Three legal devices protect a solicitor’s unpaid fees

The first is the old common law ‘retaining’ lien, or ‘possessory lien’. An unpaid solicitor may retain his client’s chattels or documents until he is paid. Although it is not discussed here, this footnote explains it.¹ A ‘retaining lien’ arises where a solicitor, for the purposes of his work, is in possession of his client’s documents or chattels. It is merely a possessory right. If his costs are not paid, the solicitor may retain his client’s chattels or documents until he is paid: [See Anon (1685) Comb 43; Anon (1701) 12 Mod Rep $54; Ex p Nesbitt (1805) 2 Sch & Lef 279; Stevenson v Blakelock (1813) 1 M & S 535; Warburton v Edge (1839) 9 Sim 508].  That right is retained even if the client discharges him: See the Court of Appeal decision in Gamlen Chemical Co (UK) Ltd v. Rochem Ltd and others [1980] 1 All ER 1049 at p. 1058 per Lord Goff and at p. 1058 per Templeman LJ. The possessory lien is lost if the solicitor discharges the client: Robins v. Goldingham.  If the exercise of the retaining lien is prejudicial to the client, the court may order the chattels to be released to the client upon payment being made to court: Richards v Platel (1841) 5 Jur 834. The common law retaining lien suffers from a deficiency. If the solicitor’s fee had not reached him, the retaining lien was of no use. The second device, the ‘statutory charge’, is of recent vintage. It merely secures a solicitor’s fees in dispute resolution cases. Its protective architecture does not cover all areas of a solicitor’s work.²See sec. 73 of the UK Solicitors Act 1974 and its mirror provision in Malaysia, in sec. 123 of the Legal Profession Act 1974. It will be discussed later.

The solicitor’s equitable lien

The third, which is discussed here in some depth, is the solicitor’s equitable lien. It is as old as the ‘retaining’ lien. There are cases going back over three centuries that show it to be a judge-made device.³ Farewell v Coker (1728) 24 ER 814; Turwin v Gibson,(1749) 26 E.R. 112, (1749) 3 ATK7 21; Mitchell v. Oldfield (1791) 100 ER 929; Ex P. Bryant (1815), 1 Madd 49, 56 ER 19, 43 Digest (Repl) 303, 3178. See Gavin Edmondson, supra, at paragraph [36] It is designed to fill the inadequacies of the retaining lien.

If a solicitor has provided services,⁴ Per Lord Burrows in Bott & Co, supra, at p. 498, paragraph [88] the court will recognise, enforce ⁵ Per Lords Briggs, in Gavin Edmondson, supra, at p. 277, paragraph 3 and protect ⁶ Per Sir Steven Sedly at the Court of Appeal in Khans Solicitors [2014] 1 WLR 1185 at paragraph [33] his interest over the fruits of his exertions. The equity binds anyone who has had notice of the solicitor’s interest, or had contrived to deprive him of it.⁷ Lord Briggs in the Supreme Court in Gavin Edmondson said that for equity to intervene “[There] must be something sufficiently affecting the conscience of the payer, either in the form of collusion to cheat the solicitor or notice or, knowledge of the solicitor’s claim against, or interest in, the fund”: see paragraph [37]

Initially, if a client was likely to deprive the solicitor of his costs, all a solicitor could do was to ask the court to intervene.⁸ See Lord Scarman J (as he then was) in Re Fuld (deceased) [1967] 2 All ER 649, at p. 653 Recently, this right has been recognised as a proprietary interest.⁹ See Bott & Co at p. 508 paragraph [131]   And so its protective mantle is no longer limited to the fruits of litigation.¹⁰ Lord Burrows, in Bott & Co, supra, at p. 497, paragraph [85] . So long as the solicitors’ exertions have resulted in some benefit to the client, or has prevented any prejudice befalling him, the equity would still apply.¹¹ Mitchell v. Oldfield (1791) 100 E.R. 929. See also Bott & Co, supra, at paragraphs [104] and [128]; as well as Gavin Edmondson, supra, at paragraphs [9] , [36] and [37] .  The court has an equitable jurisdiction to intervene and protect the solicitor’s costs if the principle is successfully invoked.¹² Mitchell v. Oldfield (1791) 100 ER 929; Bott & Co, supra, at paragraphs [104] and [128] ; and Gavin Edmondson, supra, at paragraphs [9], [36] and [37] . So long as the equity arises, the courts can – and when called upon to do so – do intervene.¹³ Supra, Mitchell v Oldfield, supra   If there are competing equities, e.g., as between the parties and that of the solicitor, the solicitor’s lien would prevail.¹⁴ Ex Parte Rhodes, Thomas, Castle (1809) 33 ER 858, at p. 859, per Eldon LC, relying on Ex parte Bryant, 1 Madd. 49. Beames on Costs, 331,2

Modern authorities continue to affirm these old principles. 

Development over three centuries

Although the principle developed incrementally over the centuries, it was Scarman J in Re Fuld [1967] who grasped the disparate legal strands and spliced them into the modern principle.¹⁵ In re Fuld, decd (No 4), In the Estate of [1968] P 727; [1967] 3 WLR 314; [1967] 2 All ER 649 The doctrine was clarified by three recent decisions of the Supreme Court of the United Kingdom: Gavin Edmondson Solicitors Ltd v Haven Insurance Co Ltd [2018], Bott & Co, Solicitors v. Ryanair DAC [2022]  and Re Peak Hotels and Resorts Ltd (in Liquidation) Candey Ltd v Crumpler and Another [2023].¹⁶Gavin Edmondson Solicitors Ltd v Haven Insurance Co Ltd [2018] UKSC 21, Bott & Co, Solicitors v. Ryanair DAC [2022] 2 All ER (Comm) 475, and In Re Peak Hotels and Resorts Ltd (in Liquidation) Candey Ltd v Crumpler and Another [2023] 1 WLR 342, or Candey Ltd v Crumpler and another (as joint liquidators of Peak Hotels and Resorts Ltd (in liquidation) [2022] UKSC 35, [2023] 2 All ER 527, [2023] 1 WLR 342, [2023] Bus LR 191, [2022] All ER (D) 67 (Dec).

Expansion of the principle

Throughout the period of its development, the nature of the equity itself has been called by different names: a ‘lien’,¹⁷ Ibid, at paragraph [154] an ‘equity’,¹⁸ Sir John Romilly MR in Haymes v Cooper(1864) 33 Beav 431 at 433, (1864) 55 ER 435 at 436. a ‘security’ or indeed, ‘protection’.¹⁹ Per Lord Hanworth MR in Mason v Mason and Cottrell ([1933] P 199 at p 214; [1933] All ER Rep 859 at p. 868.

As stated earlier, the principle itself began as the solicitor’s right to ask the court for the protection of his fees.²⁰ Barker v St Quintin (1844) 12 M & W 441 at p 451, per Parke B. See also Mercer v. Graves (1872), I.R. 7 Q.B. 499 at p. 503 per Cockburn CJ

By 2018, this concept had been expanded into a full-blown equitable charge.²¹ In Gavin Edmondson Solicitors Ltd v Haven Insurance Company Ltd Overview [2018] , the UK Supreme Court continued to reaffirm the ‘security’ principle into a ‘charge’ [2018] UKSC 21, [2018] 3 All ER 273. In the majority speech, Lord Briggs said that the case of Barker v St Quintin, ‘“… shows, better than any other, that the equitable lien operates by way of security or charge  The equitable lien was the solicitor’s ‘property right’.²² See Lady Arden  in Bott & Co, supra, at paragraph [131] . Any interference with such a right would lead to a ‘personal remedy’ against the paying party.

The animating principle behind a solicitor’s equitable lien

There are several reasons behind its development. In the main, it was to promote access to justice for potential claimants, especially those who had no means to pay lawyers upfront.²³ See Bott & Co, supra, at paragraph [163] . Modern courts are under enormous pressure to resolve disputes. Protecting solicitors’ equitable interest allows most disputes to be resolved out of court. In this way, the judiciary’s burden is eased.²⁴ Ibid, paragraph [123]. See Ormerod v Tate, where Lord Kenyon had “recognised that there was a public interest in arbitration when he held in Ormerod v Tate (1801) 1 East 464, (1801) 102 ER 179 that “the solicitor’s equitable lien was available where, …, the parties agreed to go to arbitration”.

Several preconditional triggers

Common law courts require the existence of several preconditions before the equitable principle could be invoked. For one, the solicitor must have provided some form of legal service.²⁵Gavin Edmondson Solicitors Ltd v Haven Insurance Co Ltd [2018] 3 All ER 273 at paragraphs [35] and [37] . From this some recovery must have resulted.²⁶ Khans Solicitors (a firm) v Chifuntwe [2013] 4 All ER 367 at paragraph [33] . The recovered amount has been called a ‘fund in sight.’ ²⁷ Mason v Mason and Cottrell [1933] All ER Rep at p.868; Re Fuld (decd) [1967] 2 All ER 649 at 654. Although the solicitor’s exertions were required to have made a ‘significant contribution’²⁸ Ibid, at paragraphs [82] and [83]. to the ‘fund in sight’, the Supreme Court accepted that “the solicitors’ work sets a low threshold. The work does not have to pass any test of skill or sophistication, nor need it be the sole or effective cause of the client’s recovery. It is no objection that the carrying out of the “work” may be largely automated, with minimal human intervention”.²⁹See Bott & Co, supra, at paragraph [154], per Lord Briggs who spoke for the majority

Operational aspects

However, it is necessary to examine how the principle works in practice.

When does the lien arise?

First, the question must “be decided at the time when the solicitors agree to act for the client, provided of course that some recovery ensues, to which the lien can attach.”³⁰ Per Lord Briggs in the Supreme Court in Gavin Edmondson at paragraph [37]. See also Bott & Co Solicitors Ltd v Ryanair DAC [2022] 4 All ER 255 at paragraphs [25] , [26] , [133] , [152] , [160] and [161] .

Second, for equity to intervene, “there must be something affecting the [paying party’s] conscience, either in the form of collusion to cheat the solicitor, or if he had an awareness of the solicitor’s claim against, or interest in, the fund”.³¹Ibid, paragraphs [125] and [133] .

Third, the solicitor’s equitable right over his fees comes into being when the fruits of his work are identified.³² Bott & Co, supra, per Lady Arden, at paragraphs [130] to [132].

To what part of the ‘fund’ does the equitable lien attach? It attaches to costs ‘properly incurred,’ ³³ Gavin Edmondson, supra. and to the solicitor’s unpaid charges.³⁴ ibid

How much could the solicitor claim? It is not the full amount of the fruits of the solicitor’s labour, but merely the amount of his proper costs.³⁵See the speech of Lady Arden in Bott & Co, supra, at paragraph [131]

What should be the nature of the client’s dispute or claim?

There is no necessity for the existence of any identified or anticipated ‘dispute’ between the client and the paying party.³⁶ Bott & Co, supra at paragraphs [88] , [117] , and [140].

For the solicitor to be entitled to relief, he need not have issued proceedings against the paying party.³⁷ Gavin Edmondson, supra at paragraphs [35], [86] and [88]. His duties need not even have involved contentious or non-contentious business.³⁸Ibid, paragraph [46]

Uncertainties over the costs

That there exist uncertainties over the solicitor’s costs, in and of themselves, do not matter. Any issue that his costs have not been finally determined,³⁹ Bott & Co, supra: see Lady Arden at paragraph [130] or that he is unable to ascertain, ahead of time, the quantum of his costs – do not hinder the equity from being established.⁴⁰ Fuld, decd (No 4), In the Estate of [1967] 2 All ER 649. In those circumstances, “the court’s order will protect him for the amount reasonably claimed until final determination takes place”.⁴¹ Bott & Co, supra: see Lady Arden at paragraph [130] .

Even if the ‘fund’ no longer exists,⁴² Ibid at paragraph [131] or if the litigation had resulted in a loss, the equity still arises. In such a case, the solicitor can recover his proper costs by instituting a personal action against the paying party.⁴³ Ibid, paragraph [131] .

The consistent view has always been that equity binds the entire fund in sight, that is, until the solicitor is paid. Thus, the fund in sight functions as ‘security’ for the solicitor’s unpaid fees.⁴⁴ The minority judgement of Lord Briggs and Lady Rose in Bott & Co, cite Lord Briggs in Gavin Edmondson. They state, at paragraph [19] in Bott & Co, that “Lord Briggs cited, at paras [33] and [34] (in Gavin Edmondson), early cases showing that the aim of promoting access to justice underlay the development of the lien. That aim was facilitated by giving the solicitor a security interest in the fruits of litigation. As it was put by Sir John Romilly MR in Haymes v Cooper (1864) 33 Beav 431 at 433, (1864) 55 ER 435 at 436, a solicitor

What happens if the court explicitly orders ‘costs be paid directly to the client’? That also does not prejudice the solicitor’s invocation of the equitable charge.⁴⁵Re  Fuld, decd (No 4), In the Estate of [1967] 2 All ER 649; Ex p Bryant (1815), 1 Madd at p 52  

The paying party bears the risk of double payment

Thus, if the paying party knows of the solicitor’s work, but effects payments of his costs directly to the successful party, it risks double payments.⁴⁶ Gavin Edmondson, supra at paragraph [36] . That is the inevitable effect of the equitable lien.

Are there limits to this principle?

Costs of ‘transactional work’ are wholly excluded from the protective mantle of the equity.⁴⁷ Bott & Co, supra at paragraphs [125] , [126] and [154] . This may be because in the UK, fees for transactional services are protected by statute.⁴⁸ Section 58 of the Solicitors Act 1974 (United Kingdom); Section 115 of the Legal Profession Act 1976 (Malaysia).

The equitable lien can be waived

The Supreme Court in Candey Ltd v Crumpler and Another [2023] said that the lien could be contractually waived,⁴⁹ Candey Ltd v Crumpler and Another (as joint liquidators of Peak Hotels and Resorts Ltd (in liquidation) [2022] All ER (D) 67 (Dec) but whether a waiver in fact operated would depend on the intention of the parties.⁵⁰ Ibid, p. 538 paragraph 43 Such an intention could be inferred by taking into account all the circumstances of the case.⁵¹ Ibid, p. 538. The court said, at paragraph [43] : “There is a measure of agreement between counsel that whether a solicitor’s equitable lien has been waived depends on the intention of the parties. If they have addressed the issue directly, their intention may be apparent from the words they have used. The more difficult cases are likely to
be those, such as the present, in which an intention to waive the lien is sought
to be inferred. Here the question will be whether an intention to waive the lien can be inferred taking into account all of the circumstances of the case”. The Court cited Re Taylor, Stileman & Underwood, ex p Payne Collier [1891] 1 Ch 590 at 597, [1891–4] All ER Rep 953 at 955 per Lindley LJ; Bank of Africa v Salisbury Gold Mining Co [1892] AC 281 at 284–285 per Lord Watson; Re Morris [1908] 1 KB 473 at 479–480 per Buckley LJ There the solicitor, Candey, had entered into a ‘fixed fee agreement’. The clients had executed a ‘deed of charge’ as security for outstanding fees. In the deed of security, the solicitors had not explicitly stated that they intended to retain any equitable lien.⁵² Ibid, parargraph 80. When the agreement and the deed were properly construed, it was said that the lien had been displaced by the waiver.

Contrast the equitable lien with a solicitor’s statutory charge

The statutory charge is discussed here for completion. It was the ‘second device’ mentioned earlier in the introduction. Historically, the mantle of the equitable lien did not protect solicitors’ fees in two situations.

Firstly, a solicitor’s equitable lien did not apply to real property which the solicitor was instrumental in recovering for the client.⁵³ Lord Legatt and Lady Rose in Bott & Co at p. 483, paragraph [23] quote the House of 
Lords decision in Shaw v Neale (1858) 6 HL Cas 581, (1858) 10 ER 1422.

The second was protection of fees in litigation cases. This lacuna was filled ⁵⁴ Bott & Co, supra, paragraph [23] by enacting section 73 of the United Kingdom’s Solicitors’ Act 1974.⁵⁵ Section 73(1)(a) of the UK Act states: ‘73.Charging orders: Subsec.(1). Subject to subsection (2), any court in which a solicitor has been employed to prosecute or defend any suit, matter or proceedings may at any time — (a). declare the solicitor entitled to a charge on any property recovered or preserved through his instrumentality for his assessed costs in relation to that suit, matter or proceeding; and (b).make such orders for the assessment of those costs and for raising money to pay or for paying them out of the property recovered or preserved as the court thinks fit; and all conveyances and acts done to defeat, or operating to defeat, that charge shall, except in the case of a conveyance to a bona fide purchaser for value without notice, be void as against the solicitor…’

Sec. 73 declares that where a solicitor acts for a client in a litigations case, he has a ‘charge’ over ‘any property recovered or preserved through his instrumentality for his assessed costs’ ⁵⁶ See sec.73(1)(a), in the UK Solicitors Act 1974

The equitable lien and the statutory charging order are thus parallel provisions.⁵⁷ Bott & Co, supra at paragraphs [130] to [132].

As far as solicitors’ statutory charges go, the words in sec. 123 of the Malaysian Legal Profession Act 1976 are identical to the UK sec. 73.⁵⁸ Section 123 of Legal Profession Act 1976 (Malaysia).

However, the statutory charge in Malaysia is in far broader terms; and consequently, the threshold is lower in Malaysia.⁵⁹The definition of ‘client’ in the UK provision is in sec. 87. In Malaysia, the identical provision is in sec. 3 of the LPA 1976

The statutory charge in the UK and Malaysia covers both contentious and non-contentious work; yet the definition of ‘contentious business’ in the UK is far more restrictive.⁶⁰ Section 87 of the Solicitors Act 1974 (United Kingdom); Section 3 of the Legal Profession Act 1976 (Malaysia). For example, the fee of UK solicitors for work carried out before tribunals remain unprotected.⁶¹ Pg. 49 (no citation).

The charge protects non-contentious work: this is usually probate work.⁶² Section 128 of Senior Courts Act 1981 (United Kingdom); Section 3 of the Legal Profession Act 1976 (Malaysia)

The UK Supreme Court left two questions open

The Supreme Court in Bott & Co, which adopted, applied and explained its own decision in Gavin Edmondson, however, left two questions open.

The first was whether the equitable lien protects other professionals.⁶³ Pg. 52 (no citation) This may have been left open as there could have been special statutes that deal with this question.

The second question was whether the solicitor’s costs, to be recoverable, ought to be ‘reasonable’.⁶⁴ Bott & Co, supra The Supreme Court may have avoided any comment for possibly two reasons.

Where a solicitor has delivered his bill to his client, the contents of his bill are presumed to be correct unless otherwise proven by the client.⁶⁵In the UK, the relevant section is sec. 69(2E) of the Solicitors Act 1974. It states: “Where a bill is proved to have been delivered in compliance with the requirements of subsections (2A) and (2C), it is not necessary in the first instance for the solicitor to prove the contents of the bill and it is to be presumed, until the contrary is shown, to be a bill bona fide complying with this Act.” In Malaysia, sec. 124(2), of the Legal Profession Act 1976 is in identical terms.

Thirdly, under the rules of court, clients can ask the court to tax their own solicitors’ bills. In such proceedings, the solicitors’ bills are ‘conclusively presumed to have been reasonably incurred.’ If the client contests the bills, the court has the power to ‘tax down’ bills which are of ‘unreasonable’ quanta.⁶⁶

In the UK, this is provided in Rule 46.9 of the Civil Procedure Rules. Rule 46.9(2) of the Civil Procedure Rules states: “Section 74(3) of the Solicitors Act 1974 applies unless the solicitor and client have entered into a written agreement which expressly permits payment to the solicitor of an amount of costs greater than that which the client could have recovered from another party to the proceedings.” Rule 46.9 (3) states: “Subject to paragraph (2), costs are to be assessed on the indemnity basis but are to be presumed – (a) to have been reasonably incurred if they were incurred with the express or implied approval of the client; (b) to be reasonable in amount if their amount was expressly or impliedly approved by the client; (c) to have been unreasonably incurred if – (i) they are of an unusual nature or amount; and (ii) the solicitor did not tell the client that as a result the costs might not be recovered from the other party.” Rule 46(4) states: “Where the court is considering a percentage increase on the application of the client, the court will have regard to all the relevant factors as they reasonably appeared to the solicitor or counsel when the conditional fee agreement was entered into or varied.” In Malaysia an identical rule appears in Order 59 Rule 17(2) and (3) of the Rules of Court 2012. Order 59 r.17(3), states: “For the purpose of paragraph (1), all costs incurred with the express or implied approval of the client shall be conclusively presumed to have been reasonably incurred and, where the amount thereof has been expressly or impliedly approved by the client, to have been reasonable in amount.”

Ripples in Malaysia:  AmGeneral Insurance Bhd v Sa’ Amran a/l Atan & Ors

In 2022, the Federal Court heard eight appeals together in the now famous Sa’Amran case.⁶⁷ 05 August 2022, in AmGeneral Insurance Bhd v Sa’ Amran a/l Atan & Ors & 8 other appeals, [2022] 5 MLJ 825, [2022] 8 CLJ 175. It heard arguments on 23 questions of law on the liability of motor insurers’ to pay victims of motor vehicular accidents.  

At the end of the appeal, the court awarded costs to the successful appellants. It did not specify how or when or to whom these costs ought to be paid. ⁶⁸Counsel raised no objections. It has always been the practice in Malaysia for the unsuccessful party to pay such costs to the solicitors of the successful parties.

One unsuccessful insurer intimated it would pay the costs directly to the successful parties, and not to their solicitors. The solicitors for the successful parties moved the Federal Court for orders that the insurers pay the costs directly to the solicitors.

In allowing the applications, the Federal Court said: “…[Payments] to solicitors’ accounts is a practice in the industry,” even though the words in the order were that “the costs were to be paid to the respondent”. ⁶⁹ The court further said, “We allowed all five applications based on Rule 137 of the Rules of the Federal Court Rules 1995 and Order 20 rule 11 of the Rules of Court 2012.”  See also O.59 r.16 of the Rules of Court 2012

It seems to me that the Federal Court could have come to the same conclusion had it applied the doctrine of the equitable lien.

Parting thoughts

The judge-made creature of the equitable lien, by whatever name it may have been called, though of substantial antiquity, is very much alive.

It has continued to protect the fruits of a solicitor’s labour, so that his unpaid fees are secured.

Despite the recent flurry of developments, it needs further refinement. 

[The author thanks Mr Ganavathy Naidu, Ms KN Geetha, Mr BM Thina, Miss TP Vaani, Miss JN Lheela and Miss Lydia Jaynthi for their assistance. ]