The High Court ruled that a solicitor’s lien over costs and outlays from debt collection work carried out before a company’s liquidation could attach to sums later recovered from third parties. It also said the company’s former solicitors had no lien over the company’s files, which had already been handed to the liquidator.
Mr Justice Gilligan delivered the judgment on 4 December 2012 in proceedings brought by Anthony J. Fitzpatrick, liquidator of Tadgh O’Conaill Heating & Plumbing Limited, against Barry Galvin practising under the name Barry C. Galvin & Son Solicitors. The company was in creditors’ voluntary liquidation.
The liquidator sought the return of files relating to debt collection proceedings that the firm had handled for the company before liquidation. He said the files were needed to progress collection of outstanding debts and to prepare a statutory report. He also sought a declaration that the firm had no solicitor’s lien over the documents and directions about whether to seek leave to examine Mr Galvin concerning other company records.
The firm said about €50,000 in fees remained outstanding as of June 2012. It was prepared to transfer the files to a newly appointed solicitor if the liquidator gave the usual undertaking concerning prior costs. The liquidator declined, saying the firm’s pre-liquidation costs should be treated as an unsecured claim.
At the hearing, the firm conceded the issue of possession of the files, and the files were forwarded to the liquidator. The live dispute concerned whether the firm could claim costs and outlays recovered from third parties in the debt collection proceedings. The judgment does not state that any such sums had yet been recovered.
The judge distinguished earlier decisions concerning advice given in contemplation of liquidation and a company in receivership. He held that the former solicitors’ lien ran against costs recoverable from third parties for their work and outlays up to the date of the petition to wind up the company, where those sums were recovered through debt collection proceedings continued by the liquidator and directly attributable to the firm’s work. Those qualifying sums were to rank ahead of secured creditors’ interests. Any remaining fees were to be admitted in the liquidation as an unsecured debt.
The court said the liquidator was obliged to honour the lien but did not require him to give an undertaking, because the judgment itself set out the position. The judgment does not record a decision on the requested directions concerning possible examination of Mr Galvin.