3PLR – OSWALD HICKSON COLLIER AND CO (A FIRM) V. CARTER-RUCK
POLICY, PRACTICE AND PUBLISHING, LAW REPORTS 3PLR
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OSWALD HICKSON COLLIER AND CO (A FIRM)
V.
CARTER-RUCK
COURT OF APPEAL, CIVIL DIVISION
20 JANUARY 1982
3PLR/1982/39 (CA-E)
OTHER CITATIONS
[1984] 2 ALL ER 15
BEFORE THEIR LORDSHIPS
LORD DENNING MR,
KERR AND MAY LJJ
REPRESENTATION
T L G Cullen QC and Hazel Williamson for Mr Carter-Ruck.
Robert Wright QC and David Mabb for the firm.
Solicitors: P F Carter-Ruck; Oswald Hickson Collier & Co.
Diana Procter Barrister.
MAIN ISSUES
COMMERCIAL LAW – PARTNERSHIP:- Lawyers/Solicitors – Partnership agreements – Where it precludes a partner from outgoing soliciting clients of the firm except those introduced by him – Effect where an outgoing partner has for a period acted as a sole partner of the firm – Implication for fiduciary relationship between solicitor and client – How treated
ANTI-TRUST AND TRADE REGULATIONS – COMPETITION: Professionals – Lawyers – Restraint of trade by partnership agreement – Restriction on practice in event of partner ceasing to be a partner – Deed of partnership providing that outgoing partner not to solicit or act for clients of firm except for ‘any client introduced to the firm’ by him – Defendant partner joining sole practitioner practising under name of firm – Other partner dying leaving defendant in sole practice – Defendant later joined by other partners –Whether defendant entitled to continue to act for clients for whom he had acted while in sole practice.
ETHICS – SOLICITOR:- Client – Fiduciary relationship – Entitlement to act for client – Clause in partnership deed precluding outgoing partner of firm acting for client in future – Whether clause contrary to public policy
HISTORY AND SUMMARY
In December 1943 the defendant entered into partnership with a solicitor who until then had practised on his own account under a firm name. In January 1944 the other partner died leaving the defendant in sole practice under the firm name. In August 1944 the defendant was joined in partnership by another solicitor and thereafter the partnership grew to eight partners. Clause 24 of the deed of partnership under which the partnership was conducted in 1975 provided that an outgoing partner was not to ‘approach solicit or act’ for any clients of the firm for a period of two years from his leaving the firm except for, inter alios, ‘Any client introduced to the firm’ by the partner whom he elected to retain as a client. In 1981 the defendant decided to quit the partnership and commence practice on his own account. However, the defendant wished to continue acting for a Lloyd’s syndicate which had been a client of his since the time when he was in sole practice. The remaining partners in the firm applied for an injunction restraining the defendant from acting for the client, on the ground that the client was a ‘client of the firm’ within cl 24 of the deed of partnership and that therefore the defendant was not entitled to act for that client within two years of leaving the firm. At the hearing of the application, the defendant gave an undertaking that, inter alia, until judgment in the action he would not solicit or act for the Lloyd’s syndicate. The defendant appealed, seeking an order releasing him from the undertaking.
Held – Since there had not been a ‘firm’ practising as solicitors under the name of the plaintiff firm at the time when the defendant was in sole practice from January to August 1944, any clients for whom the defendant then acted were to be taken as clients ‘introduced to the firm’ by him when he was joined in partnership by another solicitor in August 1944 and as such were outside the scope of the restrictive covenant in the deed of partnership. The defendant was therefore entitled to continue to act for the Lloyd’s syndicate for whom he had acted while in sole practice. The appeal would accordingly be allowed and the defendant released from his undertaking (see p 17 e to j and p 18 d to j, post).
Per curiam. Since the relationship between a solicitor and his client is a fiduciary relationship it is contrary to public policy for a solicitor to be precluded from acting for a client when that client wants him to act, especially in pending litigation. A clause in a partnership deed preventing one of the partners from acting for a client in the future is accordingly contrary to public policy because there is a fiduciary relationship between them and the client ought reasonably to be entitled to the services of such solicitor as he wishes (see p 18 a to c and g to j, post).
MAIN JUDGMENT
20 January 1982. The following judgments were delivered.
MAIN JUDGMENT
LORD DENNING MR.
The late Mr Oswald Hickson was a well-known solicitor. He carried on business, largely in libel work, for many years. There is now a dispute amongst the successors to his firm.
Until very recently there were eight partners. The senior partner was Mr Peter Carter-Ruck. The others joined later. The partnership has now come to an end. Various disputes have gone to arbitration. But they do not concern us today.
The question before us is the extent to which Mr Carter-Ruck is to be restrained from acting for previous clients of the firm, in particular one client, the Frank Barber syndicate of Lloyd’s. It all depends on the interpretation of cl 24 of the deed of partnership made on 10 June 1975. That says:
‘In the event of retirement or determination [it is ‘retirement’ in this case] any Partner retiring or in respect of whom the Partnership with the firm shall not be renewed shall not either in his own name alone or as Managing Clerk to or as Agent for or on behalf of or in Partnership with any other person or persons for a period of two years from such retirement or determination or non-renewal approach solicit or act for any clients of the firm except (a) In connection with business appertaining to relations by blood or marriage or business concerns in which the Partner had or there is a family interest or (b) Any client introduced to the firm by such Partner whom he elects by notice in writing to the other Partners to retain as a client of his … ’
For the determination of this case it is necessary to interpret the meaning of the words ‘Any client introduced to the firm by such Partner’. Especially the word ‘firm’.
For this purpose I must relate the history of Oswald Hickson Collier & Co. It is well shown by the various applications which were made under the Registration of Business Names Act 1916. It is clear that Mr Oswald Hickson started the business himself in 1919. He was joined later on by Mr Collier. Mr Collier died in June 1930. Then Mr Thirlby entered the partnership. On 29 April 1941 the partnership was dissolved. From that date the business was carried on by Mr Oswald Hickson himself alone.
The important date is 29 April 1941. From that date there was not a ‘firm’ or ‘partnership’ in point of law. Mr Oswald Hickson himself was carrying on his own individual business or practice. He did it under the name of Oswald Hickson Collier & Co, but it was himself alone.
He carried on alone until 30 December 1943. On 30 December 1943 Mr Oswald Hickson was joined by Mr Peter Carter-Ruck. Mr Peter Carter-Ruck had worked for Oswald Hickson Collier & Co just before the war; but not as a partner. He had gone to the war. When he came back, a partnership was formed by Mr Oswald Hickson and Mr Peter Carter-Ruck. That was on 30 December 1943. That partnership did not last very long. Within nine days of its being formed Mr Oswald Hickson died. So that partnership came to an end. That was on 9 January 1944.
Under a clause in the deed of partnership Mr Peter Carter-Ruck bought up the interest of Mr Oswald Hickson. So, from 9 January 1944, Mr Peter Carter-Ruck was the sole person running the business. There was no firm or partnership for eight months.
On 21 August 1944 Mr Peter Carter-Ruck formed a partnership with Mr John Gow. That was duly registered. So from that date onwards Mr Peter Carter-Ruck and Mr John Gow carried on business as partners in the firm of Oswald Hickson Collier & Co, which was now a firm. That firm continued operating over the years with partners going out and partners coming in until the deed of partnership was entered into in 1975 which contained the clause I have read.
I now turn to the meaning of the word ‘firm’ in cl 24. In construing it, I note that cl 25 of the deed says: ‘The firm name shall be registered pursuant to the Registration of Business Names Act 1916 … ‘ It is quite plain from s 1 of the 1916 Act that the word ‘firm’ applies when two or more persons are in partnership. The meaning of the word ‘firm’ is to be found in s 4(1) of the Partnership Act 1890, which says:
‘Persons who have entered into partnership with one another are for the purposes of this Act called collectively a firm, and the name under which their business is carried on is called the firm-name.’
Applying that meaning to the word, it seems to me that during the time when Mr Oswald Hickson worked alone there was no firm. There was a firm for a short time from 30 December 1943 until 9 January 1944. Then there was no firm again until Mr Gow became a partner of Mr Peter Carter-Ruck on 21 August 1944. For the period from January 1944 until August 1944 the sole individual running the business was Mr Peter Carter-Ruck. There was no firm during that time.
In those circumstances it seems to me that the ‘firm’, within the meaning of the deed of partnership, started in August 1944. It started when Mr Gow joined Mr Peter Carter-Ruck and carried on business in partnership with him under the name of Oswald Hickson Collier & Co. That was the ‘firm’ referred to in the deed of partnership.
That brings me back to cl 24(b):
‘Any client introduced to the firm by such Partner whom he elects by notice in writing to the other Partners to retain as a client of his.’
When the firm started in August 1944, Mr Peter Carter-Ruck brought in his clients whom he had had when he was carrying on business alone in the name of Oswald Hickson Collier & Co by himself from January 1944 until August 1944. They were his clients for whom he had paid by the payments he had made to the executors of Mr Oswald Hickson. They were his clients whom he introduced into the firm in August 1944. No doubt Mr Gow introduced his own clients into the firm at that time.
The particular client in dispute in this case is one of Lloyd’s syndicates. That client is one which Mr Peter Carter-Ruck introduced into the firm in August 1944. He elected by notice to retain that client as his. Therefore Mr Peter Carter-Ruck, in regard to that client, is not caught by the restrictions contained in the deed of partnership.
It seems to me, having read the judgment of Jupp J, that this point was not submitted to him. He said: ‘After Oswald Hickson’s death the partnership continued, being joined by Gow in 1944 … ‘ I am afraid that was an error, because, on Mr Oswald Hickson’s death, the previous partnership came to an end, and the firm did not start again until August 1944. It seems to me that, on the meaning of the word ‘firm’ in the deed of partnership, Mr Peter Carter-Ruck did not break any of the provisions at all by continuing to act for the Lloyd’s syndicate. They were his clients.
One or two other points were raised in this case. One point which was discussed here was not taken in the court below. That was the introduction into cl 24 of the words ‘approach solicit or act for any clients of the firm’. It was submitted by counsel for Mr Carter-Ruck that, as the relationship between a solicitor and his client is a fiduciary relationship, it would be contrary to public policy that he should be precluded from acting for a client when that client wanted him to act for him, especially in pending litigation. It seems to me that that submission is right. I cannot see that it would be proper for a clause to be inserted in a partnership deed preventing one of the partners from acting for a client in the future. It is contrary to public policy because there is a fiduciary relationship between them. The client ought reasonably to be entitled to the services of such solicitor as he wishes. That solicitor no doubt has a great deal of confidential information available to him. It would be contrary to public policy if the solicitor were prevented from acting for him by a clause of this kind.
I think the words ‘or act’ are too wide. Counsel for Mr Carter-Ruck agreed that they were severable. Those words ought to be struck out of the undertaking which was made. Counsel went further and said that there was no need to make an order about soliciting. He said that would be sufficiently covered by the rules of the profession as to etiquette. But I would leave it at that. I do not think it is proper to go into the various cases which were submitted to us. Mr Carter-Ruck admitted that he made a mistake in one case, quite innocently, in approaching a particular individual. I think the more satisfactory position is to strike out the words ‘or act’ in the first undertaking. The whole of the second undertaking should be struck out.
There was a further point about the family interest. That was a difficult point on construction, which I do not think it is necessary to go into in view of the matters which I have already mentioned.
I would be in favour of allowing the appeal. The second undertaking should go. As to the first undertaking, I think it would be proper to strike out the words ‘or act’. We could make an order to that effect, but, if Mr Carter-Ruck wishes, he can give an undertaking in place of the injunction.
I am very sorry to hear of all the other proceedings which have been going on between these very reputable solicitors. I only wish they could be resolved amicably, but I do not think there is anything more we can do about it or about the pending litigation.
I would allow the appeal in the circumstances which I have mentioned.
KERR LJ.
I agree. In fact, the orders at the moment take the form of an undertaking and not of an injunction; so, if the reference to ‘or act’ in part 1 is struck out and the whole of part 2 is struck out, that would produce the result which Lord Denning MR has indicated and with which I respectfully agree.
I would only add that while I respectfully agree with the reasons which Lord Denning MR has given, I do so on the basis that, although this is perhaps going to be the ultimate end of this particular bit of this unfortunate dispute, we are not of course deciding these points finally if the plaintiffs should wish to take them on to the trial. Nor are we deciding that a one-man practice can never be a ‘firm’ in any context, eg in an agreement for the valuation of goodwill, but only in the present context and on the basis of these interlocutory proceedings. However, my present inclination is entirely on the lines of what has been said by Lord Denning MR on the merits of the points which have been argued, and I would in any event modify the order in the way in which he has indicated on the grounds of convenience. I therefore agree.
MAY LJ.
I also agree and, although we are differing from the judge below, I do not think that I can add anything useful in this matter other than to agree with the judgments which have been delivered and the order proposed.
Appeal allowed.
