“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)
“[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.”
“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.”
“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.”
“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)
“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)
“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.”
“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)
“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.”
“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 .”
“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.”
“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 …”
“[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.”
“311. Looking at the matter from the point of view of the benefit to [Harcus Sinclair], [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. If that process of collaboration resulted in a collaboration agreement with [Your Lawyers], [Harcus Sinclair] and [Your Lawyers] would be acting together in the proposed group claim, and [Harcus Sinclair] would enjoy the benefits of that collaboration. If not, [Harcus Sinclair] would have to accept that it would not be free to set up its own group of claimants, in competition with [Your Lawyers]. As I understand the relevant law, it is not appropriate for me, in judging reasonableness, to try to decide whether there was substantial equivalence between the scope of the restriction in sentence 2 and what [Harcus Sinclair] received in exchange for entering into the NDA. It seems to me however that the bargain I have described in this paragraph was a perfectly reasonable commercial bargain. It opened the way to a potentially lucrative business opportunity for [Harcus Sinclair]. 312. Putting the matter another way, … [Harcus Sinclair] agreeing to the restriction in sentence 2 [was] commensurate with the benefits secured by [Harcus Sinclair] as a result of entering into the NDA.”
“It follows from what we have said already that the Restriction was also not commensurate with the benefits secured by HSLLP under the NDA. HSLLP was not securing any form of collaboration under the NDA. It was securing disclosure of confidential information to enable it to give some legal advice. The Restriction was wide ranging and out of proportion to the benefit HSLLP received under the NDA.”
“Subject to the provisions of this Act, the High Court, the Crown Court and the Court of Appeal respectively, or any division or judge of those courts, may exercise the same jurisdiction in respect of solicitors as any one of the superior courts of law or equity from which the Senior Courts were constituted might have exercised immediately before the passing of theSupreme Court of Judicature Act 1873 .”
“The conduct which is required of solicitors is to this extent perhaps raised to a higher standard than the conduct required of ordinary men, in that it is subject to the special control which a Court exercises over officers so that in certain cases they may be called upon summarily to perform their undertakings, even where the contention that they are not liable to perform them is entirely free from any taint of moral misconduct.”
“Undertakings are the bedrock of our system of conveyancing. The recipient of an undertaking must be able to assume that once given it will be scrupulously performed. If property purchasers and mortgage lenders cannot have complete confidence in the safety of the money they put into the hands Page 35 of a solicitor in the course of a property transaction, our system of conveyancing would soon break down. The breach of an undertaking given by a solicitor damages public confidence in the profession and in the system of undertakings upon which property transactions depend.”
“First, in the case of an undertaking to pay money, a fund to draw on must be in the hands of, or under the control of, the firm; or at any rate there must be a reasonable expectation that it will come into the firm’s hands. Solicitors are not in business to pledge their own credit on behalf of clients unless they are fairly confident that money will be available so that they can reimburse themselves. Secondly, the actual or expected fund must come into their hands in the course of some ulterior transaction which is itself the sort of work that solicitors undertake. It is not the ordinary business of solicitors to receive money or a promise from their client, in order that without more they can give an undertaking to a third party. Some other service must be involved.”
“The first question in the present case is whether the solicitor gave the undertaking ‘in his capacity as a solicitor’. This is difficult to define. But I think it will usually be found, in regard to money, that it is an undertaking to pay money which he has in his hands on trust, or on an undertaking that he will apply it in a particular way. Thus if a solicitor is acting for a client on the sale of land and gives an undertaking to a bank that he will pay over so much of the money, when received, to the bank, the undertaking is given ‘in his capacity as solicitor’: see In re A Solicitor (Lincoln)[1966] 1 WLR 1604 . So also, if a solicitor gives an undertaking that he will hold a sum of money in his hands pending the conclusion of negotiations, that too is given in his capacity as a solicitor, as in United Mining and Finance Corpn Ltd v Becher[1910] 2 KB 296 . But this case is very different from either of those cases. The solicitor here was not holding money in his hands at all. All that happened was that Mr Batts received money and paid it over to a client, Mr Izzet, and promised to repay it to Mr Silver. It was an undertaking to repay money lent. That is all. It was at good interest too, 2% a month. The money may have been for the benefit of a client. But that does not matter. It was in truth nothing more nor less than an undertaking to repay money lent. That is not an undertaking ‘in his capacity as a solicitor’.”
“… the first requirement of the exercise of that jurisdiction, as Lord Denning MR has pointed out, is that the undertaking in question must have been given by the solicitor in the course of his activities as a solicitor. It must be given by him professionally as a solicitor and not in his personal capacity. The reason for that is clear enough, because a remedy of this kind is intended primarily to discipline the officers of the court, Page 38 to ensure the honesty of those officers. The court is thus concerned only with their activities as solicitors, and anything done by a solicitor in his private capacity is outside this jurisdiction. What is the position here? … On its face it is simply an undertaking to repay a debt which is being contracted by the solicitor in question. If a solicitor borrows money personally and incurs a personal obligation in that regard, his promise to pay that money is not a promise in his capacity as a solicitor, even though he sits in his office when he receives the money and even though he acknowledges the debt on his professionally headed notepaper. Another possible view of this particular case is that this was in truth the giving of a guarantee by a solicitor for a debt incurred by his client. But looking at it in that way it seems to me to make no difference. Here again one cannot describe this as an act done in the capacity of a solicitor merely because a client of the partnership was involved in the transaction. The position, of course, would have been wholly different if the sense of the transaction had been that the solicitor was to receive this money and undertake to apply it in a particular way. In those circumstances one would have a conventional type of solicitor’s undertaking.”
“… The mere fact that the giver of the undertaking happens to be a solicitor is not enough. The undertaking must … be given as part of or in connection with a transaction or activity which is ‘solicitorial’.”
“236. It seems to me quite clear that the undertaking in sentence 2 was given by the first claimant as part of a solicitorial service. I say this for the following reasons. 237. The NDA recorded, in clause 1, that the defendant intended to disclose information to the first claimant ‘for the purpose of obtaining legal advice’ from the first claimant. The giving of legal advice is a classic instance of a solicitorial service. 238. Looking at the matter more widely, the NDA was put in place at the outset of a process of collaboration between the defendant and the first claimant in respect of the working up of the defendant’s group claim. The working up of this group claim involved a set of activities which can all be correctly described as solicitorial services. Preparing a legal claim for a client or a group of clients is another classic instance of a solicitorial service. 239. The whole point of sentence 2 was to protect the defendant from the first claimant accepting instructions from or acting on behalf of any other group of claimants in the contemplated group action. I will have to decide what precisely these words meant in the next section of this judgment. For present purposes the 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.”
“A purchaser will often accept an undertaking by the vendor’s solicitor when he would not accept an undertaking by the vendor himself. Thus in Damodaran s/o Raman v Choe Kuan Him[1980] AC 497 at 502, the Privy Council recognised that: ‘The main purpose and value of a solicitor’s undertaking in transactions for the sale of land is that it is enforceable against the solicitor independently of any claims against one another by the parties to the contract of sale.’ If the undertaking is signed by the vendor’s solicitor it should make clear whether the solicitor accepts liability personally.”
“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.”