“If we never do anything which has not been done before, we shall never get anywhere. The law will stand still whilst the rest of the world goes on: and that will be bad for both”.
So said Lord Denning in Packer v Packer, probably the greatest judge of England and Wales in the twentieth century. And if an example is needed about doing something that has never been done before, look no further than the judgment of the Supreme Court in Bott and Co v Ryanair, in which the majority (Lords Briggs and Burrows, and Lady Arden) outnumbered the minority (Lord Leggatt and Lady Rose) in holding that Bott could assert a solicitors’ equitable lien over compensation payable by the Irish airline, Ryanair, to the firm’s clients where flights had been delayed or cancelled.
But that is to get ahead of ourselves. Earlier blogs have considered what happens, in common parlance, when a deliberate step is taken to cut out the middle man, where that person is a solicitor, and the extent to which, if at all, the law will step in to give the solicitor a remedy.
In Gavin Edmondson Solicitors Ltd v Haven Insurance Ltd, claimants injured in minor road accidents had used the Road Traffic Act Portal to recover compensation for the personal injuries they had suffered. Where that was the case, Edmondson had notified the claims to Haven as the tortfeasors’ insurers, in the expectation that most would be negotiated and settled without any legal proceedings, with the solicitor’s reward being the modest fixed costs for their work payable under the RTA Protocol (see Solicitor’s costs: cutting out the middle man). By using Conditional Fee Agreement (CFA) “Lites”, that meant that the claimants would never have to pay any costs out of their own pockets.
To avoid having to pay the fixed costs, Haven subsequently adopted a policy which involved approaching Edmondson’s clients direct, in an attempt to buy them off by paying higher damages (but no costs) than would be recoverable using the Portal. By cutting out the middle man (Edmondson) in this way, Haven thereby avoided having to add to the settlement sum, the costs payable under the terms of the RTA Protocol.
Did Edmondson have a remedy? Yes, said the Supreme Court because the firm could assert an equitable lien over the damages: that entitlement had been established in Read v Dupper in 1795 that:
“…. The principle by which this application is to be decided was settled long ago, namely that 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 are obtained” (Lord Kenyon).
Holding that there had been no collusion by Haven and the clients to cheat Edmondson out of their fees and that each Claim Notification Form had given notice of the firm’s claim on the funds for its outstanding costs, the Supreme Court held that the solicitors could enforce their lien against Haven by requiring it to pay the fees due under the CFAs direct to them, up to the amount of the agreed settlement payments in each case.
Back to Bott!
In Bott, the firm had developed an on-line tool to assist passengers in recovering compensation from Ryanair where flights had been delayed or cancelled. From February 2013 onwards, Bott had acted in approximately 125,000 cases, using “no-win-no-fee” CFAs, which generated an average fee per claim of £95 plus VAT. On that basis, the firm’s possible costs recovery from Ryanair in the event of success worked out at £11,875,000 plus VAT (125,000 x £95). Plainly some cases failed, but that was the potential if all succeeded.
Things changed from February 2016. Instead of dealing with Bott directly in notified claims, Ryanair altered its tactics and communicated with its clients in matters in which it had received a letter before action, settling claims and paying the compensation straight to them. That meant that the solicitors never had funds passing through the firm’s account from which it could take its fees. Moreover, where a “win” had been achieved under the CFA with proceedings issued, the firm was out of pocket for the court fees. Although the individual sums were small, it was uneconomic to look to the clients for their charges in the 30% of cases in which no response had been received from them to a request for payment, so the firm had ended up writing off thousands in lost fees.
Did Bott have a remedy, or put in legal-ease, could the firm exercise a solicitors’ equitable lien over any damages recovered so that Ryanair would need to account to the firm for its costs rather than paying all sums directly to the clients?
No, said Edward Murray QC. In contrast to the situation in Haven where proceedings had been issued, the compensation had only arisen as fruits of negotiation as opposed to fruits of litigation (see Solicitor’s costs: cutting out the middle man (part 2)). Moreover, whereas in Haven, the Portal had been used, under the Bott model, there had been no formalised scheme sanctioned by the judiciary and the firm had merely been a claims handler. The work was completely different to that undertaken by Edmondson. Judgment and round one to Ryanair.
Bott appealed (see Solicitor’s costs: cutting out the middle man (part 2)). The Court of Appeal held that, where there had been no proceedings and all work had been undertaken on-line, no “Legal Services” as defined in section 19 Courts and Legal Services Act 1990 had been provided namely: “Any services which it would be reasonable to expect a person who is exercising, or contemplating exercising, a right to conduct litigation in relation to any proceedings, or any contemplated proceedings, to provide”.
The reason for that, said Lewison LJ, was that: “The making of a claim under Regulation 261 [Regulation EC 261/2004] is largely mechanical and formulaic. It requires little more than the flight distance and the length of the delay, in addition to details of the ticket purchase. The amount of compensation that a delayed passenger is entitled to receive is fixed by the Regulation. It is not a case in which the quantum of damages has to be evaluated” (paragraph 58, judgment).
Although the court was willing to accept that it was not necessary for proceedings to have been issued for the lien to be exercised, the boundary up to which that protection could arise was limited to the conducting or contemplation of litigation. Accordingly, “… Where Bott simply writes a letter of claim or assists a client to complete the on-line form, and the claim is paid in response to the letter or the form, it is not entitled to an interest in the compensation that equity will protect” (paragraph 59, judgment).
It followed that until Ryanair refused the claim, there could be no dispute or litigation, either actual or contemplated. If the damages and costs were paid direct to the client, Bott had no recourse the Ryanair if the client kept the lot. Round two to Ryanair.
Round three: the decider in the Supreme Court
Although there was much common ground between the majority and the minority, the critical dividing factor lay in whether Ryanair had to show its hand before the lien could arise. In other words, did the claim first need to be disputed? Lord Leggatt (and Lady Rose) were clear: “We can see no principled basis…. for extending the lien …. to circumstances where there is no dispute (actual or reasonably anticipated) between the parties…” (paragraph 67, judgment)
In his speech, Lord Burrows explained how this conclusion had been reached:
“As I understand it, this is primarily because, normally, there is a real prospect of a dispute in relation to personal injury claims but, normally, no real prospect of a dispute about flight cancellation and delay claims. And this in turn is because there is always likely to be some negotiation required in relation to the quantum of personal injury claims whereas the quantum in flight cancellation and delay claims is fixed” (paragraph 89, judgment).
However, Lord Burrows did not accept that the lien was limited in this way.
“…assuming that the solicitor is acting for a potential claimant rather than a potential defendant, the appropriate test for a solicitor’s equitable lien is whether a solicitor provides services (within the scope of the retainer with its client) in relation to the making of a client’s claim (with or without legal proceedings) which significantly contribute to the successful recovery of a fund by the client” (paragraph 88, judgment).
Lord Burrows continued that before providing legal services or developing a business model, the solicitor needed to know whether the firm would be entitled to an equitable lien in the event of a successful outcome. The solicitor would have no way of knowing in advance whether a claim would be disputed. It followed that: “A solicitor’s equitable lien should not turn on a test that imports considerable practical uncertainty by requiring a solicitor to speculate as to whether it is unlikely that there will be any dispute about the relevant claim……More generally, the very reason a person may engage a solicitor to make a claim (including what may appear to be a routine claim) is to avoid a dispute arising. That is, having a solicitor involved in putting forward one’s claim indicates to the other side that the claimant is serious in pursuing the claim” (paragraph 90, judgment).
Given, too, that the pursuit of claims in this way on credit provided Bott’s clients with access to justice, the majority were satisfied that the firm’s retainer was sufficient to attract the solicitors’ equitable lien, regardless of whether there was any actual dispute at the time the solicitors had been retained. Thus, in monetary terms, Ryanair must now reimburse to Bott its proper charges from those clients who have received compensation but whose costs have not been paid to the firm. Third and deciding Round to Bott and co!
Such an outcome is one which would have pleased Lord Denning. It shows that the law has not stood still. Solicitors who wish to assert a lien over the fruits of their industry in priority to other potential creditors, need not issue proceedings in order to do so, nor must the prospective defendant first have had to indicate whether the claim is disputed. Put another way, in the Bott case, the lien will arise before Ryanair is required to disclose its hand by either admitting or rejecting the claim. More generally, consultation with a solicitor who is providing legal services with the intention of avoiding a dispute, or of establishing whether there is a dispute, will be enough to get the lien ball rolling. Ploys to cut out the middle man so as to avoid paying solicitors their fees, should in future therefore become so problematic as to place them on course for ultimate extinction.
