Harcus Sinclair LLP and another v Your Lawyers Ltd
| Jurisdiction | England & Wales |
| Neutral Citation | [2021] UKSC 32 |
| Court | Supreme Court |
2021 March 24, 25; July 23
Restraint of trade - Contract - Non-compete undertaking - Solicitors undertaking to other solicitors not to accept instructions from claimants in group litigation - Whether unreasonable restraint of trade - Solicitor - Officer of court - Court’s supervisory jurisdiction - Solicitors trading as limited liability partnership undertaking to other solicitors not to accept instructions from claimants in group litigation - Whether undertaking given in capacity of solicitor - Whether subject to court’s inherent supervisory jurisdiction over solicitors -
The defendant firm of solicitors, which intended to act for a substantial number of its clients in a contemplated group litigation claim against a car manufacturer, entered into discussions with the claimant, a larger solicitors’ practice that was a limited liability partnership, regarding obtaining funding for the litigation. The defendant and the claimant entered into an agreement which provided that the defendant would disclose confidential information to the claimant for the purpose of obtaining legal advice on behalf of its clients. By that agreement the claimant undertook, among other things, not to accept instructions for or to act on behalf of any other group of claimants in the contemplated group litigation without the defendant’s written permission (“the non-compete undertaking”). That undertaking was to continue in force for six years. The agreement was signed on the claimant’s behalf by one of its partners, P, who then sent the defendant a draft collaboration agreement providing for the parties to work together. Discussions followed and there was a period of informal collaboration, but no formal agreement to collaborate was reached. During that period the claimant recruited its own group of claimants and commenced group litigation against the car manufacturer on their behalf. The defendant asserted that the claimant was thereby in breach of the non-compete undertaking and that that undertaking was a solicitor’s undertaking and so subject to the court’s inherent supervisory jurisdiction, which was given statutory recognition in section 50(2) of the Solicitors Act 1974F1. On the claimant’s claim for declaratory relief, the judge held that the defendant was entitled to injunctive relief to restrain the claimant’s breach of the non-compete undertaking but that the court’s supervisory jurisdiction was not available against either the claimant or P. The Court of Appeal allowed the claimant’s appeal and dismissed the defendant’s cross-appeal, holding: (i) that the non-compete undertaking was unenforceable as an unreasonable restraint of trade; and (ii) that the supervisory jurisdiction of the court was not available against the claimant, because it was a limited liability partnership, nor against P, because he had given the undertakings expressly on behalf of the claimant.
On the defendant’s appeal—
Held, allowing the appeal, (1) that it was well established that in order to discharge the burden of showing that a contract in restraint of trade was reasonable, the promisee had to show that the restraint protected its legitimate interests, went no further than was reasonably necessary to protect those interests and was commensurate with the benefits secured to the promisor under the contract, and that if that burden was dischaged the burden shifted to the promisor to establish that the restraint was unreasonable as being contrary to the public interest; that in determining the promisee’s legitimate interests, it was permissible to take into account not only the terms of the contract but also what the parties had objectively intended or contemplated would occur as a consequence of entering into the contract at the time the contract was made; that, likewise, the relevant benefits to the promisor were not restricted to those conferred by the provisions of the contract but could include benefits that had been intended or contemplated by the parties which the promisee was not legally bound to provide to the promisor; that, in the present case, the judge had been right to take into account the parties’ non-contractual intentions to collaborate informally when determining the legitimate interests of the defendant and the benefits intended or contemplated as flowing from the informal collaboration when assessing the benefits to the claimant; that, on the facts, the judge had been entitled to conclude that the non-compete undertaking protected the defendant’s legitimate interests, went no further than was reasonably necessary to protect those interests and was commensurate with the benefits secured to the claimant under the agreement; that, further, the judge had been entitled to conclude that the non-compete undertaking was not unreasonable as being contrary to the public interest; and that, accordingly, the non-compete undertaking was not unenforceable as an unreasonable restraint of trade (post, paras 53–54, 70–71, 75, 77, 79, 82, 84–86, 90, 92, 151–152).
(2) That in order for an undertaking given by a solicitor to be a solicitor’s undertaking that was capable of being subject to the inherent supervisory jurisdiction of the court under section 50(2) of the Solicitors Act 1974, the generally accepted test was that the undertaking had been given by the solicitor while acting in his professional capacity as a solicitor, rather than in some other capacity such as a personal or business capacity; that in determining whether an undertaking had been given in such a capacity it would be helpful to consider (i) whether the undertaking required the solicitor to do or refrain from doing something which solicitors regularly carried out or refrained from doing as part of their ordinary professional practice and (ii) whether the reason for giving the undertaking, and the cause or matter to which it related, involved the sort of work which solicitors regularly carried out as part of their ordinary professional practice; that if both those questions were answered in the affirmative then the undertaking was likely to be a solicitor’s undertaking; that, further, relevant indicators of whether an undertaking was a solicitor’s undertaking were whether it had been given in connection with a transaction involving a client, whether it had been given to the court or to a third party and whether the solicitor had been acting on instructions; that, applying that approach to the present case, a non-compete undertaking did not involve the sort of work which solicitors undertook not to do as part of their ordinary professional practice and the reason for giving the non-compete undertaking was the furtherance of both parties’ business interests, which was not the sort of work which solicitors regularly carried out as part of their ordinary professional practice; that, therefore, when giving the non-compete undertaking, the claimant had been acting in a business rather than a professional capacity; and that, accordingly, the non-compete undertaking was not a solicitor’s undertaking that was capable of being subject to the supervisory jurisdiction of the court (post, paras 103, 112, 117–119, 122–124, 151).
Per curiam. (i) As the law stands, even if the non-compete undertaking had been a solicitor’s undertaking it would not have been enforceable against the claimant, since a limited liability partnership is not subject to the court’s inherent supervisory jurisdiction over solicitors, which is confined to solicitors as officers of the court. Nor would it have been enforceable against P, since he gave it as the agent of his disclosed principal the claimant and so, in accordance with the settled principles of agency law in the context of contracts, incurred no personal liability under it. If he had given the undertaking as the partner of an ordinary unincorporated partnership on the other hand, he would have been bound by it. Parliament should consider the lacuna that exists in relation to undertakings given by solicitors working for incorporated law firms, particularly limited liability partnerships (post, paras 143–148).
(ii) Solicitors’ undertakings are enforceable under the courts’ supervisory jurisdiction even though they may not be contractually binding. However, it would be inconsistent for a non-compete undertaking to be contractually unenforceable as an unreasonable restraint of trade while being enforceable, as being a reasonable restraint of trade, as a solicitor’s undertaking. The public policy underpinning the law on restraint of trade applies equally to contracts and to solicitors’ undertakings (post, para 149).
The following cases are referred to in the judgment of Lord Briggs, Lord Hamblen and Lord Burrows JJSC:
Allan Janes LLP v Johal
Assaubayev v Michael Wilson & Partners Ltd
Attwood v Lamont [
Bank of Credit and Commerce International SA v Ali
Bankers Trust Co v Shapira [
Bridge v Deacons [
Briggs v Law Society
Cavendish Square Holding BV v Makdessi
Clark v Lucas Solicitors LLP
Coppage v Safety Net Security Ltd
Egon Zehnder Ltd v Tillman
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