The Gazette 1990

GAZETTE

' APRIL 1990

appeared to accept that formal

notice to a creditor that one intends

to claim a lien is enough to secure

priority. The law now seems to be

vaguer than one would wish; but it

is safe to say that a solicitor who

seeks to intervene without having

obtained a charging order is on

grave risk of being found to have no

right to be heard.

Priorities

Assuming the solicitor takes the

precaution of applying for a charg-

ing order, how good is the security?

Section 3 of the 1876 Act provides:

"All Conveyances and Acts

made to defeat or which shall

operate to defeat such charge or

right shall unless made to a bona

fide purchaser for value without

notice be absolutely void and of

no effect as against such charge

or right".

It is clear that any assignment of

the debt or mortgage of the

property by the client will be void

as against the solicitors

and it is

well settled that the solicitor has

priority over a judgment creditor

with a conditional order of

garnishee. Far more difficult is the

case of a solicitor who seeks a

charging order after a garnishee

order has been made absolute. In

Johnston

-v- MacKenzie

and

Cole -v-

£/ey

it was stated that

the solicitor could discharge the

garnishee order, but the fact that

the judgments do not clearly dis-

tinguish conditional from absolute

orders obscures the ratio. In

North

-v- Steward

the House of Lords

refused a charging order after

execution had issued to a judgment

creditor; though the case turned on

Scots law, the Law Lords strongly

doubted whether the statutory

provisions should be interpreted so

as to reverse a perfected court

order. On the other hand, in the

most recent" Irish decision,

Larkin

-v- Groeger,

Barrington J. hinted

strongly that the solicitor's right

should prevail over an absolute

order of garnishee.

Cordery

states that the matter should be

one for the discretion of the Court.

Despite the dictum of Barrington J.,

it would be unwise for the solicitor

to wait until after the garnishee

order had been made absolute.

The "bona fide purchaser for

value" provision has been intre-

preted restrictively: in

Cole -v- Eley

it was held that it does not protect

a purchaser who has notice of the

proceedings, even if he is unaware

that the solicitor intends to claim a

lien. In

Da/low -v- Garrold

and

Larkin -v- Groeger

it was held that

a creditor with an order of

garnishee is not a purchaser.

Apart from Section 3, a solici-

tor's claim may be defeated by the

inherent jurisdiction of the Court to

do justice between the parties. In

Larkin -v- Groeger the

plaintiff, who

had an arbitration award against

the defendants, failed in a High

Court action to have the award set

aside; Barrington J. ordered the

defendants to pay the amount of

the award but gave them their

costs of the proceedings. He was

then faced with three conflicting

claims: (i) an application by the

defendants to deduct their costs of

the High Court action from the

arbitration award; (ii) an application

by the plaintiff's solicitors for a

charging order over the award for

their costs of the arbitration; (iii) an

application by a judgment creditor

of the plaintiff to garnishee the

award. As between the judgment

creditor and the solicitor, Barrington

J. held that the charging order gave

the solicitor priority; significantly,

he stated that even had the

garnishee order been made

absolute, this would not have given

the creditor the protection of a

bona fide purchaser.

As between

the defendant and the solicitor,

however, he found that the

" . . . even prompt epplicetion

for e cherging order will not

alweys defeat another

claim

Court had an inherent discretion to

allow a set-off of judgments in

distinct actions without regard for

the solicitor's lien; relying on

Puddephatt -v-

Z.e/Y/7

and

Young -

v- Meade,

he said:-

"It is sad when one has to

decide which of two innocent

people is to bear a loss but it

appears to me that the Defend-

ants have considerable merits in

the present case. They may not

have been completely happy

with the Arbitrator's award but

they were prepared to accept it.

They were put to the expense of

defending the award in High

Court proceedings in which they

were successful and in which

they got an Order for Costs.

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They have no chance of recover-

ing their Costs unless they can

deduct them from monies

payable by them to the Plaintiff

on foot of the Arbitration award.

They owe no duty to the Plain-

tiff's solicitors and in all the

circumstances it appears to me

that it would be unjust to them

not to allow them to set off their

costs when taxed and ascertain-

ed against the amount payable

by them to the Plaintiff on foot

of the Arbitrator's Award not-

withstanding the Plaintiff's

solicitor's lien".

Therefore a charging order may

not be an absolute protection

where there is more than one set

of relevant proceedings.

Conclusion

Between them

Fitzpatrick -v- DAF

Sales

and

Larkin -v- Groeger

illustrate both the strength and the

weaknesses of the charging lien.

Clearly it is essential, for a solicitor

to protect himself, to use the

statutory procedure for a charging

order; and despite the apparently

retrospective language of Section

3 of the 1876 Act, an application

should be made before any other

party has obtained a final order over

the same fund. As

Larkin -v-

Groeger

shows, even prompt

application for a charging order will

not always defeat another claim,

but in most cases it should be

sufficient to obtain priority.