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In this post, Mark Chapman, Lauren Cousins and Jessica Eaton, all associates at CMS, comment on the decision of the UK Supreme Court in Bott & Co Solicitors v Ryanair DAC [2022] UKSC 8.  On 16 March 2022, the Supreme Court, by majority, allowed the appeal and ruled for Bott & Co Solicitors. The decision concerns the extent of the solicitor’s equitable lien.

Background

The case brought by Bott & Co Solicitors (“Bott”) against Ryanair DAC (“Ryanair”) concerns the extent of the solicitor’s equitable lien, a remedy that has been recognised by the courts for over two hundred years. A helpful history of the lien is set out in the introductory paragraphs of the dissenting judgment of Lord Leggatt and Lady Rose:

“In its traditional form, it entitled a solicitor who assists a client to recover money (or other property) through litigation to recoup the costs of doing so out of the money recovered. Any proceeds of a judgment or settlement will normally be paid to the solicitor’s firm, which can then deduct its costs before accounting to the client for the balance. But if the opposing party pays the money directly to the solicitor’s client despite knowing or being on notice of the solicitor’s interest in the debt, and the client then fails to pay the solicitor’s costs, the court may order the opposing party to pay those costs to the solicitor – in addition to the payment already made to the solicitor’s client.”

For much of the early history of the lien, it was thought that it arose only where there were court (or arbitration) proceedings in existence when the money was recovered. However, following the Supreme Court’s decision in Gavin Edmondson Solicitors Ltd v Haven Insurance Co Ltd [2018] UKSC 21 (“Gavin Edmondson Solicitors SC”), it is clear that the lien can now arise even in circumstances where no formal proceedings have been raised.

The present appeal concerned whether Bott were entitled to the lien to recover the costs incurred for claiming compensation for flight delays from Ryanair on behalf of customers.

The facts that gave rise to the present proceedings are simple. Some years ago, Bott developed an online tool, accessible by their website, whereby delayed passengers could enter their flight information to check whether they were eligible for compensation from Ryanair (and other airlines) in terms of EU Regulation 261 (“Regulation 261”). Regulation 261 applies where a passenger is leaving from or arriving in an EU member state with an EU airline and empowers customers to claim compensation where their flight is delayed, except in certain exceptional circumstances. If Bott’s software confirmed eligibility, and the individual confirmed their desire to instruct Bott on a “no win, no fee” basis to pursue the compensation claim, Bott would then send a standard form letter to the airline to ask whether the claim would be admitted or resisted. If the claim was admitted, Bott would instruct the airline to pay the compensation due into its client account whereupon Bott would deduct its fee and pass on the difference to their client/the delayed passenger.

In 2016, perhaps in response to Bott’s software, Ryanair set up its own online compensation portal whereby it began to compensate Bott’s client’s directly, thereby avoiding payment of Bott’s fee. Bott’s evidence before the Court was that they only had a 30% success rate in recovering their small fee (on average about £95) from their clients who had received their compensation direct from Ryanair. Given the sums involved, it wasn’t financially viable for Bott to pursue their clients in court for their unpaid fees. Bott then brought proceedings against Ryanair claiming a lien over the sums payable by Ryanair to Bott’s clients.

Decisions of the lower courts

The first instance decision handed down by Mr Edward Murray, sitting as a judge in the Chancery Division, rejected Bott’s claim to a lien over the compensation paid directly to Bott’s clients by Ryanair. Mr Murray held he was bound by the decision in Meguerditchian v Lightbound [1917] 2 KB 298 and the Court of Appeal decision in Gavin Edmondson Solicitors Ltd v Haven Insurance Co Ltd [2015] EWCA Civ 1230 that held a lien does not arise where compensation is obtained without the need to issue proceedings. Shortly after Mr Murray’s decision, the Supreme Court decided Gavin Edmondson Solicitors SC and found that it was not necessary for formal proceedings to have been issued for the lien to arise.

On appeal, Bott asked the Court of Appeal to consider whether Mr Murray was wrong to reject Bott’s claim and argued that Gavin Edmondson Solicitors SC now answered the question of lien in its favour.

The Court of Appeal unanimously dismissed Bott’s appeal, Lewison LJ gave the leading judgment, with which Simon and Lindblom LJJ agreed. Lewison LJ held that for the lien to arise Ryanair had to dispute the claim for compensation under Regulation 261 and the act of writing a letter of claim or assisting with an online form was not sufficient for Bott to establish the lien.

Lewison LJ recognised the decision in Gavin Edmondson Solicitors SC, however, he considered that the services being provided by the solicitor “must still be recognisable as litigation services, promoting access to justice”. Lewison LJ considered, by way of reference to the definition of “litigation services” in s 119 of the Courts and Legal Services Act 1990 (meaning any services which it would be reasonable to expect a person who is exercising, or contemplating exercising, a right to conduct litigation in relation to any proceedings, or contemplated proceedings, to provide) and “contentious business” in s 87 of the Solicitors Act 1974 (meaning business done, whether as solicitor or advocate, in or for the purposes of proceedings begun before a court or before an arbitrator. . ., not being business which falls within the definition of non–contentious or common form probate business contained in s 128 of the Senior Courts Act 1981) that for the term “litigation” to apply there had to be a dispute, which could also include arbitration, proceedings under a pre-action protocol, and potentially even in relation to the costs incurred by way of alternative dispute resolution. Therefore, the process undertaken by Bott in claiming for compensation under Regulation 261, being largely administrative and formulaic, did not constitute litigation, and would not allow for an equitable lien until and unless Ryanair disputed the claim for compensation.

Bott appealed to the Supreme Court.

Summary of Supreme Court’s findings

By majority, the Supreme Court allowed Bott’s appeal. The Court held that for the lien to arise, the solicitor must provide services (within the scope of the retainer with its client) in relation to the making of a client’s claim (with or without legal proceedings) which significantly contribute to the successful recovery of a fund by a client.

In reaching their decision, the Court found; (i) there must still be limits on when an equitable lien can be exercised to avoid it arising in non-contentious matters (such as a conveyance); (ii) the Court of Appeal was wrong to ‘fix the boundary’ (i.e. as to when the lien does and does not apply) by reference to statutory definitions; (iii) the key to ‘fixing the boundary’ is to consider the underlying purpose of promoting access to justice and; (iv) the reason for the extension of the solicitor’s lien beyond matters where proceedings have been issued is due to the (relatively recent) development of various forms of ADR – otherwise solicitors would be incentivised to issue claim forms at an early stage to make sure they get paid. That would be contrary to the rationale behind the pre-action protocol and the idea that court proceedings should be a last resort.

Commentary

The test set out above is clearly a wide one and will make it difficult for typical defendants, such as Ryanair, to attempt to cut solicitors out of the process by paying compensation to claimants or potential claimants direct. However, it is important to note that the lien will only apply where the claim has not been admitted by a prospective defendant. In other words, where a prospective defendant has made public their intention to comply with the legal obligation (in this case to compensate delayed customers), then it is unlikely that the lien would be effective as the solicitor would probably find it difficult to prove that any subsequent assistance made a “significant contribution to the successful recovery of a fund by a client”.  

Interestingly, Lord Briggs (who joined the majority), noted that

“the simple test proposed by Lady Arden and Lord Burrows may occasionally involve the recognition of the equitable lien in wider circumstances than is strictly justified by its animating access to justice principle. It may also confer upon solicitors a proprietary security for payment for services with no very sophisticated legal content which other providers of the same services do not enjoy, simply because they are not solicitors. The facts of this case illustrate both those concerns. Bott went on providing their flight delay service to Ryanair’s passengers long after Ryanair introduced its own apparently equally simple way of obtaining prompt payment of compensation in full. Other claims-handlers entered the market for low-cost claims services with products similar to Bott’s scheme who, because they were not solicitors, lacked the protection of the lien.”

Ultimately, however, Lord Briggs acknowledged that while there might be room to extend the lien to other legal service providers, that was a development best left to Parliament. It will be interesting to see whether this lien is extended to non-solicitor service providers by legislation in due course.