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21 Dec 2022

Stephenson Harwood secures Supreme Court victory

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Law firm Stephenson Harwood LLP has advised the successful respondents, Russell Crumpler and Christopher Farmer of Teneo BVI, in proceedings before the Supreme Court. Judgment in the case, Candey Ltd v Crumpler and another (as Joint Liquidators of Peak Hotels and Resorts Ltd (In Liquidation)), was given in favour of Messrs Crumpler and Farmer.

The appeal considered the circumstances in which solicitors can be considered to have waived their equitable lien – the means by which equity provides a form of security for the recovery by solicitors of their agreed charges for the successful conduct of litigation. Upholding the decision of the High Court and the Court of Appeal, a Supreme Court panel comprising Lord Kitchin, Lord Reed, Lord Briggs, Lord Hamblen and Lord Stephens unanimously dismissed the appeal.

"This is an important decision about the extent of a solicitor's right, on the insolvency of its client, to be paid its fees in priority to other creditors," said Paul Hollands, of counsel, Stephenson Harwood. "Candey asserted that it had a right to be paid almost £4 million in priority to all other creditors and claims in the liquidation. Both the High Court and the Court of Appeal had rejected this and the Supreme Court has now done the same, deciding that Candey had sacrificed its equitable lien when it took other, lesser, security. The Court also decided that a solicitor owes an existing client a fiduciary duty, when taking additional security, to make it clear to the client if it wishes to keep its existing security, which Candey had not done. As a result of this decision, Candey will have a much smaller secured claim in the liquidation and there will be more funds available for other creditors. 

"The Court also considered the important issue of whether a finding that Candey had waived its lien would have a negative impact on the ability of clients to access legal advice, by deterring solicitors from acting on the basis of alternative fee arrangements. The Court ultimately decided that it did not have this effect. Although many of the key takeaways from this decision concern the position of solicitors, the principles involved may well have ramifications more widely, for commercial and other parties seeking to rely on other types of equitable lien and security (for example, a vendor’s lien for the purchase money and the purchaser’s lien for the deposit), since this is the first time that the Supreme Court has considered the principles involved."

The Stephenson Harwood team advising on the Supreme Court appeal comprised of counsel Paul Hollands and associate Joseph Samuelson. Associate Katherine Hudson advised at earlier stages of the dispute.

Stephenson Harwood's award-winning and highly regarded international dispute resolution team advises on the full range of commercial disputes. The team represents clients in High Court litigation and international and domestic arbitration, co-ordinates proceedings in multiple jurisdictions, and advises on various regulatory and other investigations. The firm's global restructuring and insolvency practice is a multi-jurisdictional team of lawyers, who advise a wide array of stakeholders on all issues arising in connection with financial distress. The team's work covers all sectors, and encompasses domestic and international debt restructurings, schemes of arrangement, company voluntary arrangements, administrations (including pre-packs), receiverships, liquidations, personal bankruptcy, insolvency litigation and investigations, fraud and asset recovery, refinancings, workouts and turnaround strategies, debt for equity swaps, distressed M&A, distressed investing and loan to own strategies.

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