Harcus Sinclair LLP & Anor v Your Lawyers Ltd [2021] UKSC 32 (23 July 2021)
Citation:Harcus Sinclair LLP & Anor v Your Lawyers Ltd [2021] UKSC 32 (23 July 2021).
Subjects invoked: 52. 'Legal Services'.42. 'Competition'.15. 'Contract'.
Rule of thumb:If 2 law-firms agree to raise class-actions exclusively together through non-compete clauses, are these enforceable? Yes, the Court in this case affirmed that if 1 law firm agrees not to compete with another law firm in a certain area of work for 6 years then this is a valid and enforceable agreement. 6 years is not an excessive time to breach competition law, this is not a breach of capacity or illegality in the field of contract, and it does not breach any duties of a legal professional.
Background facts:
The facts of this case were that ‘Your Lawyers’ Ltd had done extensive legal research work to work out how to successfully raise a claim against Volkswagen for the ‘emissions scandal’ (get a proper statement and obtain expert reports etc), & they had 5 clients. Volkswagen essentially faked how much their vehicles emitted and led to people inhaling higher amounts of toxic fumes than they thought, and Your Lawyers knew how to claim. However, Your Lawyers lacked the extensive group litigation experience, volume of workers for paperwork, and finance for insurance/marketing, so they sought to obtain a collaboration/partnership with a bigger law firm. Mr Johal of Your Lawyers contacted Mr Parker of Harcus Sinclair, a firm who did have extensive experience in massive group litigation & the know-how to get through 1000’s of claim. Johal told Parker that if Harcus Sinclair signed a ‘Non-Disclosure Agreement’ with Your Lawyers and agreed not to be involved in any claims related to this for 6 years, then he would provide all the reports and information Your Lawyers had about it to allow Harcus Sinclair see their method for raising claims in the matter. Parker signed this on behalf of Harcus Sinclair.
Once Harcus Sinclair had essentially learned everything they could from Your Lawyers, they then decided that they did not want to do a collaboration/partnership with Your Lawyers. Harcus Sinclair instead agreed a partnership for the cases with Slater Gordon, one of the biggest firms of solicitors in the UK with the expertise, finances and volume of staff to do the group action. Your Lawyers were left at the wayside and were not a part of this prestigious and lucrative partnership between Harcus Sinclair and Slater Gordon, which signed up 40,000+ clients to sue Volkswagen in a group litigation. Your Lawyers tried to stop Harcus Sinclair from doing this, citing the NDA agreement and non-competition made between Johal and Parker on behalf of Your Lawyers and Harcus Sinclair respectively. Harcus Sinclair refused making various arguments as to why the NDA and non-competition clause did not apply.
Your Lawyers argued that they had a standard formed a standard privacy and 6 year non-competition contract with Harcus Sinclair. They argued that they wanted this non-competition clause to be interpreted in the standard manner, and for Harcus Sinclair’s partnership-collaboration to be in breach of this clause. Harcus Sinclair made a series of arguments to try and dodge the contract with Your Lawyers. They argued, firstly, that Parker provided a ‘solicitor’s undertaking’ under this contract, and a solicitor as an ‘officer of the Court’ cannot vow not to pursue certain legitimate legal means as the contract obliged as it is their professional duty to follow the legitimate legal instructions of their client, thereby making this obligation illegal, in breach of public policy, and one which could not be enforced. They secondly argued that this excessive blanket ban was an unfair restraint of trade clause in breach of competition law.
Judgment:
The Court in this case upheld the arguments of Your Lawyers Ltd. They stated that this was a standard restraint of trade clause and they were upholding it to ensure that Harcus Sinclair acting in partnership/collaboration with Slater Gordon was in breach of this clause. The Court were not persuaded by Harcus Sinclair’s arguments. They stated that this was a firm agreeing not to work in a certain part of the legal field, which was a business decision rather than a legal one, and did not infringe upon any solicitor’s professional duties to a client. They therefore held that this agreement did not breach public policy/illegality. They further held that agreeing not to take on one particular type of claim for 6 years was not an excessive restraint of trade to invoke competition law. In short, Harcus Sinclair’s arguments to try to duck their contractual obligations were not upheld - the contract was enforceable.
Ratio-decidendi:
Lord Briggs Ratio-Decidendi at 49 & 122-125 ‘49. … Certainly, it is important that those rules of contract law often grouped together as dealing with “illegality and public policy”, which include the rules on restraint of trade, should also be applied to solicitors’ undertakings. The policy of upholding high standards for solicitors does not entail the legal enforceability of solicitors’ undertakings that are in restraint of trade or are otherwise contrary to public policy or involve illegality. It cannot be correct because, as a matter of policy, it would be inconsistent, to decide that the non-compete undertaking in this case was contractually unenforceable as an unreasonable restraint of trade while then deciding that it was enforceable, as being a reasonable restraint of trade, as a solicitor’s undertaking. The relevant public policy underpinning the law on restraint of trade applies equally to contracts and to solicitors’ undertakings… 122. … The non-compete undertaking has, however, nothing to do with the provision of legal advice. It does not assist in the giving or understanding of any such advice. It is addressing an entirely different matter, namely the protection of Your Lawyers’ business interests. The advice was not being provided to Your Lawyers as an actual or potential client of Harcus Sinclair, but as a potential business collaborator. As the judge recognised, the non-compete undertaking related to the intended collaboration between the two firms - ie the proposed business arrangement between them. A business arrangement between two law firms is not the sort of work which solicitors undertake as part of their ordinary professional practice. It is a business matter rather than a professional matter, even if the business in question relates to the provision of professional services…151. For all these reasons we conclude that the non-compete undertaking given by Harcus Sinclair is not unenforceable as an unreasonable restraint of trade; that it was not a solicitor’s undertaking; that, if it was a solicitor’s undertaking, it would not have been enforceable under the court’s summary jurisdiction over its officers against Harcus Sinclair because Harcus Sinclair is not an officer of the court or against Mr Parker as it was not given by him in a personal capacity; that it would not have been enforceable if it had constituted an unreasonable restraint of trade …’
‘For all these reasons we conclude that the non-compete undertaking given by Harcus Sinclair is not unenforceable’, Lord Briggs at 151
Warning: This is not professional legal advice. This is not professional legal education advice. Please obtain professional guidance before embarking on any legal course of action. This is just an interpretation of a Judgment by persons of legal insight & varying levels of legal specialism, experience & expertise. Please read the Judgment yourself and form your own interpretation of it with professional assistance.