When professionals fall out with their clients, fees don’t get paid and professional negligence claims often follow. Regardless of who sues who in those circumstances, the pleadings will reflect the professional seeking to recover its unpaid fees and the client seeking to recover damages in negligence. In addition, a key question for the professional is whether it should rely on the common law right to exercise a lien over the client's file in respect of the unpaid fees in order to avoid disclosing the file at the disclosure stage in formal proceedings. If permitted to do so by the Court, this step is likely to have a material bearing on clients' prospects of establishing negligence against the professional unless the outstanding fees are paid. 

Surprisingly, there is no direct authority on this point. The recent judgment in Ellis v John Hodge Solicitors (a firm) [2022] EWHC 2284 (Comm) therefore provides welcome guidance on this often inflammatory issue. However, the decision is likely to come as a blow to the professional community as the Court held that, although it has the power to modify the parties' duties of disclosure, it was not appropriate to do so when the underlying client file plays an integral role in determining the evidential issues in the case thereby ensuring that the interests of justice are served.

We therefore consider the case and what lessons can be learned for professionals fighting to recover fees from disgruntled clients and who wish to intentionally withhold disclosure of their files in an attempt to punish their clients when litigation then ensues between the parties.

The facts

The claimant, Mr Ellis, instructed John Hodge Solicitors ("JHS") to act for him in a personal injury claim where he sought damages of more than £500,000. Mr Ellis rejected a series of settlement offers of up to £200,000 from the defendant in the underlying claim and instead went to trial where he was awarded just £11,813 with "disastrous" consequences.

As Mr Ellis had not paid JHS' outstanding fees from the underlying litigation, the firm refused to provide him with the client file. It is therefore surprising that he then commenced formal proceedings against JHS alleging professional negligence without having had sight of the underlying file(s). In spite of this evidential handicap, Mr Ellis alleged that JHS had failed to properly advise him on the offers and on the risk that the underlying defendant's expert evidence would be preferred to that of his own. JHS, on the other hand, refuted the claim and asserted that they properly advised Mr Ellis of the risks. JHS also counterclaimed for their unpaid fees.

The claim was issued in the Manchester Business and Property Courts whereby the Disclosure Pilot governed by Practice Direction 51U (soon to be replaced in similar terms by PD57AD) applied. The Disclosure Pilot provides that, unless the parties agree otherwise, they must serve an initial disclosure list of documents on all other parties and provide copies of key documents with the Particulars of Claim and the Defence.

JHS therefore served a Defence and Counterclaim but did not provide Initial Disclosure because they sought to exercise a lien over the client files on the ground of unpaid fees. The issue remained unresolved by the time of the first Costs and Case Management hearing on 30 August 2022.

The right to embarrass vs the right to justice

It was common ground that JHS' file was disclosable. However, JHS' fees were unpaid and the firm was therefore entitled to "embarrass" the client by declining to provide the file.[1] As JHS wanted to preserve the value of the lien, and to avoid any alleged prejudice in not fully disclosing the file, they proposed that disclosure of the file should be restricted to Mr Ellis' new solicitors provided they gave an undertaking (known as a Robins undertaking[2]) not to share the file with Mr Ellis and then return it after they had considered it.

A solicitor has a right to assert a lien and withhold a file from a former client where the client wants to use the file to prosecute an existing case in which the solicitor had previously acted or even start a fresh claim. However, Mr Ellis argued that a lien had no application where the disclosure is sought pursuant to the parties' disclosure obligations. Mr Ellis also argued that CPR Part 31.22 already restricts the use of documents disclosed in litigation to the proceedings and so there was no basis for requiring a party that has the benefit of disclosure and inspection to give an undertaking of the kind proposed by JHS. Finally, and perhaps most importantly, Mr Ellis contended that the interests of justice should weigh heavily in favour of disclosure of the file as his standing in the litigation would be substantially compromised if he did not have sight of the file at that stage. 

The decision

The issue before the Court was whether a solicitor's lien over a file for unpaid fees can restrict its obligation to provide disclosure of the file pursuant to the Civil Procedure Rules. The Court was not referred to any reported authority on the exercise of a solicitor's lien in this context. Although not a direct authority, HHJ Pearce considered that Woodworth v Conroy [1976] QB 884 relating to an accountant's lien supported his conclusions that:

  • The Courts have the power to modify duties of disclosure that would otherwise arise under PD51U where the party from whom disclosure is sought has a valid lien over the file for unpaid fees
  • On the facts, it was not appropriate to exercise this power where the party asserting the lien was suing for unpaid fees and inspection of the file was central to determining the evidential issues in the case and
  • Ordering a Robins undertaking was not realistic because Mr Ellis would not be able to deal with the issues in the litigation without knowing exactly what the documents said and if he was told the full content of the documents, the lien would lose its value just as much as if he saw the documents themselves.

It is also worth noting that the fact that JHS had counterclaimed for fees was described as "significant". The claim was being defended in part on the basis that JHS were entitled to the fees claimed, thereby putting the contents of the file directly in issue. The Court considered this to be a powerful argument for holding that the lien could not be asserted on equitable principles.

Lessons to be learned

This case is a reminder to professionals that they have the right to withhold the client's papers from the client when the client doesn’t pay. In principle, if this leads to full blown litigation, the Court also has the power to modify a professional's duty of disclosure of documents by reference to a professional's lien over the client file.

However, whilst each case will turn on its own facts, it seems likely that, in the majority of proceedings involving professional negligence claims, principles of natural justice and equity will dictate that a Court should order disclosure of the client file notwithstanding the existence of a lien. This will pave the way for a fair determination of the relevant evidential issues and allow justice to prevail.