Candey Ltd v Crumpler & Anor, Re Peak Hotels and Resorts Ltd [2022] UKSC 35 (21 December 2022)
Citation:Candey Ltd v Crumpler & Anor, Re Peak Hotels and Resorts Ltd [2022] UKSC 35 (21 December 2022).
Rule of thumb:Can solicitors contract out of their right to legal fees? And agree a floating charge instead? What happens if this company floating charge then does not cover the amount of money the solicitors are owed in fees? Yes, solicitors can contract out of their right to fees and agree a floating charge instead, however, if the company goes bust and the floating charges do not cover what they are owed, then they have no special creditor rights.
Background facts:
The facts were that Candey were solicitors acting for Crumpler, a hotel & holiday resort company, in an extended number of litigation cases Crumpler had. Crumpler were in financial trouble and so Candey agreed a contract with Crumpler for a floating charge over some of Crumpler’s assets so that Candey’s fees could be paid.Crumpler’s financial position eventually became so bad that they went into administration, and the Crumpler administrators, BVI, ended their legal services contract with Candey, and they appointed new solicitors to handle Crumpler’s litigation. When Crumpler were eventually liquidated, the floating charge Candey held over Crumpler did not cover the full amount of the fees that Candey believed they were owed.
Parties argued:
Candey argued that they had a solicitor’s lien at common law over the money recovered by the newly appointed solicitor in the litigation, and that they should be entitled to this in addition to their floating charge. Crumpler argued that the Solicitors had contracted out of their right to fees & lien and the only thing which applied was the floating charges.
Judgment:
The Court rejected Candey’s arguments and upheld the Crumpler administrator’s arguments. The Court affirmed that this invoked the contract law principle of ‘contracting out’. People are not allowed to contract out of their statutory rights, but they are allowed to contract out of their common law rights. The Court held that Candey contracted out of their common law right of lien and took a floating charge instead of this. The Court further affirmed that Candey were only entitled to the floating charge, as well as what other money they were entitled to as an ordinary creditor once the insolvency process was finished, but their common law right of lien did not apply (solicitor’s fees Regulations are the rates if the matter runs to Court, however, these Regulations do not state that a Solicitor must be paid this for every moment of time they spend working for a client, and solicitors can contract out of these with clients if they so wish).
Ratio-decidendi:
‘104. Candey’s equitable lien was waived when the parties entered into the FFA and the Deed of Charge in October 2015. The lien was not expressly reserved and there were ample grounds to infer that the parties intended the lien to be replaced by the Deed of Charge in conjunction with the FFA. 105. In these circumstances it is not necessary or appropriate to deal with the alternative argument advanced by PHRL, namely that if the lien was not waived when PHRL and Candey entered into the FFA and the Deed of Charge, it was surrendered under section 214(1) of the BVI Insolvency Act 2003 when Candey lodged a proof of debt in PHRL’s liquidation without mentioning the lien’, Lord Kitchin
Warning: This is not professional legal advice. This is not professional legal education advice. Please obtain professional guidance before embarking on any legal course of action. This is just an interpretation of a Judgment by persons of legal insight & varying levels of legal specialism, experience & expertise. Please read the Judgment yourself and form your own interpretation of it with professional assistance.