Lett v Wexford Borough Council (No2): Re s 3 of the Legal Practitioners (Ireland) Act 1876

Solicitor-Salisbury-ImageIn this case (here), the Supreme Court granted an order under s 3 of the Legal Practitioners (Ireland) Act 1876 declaring that Matheson, Lett’s solicitor, was entitled to a charge over costs awarded to Lett in its action against the State, even though Lett had granted Anglo a charge over all proceeds of the action in return for a loan to finance the action. However, as Pine Investments, the successor in title of Anglo’s charge, was not party to proceedings, the Court did not decide whether Anglo was “a bona fide purchaser for value without notice”, and the Court ordered that Matheson notify Pine Investments of the outcome of the case within one week.

Background

In 2007, Lett borrowed €750,000 from Anglo Irish Bank Corp to fund a High Court action against the State for breach of legitimate expectation. As security, Lett granted Anglo a fixed charge over all receivables (with Lett’s directors providing personal securities). Lett was successful: the High Court (Clarke, J) awarded damages of €1,150,000, plus costs. The State appealed to the Supreme Court. In 2012, the Supreme Court upheld the decision of the High Court (but reduced the award to €650,000) and awarded costs against the State. Pine Investments is the successor in title of Anglo’s charge. Matheson applied to the Supreme Court for an order under s 3 of the 1876 Act.

S 3 of the 1876 Act (here) establishes a non-mandatory jurisdiction for courts to declare that a solicitor employed to prosecute or defend a court action is entitled to a charge over property recovered or secured through the solicitor’s work. S 3 also provides that any conveyance or act done for the purpose of defeating the solicitor’s charge is void, unless made by a bone fide purchaser for value without notice of the solicitor’s claim.

Lett objected to Matheson’s application. The Supreme Court identified two issues:

(a) whether the Solicitors are prima facie entitled to a declaration under s. 3 and, if so, whether there is a countervailing consideration on the basis of which the Court should not exercise its discretion; and

(b) the issue of priority, namely, whether the prima facie entitlement of the Solicitors, which it is suggested has been established, is defeated by the terms of the Mortgage Debenture now vested in Pine Investments.

Lett argued, among other things, that there was a public policy issue: if parties are to be able to enforce their rights, they should be able to finance expensive litigation with borrowings; and that requires that lenders’ security should rank above solicitors’ security. Matheson counter-argued that if solicitors’ fees do not have priority, solicitors will be less willing to take on cases, which would impede access to the courts. Laffoy J held stated that the Court was not concerned with policy but with applying the provisions of s 3 of the 1876 Act.

Laffoy J held that Matheson was prima facie entitled to a charge over the award of costs. Once the solicitor has established a prima facie entitlement to a charge the onus shifts to the opposing party to prove on the balance of probabilities that there is a countervailing consideration to defeat that entitlement. And as Pine Investments was not before the Court the issue of whether Anglo was a bone fide purchaser for value without notice was not fully argued. Therefore the Court could not rule on whether, or not, Pine Investment’s charge has priority over Matheson’s.

Laffoy J made an order directing the State to pay Lett’s costs award to Matheson, and directing that Matheson write to inform Pine Investments of the outcome of the case within one week.

McKechnie J and Dunne J, the other two members of the three judge panel, concurred.

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