LAW REPORT: Solicitor breached undertaking over lien

LAW REPORT: 31 October 1996; Bentley and another v Gaisford and another
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Bentley and another v Gaisford and another; Court of Appeal (Sir Richard Scott, Vice Chancellor, Lord Justice Roch, Lord Justice Henry) 21 October 1996

Where a solicitor gave an undertaking to his client's former solicitor, to hold documents supplied by the former solicitor "to your order" so as to preserve the former solicitor's retaining lien over the documents against the client's payment of his fees, the current solicitor acted in breach of the former solicitor's lien when he made copies of all the documents and sent them to the client.

The Court of Appeal by a majority (Sir Richard Scott V-C dissenting) allowed an appeal by the plaintiffs, Keith Anthony Charles Bentley and Hewett & Co, against the dismissal by Judge William Crawford QC, sitting as a High Court judge, of their action against the defendants, Robert Edmund Gaisford and Sinclair Roche & Temperley.

John Cherryman QC and David Bailey (Hewett & Co) for the plaintiffs; Peter Gross QC and David Allen (Sinclair Roche & Temperley) for the defendants.

Lord Justice Roch said the plaintiffs had been retained by China Everbright Co (CET) to act for them in an arbitration. CET terminated that retainer and instructed them to send all their documents to the defendants, who had been instructed in their place. The plaintiffs faxed the defendants:

Upon receiving your undertaking to hold the documents/our file to our order in respect of outstanding fees and disbursements, we shall put out papers for collection.

The defendants by fax agreed to hold the documents "to your order". Having read the files, however, Mr Gaisford copied them all and faxed them to CET. He said did this because he was concerned at the way the plaintiffs had dealt with the arbitration and thought it his duty to refer the documentation to his clients and seek their instructions. His understanding of the undertaking was that his firm was only obliged to return the original documents to the plaintffs on their demand.

The judge held that that the obligation was threefold: (a) to preserve the original documents; (b) not to part with possession of them; and (c) to return them promptly on demand. They did not undertake not to copy them, nor that they would not retain any copies made. If the plaintiffs wanted to prevent this, they should have insisted on a different form of undertaking.

That conclusion was based in part on an erroneous assumption that the second solicitor's power to deal with documents handed to him by the first solicitor depended on the extent of the undertaking he had given the first solicitor.

The case law established that where solicitor one transferred documents to solicitor two to hold to solicitor one's order, the lien of solicitor one was preserved, even if solicitor two refused to give an undertaking: see Caldwell v Sumpter [1972] Ch 478. It was sufficient that there should be an intention not to abandon the lien.

What was the form and extent of the lien once the documents had been handed over to solicitor two? The judge held that solicitor two could use the documents in such a way as to render solicitor one's lien totally meaningless. Here the defendants had acted so as to remove completely the client's need to seek to obtain the originals from the plaintiffs.

In Heslop v Metcalfe [1937] 3 My & C 183 at 190, Lord Cottenham LC said:

I think the principle should be, that the solicitor claiming the lien, should have every security not inconsistent with the progress of the cause.

That principle could be applied to cases such as the present. His Lordship did not accept that such a rule would create practical difficulties for solicitor two and the client because neither could be sure what use they were permitted to make of the documents.

His Lordship would hold that in copying every document in every file and sending copies of all those documents to the client, the defendants were in breach of the plaintiffs' lien. A declaration to that effect would be made, but, on the basis that Mr Gaisford thought he was acting properly in his client's interests, this was not a case where it would be appropriate to order compensation.

Paul Magrath, Barrister