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England and Wales High Court (Chancery Division) Decisions |
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You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Candey Ltd v Crumpler & Anor (Liquidators of Peak Hotels & Resorts Ltd) [2019] EWHC 282 (Ch) (15 February 2019) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2019/282.html Cite as: [2019] Bus LR 1901, [2019] EWHC 282 (Ch), [2019] WLR(D) 130 |
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BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
IN THE MATTER OF PEAK HOTELS & RESORTS LIMITED (IN LIQUIDATION)
AND IN THE MATTER OF THE INSOLVENCY ACT 1986 AND THE CROSS
BORDER INSOLVENCY REGULATIONS 2006
Fetter Lane London |
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B e f o r e :
(Sitting as a Deputy Judge of the Chancery Division)
____________________
| CANDEY LIMITED |
Applicant/Respondent |
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| -and- |
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| RUSSELL CRUMPLER and CHRISTOPHER FARMER (AS JOINT LIQUIDATORS OF PEAK HOTELS & RESORTS LIMITED (IN LIQUIDATION)) |
Respondents/Applicants |
____________________
DAVID HOLLAND QC and STEPHEN ROBINS (instructed by Stephenson Harwood LLP for the Joint Liquidators
Hearing dates 10, 11, 12, 13 July 2018
____________________
Crown Copyright ©
ANDREW HOCHHAUSER QC
Table of Contents
Introduction
(1) The determination of the following issue directed to be determined by paragraph 8 of the Order of HHJ Raeside QC dated 5 December 2017 ("the Exemption Issue"), namely: whether, for the purposes of Candey seeking recovery of a success fee under a conditional fee agreement ("CFA") dated 8 May 2016 with Candey Law LLP ("Candey LLP"), the Liquidators' application by Application Notice dated 27 September 2016 ("the Liquidators' Application") amounts to "proceedings" within the definition of article 4(c) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (Commencement No.5 & Saving Provisions) Order 2013 (SI 2013/77) ("the LASPO Order").
(2) The determination of Candey's application by Application Notice dated 17 April 2018 ("the Lien Application"), seeking a charging order under section 73 of the Solicitors Act 1974 ("the 1974 Act"). The Lien Application came before Hildyard J on 24 April 2018, pursuant to which directions were given in an Order dated 4 May 2018. Pursuant to paragraph 4 of that Order, the Lien Application was listed together with the hearing of the Exemption Issue.
The relevant background
(1) First, on 24 January 2014 PHRL borrowed under a convertible loan some US$35m from Jinpeng Group Limited ("Jinpeng").
(2) Second, on 31 January 2014 ARGL entered into a loan facility with Pontwelly Holding Company Limited ("Pontwelly") under which it borrowed US$208m.
(3) Third, on 2 April 2014, PHRL borrowed US$50m from Sherway Group Limited ("Sherway").
(4) Fourth, the monies paid by Tarek upon completion of the acquisition in the sum of US$95,000,000.
(1) "The London Litigation": Proceedings brought by PHRL in June 2014 in the Chancery Division against, amongst others, Tarek, Sherway Group Limited, and their ultimate beneficial owners, in which PHRL relied on breaches of various contractual arrangements and the economic torts of inducing a breach of contract and conspiracy.
(2) Hong Kong arbitrations concerning the US$35m loan from Jinpeng ("the Hong Kong Arbitrations").
(3) Proceedings in the BVI Court of Appeal concerning the above loan.
(4) Proceedings in the BVI for permission to bring Chapter 11 proceedings in New York.
(5) Proceedings in the BVI relating to costs of the discharge of PHRL's provisional liquidators and the costs incurred in proceedings before the BVI Commercial Court.
(6) Stayed proceedings in New York brought by Mr Doronin, the individual behind Tarek.
(7) A dispute in New York with an entity known as SURF in respect of monies held by Standard Chartered Bank ("the SCB Monies").
(8) A dispute with Bryan Cave LLP over their accounting practices.
(9) Assisting Lalit Modi, a named Third Party in the London Litigation.
(10) Assisting PHRL with corporate finance raising.
(11) Injunctive relief against Mr Omar Amanat, the founder of PHRL who had appropriated PHRL's money ("the Power Capital Proceedings").
(12) Anticipated Chapter 11 proceedings in respect of ARGL, alongside US firm Brown Rudnick LLP.
(1) Candey agreed to continue to act for PHRL in (i) the London Litigation, (ii) the Hong Kong Arbitrations, (iii) proceedings in the BVI Commercial Court and Eastern Caribbean Supreme Court, (iv) the Power Capital Proceedings, and (v) other matters expressly agreed from time to time (including ongoing general advice) [Clause 2],
(2) PHRL agreed to pay Candey a fixed fee of £3,860,637.48 ("the Fixed Fee"), but "to assist PHRL's cash flow PHRL is not obliged to pay the Fixed Fee before judgment on liability is handed down or a settlement is agreed in the Tarek proceedings [the London Litigation] unless PHRL obtains cash from elsewhere as set out in this agreement". Interest at 8% per annum would accrue from judgment or settlement [Clause 4],
(3) The Fixed Fee excluded Candey's outstanding unpaid invoiced costs of £941,358.94 ("the Outstanding Costs"), which PHRL agreed to pay in specified tranches on particular dates. It also excluded all disbursements including (amongst other things) Court fees and Counsels' fees [Clause 5].
(4) "Any monies recovered by PHRL from the date of this agreement (whether for costs or otherwise) will be applied by Candey towards the Outstanding Costs and/or the Fixed Fee and/or disbursements at Candey's discretion." [Clause 7].
"InvoicingWe will invoice you on a monthly basis and we require our invoices to be paid within 7 days of receipt. Thereafter, following 7 days' notice, we may suspend work on your matter until payment is received and charge you interest... We are entitled to retain all papers until our fees are paid in full
No rate of interest was specified.
4. "Save for the Deed of Charge dated 25 March 2015 (and related security) in favour of Campion Maverick, PHRL warrants and agrees that it has not created, and will not create or permit to subsist, any other security or charge over the rights and monies protected by this Deed.
5. PHRL irrevocably agrees and instructs CANDEY to act with full powers (and shall instruct any other and or future lawyers to use their best endeavours to assist CANDEY to ensure that any monies or benefits arising or payable in any Court proceedings in any jurisdiction shall be paid directly to CANDEY towards payment and discharge of any liability pursuant to the Fixed Fee Agreement prior to anyone else save for repayment of any bona fide liability due to Campion Maverick. [Emphasis added]
6. In the event that any of PHRL's rights title or interest in or to any monies or benefits covered by this Deed are assigned (which assignment shall require CANDEY's prior written consent) or awarded to a third party by Court order, or such monies are otherwise paid (contrary to the irrevocable instructions above) to a third party, that third party shall receive such monies subject to this Deed and subject to the discharge of all liabilities to Candey pursuant to the Fixed Fee Agreement." [Emphasis added]
(1) PHRL was ordered to repay US$50 million plus accrued interest to Sherway.
(2) The sums paid into Court by way of security for costs were to be paid out as to (i) £750,000 to Tarek, (ii) £750,000 to Sherway[2] and (iii) any remaining amounts (including all accrued interest) to PHRL.
(3) The sums paid into Court by way of fortification of the cross-undertakings were to be paid to PHRL.
(1) on the New Monies Point, the Settlement Proceeds and SCB Monies were not 'new monies' but were the proceeds of existing assets of the Company which fell within Candey's charge;
(2) the Deed of Charge was a floating charge, rather than a fixed one; and
(3) the Company had been insolvent as at the date of the Deed of Charge, so that section 245 of the 1986 Act was engaged.
(1) Candey's Fixed Fee of £3,860,637.48, rather than a "time cost" basis, was the basis for valuing Candey's services and that was a fair and reasonable fee for work done by Candey on behalf of PHRL;
(2) The Liquidators' Application was dismissed;
(3) The sum of £3,860,637.48 was payable by the Liquidators to Candey with interest thereon in the sum of £543,874 with daily interest accruing in the sum of £846.17.
The Exemption Issue - the background
"4. Saving provisionArticle 2(l)(a) and (c) and article 3(a) and (c) do not apply to-
…
(c) proceedings in England and Wales brought by a person acting in the capacity of-(i) a liquidator of a company which is being wound up in England and Wales or Scotland under Parts IV or V of the 1986 Act"
Candey's submissions on the Exemption Issue
(1) The Recognition Order provides at paragraph 1 that PHRL's liquidation in the
BVI "fee recognised as a foreign main proceeding in accordance with the UNCITRAL Model Law on cross-border insolvency as set out in Schedule 1 to the CBIR".
(2) Article 20 of Schedule 1 to the CBIR sets out the effect of recognition of a foreign main proceeding.
i. Under paragraph 1(a) of Article 20 "upon recognition of a foreign main proceeding, commencement or continuation of individual actions or individual proceedings concerning the debtor's assets, rights, obligations or liabilities is stayed".
ii. However, paragraph 5 of Article 20 provides that the stay in paragraph 1 "does not affect the right to request or otherwise initiate the commencement of a proceeding under British insolvency law or the right to file claims in such a proceeding".
iii. 'British insolvency law' is defined in Article 2(a) as "provision extending to England and Wales and made by or under the Insolvency Act 1986 (with the exception of Part 3 of that Act) or by or under that Act as extended or applied by or under any other enactment (excluding these Regulations)."
(3) Article 21 of Schedule 1 sets out the relief that may be granted upon recognition of a foreign main proceeding. Paragraph 1 of Article 21 provides:
"1. Upon recognition of a foreign proceeding, whether main or non- main, where necessary to protect the assets of the debtor or the interests of the creditors, the court may, at the request of the foreign representative, grant any appropriate relief including-…(g) granting any additional relief that may be available to a British insolvency officeholder under the law of Great Britain, including any relief provided under paragraph 43 of Schedule B1 to the Insolvency Act 1986".
(4) Accordingly, the effect of the Recognition Order was to give the Liquidators the right to request or initiate proceedings under the Insolvency Act, in the same way as such proceedings might be available to a "British insolvency officeholder".
"168. Supplementary powers (England and Wales)(1) This section applies in the case of a company which is being wound up by the court in England and Wales.(2) The liquidator may seek a decision on any matter from the company's creditors or contributories...(3) The liquidator may apply to the court (in the prescribed manner) for directions in relation to any particular matter arising in the winding up."
"80. ...I consider it somewhat surprising that subparagraph (g) is expressed in the way in which it is if it had really been intended that the phrase "any appropriate relief" permitted the recognising court to grant relief which it would not be able to grant in an insolvency conducted in accordance with the laws of the recognising court. A power for the recognising court to grant relief in that way would be a very significant power. It is odd to think that such a power was intended without there being any specific reference to the recognising court's ability to apply the law of a foreign state, or even to do something which no system of law anywhere would allow. This is particularly so in view of the terms of sub-paragraph (g) which deliberately limit relief under that sub-paragraph to relief which would be available to a British insolvency office holder under the law of Great Britain." [Emphasis added]
"3.93...the supposition of 'a British insolvency office-holder' is important because it restricts additional relief to that available to a British insolvency office-holder. It would seem to rule out relief available at common law, by wav of judicial assistance, to a foreien office-holder, and such relief would, in any event, seem to be limited to relief equivalent to that available in an analogous British insolvency proceeding."
"...the domestic court must at least be able to provide assistance by doing whatever it could have done in the case of a domestic insolvency. The purpose of recognition is to enable the foreign office holder or the creditors to avoid having to start parallel insolvency proceedings and to give them the remedies to which they would have been entitled if the equivalent proceedings had taken place in the domestic forum".
"Article 2(l)(a) and (c) and article 3(a) and (c) do not apply to...(c) proceedings in England and Wales brought by a person acting in the capacity ofi) a liquidator of a company which is being wound up in England and Wales or Scotland under Parts IV or V of the 1986 Act; orii) a trustee of a bankrupt's estate under Part IX of the 1986 Act"
The Liquidators submissions on the Exemption Issue
"1. Upon recognition of a foreign proceeding that is a foreign main proceeding, subject to paragraph 2 of this article-(a) commencement or continuation of individual actions or individual proceedings concerning the debtor's assets, rights, obligations or liabilities is stayed;(b) execution against the debtor's assets is stayed; and(c) the right to transfer, encumber or otherwise dispose of any assets of the debtor is suspended.2. The stay and suspension referred to in paragraph 1 of this article shall be
(a) the same in scope and effect as if the debtor...in the case of a debtor other than an individual, had been made the subject of a winding-up order under the Insolvency Act 1986; and(b) subject to the same powers of the court and the same prohibitions, limitations, exceptions and conditions as would apply under the law of Great Britain in such a case,and the provisions of paragraph 1 of this article shall be interpreted accordingly."
"1. Upon recognition of a foreign proceeding, whether main or non-main, where necessary to protect the assets of the debtor or the interests of the creditors, the court may, at the request of the foreign representative, grant any appropriate relief including—…
(g) granting any additional relief that may be available to a British insolvency officeholder under the law of Great Britain, including any relief provided under paragraph 43 of Schedule B1 to the Insolvency Act 1986(28)".
"1. Subject to paragraphs 6 and 9 of this article, upon recognition of a foreign proceeding, the foreign representative has standing to make an application to the court for an order under or in connection with sections 238, 239, 242, 243, 244, 245, 339, 340, 342A, 343, and 423 of the Insolvency Act 1986(29) and sections 34, 35, 36, 36A and 61 of the Bankruptcy (Scotland) Act 1985
"This delay was to give insolvency practitioners and other interested parties time to prepare for and adapt to the changes."
The previous ministerial statement (which is referred to in the statement of 26th February 2015) is that dated 24th May 2012. It said this:
"Secondly, the provisions in relation to sections 44 and 46 will not come into effect until April 2015 in respect of insolvency proceedings. Insolvency cases bring substantial revenue to the taxpayer, as well as to other creditors, and encourage good business practice which can be seen as an important part of the growth agenda with wider benefits for the economy. These features merit a delayed implementation to allow time for those involved to adjust and implement such alternative arrangements as they consider will allow these cases to continue to be pursued".
These would appear to be entirely consistent with the ambit of the intended exception being territorial.
(1) He may apply under the CBIR;
(2) He may apply under section 426 of the 1986 Act;
(3) He may be entitled to bring proceedings in England under the Regulation (EU) 2015/848 on insolvency proceedings ("Recast Insolvency Regulation"); or
(4) He may be entitled to apply for relief at common law (see Singularis Holdings Ltd v PricewaterhouseCoopers [2015] AC 1675).
(1) Under section 426 of the 1986 Act the English court may choose to apply foreign insolvency law and may grant the relief available to a foreign insolvency officeholder under foreign law;
(2) Under the Recast Insolvency Regulation, the liquidator in a foreign main proceeding in a Member State of the EU is entitled to seek relief under the laws of the Member State in which the liquidation is being conducted; and
(3) At common law, the Privy Council held in Singularis that the available relief does not include the statutory relief "available to a British insolvency officeholder under the law of Great Britain". Common law assistance cannot involve such relief.
(1) Candey's purposive argument also falls foul of the fact that the words "acting in the capacity of are found only in paragraphs (c) and (d) of Article 4. They do not appear in paragraphs (e) or (f) of Article 4. On Candey's case, this gives rise to a major unexplained anomaly: When a company goes into liquidation, causes of action may be vested in the company itself (e.g. claims to recover pre-liquidation debts owed to the company) or they may be new statutory claims vested in the liquidator (e.g. section 238 of the Insolvency Act 1986). Some of the claims vested in the company may be brought in the name of the liquidator under section 212 of the Insolvency Act 1986.
(2) Candey's argument seeking to bring foreign liquidations within Article 4 fastened onto the reference to "capacity" in paragraphs (c) and (d). However, that word does not appear in paragraphs (e) or (f) and there is no conceivable basis for contending that paragraphs (e) or (f) apply to companies which are in liquidation abroad.
(3) On Candey's approach, therefore, there is an unexplained difference in treatment between English liquidations (which will fall within Article 4 of the LAPSO Order whether the claimant is the English liquidator or the company itself) and foreign liquidations (which, it is said, will fall within Article 4 where the claimant is the foreign liquidator but cannot fall within Article 4 where the claimant is the company itself). This further undermines Candey's purposive construction and supports the Liquidators' position. The fact that paragraphs (e) and (f) cannot apply to foreign liquidations confirms that paragraphs (c) and (d) were intended to be confined to English cases as well (as the language of those provisions itself makes clear).
"(1) This rule applies where -(a) a party applies to amend his statement of case in one of the ways mentioned in this rule; and(b) a period of limitation has expired....(4) The court may allow an amendment to alter the capacity in which a party claims if the new capacity is one which that party had when the proceedings were started or has since acquired."
Discussion and conclusion
(1) I accept the Liquidators' submissions that the Recognition Order obtained by the Liquidators does not turn a foreign liquidation into a liquidation under Parts IV and/or V of the Insolvency Act 1986;
(2) Although the Recognition Order confers the right to relief under Articles 20, 21 and 25 of Schedule 1 to the CBIR and allows the foreign liquidation to be treated in many respects as if the foreign company was in liquidation in England and Wales, it remains expressly a "foreign proceeding." A foreign liquidator does not become "a British insolvency officeholder." The effect of recognition is not to make the foreign liquidator an officer of the English Court [See Glasgow v ELS Law Ltd [2017] EWHC 3004 (Ch) at [82] to [86]];
(3) In my view there is a distinction to be drawn between the status of the Liquidators and the relief to which they are entitled. I do not accept Candey's submission that the effect of recognition under the CBIR, which confers certain powers upon the Liquidators is synonymous with saying that recognition under the CBIR allows a foreign liquidator to "act in the capacity" of a liquidator of a company which is being wound up in England and Wales. That confuses the exercise of powers and the relief that is available with the status of the person who is entitled to exercise those powers and obtain the relief.
(4) The reliance on paragraph 22 of Lord Hoffmann's advice in the Cambridge Gas case does not, in my view, assist Candey in relation to this issue. As Mr Holland drew to my attention in oral submissions, that case has been the subject of subsequent criticism - see [18], [19] and [37] of the judgment of Lord Sumption in the Siguliars case, which described the Cambridge Gas case as a "controversial decision" and at paragraph 18 the Board reversed it in certain respects, stating "The Board considers it to be clear that although statute law may influence the policy of common law, it cannot be assumed, simply because there would be a statutory power to make a particular order in the case of domestic insolvency, that a similar power must exist at common law. So far as Cambridge Gas suggests otherwise, the Board is satisfied that it is wrong for the reason suggested by Lord Collins of Mapesbury. If there is a corresponding statutory power for domestic insolvencies there will usually be no objection on public policy grounds to the recognition of a similar common law power. But it cannot follow that there is such a power...",
(5) I do not accept that there is a material distinction to be drawn between the phrases "acts as" as employed in section 388 of the 1986 Act and "acts in the capacity of " as employed in Article 4 of the LAPSO Order. As Mr Lord ultimately accepted, if the words "acts as" were used in Article 4, Candey would not be within the exemption. Since I see no material difference between the two phrases, the same result follows. Nor, in my view, are the words "acts in the capacity of otiose, if that Article is construed as contended for by the Liquidators. I accept that there is a distinction to be drawn between Liquidators acting as such, as opposed to acting in a personal capacity as identified by Arden LJ in Hag v Singh [2001] 1 WLR 1594, albeit in the context of CPR 17.4(4).
(6) Thus I find that the proper construction of the words of Article 4 on its face results in the Liquidators' Application not falling within its terms. However, if it were necessary to employ a purposive construction, I would have reached the same conclusion by reference to the ministerial statements referred to in paragraph 64 above.
(7) I further accept the submission made by the Liquidators that, given the different options available to a foreign liquidator in order to seek relief from the English court, as set out at paragraph 63 above, in relation to the options there mentioned other than under the CBIR, on Candey's construction Parliament decided that the exemption should apply to English liquidators and to foreign liquidators who chose to seek relief in England under the CBIR, but not to foreign liquidators who chose instead to seek relief in England under section 426 of the 1986 Act or the Recast Insolvency Regulation or at common law. In my view there appears to be no rational explanation for drawing any such distinction.
Conclusion on the Exemption Issue
The Lien Application
"(1) Subject to sub-section (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 taxed costs in relation to that suit, matter or proceeding; and(b) make such orders for the taxation 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
(1) A solicitor has three sources of security for his costs by operation of law. "First at common law, he has a possessory or retaining lien over documents and other property in his possession, secondly, also at common law, he has the right to apply to the court for a direction that personal property, including money, recovered or preserved as a result of his work in the litigation should stand as security for his costs. Thirdly, under section 73 of the Solicitors Act 1974, he has a right to apply for a charging order on property recovered or preserved through his instrumentality in litigation..." per Richards J (as he then was) at [12] in Clifford Harris v Solland (No.l) [2004] EWHC 2488(Ch) ("Clifford Harris no.1";
(2) In Re Born [1900] 2 Ch 433 Farwell J decided that in making a charging order then under the Attorneys and Solicitors Act 1860, he was not giving the solicitor any new right but giving the statutory charge in aid of the existing common law lien, that is "merely enabling them more cheaply and speedily to enforce a right they already possess". The section is therefore largely procedural (although not wholly so; for example, it has been held to extend to real property which the common law right does not) - see Clifford Harris v Solland International [2005] EWHC 141 (Ch) at [21(ii)] per Mr Christopher Nugee QC (as he then was), sitting as a Deputy Judge of the High Court, ("Clifford Harris no. 2").
(3) The so-called equitable lien over property recovered in proceedings is not a true lien, which can only exist in the strict sense where the person claiming the lien has the property which he claims to be subject to the lien in his possession. It is "only a claim or right to ask for the intervention of the court for his protection" (Mercer v Graves (1872) LR 7 QB 499, 503 per Cockbum CJ): see James Bibbv Ltd v Woods and Howard [1949] 2 KB 449, 453f per Lord Goddard CJ. It is a "right to claim the equitable interference of the court" see Re Fuld at pages 735-6 and Fairfold Properties v Exmouth Docks (No.2) [1993] Ch 196. It has recently been described in the Supreme Court as "a form of equitable charge" (see Gavin Edmondson v Haven Insurance [2018] 1 WLR 2052 (at [2] to [4] and [30]-[37]) 1"Haven Insurance")).
(4) A solicitor has no absolute right to a charging order under the section, and the court has a discretion in the matter: Re Born [1900] 2 Ch 433, 435. See also Re Fuld (no. 4) [1968] P. 727 at page 736; Fairfold Properties Ltd v Exmouth Docks Co Ltd (no. 2) [1993] Ch 196 at pages 202-3; Clifford Harris no. 2 at [22]-[23] and Gavin Edmondson v Haven Insurance at [57].
(5) The statutory charge will be limited to costs properly incurred in the proceedings in which the property was recovered or preserved. See Re Fuld (no. 4) at page 739.
(1) Waiver - pre-liquidation, when entering into the Deed of Charge at the time of the FFA, namely 21 October 2015, alternatively post-liquidation by failing to mention the lien when filing a proof of debt in the liquidation, and by making no mention of it thereafter prior to 29 March 2018;
(2) Instrumentality - if there has been no waiver, the Liquidators submit that the funds held by the Liquidators, which Candey asks the court to charge in its favour, were neither recovered nor preserved through Candey's instrumentality;
(3) Abuse of process - the Liquidators contend that it is an abuse of process for Candey to seek to rely on a lien at this stage in the proceedings. They submit that Candey is precluded from seeking an order under s.73 or that the Court should exercise its discretion thereunder by declining to grant a charge or by ensuring that any charge does not confer on Candey any rights which exceed those under the Deed of Charge.
I shall consider each of these in turn.
Waiver
(1) Both the so-called equitable lien and the right under s.73 can be released or waived if a solicitor takes alternative security for his costs which is inconsistent with his common law and statutory rights and does not preserve those rights. See Re Morris [1908] 1 KB 473 (at pages 475, 477, 479, 480-1); Clifford Harris no.1 (at [15]-[17]) and Clifford Harris no.2 (at [26]-[29], [35], [38], [43] and [49]-[50]);
(2) The authorities describe a number of circumstances in which a solicitor will be treated as having waived his rights:
In Re Morris Buckley LJ stated at page 477:
"Where a solicitor entitled to a lien takes from his client security upon property already included in the lien, or where such an one takes a security which gives time (say for a period of three years), or which gives a right to interest which would not otherwise be payable, it may well be that the lien is gone. In such case there is a new arrangement between creditor and debtor which...is incompatible with the retention of the lien.The existence of the security is inconsistent with the continued existence of the lien."
See also Curry v Rea [1937] NI 1 where a charge over the same property was held to be inconsistent with the lien so as to give rise to waiver of the lien;
(3) In Clifford Harris no.l, David Richards J stated at [17]:
"There are two key questions, as reflected in the passage cited above from Cordery: is the security inconsistent with the solicitor's rights at common law and under section 73, and, because of the fiduciary relationship between them, did the solicitor inform the client that he was reserving those legal rights. If it is inconsistent, it will be taken to waive the solicitor's other rights, unless he has reserved them."
And at [23]:
"There is clear authority that a charge on the same asset as that covered by a lien or right to apply for a charge will displace the lien or right. The decision of the Northern Ireland Court of Appeal in Curry v Rea [1937] NILR 1 is authority in respect of a possessory lien, and puts it on the basis of either waiver or merger. Waiver of the right to apply for a charge is the effect of Groom v Cheesewright. There is an obvious inconsistency between an express charge, and a lien or right to apply to a court for a charge, on the same asset.(4) If, on taking security, the solicitor is to preserve his common law and statutory rights then he has to reserve them: see Re Morris [1908] 1 KB 473, a majority decision of the Court of Appeal (at pages 475, 479, 481) Re Taylor, Stileman & Underwood [1891] 1 Ch 590 ("Re Taylor") (at pages 597 and 601), Clifford Harris no.l (at [17] and [28]). There is a controversy as to whether the reservation can be implied as well as express to which I will turn later;
(5) There is a helpful analysis of the earlier authorities in Clifford Harris no.2 by Mr Christopher Nugee QC, from which the following principles can be ascertained:
(a) The doctrine of waiver applies equally to rights under s.73 as much as it does the common law lien [24]-[25];(b) There was previously some controversy as to whether the absence of a reservation was sufficient in itself to amount to a waiver, or whether there was a further requirement of inconsistency. The majority of the Court of Appeal in Re Morris (Buckley LJ, with whom Lord Alverstone CJ agreed), held that an express or implied reservation was necessary, where the solicitor took security which was inconsistent with his general lien. Further in Re Taylor, the Court of Appeal unanimously held that a firm of solicitors had lost their retaining lien over their client's papers by taking a promissory note from the client and her husband with interest at 5%, and a charge over a client's life policy. The way in which each member of the Court of Appeal expressed themselves, did not suggest that the lien will be destroyed in every case where the solicitor takes any substantial security [33]. The fact is that each member of that Court referred to the decision of Sir John Leach MR in Roberts v Jeffreys (1830) 8 LJ (OS) (Ch) 137, where a solicitor lost his lien by the taking of a promissory note. In that case the court regarded as crucial the fact that the promissory note would entitle the solicitor to claim interest which he would not otherwise have been able to claim [34]-[35];(c) Following the Court of Appeal decision in re Taylor and the interpretation placed upon that decision by the majority in Re Morris, Mr Nugee QC concluded that a solicitor will only be held to have waived his lien if he takes a security which is inconsistent with the lien [38];(d) What is meant by 'inconsistency' is that there is some feature of the security which is incompatible with the lien (such as time to pay and retaining the client's papers in the meantime) such that the two rights cannot sensibly have been intended to subsist in parallel [43];(e) In the case before him, neither party had in mind the s.73 right at the time the charge was given, and neither party positively intended to preserve it [43 iv)]"I accept that if both solicitor and client positively intend that the solicitor's existing rights will be unaffected by the taking of the security, that will be effective to preserve them. But that will not usually be the case unless the solicitor explains the position to the client. It is not in my judgment sufficient to defeat a waiver that the solicitor had no positive intention to waive: if there is an inconsistency, the solicitor will be regarded as having waived his rights unless he expressly reserves them." [40] [Emphasis added].It is to be noted that at [40] the Deputy Judge there limited reservation to express reservation, whereas in Re Morris, at p477 Buckley LJ (with whom Lord Alverstone CJ agreed) refers to a solicitor who "expressly or, having regard to all the facts, impliedly reserves his lien", and at page 479 cited with approval Lindley LJ's statement in Re Taylor that "whether a lien is waived or not by taking a security depends upon the intention expressed or to be inferred from the position of the parties and all the circumstances of".(f) Mr Nugee QC's analysis in Clifford Harris no. 2 has been approved by the Court of Appeal in Metall Market OOO v Vitorio Shipping Co Ltd [2013] EWCA Civ 650 at [45]:"The nub of [Mr Nugee QC's] analysis is in paras 38-40 where he explains, on the basis of In re Taylor [1891] 1 Ch 590 but also subsequent authorities, that even a solicitor, with the duty he owes to explain matters to his client, will not be taken to have waived his lien unless he has done something inconsistent with it; that an inconsistency will, however, be more readily found in the case of a solicitor because of that duty owed to his client; that the test of waiver is objective; and that such objectivity allows for the position where both parties positively intend that existing rights will be unaffected by the taking of security or where it is made plain that the rights of lien are reserved."(g) The inconsistency in Clifford Harris no.2 arose from the fact that the charge included provision for interest at 8%, and that it was well established that a security which makes provision for interest that would not otherwise be due is an example of inconsistency ([44]). On that basis, the learned Deputy Judge held at [51] that the s.73 right was waived;(h) Finally, at [62], the Deputy Judge referred to the possibility of reviver in the following terms:"Before leaving reviver, however, it seems to me to be potentially relevant in another way. On the analysis I have adopted, the principle is that a solicitor is effectively presumed to intend to waive his rights whenever he takes that a security that is in any way inconsistent with them. However, since the ground for assuming waiver is the taking of inconsistent security, I do not see why the solicitor should be presumed to have intended the wavier to continue to have effect if the security he thought he was taking turns out not to have been valid and binding. In other words if the client is able to, and does, have the security avoided, then the parties are in my judgment entitled to be put back into the same position as that in which they would have been had it never been granted... " [Emphasis added]
The Liquidators' submissions on waiver
"There is clear authority that a charge on the same asset as that covered by a lien or right to apply for a charge will displace the lien or right. The decision of the Northern Ireland Court of Appeal in Curry v Rea [1937] NILR 1 is authority in respect of a possessory lien, and puts it on the basis of either waiver or merger. Waiver of the right to apply for a charge is the effect of Groom v Cheesewright. There is an obvious inconsistency between an express charge, and a lien or right to apply to a court for a charge, on the same asset" (Emphasis added).
(1) First, the lien and the Deed of Charge covered the same property. As set out above, the authorities make clear that "security taken on property already included in the lien" is a paradigm example of inconsistent security.
(2) Secondly, according to Candey, the lien and the Deed of Charge have a different priority ranking. As explained above, the Deed of Charge has been held to rank at floating charge level, after liquidation expenses. Candey seeks to by-pass this finding by now contending for a lien which (it says) will rank ahead of liquidation expenses. If this is right, the lien will necessarily be inconsistent with the Deed of Charge, because Candey's claim will rank simultaneously at two different levels in the priority waterfall. See Groom v Cheesewright [1895] 1 Ch 730 at page 733.
(3) Thirdly, Candey has consistently contended that the Deed of Charge conferred a right to appoint a receiver (see its communications dated 13 February 2016, 9 May 2016, 2 June 2016, and 6 September 2016). The lien would not have conferred any such right.
(4) Fourthly, the package of rights conferred by the Fixed Fee agreement and the Deed of Charge included a right to interest at 8% per annum (see clause 4 of the FFA). No such right was available under Candey's standard terms and conditions to which the lien would have attached. As set out above, the grant of a more favourable rate of interest under a new security is a paradigm case of inconsistency resulting in waiver of the lien: see Clifford Harris no.2 at [44],
(1) First, Candey relies on paragraph 3 of its Terms and Conditions. However, that is expressly limited to the retaining lien on client's papers and goes no wider.
(2) Secondly, Candey relies on clause 7 of the FFA and the third paragraph of the Deed of Charge to say that it would be entitled to any recoveries. However, those provisions are part of the package of rights granted by the FFA and the Deed of Charge and seek to describe the effect of those documents. They are not express reservations of the solicitor's lien. Clause 7 of the FFA does not reflect the equitable lien or statutory right. It refers to "any monies recovered by PHRL from the date of this agreement (whether for costs or otherwise)" which wording is apt to cover a much wider range of sums than merely "any property recovered or preserved" in the London Litigation. As clause 2 makes clear, the FFA covered more than just the London Litigation.
(3) The fact that the lien did not survive is made clear by the fourth paragraph of the Deed of Charge which provides: "Save for the Deed of Charge dated 25 March 2015 (and related security) in favour of Campion Maverick, PHRL warrants and agrees that it has not created and will not create or permit to subsist any other security or charge over the rights and monies protected by this Deed' (Emphasis added).
Post-liquidation waiver of the lien
"(1) Subject to subsection (2), if a secured creditor omits to disclose his security interest when submitting a claim in the liquidation of a company, he shall surrender his security interest for the general benefit of the creditors.(2) The Court may, on application by a secured creditor who is required to surrender his security interest under subsection (1), if it is satisfied that the omission was inadvertent or the result of an honest mistake by order direct
(a) that he is not required to surrender his security interest; and(b) that he values his security interest and amends his claim accordingly".
(The equivalent provision in England is Rule 14.16 of the Insolvency Rules 2016.)
Candey's submissions on waiver
"83. The legal principles upon which AG relies to advance its claim for a charge over the funds held by the Administrators are these:-'The lien of a solicitor is grounded on the principle that it is not just that the client should get the benefit of solicitor's labour without paying for it ' (Cotton LJ at 491 in Guy v Churchill)'It is right that they who get the benefit of the recovery of money should bear the expense of recovering it'. (Lindley LJ at 492 in Guy v Churchill).84. The rationale behind the principle goes back at least to Haymes v Cooper which was cited in Guy v Churchill. It is predicated on the basis that the solicitor has a right that no one else enjoys, namely to ask the court to interfere equitably in order to protect the rights of an unpaid solicitor by the grant of a charge over any property recovered or preserved through his instrumentality. It follows that in a simple case, where the solicitor takes proceedings to recover a debt for his client as a result of which a sum is paid to him and not to his client, a common law lien arises, and the solicitor has an entitlement to apply to the court for a s.73 charge over the fund until he is paid. The solicitor's right is one that is unique and which is recognised by the court and cannot be exercised by anyone who is not a solicitor.
(1) In Haymes v Cooper [1865] 33 BEAV. 431, Sir John Romilly MR stated: "I have always understood the law to be, that a solicitor had an inherent equity to have his costs paid out of any fund recovered by his exertions; and that the court would not part with it until these costs had been paid, except by the consent of the solicitor.... My opinion is that where a man knows that there is a fund in court, he knows also that it is subject to a solicitors' lien for his costs of recovering it and that he is entitled to be paid in the first instance...".
(2) In Guv v Churchill [1887] 35 D CH 489, Cotton LJ stated "The lien of a solicitor is grounded on the principle that it is not just that the client should get the benefit of the solicitor's labour without paying for it."
(Of similar effect is the statement by Kekewich J in Groom v Cheesewright [1895] 1 Ch 730 at 732.)
(1) At the time the FFA and the Deed of Charge was made, there was a deed of charge (and related security), creating a prior fixed charge in favour of Campion Maverick. Although I was informed that the Campion Maverick charge was subsequently not recognised by the Liquidators, it was regarded as valid at the time the FFA and the Deed of Charge was entered into. The Campion Maverick charge is expressly referred to in clause 4 of the Deed of Charge and the effect of this is that at that time Candey believed that it had a fixed charge, but not a first fixed charge. This is to be compared with the solicitor's lien which placed Candey in a better position because in Mr Lord's words "the effect of section 73 is that you go in right at the top, because it is akin to salvage"[3]
(2) Mr Lord also relies on clause 6 of the Deed which provides:
"In the event that any of PHRL's rights title or interest in or to any monies or benefits covered by this Deed are assigned (which assignment shall require CANDEY's prior written consent) or awarded to a third party by Court order, or such monies are otherwise paid (contrary to the irrevocable instructions above) to a third party, that third party shall receive such monies subject to this Deed and subject to the discharge of all liabilities to Candey pursuant to the Fixed Fee Agreement." [Emphasis added].
(3) He submits the concluding words beginning with the word "and" means the reference to the fixed fee agreement must by reference and inference include the preservation of the lien.
"….the remedy [the solicitor's equitable lien] exists to provide security for the solicitor's charges under his retainer, limited to the amount of the debt created by the settlement agreement."
On this basis, he submits, the s.73 lien included the 8% entitlement within the FFA, the original retainer and it is not inconsistent with the Deed of Charge, unlike the position in Clifford Harris no.2.
"If the taking of the charge had the effect of waiving CH's s 73 right, the setting aside of the charge would cause the s 73 right to spring up again or revive. Indeed this would I think be a paradigm case of "reviver", a point I return to below. It seems to me therefore that it is unlikely that CH could find themselves in a position in which they lose the benefit of both the charge and the s 73 right".
No post-liquidation waiver
Discussion on pre-liquidation waiver
(1) In relation to the question of whether there is an inconsistency between the security obtained and the solicitor's rights at common law and s 73 of the Act, in my judgment, one has to look at the FFA, the attached Terms and Conditions and Deed of Charge as part of the same transaction. I accept the Liquidators' submissions in this regard. That appears to be accepted by Candey, because it relies upon clause 7 of the FFA and clause 3 of the Terms and Conditions, which were incorporated into the FFA, save insofar as they were not inconsistent, in order to defeat the Liquidators' assertion of waiver. Indeed it was accepted by Mr Lord that one had to look at the FFA, the Deed of Charge and the Terms and Conditions as "one document" although he then sought to draw a distinction when one was considering the question of inconsistency.[5]
(2) Applying the test for inconsistency laid down by the Deputy Judge in Clifford Harris no. 2, at [43], which Candey accepts is the correct test, namely "is there some feature of the security which is incompatible with the lien such that the two rights cannot sensibly have been intended to subsist in parallel?", under the terms of clause 4 of the FFA, it is clear that there is an entitlement to an interest rate in excess of what would otherwise be the case under Candey's Terms and Conditions. The Liquidators point to that as a clear inconsistency, as was found to be the case in Clifford Harris no.2. In the course of his oral submissions, Mr Lord argued because the increased rate on interest was contained in the retainer, namely the combination of the FFA, and the Terms and Conditions (insofar as the latter was not inconsistent with the former), as opposed to the Deed of Charge, that was a material difference.[6] At first I was of the view that there was no distinction to be drawn, but on analysis it seems to me that Mr Lord's submission is correct, and reflects Lord Briggs' judgment at [66] of Haven, where he stated "the remedy exists to provide security for the solicitor's charges under his retainer". One can test the matter in this way: assume there was no Deed of Charge; the lien would apply to the retainer, which would include the interest rate under clause 4 of the FFA. There is therefore no inconsistency in that regard with the Deed of Charge;
(3) Looking at the other matters relied upon by the Liquidators, first, they rely upon the fact the security was taken on property already included in the lien and that is a paradigm example of inconsistent security. Applying the dictum of David Richards J at [23] in Clifford Harris no.1 referred to at paragraph 82 above, in my view this point is well made, when taken with the further point on which they rely, namely that according to Candey, the lien and the Deed of Charge have a different priority ranking. As explained above, the Deed of Charge has been held to rank at floating charge level, after liquidation expenses. Candey seeks to by-pass this finding by now contending for a lien which will rank ahead of liquidation expenses. If this is right, the lien will necessarily be inconsistent with the Deed of Charge, because Candey's claim will rank simultaneously at two different levels in the priority waterfall. See Groom v Cheesewright [1895] 1 Ch 730 at page 733.
(4) Finally the Liquidators take the point that Candey's frequent assertion in correspondence, referred to in paragraph 83(3) above that the Deed of Charge conferred a right to appoint a receiver is a benefit to which Candey would not have been entitled under a solicitor's lien, is another material inconsistency. It is important to remember, however, that this assertion was made before the Order of 23 June 2017, holding that the Deed of Charge created a fixed rather than a floating charge. In those circumstances I do not regard this as being of much assistance to the Liquidators in this regard.
(5) By reason of my findings at paragraph 116(3) above, however, I have reached the conclusion that there was an inconsistency between the Deed of Charge and the solicitor's lien.
(1) I accept Candey's submission that the requisite reservation of a solicitor's lien can be either express or implied, and to the extent that the Deputy Judge in Clifford Harris no.2 limited what was sufficient to defeat waiver to express reservation, that failed to take proper account of the majority of the Court of Appeal in Re Morris. which approved the statement by Lindley LJ in Re Taylor referred to in paragraph 98 above. In my judgment, however there was neither here;
(2) I further accept that Candey's submission that its intention in obtaining the charge under the Deed of Charge, is to be determined on an objective basis. I therefore turn to the provisions of the FFA, the Terms and Conditions and the Deed of Charge on which Candey relies.
(3) The last sentence of clause 3 of the Terms & Conditions refers only to a retaining lien on client's papers and I accept the Liquidators' submission that this takes matters no further. Further, I do not accept Candey's submission that, properly construed, clause 7 of the Deed of Charge amounted to an express or implied reservation of the solicitor's lien. It does not reflect or intend to refer to the equitable lien or statutory right. It refers to "any monies recovered by PHRL from the date of this agreement (whether for costs or otherwise)" which wording is apt to cover a much wider range of sums than merely "any property recovered or preserved" in the London Litigation. As clause 2 makes clear, the FFA covered more than just the London Litigation. Nor do I regard Mr Candeys' statement, referred to at paragraph 100 above, as amounting to a reservation of the lien. I therefore accept the Liquidators' submissions in this regard.
(4) In my judgment paragraph 4 of the Deed of Charge does not assist either Candey or the Liquidators. The fact that Candey appreciated at the time that they were not getting a first fixed charge, does not in itself amount to an implied reservation of their lien, and the wording of paragraph 4 of the Deed of Charge, which states:
"...PHRL warrants and agrees that it has not created and will not create or permit to subsist any other security or charge over the rights and monies protected by this Deed"
does not seem to me to warrant that Candey have no other security or preclude them from reserving their lien. It relates to actions on its part, not Candey's. It could not unilaterally remove Candey's solicitors' lien, had it been expressly or implicitly reserved.
(5) In relation to the point made by Mr Lord on the proper construction of the final words of clause 6 of the Deed of Charge, namely
"that third party shall receive such monies subject to this Deed and subject to the discharge of all liabilities to Candey pursuant to the Fixed Fee Agreement." [Emphasis added],
I do not accept Candey's submission that the final words of the clause following the word "and", must by reference and inference include the preservation of the lien. They are confined to the liabilities owed to Candey under the FFA, as the words state on their face.
Conclusion on pre-liquidation waiver
Post-liquidation waiver
Instrumentality
"did those settlement debts owe their creation, to a significant extent, to [the solicitors] services provided to the claimants under the [retainers]?"
The Liquidators' submissions on instrumentality
"...insofar as it is suggested that we could have foreseen a settlement on the terms negotiated that is wrong. I do not believe that we would ever have been given authority to settle on the terms that he [Mr Crumpler] did. Ms Turnbull and Messrs Zecha and Robinson would never have agreed to settle on those terms."
(Candey 1 paragraph 106). At paragraph 85 of Brisby 1, Mr Brisby QC states that, along with Messrs Zecha, Turnbull, Judge and Candey, he was "shocked and disappointed when I learned about the settlement" describing it as "pathetic". Thus, had the liquidation not occurred and the Liquidators not intervened, the London Litigation would have ploughed on to trial and beyond.
Candey's submissions on instrumentality
"Here undoubtedly the property was preserved by the action brought by these solicitors on behalf of the Plaintiff and but for the proceedings taken by them the mortgagee would have lost her security... " (Emphasis added)
(1) The phrase 'property recovered or preserved through his instrumentality' is widely construed, having regard to the purpose of the Solicitors Acts.
(2) A former solicitor's instrumentality is not denied by the fact that the client has chosen to compromise the action without reference to the solicitor, nor is it affected by the appointment of liquidators over the client company.
(3) The fact that a solicitor is unaware that a party has compromised proceedings is no reason to deny his instrumentality in getting the party to the position immediately prior to compromise.
(4) The solicitor's instrumentality prior to an insolvency event continues beyond the insolvency event, which does not break the chain.
(5) The fact that the company went into liquidation does not allow the liquidators to say that the solicitor's prior work was not instrumental in obtaining the result under the compromise.
(1) It acted for PHRL in relation to the London Litigation, and numerous other matters, many of which were closely related to the London Litigation, from April 2014 until it was disinstructed on 3 March 2016, the day after the settlement was reached, and three weeks after the Liquidators were appointed;
(2) Whilst PHRL's difficulties in funding the various litigation in which it was involved are clearly acknowledged by the Liquidators[7], what is not acknowledged by the Liquidators is that but for Candey, PHRL would not have been able to continue any of the litigation in which it was involved. Candey had shown enormous flexibility on fees, continued working and also helped PHRL to source funding for its claim, all of which was essential to keeping the case going and ultimately to achieving a settlement.
(3) The day on which the proceedings were settled was the same day on which witness evidence was due to be exchanged. Candey had finalized PHRL's evidence, ready for service, and believed that PHRL's opponents would have real difficulties in setting out their case. In such circumstances, it is obvious why PHRL's opponents would have been so ready to engage in settlement discussions.[8]
(4) Mr Crumpler's suggestion that the funding position of PHRL as at the date of settlement was such that PHRL had to settle, is not only irrelevant (for the reasons given above i.e. it requires the Court to disregard Candey's instrumentality prior to that date), it is also factually incorrect, since Mr Candey explains that Candey had secured additional funding for PHRL in January 2016 in the form of a US$5m facility provided by Mr Jerry Liu. [9]
(5) This reasoning applies to the SCB Monies just as to all other proceeds of the litigation: payment of a share of the SCB Monies to PHRL was a term of the settlement. As Mr Crumpler himself puts it (Crumpler 5, paragraph 39): "it was agreed between the Company and Tarek that, subject to certain conditions, they would cooperate to achieve the release of a sum of USD3 million held by Standard Chartered Bank ("SCB") in an account in the name of ARGL but considered, in fact to be beneficially owned by the Company and Tarek in equal shares, to be split equally between the Company and Tarek. The Company's share of this was USD 1.5m (the "SCB Funds")" and at paragraph 146: "the transfer of the SCB Funds ... was a purely mechanical event which flowed from the accord which the Liquidators were able to reach with Tarek by reason of the compromise of the dispute that was the subject matter of the London Litigation"
(6) Accordingly, since Candey was clearly instrumental in PHRL obtaining the settlement, it follows that it was also instrumental in PHRL recovering its portion of the SCB Monies.[10]
(1) It requires the Court to consider the question of instrumentality from the moment of the Liquidators' appointment, as if it constituted a break in the chain, and without regard to Candey's exertions prior to that involvement. As a matter of principle, that is the wrong approach;
(2) It requires the Court to disregard the obvious reality that a party's negotiating position in obtaining a compromise is a direct result of the conduct of their case up to that point - quite apart from authority, as a matter of common sense it is absurd to suggest that the result that was achieved in the compromise had nothing to do with Candey's involvement in the case leading up to that compromise;
(3) If it was correct, it would mean that anyone could defeat a solicitor's lien by secretly settling a case; this would render the security worthless and could not possibly have been intended by the phrase 'property recovered or preserved by his instrumentality'.
Discussion and conclusion on the instrumentality issue
(1) I accept Candey's submissions that having regard the authorities referred to in paragraphs 132 and 133 above, it is clear that one must take a broad interpretation of the word 'instrumental' and apply the "but for" test. The principles set at paragraph 134 above are to be derived from those authorities;
(2) Applying those principles to the facts of this case, it is, in my view, wholly artificial to disregard Candey's role and the earlier substantial work done by it the London Litigation from April 2014 until it was disinstructed on 3 March 2016, the day after the settlement was reached;
(3) I accept Candey's submissions that the facts set out in paragraph 135 above are indicative that it was instrumental in relation to both the Settlement Proceeds and the SCB Monies.
(4) In my judgment the stance taken by the Liquidators simply ignores the fact that a party's negotiating position in obtaining a compromise significantly affected result of the conduct of their case up to that point. I accept Candey's submission that the logical effect of the Liquidators' argument is that it would mean that anyone could defeat a solicitor's lien by secretly settling a case. Such an argument failed in Moxon v Shepherd referred to in paragraph 132 above;
(5) The Liquidators' argument that but for the intervention of the liquidation and the Liquidators, all the evidence is that the Company and Candey would have sought to continue the London Litigation to trial and beyond appears to me to miss the point. The fact that they may have far preferred to continue the London Litigation in the expectation, well-founded or otherwise, that this would provide a better outcome, does not prevent Candey being 'instrumental' in relation to the Settlement Monies, given their considerable work prior to the settlement being reached and by what Mr Candey refers to in Candy 6 at paragraph 34 as Candey's "commitment to the cause".
Abuse of process and the Court's exercise of its discretion
The Liquidators' submissions on abuse of process and the Court's exercise of its discretion
(1) As explained above, the parties have spent significant time and incurred substantial cost litigating over Candey's reliance on the security rights contained in the Deed of Charge. (See Crumpler 5 at paragraphs 47 to 57);
(2) Further, it is clear from previous correspondence and witness statements that Candey was relying on the security contained in the Deed of Charge (which it contended was a fixed charge), and not on any other form of security, such as a lien;
(3) Candey contended that its security over the Settlement Proceeds and the SCB Monies took the form of a fixed charge, pursuant to the Deed of Charge. Further, Candey did not seek at any stage to argue that it was secured by way of a lien;
(4) The Order of HHJ Davis-White QC declares that Candey's security takes the form of a floating charge. There has been no appeal by Candey in relation to that and it is now out of time to do so. If it is right that Candey has a lien which falls outside of section 245 of the 1986 Act and ranks in priority to liquidation expenses, it will follow that the entirety of the litigation to date has been pointless and a waste of time and money dealing with an academic point. Candey would have had a complete answer to the Liquidators' Application which it failed to mention for over 2 years and instead allowed the litigation to proceed on a different and inconsistent basis.
Candey's submissions on abuse of process and the Court's exercise of its discretion
Discussion and conclusion in relation to abuse of process and the Court's exercise of its discretion
Lord Neuberger in Henley v Bloom is relevant here. Contrary to Candey's submission, in my judgment it would have been desirable for Candey to have raised their reliance on the lien which falls outside of section 245 of the 1986 Act, because whilst not a defence to the application, it would have rendered it moot. That, however, is not the same as saying that raising it now for the first time amounts to an abuse of process. That said, I would have penalised Candey in costs because, had Candey raised it earlier in the Liquidator's Application, it would have saved substantial costs.
Conclusion
Note 1 Ms Sarah Bower was formerly one of the Joint Liquidators and a party to the proceedings but has been substituted by the Order of ICC Judge Middleton dated 20 November 2018.. [Back] Note 2 The Liquidators have stated that Tarek and Sherway have loaned these monies back to PHRL. [Back] Note 3 Day 1/133 lines 13-14 [Back] Note 5 Day 3/314 lines 12-18 [Back] Note 6 Day 1/112 line 24-114 line [Back] Note 7 See, e.g. Crumpler 5/§30 [Back] Note 8 Candey 6/§§35-36 [Back] Note 11 See the letter dated 25 May 2016 from Stephenson Harwood to Candey [Back] Note 12 Candey 6/§61(a); [Back]
