Withers loses client money battle in appeal court

The Court of Appeal has upheld an appeal by Langbar International against Withers in a battle over client money.

The appellate court said when determining whether client money held by the lawyer  could be subject to a lien to cover legal fees, the issue was whether the money had been set aside for general purposes or for a purpose which was incompatible with a lien arising.

In allowing the appeal Lord Justices Lloyd, Kitchin and Sir Robin Jacob overturned the first instance decision handed down by Mr Justice Morgan in May (9 May 2011).

In that ruling Morgan J said Withers had a common lien over money held in its client account complying with a court order made in the course of litigation conducted between its client, Rybak, and Langbar International.

In that case Rybak had agreed to settle the claims against it for £30m. A proportion of that money was paid into the Withers client account to safeguard the cash.

Withers had wanted to set aside £410,000 of that cash to cover the fees incurred by Rybak during the course of its dispute with Langbar.

Langbar, the appellant, argued that the money was owed to it as part of the settlement.

Rybak gave Withers its rights to the money on the basis that any money recovered would be applied to reduce Rybak’s debt to the defendant. The judge rejected the submission.

Giving the substanstive ruling Jacob said the point of the order was to “ensure that the money was held in this jurisdiction so as to be available, if the court thought fit, to satisfy, or go towards satisfying, Langbar’s claim.

“The payment had no other purpose. The money could easily have been paid into court or into a joint solicitors’ account instead. No-one could realistically have supposed, when Langbar (for it was Langbar) proposed that the money be paid into a  Withers  client account that Withers would have any claim ahead of Langbar over the money.”

The firm instructed Wilberforce Chambers’ Joanna Smith QC to lead Sebastian Allen of the same set.

Jones Day partner Sion Richards instructed 3 Verulam Buildings’ Andrew Fletcher QC to lead Charlotte Eborall of the same set for Langbar.