Harcus Sinclair LLP and another v Your Lawyers Ltd

When deciding whether a contractual restraint protects a promisee’s legitimate interests, the court may consider, objectively at the date of contracting, the parties’ non-contractual intentions or contemplated future dealings as well as the contract’s terms. The promisee must justify the restraint as between the parties. If it does so, the promisor must establish that it is contrary to the public interest.

A non-compete undertaking between law firms, limited to a particular group litigation and tailored to the anticipated collaboration, may therefore be enforceable. An undertaking is a solicitor’s undertaking only when given in a professional, rather than business, capacity. A promise not to compete with another law firm is ordinarily a business undertaking.

The appellant solicitors’ firm had begun preparing a group claim arising from the Volkswagen emissions scandal. It disclosed a litigation pack to the first respondent law firm under an NDA. The NDA included a six-year undertaking that the recipient would not accept instructions from, or act for, another group of claimants in the contemplated group action without permission.

The respondents later assembled their own group of claimants and acted through an LLP-related vehicle. The High Court held that the restriction was enforceable and granted injunctive relief. The Court of Appeal held that it was an unreasonable restraint of trade and discharged the injunctions: [2019] EWCA Civ 335.

The Supreme Court considered whether the restriction was an unreasonable restraint of trade, whether it was a solicitor’s undertaking, and the consequences of its having been given by an LLP and signed by a solicitor on the LLP’s behalf.

Appeal allowed. The non-compete undertaking was enforceable. The Court of Appeal had erred in holding that it was an unreasonable restraint of trade.

1. Restraint of trade. The promisee bears the burden of showing that a restraint is reasonable as between the parties. This requires a legitimate interest and a restraint going no further than reasonably necessary to protect it. The court also treated the benefits available to the promisor as relevant. If that burden is met, the promisor must show that the restraint is contrary to the public interest.
2. Legitimate interests and contemplated dealings. The assessment is made when the contract is made. It is not confined to express or implied contractual obligations. It may include what the parties objectively intended or contemplated would follow from the contract, even if they had not agreed legally binding obligations to bring it about. Here, the intended informal collaboration gave the appellant a legitimate interest in preventing the respondent from using the resulting opportunity to establish a rival claimant group.
3. Application. The six-year restriction was directed only to the emissions litigation and approximately matched the relevant limitation period. It was reasonably necessary to protect that interest and was commensurate with the contemplated commercial opportunity available to the respondent. The firms had equal bargaining power. The restriction did not materially impair claimants’ access to solicitors and was not contrary to the public interest.
4. Solicitor’s undertaking. The undertaking was not given in the respondent’s capacity as a solicitor. Its subject matter was a promise not to compete, and its purpose was to protect the firms’ own business interests. It was therefore a business arrangement, not a professional undertaking subject to the court’s summary supervisory jurisdiction.
5. Further observations. The court declined, as unnecessary to the result, to decide whether its inherent jurisdiction should be extended to incorporated law firms. It stated that, under the present position, an LLP is not an officer of the court and a solicitor signing solely as its disclosed agent incurs no personal liability. It also observed that a solicitor’s undertaking would not be enforceable if it were an unreasonable restraint of trade.

• United Kingdom Supreme Court: Allowed the appeal and held the non-compete undertaking enforceable: [2021] UKSC 32 .
• Court of Appeal: Held the undertaking unenforceable as an unreasonable restraint of trade and discharged the injunctions: [2019] EWCA Civ 335 .
• High Court: Held the undertaking enforceable, found a breach, and granted injunctive relief: [2017] EWHC 2900 (Ch) ; [2018] 1 WLR 2479 .