Equitable Liens and Charges

Equitable Liens and Charges

Equitable liens and charges are largely created in three situations: by course of conduct; by agreement, or by statute.

While there is a historical distinction between equitable liens and equitable charges, sometimes the two concepts are combined into the term “charging lien”.

Equitable liens arising by course of conduct arise by operation of law to address situations of unjust enrichment, where it is just and equitable to impose them. These liens confer a charge upon property until certain claims are satisfied, independently of possession, and error enforceable by means of an order for sale  (Snell’s Principles of Equity 1990, p. 456)

An equitable mortgage is a charge against property and is different from an equitable lien in that it grants the mortgage the additional right to foreclose against the property.

All equitable mortgages are equitable liens, but not all equitable liens are equitable mortgages.

In Swiss Bank Corp. v . Lloyds Bank LTD (1982) AC 584 (HL) the court stated:

An equitable charge may, it is said take the form either of an equitable mortgage or an equitable charge not by way of mortgage.

An equitable mortgage is created when the legal owner of the property constituting the security and is into some sort of instrument or does some act which, through insufficient to concur a legal estate her title in the subject matter upon the mortgagee, nevertheless demonstrates a binding intention to create a security in favor of the mortgagee.

An equitable charge which is not an equitable mortgage is said to be created when property is expressly or constructively made liable, or specially appropriated, to the discharge of a debt, or some other obligation and confers on the charging a right of realization by judicial process, such as a receiver or order for sale.

A solicitor’s lien may be used to secure fees and disbursements were property has been recovered or preserved as result of a litigation proceeding in which the solicitor has been involved. The purpose of a charging lien is to protect the lawyer from the unjust result of recovering or protecting property and not receiving full payment for services rendered. Wilson King v. Lyall 1987 , 12 BC LR 353 (CA )

The lien reflects the solicitor’s right to request the equitable interference of the court and claim a charge against property that has been recovered or preserved through his or her efforts.

This right at common law has been codified in section 79 of the Legal Profession act.

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