UK Supreme Court holds law firm's non-compete clause with rival as valid

UK Supreme Court holds law firm's non-compete clause with rival as valid

Your Lawyers had dragged rival Harcus Sinclair to court over the dispute in the Volkswagen emission claims case

A non-compete clause entered between two law firms turned into a bone of contention leading to a prolonged legal dispute that required the intervention of the UK Supreme Court.

Consumer action law firm Your Lawyers had dragged rival firm, Harcus Sinclair, to the court over the enforceability of the non-compete clause relating to their potential collaboration in a group of emission claims against the German vehicles manufacturer Volkswagen.

The UK Supreme Court on 23 July ruled in favour of Your Lawyers and said that the clause in a non-disclosure agreement (NDA) the firms signed so they could discuss working together on a claim was enforceable, meaning that 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.

Your Lawyers had knocked on the doors of the High Court in 2017 following which Harcus Sinclair was ordered to stop representing claimants in the Volkswagen case due to the existence of the non-compete clause.

The Court of Appeal, however, reversed the High Court order by finding that Your Lawyers' agreement with Harcus Sinclair was 'unenforceable as being unreasonable restraint of trade'.

The Supreme Court was in consonance 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".

UK's Apex Court 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".

"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," Aman Johal, director of Your Lawyers, said, adding that they were now entitled to bring a claim for damages.

The case also raised a pertinent 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 since 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 observed that the question was "probably better dealt with by legislation than by the courts, because of the availability of procedures for consultation which the court lacks".