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 11 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 u and Cole -v- £/ey 13 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 14 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. 15 Cordery 16 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 yi 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. 18 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 19 and Young - v- Meade, 20 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". 21 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. n

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