Two law firms wanted to explore collaboration on Volkswagen emissions claims. One promised not to act for a rival claimant group without the other’s permission. Their collaboration was never formalised, so the question was whether that contemplated opportunity could still justify enforcing the promise.
Your Lawyers Ltd was preparing a group claim arising from the Volkswagen emissions scandal and was introduced to Harcus Sinclair LLP, which had greater experience of major group litigation and funding. On 11 April 2016 the firms signed a non-disclosure agreement. Harcus Sinclair undertook not to use confidential information except for the stated purpose and not to accept instructions for, or act for, any other group of claimants in the contemplated group action without Your Lawyers’ express permission. The undertakings were to last for six years. Confidential information was supplied the same day.
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No binding collaboration agreement was concluded. The trial judge found, however, that the parties intended to collaborate informally and did so for a time, without either side being legally committed. During that period Harcus Sinclair, without Your Lawyers’ knowledge, recruited its own claimants and issued proceedings. The work was later transferred to an associated company, which collaborated with another firm. The judge found that those proceedings derived from Harcus Sinclair’s own work rather than misuse of Your Lawyers’ confidential information. By trial, the Harcus Sinclair side acted for more than 43,000 clients and Your Lawyers for more than 9,000.
The decisions below
Edwin Johnson QC, sitting as a deputy High Court judge, construed the undertaking as preventing Harcus Sinclair from acting for a rival group in the emissions litigation. He held that it was a solicitor’s undertaking, but that the court’s supervisory jurisdiction did not extend to a limited liability partnership and did not bind the solicitor who signed, Mr Parker, because he signed only for the firm. He held that the restriction protected legitimate interests connected with the intended collaboration, was no wider than reasonably necessary, was commensurate with the benefits obtained, and was not contrary to the public interest. He granted an injunction requiring Harcus Sinclair to cease acting and to procure that its associated company do likewise.
The Court of Appeal agreed with that construction but held that the undertaking was an unreasonable restraint of trade. It treated Your Lawyers’ only legitimate interest as protection of confidential information disclosed so that legal advice could be given. Because the agreement contained no collaboration obligation, the Court of Appeal considered the non-compete wider than necessary and disproportionate to the contractual benefits. It discharged the injunctions. It also considered itself bound by earlier authority that the supervisory jurisdiction does not extend to limited liability partnerships.
Reasonableness of the restraint
Lords Briggs, Hamblen and Burrows, with whom Lord Lloyd-Jones and Lady Arden agreed, treated enforceability under the restraint of trade doctrine as the decisive issue. The party seeking enforcement must show that the restriction is reasonable between the parties: it must protect legitimate interests, go no further than reasonably necessary, and be commensurate with the benefits to the other party. The other party must then show that it is contrary to the public interest.
The agreement was best analysed as a unilateral contract. Your Lawyers was not obliged to disclose anything, but disclosure made Harcus Sinclair’s undertakings binding. Because disclosure occurred on the day of signature, the contract was made then.
The Court held that legitimate interests are not confined to interests created by contractual obligations. Assessed objectively when the contract was made, the parties’ non-contractual intentions and what they contemplated may also be considered. The judge had found that informal collaboration was intended and that the undertaking was meant to stop Harcus Sinclair using that opportunity to establish a rival claimant group if formal collaboration failed. The Court of Appeal therefore erred in law by disregarding those matters merely because the agreement imposed no duty to collaborate. Your Lawyers had a legitimate interest in protecting the group claim it had already begun to build.
On that basis, six years was not excessive. The period was chosen so that it would broadly cover the limitation period, and the restriction applied only to the emissions litigation. Harcus Sinclair could continue the remainder of its practice. The relevant benefits likewise extended beyond the confidential information to the contemplated collaborative opportunity. The firms were of at least equal bargaining power, and Harcus Sinclair was the more experienced in this field. The undertaking was also not contrary to the public interest: it was limited to one set of claims, other firms remained available, and reasonable contractual restrictions of this kind could properly be enforced.
Why it was not a solicitor’s undertaking
The undertaking did not engage the court’s supervisory jurisdiction. Such an undertaking must be given by a solicitor in a professional capacity. The promise here was not to compete with another firm. That is not something solicitors regularly undertake as part of ordinary professional practice for a client. It was required so that Your Lawyers would disclose information and so that both firms could consider a business opportunity. Harcus Sinclair was acting in a business capacity, not professionally for a client. The judge’s contrary conclusion was therefore wrong in law.
The Court considered the position as it stood in 2021. An incorporated law firm was not itself an officer of the court, and the solicitor who signed had acted as agent for the firm. The Court declined to extend its supervisory jurisdiction in these proceedings. The ordinary contractual route to enforcement was a separate matter.
Even if this had been a solicitor’s undertaking, the restraint of trade rules would still have applied. The courts’ concern to uphold high professional standards does not justify enforcing an undertaking that is an unreasonable restraint of trade. Its status as a solicitor’s undertaking would at most have been an additional public-interest factor and would have been unlikely to change the outcome.
Verdict: The Supreme Court allowed Your Lawyers’ appeal. The six-year restriction was enforceable as a contractual undertaking in the circumstances of this litigation. It did not qualify as a solicitor’s undertaking enforceable under the court’s supervisory jurisdiction.
Source: Harcus Sinclair LLP and another v Your Lawyers Ltd [2021] UKSC 32
