Solicitor’s Undertakings and the Court’s Inherent Jurisdiction
On 23 July 2021, the Supreme Court handed down Judgment in the case of Harcus Sinclair LLP –v- Your Lawyers Ltd. Whilst the Supreme Court concluded that a non-compete clause in a non-disclosure agreement between law firms was reasonable as a restraint of trade, it also examined the enforcement of solicitor’s undertakings given by solicitors practising in incorporated law firms.
The background to the claim related to group litigation being brought by Volkswagen customers regarding misrepresentations with respect to the emissions of Volkswagen diesel vehicles. Harcus Sinclair LLP entered into a non-disclosure agreement (“NDA”) with Your Lawyers Ltd. in the anticipation that the two firms of solicitors may collaborate in respect of the group litigation against Volkswagen. Mr Parker, a member of Harcus Sinclair LLP, signed the NDA expressly for and on behalf of Harcus Sinclair LLP. The NDA contained a provision that Harcus Sinclair LLP “undertakes not to accept instructions for or to act on behalf of any other group of claimants in the contemplated group action”, without Your Lawyers Ltd.’s permission. Ultimately, Harcus Sinclair LLP and Your Lawyers Ltd. failed to reach agreement on jointly taking forward the group litigation. Harcus Sinclair LLP subsequently entered into an agreement with another firm of solicitors with respect to the group litigation. Harcus Sinclair LLP accepted instructions on behalf of a group of claimants and issued a group action concerning the emissions of Volkswagen diesel vehicles, without obtaining Your Lawyers Ltd.’s express permission. Harcus Sinclair LLP and Your Lawyers Ltd. issued proceedings in August 2017 seeking declaratory relief in relation to the non-compete clause and solicitor’s undertaking.
Issue for the Court to Determine
Your Lawyers Ltd. sought an injunction restraining Harcus Sinclair LLP from acting in the emissions litigation. The Supreme Court was asked to consider whether the non-compete clause was an unreasonable restraint of trade or whether it represented a solicitor’s undertaking enforceable by the Court under its inherent jurisdiction and that Harcus Sinclair LLP, and / or Mr Parker, had breached that undertaking.
Restraint of Trade and Reasonableness
The Supreme Court concluded that the non-compete clause was a reasonable protection of Your Lawyers Ltd.’s interests, and was enforceable by way of injunction as a contractual covenant. The Court emphasised that two parties of equal bargaining power can be expected to be able to look after their interests in agreeing terms which are reasonable between themselves.
However, the Supreme Court went on to discuss the Court’s jurisdiction to supervise the conduct of solicitors as officers of the Court, and exercise its jurisdiction to enforce undertakings given by solicitors in the course of their practice. The Supreme Court considered that the clause was not a solicitor’s undertaking which was binding as a matter of professional conduct. In doing so, the Supreme Court held there was only a narrow class of undertakings given by solicitors which would be classed as “solicitor’s undertakings”. Only these would be enforced by the Court pursuant to its inherent jurisdiction over solicitors as officers of the Court.
The Supreme Court considered two matters to be relevant in determining whether a clause amounts to a solicitor’s undertaking:
- Firstly, the subject matter of the undertaking and whether what the undertaking requires the solicitor to do (or not to do) is something which solicitors regularly carry out (or refrain from doing) as part of their ordinary professional practice; and
- Secondly, the reason for giving the undertaking and the extent in which the cause or matter (to which it relates) involves the sort of work that solicitors regularly carry out as part of their ordinary professional practice.
If both questions are answered affirmatively then the undertaking is likely to be a solicitor’s undertaking.
In this case, the Court felt that the undertaking provided by Harcus Sinclair LLP was not a solicitor’s undertaking because it related to a potential business opportunity and furtherance of the parties’ business interests. The undertaking was not entered into in furtherance of any interests of the client.
The Court also noted that the undertaking was given in the name of the LLP, rather than Mr Parker in his personal capacity. The Court noted that it did not have jurisdiction over corporate identities providing legal services, such as LLPs, which have a separate legal personality.
The Supreme Court’s conclusions re-emphasised the concerns about whether those dealing with incorporated law firms and solicitors LLPs are aware that undertakings given by them are not currently reinforced by the Court’s supervisory jurisdiction.
In practice, solicitors will have to consider how to ensure their client’s interests are protected when dealing with incorporated entities, for example, ensuring that a personal undertaking is given by an individual solicitor.
If you would like any further information or advice, please contact Timothy Cockram from the Litigation and Dispute Resolution team at Carson McDowell.
*This information is for guidance purposes only and does not constitute, nor should be regarded, as a substitute for taking legal advice that is tailored to your circumstances.