So, Whose Money is It, Then? Rival Claims to Property under CPR Part 86: Stephenson Harwood LLP v Medien Patentverwaltung AG [2020] EWCA Civ 1743

05 Mar 2021

Stephenson Harwood LLP v Medien Patentverwaltung AG [2020] EWCA Civ 1743

17 December 2020


The Claimant stakeholder (‘SH’) were the solicitors for the First Defendant (‘MPV’) in patent proceedings brought against various parties in several jurisdictions.  MPV was assisted in these proceedings by the Second Defendant (‘Mr Kagan’) a practising US attorney who also had a consultancy business called Kagan Consultants.  MPV’s patent claims before the English courts were financed by a litigation funding company, which paid SH’s fees, disbursements, and a monthly fee of USD 5,000 to either Kagan Consultants or to Mr Kagan personally.

In late 2018, the patent proceedings settled for a global costs-inclusive payment of US$6.5m which was to be paid to SH. In November 2018, prior to the receipt of the settlement monies, SH was notified of the existence of a claim by Mr Kagan against MPV asserting entitlement to a success fee, estimated to be around US$570,000 to which Mr Kagan further asserted a proprietary claim when received by SH as part of the settlement monies.  MPV denied that it had any contractual relationship with Mr Kagan personally, asserting its relationship was with Kagan Consulting to whom nothing further was due.

On 8 January 2019 SH received a tranche of the settlement monies on behalf of MPV and, given the competing claims, set aside and retained the sum of $570,000 in its client account (‘the Monies’).  Both MPV and Mr Kagan subsequently demanded SH pay the Monies to them and threatened legal action if SH did not do so. SH therefore brought the present Part 86 proceedings by a Claim Form issued on 30 January 2019, naming the rival claimants to the Monies as the defendants. Their acknowledgements of service were filed on 14 February 2019.

MPV did not at this point dispute the jurisdiction of the court by checking the relevant box in the acknowledgment of service form, but indicated it intended to contest the claim and requested the court direct the Monies to it along with interest.  It did not intimate it might challenge the jurisdiction until the defendants exchanged witness statements on 27 February 2019.  MPV, through a statement made by its CEO, denied that Mr Kagan was entitled to a success fee and that there was any agreement between MPV and Kagan Consultants subject to the jurisdiction of the English courts.  Mr Kagan, on the other hand, set out in his witness statement the reasons why he considered he had a beneficial entitlement to the Monies; and contended there was an express trust and/or a constructive trust and/or that an equitable lien should be imposed in his favour.

By a letter dated 21 March 2019, MPV’s solicitors wrote to the solicitors for Mr Kagan, expressing the view that MPV did not consider it “appropriate for the Master to determine the underlying claim pursued by Mr Kagan by way of a trial within the stakeholder claim,” and subsequently clarified that they considered Switzerland the appropriate jurisdiction for the trial of Mr Kagan’s contractual claim regarding the disputed terms of his retainer.  MPV did not, however, make any Part 11 application challenging the court’s jurisdiction to hear SH’s stakeholder claim, but served a second witness statement rebutting Mr Kagan’s contentions regarding the arrangements for the payment of his fees.

Before the Deputy Master and the Deputy Judge

In his ex tempore judgment the Deputy Master held that CPR Part 11 applied to the stakeholder application and that, as MPV had failed to make a Part 11 application disputing the court’s jurisdiction, it was to treated as having accepted that the court had jurisdiction to try the claim.

Permission for a first appeal was granted by Morgan J, pending the outcome of which proceedings were stayed.

The appeal came before Mr Lenon QQ (‘the Deputy Judge’) who determined two relevant issues as follows:

  • Does CPR Part 11 apply to a stakeholder application, and, if so, the effect of MPV’s failure to make a Part 11 application. The Deputy Judge concluded that Part 11 did apply, and that MPV’s failure to make a Part 11 application meant that it was treated pursuant to CPR 11(5) as having accepted the jurisdiction of the court to determine the stakeholder application. This included the making of any directions and the determination of any issues arising in the stakeholder claim as to whether Mr Kagan or MPV is entitled to the Monies.
  • whether MPV had, by its conduct, submitted to the jurisdiction of the Court to determine the issues raised by Mr Kagan in any event. The Deputy Judge concluded that MPV had, by the steps it had taken in the proceedings, submitted to the jurisdiction.

MPV appealed against both findings.

The Court of Appeal

Floyd LJ, with whom Popplewell and Henderson LJJ agreed, summarised the nature of a Part 86 stakeholder claim at [41]-[43] as follows:

A stakeholder claim is a claim by a party facing rival claims to some form of property which asks the court to decide which of the rival claimants has the better claim to the property. The purpose of bringing the claim is so that the stakeholder may safely decide how to dispose of the property. The court has the power to give a direction as to how the property is to be disposed of which binds the parties to the proceedings. If the stakeholder disposes of the property in accordance with the directions of the court, it can do so without incurring liability to one or other of the rival claimants. In the normal case, the court will decide that the stakeholder is not liable to one of the claimants, but liable to the other.

This short characterisation of the nature of stakeholder relief shows that it is analogous in some respects to a claim for a declaration. The court’s direction at the end of stakeholder proceedings is comparable to a declaration of the stakeholder’s non-liability to one of the rival claimants and of liability to the other in respect of the claims to the property. In that sense there is a substantive aspect to the claim.

Although a stakeholder claim may give rise to an issue being stated between the rival claimants, a rival claimant does not bring a claim against the other. The issue, if directed, arises as a consequence of the fact that the stakeholder claim is brought to determine the rival claims against the stakeholder.

MPV’s case on appeal, therefore, had been wrong in at least two respects.  First, MPV had been wrong to characterise SH’s stakeholder claim as a purely procedural application for directions for the trial of an issue, which raised questions of jurisdiction only after the issues for trial had been identified.   Second, contrary to MPV’s assertion, SH’s stakeholder claim, naming MPV and Mr Kagan as defendants, had not created a claim by Mr Kagan against MPV to which SH’s own claim was merely a procedural preliminary.  Although the issues in a direct claim by Mr Kagan against MPV might, or indeed would, overlap with the issues arising in SH’s stakeholder claim, these were material in the stakeholder claim only insofar as necessary for the court to achieve the objective of determining the rival claims to the Monies.

Thus, SH’s claim sought a binding direction as to how the Monies should be disposed of, which would require the court to determine certain substantive issues as between MPV and Mr Kagan.  It was not, therefore, open to MPV to accept jurisdiction for the purpose of SH’s claim, but challenge jurisdiction for the purpose of determining the issues arising between it and Mr Kagan.  In failing to challenge the jurisdiction by issuing a Part 11 application in SH’s stakeholder claim, MPV was deemed to have submitted to the jurisdiction for the purpose of deciding whether it were MPV or Mr Kagan who was entitled to the Monies.  The first ground of appeal therefore was dismissed.

Although this was sufficient to dispose of the case, Floyd LJ further considered that, in any event, the Deputy Judge had been correct to hold that MPV had submitted to the jurisdiction in fact.  MPV had not made clear at all material times that it did not accept the jurisdiction of the courts to give a final and binding direction as to how the Monies should be disbursed.  Rather, MPV had indicated on its acknowledgment of service it required the court to order payment of the Monies to it with interest, and continued to engage actively in the substantive aspects of the proceedings.


Although a Part 86 application shares many similarities with a declaration, this decision makes clear both (i) that such claims have a substantive aspect that binds the rival defendants to the property in respect of which the stakeholder claim is made; and (ii) CPR Part 11 applies to the claim in its entirety.  Should, therefore, a defendant to a claim wish to challenge the jurisdiction of the English court to determine the substance of its asserted entitlement to the property in question, they should take care to assert such challenge to the Part 86 stakeholder claim itself and engage in proceedings only so far as necessary to challenge jurisdiction.


Rajiv Bhatt

Rajiv Bhatt

Call: 2014


This content is provided free of charge for information purposes only. It does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of Chambers or by Chambers as a whole.


Please note that we do not give legal advice on individual cases which may relate to this content other than by way of formal instruction of a member of Gatehouse Chambers. However, if you have any other queries about this content please contact: