Bott & Co Solicitors Ltd v Ryanair DAC – Supreme Court reverses Court of Appeal decision on equitable liens

On 16 March 2022, the Supreme Court issued its judgment on the dispute between Bott & Co and Ryanair over whether Bott can assert an equitable lien over compensation paid to passengers pursuant to Regulation 261/04 (as amended) where it is instructed by passengers to pursue Ryanair for fixed compensation. Reversing the decision of the First Instance and Court of Appeal courts, the Supreme Court held that, where there is a claim, Bott & Co can indeed insert an equitable lien over compensation in order to deduct its fees, even where no dispute arises between the passenger and Ryanair as to whether compensation is due.

Background

Regulation No 261 / 2004 (as amended) entitles certain passengers to fixed compensation in the event they are denied boarding, their flight is delayed over three hours, or their flight is cancelled, subject to certain conditions.

Bott & Co is a firm which specialises in handling such compensation claims on a "no win, no fee" basis. The firm charges 25% of the total compensation awarded to the passenger plus VAT, in addition to an administration fee of GBP25 per passenger, which is deducted from the compensation before it is paid to the client. Its business model is premised on handling a large volume of claims, the vast majority of which are settled without dispute. When this action began in October 2016, Bott had handled approximately 125,000 claims against Ryanair and was claiming a 99% success rate.

In March 2014, Ryanair introduced a new process whereby passengers could claim compensation for flight disruptions via an online form on its website. Despite this, the airline saw an increase in the number of claims submitted by third parties. In July 2016, the airline amended their General Terms and Conditions of Carriage to reflect their position on third party compensation claims. Article 15 held that passengers must, subject to some exceptions, submit claims directly to Ryanair and allow 28 days for the airline to respond before engaging any third parties to claim on their behalf. Further, Ryanair refused to process any third-party claims that had not first been submitted directly by the passenger. In all cases where compensation was due, the airline would pay passengers directly, even when claims were submitted by a third party.

In these circumstances, Bott lost the opportunity to deduct its fees, averaging GBP95 per claim, from the awarded compensation before paying the balance to the client. Given the small value involved in each individual case, it did not make financial sense to take legal action to recover unpaid fees from clients. Consequently, Bott took the issue up with Ryanair by issuing proceedings against the airline in 2016 for (1) an injunction to prevent it from paying passengers directly where Ryanair was on notice that Bott had been retained on the basis that Bott had an equitable lien over any compensation award; and (2) an indemnity in respect of fees already paid directly to its clients since September 2016, which it had been unable to recover.

First Instance decision

In March 2018, the High Court of Justice dismissed Bott’s claim for an equitable lien over compensation paid by Ryanair. In doing so, Murray, J asked:

1. Is Ryanair obliged to refrain from communicating directly with the client in respect of that claim? (the Direct Communication Issue);
2. Is Ryanair obliged to pay compensation directly to Bott? (the Direct Payment Issue); and
3. Is Ryanair obliged to indemnify Bott in respect of fees where it has paid compensation directly to Bott's client while on notice of the claim and where Bott has not recovered its fees in respect of the claim from the client? (the Indemnity Issue).

The Judge found in favour of Ryanair on all three questions. It was held that Bott was not entitled to payment or indemnity, in accordance with Meguerditchian v Lightbound 1917, which held that Court proceedings to be a necessary part of a solicitor's equitable lien claim. The vast majority of compensation claims submitted by Bott were paid without resort to litigation or arbitration.

Bott further claimed that Ryanair's policy was unenforceable pursuant to either Article 15.1 of Regulation 261/04 or Article 3 of the Unfair Contract Terms Act. These arguments were also rejected by the Judge who found the policy to be fair and reasonable overall.

Court of Appeal decision

Bott appealed and the case was heard in the Court of Appeal in February 2019, where the grounds of appeal were rejected. Lord Justice Lewison found Ryanair's policy did not place any material obstacles in the passenger's route to compensation. The procedure was held to be a straightforward process for the airline's passengers to make their compensation claims without the assistance of a third party and, in any case, nothing in the policy prevented a passenger from instructing a third party to assist with such a claim.

Supreme Court decision

At Supreme Court level, however, Bott's appeal was allowed by a 3:2 majority thereby reversing the decisions at First Instance and Court of Appeal. Burrows, L, Arden, L and Briggs, L gave three separate judgments but all agreed that the test for an equitable lien was a claim based test. Leggatt, L and Rose, J jointly dissented, arguing that a claim on its own was not sufficient: there must be an existing or reasonably anticipated dispute in connection with the services provided by the solicitor in order for an equitable lien to rightly arise.

Burrows, L held that the Supreme Court's decision in Gavin Edmondson Solicitors v Haven Insurance Co Ltd (Gavin Edmondson) 2018 is best interpreted as supporting a clear, principled and easy-to-apply test that does not turn on whether there was a dispute. In Gavin Edmondson, the solicitors handled low value personal injury claims and had entered claims via an online portal pursuant to the RTA pre-action protocol. The Supreme Court in that case examined the role of the solicitor’s equitable lien in the context of modern litigation, where out of court settlements and alternative dispute resolution are encouraged, and held that the solicitors did have an equitable lien over the settlement fund because the solicitors' work had contributed to the claim.

Burrows, L held that Gavin Edmondson must be applied to the present case, and the following claim-based test for a solicitor's equitable lien ought to be applied: Whether a solicitor provides services (within the scope of the retainer with its client) in relation to the making of a client's claim (with or without legal proceedings) which significantly contribute to the successful recovery of a fund by a client. Burrows, L highlighted that the threshold of 'significantly contribute' is a low one, and it could be fairly said that Bott has made a significant contribution to the recovery of compensation by its client, notwithstanding the availability of Ryanair's online form process. Burrows, L further held that Ryanair was bound by the equitable lien because it had notice of such, and the airline was adopting the risk of double liability if it chose to pay the clients directly.

Arden, L and Briggs, L both agreed with the test put forward by Burrows, L. Arden, L argued that Gavin Edmondson established that an equitable lien can arise where no litigation has yet been commenced and indeed may never be commended. She further highlighted the clear link between the lien and access to justice, pointing to Briggs, L's judgment: It is a judge-made remedy, motivated not by any fondness for solicitors as fellow lawyers or even as officers of the court, but rather because it promotes access to justice.

Leggatt, L and Rose, L jointly dissented. They argued that for a lien to arise, there must be a dispute, existing or reasonably anticipated, in connection with which the services of the solicitor are sought, and that in the vast majority of cases handled by Bott there is no such dispute. It was argued that there is no reason to suppose that Ryanair will withhold or delay payment, and there is no dispute regarding the amount of compensation payable.

Impact on Airlines

This change of approach by the Supreme Court is intended to promote access to justice for potential claimants unable to pay solicitors upfront. In many cases, access to justice will, indeed, be promoted.

However undisputed Regulation 261/04 claims which, if accepted, require no negotiation given the fixed nature of compensation, are distinct from claims which require negotiation of quantum even where liability is accepted. As a result, while well intended, this decision in fact puts the passenger who instructs a solicitor to handle an undisputed claim in a worse position by allowing a 25% plus deduction to be made to their award.

The decision does not prevent airlines from encouraging passengers to contact them directly before instructing solicitors, which would be a logical step for most passengers to take. The challenge for airlines is to assess and pay worthy claims in a timely manner to prevent intervention of solicitors in undisputed claims.