors of their costs and the settlement was not done "on the quiet".
15. The argument for the respondent today is that Margaretson and Jones is a complete and unitary description of the law in this area as it developed in equity through the nineteenth century cases and as it still remains. Therefore both knowledge and collusion have to be shown in relation to both payer and receiver. The judge did not find collusion, and that was a finding that was open to him to make as a reasonable inference from the undisputed facts. Therefore the claim must fail as the judge rightly found.
16. If there still remains a separate doctrine based on or evidenced by the case of Ross, and which has not been subsumed into what might be called the Margaretson principle it is not sufficient for the paying party to know of the existence of the lien and the claimants desire to assert it but there must still be an intention to defeat it.
17. So far as that is concerned the appellant relies on the response that is made on the 4 August warning the first defendant not to involve himself with matters relating to costs. But for the SSHD it is pointed out that that was not a letter sent or copied to her, and therefore even if mere knowledge is sufficient to bring the principle into play it was not present in this case or at least has not been shown to have been so. Nor for that matter does it mention in terms the assertion of the solicitors' lien as being a matter of concern to them. The Appellants argue that an intention to defeat the lien can be inferred from the first defendant's stated desire that the costs be paid to him and the withdrawal of the offer of £7.150.
18. I prefer the arguments advanced by Mr Radley-Gardner on this issue. I do not believe that there are two discreet and distinct concepts or doctrines in play; but it is the case that the law developed into the principle summarised by Kekewich J in the passage cited above. Nothing in re Fuld [1967] 2 All ER 649 undermines that proposition. The intervention of the court in that case was plainly a precautionary measure to prevent the possibility of a future collusive compromise damaging the interest of the solicitors, there being some evidence of the relevant litigant's likelihood of so doing.
19. In short therefore I agree with the finding made by the Costs Judge below and the reasons he gave for reaching it. Even on the fresh arguments now ventilated before me, which were certainly not before him in anything like the form in which they were advanced to me, I consider that the claim would still have failed. I therefore dismiss this appeal.