UK Supreme Court upholds law firm's non-compete clause with rival after four-year legal battle
Your Lawyers celebrates victory in dispute sparked by potential collaboration over a VW emissions group claim
The UK Supreme Court has ruled in favour of consumer action law firm Your Lawyers in a dispute with rival firm Harcus Sinclair over the enforceability of a non-compete clause relating to their potential collaboration in a group emissions claim against Volkswagen.
The court ruled today that the clause in a non-disclosure agreement (NDA) the firms signed so they could discuss working together on a claim was enforceable, meaning Harcus Sinclair should have sought Your Lawyers' permission before it subsequently ‘retained clients’ and signed on another City firm, Slater and Gordon, to launch its own group collective action.
The case reached the High Court in 2017, when Harcus Sinclair was ordered to stop representing claimants in the VW case as a result of the non-compete clause. The Court of Appeal, however, reversed the High Court’s decision by finding that Your Lawyers’ agreement with Harcus Sinclair was ‘unenforceable as being unreasonable restraint of trade’.
In today's judgment, the Supreme Court, sided with the original High Court decision, ruling that Your Lawyers 'did indeed have legitimate interests, flowing from the intended informal collaboration, which it was protecting by the non-compete undertaking'.
It also backed the clause's six-year time period arguing it was 'logical and necessary for the non-compete undertaking to last for a six-year period that would roughly equate to the limitation period for claims in the emissions litigation'.
Aman Johal, director of Your Lawyers, said: “This is such an important victory for Your Lawyers but also for the dignity and sanctity of the legal profession. We have lived and breathed this case for four long years and were forced to take the matter all the way to the UK Supreme Court simply to oblige a law firm to honour an agreement that they freely entered into.”
Your Lawyers said it would 'now be entitled to bring a claim for damages'.
In their commentary on the judgment, Fountain Court barristers Richard Coleman QC and Philip Ahlquist, who were instructed by Your Lawyers, said the court had ‘emphasised that where two parties are of equal bargaining power, a court should approach the question of reasonableness on the basis that such parties can be expected to be able to look after their own interests in agreeing terms that are reasonable between themselves’.
The case also raised an important question about the court’s supervisory role over solicitors given their status as officers of the court, and whether ‘solicitor’s undertakings’ could be extended to LLPs or limited companies providing legal advice. Lord Briggs, Lord Hamblen and Lord Burrows declined to address this issue because they had ruled that Harcus Sinclair was acting in a business capacity rather than a professional one when it signed the agreement.
The judges said ‘a properly informed decision' would require assistance from the Law Society and other regulatory and professional bodies. They added that the questions was ‘probably better dealt with by legislation than by the courts, because of the availability of procedures for consultation which the court lacks’.
Since the inception of the case, Harcus Sinclair has split into two separate firms, with Harcus Parker, which was unavailable for comment, carrying out group litigation work.