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	England and Wales High Court (Senior Courts Costs Office) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Senior Courts Costs Office) Decisions >> Addleshaw Goddard LLP v Wood & Anor [2015] EWHC B12 (Costs) (08 April 2015) URL: http://www.bailii.org/ew/cases/EWHC/Costs/2015/B12.html Cite as: [2015] EWHC B12 (Costs)

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IN THE HIGH COURT OF JUSTICE
SENIOR COURTS COSTS OFFICE

		Thomas More Building, Royal Courts of Justice, Strand London, WC2A 2LL
		8th April 2015

Master Campbell, Costs Judge:

This judgment is in 12 Parts namely :-

Part 1. Introduction paras 1 - 2

Part 2. The background paras 3-11

Part 3. The issues para 12

Part 4 The Law paras 13

Part 5 The terms of the retainer letters and irrevocable agreement paras 14-17

Part 6 Level 2 Success paras 18-23

Part 7 The submissions for AG paras 24 – 49

Part 8 The submissions for the Administrators paras 50 – 67

Part 9 Decision on the CBA paras 68 – 82

Part 10 Decision on section 73 paras 83 - 126

Part 11 Next steps para 127

Part 12 Formal order para 128

PART 1 - INTRODUCTION

1. The issues addressed in this reserved judgment are the following:-

i) Is the Claimant ("AG") entitled to an order for a payment by the Defendants ("the Administrators") in the sum of £12,663,822.95 for fees earned under a Contentious Business Agreement ("CBA") dated 26 October 2010?

ii) Is AG entitled to a declaration under Section 73 of the Solicitors Act 1974 ("the Act") that it is entitled to a charge on money held by the Administrators which have been recovered (so AG contends) through AG's instrumentality to the value of £12,663,822.95 until payment?

iii) Is AG entitled to any further order under Section 73 of the Act which might be required to give effect to any order for payment should one be made?

2. AG's application was issued on 21 October 2014. It has been supported by witness statements made by Mark Richard Hastings, a partner in AG, dated respectively 19 October 2014 ("Hastings I"), 8 January 2015 ("Hastings II"), 16 January 2015 ("Hastings III"), 20 January 2015 ("Hastings IV") and 27 February 2015 ("Hastings V") (after submissions had closed), together with exhibits MRH1-4. In response, on 11 December 2014, Nicholas Stewart Wood, a Licensed Insolvency Practitioner and Partner in the firm of Grant Thornton, made a witness statement in opposition ("Wood I"). No requests were made for cross-examination and I did not hear any live evidence. The hearing of the application was listed for one day, but lasted the best part of two. AG were represented by Mr Bacon QC, Mr J Briggs and Mr D Saoul, and Mr Atherton QC and Mr R Marven appeared for the Administrators. At the outset I was asked by counsel to sit in private under CPR 39 and with both sides being content that I should so order, I duly did. In advance of the hearing, the parties had helpfully lodged an agreed bundle, in addition to which I had the benefit of skeleton arguments prepared by Mr Bacon and Mr Atherton respectively. Where appropriate in this judgment, I shall identify the relevant documents in the bundle by reference to pages as follows [ ]. At the conclusion of the submissions, I reserved judgment. During the course of drafting the judgment, I raised further points upon which I required clarification. That led to both sides lodging additional written submissions and Mr Wood made a further witness statement on 12 March 2015 ("Wood II"). I have taken this further material into account in reaching my decisions. In order to preserve confidentiality, in so far as this judgment is to be made public, various figures are referred to as "the £Amount X" or "the $Amount Y" to avoid identifying the actual sums involved. Likewise, confidential extracts of original documents are referred to as "Trigger A Amount" and "Trigger B Amount" where necessary.

PART 2 - BACKGROUND

3. From 10 April 2014 until 26 January 2015, Mr Wood and his fellow partner in Grant Thornton, Mr Kevin John Hellard, were the Administrators of the Estate of the late Boris Abramovich Berezovsky, who died on 23 March 2013. Subsequently they have been appointed as trustees of Mr Berezovsky's insolvent estate, but I shall continue to refer to them as "Administrators".
4. Outside his native Russia and within legal circles in England and Wales, Mr Berezovsky is probably best known for his involvement in high profile litigation, including his failed action against Roman Abramovich before Gloster J - (Berezovsky v Abramovich [2012] EWHC 2463 (Comm)). Whilst it is common knowledge that AG acted for Mr Berezovsky as his solicitors in the Abramovich litigation, less well known is the fact that the firm was also retained in concurrent disputes, including an action brought in the Chancery Division (High Court claim No. HC08C03549) against the Estate of the late Mr Arkadi Patarkatsishvili ("AP"), various members of his family and an individual called Joseph Kay. In those proceedings, Mr Berezovsky sought, amongst other relief, a declaration of his entitlement to joint venture assets and an account of their value in which he contended for a 50% interest as between himself and Mr Patarkatsishvili. According to Hastings' I at paragraph 7, [MRH1 4], that action was known as the "Main Action" and was also described for AG's internal purposes as "Project Aintree". Concurrently, AG was retained in over 30 other matters, in particular two relatively substantial actions in the Chancery Division, the first against the Estate of Mr Patarkatsishvili, certain private investment companies called Salford and the Officers of Salford ("the Salford Action") and the second against the estate of AP, various members of his family and a Mr Vasily Anisimov ("the Metalloinvest Action") which, with "Project Aintree", were known collectively as "the Chancery Actions".
5. The terms upon which Mr Berezovsky retained AG need to be set out in detail (see paragraph 14 et seq. below). In so far as there is anything between the parties about whether the retainer is a CBA or a Conditional Fee Agreement ("CFA") and whether it matters, I shall deal with later in this judgment, but for convenience, I shall refer to the material document as "the CBA". For present purposes, it is enough to say that:-

i) On 15 May 2009, Mr Berezovsky signed an engagement letter relating to the Main Action, to which was annexed AG's Terms of Business ("the Original Letter") [MRH1 1-14].

ii) On 26 October 2010, Mr Berezovsky signed a further engagement letter which "amends our letter dated 15 May 2009 … which continues in force except as varied by the agreement contained in this letter from the above date" ("the October Letter") [MRH 1 15-50].

iii) The terms of the October Letter provided that Mr Berezovsky would pay for AG's services under the retainer in the following way:-

a) If the Main Action did not succeed (by way of final judgment or favourable settlement) he would pay AG for work done at a reduced hourly rate of approximately 50% of the firm's standard charges known as the "Reduced Fee".

b) If Mr Berezovsky obtained any "Benefit" (as defined) namely a favourable judgment or order or settlement from pursuing the Main Action, defined as "Level 1 Success", then he would pay AG's fees for work done at the firm's standard charging rate.

c) If Mr Berezovsky recovered "any Benefit" as a result of which he made a recovery (whether in the form of assets or money) with an aggregate value of at least the Trigger A Amount (with asset value(s) to be taken at the date of recovery) or made an aggregate recovery of at least the Trigger B Amount (or assets to that value) across the Chancery Actions, a 100% success fee would be added to AG's standard hourly charges being defined as "Level 2 Success".

(iv) On 23 October 2012, Mr Berezovsky signed an irrevocable payment instruction in AG's favour to pay the firm out of any monies currently or in future paid to AG what was due for fees and disbursements [MRH 3 4-5] ["the Irrevocable Agreement"].

6. The Main Action was expected to commence in November 2012 with a trial estimate of fourteen weeks. However, it was settled on confidential terms in a Settlement Agreement dated 9 September 2012 which was not before the court but according to Mr Hastings, the Administrators have seen and are aware of its contents. Under clause 4.3(b), Mr Berezovsky received a substantial amount in Euros which was paid into AG's client account on 10 September 2012 [AG's supplemental Note at 12] which the firm says (and the Administrators agree) represented a "Benefit" as defined in the CBA [Exhibit MRH 1 at 52 and transcript day 2 p 14 at 13].
7. On 21 September 2102, AG delivered an invoice to Mr Berezovsky for £4,674,567.25 plus VAT of £934,911.45 total £5,609,468.70 [MRH1 54] for the Level 1 Success Fee. That was an identical sum to the amount of the charges which AG had earlier submitted to Mr Berezovsky for its Reduced Fee between 18 October 2010 and 11 September 2012 [MRH1 55]. Mr Berezovsky paid the Reduced Fee and also £4,164,583.15 towards the Level 1 Success Fee leaving a balance outstanding of £1,444,885.55 [MRH 1 56]. The Euro recovery comprised part of the funds used for this purpose.
8. Pursuant to the settlement, on 21 March 2014, a payment of $Amount Y ("the $Amount Y") was made by Signature Litigation LLP on behalf of parties to the Settlement Agreement to Holman Fenwick Willan ("HFW") [MRH1 62] who act for the Administrators. The Administrators accept that that was a fund received in respect of settlement of the Main Action (HFW letter 12 March 2015 at paragraph 4). On 31 July 2014, AG submitted an invoice to the Administrators for the Level 2 Success Fee in the sum of £9,349,114.50 plus VAT of £1,869,822.90 total £11,218,937.40 [MRH1 57]. That sum remains unpaid.
9. As I have said, the terms of the Settlement Agreement are confidential but for the purposes of the background on this point, the following is what Mr Hastings has said about it in, respectively, Hastings I , Hastings III and Hastings IV :-

"21. … Suffice to say for present purposes that pursuant to that agreement, substantial sums have been paid by certain defendants to the Chancery Actions to Mr Berezovsky. Focusing again on the Main Action, which is the subject of this claim, the payments ultimately made under the agreement exceed the individual sum which qualifies as "Level 2 Success" as defined in the October letter (being the Trigger A Amount). I note for completeness that "Level 1" Success is not defined by reference to a particular sum, rather, it is triggered on the receipt of any "Benefit" (as defined in the October Letter).

22. Accordingly:

22.1 On 21 September 2012, AG invoiced Mr Berezovsky for the Level 1 Success Fees due in relation to fees incurred in the Main Action from the date of the relevant October letter, ie the difference between the relevant fees charged at the reduced hourly rate and the value of those fees calculated at AG's basic rate. The amount due and payable was £4,674,557.25 plus VAT of £934,911.45, giving a total of £5,609,468.70 (see page 27). This invoice was not challenged and indeed I can confirm that a large part of this invoice was satisfied, leaving a balance of £1,444,885.55 (excluding interest) which remains outstanding …

22.2 On 4 August 2014 (with payment having been made under the Agreement on or around 21 March 2014), AG rendered an invoice (dated 31 July 2014) to Holman Fenwick Willan, representing the Defendants, in respect of the Level 2 Success Fee payable under the October letter relating to the Main Action, being a sum of £11,281,937.40 including VAT ...

23. As matters stand, the Level 2 Success Fee invoice has not been paid, and, as mentioned above, £1,444,885.55 of the Level 1 Success Fee also remains unpaid, giving a total outstanding of £12,663,822.95, in respect of success fees payable under the October Letter …"

Hastings III – "5. At paragraphs 58-61 of the Defendants' skeleton argument, it is suggested that AG had no right to the Level 2 Success Fee until March 2014 (i.e. after Mr Berezovsky'….

6…..As is plain from this definition [of Level 2 Success], the relevant trigger occurred when Mr Berezovsky made a recovery of at least [the Trigger A Amount] ……

7….in fact, by 25 September 2012, Mr Berezovsky had recovered in excess of [the Trigger A Amount] pursuant to the terms of the AP Settlement , thus triggering Level 2 Success".

Hastings IV – "3…… taking into account a specific payment we made out of the funds we received in early September 2012 pursuant to paragraph 4.3 of the AP Settlement, a net recovery to Mr Berezovsky of in excess of US [$Amount X] arose on 12 October 2012." [This was corrected in Hastings V to £Amount X].

10. Pending the resolution of various disputes between Mr Berezovsky's competing creditors about entitlement to its ownership, the money received from Signature has been and remains held to the order of the Administrators (called the "Monies"). On 4 August 2014, AG notified the Administrators of its claim on this fund to the extent of its unpaid fees of £12,663,822.95. A short exchange of correspondence then followed culminating in a summary of the Administrators' view given by letter dated 23 September 2014 from HFW to AG as follows [Tab 12 36-38]:-

"You invited us to indicate whether we object to your firm's claim that their outstanding success fees be paid from the [Monies] in priority to all other claims, save for Mr Abramovich's claim to those monies. The General Administrators do object to such a claim and consider that any outstanding fees which may be due from the Estate to your firm rank, and should be paid, as an unsecured debt in the Deceased's Estate.

Even assuming the totality of the £12,822,120.95 [Note : the £158,298 difference concerns other fees claimed under a different retainer] claimed by your firm is due from the Estate, your firm presently has no proprietary or secured claim to those fees. The terms of the Settlement Deed do not grant your firm a proprietary interest in the [Monies] and a preserving lien does not provide any such right either, but merely entitles a solicitor to ask the Court for assistance to enforce the payment of their fees as against a client. In order to rank in priority to the other unsecured creditors, your firm would need to successfully apply to the Court for the granting of a charge in respect of those fees under Section 73 of the Solicitors Act 1974 (a "s.73 charge").

If such an application were to be made by your firm, it would be opposed by the General Administrators:

1. Your firm is well aware of the Protocol for future administration of the Estate of Boris Berezovsky (Deceased) … Clause 12 of that Protocol provides:

"In the interests of prudence, the Estate will be administered on the basis that there is a reasonable probability that the Estate is insolvent unless and until [the General Administrators] are satisfied that it can properly be administered on the basis that it is solvent …"

The General Administrators remain of the view that there is a reasonable probability that the Estate is insolvent and are administering the Estate on that basis. The grant of a s.73 charge in the context of an estate that is probably insolvent is quite different from the grant of a charge in the usual circumstances where a solvent client simply elects not to pay his solicitor. The effect of granting a s.73 charge in the present circumstances would be to give an unwarranted advantage to your firm in any insolvency procedure involving the Estate against the other unsecured creditors. That is not the purpose of a s.73 of the 1974 Act and a Court is unlikely to exercise its discretion to allow such priority to be granted to your firm.

2. Your firm will also be aware of the provisions of the Administration of Insolvent Estates of Deceased Persons Order 1986, in particular Article 3 and paragraph 12 of Part II of the Schedule to that Order, which provide that upon the making of an insolvency administration order, the provisions of s.284 of the Insolvency Act 1986 shall have effect as if the petition had been presented, and the insolvency administration order had been made, on the date of death. This, accordingly, in the event that an insolvency administration order is made, has the effect of rendering void any dispositions made from the Deceased's Estate from the date of his death, unless such dispositions are authorised by the Court.

The grant of a s.73 charge would, plainly, be a disposition of an asset of the deceased person for the purposes of s.284 of the 1986 Act. As such, even if the Court otherwise granted the charge, it would be rendered void by operation of s.284 of the 1986 Act in the event that an insolvency administration order were to be made. As a consequence, the General Administrators are of the view, given the probability that the Estate is insolvent, that if your firm applied for a s.73 charge, it would also have to apply for relief under s.284 of the 1986 Act. The Court would only grant such relief if it could be shown that the proposed transaction (ie the grant of a s.73 charge) would be beneficial to, or would not prejudice, the interests of the creditors of the Estate as a whole. Your firm could not satisfy that test since the effect of the proposed disposition would be fundamentally prejudicial to the creditors as a whole since it would be to grant your firm priority over the unsecured creditors.

In those circumstances the General Administrators are of the view that the Court would decline to grant a s.73 charge in favour of your firm.

3. Furthermore, the fees now claimed by your firm represent success fees under the relevant contentious business agreement. Your firm is therefore not seeking the payment of fees to compensate them for the time and resources expended by it to achieve the settlement, in part, represented by the [Monies], but instead represent a bonus in respect of the fees otherwise agreed to be paid by Mr Berezovsky to your firm for your firm's work …

We therefore invite you to agree to take no steps to enforce or otherwise claim the "Outstanding Fees" as defined in your letter (or any other fees which you say are due from the Estate) until the issue of the Estate's solvency has been determined. In the event that an insolvency administration order is made in respect of the Estate, you would be able to prove in the insolvent Estate. If the determination is that the Estate is solvent, and no insolvency administration order is made, the General Administrators would be in a position to pay your firm's outstanding fees which are properly due from the Estate as and when appropriate.

In respect of your suggestion that your firm is entitled to apply to the Senior Courts Costs Office to enforce the terms of the contentious business agreements under ss.60 and 61 of the 1974 Act, the General Administrators see little point in expending the time and incurring the expense of an application to a costs judge until it is known whether there will be any funds available in the Estate to make a distribution to the unsecured creditors. If indeed, an insolvency administration order is made in respect of the Estate – which the General Administrators continue to consider is probable – it is likely to be quicker and cheaper for your firm to simply prove in the insolvency administration, rather than invoke the Section 61 procedure."

11. Absent any resolution of the issues raised in HFW's letter, as I have said, on 21 October 2014, AG issued its application under CPR 8 for the orders set out in paragraph 1 of this judgment. The application was listed for directions on 3 November 2014 when a timetable was fixed for the service of evidence, the lodging of a bundle for the use of the court and skeleton arguments, with the matter to be heard on 19 January 2015.

PART 3 - THE ISSUES

12. Having set out the background, it can be seen that the following issues will need to be addressed in order to decide whether AG is entitled to any of the orders set out in paragraph 1 of this judgment.

i) Is the retainer a CBA in respect of which the Court can direct that it should be enforced under s.61 of the Act? In particular, in this context, was Mr Berezovsky properly advised when he signed the Original Letter, as amended by the October Letter, as to their consequences?

ii) If the retainer is a CBA and if satisfied that it should be enforced under s.61, should the Court also enquire into the hours worked to establish whether they are reasonable and/or excessive? (See Section 64(4A) and (4B) of the Act).

iii) If the retainer is a CBA, is the success fee of 100% fair and reasonable?

iv) Is AG entitled to a charge under s.73 in principle? If so when does the right to the charge arise? Is it a pre-existing right which accrued before Mr Berezovsky's death (AG's case) or does it subsist only when the charge is actually granted and until then, there is merely an inchoate right to seek the aid of the court in equity to enforce payment of the fees (the Administrators' case)?

v) If there is to be a charge under s.73, must there also be an assessment of the fees in order to ascertain the amount of that charge?

vi) Should there be a stay pursuant to the Insolvency Act 1986 or should the court make a declaration that no charge should be made pending determination of the petition for the making of an insolvency administration order as and when that is presented.

PART 4 - THE LAW

13. The relevant sections of the Act provide as follows:-

"59. Contentious business agreements.

(1) Subject to subsection (2), a solicitor may make an agreement in writing with his client as to his remuneration in respect of any contentious business done, or to be done, by him (in this Act referred to as a "contentious business agreement") providing that he shall be remunerated by a gross sum or by reference to an hourly rate, or by a salary, or otherwise, and whether at a higher or lower rate than that at which he would otherwise have been entitled to be remunerated.

(2) Nothing in this section or in sections 60 to 63 shall give validity to —

(a) any purchase by a solicitor of the interest, or any part of the interest, of his client in any action, suit or other contentious proceeding; or

(b) any agreement by which a solicitor retained or employed to prosecute any action, suit or other contentious proceeding, stipulates for payment only in the event of success in that action, suit or proceeding; or

(c) any disposition, contract, settlement, conveyance, delivery, dealing or transfer which under the law relating to bankruptcy is invalid against a trustee or creditor in any bankruptcy or composition.

60. Effect of contentious business agreements.

(1) Subject to the provisions of this section and to sections 61 to 63, the costs of a solicitor in any case where a contentious business agreement has been made shall not be subject to taxation or (except in the case of an agreement which provides for the solicitor to be remunerated by reference to an hourly rate) to the provisions of section 69.

(2) Subject to subsection (3), a contentious business agreement shall not affect the amount of, or any rights or remedies for the recovery of, any costs payable by the client to, or to the client by, any person other than the solicitor, and that person may, unless he has otherwise agreed, require any such costs to be taxed according to the rules for their taxation for the time being in force.

(3) A client shall not be entitled to recover from any other person under an order for the payment of any costs to which a contentious business agreement relates more than the amount payable by him to his solicitor in respect of those costs under the agreement.

(4) A contentious business agreement shall be deemed to exclude any claim by the solicitor in respect of the business to which it relates other than —

(a) a claim for the agreed costs; or

(b) a claim for such costs as are expressly excepted from the agreement …

61. Enforcement of contentious business agreements.

(1) No action shall be brought on any contentious business agreement, but on the application of any person who —

(a) is a party to the agreement or the representative of such a party; or

(b) is or is alleged to be liable to pay, or is or claims to be entitled to be paid, the costs due or alleged to be due in respect of the business to which the agreement relates,

the court may enforce or set aside the agreement and determine every question as to its validity or effect.

(2) On any application under subsection (1), the court —

(a) if it is of the opinion that the agreement is in all respects fair and reasonable, may enforce it;

(b) if it is of the opinion that the agreement is in any respect unfair or unreasonable, may set it aside and order the costs covered by it to be assessed as if it had never been made;

(c) in any case, may make such order as to the costs of the application as it thinks fit.

(3) If the business covered by a contentious business agreement (not being an agreement to which section 62 applies) is business done, or to be done, in any action, a client who is a party to the agreement may make application to a costs officer of the court for the agreement to be examined.

(4) A costs officer before whom an agreement is laid under subsection (3) shall examine it and may either allow it, or, if he is of the opinion that the agreement is unfair or unreasonable, require the opinion of the court to be taken on it, and the court may allow the agreement or reduce the amount payable under it, or set it aside and order the costs covered by it to be assessed as if it had never been made.

(4A) Subsection (4B) applies where a contentious business agreement provides for the remuneration of the solicitor to be by reference to an hourly rate.

(4B) If on the assessment of any costs the agreement is relied on by the solicitor and the client objects to the amount of the costs (but is not alleging that the agreement is unfair or unreasonable), the costs officer may enquire into —

(a) the number of hours worked by the solicitor; and

(b) whether the number of hours worked by him was excessive.

(5) Where the amount agreed under any contentious business agreement is paid by or on behalf of the client or by any person entitled to do so, the person making the payment may at any time within twelve months from the date of payment, or within such further time as appears to the court to be reasonable, apply to the court, and, if it appears to the court that the special circumstances of the case require it to be re–opened, the court may, on such terms as may be just, re–open it and order the costs covered by the agreement to be assessed and the whole or any part of the amount received by the solicitor to be repaid by him …

70. Assessment on application of party chargeable or solicitor.

(1) Where before the expiration of one month from the delivery of a solicitor's bill an application is made by the party chargeable with the bill, the High Court shall, without requiring any sum to be paid into court, order that the bill be assessed and that no action be commenced on the bill until the assessment is completed.

(2) Where no such application is made before the expiration of the period mentioned in subsection (1), then, on an application being made by the solicitor or, subject to subsections (3) and (4), by the party chargeable with the bill, the court may on such terms, if any, as it thinks fit (not being terms as to the costs of the assessment), order —

(a) that the bill be assessed ; and

(b) that no action be commenced on the bill, and that any action already commenced be stayed, until the assessment is completed.

(3) Where an application under subsection (2) is made by the party chargeable with the bill —

(a) after the expiration of 12 months from the delivery of the bill, or

(b) after a judgment has been obtained for the recovery of the costs covered by the bill, or

(c) after the bill has been paid, but before the expiration of 12 months from the payment of the bill;

no order shall be made except in special circumstances and, if an order is made, it may contain such terms as regards the costs of the assessment as the court may think fit.

(4) The power to order assessment conferred by subsection (2) shall not be exercisable on an application made by the party chargeable with the bill after the expiration of 12 months from the payment of the bill …

73. Charging orders.

(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.

(2) No order shall be made under subsection (1) if the right to recover the costs is barred by any statute of limitations."

PART 5 - THE TERMS OF THE RETAINER LETTERS AND IRREVOCABLE AGREEMENT

14. The following are the material parts of the retainer letters to which I need to refer. The letter of 15 May 2009 provides as follows [MRH1 2-5]:-

"Dear Mr Berezovsky

Project Aintree (formerly known as Project A – Claim No: HC08C03549

We are very pleased that you have decided to instruct us in relation to Project Aintree …

You have authorised us to accept and act on instructions given jointly or individually by Michael Lindley, Michael Cotlick and Yuli Dubov on your behalf and we will rely upon their instructions unless and until you notify us in writing to the contrary.

This letter sets out the scope of our work, tells you who will be advising you and provides our current fees. A further copy of our terms of business accompanies this letter and will apply to the provision of services to you except to the extent that they may be varied in this engagement letter or in future engagement letters …

Partner Responsibility, Personnel and Fees

In accordance with our client care and quality of service programme, I will be the partner responsible to you for this work (Matter Partner).

I set out below our direct dial telephone numbers and the names and/or status and numbers of those who I propose to assist us with the work and with whom you can expect to deal. I also set out the hourly charging rates before and after 1 May 2009 (reflecting our agreed discount) on each person … Our rates are reviewed annually on 1 September. Notwithstanding this, there will be no review of the rates until 1 May 2010.

As our work progresses, it may become necessary to use the expertise of additional lawyers or staff. Should other associates be required to assist in this matter, their hourly rates will vary between £260 and £405, depending on their level of experience. I will discuss their involvement with you as the need arises.

It is our standard practise to invoice our clients monthly. All invoices will be discharged by you within fourteen days of receipt … I would be obliged if you would confirm your agreement to these terms by signing and returning the enclosed copy of this letter. If you have any questions or comments about the contents of this letter or wish to discuss further the terms of our appointment, please do not hesitate to contact me. I hope that the basis of our relationship is clear and we look forward to working with you on this case.

Yours sincerely

Michael Barnett

Partner for Addleshaw Goddard LLP

I have read the above letter and accept the terms set out therein.

Signed: [Boris Berezovsky]

15.05.2009"

15. On 26 October 2010, the Original Letter was amended by the October Letter [MRH1 16-22]. The material terms provide as follows:-

"Dear Mr Berezovsky

Main Action: HC09C03549

Discount Conditional Fee Agreement

This letter amends our letter dated 15 May 2009 ("Original Letter) which continues in force except as varied by the agreement contained in this letter from the above date. This letter and the Original Letter together set out the terms upon which we will act for you in respect of the Claim as defined in the Schedule. The terms of this letter will take effect from 1 August 2010.

1. Interpretation

The Schedule to this letter contains definitions. Where this letter uses words which are defined in the Schedule, those words have the meanings assigned to them in the schedule. This letter, the Original Letter and the Schedule together constitute the CBA. The CBA is a contentious business agreement within the meaning of the Solicitors Act 1974.

4. Invoicing arrangements

Under this Agreement our fees would be calculated by reference to the hourly rates set out above [these are not in dispute so I have omitted paragraph 3 of the letter]. We will bill you on account for the Reduced Fee, together with any Expenses and VAT usually on a monthly basis. You will have to pay us the Reduced Fee, the Expenses and VAT whether you are Successful or Unsuccessful.

Our invoices in respect of the Reduced Fee and Expenses will be interim invoices on account and you must pay them within 30 days.

We will invoice you any further sums due under this agreement as and when they become due.

5. What payment is due to us if you are Successful

If you achieve Level 1 Success, you will pay us the following amounts:

(a) Any amount of the Reduced Fee which has not yet been paid;

(b) The difference between the Reduced Fee and the Basic Fee;

(b) Any Expenses which have not yet been paid;

(d) VAT on the above at the applicable rates.

If you achieve Level 2 Success, you pay us:

(a) to (d) above and, in addition:

(e) The Success Fee;

(f) VAT thereon at the applicable rates …

12. Right to Apply for an Assessment

Generally the clients of solicitors have a right to have the solicitors' charges assessed by the court, subject to certain conditions. As this agreement is a contentious business Agreement, your rights to have our charges assessed by the court are limited by Sections 59 to 61 of the Solicitors Act 1974. We will advise you fully of your rights on request. You are welcome to seek advice from another law firm, but would have to pay for that advice …

If you wish to enter into a conditional fee agreement with us on these terms, please sign and return the enclosed copy of this letter.

Yours sincerely

Richard Leedham

Partner, Head of Litigation for Addleshaw Goddard LLP

I confirm that the matters set out in this letter were fully explained to me orally by an independent solicitor

Signed: [Boris Berezovsky]

26 October 2010"

16. The schedule sets out the relevant definitions as follows:-

"Basic Fee

Means the firm's fees calculated at the firm's standard hourly rates set out in the column headed "Hourly rate – Basic Fee" in the table in clause 3.

Benefit

Means obtaining a judgment or order or award at first instance or a settlement under which the Other Parties are liable to pay money or to give any other advantage or benefit to you including but not limited to a judgment or order for specific performance and any other order, undertaking or agreement that the Other Parties will do or refrain from doing any act or execute any document, whether or not of measurable financial value. Obtaining Costs Only relief (see clause 7) or any purely procedural advantage (such as disclosure of documents) is not a Benefit for these purposes.

For the avoidance of doubt obtaining by judgment or order or award at first instance or a settlement relief substantially in the form of any of the prayers set out in the relief section of paragraphs 1 to 21 of the Amended Particulars of Claim dated 1 April 2010 in HC08C03549 (pages 93 to 97) against the defendants or any of them shall constitute a Benefit for these purposes.

Recoverable Basic Fee

Means such part of our Basic Fee as the Other Parties (or any of them) agree or are ordered to pay.

Reduced Fee

Means the firm's fees calculated at the reduced hourly rate set out in the column headed "Hourly rate – Reduced Fee" in the table in clause 3, and payable whether or not the Claim is Successful.

Level 1 Success

Means your obtaining, in relation to any work carried out under this Agreement, (whether or not at the time in question we continue to represent you or are instrumental in procuring the outcome in question) any Benefit.

Level 2 Success

Means your obtaining (whether or not at the time in question we continue to represent you or are instrumental in procuring the outcome in question):

(a) any Benefit, where the consequence is that you make a recovery (whether in the form of assets or money) with an aggregate value of at least [the Trigger A Amount] (with asset value(s) to be taken at date of recovery); and/or

(b) a recovery (whether in the form of assets or money) with an aggregate value after any counterclaims of at least [the Trigger B Amount] (with asset value(s) to be taken at date of recovery) from any or all of the Other Parties and defendants to the Other Chancery Proceedings.

Success

Shall include success in relation to part of the Claim, notwithstanding that other parts of the Claim remain in issue, and where Success is achieved, the Basic Fee and (where it is Level 2 Success) the Success Fee will be payable in respect of all work conducted by us, and not merely in respect of work conducted in relation to that part of the Claim which was successful.

Where there is a counterclaim against you and our conduct of the defence of that counterclaim is covered by this Agreement, Success shall be assessed by reference to whether a net sum is due to you after the setting off of any sum payable by you in respect of the counterclaim, including Interest.

In determining whether any Benefit has been obtained or the level thereof no account shall be taken of costs payable by or to you.

In the event of Success being affected by any appeal, Success shall be determined by the ultimate result when all appeals have been disposed of.

Success Fee

Means a fee representing 100% of the Basic Fee. The Success Fee comprises both:

(a) the fact that if you are Successful we will not be paid the difference between the Reduced Fee and the Basic and Success Fees until the end of the case (the Financing Factor); and

(b) the following additional factors which we refer to as Risk Factors:

(i) the fact that we are taking the risk of being paid the Reduced Fee instead of the Basic Fee if you are Unsuccessful;

(ii) our assessment of the risks of your case, including:

The fact that you are the claimant in highly complex proceedings in which the Other Parties have demonstrated a willingness to fight to trial;

The fact that prior to entering into this Agreement the parties to the Proceedings have not given disclosure;

That obtaining evidence abroad, which is necessary in connection with the Claims, can be more difficult than obtaining evidence in this jurisdiction;

The fact that prior to entering this Agreement the parties to the Proceedings have not exchanged witness statements;

The fact that much depends on oral testimony at trial and the ability of witnesses to withstand cross-examination, which can be unpredictable.

The Financing Factor constitutes 1% of the Success Fee, while the Risk Factors constitute the balance of 99%.

Unsuccessful

Means that a final judgment, award or determination is made against you in respect of each issue comprised in the Claim, or you otherwise fail to achieve Level 1 Success."

17. The Irrevocable Agreement signed on 23 October 2012 where material said this :-

"STRICTLY PRIVATE & CONFIDENTIAL

Addleshaw Goddard LLP

Milton Gate

60 Chiswell Street

London

EC1Y 4AG

Dear Sirs

Payment Instruction

1. I refer to the settlement deed in respect of certain proceedings between myself, Inna Gudavadze (Inna) and others dated 9 September 2012 as subsequently amended (the Settlement Deed).

2. In respect of any monies currently held in, or in future paid into, your client account(s) on my behalf pursuant to the terms of the Settlement Deed together with any interest accruing on the same (the "Monies") I hereby irrevocably (i) agree that you may and (ii) authorise and instruct you to:

(a) retain the Monies and not pay any amount of the Monies to me until the amounts referred to in paragraphs 2(b) and (c) have been paid in full;

(b) without the need to obtain further consent or instruction from me, pay out of the Monies the amounts agreed by me to be paid pursuant to the terms of any Costs Agreement, such amounts to be paid in advance of the relevant payment deadline and for these purposes a "Costs Agreement" means any agreement entered into by me (or by you on my behalf) and a third party in respect of the payment by me of that third party's costs and of which you have received a copy; and

(c) without the need to obtain further consent or instruction from me, pay out of the Monies all fees, disbursements and expenses that are payable to you or that become payable to you pursuant to the terms of the retainers between you and me as and when the same are due so long as the terms of the Settlement Deed and the Costs Agreements do not prohibit their payment at that time but if they do prohibit payment at that time they shall be paid as soon as that prohibition ceases to apply.

3. If the amount of the Monies standing to the credit of your client account(s) at the relevant time is such that it will not be possible to make a payment referred to in paragraph 2(b) or (c) in full that is required to be made at that time, part payment shall be made instead with the balance to be paid from additional Monies as and when received by you into your client account(s).

….

Yours faithfully

Executed and delivered as a deed by

Boris Berezovsky"

PART 6 - LEVEL 2 SUCCESS

18. Before dealing with the submissions, I need to clarify a point which was the source of some confusion (at least so far as I was concerned) at the hearing, namely whether Level 2 Success (as defined in the CBA) had been achieved and if so, when. It was my understanding on reading AG's evidence that it was the firm's case that Level 2 Success had been triggered by the recovery of the $Amount Y, no mention having been made of a recovery of £Amount X in September 2012 in Hastings I. That also appeared to be the belief of the Administrators and their advisers, their view being that it had been achieved upon receipt of $Amount Y on 21 March 2014, after Mr Berezovsky's death. For that reason, Mr Atherton's skeleton argument dated 15 January 2015 had proceeded (at paragraph 60) on that basis. However, Hastings III signed the following day deposed at paragraph 7 that - "In fact by 25 September 2012, Mr Berezovsky had recovered in excess of [the Trigger A Amount] pursuant to the terms of the AP settlement, thus triggering Level 2 Success". According to HFW [letter to the court 3 March 2015], it was only at that point that the Administrators had appreciated that it was now being said that the trigger point was not March 2014 but September 2012. They then went on to submit that it was Mr Hastings' evidence that there had been no "appropriation" of the "at least [the Trigger A Amount]" to any of the specific actions, by which I assume was meant that the Administrators did not accept that the funds in question had been recovered exclusively in the Main Action and not (for example) also in the Salford Action. Mr Hastings then signed Hastings IV on 20 January 2015 in which he said that a "… net recovery to Mr Berezovsky of in excess of US[$Amount X] [sic] arose on 12 October 2012." That was then clarified in Hastings V, that for US $ should have been written £ sterling.
19. During the course of argument, it was still unclear to me on what date exactly it was contended by AG that the trigger arose (for candidates, see Mr Bacon's skeleton argument at paragraph 35, alternatively 25 September 2012 (Hastings III at 7) alternatively 12 October 2010 (transcript day 2 page 53 line 34)). For that reason, on 23 February 2015, I wrote a Note to the parties asking for clarification. In the light of the response thereto, I sent a further Note on 4 March 2015 which said this:- "Given the absence of any further evidence from the Administrators in rebuttal of AG's case that receipt of [£Amount X] triggered Level 2 Success on 12 October 2012, I am intending to proceed on the basis that Hastings 4 (as corrected in Hastings 5) is unchallenged and will accept for the purposes of the judgment, that it was, indeed, achieved on that date, unless the Administrators wish to file and serve evidence asserting to the contrary: for that purpose, I give leave to do so provided service is effected on AG and the Court by 4.00pm on 12 March 2015".
20. Mr Wood (in his capacity as Trustee) took the opportunity to reply to Hastings IV and V via Wood II. At paragraph 6, he states that "The Trustees accept that by 12 October 2012, the Deceased had recovered in excess of [the Trigger A Amount] pursuant to the terms of the Agreement." However, he continues that the Trustees' "understanding" is that the Agreement was a "global settlement", that is to say one that went beyond simply the Main Action . Accordingly it has not been possible for the Trustees to identify specifically the monies recovered by Mr Berezovsky such as "… to ascertain definitively whether Level 2 Success was achieved under part (a) of the definition of that term as contained in the CFA … Moreover, Mr Hastings does not assert that any such appropriation was undertaken in relation to the monies received on or before October 2012" (see paragraphs 8-9).
21. I do not find this evidence convincing. In the first place, Mr Hastings exhibited as MHR4 a witness statement he had made in action HC10C04393 on 12 June 2013 indicating that AG were entitled to their fees for Level 2 Success which had not been challenged by the Administrators at any time until Mr Atherton's skeleton argument had been prepared. Next, it was asserted by Mr Bacon and not challenged on instructions by Mr Atherton that the Administrators have seen the confidential Settlement Agreement and Mr Bacon went further in saying that the document itself gives details of the payments that were due, in respect of what and from whom. It follows, in my judgment, that it is more likely than not that it would be within the gift of the Administrators to research the terms of settlement in order to satisfy themselves that the £Amount X was (or was not) recovered in the Main Action and to lead evidence on that point if there was any doubt. Instead, what Mr Wood says is no more than surmise on his part. Contrastingly, Mr Hastings has advanced a positive case that the entirety of the £Amount X was attributable to the Main Action and that, accordingly, the question of appropriation does not arise.
22. My Note of 4 March 2015 gave Mr Wood the opportunity to serve evidence to the contrary by informing the court of the exact attributions of the settlement funds, if it was his case that Mr Hastings was wrong that not all of it was referable to the Main Action. He has not done so, by demonstrating, for example, that part of the money was attributable to the Salford or Metalloinvest actions. It follows that I prefer Mr Hastings' evidence on this point and accept for the purpose of the issues I have to decide, that Level 2 Success was triggered upon receipt of the £Amount X on 12 October 2012. For that reason, it is not necessary for me to address a construction argument about the meaning of the Level 2 Success Fee clause in the CBA put forward by Mr Bacon in paragraph 6 of his Supplemental Note.
23. For clarity and for reasons which I hope will become clear, it is my view that the trigger for Level 2 Success and the date upon which AG's right of security in the funds recovered under the terms of the settlement , are different points. Put another way, the fact that 12 October 2012 may have been the trigger for Level 2 Success does not have a bearing upon the date upon which, as a matter of law, any right to apply for a s.73 charge may have arisen in AG's favour.

PART 7 - THE SUBMISSIONS FOR AG

(a) The CBA

24. Mr Bacon's submissions on behalf of AG are that prior to his death, Mr Berezovsky had been involved in a number of high profile commercial actions at a time when he was experiencing "cash-flow" problems. That had created difficulties about how he could afford to fund the litigation with which he was concerned on a day-to-day basis. The CBA with AG provided him with a solution because it gave him the means whereby he could continue his litigation claims without having to meet the firm's fees on a "pay as you go" basis, but rather, on terms that only the Reduced Fee would be payable "up front". Anything further would depend upon either "Benefit" or "Success" being achieved either in the Main Action or in the Chancery Actions. It followed that the CBA was both what Mr Berezovsky wanted and what he needed if he was to pursue the multiple claims in which he was involved. To that end, Mr Berezovsky had:-

i) Agreed to the CBA, having taken independent legal advice,

ii) Scrutinised in detail and ultimately approved the work to which the outstanding fees related,

iii) Made substantial part payments,

iv) Recovered significant sums exceeding the Trigger A Amount in the Main Action, thereby triggering AG's entitlement to the Level 2 Success Fee.

25. Mr Bacon's submission is that, without more, these four factors render absolute AG's entitlement to their fees. In addition, he draws attention to the fact that in terms of the signing of the Original Letter and the October letter, Mr Berezovsky had been advised to obtain independent legal advice and had done so by consulting his "Client Team" consisting Michael Lindley, a partner in Streathers Solicitors LLP, Michael Cotlick, an Israeli qualified lawyer, Natalia Nosova, a woman of business, and Yuli Dobov, a business associate of Mr Berezovsky of 30 years standing.
26. In the Abramovich litigation, Mr Lindley had explained to the court under cross-examination, that he had been responsible for negotiating the agreement made between Mr Berezovsky and AG (see transcript day 14 pages 4-5 of MRH4). During the course of the litigation, AG had invoiced Mr Berezovsky each month at the firm's discounted rate and when doing so, had provided the Client Team with detailed billing information. The invoices had then been scrutinised and any concerns raised by the Client Team were discussed with AG. The upshot of those discussions had been the agreement to a global discount applicable to the Main Action in the sum of £93,336 via credit note 254396, with a further £10,000 reduction subsequently being given as a "gesture of goodwill" via credit note 90035430 and an additional £2,600 being deducted via credit note 90035574 in respect of a Mr Herring's time. Having applied the credit notes to the balance of the charges, the Reduced Fee had then been paid in full in Mr Berezovsky's lifetime. The only inference that could be drawn from that was that had the Reduced Fee not been agreed, there would have been no payment.
27. So far as the Level 1 Success Fee is concerned, Mr Bacon points out that the majority of the fees due have been paid leaving "just" £1,444,885.55 outstanding. The relevant invoice was rendered on 21 September 2012 in the sum of £5,609,468.70, being the difference between AG's fees charged at the reduced hourly rate and their value at the firm's basic rate. With much of that fee also having been paid in Mr Berezovsky's lifetime, the inevitable inference to be drawn from that too, Mr Bacon submits, is that that invoice was also agreed.
28. In respect of the final invoice representing the Level 2 Success Fee rendered on 4 August 2014 in the sum of £11,281,937.40, including VAT, Mr Bacon submits that this was also agreed. The evidence for that is to be found in the irrevocable instruction given in the Irrevocable Agreement which Mr Berezovsky signed (having taken advice from the Client Team) that AG's fees generally should be paid, albeit that the bill itself was not rendered until after his death. The reason why the invoice for the Level 2 Success Fee was not raised until 31 July 2014 was that AG did not wish to incur a substantial liability to pay VAT before funds sufficient to meet the bill, had been received. However, it is Mr Bacon's submission that (1) Mr Berezovsky and his advisers knew the amount of the Level 2 Success Fee (2) that Mr Berezovsky had approved it by signing the irrevocable instruction and (3) that Mr Berezovsky was aware that it would be discharged once the funds from Signature had been received. Indeed, these factors were also conclusive as a matter of law, that a contractual estoppel had arisen whereby, Mr Berezovsky having represented unequivocally that he had received legal advice, the Administrators were now precluded from denying that he had done so (see Peekay Intermark Ltd v Australia and New Zealand Banking Group Ltd [2006] EWCA Civ 386). In the event, it was only Mr Berezovsky's untimely death and the appointment of the Administrators which had prevented payment being made in accordance with his instructions.
29. So far as the CBA itself is concerned, Mr Bacon relies on the following matters to support his submission that it is valid and should be enforced:

the agreement was sufficiently certain in order to comply with s.60 of the Act,

its terms were not unfair and/or unreasonable,

AG's risk of going unpaid as to the Level 1 and 2 Success Fees were substantial thereby justifying the 100% success fee if the financial recovery was achieved,

the Administrators have no entitlement to an examination of the hours worked under s.60(4B) of the Act.

I shall deal with each in turn.

30. So far as the construction of the CBA is concerned, Mr Bacon points out that s.59(1) of the Act permits a solicitor to make an agreement in writing with his client as to his remuneration in respect of any contentious business done or to be done "by reference to an hourly rate … or otherwise …". That is the position here, Mr Bacon submits, the CBA having been drafted by very senior counsel and committed to writing. It provides for hourly expense rates for AG's solicitors (about the level of which the Administrators have taken no point), whilst at clause 3, reserving the right to increase the rates annually in which case "We will discuss the rates with you". Clause 3 continues that "as work progresses it may become necessary to use expertise or additional lawyers or staff but we will discuss their involvement with you as the need arises".
31. Mr Bacon makes two points here in the context of certainty. First, the right to increase the rates annually is a standard clause which is used in virtually all client retainers so that the solicitor can alter hourly charges, usually in line with inflation each year. In the present case, there was no question of any "imposition" upon Mr Berezovsky: on the contrary, as the clause makes clear "We will discuss the rates with you". In any case, that had never been necessary because the rates had remained unchanged throughout the period of the retainer. Second, in high value commercial litigation such as the Main Action, clause 3 anticipated the need to bring in additional fee earners as expediency required, but specifically, following a discussion about their involvement were that requirement to arise. On that basis, Mr Bacon submits that there is no uncertainty at all.
32. As to the reasonableness of the terms of the CBA, these were fair and reasonable in Mr Bacon's submission. First, they had been discussed and agreed by Mr Berezovsky's Client Team who reported directly to him. Second, Section 58 Access to Justice Act 1999 entitles solicitors to charge a success fee on the totality of the basic fee, even if there is a discount in the event of a particular outcome (see Gloucestershire County Council v Evans [2008] 2 Costs LR 308). Here, the case had involved an enormous risk to AG. In the event of failure, the firm would have received only 50% of its standard charges in the Main Action and the risk of losing had increased significantly following Mr Berezovsky's defeat in the Abramovich claim, which had damaged his credibility as a witness.
33. So far as the Level 1 Success Fee was concerned, this was payable only if a "Benefit" as defined was achieved. As to the Level 2 Success Fee, this was not a case in which "success" meant merely the recovery of damages, but quite the reverse, since the trigger was either the Trigger A Amount in the Main Action or the Trigger B Amount across the Chancery Cases in which AG were instructed. In Mr Bacon's submission, that was support for the proposition that the CBA was not unbalanced in AG's favour. On the contrary, it had suited Mr Berezovsky to be required to pay only a substantially reduced fee immediately and for any increased sum to be deferred conditional upon a successful result. Put another way, the CFA via its differential terms met his cash-flow difficulties and the arrangement enabled Mr Berezovsky to continue to fund the complex litigation in which he was involved. As such, the CBA was neither unfair nor unreasonable. For those reasons, its terms should be enforced by an order that the Administrators pay AG the outstanding fees in full.
34. As to the application of s.61(4)(B), Mr Bacon's point is simple. Mr Berezovsky received the invoice for the Reduced Fee in his lifetime, he took advice about its reasonableness from his Client Team, he negotiated various reductions, he paid the fee. In these circumstances, where the client has expressly approved the charges and discharges them, s.61(4)(B) is simply not engaged. The fact that part of the Level 1 Success Fee and all of the Level 2 Success Fee remain outstanding makes no difference since they are simply the balance of fees that Mr Berezovsky had expressly approved in his lifetime and paid. In short, s.61(4)(B) has no application here.

(b) S.73 Charge

35. In the event that I make an order to enforce the CBA under s.61, Mr Bacon submits that AG is entitled to a charge over the funds recovered in the Main Action under s.73 of the Act pending payment of their bills, ahead of the resolution of any competing claims to the money between the creditors and beneficiaries of Mr Berezovsky's Estate. The case advanced on behalf of AG is short and to the point: funds have been recovered for Mr Berezovsky through the instrumentality of the firm and it is trite law that a client or third party should not enjoy the benefit of the solicitors' labours without paying for them. There are, in Mr Bacon's submission, a long line of authorities which all support the proposition that AG's entitlement to a charge emanates from a right over "property" as defined in s.73 (here a chose in action) which arose prior to Mr Berezovsky's death and his subsequent insolvency. In so far as the Administrators have argued that for any right to arise, it could only do so after Mr Berezovsky's death, in Mr Bacon's submission they are mistaken. It is his contention that the right to the charge is a pre-existing right which arose at the date of the settlement and not upon receipt of any funds payable under its terms, and which is exercisable over the money now held by the Administrators.
36. On Mr Bacon's case, the genesis of the solicitor's entitlement is to be found in Haymes v Cooper [1864] 33 BEAV.431, in which Sir John Romilly MR said this:-

"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.

It is not a question of priority, because it is an existing equity of the solicitor, which could not be divested by any assignment by the client. If a sum of £1,000 were recovered for A.B. by the exertions of his solicitor, and A.B. assigned it to C.D., who obtained a stop-order on the fund and gave notice of it to the Accountant-General, then although C.D. would have priority over other incumbrancers who had not got a stop-order, yet he could only claim that which the client could give him, namely, the fund subject to the solicitor's right. Again, it is not a question of notice, because every man who knows there is a fund in court, knows also that it is liable to the lien for costs of the solicitor, through whose exertion the fund has been obtained, and the assignee has the benefit of those exertions as well as the assignor … 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 ..."

37. Haymes was followed by Guy v Churchill [1887] 35.D CH 489 (at 491) when Cotton LJ said this:-

"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."

38. It is Mr Bacon's submission that where, as here, there has been an intervening insolvency, it makes no difference to the entitlement to or to the validity of the charge. In Guy v Churchill, the Claimant had lost at first instance and paid the Defendant £298 for costs. On appeal, the order was reversed and the £298 repaid to the client which was held to be a sum recovered by the exertions of the Claimant's solicitors. Of that amount, the solicitors sought a charge for £165, being the costs of the appeal as between the parties, together with a further sum representing the costs as between themselves and their own client. Notwithstanding the fact that between the trial of the action and the hearing of appeal, a petition in bankruptcy had been presented against the Claimant, the Court of Appeal had upheld the entitlement of the solicitor to a lien over the £298 in respect of its costs, with the surplus to be paid to the Official Receiver. It follows, Mr Bacon submits, that Guy v Churchill is authority for the proposition that the insolvency of the client has no bearing on the solicitor's entitlement to his charge under s.73 and since AG's right to the charge pre-dates any charging order, the making of such an order would not of itself comprise a disposition of property susceptible to the avoidance provisions under Section 284 Insolvency Act 1986. Mr Bacon further submits that Section 284 is of no application anyway since:-

i) No insolvency administration order has yet been made, and

ii) The charging order would be made with the consent of the Court (see his skeleton, paragraph 38.2).

39. The fact that such a charge might adversely affect other creditors such as residuary legatees, is, in Mr Bacon's submission, also irrelevant. He relies on Clutterbuck v Bradford [1945 ] CH 61, in which the court had been invited not to make an order under s.69 of the 1932 Act (as s.73 then was) on the ground that it would cause hardship to the residuary legatees who had already obtained a garnishee order nisi before the application had been made. At paragraph 67, Lord Greene MR had said this:-

"The next, and last, point with which I have to deal with is this. It is said that under the section a solicitor is entitled to a charging order, not as of right, but only as a matter of discretion. That, no doubt, is true, but it is, I think, right to say that prima facie a solicitor is entitled to his charging order if he satisfies the requirements of the section, and that some good reason must be shown for depriving him of it. It has been held in many cases that some conduct of the solicitor may make it unjust to give him this form of relief. In the present case it is said that to make an order in favour of the applicants will be a grave hardship on the residuary legatees … True that in the end the position of the residuary legatees, assuming they do not recover their costs, will be that their fund will have been depleted by payment of the costs now in issue, while they personally will be unable to recover from Colonel Blake their costs of the first application. That may be unfortunate, but the question we have to decide is whether their misfortune is sufficient to justify us in withholding from the solicitors the right to which prima facie they are entitled. I do not propose to assert as a matter of principle that the discretion should be exercised against the solicitor only in cases where some conduct of his own makes it unjust to give him the relief asked for. That, I think, would not be the proper course to take in view of the language of the section, but I think I am entitled to say that, in a case where no conduct of the solicitor was involved, it would require very exceptional circumstances to justify the court in refusing to the solicitor that security in respect of the fruit of his labours to which he is prima facie entitled. In the present case, hardship though it be to the residuary legatees, I do not find any such circumstances and, in my opinion, that point also fails."

40. Mr Bacon submits that where, as here, there has been a settlement agreement and a substantial payment made to the solicitors, the fact that hardship might be caused to other creditors of Mr Berezovsky is not a ground upon which to refuse to make the order, nor does it preclude the court from dealing with the assets in the estate. It is relevant too, that no issue arises here about AG's conduct which might give rise to any departure from the norm that the solicitor should be paid for his labours in recovering a fund on behalf of his client.
41. So far as the right itself to a charge is concerned, Mr Bacon contends that were such an order to be made, this would not be conferring a new right but, on the contrary, merely enforcing a pre-existing right. In these circumstances, where, as here, such a charge is in respect of an already existing right, it ranks ahead of other creditors since without the labour expended by the solicitor, there will be no property or money recovered in respect of which any other creditors to the estate can lay claim - see Scholey v Peck [1893] 1 CH 709 at 7/11 where Romer J said this:-

"I hold, therefore, that the solicitors are entitled to the charge for which they ask, not only against the Plaintiff, but also against the mortgagee, who is taking the benefit of the action, and over whose mortgage they must have priority. The charge will include their taxed costs, charges and expenses properly incurred in preserving the property …"

42. Mr Bacon submits that it would be odd if that were not the case since in circumstances such as these where the client has financial difficulties, the need for recognition of the solicitor's rights to a charge is even more acute.
43. Mr Bacon places particular emphasis on the decision on Re: Born [1900] 2 CH 433, in which, he contends, Farwell J also recognised the pre-existing right to a charge in circumstances where there had been an insolvency. At page 435 the Learned Judge said this:-

"It is also contended that, having regard to the winding up, I ought not now to give the applicants a charge under this statute. But though this application is under the statute, it is very material to consider whether, if I make a charging order, I am thereby giving the applicants a new right, or merely enabling them more cheaply and speedily to enforce a right they already possess. Now, it is plain that they have a common law lien on the company's share of the fund in court, the amount of their costs. It would be monstrous if this were not so, as the company would never have recovered the money without their exertions. It resembles the case of debenture holders who have to allow a liquidators' costs when they take the benefit of his exertions and it is clear that justice calls for such a lien. Now this common law lien has not been abrogated by the statute – Haymes v Cooper- or affected by the winding up, and all I am really asked to do is to give the statutory charge in aid of the already existing common law lien, which is prior to any right of the any official receiver or liquidator"

44. It follows, Mr Bacon submits, that at common law, a solicitor is entitled to a particular lien, which is capable of being actively enforced on a fund or on the fruits of a judgment recovered by his exertions, and that the common law prevails notwithstanding the bankruptcy of the client. In this context, it is immaterial whether the money is in court or in the hands of the solicitor and it matters not either that funds may have been received after the insolvency (see Hammonds v Thomas Muckle & Sons [2006] BPIR 704) in which HHJ Langan QC stated that he had "searched the cases in vain for any statement of principle to the effect that the solicitor's lien is restricted to funds received before the insolvency". Having then referred to Re: Meter Cabs Ltd [1911] 2 CH 557, the Judge had said this:-

"I hope that he [counsel] will not think me guilty of any disrespect if I do not rehearse them [the authorities] here. Most are examples of solicitors after insolvency of a client successfully enforcing a lien against funds which had been received prior to the commencement of the relevant bankruptcy or liquidation. That is, of course, the common situation. Prior to insolvency, a solicitor will often have had no reason to suppose that he was at risk of being unpaid and hence no reason to go against damages or other funds which had come into the hands of the client … Assuming in favour of Mr Marks [counsel] that the commencement of the administration is indeed the cut-off point, one should ask whether Hammond's lien was in existence at that date. That depends on whether there was some property, be it a fund of money or a chose in action, to which the lien could attach."

45. Here Mr Bacon asserts that the right which has arisen is a chose in action which necessarily will not be property or money in the solicitor's possession satisfying the features of a common law lien. In his submission, it makes no difference. He relies on Fairfold Properties Ltd v Exmouth Docks Co Ltd (No 2) [1993] CH 196 in which the court held that property in s.73 was to be construed widely and would encompass a chose in action including an order for costs where no taxation had taken place. In these circumstances, it is Mr Bacon's submission that it is not the receipt of the money but the making of the agreement under which the money becomes payable that is the key. Here that had all taken place long before the insolvency proceedings had been commenced and that whilst he accepts that AG's lien had not been possessory, in the sense of holding the funds, a chose in action had arisen in AG's favour when the case was settled. For that reason, AG is entitled to its charge.
46. For all these reasons, Mr Bacon submits that the court need not be concerned about the possibility of other proprietary claims over the settlement monies, be they good or bad, save that the fact that the estate has been declared insolvent is all the more reason for granting the charge so that other creditors do not receive the benefit of AG's labours for nothing. As regards those creditors, since AG is a secured creditor, there is no question of gaining any illegitimate advantage over unsecured creditors. AG is entitled to the protection of the charge in priority since without the firm's services, no fund would be available for distribution to anyone.
47. Mr Bacon further submits that there is no difficulty about the charge attaching to the Level 1 and Level 2 Success Fees. The reason for that is that they relate to work done in the Main Action. The amount, if payable, is directly referable to the work done and whether it produces an outcome that provides for a "Benefit" as defined. There is no reason whatsoever to distinguish between the Reduced Fee, the Level 1 and the Level 2 Success Fees since they are all part of the same remuneration for "work conducted" under the CBA which AG undertook on Mr Berezovsky's behalf. Each success fee is a proper and legitimate part of AG's remuneration for its work in the Main Action exceeding the Trigger A Amount and AG is entitled to protection in respect of the fruits of its labours. In this respect, Mr Bacon draws attention to the fact that the section in the Act draws no distinction between base costs and additional liabilities.
48. In so far as the Act refers to the solicitor's "assessed costs" it is Mr Bacon's submission that there is no need for a detailed assessment before the s.73 charge can be ordered. He relies on Fairfold Properties Ltd, where Ferris J made an order under Section 73(1)(b) for the payment of certain costs without, at that stage, requiring the amount of those costs to be fixed by assessment. For that reason it would be wrong to adopt a narrow construction to the phrase "assessed costs". Mr Bacon submits that, properly and purposefully construed, those words include determinations under s.61 where the Court holds a CBA to be fair and reasonable so that the sums due pursuant to it are payable. They do not limit the s.73 jurisdiction to bills which have been or will be subject to an assessment under s.70 of the Act.
49. For these reasons Mr Bacon submits that the CBA must be enforced and that AG's entitlement to their fees from the monies recovered from Signature's clients should be subject to a charge under s.73 pending payment, the fact of Mr Berezovsky's insolvency being irrelevant as the entitlement arose long before any insolvency proceedings had been commenced.

PART 8 - THE SUBMISSIONS FOR THE ADMINISTRATORS

(a) The CBA

50. It is the Administrators' case that there is insufficient certainty as to the terms of the retainer as set out in the Original Letter and the October Letter for it to be a CBA. In this context, Mr Atherton relies on the judgment of Lord Denning MR in Chamberlain v Boodle and King [1982] 1 WLR 1443, 1445 B-D, where he said:

"… It seems to me that an agreement in writing can be contained in letters. But the letters ought at least to be signed by the client if he is to be deprived by the agreement of his right to tax. Further, the agreement must be sufficiently specific – so as to tell the client what he is letting himself in for by way of costs … What rate is to be charged? And for what partner? Of what standard? … An hour for associates who may be involved. Which legal executives? Of what standard? Which associates? …Which is left completely uncertain by this agreement. Then there is the hourly rate. That must depend upon the skill and expertise of the individual partner or associate. A skilled partner can do the work in half the time of a slow partner. Is the client to be charged double the rate because a slow partner has been put on the case?"

51. Here, it is not the Administrators' case that the agreement is void for uncertainty, but it is their contention that the terms of the letters are insufficiently certain to render it capable of being characterised as a CBA. Mr Atherton relies on Wilson v Specter Partnership [2007] EWHC 133 (Ch) at paragraph 16(b), where Mann J identified the relevant issue in that case as whether the "terms as to charging" recorded in the agreement left "an element of uncertainty". Mr Atherton submits that if the remuneration terms in a retainer agreement include elements of uncertainty, then the document cannot be a CBA: that is the position here, he says, because clause 3 gives AG an entirely open ended right to increase hourly rates each year. Rather than saying "which we will agree with you", clause 3 simply states "which we will discuss". There is no indication by how much or on what basis any increase in hourly rates will be implemented. In so far as the identity of the fee earners is concerned, the criticism is two-fold. First, Clause 3 gives no indication about the partners' seniority, their skills or disciplines. Second, there is insufficient detail about the departments in AG which might be called upon for input, still less any information about the solicitors who would then become involved, their grades, rates, seniority, and so on. The combination of these factors Mr Atherton, submits, renders the retainer insufficiently certain to be a CBA.
52. So far as fairness and reasonableness under s.61(4) of the Act are concerned, Mr Atherton submits that the Court ought not to conclude that the retainer is, in all respects, fair and reasonable so that it should be enforced. He challenges the reasonableness of the CBA having regard to Mr Bacon's case that the risk to AG was that the firm would be paid only one half of their usual fees in the event that the criteria for Level 1 or Level 2 Success were not triggered. Mr Atherton points out that under that arrangement, Mr Berezovsky was contractually bound to meet the Reduced Fee so in reality, only the balance of 50% of the firm's basic charge was at risk. Taking that factor into account, it was necessary to have regard to "the costs at risk" when considering the reasonableness of the success fee in a retainer which provided for a discounted fee (see judgment of Dyson LJ in Gloucestershire CC paragraph 28 at E). Since, win or lose, AG would recover the Reduced Fee, it followed that at 100%, the success fee was excessive and unreasonable. Moreover, the Level 2 Success Fee, if achieved, meant that AG would recover double their ordinary charges in circumstances where Mr Berezovsky was obliged to pay 50% on basic fees whatever the result of the litigation. Mr Atherton expresses the position thus in his skeleton argument [19] "This Success Fee is twice what can be justified as reasonable, because (as already noted) only half the Basic Fee was ever at risk". For that reason, he submits that the agreement should not be enforced as a CBA.
53. Mr Atherton also advances the Administrators' concerns about how Mr Berezovsky's agreement to the retainer was given in the first place. The Administrators are not satisfied that AG has established that the terms were fair to Mr Berezovsky : nowhere in the material before the court, it is said, has AG adduced any evidence, correspondence or attendance notes to demonstrate that Mr Berezovsky fully understood the terms of business that he was signing. Although it is correct that he signed both the Original and October Letters, the signature clause merely contains pro forma wording that "I confirm that the matters set out in this letter were explained to me orally by an independent solicitor". It is of significance, Mr Atherton submits, that no evidence has been led to support the assertion by Mr Hastings that Mr Berezovsky received any independent advice and if he did, the quality or extent of it.
54. As to the hours worked, Mr Atherton draws attention to the fact that under s.61(5), even where the amount agreed under a CBA has been paid, the Court can re-open the agreement provided that special circumstances can be shown. Here he contends that the Court ought to enquire into the hours worked and whether they were excessive, they being an essential component of this particular success fee having been calculated as a multiple (100%) of the Basic Fee, which itself is defined by reference to hours worked.
55. In so far as it is open to the Court to make an order under s.61 at all, it is the Administrators' case that the jurisdiction to do so is limited to CBAs where the agreement provides for the solicitor to receive and for the client to pay a fixed amount under the agreement. Where, as here, the CBA does not fix the amount payable but, on the contrary, provides that the amount due is to be calculated by reference to the hours worked at an hourly rate, Mr Atherton submits that the most that the Court can do is to make an order for payment in accordance with the terms of the agreement, that is to say of a sum based upon a reasonable number of hours worked. It follows that even if the Court were to be satisfied that (i) the Original Letter and October letter are a CBA, and (ii) that it should be enforced, before doing so, there must be a determination under s.61(4A) and (4B) of the reasonable hours worked, because Mr Berezovsky's liability is not in the fixed sum of £12,663,822.95, but only for an amount reflecting those hours reasonably worked.

(b) The s.73 charge

56. Mr Atherton submits that the central issue is whether the making of an order for a charge under s.73 would create new rights in AG's favour or whether to do so would merely give effect to a pre-existing right. The Administrators' contention is that any charge would create a new right since AG has no security in the fund (and therefore no right of priority) until the grant of the charge itself.
57. Mr Atherton draws attention to the distinction between a common law lien and an equitable lien (more commonly known as a "particular" lien). In respect of the former, it is a requirement that the solicitor must hold property or money belonging to the client in respect of such a lien. The grant of a charge over such a lien has particular advantages over the mere holding of property or money, in that such a charge carries with it the right to apply for an order for sale and the ability to discharge sums owing to the solicitor from the subject matter of the lien. In the present case, no common law lien has arisen because AG has never held the fruits of the litigation (being the $Amount Y) resulting from the firm's labours. All that AG have had is a particular lien, that is to say the right of the solicitor to go to court and ask for the fund to be charged - see James Bibby Ltd v Woods & Howard [1949] 2 KB 449, 453 to 454, confirmed by Hobhouse J in Halvanon Co Ltd v Central Reinsurance Corporation [1998] 1 WLR 1122, 1129C (who also cited the earlier cases of Mercer v Graves [1872] L.R. 7 QB 499 and Mason v Mason [1933] P.199 (CA)) and explained by Christopher Nugee QC in Clifford Harris v Solland International Ltd [2005] EWHC 141 (Ch) in the following way:-

"… Although commonly referred to as a lien, the solicitor's right, whether under common law or statute, is not a true lien, which can only exist in the strict sense where a person claiming the lien has the property which he claims to be subject to the lien in his possession. Thus a solicitor also has at common law a general lien over his client's papers or other property in his possession, which is a true retaining lien; but the so-called lien over property recovered in proceedings is only a claim or right to ask for the intervention of the court for his protection …"

58. What follows, in Mr Atherton's submission, is that AG does not have an existing right in the settlement funds and until the grant of any charge under s.73, the firm merely has an inchoate entitlement to seek the aid of the court in equity to enforce payment of the unpaid bills against Mr Berezovsky's estate. Since AG's case is predicated upon the basis that it already holds pre-existing security over the settlement funds, that is an assumption that is erroneous because no such right will arise unless or until a charge is granted under s.73. In short, a particular lien cannot create an immediate right of security over a fund that is not in the possession of the solicitor and here the right to be paid only arose on recovery being made and received by Mr Berezovsky, that is to say by his estate in March 2014. In so far as funds were received before that date (the £Amount X for example), they were paid away to meet liabilities and at that point, there ceased to be anything upon which the lien could bite.
59. Mr Atherton submits that the court should not exercise its discretion to grant such a right of security. First, this is not a case where the client has tried to evade paying his solicitors as was the situation in Clifford Harris. On the contrary, here the estate is insolvent following the death of Mr Berezovsky, and in these circumstances the Administrators must abide by the applicable provisions of the Insolvency Act 1986 and of the Insolvency Rules 1986 as regards the rights of secured and unsecured creditors. Second, the grant of a charge would place AG in a better position vis a vis Mr Berezovsky's other creditors than it currently enjoys, by creating a new right as a secured creditor which would rank in priority to the rights of the general body of unsecured creditors. Mr Atherton submits that that is not, nor can it be the purpose of s.73. Third, the grant of a charge which has the effect of preferring AG over other creditors of Mr Berezovsky's estate, would be a disposition of a proportion of the settlement funds and as such, would be void under Section 284 of the Insolvency Act 1986 in the event that an insolvency administration order is made over the estate. If that happens, the date of the presentation of any petition for such an order and the making of it, would be deemed to be the date of Mr Berezovsky's death - see Article 3 in paragraph 12 of Part II of the Schedule to the Administration of Insolvent Estates of Deceased Parsons Order 1986. It follows that even if a charge were to be granted, it would simply be avoided as soon as the estate enters into formal insolvency. Fourth, any disposition of the assets of the estate can only be rendered effective if validation relief were to be sought and obtained by AG. For a validation order to be granted, AG will need to demonstrate that the transaction will be beneficial to or will not prejudice the interests of the estate's other creditors – Practice Direction : Insolvency Proceedings [2012] para [14.8.8] quoting Denney v John Hudson & Co Ltd [1992] BCC 503 (CA) and Re Fairway Graphics Ltd [1991] BCLC 468. That is not a realistic proposition. The payment of the balance of the invoiced fees will provide no benefit to the creditors of the estate and merely reduce the amount of money available to pay other proprietary claims. Fifth, where, as here, the court is aware of a petition for the making of an insolvency administration order, the court should adjourn the application pending the outcome of the hearing of the petition, alternatively, these proceedings should be stayed.
60. So far as the case law relied on by AG is concerned and in particular Mr Bacon's reliance on Re: Born, Mr Atherton observes that Farwell J believed that he was dealing with solicitors who had a common law lien over a fund in court for the amount of their costs. That is to be contrasted with the position here, where AG has never had a common law lien over the funds in respect of which it now seeks a charge. It follows that in Re: Born, the grant of the charge ordered by Farwell J did not create any new rights, and in so far as Mr Bacon has argued that Re: Born is authority for the proposition that a charge can be granted post-insolvency in support of a particular (as opposed to a common law) lien, the reality is that it does not do so : this is because Re: Born is limited to common law liens where pre-existing rights have already arisen. In any event, Mr Atherton submits that the case has an oddity which is that Farwell J was satisfied that there was a common law lien, even though the recovered property was in court and not within the possession of the solicitors. In these circumstances, it is Mr Atherton's case that Re: Born ought to have been decided on the basis that the court should have ordered that no money was to be paid to the client out of the funds in court, if to do so would have deprived the solicitors of their rightful fees. In other words, the court did not need to award the charge in order to give the solicitor the protection needed for his unpaid bill. That is exactly the situation which arises here, he says, where the Administrators have already indicated (by letter dated 13 October 2014) that no money will be paid out of the funds they hold without 28 days notice being given to AG. That is protection enough.
61. So far as Mr Bacon relies upon the decision in Re: Meter Cabs Ltd, Mr Atherton makes the observation that the lien in that case had been correctly classified as a common law lien since the recovered property was within the solicitor's possession at the relevant time. That is not the situation here since AG cannot rely upon a common law lien based upon possession of the settlement funds.
62. As to Hammonds v Muckle & Sons Ltd, that case concerned permission to commence an application under s.73 notwithstanding the fact that the client company had entered into administration. In other words, it was a pre-permission hearing and not the final determination of whether or not a charging order should be granted. In these circumstances, taken at its highest, it is Mr Atherton' submission that Muckle can only stand for the proposition that, at the time, the merits of the s.73 application were sufficient to justify the grant of permission for the application to be made. No determination had taken place of the substantive application for the granting of a charge.
63. If that be wrong and were the court to find (notwithstanding the decisions in Mason v Mason, Bibby and Halvanon) that a particular lien over a settlement fund does create an immediate security right in property that is not in the possession of a solicitor, Mr Atherton submits that the application should still be dismissed, save in so far as the balance of the Level 1 Success Fee remains unpaid. He contends that on its true construction, the definition of "Level 2 Success" means that there is no entitlement to such a fee until payment, that is to say, in the present case, payment to the Administrators of the $Amount Y in March 2014. Since that payment post-dated Mr Berezovsky's death by a year, it is Mr Atherton's submission that AG's right to the Level 2 Success Fee could not and did not arise until after the start of the insolvency process. In these circumstances, any lien arising upon payment of the settlement funds would constitute a disposition of Mr Berezovsky's property and thereby be void under Section 284 of the Insolvency Act upon the making of an insolvency administration order.
64. If Mr Atherton is mistaken on this point in the sense that Level 2 Success was triggered when the £Amount X was received into AG's client account on 12 October 2012, he contends that thereafter there ceased to be a fund upon which a particular lien could attach, because the money was used to meet other of Mr Berezovsky's liabilities. For that reason, the only time that the entitlement to a particular lien could arise was when the $Amount Y was received in March 2014, by which time Mr Berezovsky had died with the result that the insolvency consequences under the Insolvency Act 1986 now apply to AG's claim.
65. So far as Mr Bacon's submission that it is not the receipt of the money but the making of the agreement that is the critical point at which the entitlement to a charge crystallises is concerned, Mr Atherton contends that the CBA operated in a different way : his case is that under the terms of the agreement, the moment of crystallisation was postponed until the settlement funds were actually received. That was a matter to which had AG agreed, or alternatively, the firm had waived its case on crystallisation at the date of settlement. All of this is plain, he says, from the definition of Level 2 Success in the CBA which refers to the "recovery" of assets with their value to be taken at the date of that recovery. That means that the right to the success fee did not arise until receipt of the $Amount Y in March 2014, after the insolvency process had begun and thus any charge would be void. That can be contrasted with the position in Born where the common law lien pre-dated the client's winding up so the solicitor could take his charge unaffected by the insolvency.
66. Even if the court were minded to make a s.73 charge, Mr Atherton advances a further reason why it should not attach to the Level 2 Success Fee. He submits that it is not a reward for work completed, but, on the contrary, represents a lump sum bonus payable upon success. As such, it did not require the expenditure of labour and services over and above the work actually done nor did it form part of the work AG undertook in order to obtain the fruits of the litigation. The funds already received, even excluding the unpaid basic fee, represent proper remuneration for work the firm has concluded on behalf of Mr Berezovsky and in so far as the court is able to exercise discretion, it should not do so in AG's favour at the expense of other creditors of the estate by granting a s.73 charge in respect of a success fee that does not reflect work done by AG but is merely a bonus.
67. Finally, Mr Atherton submits that no charge can be granted under Section 73(1)(a) except over "assessed" costs. Here the costs have not been assessed by the court and accordingly, if and to the extent that it is AG's case that the costs claimed ought not to be subject to an assessment, then by the same token AG cannot be entitled to seek a charging order in respect of those costs which have not been assessed.

PART 9 - DECISION ON THE CBA

68. In paragraph 5, I mentioned that I would need to address whether the retainer between AG and Mr Berezovsky was a CBA or a CFA and whether it mattered. The Administrators' position is that this was a CFA and that, accordingly, the provisions of s.59 - s. 61 of the Act have no application. Mr Wood (Wood 1 - paragraph 15), observes that the application is to "enforce the discounted CFA" and throughout his skeleton argument, Mr Atherton refers to "the CFA" and not to " the CBA". For AG, any reference by Mr Bacon to the retainer in his skeleton argument is to "the CBA". If Mr Atherton be right, it is correct that ss.59-61 will not be engaged since they apply only to CBAs and not to CFAs, so AG's application for enforcement will fail at the first hurdle.
69. In my judgment, the terms of the retainer between AG and Mr Berezovsky are evidenced in a CBA which is, in principle, eligible to be enforced under s.61 of the Act. Although it is right that the October Letter is headed "Discounted Conditional Fee Agreement", the body of the letter explains to Mr Berezovsky in clear terms that although the Original Letter, the October Letter and the Schedule thereto constitute a CFA, "…this is a Contentious Business Agreement". The letter continues at paragraph 12 to explain that because the agreement is a CBA, Mr Berezovsky's rights under the Act are limited by ss.59-61. In doing so it would have been plain to Mr Berezovsky as advised by his Legal Team, that this was a different type of retainer to one in which he would have an absolute right to have the charges assessed by the court under s.70 of the Act if he wished to do so.
70. I consider that here would be no purpose in telling Mr Berezovsky that that was so, unless the document was just that, a CBA. The fact that, as a term of the agreement, there is a mechanism under which AG's fees are to be discounted unless "Benefit" and "Success" as defined are achieved, does not make the agreement a CFA, or expressed differently, not a CBA. Whilst I accept that it is not necessarily the case that just because a document says it is a CBA, that it must be a CBA and that regard must be had to "the substance" and not merely " the form" (see Specter paragraph 14), here I am in no doubt that the terms I have mentioned provide sufficient evidence of the former. It follows that I am satisfied that the retainer which Mr Berezovsky signed was a CBA and that in principle, the court has jurisdiction to enforce it under s.61 of the Act.
71. Whilst it is not part of their case that the entire retainer was defective and therefore unenforceable, the Administrators have advanced alternative challenges to its validity by reference to the manner in which the CBA was executed. They cast doubt on AG's explanation that the agreement was properly explained to Mr Berezovsky and that he took independent legal advice as to its terms in accordance with AG's recommendation to do so.
72. I prefer Mr Bacon's submissions on this point. As he explained, Mr Berezovsky was an experienced man of business and whilst the terms of the retainer may have been unusual and the fees significant, Mr Berezovsky had a team working for him including lawyers, whose brief included the task of providing advice about legal documents. In my judgment, the evidence of Mr Lindley is both significant and persuasive when he said this on day 14 of the Abramovich trial:-

"In 2008, November 2008, Mr Berezovsky asked me at – I think it was at his mother's birthday party – whether I would assist him in finding a firm of lawyers that would be prepared to take over the conduct of the Roman Abramovich litigation from Cadwaladers. So I spent some time looking into this and the result was the appointment of Addleshaw Goddard. I think that they were appointed in – I think it was December, early December 2008.

So with regard to their appointment, I negotiated their terms of business. Moving forward, we had discussions in terms of the personnel that were going to work on these cases. I also had some input in terms of the appointment of the senior barrister team, which resulted in the appointment of Laurence Rabinowitz and Richard Gillis. I have been involved – I would say this is one of my main roles in relation to this litigation, is to review billings, to stay on top of billings. I was responsible for negotiating a CFA which Mr Berezovsky entered into with Addleshaw Goddard. [emphasis added]

I perceive my main role in the litigation is to really focus on financial matters, focus on and use my knowledge of the business, the legal business, to deliver the legal services that have been provided at a cost which is competitive and gets the best deal for Mr Berezovsky."

73. That evidence could scarcely be clearer about the circumstances in which Mr Berezovsky came to enter into the retainer (as an aside, whilst Mr Lindley may have referred to the document as a CFA, I do not think this is of any significance for the reasons given –see paragraphs 69-70 above). It follows that even if I were to have any concern about Mr Berezovsky's signature merely having been put to a pro forma wording, that would be laid to rest by the involvement of the Client Team and the evidence given by Mr Lindley which I have recited above. That evidence has all the more force when it is remembered that it was provided in circumstances where the issue was not whether the documents had been properly explained to Mr Berezovsky, but rather, what role Mr Lindley had played and what responsibility lay with him as his legal adviser. In answering that question, Mr Lindley made it plain that he, as a solicitor, had been responsible for completing the terms of AG's retainer. Put another way, this was not a case where an inexperienced individual had signed a document which he had negotiated himself without the benefit of legal advice. Here it was the reverse: this was an experienced businessman who took advice before signing it. The submission casting doubt about the validity of the CBA arising from the circumstances of its execution, accordingly fails and for that reason, it is unnecessary to address Mr Bacon's case on estoppel by representation.
74. I reach the same conclusion about certainty of the terms of the agreement. Whilst Mr Atherton is right to rely on the decision in Chamberlain as a statement of principle, I am satisfied that the facts which concerned Lord Denning in Chamberlain and indeed Mann J in Specter are not present here. First, the agreement was made in writing, signed by the client and set out the hourly rates etc. In Chamberlain, there is no mention that Mr Chamberlain III had ever signed the letters relied on by his former solicitors as evidence of the CBA, nor that they had given him "… the least idea what he [was] letting himself in for by way of costs" [191 at c.], whilst in Specter there was no signed agreement relating to the specific piece of litigation being undertaken (see judgment paragraph 16a). Second, it is plain from Mr Lindley's evidence to Gloster J that he had been involved in discussions in terms of the personnel who were to be deployed on the case. In difficult and complex litigation such as the Main Action, the ability of AG to call upon specialist expertise when required, is not a term that is either uncertain or unreasonable in my view. Third, as Mr Bacon has emphasised, a clause which permits a solicitor to increase his hourly charging rate (for example in line with inflation) is ubiquitous in solicitors' engagement letters. Here the clause in question added the caveat that any changes would be discussed with Mr Berezovsky before implementation. Again, I see nothing uncertain or unreasonable about such a clause. The Administrators' case on uncertainty accordingly fails.
75. Next, the success fee. The short point here is that win or lose, AG were entitled to be paid and indeed have received, 50% of the fees they would ordinarily would have charged for the case. For that reason it is said that the entitlement to the balance of the "usual" fee for winning something, however small, was unreasonable, and an additional 100% of that fee for recovering either Trigger A Amount in the Main Action or Trigger B Amount in the Chancery Actions, was wholly unjustified. I disagree. To start with, as Mann J observed in the Main Action, "This was a very complex piece of litigation. The trial would have thrown up a myriad of points, both factual and legal. … There were freezing order applications, time summonses, search and seizure applications, disclosure disputes, privacy and redaction disputes, disputes about privilege and many other points, including disputes about what the dispute should be about …". Given these difficulties, many of which as it seems to me, were present here, the risks of AG going part-paid were high. Not only that, the sheer size of the litigation across all the actions would have tied up many of AG's fee earners for significant periods with the possibility that at the end of it all (as proved to be the case in the Abramovich action), the firm would have had to be satisfied with the Reduced Fee and nothing else. Next, it must be remembered that this was a business agreement between people whose work was business and the supply of business services, in which Mr Berezovsky did not have the financial luxury and ability of being able to meet his legal bills as and when they fell due. The commercial solution to that problem was to enter into a retainer which had elements of "give and take" on both sides. For Mr Berezovsky, the CBA gave him the ability to finance the litigation without all the fees having to be paid "up front". For AG, the firm took the risk that if the litigation failed, millions of pounds worth of work would have to be written off, but the quid pro quo for that was that if the actions succeeded, the firm would receive a bonus.
76. Both sides relied on Gloucestershire CC. I agree with Mr Atherton that "costs at risk" and the fact that win or lose, AG would recover the Reduced Fee, are relevant factors to take into account when considering the reasonableness of the success fee, but that is tempered by the fact that that was a case about costs between the parties. The position here is once removed, in the sense that, contrast Gloucestershire CC where it was the paying party saying that the success fee was too high, here we are addressing charges as between solicitor-and-own client under a contractual agreement which has provided for its level. It follows that in accepting Mr Bacon's submission, I am not doing so simply because agreements embodying such terms, in particular that the success fee can be 100%, have been permitted since 1999 under Section 58 Access to Justice Act 1998. On the contrary, in the circumstances as they have been explained to me, I do not consider that the success fee is either unreasonable or unfair, having been commercially negotiated by both sides in the way I have described, so the point fails.
77. Finally in this series of challenges, Mr Atherton submits that even if the court is persuaded to enforce the terms of the CFA, there should first be an enquiry into the number of hours worked in order to be certain that the hours charged are not excessive. In this respect, he draws a distinction between a CBA which provides for remuneration by way of a fixed sum and the case here, where the charges are worked out by reference to an hourly rate.
78. Mr Atherton is correct that AG have already been paid the Reduced Fee and part of the Level 1 Success Fee, in total £9,774,050.18 (including VAT) and that the further £12,663,822.95 claimed is a large sum. In other circumstances, his submission might prove irresistible, given the size of the fee and the number of hours worked (35,573.94 according to Mr Hastings [MRH1 7] paragraph 6.2). However, the position here has the following crucial distinctions. To start with, the invoice for the Reduced Fee was submitted to Mr Berezovsky in his lifetime. It was then scrutinised by his Client Team, as a result of which reductions were made and the bill was then paid. The evidence for the fact that the fees were negotiated is to be found (by way of illustration) in MRH3 at page 136 which refers to "a meeting last week" at which the AG's accounts and disbursements covering May, June and July 2011 were discussed. There is then in MRH3 at page 2, an email from Mr Cotlick to AG dated 22 October 2012 as follows:-

"Thank you very much for your email. It summarises correctly the matters discussed at our meeting on Thursday.

I am also grateful for the confirmation that you agree with the proposal in relation to the payment of the Level 1 Success Fee … Best regards. Michael"

79. I shall not set out the contents of the e mail to which Mr Cotlick was replying but it is clear that it was written following a meeting at partner level, being one of many such events, which he attended at AG's offices on 19 October 2012 for the specific purpose of discussing the firm's fees both incurred and going forward. Indeed, it appears that the suggestion that there should be an irrevocable authority was made by Mr Cotlick at that meeting and that the Irrevocable Agreement had been signed shortly thereafter. Mr Lindley also told Gloster J that one of his main roles had been to review billings (see paragraph 72 above).
80. In my judgment, those steps having been taken, the bill and by implication the hours worked, were thereby approved and, by the same token, so were the success fees. I say this because the Level 1 and Level 2 Success Fees are simply the contractual balance of charges which had already been approved by the client and paid. Not only that but Mr Cotlick's e mail dated 22 October 2012 gave express approval to the payment of invoice 307327 for the Level 1 Success Fee. To that can be added the irrevocable undertaking which Mr Berezovsky signed on 23 October 2012 which authorised AG to pay the invoices out of any money then held in, or in future to be paid into the firm's client account. The client having approved the charges, I do not think it can be validly advanced on behalf of the Administrators that this was not a case of "work done" to earn the success fee. For that reason the point fails.
81. That also deals with a further submission made by Mr Atherton by his reference to examples of charges that would be vulnerable to reduction upon any scrutiny being carried out by the court. Those he gave include the fact that the scope of the work under the retainer is said not to cover the conduct of any application for permission to appeal or any final or any interlocutory appeal. Nonetheless, charges were made (by way of illustration) for "drafting emails to House of Lords, drafting letter to Court of Appeal" and "discussions with Mr Kelleher in relation to appeal" which plainly fell outside the definition of the work for which AG was retained. That maybe so but the point fails for the reason I have given, namely that the bill including the charges for that type of work was scrutinised by the Client Team, negotiated down and reflected in the issue of the credit notes. It follows that that scrutiny having been carried out, no purpose would be served by involving the court in a repeat of that exercise in circumstances where Mr Berezovsky, in his lifetime, approved the charges and gave instructions to pay them via the Irrevocable Agreement when sufficient of the settlement funds were received to do so.
82. For all these reasons, I am satisfied that the retainer was a CBA, that its terms were not unreasonable or unfair to Mr Berezovsky and that no purpose would be served were the court to carry out an enquiry by detailed assessment into the hours worked on the case. It follows that, subject to what I have to say below about the s.73 charge, AG is entitled to an order for enforcement of the CBA for the sums claimed.

PART 10 - DECISION ON SECTION 73

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.
85. As I have said, that is but a simple example. In practice there is unlikely to be any need for a charge in the circumstances I have described because the money in question can simply be transferred by the solicitor from his client account to his office account in order to settle the bill, as happened here with the Euro recovery. On 7 September 2012, a substantial amount in Euros had been received into AG's client account, thereby entitling the firm to exercise a common law lien and to apply for a charge if it wished to do so. Three days later, the money was transferred from client account to office account (Supplemental Note paragraph 12), so the need for a charge over the funds in question did not arise.
86. The position is likely to be different where the recovery is an asset rather than money. Suppose the fruits of the litigation include a property for which the solicitor holds the Land Certificate and exercises a common law lien. In that event, the solicitor will need a s.73 charge in order to sell the property and apply proceeds of sale to his bill (Barrett v Gough Thomas (1951) Ch 242 at 250). That will be the case too where the fund recovered through his exertions does not pass into the solicitor's client account, but is held by someone else. It is AG's case that that is why the firm needs the charge here in order to secure sufficient of the $Amount Y to cover the outstanding bills, which sum the firm had been due to receive but had agreed instead to it being paid to the Administrators in their then capacity as receivers following Mr Berezovsky's death.
87. Mr Atherton contends that without possession of the funds, there is no common law lien and in so far as AG may have held funds, any common law lien over them has been lost since the firm cannot have a right to retain property not in its possession (HFW letter 12 March 2015 at [3]). Moreover, such funds as were recovered went out of AG's account so the lien was lost. Accordingly, absent possession, there is not and has never been a lien in the true sense. If that be right, the best that AG can contend for is a particular lien over the fruits of the litigation, which, at most, amounts to an inchoate right to go to the court to apply for a charging order. Until that is done, the solicitor has no right over the fund and where, as here, the application to exercise the right was not made until October 2014, eighteen months after Mr Berezovsky's death, AG does not have any existing right in the settlement funds. Insofar as such a right is asserted now, it is subject Mr Berezovsky's insolvency and to the insolvency regime including s.284 and thus, if made, would immediately be avoided.
88. I do not accept these submissions. I consider that the line of authorities to which Mr Bacon took me are those in which the principles which bind this court are to be found and are to be preferred to those to which Mr Atherton drew my attention. I need to address each in turn in order to explain why I consider that the Administrators are mistaken in their case that no right in the funds recovered can arise in AG's favour unless or until a charge is granted.
89. The issue in a nutshell is whether the Settlement Agreement created an immediate right of security in AG's favour in a fund to be recovered as a result of its exertions, which in the court's discretion, can be enforced by the grant of a charge under s.73 (AG's case) or whether not having the fund in the firm's possession, means that no right in the $Amount Y held by the Administrators can arise in AG's favour until the grant of the charge itself and that since that will be a new right, the consequences of Mr Berezovsky's insolvency will apply (the Administrators' case).
90. I have already mentioned the starting point is Haymes in which it is to be observed that the Master of the Rolls drew no distinction between a common law lien and a particular lien. In that case, the fund to be charged was "a fund in Court". It was not and never had been, in the possession of the solicitor, Mr Field, whose exertions in the suit on behalf of a Mr Jenkins had resulted in the recovery of £91 paid into Court. Nonetheless, the Master of the Rolls was satisfied that Mr Field should have a first charge on the fund in priority to a Mr Cooper who had had notice of the lien. Mr Atherton says that because the case was one involving a payment into court, it is not analogous to the position here and anyway it has no insolvency context. That is true, but the value of the case is that even although at best the solicitor only had a particular lien, the court still granted the charge in priority to Mr Cooper's claim.
91. Would the outcome have been different had Mr Jenkins, like Mr Berezovsky, become insolvent ? I do not think it would. On this point, I was referred to two cases in which a charge was granted notwithstanding the insolvency of the client for whom the solicitor had acted in making the recovery. In neither case had the solicitor held the money in question. In Emden v Carte [1881] 19 ChD 311 (referred to in Meter Cabs), the solicitor (presumably innocently) had acted for an undischarged bankrupt without his trustee's knowledge and had secured a payment into court. On the solicitor's application for a charge, the Court held that the fund in question could be charged with the solicitor's costs up to the time of the trustee's intervention.
92. In Guy v Churchill, the Defendant on appeal was required to repay to the Plaintiff the sum of £298 and the Plaintiff's solicitor thus could not exercise a common law lien over the money. Nonetheless, the entitlement of the Official Receiver to those funds (the Plaintiff having gone bankrupt) was only to the surplus, the solicitor being granted a lien over both the costs taxed as between the parties and his costs taxed as between his firm and the Plaintiff. It follows that in both cases, the fact that this was not a common law lien because the solicitors did not hold the funds to be charged, did not prevent the court from granting a charge in favour of the solicitors over the funds recovered. Nor did the insolvencies defeat the applications for charges in either case.
93. Next in Re: Born, Farwell J also gave the solicitor a charge over a fund not in his possession but one that was in court, finding that all that he was being asked to do was "to give the statutory charge in aid of the already existing common law lien, which is prior to any right of the Official Receiver or liquidator".
94. Mr Atherton is critical of the decision in Born and suggests that it may have been wrongly decided (skeleton paragraph 55) because he contends that there can only be a particular lien unless the solicitor holds the property to be charged. Whilst he accepts that if the lien in that case was a common law lien (in doubt, he says, because the solicitor was not in possession of the funds, the court was), he says the grant of the charge would not have created any new rights in property. It follows that Re: Born can have no application here because AG has only (insofar as the firm has anything at all) a particular lien and an inchoate right to apply to the court for a charge.
95. In my judgment, it makes no difference whether Farwell J was right or wrong in so far as he considered in Re Born that the lien was a common law lien even though the money was in court. The facts in that case were that the solicitor had acted successfully for a limited company in proceedings in which money had been recovered and paid into court. The company had then closed its office and ceased to trade. Three years later, a winding up order had been made on the application of a creditor. The issue which then arose was whether the solicitor should be given a charge over the funds in court in priority to the other creditors of the company and to the costs and expenses of the petitioning creditor and Official Receiver. Farwell J was asked to decide two points : first whether the solicitor had delayed too long. He had not. Second, whether the lien existed prior to the winding up and was therefore unaffected thereby. It had and the solicitor was entitled to his charge in priority. In reaching his decision, Farwell J was referred to Haymes which, as I have said, was also a case concerning funds in court, with the Court of Appeal drawing no distinction between the two types of lien, but nonetheless granting the application for a charge. In my judgment, in having been so referred, Farwell J was doing no more than applying the law in Haymes and the fact that he may inadvertently have referred to a common law lien instead of a particular lien, is neither here nor there. The key point is that Haymes drew no distinction between the two in having granted the charge, holding that only a bona fide purchaser for value could have defeated the entitlement of the solicitor to a first charge over the fund in court.
96. In Mr Bacon's line of authorities, in Meter Cabs, the distinction is that the property recovered (namely £29) was in the hands of the solicitor and accordingly, a common law lien did arise. Having been referred in argument to Emden v Carte and (via Re: Born) to Haymes, Swiffen Eady J said this:

"It is clear that at common law a solicitor is entitled to a particular lien, which is capable of being actively enforced, on a fund or on the fruits of a judgment recovered by his exertions for the costs of recovery, or those immediately incidental thereto …"

97. At 562, the Judge, having accepted that the £29 had been recovered through the exertions of the solicitor, made the following observation:-

"It is true that in Re: Born the money was in court, while here it is in the solicitor's hands. That is perfectly immaterial. His right of lien extends to the costs of establishing the claim in the arbitration."

98. I infer from that that the court was not concerned about whether the solicitor had a common law lien because he held property, rather than a particular lien if he did not. As Swiffen Eady J said, it was "immaterial" to the entitlement of the solicitor to a charge over the fund recovered through his exertions. It follows that at least until Meter Cabs was decided in 1911, the court in granting a charge to protect a solicitor's entitlement to a fund being the fruits of his labour, did not appear to draw any distinction between common law liens and particular liens, notwithstanding the misnomer about nomenclature highlighted by Christopher Nugee QC in Clifford Harris.
99. Next is Re: Fuld [1968] Probate Division 727, in which Scarman J reinforced the point about nomenclature at page 35 at F-G that "the term "lien" is a misnomer", but on my reading of the judgment, he was not troubled by the distinction now urged on me by Mr Atherton. Scarman J's concern was about whether the solicitor should be entitled to his charge where allegations of negligence had been raised by the client. But for that it appears that he would have granted the charge but instead he protected the solicitor's position by directing that there should be no payment out of the fund without notice first being given to the solicitor. It follows that in doing so, the court was giving recognition to the lien, albeit not going so far as granting a charge owing to the allegation of negligence. At 736 at C he also said this:-

"By their application, therefore, the solicitors are claiming, at this stage, the equitable interference of the court. If they are to obtain the assistance of the court, they must first show that there is a fund in sight …"

100. The reference to "a fund in sight" stems from the judgment of Lord Hanworth in Mason v Mason at 214 that the lien in favour of the solicitor "…is one that prevails over a fund which is in sight..".
101. Next there is Muckle. Mr Atherton invites me to be cautious about Muckle since the issue before the Deputy Judge was merely whether permission to commence an application under s.73 of the Act against administrators should be granted. It was not a final determination about whether a charging order should be granted. That may be so, but Muckle is the only modern authority that draws together the issues which have been argued before me and in which the court was referred to authorities upon which Mr Atherton relies such as Bibby and Re Fuld. Moreover some of its facts are on all fours with those here.
102. In Muckle, the solicitor had acted for Thomas Muckle & Sons Ltd in proceedings in which judgment was obtained against a liquidator resulting in the recovery of a dividend of £73,000 odd. However, Muckle itself then went into administration and the dividend was paid to the administrators, against whom the solicitors applied for leave to bring the proceedings under s.73 for a declaration that the firm was entitled to a charge on the dividend. Points taken against the solicitors were that the firm could only exercise its lien and take proceedings under s.73 in respect of funds which the client had received prior to the insolvency. Dealing with that submission, at 14, HHJ Langan QC sitting as a Deputy Judge of the High Court said this:-

"Most [authorities] are examples of solicitors, after the insolvency of a client, successfully enforcing a lien against funds which had been received prior to the commencement of the relevant bankruptcy or liquidation. It is, of course, the common situation: prior to the insolvency, a solicitor will often have had no reason to suppose that he was at risk of being unpaid and hence no reason to go against damages or other funds which had come into the hands of the client. But I have searched the cases in vain for any statement of principle to the effect that the solicitors' lien is restricted to funds received before insolvency. Further, one of the cases cited by Mr Marks is an example of the lien being allowed in respect of a post-insolvency receipt.

15. The case to which I refer is Re: Meter Cabs …"

103. HHJ Langan QC also dealt with the submission that when Muckle went into administration, the solicitor had nothing in the nature of an accrued right which could be asserted against the company, but merely an inchoate and, as yet, unexercised right to apply to the court under s.73 (see again Bibby). That submission was dealt with at 17, when HHJ Langan QC said this:-

"There is, in my judgment, a fatal defect in this approach. It ignores the nature of Section 73 itself, which does no more than provide a procedure for enforcing a right which a solicitor already has a common law (see: Re: Born). Assuming in favour of Mr Marks that the commencement of the administration is indeed the cut-off point, one should ask whether Hammonds' lien was in existence at that date. That depends on whether there was some property, be it a fund of money or a chose in action, to which the lien could attach. The effect of the judgment handed down by Lloyd J on 12 March 2004 was that the company's proof of debt against AA was, as a matter of principle although not of quantification, vindicated. That seems to me to be as close an analogy as one can find to a judgment for unliquidated damages which have yet to be assessed. Such a judgment is, on authority, (The Paris (1896) P97, cited in Fairfield Properties: at 204B), property which is susceptible of being the object of a solicitor's lien. Alternatively, if one adopts the test formulated by Scarman J in Re: Fuld … and asks whether there was a "fund in sight" by the commencement of the administration, the answer must be in the affirmative as a consequence of the decision of Lloyd J. Either way, if the making of an order under Section 73 were to advance the status of Hammonds from that of unsecured to secure creditors, this would not fall foul of the decision in London Flight Centre (Stansted) Ltd v Osprey Aviation Ltd [2002] BPIR 1115. The lien here came into existence before the administration and, as Hart J expressly stated, nothing in the Insolvency Act 1986 "prevents a creditor unsecured at the date of administration order from subsequently becoming secured"."

104. I find Muckle is helpful here. In that case, the fact that Muckle became insolvent and the dividend was paid to the administrators, was not fatal. On the contrary, the solicitor's lien existed prior to the insolvency and could be exercised over the fund subsequently recovered. That is analogous to the position here. Whilst it is right that at the date of Mr Berezovsky's death, funds had still to be recovered in the sense of cash to be paid over, that is not determinative in my view. What matters is that from the date of the settlement, AG had a chose in action to which its lien could attach and a fund was in sight over which it could be exercised. Whilst I recognise that the decision in Muckle was given on an application for leave, in his judgment, HHJ Langan QC carried out a thorough review of the authorities which are relevant, including those relied on by Mr Atherton. Had he instead been dealing with the point other than on an application for leave, it is difficult to see how his judgment would have differed. I consider that that factor should be given more weight than the very limited persuasive value that Mr Atherton suggests that I should give to Muckle.
105. In the result, I accept Mr Bacon's submission that there is a safe line of authority stemming from Haymes that it is not the grant of a charge by the court that creates the right in the fund recovered. On the contrary, the authorities indicate that even if a solicitor does not have a common law lien but only a particular lien, there exists a chose in action over the property recovered or to be recovered if it is "a fund in sight" to which that lien can attach, and the right arises at that moment and not when the fruits of the litigation are received. By this means, as it seems to me, the solicitor enjoys priority ahead of the claims of the general body of creditors, which is exactly the intention of s.73 and its predecessor sections in the Solicitors Acts in force before the 1974 Act.
106. Mr Atherton submits that this is not and cannot be the purpose of s.73 (skeleton 47b), but in my judgment, it would be odd if it were otherwise and if anything, the opposite is true. As I have said, where the solicitor holds the recovered property in money, he is unlikely to have any use for a s.73 charge since it is open to him simply to transfer from his client account to his office account, sufficient of the recovered fund to meet his outstanding charges (see paragraph 84   above). It follows that the need for a charge is more likely to arise where property is preserved and the solicitor requires an order for sale (for example where he holds the Title Deeds) or, where, as here, a proportion of the fund recovered has never passed through the solicitor's client account but is held by someone else, such as the client, or as here, Administrators/Trustees. Where that is the case, the protection Mr Atherton urges on me as being an adequate safeguard for the solicitor, namely the agreement of the Administrators not to part with the fund without giving 28 days notice, would not meet the point. Whilst it might be a comfort against distribution, it would not make the solicitor a secured creditor. On the contrary, he would rank with the general body of creditors who would thereby benefit by enjoying the fruits of the solicitor's labours without having paid the proper price for them. That appears to be alien to the very purpose of s.73 and the intention of the courts that the claim of a solicitor to a fund which only exists through his endeavours, should not be enjoyed by a third party who has paid nothing for the solicitor's exertions in recovering it. On the contrary, Parliament has decided that it is the solicitor who is to have the first payout from the fund in question (where no bona fide purchaser for value without notice is involved). Were the case advanced by Mr Atherton to be correct, on the facts here, that simply would not happen.
107. In my opinion, the point is illustrated perfectly having regard to the circumstances which have arisen in this case. When AG recovered the Euros, it had a common law lien (agreed by the Administrators- see HFW letter 12 March 2012 at 3) but did not need a s.73 charge because the cash the firm held could simply be transferred from the client account into the office account. However, when the $Amount Y was recovered and paid to the Administrators, only a particular lien arose, so the firm did (and still does) need a charge, lest otherwise it will not rank in priority for its unpaid bills over other creditors, who will thereby have benefited at the firm's expense by obtaining a significant recovery at no cost. Giving effect to the authorities relied on by Mr Bacon only makes sense if the right arises when the bargain is struck and not when the recovery is made. Were it to be otherwise, s.73 would be of no use to the solicitor since even with his charge, on an insolvency, he would rank alongside the ordinary body of creditors and the operation of s. 284 would render the charge void. That is what the line of cases stemming from Haymes is directed at preventing in my view.
108. I see no reason why the fact that payment of the $Amount Y post-dated Mr Berezovsky's death should make any difference. Mr Atherton contends that as regards timing, no lien can attach to the £Amount X because that fund has been paid away. Accordingly, the only lien that can arise is over the $Amount Y which was not received until March 2014 and so is tainted by insolvency considerations. That is correct about the £Amount X. It has long gone, but the same is not true about the $Amount Y. In my judgment, that was a "fund in sight" since it formed part of the AP settlement and was an element of the same recovery as that of the Euros and the £Amount X, both of which had been achieved through AG's instrumentality. For that reason, it is a fund to which, in principle, AG's right to payment can attach.
109. In Clifford Harris, Christopher Nugee QC elaborated on what is meant by a "fund in sight". At 21(iv), he said this :-

It is not disputed that the settlement monies are "property recovered or preserved through [the] instrumentality" of CH. Nor is it disputed that CH were entitled to bring these proceedings in July 2004 even though the settlement monies had (it would appear-the actual date is not in evidence) not been paid over. The jurisdiction can be exercised as soon as there is a "fund in sight" (Re Fuld…) and this was undoubtedly the case by July 2004".

110. It can be seen, therefore, that even though the settlement monies had yet to be paid (in that case to new solicitors so a common law lien would not have arisen –see judgment paragraph 16), the s.73 jurisdiction could be exercised because in July 2004 there was a "fund in sight" (following Re Fuld) , even though the settlement monies were not paid until 4 October 2004 (see judgment paragraph 16). Nonetheless, had it not been for a waiver argument, the Judge "….would have had no hesitation in exercising the discretion in favour of granting them [the solicitor] a charging order" [judgment paragraph 23]. It follows, in my judgment, that Clifford Harris also supports the proposition that the right of the solicitor over the security to be charged arises when there is a "fund in sight" rather than when the fruits of the solicitor's labour are paid, the Judge in that case indicating that he would have had no qualms about granting the charge, even though Clifford Harris had only a particular lien and not a common law lien.
111. However, Mr Atherton submits that whether or not there was a "fund in sight" is an irrelevance here because under the terms of the CBA, AG waived or varied the moment of crystallisation until the money due had been paid. I disagree. According to the definition of Level 2 Success, the Benefit (as defined) is obtained when the settlement is achieved. The recovery of money is merely the consequence of that settlement. There is nothing to suggest (and the October Letter does not say so), that because the date(s) of payment post-dates the date of the agreement, the effect of that is that the right to a lien will not arise until the money is received. For that reason I consider there being "a fund in sight" is not only relevant, but also a crucial factor in this case.
112. As I have said, Mr Atherton also cited his own line of authorities in support of his arguments on pre-existing rights, (namely that there were none) which I must also deal with. He relies upon the decisions in Bibby, Mason v Mason and Halvanon and at paragraph 56 of his skeleton argument he says this:

"Even if the above submissions are not accepted and it is held that Lord Goddard CJ, Hobhouse J and the Court of Appeal in Mason v Mason were wrong, so that a particular lien over a judgment or settlement does create immediate security right in property, even though not in the possession of the solicitor, AG's application for a Section 73 charge, it is submitted, nevertheless ought to be dismissed for the vast majority of its fees claimed."

113. I am certainly not saying, (it would be an impertinence to do so and against binding authority), that the decisions of those eminent judges were wrong. On the contrary, I am sure that they were correct in so far as they related to the facts and issues with which they were concerned. However, as Mr Bacon points out, they are not on point here.
114. Mason v Mason concerned a matrimonial dispute and the ability of the solicitor to go to directly against the husband for payment of the shortfall in costs between solicitor and client. The facts in that case were that the husband's divorce petition had been dismissed with costs. Those he paid into court. An intervener then obtained an award of costs against the wife. The husband took an assignment of those costs. An order was then made for payment of the wife's costs to the wife's solicitors. The husband set the intervener's costs off against what he owed the wife in costs and paid her the balance. Her solicitors then obtained a garnishee order nisi against the husband's bank account on the basis that the firm was a judgment creditor for the amount of the set-off.
115. Lord Hanworth MR with whom Lawrence and Romer LJJ agreed, found that that was incorrect. The wife was not a secured creditor and her solicitors could have no larger right than hers. Since the husband was entitled to rely on the assignment of the third party's debt as a set-off against what he owed the wife, she was not to be treated as having a fund secured to her for payment of any additional amount. For that reason, there was no additional sum over which there could be a lien in favour of her solicitors and no order could be made for payment of any costs to her solicitors in the first instance. As Lord Hanworth MR expressed the position at [214] (which bears repeating) –"The nature of a solicitor's lien is pointed out in the course of that case [Mercer v Graves]….That lien is one which prevails over a fund which is in sight ; the right is one which, so to speak, cannot prevail at large. That being so, there does not appear to be any order which gives a right to the wife's solicitors to come to Court and ask for the garnishee order. The order of 10 March gives them the right to receive the amount of her costs in right of the wife, but they are really the conduit pipe to receive the money and no more".
116. Agreeing, Romer LJ added this at 217:-

"In my opinion, therefore, the wife's solicitors in this case were not persons who had, within the meaning of Order 65 Rule 1 obtained any judgment or order for the recovery or payment of money: it was the wife and the wife only who had obtained such a judgement or order."

117. In my judgment, the facts in Mason v Mason are far removed from those here. The issue there was whether there was a fund or, indeed, a fund "in sight" over which a solicitor's charge could attach. There was neither, in contrast to the position here, where it is not in dispute that a fund has been recovered through the exertions of AG and the issue is simply what entitlement (if at all) the firm has to it. With respect to Mr Atherton's careful submissions, Mason v Mason is not on point here.
118. The reference to Mercer v Graves is to a case about set-off and not s.73 in my view. A judgment had been obtained in Ireland against the plaintiff to which a set-off had been pleaded on the basis that his attorney had conducted an action to judgment and had an equitable interest in the proceeds for costs he was owed for his work. That set-off failed because no authority had been cited to show that the so called lien of the solicitor was equivalent to an assignment or charge on the judgment. Nor had any property been recovered or preserved. It follows that I consider the value of Mercer v Graves is limited since it was not a case about liens in the context of the arguments which arise here.
119. I derive limited assistance from Bibby also. In that case the property recovered or preserved was £90 paid to a judgment debtor. That being so, only a particular lien could arise but it had been the client rather than his solicitor who sought the charge over the fund on the basis that the solicitor was owed a debt. The client's attempt failed before Birkett J and in the Court of Appeal. However, the reason for that was not for want of a lien, but because the application was too late and had never formally been made by the solicitor, only by the client. Had it been pursued by the solicitor before a garnishee nisi had been made absolute, it appears that the outcome would have been otherwise. At 453 Lord Goddard CJ said this - "I will assume that, if the solicitor had in the present case applied to the appropriate court….for a charging order, he would have got one." It follows that the failure to obtain the charge in Bibby had nothing to do with whether or not there was a common law or particular lien and when it had arisen: had the solicitor made the application, he would have "got" the charge even though he had only the latter. It follows that in so far as Bibby is of assistance, if anything it supports AG's case rather than the Administrators.
120. As to Halvanon, I do not consider the facts bear a helpful relationship to those which arise here. In that case, the fund over which the lien was asserted had been paid into an account pursuant to court order in the joint names of the parties' solicitors. It was in issue whether or not the sums in the account were "property recovered or preserved" (1126 at D9) and the matter for decision by Hobhouse J was whether the solicitor asserting the lien could be removed from the account and replaced by a different solicitor. Hobhouse J's answer with regard to the application for the charge, was to hold that the solicitor's interest would be adequately protected by imposing a prohibition on any payment-out without the solicitors first giving their consent, save on an application to the court on notice to the solicitors for that purpose.
121. Whilst it is right as Mr Atherton stresses, that none of the authorities starting with Haymes were cited in Halvanon, in my opinion, that is not significant, persuasive, decisive or indeed surprising. In the first place, the facts are far removed from those here where there is no question of AG giving up being signatories to an account to which they are joint custodians. Second, whether or not property had been recovered or preserved was a matter for argument. That is not the case here where it is agreed that it has. Third, Hobhouse J considered (1131 at H) the authorities relied on by Mr Bacon including Emden v Clarke (cited in Meter Cabs) in which property had been recovered or preserved. That decision in Hobhouse J's opinion was "… clearly distinguishable from the situation which exists in the present case where the plaintiffs have yet to establish any right to any of the money which is in court" (1132 at C). It follows that I do not consider that Halvanon is on all fours with the facts here and even if I am wrong, it is plainly distinguishable for the reasons I have given.
122. For these reasons, I agree with Mr Bacon that the Haymes line of authorities provide a secure route which permit me to reach the conclusion that I have, namely that upon the settlement being reached, AG acquired a chose in action which crystallised upon the agreement and not upon the payment of the money. In doing so, the lien that thereby arose attached to a fund which, although not in AG's possession, was "in sight", so the firm's right to it arose before Mr Berezovsky's death and subsequent insolvency. Thus the difficulties which otherwise would have arisen on his bankruptcy are not relevant or applicable here. That being so, I consider that AG is entitled to a charge under s.73 over the fund pending payment.
123. Should the amount of that charge be the sum which I consider that Mr Berezovsky approved in his lifetime, or is it necessary for there first to be an assessment, as the Administrators have contended – see paragraph 65 of Mr Atherton's skeleton argument? He argues that s.73(1)(a) refers to a declaration that a solicitor is entitled to a charge for his "assessed" costs. Accordingly, it is part of the scheme under the Act that a charge can only be enforced once the court has scrutinised and assessed the costs in question.
124. In my judgment, that submission is in conflict with Fairfold Properties in which Ferris J decided that the court was not bound to make an order for assessment [204 at F]. His decision was followed by Jacob J in Harrods Ltd v Harrods (Buenos Aires) Ltd [2014] 6 Costs LR 975 at 22 in which he said this:-

"Going back to s.73 the language is peculiar. What the court may declare is a charge on any property recovered et cetera, "for his taxed costs". Does that mean there must be a taxation? The court plainly has an overall discretion as to whether a charging order should be made. The provision says "may at anytime (a) make the declaration: and (b) make orders for a taxation".

125. A number of cases show that it would be ridiculous to have a taxation and yet very sensible to have the charge. Ferris J held that "may" applies separately to (a) or (b) in Fairfold Properties…. I do not think that quite solves the problem of the language. The problem is that the court may declare the charge "for the taxed costs". Can it declare a charge for costs which are not taxed?
126. Mr Briggs submits that really, to make sense of this section, "taxed costs" means costs which would be granted on taxation – the proper costs. Sometimes one is driven to construe a provision in such a way that one goes beyond the literal meaning of the words used to a meaning that it is obviously intended to convey. I think this is one of these sections. I think, therefore, as did Ferris J, that there is a discretion whether or not to order a taxation. I proceed on that basis".
127. Given that both Ferris J and Jacob J found that an assessment was not mandatory to the grant of a charge, I decline to exercise my discretion in favour of the Administrators on this point. As I have said above (paragraphs 80 – 81), I do not consider that any purpose would be served in having an assessment. In short, I would hold that following Fairfold and Harrod's, s.73 does not demand that there be an assessment before the charge can be granted, so the point fails.
128. That leaves the question of a stay. The outcome of the application is that upon the grant of a charge, AG will rank as a secured creditor whose right arose before Mr Berezovsky's insolvency and accordingly is unaffected by it. Accordingly, the charge will not be avoided and no validation order will be required and it follows that I see no reason why the money should not be paid out now. The fees were hard earned on AG's part and without the firm's exertions, the creditors could usefully reflect that there would have been no fund over which they can now lay claim. Given too, that but for his death, the money would long since have been paid to AG, I consider it is only just that the firm's bills should be cleared without further delay. The application for a stay is refused.

PART 11 - NEXT STEPS

129. Since the application for the charge has succeeded, I consider that AG should be entitled to its costs. I have seen both sides' schedules. The sums in question are large. They are scarcely susceptible to summary assessment and in any case, the hearing lasted two days so a detailed assessment would be more appropriate. It follows that I propose that there should merely be a payment on account at this stage, in a sum to be agreed if possible, failing that, I shall decide the figure on paper. If the Administrators wish to apply for permission to appeal, I propose also to deal with that on the basis of a written submission which should be very brief. The parties need not attend when this judgment is handed down.

PART 12 - FORMAL ORDER

130. The application succeeds. AG is granted a charge under s.73 over the fund held to the order of the Administrators pending payment of the firm's outstanding bills.

POSTSCRIPT. This is the Official Judgment handed down for publication which contains various amended figures in order to preserve confidentiality about the terms of the Settlement Agreement. An unamended version was handed down in Private. I would like to express my gratitude to counsel and those who instruct them for their way in which they have presented these applications on behalf of those they represent.