Harcus Sinclair LLP (Respondent) v Your Lawyers Ltd (Appellant)

Trinity Term

[2021] UKSC 32

On appeal from: [2019] EWCA Civ 335

Appellant

Respondents

Richard Coleman QC	Jonathan Crow QC
Philip Ahlquist	Jawdat Khurshid QC

Josephine Higgs

(Instructed by Your	(Instructed by Harcus
Lawyers Ltd)	Sinclair UK Ltd)

LORD BRIGGS, LORD HAMBLEN AND LORD BURROWS: (with whom
Lord Lloyd-Jones and Lady Arden agree)

1.         Introduction

1. This appeal involves a dispute between two law firms as to which firm can

act for group claimants in respect of substantial litigation concerning diesel
emissions from vehicles manufactured by Volkswagen.

2. The central issue on the appeal is whether a non-compete undertaking given by one of the law firms to the other in relation to the contemplated group litigation is unenforceable as an unreasonable restraint of trade. A related issue is whether the undertaking was a solicitor’s undertaking and, if so, whether it is enforceable against the individual solicitor who gave the undertaking on behalf of his firm and also against that law firm, which is a limited liability partnership (“LLP”). If it was a solicitor’s undertaking, further issues arise as to whether and how that affects the restraint of trade issue.

3. In this judgment, for reasons which appear later, we have deliberately used the trans-atlantic phrase “law firm” to encompass all business entities providing what are in the current regulatory legislation called “solicitor services”. This includes solicitors practising on their own or in traditional partnership, and also the newer corporate bodies such as solicitors’ limited liability partnerships (“LLPs”) and limited companies now authorised to provide solicitor services.

2.         The factual background

4. On 18 September 2015 the United States Environmental Protection Agency issued a notice of violation alleging that certain Volkswagen vehicles manufactured between 2009 and 2015 had been fitted with a “defeat device” which detected when the vehicle was being tested for compliance with emissions standards and manipulated the results. As a convenient shorthand, this has been referred to as the “Volkswagen emissions scandal”.

5. The appellant, Your Lawyers Ltd (“Your Lawyers”), is a limited company

carrying on the business of solicitors. Mr Aman Johal (“Mr Johal”) is a solicitor and
director of Your Lawyers.

6. The first respondent, Harcus Sinclair LLP (“Harcus Sinclair”), is an LLP

carrying on the business of solicitors. The second respondent (“Mr Parker”) is a
solicitor and was, at the material time, a member of Harcus Sinclair.

7. Mr Johal of Your Lawyers took the view that there was a potential group claim to be pursued in respect of the manipulation of emissions by Volkswagen and Your Lawyers made preparations to get such a group claim off the ground. On 26 October 2015, Your Lawyers sent a letter before action to Volkswagen Group United Kingdom Ltd (“VWUK”), the importer of Volkswagen vehicles into the United Kingdom, which listed causes of action including fraudulent misrepresentation, unjust enrichment and breaches of various consumer regulations and of the Sale of Goods Act 1979. Thereafter, Your Lawyers engaged in correspondence with Freshfields Bruckhaus Deringer LLP (“Freshfields”), solicitors for VWUK.

8. On 26 January 2016, Your Lawyers issued a claim on behalf of five claimants, selected as representative claimants, against VWUK, in which the intention was expressed to apply for a Group Litigation Order (“GLO”) under CPR Part 19 (“the January action”). By April 2016, Your Lawyers had obtained instructions from approximately 4,000 potential claimants in the proposed group claim.

9. In order to pursue a group action, it is necessary for firms to obtain, on behalf of their clients, both third party funding to cover the legal costs that would be incurred and also after-the-event insurance (“ATE insurance”) to cover the risk of an adverse costs order being made against the group of clients. For these purposes, Your Lawyers engaged the assistance of Mr Fairley of Capital Interchange Ltd, a broker specialising in third party funding and ATE insurance. Mr Fairley signed a non-disclosure agreement with Your Lawyers on 19 February 2016. Mr Fairley suggested collaboration with a larger law firm that had more experience of financing and undertaking major group actions. Harcus Sinclair was such a firm.

10. Mr Parker had experience of obtaining funding for group claims and was known to providers of such third-party funding. It had crossed Mr Parker’s mind that there might be a viable group claim against Volkswagen and he had asked his team at Harcus Sinclair to have a look at the background facts, but he was not convinced of the economics of a group claim. His view was that, because each individual claim would be of relatively low value, there would have to be thousands of claims for the litigation to become a viable proposition for a third-party funder.

11. Mr Fairley put Your Lawyers in touch with Harcus Sinclair and Mr Parker. He also contacted Therium Capital Management (“Therium”), a company which provides third-party funding for litigation, raising the possibility of Your Lawyers’ working alongside Harcus Sinclair.

12. Your Lawyers sent a draft non-disclosure agreement to Mr Parker on 10 April 2016. Mr Parker asked Ms Morrissey, a senior solicitor at Harcus Sinclair who was working on another group action, to take a look at the draft agreement as she had looked at a number of similar agreements in the previous year. Ms Morrissey read and considered the draft agreement and, subject to some suggested amendments, regarded the draft agreement and the restrictions it contained as acceptable for Harcus Sinclair to agree. Mr Parker signed the amended document expressly for and on behalf of Harcus Sinclair on 11 April 2016 without reading it himself. At the time, both Mr Parker and Ms Morrissey were familiar with the concept of non- disclosure agreements and understood and accepted their use by law firms seeking external advice and assistance in contemplated group actions.

13. The agreement (“the NDA”) was headed as a non-disclosure agreement and

identified Your Lawyers as “the Discloser” and Harcus Sinclair as “the Recipient”.
It materially provided as follows:

“1. The Discloser intends to disclose information (the Confidential Information) to the Recipient for the purpose of obtaining legal advice on behalf of Claimants in a large Group Action (the Purpose).

2. The Recipient undertakes not to use the Confidential Information for any purpose except the Purpose, without first obtaining the written agreement of the Discloser. The Recipient further undertakes not to accept instructions for or to act on behalf of any other group of Claimants in the contemplated Group Action without the express permission of the Discloser.

3. The Recipient undertakes to keep the Confidential Information secure and not to disclose it to any third party except those who know they owe a duty of confidence to the Discloser and who are bound by obligations equivalent to those in clause 2 above and this clause 3.

4. The undertakings in clauses 2 and 3 above apply to all of the information disclosed by the Discloser to the Recipient, regardless of the way or form in which it is disclosed or recorded but they do not apply to:

(a)	any information which is or in future comes into

the public domain (unless as a result of the breach of this
Agreement); or

(b) any information which is already known to the Recipient and which was not subject to any obligation of confidence before it was disclosed to the Recipient by the Discloser.

…

7. The undertakings in clauses 2 and 3 will continue in

force for six years from the date of this Agreement.” (Emphasis
added)

14. The dispute between the parties concerns the restriction contained in the

emphasised second sentence of clause 2 of the NDA (“the non-compete
undertaking”).

15. After the NDA had been signed, Your Lawyers provided Harcus Sinclair with its “Litigation Pack” later the same day. The “Litigation Pack” consisted of:

(1) An overview note prepared by Your Lawyers on the proposed group claim entitled the “VW Group Litigation”;

(2)	Your Lawyers’ letter before action to VWUK dated 26 October 2015;
(3)	Correspondence with Freshfields following the letter before action;
(4)	The claim form in the January action;
(5)	An “Advice on Liability” provided by counsel dated 24 March 2016;
(6)	A “Note on Quantum” provided by counsel dated 2 April 2016;
(7)	Transcripts from proceedings in the United States; and
(8)	Wikipedia information relating to the emissions events.

16. On 12 April 2016, Mr Parker sent Mr Johal an anonymised draft collaboration agreement, providing for two law firms to work together, each having their own clients. Thereafter, Harcus Sinclair and Your Lawyers discussed their proposed collaboration. There was a meeting between them on 28 April 2016, but the trial judge found that no formal agreement to collaborate, beyond the draft, was reached at that meeting. He found that there followed an informal process of collaboration, whereby the parties proceeded on the basis that they would be working towards agreeing the terms of a written collaboration agreement, and that pending its signing neither side was legally committed to collaborate.

17. On 17 August 2016, Mr Johal sent Mr Parker a further draft collaboration agreement between Your Lawyers and Harcus Sinclair. The judge said that it remained apparent from various clauses that each would have its own clients. Later drafts were also exchanged. The judge found that neither side addressed its mind at any stage to what would happen if no written collaboration agreement were agreed. Mr Johal relied on the NDA, and Mr Parker assumed that Harcus Sinclair would be free to strike out on its own or in collaboration with another firm or firms, because he had not read the NDA.

18. During the course of this informal process of collaboration, and without the knowledge of Your Lawyers, Harcus Sinclair recruited its own claimants (“the HS Group”) and on 19 October 2016 issued a claim form on their behalf against, among others, the manufacturers of affected vehicles (“the October action”). The judge found that the October action derived from Harcus Sinclair’s own work and the work of its counsel and was not the product, in any relevant sense, of any confidential information disclosed to Harcus Sinclair by Your Lawyers.

19. The October action was commenced by Harcus Sinclair with 67 claimants and Mr Parker reported this to Mr Johal after the event by email on 20 October 2016. Mr Johal’s response of the same day expressed surprise at the content of Mr Parker’s email. He interpreted Mr Parker’s email as asking Your Lawyers to support the application for Harcus Sinclair to be the sole lead solicitor in the absence of a cooperation agreement. He asked Harcus Sinclair to hold off on issuing the GLO application until the manner in which they were to cooperate had been concluded. Harcus Sinclair filed its GLO application to be lead solicitor on 28 October 2016, by which time Therium had decided to fund Harcus Sinclair.

20. On 17 November 2016, Harcus Sinclair and Therium met with another law

firm, Slater and Gordon, to discuss a collaboration between Harcus Sinclair and
Slater and Gordon.

21. By 25 November 2016, Harcus Sinclair had decided to transfer the litigation to the second claimant, Harcus Sinclair UK Ltd (“HSUK”), for reasons unrelated to the non-compete undertaking and, as regards those who made the decision (who did not include Ms Morrissey), in ignorance of the non-compete undertaking. HSUK was the vehicle through which Harcus Sinclair conducted group litigation.

22.       On 25 November 2016, Therium declined to fund Your Lawyers.

23. During October and November 2016, the informal process of collaboration between Harcus Sinclair and Your Lawyers in respect of the proposed group claim, pending the agreement of the terms of a binding collaboration agreement, was faltering, but was not treated as abandoned by either party, in their dealings with each other, and had not been finally abandoned by either party. Nor had the parties, in their dealings with each other, formally given up on the prospect of collaboration. Mr Parker, by virtue of his dealings with Slater and Gordon, would have known this was a remote prospect, but he did not communicate that knowledge to Your Lawyers.

24. On 21 December 2016, HSUK and Slater and Gordon entered into what was described as a “Co-Counsel agreement” under which they agreed to work together in the litigation. Your Lawyers was unaware of the negotiations or agreement between HSUK and Slater and Gordon.

25. On 6 January 2017, Mr Johal emailed Mr Parker asserting for the first time that Harcus Sinclair’s involvement had been “on the basis that you could not accept instructions from any claimants without my authority”, although he did not at that time claim that this was a solicitor’s undertaking. The correspondence which followed marked the end of the informal process of collaboration.

26. On 9 January 2017, HSUK issued a press release publicising the application for a GLO, advertising its role in the emissions litigation and its collaboration with Slater and Gordon, and identifying HSUK as the firm which would be lead solicitor in the emissions litigation.

27. On 25 January 2017, HSUK issued a notice of change of acting in respect of the HS Group, replacing Harcus Sinclair as solicitors on the record in the proceedings. Harcus Sinclair provided HSUK with the legal resources (ie Harcus Sinclair’s members and employees) which HSUK required to conduct the emissions litigation. Under these arrangements, Mr Parker continued to act for the HS Group in his capacity as a member of Harcus Sinclair.

28. In a witness statement filed in the emissions litigation on 14 July 2017, Your Lawyers contended that the non-compete undertaking was a solicitor’s undertaking. Harcus Sinclair contends that this was the first time Your Lawyers made this assertion.

29. By the time of the trial of the action, HSUK, acting jointly with Slater and Gordon, acted for over 43,000 clients with claims against the Volkswagen Group. Your Lawyers acted for over 9,000 clients with claims against the Volkswagen Group. Harcus Sinclair’s application for a GLO was pending. The dispute between Harcus Sinclair and Your Lawyers had become an issue in that application because it was said to affect the question of who should be the lead solicitors in the intended group claim.

3.         The decisions of the courts below

(1) The High Court

30. The trial was heard over four days between 27 September and 2 October 2017

before Mr Edwin Johnson QC, sitting as a deputy judge of the High Court. His
judgment, [2017] EWHC 2900 (Ch), is reported at [2018] 1 WLR 2479.

31. The judge held that the non-compete undertaking took effect as a solicitor’s undertaking, but that the court’s supervisory jurisdiction was not available as against Harcus Sinclair. This was on the basis that the Court of Appeal in Assaubayev v Michael Wilson & Partners Ltd [2014] EWCA Civ 1491; [2015] PNLR 8 had decided that the court’s supervisory jurisdiction over solicitors was confined to solicitors as officers of the court and did not extend to limited liability partnerships and companies through which solicitors conduct their practice. The judge also held that the court’s supervisory jurisdiction was not available against Mr Parker, because he gave the undertakings contained in the NDA expressly on behalf of Harcus Sinclair.

32. As to the interpretation of the non-compete undertaking, the judge concluded that it precluded Harcus Sinclair, without Your Lawyers’ express permission, from accepting instructions for, or acting on behalf of, any other group of claimants in any actual or intended group action in the English courts involving Your Lawyers’ client group against anyone who could be held responsible in civil proceedings in respect of the Volkswagen emissions scandal. He rejected Harcus Sinclair’s case that “the contemplated Group Action” in clause 1 of the non-compete undertaking referred only to the January action. In the judge’s view, there was no ambiguity in the non-compete undertaking and its meaning was clear. The judge further held that the NDA contained an implied term whereby Harcus Sinclair undertook that HSUK would not do anything which, if done by Harcus Sinclair, would be a breach of the non-compete undertaking.

33. The judge concluded that the non-compete undertaking, construed in this way, was not unenforceable as an unreasonable restraint of trade. In summary, he concluded that the non-compete undertaking was no more than was reasonably necessary, as at the date of the NDA, to protect Your Lawyers’ legitimate interests and was commensurate with the benefits secured to Harcus Sinclair under the NDA. He considered that the non-compete undertaking was intended to protect Your Lawyers from Harcus Sinclair being well placed, as a result of the informal collaboration, to form its own group of claimants in competition with Your Lawyers, as in fact happened. In his view, the restriction of the non-compete undertaking was commensurate with the benefits Harcus Sinclair obtained of access into informal collaboration with Your Lawyers. He also concluded that the non-compete undertaking was not contrary to the public interest. He considered that there was no reason why a law firm should not be entitled to bind themselves by contract not to act in future for a particular group of persons and that there was a public interest in group action solicitors knowing that the court would enforce reasonable restrictions of this kind.

34. The judge found that Harcus Sinclair was in breach of the non-compete undertaking and the implied term. He further held that the non-compete undertaking had not ceased to have effect; that Your Lawyers had not permitted Harcus Sinclair to act for the HS Group; and that Your Lawyers had not lost the right to enforce the non-compete undertaking as a result of acquiescence, waiver or estoppel.

35. The judge concluded that Your Lawyers was entitled to an injunction for six

years from the date of the NDA requiring Harcus Sinclair to cease acting for the HS
Group in the emissions litigation and to procure that HSUK do likewise.

(2)	The Court of Appeal

36. The appeal was heard over three days between 12 to 14 February 2019. The

Court of Appeal’s judgment, [2019] EWCA Civ 335, was handed down on 5 March
2019 and is reported at [2019] 4 WLR 81 and [2019] PNLR 19.

37. The Court of Appeal granted Your Lawyers permission to appeal against the judge’s conclusions that the court’s supervisory jurisdiction was not available as against Harcus Sinclair or Mr Parker, but dismissed that appeal. In relation to the non-availability of the jurisdiction over an LLP, the Court of Appeal considered itself to be bound by the decision in Assaubayev v Michael Wilson & Partners Ltd. There was a dispute between the parties as to whether the Court of Appeal had accepted or rejected the judge’s conclusion that the non-compete undertaking was a solicitor’s undertaking. The Court of Appeal’s order does not address the issue.

38. The Court of Appeal agreed with the trial judge’s interpretation of the non- compete undertaking. It held, at para 68, that “the clear words” of the non-compete undertaking “mean what they say” and that they were not ambiguous. Harcus Sinclair was refused permission to cross-appeal on that issue by the Supreme Court.

39. The Court of Appeal said that it would want to reserve for another occasion the question whether it is permissible to imply terms into a restriction of the kind in issue in order to extend its ambit, but agreed with the trial judge that Harcus Sinclair itself acted in breach of the non-compete undertaking (if valid) by providing the services of its partners and employees to HSUK for the purpose of doing what Harcus Sinclair could not do under the non-compete undertaking.

40. In the view of the Court of Appeal, the judge had erred in law in reaching his decision on restraint of trade and it was appropriate for the court to consider the matter afresh. Having done so, the Court of Appeal held that the non-compete undertaking was unenforceable as an unreasonable restraint of trade because in summary, Your Lawyers’ only legitimate interest was to protect confidential information that it was disclosing for the purpose of obtaining Harcus Sinclair’s legal advice and the non-compete undertaking was not reasonably necessary to protect that legitimate interest; the non-compete undertaking was not commensurate with the benefits secured by Harcus Sinclair under the NDA, which did not include any form of collaboration under the NDA; the non-compete undertaking was wide- ranging and out of proportion to the benefit Harcus Sinclair received under the NDA; it was therefore a broader restriction than was reasonably required for the protection of Your Lawyers’ legitimate interests as the party to the NDA disclosing confidential information to Harcus Sinclair. In the light of this conclusion, the Court of Appeal did not consider it necessary to determine whether the non-compete undertaking was to be regarded as reasonable in the public interest, although they observed that they were not convinced that the judge had asked the right question. The injunctions granted by the judge were accordingly discharged.

41. The Court of Appeal refused Harcus Sinclair permission to appeal on the issues of acquiescence, waiver and estoppel, after hearing full argument on them.

4.         The issues

42.       The parties agreed that the appeal raised six issues, which may be stated as

follows:

(1)	Is the non-compete undertaking a solicitor’s undertaking?

(2) Does the High Court have an inherent supervisory jurisdiction over incorporated law firms, whether limited liability partnerships, such as Harcus Sinclair, or limited companies such as Your Lawyers, through both of which solicitors practise?

(3) Can the High Court’s inherent supervisory jurisdiction be exercised in this case in relation to Mr Parker?

(4) If the non-compete undertaking constitutes a solicitor’s undertaking that in principle is capable of enforcement against Harcus Sinclair and/or Mr Parker, should it be enforced notwithstanding that, applying contractual principles, as the Court of Appeal held, the non-compete undertaking constituted an unreasonable restraint of trade?

(5) If the non-compete undertaking was a solicitor’s undertaking, was the Court of Appeal wrong in holding (if it did) that this was irrelevant to the question whether the non-compete undertaking was contrary to public policy on the grounds of restraint of trade?

(6) Was the Court of Appeal wrong in holding that the non-compete undertaking constituted an unreasonable restraint of trade?

43. It will be apparent that issues (2) to (5) depend on it being held, under issue (1), that the non-compete undertaking was a solicitor’s undertaking. For reasons set out below, we conclude that it was not such an undertaking. It follows that the critical issue for the determination of the appeal is issue (6), namely whether the non-compete undertaking was an unreasonable restraint of trade. That issue will therefore be addressed first. We will then consider whether the non-compete undertaking was a solicitor’s undertaking - issue (1). Since they have been fully argued, issues (2) to (5) will then be addressed, but relatively briefly since their resolution is not necessary to the decision on the appeal.

5. Issue (6): was the Court of Appeal wrong in holding that the non- compete undertaking constituted an unreasonable restraint of trade?

(1)	The restraint of trade doctrine

44. Given that, prior to 2019, the highest court had not decided a case on the restraint of trade doctrine for 45 years, it is remarkable that this is the third case in three years in which the restraint of trade doctrine has been considered by the Supreme Court. In Egon Zehnder Ltd v Tillman [2019] UKSC 32; [2020] AC 154, the power to sever the offending restraint of trade clause from the rest of the contract was explored and a previously leading case, Attwood v Lamont [1920] 3 KB 571, was overruled. In Peninsula Securities Ltd v Dunnes Stores Ltd (Bangor) [2020] UKSC 36; [2020] 3 WLR 521, the court examined what Lord Wilson described, at para 1, as the “outer reaches” of the restraint of trade doctrine. It was held that a restrictive covenant over land, given by a developer of a shopping centre, preventing there being a rival shop to that of the claimant (who was an “anchor tenant”) did not engage the doctrine; and the central reasoning of the majority of the House of Lords in Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269 favouring a “pre-existing freedom” test was departed from in favour of applying a “trading society” test.

45. One might think that the recent series of Supreme Court cases analysing the law on illegality (Patel v Mirza [2016] UKSC 42; [2017] AC 467, Henderson v Dorset Healthcare University NHS Foundation Trust [2020] UKSC 43; [2021] AC 563, Grondona v Stoffel & Co [2020] UKSC 42; [2021] AC 540) is also relevant. This is not least because, in the contract textbooks, illegality is usually closely linked with public policy so that, for example, contracts involving crimes are usually examined alongside contracts that are contrary to public policy, such as contracts involving sexual immorality or contracts interfering with the administration of justice or contracts in restraint of trade. But the principles governing contracts in restraint of trade are well-established and (with the exception of the rules on severance) self-contained and already reflect the type of flexibility that Patel v Mirza has brought to the law on contracts affected by illegality. It seems preferable, therefore, to treat the law on the enforceability of contracts in restraint of trade as being separate from, albeit similar to, the law on the enforceability of contracts affected by illegality as laid down in Patel v Mirza. Certainly, neither counsel in this case placed any reliance on Patel v Mirza in relation to the restraint of trade doctrine.

46. Most cases on the restraint of trade doctrine have concerned restraints on the seller of a business and on employees. But there have also been many cases that do not fall within either of those two categories such as the exclusive dealing and exclusive services agreements that were the subject matter of the House of Lords’ decisions in, respectively, Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269 and A Schroeder Music Publishing Co Ltd v Macaulay [1974] 1 WLR 1308. As Lord Wilberforce made clear in the Esso case, at 337, the categories of contracts in restraint of trade “can never be closed”.

47. In this case, the facts concern a novel situation for the application of the doctrine: a non-compete undertaking given by one law firm to another in relation to a group litigation claim. However, it is clear, and not in dispute between the parties, that the non-compete undertaking in this case does engage the restraint of trade doctrine. It follows that we are solely concerned with deciding whether the restraint of trade is unreasonable. In deciding that, it is well-established in the case law that two principles must be applied (see, eg, Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] AC 535; Herbert Morris Ltd v Saxelby [1916] 1 AC 688; Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269; A Schroeder Music Publishing Co Ltd v Macaulay [1974] 1 WLR 1308; Bridge v Deacons [1984] AC 705; and see generally Heydon, The Restraint of Trade Doctrine, 4th ed (2018); Chitty on Contracts, 33rd ed (2018), paras 16-106 - 16- 174); Stephen Smith, “Reconstructing Restraint of Trade” (1995) Oxford Journal of Legal Studies 565).

48. The first principle is that it is for the promisee (Your Lawyers) to establish that the non-compete undertaking is reasonable as between the parties. To satisfy this burden, the promisee must show, first, that the non-compete undertaking protects legitimate interests of the promisee and, secondly, that the non-compete undertaking goes no further than is reasonably necessary to protect those interests. There also appears to be a third element which the courts below in this case (relying on the words used by Lord Diplock in A Schroeder Music Publishing Co Ltd v Macaulay at pp 1315-1316) referred to as the promisee needing to show that the restriction is commensurate with the benefits secured to the promisor under the contract. Richard Coleman QC, counsel for Your Lawyers, submitted that there is no such third element at least where, as in this case, the parties are of equal bargaining power.

49. The second principle is that, if the promisee succeeds in establishing that the non-compete undertaking is reasonable as between the parties, the burden shifts to the promisor to establish that the undertaking is unreasonable as being contrary to the public interest.

50. In this case, it is the first of those two principles - the reasonableness between the parties - that raises particular difficulties although both will need to be examined. And within the enquiry as to the reasonableness between the parties, there is a difficult, and largely unexplored, critical issue as to the range of enquiry that is permissible in determining whether the promisee has legitimate interests.

(2)	A preliminary question: what type of contract is the NDA?

51. The relevant clauses of the NDA have been set out in para 13 above. It is not in dispute that the NDA, dated 11 April 2016, is contractually binding (subject to whether the non-compete undertaking is unenforceable under the restraint of trade doctrine). But it would appear that, until this matter was adverted to by Mr Coleman in the Supreme Court, the question as to what exactly is the correct contractual analysis of the NDA had not previously been raised either at first instance or in the Court of Appeal.

52. Mr Coleman submitted that this was a unilateral contract. Neither party was promising to do anything merely by signing the contract. The agreement was rather that, if Your Lawyers were to provide confidential information to Harcus Sinclair, Harcus Sinclair would be bound by the non-disclosure and non-compete undertakings. He referred to the hypothetical example, known to all law students, of A promising money to B if B walks from London to York. B is not promising to do anything. That is why such a contract is labelled a “unilateral” contract which contrasts with the more common “bilateral” contract where both parties are promising, and binding themselves, to do something. So here Your Lawyers (the equivalent of B in that example) was not promising to do anything. But if Your Lawyers did provide the confidential information to Harcus Sinclair (the equivalent of A), then Harcus Sinclair would be bound by its undertakings. The alternative interpretation is that this was a bilateral contract in which Your Lawyers was promising to provide confidential information in return for the promises by Harcus Sinclair to comply with the non-disclosure and non-compete undertakings.

53. The unilateral contract analysis of the NDA is to be preferred because it is hard to accept that Your Lawyers would be in breach of contract if it chose not to provide the confidential information. It should be noted that, on these facts, the unilateral contract analysis does not affect the date when the contract was made. As confidential information was provided by Your Lawyers, and was provided on the same day as the NDA was signed, the contract, even if unilateral, was made on 11 April 2016.

(3)	Legitimate interests of Your Lawyers flowing from the intended

collaboration between the parties?

(i)        The view of the judge

54. It is clear (whether one classifies the contract as unilateral or bilateral) that neither party was expressly or impliedly promising to collaborate with the other. However, in considering whether the non-compete undertaking was protecting legitimate interests, it is important that the judge found not only that there was informal collaboration between the parties for several months after the making of the NDA in April 2016 but also that the parties intended (at the time of the NDA) that the non-compete undertaking should protect Your Lawyers in the event of the proposed collaboration not working out. It is also clear from the judge’s reasoning that, at the time of the NDA, the parties intended to engage in informal collaboration.

55. Given its importance, it is helpful to set out the most relevant passages from Edwin Johnson QC’s judgment on this matter of collaboration between the parties (noting that he was throughout referring to the non-compete undertaking as “sentence 2”). He said, for example:

“[T]he important point is that sentence 2 was intended to provide the defendant with a particular form of protection in connection with the first claimant giving its advice and, more generally, in connection with the intended collaboration between the defendant and the first claimant.” (para 239)

“As from their entry into the NDA, the parties were engaged in negotiations over the terms of a collaboration agreement.” (para 304)

“Unfortunately, the parties were not able to agree such a collaboration agreement, and their period of informal collaboration came to an end, in circumstances where [Harcus Sinclair], by reason of its work during the period of informal collaboration, was well placed to form its own group of claimants in competition with the defendant. The restriction in sentence 2 was, in my view, intended to provide the defendant with protection from just such a scenario. I find it very hard to see how a restriction which was intended to provide this protection went beyond what was reasonably necessary, as at the date of the NDA, to protect the legitimate interests of the defendant.” (para 305) (Emphasis added)

“[T]he defendant had a legitimate interest in preventing [Harcus Sinclair] from using its position as advisor/collaborator in respect of the defendant’s group of claimants to strike out alone, or in concert with another firm, and set up a rival group in competition with the defendant.” (at para 306) (Emphasis added)

“[Harcus Sinclair’s] entry into the NDA, and thus [Harcus Sinclair’s] entry into the restriction in sentence 2 were what provided [Harcus Sinclair] with access into a process of collaboration with the defendant.” (at para 311) (Emphasis added)

“When the defendant embarked on a process of collaboration with [Harcus Sinclair], there was the risk that [Harcus Sinclair] would do sufficient work of its own to be able to achieve a head start in the proposed group claim, without having to rely upon or use any confidential information provided by the defendant. Putting the matter another way, [Harcus Sinclair] would secure an advantageous position as a result of being invited to collaborate with the defendant, and as a result of collaborating with the defendant, not as a result of having access to confidential information. If the risk of that advantage being exploited by [Harcus Sinclair] was to be avoided, the NDA required sentence 2 …” (para 406)

56. The non-compete undertaking gave Harcus Sinclair access to a process of informal consultation with Your Lawyers. In the light of that intended informal collaboration, the judge clarified that Your Lawyers had legitimate interests in preventing Harcus Sinclair setting up a rival group of claimants to the group of claimants that Your Lawyers had started setting up. For example, he said, at para 300:

“Sentence 2 … was concerned with preventing the first claimant [Harcus Sinclair] from setting up a rival group of claimants in the proposed group claim. In other words, sentence 2 was intended to prevent the very thing which has now occurred, with the HS Group. The defendant and the claimants are now in direct and acrimonious competition in the emissions litigation, in a manner which does not seem to me to be assisting any of the claimants or potential claimants in the emissions litigation.”

And he explained this further at para 316:

“The defendant in the present case did have a legitimate interest to protect, namely its own proposed group claim. The purpose of the restriction in sentence 2 was to ensure that the first claimant did not set up its own group of claimants in competition with the defendant’s group. The defendant was not a party which had no connection with claims arising out of the emissions events, and which was seeking to prevent the first claimant from involvement in such claims. The defendant had a real and substantial interest in such claims, by virtue of its own group of claimants and by virtue of all the work which it had done, prior to the NDA, to prepare the proposed group claim.”

57. The judge’s view, therefore, was that Your Lawyers had legitimate interests in protecting its own proposed group claim from Harcus Sinclair setting up a rival group claim. Those legitimate interests flowed from the intended process of informal collaboration, which would be embarked upon consequent on entry into the NDA. The judge considered that the non-compete undertaking was designed to protect those legitimate interests which would not be sufficiently protected by protecting Your Lawyers against disclosure and use of its confidential information.

58. It is noteworthy that the judge’s finding that the parties intended to collaborate informally under the NDA reflected Harcus Sinclair’s own pleaded case and evidence. Thus, the witness statement of Mr Beresford, which stood as Harcus Sinclair’s Particulars of Claim, stated:

“the NDA was an initial document which was intended to govern the terms of the collaboration between Harcus Sinclair and Your Lawyers pending the conclusion of a more extensive ‘collaboration agreement’.”

(ii)       The view of the Court of Appeal

59. The Court of Appeal regarded it as very important that the NDA did not

include a collaboration agreement. It concisely set out its view on this matter in para
83:

“In our judgment, YLL’s legitimate interests can only be ascertained at the date of the NDA and on the basis of its actual provisions. The NDA was aimed at protecting the confidential information which was being disclosed for the purpose of obtaining legal advice, not at collaboration between YLL and HSLLP. Had the NDA included a collaboration agreement, it might well have been reasonable to prevent HSLLP from acting for other claimants outside that collaboration. But that was not what the NDA was about. In our view, YLL’s only legitimate interest under the NDA was to protect the confidential information that it was disclosing for the purpose of obtaining HSLLP’s legal advice. It is hard to see why a restriction that went beyond using that confidential information for its own purposes or for the purposes of other clients could be reasonable in that context.” (Emphasis added)

60. The Court of Appeal was therefore indicating that the position might well have been different had the NDA included a collaboration agreement because Your Lawyers would then have had legitimate interests in protecting its group of claimants from Harcus Sinclair setting up a rival group. But Your Lawyers’ legitimate interests could only be ascertained “on the basis of [the NDA’s] actual provisions” and they did not include any provision about collaboration.

61. It should be stressed that the Court of Appeal was not overturning the judge’s findings of fact that Your Lawyers had legitimate interests to protect if, as a matter of law, the judge had been entitled to take into account the parties’ intentions to collaborate. It is well-established that the determination of a promisee’s legitimate interests is essentially a question of fact based on evidence: see, eg, Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269, 301 (per Lord Reid). But the Court of Appeal was overturning the judge, as a matter of law, on the basis that it was not open to him to make factual findings about Your Lawyers’ legitimate interests where those alleged legitimate interests did not flow from any contractual provisions about collaboration in the NDA.

(iii)      A critical question of law

62. It follows that, on the facts of this case, there is a critical question of law that we must decide in order to determine whether Your Lawyers had legitimate interests to protect by the non-compete undertaking. That question of law is whether one can take into account, in assessing Your Lawyers’ legitimate interests, not only the NDA provisions (express or implied) but also - assessed at the time the NDA was made - the parties’ non-contractual intentions or what they contemplated would occur as a consequence of entering into the contract. Put another way, does the fact that the NDA did not include any legally binding obligations to collaborate mean that it is irrelevant, in deciding on Your Lawyers’ legitimate interests, that the parties intended, or contemplated, at the time the NDA was made, a process of informal collaboration consequent on the NDA?

63. Plainly there is no need for the legitimate interests to be spelt out, or referred to, in the contract. For example, it is well-recognised that, in considering the reasonableness of a restrictive covenant, an employer has a legitimate interest in preventing an ex-employee using its trade secrets or soliciting its customers: but there may be no mention of trade secrets or customers in the restrictive covenants or elsewhere in the employment contract. Again, it is clearly established that a party’s legitimate interests may flow from many contracts taken together rather than just one contract, as in Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd [1968] AC 269, 302, where Esso’s legitimate interest was held to be “maintaining a stable system of [petrol] distribution throughout the country” (per Lord Reid). Therefore, the question we are asking is not whether a legitimate interest has to be mentioned in the contract or must flow from the contract taken in isolation from other contracts. Rather the question is whether, in determining the promisee’s legitimate interests, one can take into account not only the contractual obligations of the parties but also (assessed objectively at the time the contract was made) their non-contractual intentions, or what they contemplated, as a consequence of entering into the contract.

64. No doubt it will be rare for this question to arise and to be critical to the determination of the case. Not surprisingly, therefore, the authorities on the restraint of trade doctrine have approached legitimate interests almost entirely through the lens of the contractual provisions. However, we were referred by counsel to relevant obiter dicta in three cases. On behalf of Your Lawyers, Mr Coleman referred us to Gledhow Autoparts Ltd v Delaney [1965] 1 WLR 1366 which concerned a restrictive covenant in a contract of employment of a travelling salesman. The Court of Appeal (Sellers, Danckwerts and Diplock LJJ) held that the restrictive covenant was unenforceable as an unreasonable restraint of trade because it went beyond protecting the employer from the non-solicitation of existing customers and therefore went beyond what was necessary to protect the legitimate interests of the employer. In stressing that the relevant time to assess the question of reasonableness was the time the contract was made, Diplock LJ said the following at p 1377:

“The defendant was in fact employed for over six years by the plaintiffs and no doubt became a valuable servant and acquired considerable knowledge of and personal relation with the plaintiffs’ customers. It is natural in those circumstances to tend to look at what in fact happened under the agreement. But the question of the validity of a covenant in restraint of trade has to be determined at the date at which the agreement was entered into and has to be determined in the light of what may happen under the agreement, although what may happen may cover many possibilities which in the result did not happen. A covenant of this kind is invalid ab initio or valid ab initio. There cannot come a moment at which it passes from the class of invalid into that of valid covenants.” (Emphasis added)

Mr Coleman submitted that Diplock LJ’s obiter dicta supported the approach of the judge in our case. While it should be noted that Diplock LJ’s words referred to what might happen “under the agreement”, we agree that they can be interpreted as supporting an approach whereby the judge took into account what the parties intended, or contemplated, consequent on the NDA, in particular that there would be a period of informal collaboration.

65. In contrast, Jonathan Crow QC, counsel for Harcus Sinclair, relied on Watson v Prager [1991] 1 WLR 726 in which a contract between a boxer and his manager, who was also the promoter for nearly all his fights, was held to be an unreasonable restraint of trade. One reason for this was that the contract entitled the manager to exclude the boxer from any share of television receipts thereby benefiting himself in his capacity as promoter. As it turned out, the purses received by the boxer were reasonable. But at p 749, Scott J said this:

“The reasonableness of a contract in restraint of trade must be tested not by a reference to what the parties have actually done or intend to do but by what the terms of the contract entitle or require them to do. The reasonableness of the purses received … is not in point.”

66. Mr Crow further relied on Coppage v Safety New Security Ltd [2013] EWCA Civ 1176; [2013] IRLR 970, in which a non-solicitation restrictive covenant in an employment contract was held to be a reasonable restraint of trade and therefore enforceable by the employer. In summarising the relevant principles in determining the reasonableness of the restrictive covenant, Sir Bernard Rix included the following at para 9:

“The question of reasonableness has to be asked as of the outset of the contract, looking forwards, as a matter of the covenant’s meaning, and not in the light of matters that have subsequently taken place (save to the extent that those throw any general light on what might have been fairly contemplated on a reasonable view of the clause’s meaning) … In that context, the validity of a clause is not to be tested by hypothetical matters which could fall within the clause’s meaning as a matter of language, if such matters would be improbable or fall outside the parties’ contemplation.” (Emphasis added)

67. However, although not directly referred to by counsel, it appears that the most important cases - in the sense that the decisions to some extent rested on this point - are two further cases on restrictive covenants in employment contracts: Allan Janes LLP v Johal [2006] EWHC 286 (Ch); [2006] ICR 742, and, at first instance, Egon Zehnder Ltd v Tillman [2017] EWHC 1278 (Ch). The latter case was ultimately appealed to the Supreme Court which restored Mann J’s decision at first instance but without commenting on the point with which we are now concerned. In both cases, one issue was whether one should take into account, in assessing the reasonableness of the restriction, that the employee might be promoted. It was held that, applying the obiter dicta of Diplock LJ in Gledhow Autoparts Ltd v Delaney, which was set out in both cases, one should indeed take that into account because it was contemplated at the time the contract was made. This was so even though (presumably) there was no contractual obligation to promote the employee. In Allan Janes LLP v Johal, Bernard Livesey QC (sitting as Deputy Judge of the High Court) said at paras 38-39:

“38. The defendant contends that the case needs to be looked at on the basis that she has personally dealt with only a small proportion of the clients of the firm and has turned out not to be very good at marketing herself and generating new clients. I do not accept that submission. It is contrary to the fundamental principle that the reasonableness of the restriction must be interpreted in accordance with what was in the contemplation of the parties at the date when the contract was made and not as matters in the end turned out. The reason for this is that the covenant will have been formed at the beginning of the employment in the light of what was in the contemplation of the parties at that time. If the covenant was unreasonable for those expectations it will be wholly unenforceable [,] not partly unenforceable to the extent of what the outcome turned out to be …

39. Since the defendant was recruited into a senior position with a mutual hope that it would mature into a partnership offer, it clearly was within the actual contemplation of the parties that the claimant would promote the defendant to all its actual and target clients, that she would assist in marketing, would generate relationships with actual and potential clients and might well be successful in generating clients from just the sort of introductions as were the natural consequence of each of the marketing events on which the claimant spent its money.”

68.       Similarly, in Egon Zehnder Ltd v Tillman Mann J said at para 27:

“That is not to say that one only looks at the actual position as at the date the employment started. If one looked at that position alone few covenants would be valid because in most cases the employee will not have engaged fully enough with the business to justify it. One has to go further and look at what was in the contemplation of both parties. That contemplation can include promotion. Diplock LJ made plain the appropriateness of looking at the contemplated future, and the question of promotion was dealt with in Allan Janes LLP v Johal [2006] ICR 742.”

69. A similar approach was taken in another first instance decision, Pickwell v Pro Cam CP Ltd [2016] EWHC 1304 (QB); [2016] IRLR 761. This did not concern promotion but rather the contemplated qualification, and gaining of experience, of two trainee agronomists. The relevant restrictive covenants were concerned to protect the employer once the trainees were qualified and experienced. Judge Curran QC, sitting as a judge of the High Court, held that, in the light of the contemplated qualification and gaining of experience of the employees, the restrictive covenants protected the employer’s legitimate interests. He applied Allan Janes LLP v Johal and cited the paras set out above from the judgment in that case. However, it may be argued that this decision is not quite on the point we are here concerned with because, in contrast to the promotion cases, it would appear that there was a contractual obligation, under the contract of employment, to train and provide experience to the two employees (assuming they remained employees).

70. In our view, the submission of Mr Coleman is correct on this crucial question of law. In determining the legitimate interests of the promisee one can take into account what the parties (objectively) intended or contemplated, consequent on the contract, at the time the contract was made as well as the contract terms. In addition to relying on the obiter dicta of Diplock LJ, and on the two first instance decisions referred to in paras 67-68 above (although no previous case has been concerned with the precise issue in this case and the facts of those two cases were plainly very different from those in this case), we rely on the following five general reasons.

(i) Provided the enquiry is confined to the parties’ intentions, or what they contemplated, at the time the contract was made, it is hard to accept that there is any good reason of principle or policy why a party should be prevented from seeking to protect its interests by a clause which anticipates what both parties intended, or contemplated, would occur even if they have not reached any binding agreement to bring about that occurrence.

(ii) The very adoption of the phrase “legitimate interests” rather than

“legally protected interests” suggests that one is not just concerned with what
flows from the parties’ legal rights.

(iii) In other areas of the law of contract where the phrase “legitimate interest” is used, the relevant legitimate interest can extend beyond the contractual rights of the parties. For example, the modern test for whether a term is unenforceable, because it is a penalty, is whether or not the stipulated sum, judged at the time of the making of the contract, is out of all proportion to a legitimate interest of the claimant in the performance of the contract: Cavendish Square Holding BV v Makdessi and ParkingEye Ltd v Beavis [2015] UKSC 67; [2016] AC 1172. On the facts of the ParkingEye case, it was accepted, at para 99, that in considering ParkingEye’s legitimate interest in performance it was relevant to consider the interests of third parties (who had no rights under the contract) in the sense that encouraging the prompt turnover of car parking space was for the benefit of the owners of the operator of the retail park and members of the public. See generally Chitty on Contracts, 33rd ed (2018), para 26-218.

(iv) Although not a direct parallel, it may be regarded as relevant that, in interpreting contracts, the law has shifted from any historically narrow focus on what lies within the “four corners of the contract” to taking into account the factual matrix. That is, the accepted modern approach to interpreting a term in a contract is to ask what the term (viewed in the light of the whole contract) would mean to a reasonable person having all the relevant background knowledge reasonably available to the parties at the time the contract was made: see Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, 912, and Bank of Credit and Commerce International SA v Ali [2002] 1 AC 251, para 39.

(v) We have seen that the preferable analysis of the contract in this case was that it was a unilateral contract. It may be thought particularly difficult to confine the analysis of a legitimate interest to the contractual obligations of the parties where only one party (Harcus Sinclair) was promising to do anything. Put another way, the Court of Appeal regarded it as important that Your Lawyers had no legal obligation to collaborate but, if the unilateral contract analysis is correct, Your Lawyers had no legal obligation to do anything.

71. It follows, with great respect, that the Court of Appeal made an error of law in overruling the judge’s reasoning that one could take into account the parties’ non- contractual intentions to collaborate informally. Your Lawyers did have legitimate interests to protect through the non-compete undertaking and the Court of Appeal was wrong, as a matter of law, to determine Your Lawyers’ legitimate interests without taking into account the parties’ non-contractual intentions (or contemplation) to collaborate informally. Although it would appear that neither the judge nor the Court of Appeal was referred to the obiter dicta and first instance decisions considered above, the judge was correct that, in addition to the contractual obligations, one can also take into account (assessed at the time the contract was made) the non-contractual intentions of the parties, or what they contemplated, as a consequence of entering into the contract. And once one clarifies that legal position, the judge was fully entitled to decide on these facts that, as set out in paras 56-57 above, Your Lawyers did indeed have legitimate interests, flowing from the intended informal collaboration, which it was protecting by the non-compete undertaking. This was not a case where there was no legitimate interest to protect: the undertaking did not fall foul of protecting Your Lawyers “against competition per se” (to use the words of Lord Atkinson in Herbert Morris Ltd v Saxelby [1916] 1 AC 688, 700).

(4)	The other two elements of reasonableness between the parties

72. We have seen in para 48 above that, if legitimate interests are established, the party (the promisee, here Your Lawyers) seeking to enforce the undertaking must go on to establish that the undertaking does not go further than is reasonably necessary to protect those interests; and it appears that the promisee must also establish that the restriction is commensurate with the benefits to the other party (the promisor, here Harcus Sinclair) secured under the contract. We now turn to those other two elements.

(i)        Was the non-compete undertaking reasonably necessary to protect

the legitimate interests of the promisee?

73. The primary controversy here is over the length of time of the non-compete undertaking. It was to last for six years. Mr Crow submitted that that was far too long and that the most that might have been justified to protect legitimate interests of Your Lawyers (assuming, contrary to his submissions, that there was such an interest going beyond the protection of the confidential information) would be, say, a six-month non-compete undertaking which would have served to protect Your Lawyers’ head-start in the emissions litigation.

74. The judge was of the view that the six-year period was rational and necessary

in order to keep Harcus Sinclair out of the emissions litigation (other than with Your
Lawyers’ consent). As he explained, at para 297:

“This period of time was, as I understand the position, selected to ensure that, by the time this period expired, claims arising out of the emissions events would, or would be likely to have become statute barred.”

He went on at para 310:

“It is … difficult to see how sentence 2 could have been narrower, whilst still protecting the defendant’s legitimate interests … in terms of protecting the position of the defendant against a rival group of claimants formed by the first claimant. If sentence 2 was to protect the legitimate interests of the defendant, it needed to have the width which I have construed it to have.”

This all led to his conclusion at para 317:

“I conclude that the defendant has discharged the burden of justifying the restriction in sentence 2 as one which … was no more than was reasonably necessary, as at the date of the NDA, to protect the legitimate interests of the defendant …”

75. It can be seen that the judge’s approach here was dependent on his analysis of Your Lawyers’ legitimate interests. Following on from our agreement with that analysis, we agree with the judge on this aspect as well. Once it is seen that Your Lawyers had legitimate interests in protecting its own proposed group claim from Harcus Sinclair setting up a rival group claim, 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. And of course the restriction was solely concerned with the emissions litigation. Harcus Sinclair was not being restricted in any way from carrying on all the rest of its normal business as solicitors. In that sense, we accept Mr Coleman’s submission that the restriction was a narrow one.

76. The criticism of the judge by the Court of Appeal entirely rested on the Court of Appeal’s narrow view of Your Lawyers’ legitimate interests which we have rejected above. At paras 77-78, the Court of Appeal precisely said that, because the judge had erred in his analysis of the legitimate interests of Your Lawyers, the judge had been asking himself the wrong question when it came to what was reasonably necessary to protect those interests. And at para 84, the Court of Appeal went on:

“[W]e take the view that a broad Restriction preventing HSLLP ever acting for other claimants in the Emissions Litigation, inserted into an otherwise unobjectionable NDA, cannot possibly be reasonably necessary to protect YLL’s legitimate interests. That much is obvious, we think, once those legitimate interests are identified. The judge’s error was to think that the NDA allowed for a period of informal collaboration, which YLL had the legitimate right to protect. YLL might have had such a right if it had entered into any kind of collaboration agreement, but it did not.”

144. The result is that, as matters stand, the non-compete undertaking would not have been enforceable against Harcus Sinclair even if it had been in the nature of a solicitor’s undertaking, because Harcus Sinclair is not an officer of the court (and indeed, as we have made clear at para 137 above, Harcus Sinclair, as an LLP, is not a solicitor). As for Mr Parker, even if the non-compete undertaking had been in the nature of a solicitor’s undertaking, we agree with the courts below that he is not liable to perform it at the direction of the court exercising its undoubted jurisdiction over him as one of its officers, for the simple reason that he did not give it in his personal capacity, but only on behalf of Harcus Sinclair. He signed the NDA as the agent of his disclosed principal Harcus Sinclair and thereby, in accordance with the settled principles of agency law in the context of contracts, incurred no personal liability under it.

145. We can see no good reason why a different rule should apply to the enforcement of a solicitor’s undertaking under the court’s supervisory jurisdiction. Where a solicitor gives an undertaking expressly on behalf of an ordinary unincorporated partnership of which he (or she) is a partner, then he is bound by it, and therefore subject to the court’s jurisdiction to enforce it, precisely because he is a partner, not because he was the human instrument by which the partnership (ie all the partners including him) gave it. While the partner who gave the undertaking is acting as an agent for the other partners (see section 5 of the Partnership Act 1890), that partner does not “drop out of the picture” (as a disclosed agent normally would) but is jointly liable, as a partner, with all the other partners (see section 9 of the Partnership Act 1890). The critical difference where the undertaking is given on behalf of a solicitors’ LLP (or a limited company) is that it binds only the separate legal person constituted by the LLP, not its solicitor members. The solicitor who gave the undertaking “drops out of the picture”. That in our view is the inevitable consequence of the separate legal personality, and limited liability, of the LLP.

146. Your Lawyers submit that the matter is not determined by a conclusion that Mr Parker incurred no contractual liability under the NDA which he signed. He should as an officer of the court have ensured that it was complied with by Harcus Sinclair, even if (i) Harcus Sinclair is not amenable to the court’s supervisory jurisdiction and (ii) the undertaking which the NDA contained did not bind him personally.

147. We do not consider that it makes any difference to the amenability of a solicitor to the court’s supervisory jurisdiction that he or she actually signs an undertaking for a body which is not itself an officer of the court, while incurring no personal liability for its performance, save that it may constitute evidence that the solicitor knew about it, (an inference which Mr Parker persuaded the judge should not be drawn against him, because he did not read the NDA before signing it). We leave open for another occasion the question whether a solicitor may attract the court’s supervisory jurisdiction by actively procuring the non-compliance by an incorporated law firm with an undertaking of a type which, if it had been given by a solicitor, would have been a solicitor’s undertaking. It does not arise in the present case because the non-compete undertaking was not of that type.

148. In the meantime, we share the judge’s concern about whether those dealing with incorporated law firms, and with solicitors’ LLPs in particular, are sufficiently aware that undertakings given by them are not currently buttressed by the court’s supervisory jurisdiction. We note, however, that the following passage appears in the latest online version of Cordery on Legal Services, at para 319:

“Given that most solicitors now practise through some form of entity, the practical effect of the decision [of the Court of Appeal] in Harcus Sinclair is that most undertakings can now only be enforced by a breach of contract claim. Alternatively, an aggrieved party can hope that the risk of being reported to the SRA will encourage compliance. This clearly falls well short of the protections that made undertakings such a powerful tool, and clients and law firms alike may want to review their reliance upon them.”

It may be that, as the judge suggested, the lacuna may be addressed by ensuring that a relevant undertaking is given personally by a solicitor, as well as, or in the alternative to, the incorporated law firm for which he or she acts. But that may not always be a satisfactory solution where summary enforcement is sought, if the individual solicitor lacks the power within his or her incorporated law firm to ensure that compliance occurs. We take the view that this is at best a partial and temporary solution. We therefore express the hope that Parliament will consider the lacuna that this judgment has confirmed in relation to undertakings given by solicitors working for incorporated law firms, particularly LLPs.

8. Issue (4): if the non-compete undertaking constitutes a solicitor’s undertaking that in principle is capable of enforcement against Harcus Sinclair and/or Mr Parker, should it be enforced notwithstanding that, applying contractual principles, as the Court of Appeal held, the non-compete undertaking constituted an unreasonable restraint of trade?

149. Although it is not necessary for us to deal with this issue, we heard full argument on it. We can express our views on it very briefly. It is clearly correct that solicitors’ undertakings are enforceable, under the courts’ inherent supervisory jurisdiction, even though they may not be contractually binding. This may be, for example, because the undertaking is not supported by consideration or does not comply with the formalities that would be required for a contractual undertaking of that nature (see para 102 above). The explanation for this willingness to uphold a wider range of promises in the context of solicitors’ undertakings than under the law of contract is because, in the exercise of its inherent supervisory jurisdiction over officers of the court, the courts are concerned to uphold particularly high standards of conduct irrespective of some of the rules imposed in contract law (see para 100 above). But that policy of upholding particularly high standards for solicitors plainly does not mean that none of the rules of contract law are applicable to solicitors’ undertakings. Certainly, it is important that those rules of contract law often grouped together as dealing with “illegality and public policy”, which include the rules on restraint of trade, should also be applied to solicitors’ undertakings. The policy of upholding high standards for solicitors does not entail the legal enforceability of solicitors’ undertakings that are in restraint of trade or are otherwise contrary to public policy or involve illegality. It cannot be correct because, as a matter of policy, it would be inconsistent, to decide that the non-compete undertaking in this case was contractually unenforceable as an unreasonable restraint of trade while then deciding that it was enforceable, as being a reasonable restraint of trade, as a solicitor’s undertaking. The relevant public policy underpinning the law on restraint of trade applies equally to contracts and to solicitors’ undertakings.

9. Issue (5): if the non-compete undertaking was a solicitor’s undertaking, was the Court of Appeal wrong in holding (if it did) that this was irrelevant to the question whether the non-compete undertaking was contrary to public policy on the grounds of restraint of trade?

150. As with issue (4), although it is not necessary for us to deal with this issue, we heard full argument on it and can express our views in very short measure. We accept that there are good policy reasons for solicitors’ undertakings to be upheld, just as there are good policy reasons for contracts to be binding. When a solicitor’s undertaking or a contract is alleged to be in restraint of trade, the law needs to reconcile the good policy reasons for upholding the solicitor’s undertaking or contract with the good policy reasons for denying enforceability. In general terms, one can say that the major reconciliation required is between a policy of upholding freely made contracts and undertakings and the policy of upholding freedom of competition. It is not clear that anything is added to the force of upholding freely made contracts and undertakings by treating a solicitor’s undertaking (even if that is a solicitor’s undertaking in the sense of triggering the inherent supervisory jurisdiction of the court) as significantly different from a contractual undertaking given by, for example, an accountant or the seller of a business. At most, applying the specific policy explained above of upholding particularly high standards because solicitors are officers of the court, the fact that there is a solicitor’s undertaking (triggering the inherent supervisory jurisdiction of the courts) may be regarded as an additional factor to be taken into account in considering the restraint of trade principle of reasonableness in the public interest. But even if one were to accept that the fact that one is concerned with a solicitor’s undertaking has some relevance in applying the restraint of trade doctrine, it seems most unlikely that the fact that one is concerned with a solicitor’s undertaking will be determinative if the undertaking would otherwise be an unreasonable restraint of trade.

10.       Conclusion

151. For all these reasons we conclude that the non-compete undertaking given by Harcus Sinclair is not unenforceable as an unreasonable restraint of trade; that it was not a solicitor’s undertaking; that, if it was a solicitor’s undertaking, it would not have been enforceable under the court’s summary jurisdiction over its officers against Harcus Sinclair because Harcus Sinclair is not an officer of the court or against Mr Parker as it was not given by him in a personal capacity; that it would not have been enforceable if it had constituted an unreasonable restraint of trade, and that its status as a solicitor’s undertaking is of little relevance in determining whether it constitutes a restraint of trade.

152.     In the light of our conclusion on the restraint of trade issue, we would allow

the appeal.

JUDGMENT

Harcus Sinclair LLP and another (Respondents) v

Your Lawyers Ltd (Appellant)

before

Lord Lloyd-Jones

Lord Briggs Lady Arden

Lord Hamblen Lord Burrows

JUDGMENT GIVEN ON

23 July 2021

Heard on 24 and 25 March 2021