Lien won't circumvent disclosure obligations

In Mr David Ellis v John Hodge Solicitors (a firm) [2022] EWHC 2284 (Comm) the Court confirmed that solicitors cannot assert a lien so as to modify disclosure obligations under the Civil Procedure Rules in a claim for professional negligence.

The facts

John Hodge Solicitors (JHS) acted for Mr Ellis in a personal injury claim (the underlying claim). The defendant in the underlying claim made a series of offers, the highest being £200,000. Mr Ellis sought to recover in excess of £500,000. At trial, the Court awarded damages of £11,813.63 – the decision not to accept the offer of £200,000 had disastrous consequences for Mr Ellis. 

Mr Ellis brought a claim against JHS for damages for professional negligence alleging that they failed to properly advise him on the effect of the offers made by the defendant in the underlying claim. The parties were expected to provide initial disclosure at the same time as serving their statement of case under the Disclosure Pilot Scheme (now implemented under PD 57AD).

JHS defended the claim on the basis that Mr Ellis was fully and properly warned of the risks and counterclaimed for unpaid fees. In its defence JHS stated that it was "not able" to provide initial disclosure under the Disclosure Pilot Scheme because it was exercising a lien over its files. JHS acknowledged that its file of papers was highly relevant and offered to provide the file to Mr Ellis' solicitors on the undertaking that they would not disclose the papers to Mr Ellis to preserve some of the lien's value.

The issues

It was common ground that the retainer was terminated by mutual consent on the resolution of the underlying claim, that the file was disclosable as it contained key documents and material which was necessary for Mr Ellis to know whether his case as pleaded could be maintained. 

The Court was asked to decide whether a lien of this nature extended so as to restrict disclosure of the file, pursuant to a disclosure obligation under the CPR, and if so, whether the Court should exercise its power to restrict the right to withhold pursuant to the lien. 

The relevant law

A solicitor has a common law right to exercise a general lien over client's property – that includes documents held by the solicitor. In other words, subject to certain exceptions, a client cannot have access to their documents or money which is subject to a lien.

The Court can interfere with the enforcement of the common law lien on equitable principles. When it does so, the Court should have regard to:

• When and why the solicitor / client relation ended and who ended it.
• The nature of the case and the stage that the litigation had reached.
• The conduct of the solicitor and the client respectively.
• The balance of hardship which might result from the order that the court is asked to make.
• The fact that the value of the lien is likely to be considerably reduced if the file is handed over.

Where a client terminates the retainer, the court will normally make an order obliging the original solicitor to hand over the file to the new solicitors against an undertaking to preserve the original solicitor's lien – as sought by JHS here (a so-called Robins undertaking following the decision in Robins v Goldingham (1872) LR 13 Eq 440). 

However, in all the previous authorities, the litigation in which the lien was being asserted was the same litigation or related to the same litigation. In this case, the litigation in which the lien was being asserted was a different claim involving a different defendant. 

Although not a direct authority, the Court considered Woodworth v Conroy [1976] QB 884 which concerned an accountant's lien, asserted in defence to a claim for delivery up of the accountant's file. Here it was stated that the right of a solicitor to withhold papers from inspection by his client, even in litigation, was recognised as long ago as 1882. This basic right has not been queried. However, the defendant had not simply asserted a lien but had raised a counterclaim for fees, in response to which the claimant alleged negligence in the performance of some of the work. The Court noted that it would be impossible to try the issues raised without evidence being led as to what work had been done and how it was done. The best evidence of this would be in the file and the court would have to assess its content.

The decision

The Court held that JHS had an obligation to disclose its file and Mr Ellis' solicitors were not required to give an undertaking restricting the use of the papers. Of particular importance was:

• The importance of the documents in the file to the issues before the court. Mr Ellis could not fairly conduct the claim without knowing the content of the file.
• The undertaking was unrealistic. Mr Ellis could not properly deal with the issues without knowing exactly what the documents said. The lien would lose its value if Mr Ellis was told the full content of the documents just as much as if he saw the documents himself.
• The obligation under CPR 31.22 not to use documents disclosed in these proceedings for the purpose of other proceedings had the same consequences as the proposed undertaking.
• The fact that JHS counterclaimed for fees was significant. This part of the claim was defended on whether JHS was in fact entitled to the fees claimed, putting the content of the file directly in issue. The risk of prejudice to Mr Ellis, in circumstances where JHS had chosen to bring a counterclaim against him, was a powerful argument for holding that the lien could not be asserted on equitable principles. 

Takeaways

It was striking that the parties were unable to find any authority on the exercise of a solicitor's lien in this context. 

A solicitor with unpaid fees has a potential common law lien over his property, including documents which 'belong' to the client (see the Law Society practice note on the subject of document ownership). 

However, solicitors as officers of the court are subject to its supervisory jurisdiction and the court can therefore interfere with the enforcement of the common law lien on equitable principles. The principles to be applied differ depending on who terminated the retainer. If the client terminated the retainer (other than for misconduct by the solicitor), the client will generally not be able to access any money or property, or inspect any documents subject to the lien. If ended by the solicitor, even with reasonable cause, unless there are exceptional circumstances, the solicitor will normally be ordered to provide the file to the client's new solicitors. 

A solicitor can seek to protect its interests through an undertaking. However, the difficulty in releasing the file to the undertaking is that the lien is likely to be worth very little at the conclusion of the litigation.

This case suggests that solicitors will struggle to rely on a lien to refuse disclosure of their files in a claim for professional negligence brought by a former client.