Firm that enforced litigation non-compete clause goes after funders

Jones: NDAs distinguished

The law firm that won a Supreme Court ruling enforcing a non-compete undertaking given by another is also suing the litigation funder which worked with that firm, it has emerged.

The High Court last week rejected applications by broker Capital Interchange Ltd (CIL) and funder Therium Capital Management to strike out the claims brought by Chesterfield-based solicitors Your Lawyers.

Your Lawyers approached London practice Harcus Sinclair (HS) in April 2016 for help with the group it was building to sue Volkswagen over the diesel emissions scandal. (HS has since split, with the litigators setting up Harcus Parker.)

As a first step, HS was required to sign a non-disclosure agreement (NDA), which included a non-compete clause.

This provided that HS undertook “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 Your Lawyers. The undertaking was stated to last for six years.

The parties worked together informally but, although a draft was discussed, no formal collaboration agreement was ever signed. HS then recruited its own claimants and issued a claim form on their behalf in October 2016.

This led to litigation and the Supreme Court ruling in 2021 overturning the Court of Appeal and finding that the non-compete clause was reasonable and not a restraint of trade.

In her ruling, Elizabeth Jones KC, sitting as a deputy High Court judge, noted that Your Lawyers’ claim against HS had been stayed pending the outcome of the emissions litigation – which settled in May 2022 – with issues of causation and quantum of loss remaining to be determined.

She recorded how, in February 2016, Your Lawyers approached CIL with a view to arranging funding for its proposed claim.

They entered into an NDA which required CIL to keep secure the confidential information Your Lawyers provided about the case and not disclose it to any third party that did not owe a similar duty of confidence to the law firm.

Your Lawyers alleges that it was falsely assured by CIL that it had confidentiality agreements with the funders it was recommending. In April 2016, CIL forwarded the litigation pack the firm had prepared to Therium.

At the same time, Your Lawyers says, CIL suggested working alongside another firm such as HS and was tasked with connecting the pair.

A few days later, and before Your Lawyers and HS entered into their NDA, Therium emailed the litigation pack to HS.

Your Lawyers alleges that it continued to provide HS and Therium with confidential information while they negotiated a way forward.

In autumn 2016, after Harcus Sinclair began its own action, Therium informed Your Lawyers that it would not fund its case.

In December 2016, HS entered into a co-counsel agreement with Slater & Gordon, backed by Therium, but had to withdraw in 2017 after the first-instance decision in the HS claim. Slater & Gordon continued acting alone for ultimately 71,000 clients.

Your Lawyers is suing CIL for breach of the NDA, while its claim against Therium is for unlawful means conspiracy, breaches of duties of confidence, and restitution of benefits.

Your Lawyers pleads that, but for these breaches, neither Therium nor Harcus Sinclair would have acted to form a rival group, “with the result that [it] would have remained ahead of other firms and would have been (or would have been likely to be) the first to announce a group action, whether alongside Harcus Sinclair or otherwise”.

The firm alleges that it could have secured ‘first mover’ advantage by applying for a group litigation order and increased the size of its group significantly; in April 2016, it had around 4,000 clients.

“The damage claimed is that the number of claimants in its group was substantially reduced, leading to a consequent reduction in fees (including success fees) that it was able to charge to its clients, as well as through an overall diminution in it role and prominence in the emissions litigation”.

Judge Jones rejected the applications for strike-out/summary judgment made on multiple grounds. She distinguished the HS and CIL NDAs – meaning comments from the Court of Appeal on the former may not apply – and found no issue estoppel as between Your Lawyers and Therium in relation to the findings of fact in the HS litigation.

She also rejected the contention that the proceedings were a collateral attack on the HS judgment or were an abuse of process.

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