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The Supreme Court has unanimously allowed the appeal in Harcus Sinclair LLP and another (Respondents) v Your Lawyers Ltd (Appellant)  UKSC 32, a case which raises interesting questions regarding the nature and enforceability of solicitors’ undertakings and the Court’s inherent jurisdiction to supervise the conduct of authorised bodies through which solicitors practise.
Your Lawyers LLP issued a claim against the Volkswagen Group with the intention of applying for a Group Litigation Order (“GLO”) in the emissions litigation. Harcus Sinclair LLP, which is experienced in group litigation, entered into an NDA with Your Lawyers, in order to receive confidential information. The NDA included a non-compete clause through which Harcus Sinclair undertook, for six years, “not to accept instructions for or to act on behalf of any other group of claimants in the contemplated group action” without Your Lawyers’ permission. Harcus Sinclair recruited claimants for its own group action, issued a claim and filed an application to be lead solicitor in the group action. It agreed to collaborate with another law firm. Your Lawyers contended that the non-compete clause amounted to a solicitor’s undertaking.
It was not in dispute that the non-compete clause was a restraint of trade, but the Supreme Court held that it was not an unreasonable restraint or contrary to the public interest.
The Supreme Court also considered whether the non-compete clause amounted to a solicitor’s undertaking. The discussion of the nature of solicitors’ undertakings is important, as the system underpins much of the transactional work carried out by the profession.
In answering the question, the Supreme Court suggested it would in many cases be helpful to consider two questions. “The first concerns 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. The second concerns the reason for the giving of the undertaking and the extent to which the cause or matter to which it relates involves the sort of work which 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 the present case, the subject matter of the undertaking was a promise not to compete with another law firm. This did not involve the type of work which solicitors undertake not to do as part of their ordinary professional practice. Solicitors are not in practice not to work, and it was difficult to conceive of circumstances in which such a non-compete undertaking could be given on behalf of a client. To put it another way, the non-compete clause concerned the “business of law” rather than “legal work”. As to the second question, the reason for the undertaking was furtherance of the parties’ business interests rather than that of any client, and acting in their own rather than a client’s business interests was not part of their ordinary professional practice. Accordingly, Harcus Sinclair gave the undertaking in a business capacity rather than a professional capacity, and the non-compete clause was not a solicitor’s undertaking.
If the non-compete clause had been a solicitor’s undertaking, would the courts’ supervisory jurisdiction to enforce it apply to Harcus Sinclair or to Mr Parker (the solicitor who had signed the agreement on its behalf)?
Though it was not necessary to decide these issues given the conclusions on the first two issues, the Court explained that the court’s inherent supervisory jurisdiction over solicitors applies because of their status as officers of the court. Most law firms are now set up as LLPs, and, whilst they are authorised to provide solicitor services, LLPs are not officers of the court, because the authorising legislation has not made them so, and because the court has yet to recognise any incorporated body as one of its officers. The Supreme Court was not prepared to extend the jurisdiction.
As matters stood, the non-compete clause would not have been enforceable against Harcus Sinclair as a solicitor’s undertaking because Harcus Sinclair, as an LLP, was not an officer of the court. It would also not have been enforceable against Mr Parker, the individual solicitor, as he gave the undertaking on behalf of Harcus Sinclair, and not in a personal capacity.
The Supreme Court also held that, if the non-compete clause had been an unreasonable restraint of trade, it would not have been enforceable as a solicitor’s undertaking, and the fact that a non-compete clause might be a solicitor’s undertaking is of little relevance in determining whether it constitutes a restraint of trade.
The most significant aspect of this judgment is the confirmation that solicitors’ undertakings provided by LLPs are not summarily enforceable by the court. A breach of undertaking amounts to professional misconduct that can be the subject of regulatory sanction, and may also give rise to a claim for breach of contract. However, in the case of undertakings entered into with LLPs and other incorporated law firms, a layer of protection has been lost. Given the important role of solicitors’ undertakings in transactional matters, this state of affairs gave the Supreme Court cause for concern. It therefore expressed the hope that Parliament would “consider the lacuna that this judgment has confirmed”. In the meantime, not many solicitors will be willing to step up and provide personal undertakings to bolster consumer confidence, and so it may be that the market will find other ways to fill the gap.