Supreme Court holds that claimants' solicitors have an equitable lien for their costs where an insurer settled directly with those claimants under the RTA portal
Solicitors are entitled, under common law, to an equitable lien for payment of their costs and disbursements. Accordingly, where a judgment, award or settlement is paid by the defendant's solicitor to the claimant's solicitor, the claimant's solicitor will be entitled to deduct his charges before accounting to his client for the balance. However, equity would only enforce that remedy where there has been a direct payment to the claimant if there has been collusion between the claimant and the payer to deprive the solicitor of his charges.
No collusion was alleged in this case. However, the payer (a motor insurer) settled directly with the claimants after it was notified of the claimants' claims on the RTA Portal. That settlement did not include an amount for the claimants' solicitors' costs or disbursements. The Court of Appeal held that, although the Conditional Fee Agreement ("CFA") entered into between the claimants' solicitors and the claimants had created no contractual liability of the claimants for the solicitors' charges, the court could use its equitable jurisdiction to intervene and order the insurers to pay the charges allowable under the RTA Protocol to the solicitors.
The Supreme Court has now unanimously dismissed the appeal from that decision, although its reasoning differed from that of the Court of Appeal. It held that the claimants did have a contractual liability to pay their solicitors' charges. It then went on to hold that "Once a defendant or his insurer is notified that a claimant in an RTA case has retained solicitors under a CFA, and that the solicitors are proceeding under the RTA Protocol, they have the requisite notice and knowledge to make a subsequent payment of settlement monies direct to the claimant unconscionable, as an interference with the solicitor’s interest in the fruits of the litigation. The very essence of a CFA is that the solicitor and client have agreed that the solicitor will be entitled to charges if the case is won. Recovery of those charges from the fruits of the litigation is a central feature of the RTA Protocol".