Quantum Advisory Ltd v Quantum Actuarial LLP

A contractual substitution may amount to novation by conduct where the parties’ dealings, viewed in context, demonstrate acceptance of the new contracting party. Novation substitutes a party on existing terms; it does not rewrite the contract or remove references that define its subject matter.

Whether contractual restrictions engage the restraint of trade doctrine depends on the substance and commercial context of the agreement, applying a broad and flexible rule of reason. A bespoke commercial arrangement created to enable a new business to operate may fall outside the doctrine; alternatively, restraints may be reasonable where they protect retained goodwill and reflect a freely negotiated allocation of commercial interests.

Commercial agreements should be construed to give effect to an ascertainable and workable intention. Uncertainty is a last resort, particularly where the parties have performed the agreement for years.

The claimant was the successor company to the business formerly conducted by Old Quad. The defendant limited liability partnership had been established as part of a restructuring under which it serviced the legacy business while retaining a specified percentage of fee income.

The claimant sought declarations and injunctive relief under a Services Agreement and payment under an Introducer’s Agreement. The defendant disputed novation, argued that direct client engagements removed clients from the Services Agreement, challenged restraints as unreasonable, contended that the Introducer’s Agreement was void because its Q List schedule was blank, and resisted an account.

The central issues were whether the agreements remained enforceable, whether the contractual restraints were invalid, whether the Introducer’s Agreement was uncertain, and whether an account should be ordered.

1. Novation. The Services Agreement was novated from Old Quad to New Quad. Novation requires consent, but acceptance may be inferred from conduct. The court examined the restructuring, the parties’ knowledge, the LLP’s prolonged dealings with New Quad, and the parties’ practical arrangements. Those matters established acceptance despite the absence of a formal novation document.
2. Novation substituted New Quad as contracting party on the existing terms. It did not replace references to Old Quad used to define the contractual subject matter. The Services Agreement therefore remained coherent and workable. In any event, assignment had transferred its benefit to New Quad, although novation was required to transfer the burden.
3. Direct client engagements. Clients directly retained by the LLP remained legacy clients for the purposes of the Services Agreement. The direct retainers were administrative arrangements, and both parties continued to apply the agreed fee division. The contractual relationship had to be understood in the light of the parties’ conduct and commercial purpose.
4. Restraint of trade. The restraints in clause 2 did not engage the doctrine. The Services Agreement was a bespoke arrangement which enabled the LLP to trade, supplied it with infrastructure and access to the Quantum business, and preserved the legacy goodwill for New Quad. The restraints protected the agreed ownership boundaries rather than sterilising the LLP’s capacity to work. The doctrine could not be applied mechanistically or by categorising the contract in the abstract.
5. Alternatively, if the doctrine applied, the restraints were reasonable. The agreement was made by experienced and capable business people, the restraints protected New Quad’s legitimate interests, the LLP had agreed to the long term of the arrangement, and the evidence did not establish public detriment or oppressive bargaining conditions. The court considered the restraints in the context of the whole bargain, including the LLP’s continuing commercial opportunities.
6. Introducer’s Agreement. The blank Schedule 1 did not make the agreement void for uncertainty. The Q List had been agreed and remained objectively identifiable through the parties’ background and conduct. Alternatively, the parties were estopped by convention from denying the agreed basis of the arrangement. In any event, the LLP had not shown that payments related to persons outside the class of Prospective Clients.
7. Account. Clause 9.2.9 concerned data-protection compliance and did not create a general right to an account of all dealings. The claimant had not shown non-compliance or a proper evidential basis for an account.
8. The claim succeeded except as to the account. The counterclaim failed.