Pay Up, Or Else… Disclosure Obligations v Solicitors’ Liens

Ellis v John Hodge Solicitors (a firm) [2022] EWHC 2284 (Comm) concerned a novel argument against disclosure.  The Defendant solicitors had formerly been instructed by the Claimant in personal injury litigation.  In later professional negligence proceedings against the Defendant, the Claimant sought disclosure of his client file from the personal injury claim.  It was common ground that file was disclosable under CPR PD51U, being highly relevant to the Claimant’s professional negligence claim and Defendant’s counterclaim for unpaid fees.  Nevertheless, the Defendant declined disclosure on the basis it was exercising its common law lien for unpaid fees.  Accordingly, the issue was not whether the file’s specific disclosure should be ordered, but whether a solicitor’s common law rights to a lien in respect of costs can restrict CPR disclosure obligations.  Read our case comment to find out what justified disclosure, without the usual “Robins” undertakings.

Background

This disclosure application arose in a professional negligence claim brought against a firm of personal injury solicitors.  The Claimant argued that during the personal injury matter (the “Underlying Proceedings”), the Defendant failed to advise on the consequences of refusing various offers to settle.  In its defence, the Defendant asserted that the Claimant was fully and properly warned of Underlying Proceedings’ risks and the consequences of failing to beat offers. It further counterclaimed for unpaid fees.

It was common ground that the client file relating to the Underlying Proceedings was disclosable under PD51U (now PD57AD): it contained key documents on which the Defendant relied, both for its counterclaim and its defence that the Claimant’s particulars were misconceived.  Disclosure was therefore necessary for the Claimant to know whether his pleaded case could be maintained, and to plead his defence to the Counterclaim.

The Defendant refused to provide initial disclosure of the file, asserting it was exercising a lien over it for unpaid fees.  Nevertheless, given its PD51U obligations, the Defendant offered to disclose the file to the Claimant’s solicitors upon an undertaking not to disclose it to the Claimant and to return it after perusal, following Robins v Goldingham [1872] LR 13 Eq. 440.

The Issues and the Law

The issues before HHJ Pearce were accordingly (i) whether a solicitor’s common law right to a lien in respect of costs could restrict disclosure under the CPR and, (ii) if so, whether the Judge ought exercise the equitable discretion to restrict retention of the file under the lien.

HHJ Pearce approved McBride J’s summary of the law in Donaghy v JJ Haughey Solicitors [2019] NI Ch 1, cited at [10]:

“- Subject to any agreement to the contrary, a solicitor has a common law right to exercise a general lien in respect of his costs on any property belonging to his client which properly comes into the solicitor’s possession in that relationship.

– Solicitors, as officers of the court, are subject to the court’s supervisory jurisdiction and the court can therefore interfere with the enforcement of the common law lien on equitable principles.

– Where the solicitor has terminated the retainer, the court will normally make an order obliging the original solicitor to hand over the file to the new solicitor against an undertaking by the new solicitor to preserve the original solicitor’s lien, known as the “Robins” undertaking.

– Where the client has terminated the retainer, this is a weighty factor against interfering with the exercise of the lien, but the court retains the power to do so on equitable principles.

– When invited to interfere with the exercise of the lien, the court should make the order which best serves the interest of justice, in particular weighing (i) the risk that the client would be deprived of material relevant to the conduct of the case if the lien is sustained; against (ii) the principle that litigation should be conducted with due regard to the interest of officers of the court, who should not be left without payment for what is justly due to them.

– In determining the appropriate order, the court should have regard to all of the circumstances of the case.”

The Decision

The Judge concluded that although the Court was able to modify CPR 51U disclosure obligations pursuant to a solicitors’ lien, doing so on the present facts would be inappropriate. Disclosure – without Robins undertakings – was therefore ordered.

No authority was cited in which a lien was asserted in proceedings separate to those for which a case file had been initially created.  Here, the client file (over which the lien was asserted) related to the Underlying Proceedings, but was central to both the Claimant’s professional negligence claim and the Defendant’s counterclaim for unpaid fees.  As such, the Claimant could not fairly conduct its claim without sight of the file, and the Defendant’s counterclaim could not be properly tried without its disclosure.

HHJ Pearce’s own research nonetheless returned an analogous case concerning an accountant’s lien under RSC Ord. 24, r.13(1): Woodworth v Conroy [1976] QB 884. Lawton LJ recognised therein that “The right of a solicitor to withhold papers from inspection by his client, even in litigation between them, was recognised as long ago as 1822 […] In later cases the limitations upon this right have been discussed”.  He proceeded to hold that where cases advanced in good faith put the very contents of a client file in issue (particularly in claims for unpaid fees and/or negligence):

“it would be impossible to try the issues raised without evidence being led as to what work had been done and how it was done. […] Unless there is some other element in the case [such as a point being taken solely to trigger disclosure], inspection of the files would be necessary in order to dispose fairly of these issues.”

The Judge further considered that the proposed Robins undertakings gave merely illusory assistance when balancing the Parties’ interests.  Their effect was that much of the lien’s utility would be lost.  The Claimant would need to inspect the documents fully to deal with the issues, which was no different to the Claimant having possession of the file.  Further, the CPR 31.22 restrictions on the subsequent use of disclosed material broadly mirrored the remaining undertakings.  Although fewer issues arose in the context of the counterclaim – whether the Defendant was entitled to fees was largely a legal question – the risk of prejudice remained such that maintaining the lien was inappropriate.

Accordingly, the Judge ordered disclosure of the file without any undertaking by the Claimant’s solicitors.

Comment

Ellis provides practitioners with useful – if merely persuasive – guidance on the interaction of the law on disclosure and solicitors liens. Without hearing full argument on the case, HHJ Pearce concluded obiter that Woodworth remained good law, that it was applicable to the CPR, and that the Court possesses the “power to modify duties of disclosure that would otherwise arise under [PD 57AD].”

He therefore concluded – against a “striking” absence of authority – that the basic rule in Ismail v Butler [1996] 2 All ER 506 (solicitors have a general right to “embarrass” clients by withholding papers to force payment) is capable of overcoming the CPR disclosure provisions.

Nonetheless, given the criteria for that discretion’s exercise (see [10] as above), it is hard to conceive of a factual matrix (in solicitors’ negligence claims, at least) in which the Court will uphold a lien.  Nearly all claims concern the legitimacy of fees, the steps taken in the litigation and any advice or other statements given, all of which will likely be evidenced by a client file.  Perhaps the most persuasive points supporting a lien against disclosure are the circumstances of a client’s termination of the underlying retainer, and the bona fides of the later pleaded issues said to trigger disclosure.  Given the protections of CPR 31.22, it is also hard to see when disclosure subject to Robins undertakings would ever strike a more attractive balance between the parties’ interests than would simple disclosure.

The case is also a reminder of the Court’s own powers of legal research, and the uncertainties flowing from the absence of argument on central authorities.  As an explanation for the dearth of authority, it was submitted that parties usually resolve the interaction of liens and disclosure obligations in pre-action correspondence.  Indeed, parties are generally well advised to address issues of disclosure promptly, and to prepare claims in full light of all relevant documents.  While it remains to be seen if the Claimant’s pleading without sight of the case file proves costly, the largely unargued, obiter nature of the judgment provides limited certainty for the outcome of any such pre-action disclosure applications, if contested.

Article by Rob Hammond.