BUSINESS AND PROPERTY COURTS IN WALES
CIRCUIT COMMERCIAL COURT (QBD)
2 Park Street, Cardiff, CF10 1ET
B e f o r e :
sitting as a Judge of the High Court
| QUANTUM ADVISORY LIMITED
|- and -
|QUANTUM ACTUARIAL LLP
Andrew Butler QC (instructed by Acuity Legal) for the Defendant
Hearing dates: 4, 5, 6 & 7 February 2020
Crown Copyright ©
JUDGE KEYSER QC:
- Was the Services Agreement novated from Old Quad to New Quad?
- Has the entry by the LLP into direct engagements with certain legacy clients had the effect that those clients are now to be treated as clients of the LLP and not as New Quad's legacy clients, with the result that New Quad is not entitled to a share of the fee income from those clients under the Services Agreement?
- Are covenants by the LLP in the Services Agreement unenforceable as being in unreasonable restraint of trade?
- Is the Introducer's Agreement void for uncertainty?
- If the Introducer's Agreement is not void, is New Quad entitled to an account of moneys due to it under the Introducer's Agreement?
The Services Agreement
"Quad has resolved to appoint the LLP to carry out certain responsibilities for and on behalf of Quad in relation to its business, and the LLP agrees to carry out such responsibilities (the Services, as defined below) in consideration for the payment by Quad of the Administration Fees and any other payments due to Quad pursuant to this Agreement."
"2.1 With effect from the Effective Date [defined to mean 6 April 2007], Quad confirms the appointment of the LLP to be (subject to the provisions of clause 2.8 below) solely responsible for the provision to Quad of the services set out in Schedule 7 to this Agreement to the extent that they:- (a) relate to any engagements of Quad by the Clients, or (b) are referred to Quad or the LLP by any of the Introducers during the Extended Period [defined to mean the period from 6 April 2007 until 31 March 2008] (save where any Introducer receives a bona fide substantive financial reward from the LLP), or (c) relate to the Pipeline Business, together with such other services as the parties may agree from time to time in writing that the LLP is to perform for Quad (the 'Services'). Quad confers upon and grants to the LLP such power and authority as is necessary or desirable for providing the Services. The LLP hereby accepts the appointment to provide the Services to Quad, subject to the terms and conditions set out in this Agreement.
2.2 The LLP shall not, during the course of this Agreement and for a period of 12 months after its expiration or termination for whatever reason, directly or indirectly:-
2.2.1 solicit or entice away (or attempt to solicit or entice away) any Client in connection with any Services; or
2.2.2 obtain instructions for any Services from any of the Clients or undertake any Services for any of the Clients; or
2.2.3 undertake any Services in relation to either the Pipeline Business or any work introduced by any of the Introducers during the Extended Period without first having referred such matters to Quad other than pursuant to the provisions of this Agreement;
It is acknowledged that the LLP shall not be in breach of these provisions to the extent that Quad has been given the opportunity to undertake any such Services and has declined the opportunity to do so in writing.
2.3 If the LLP commits any breach of clause 2.2 above then it agrees to pay to Quad on demand an introduction fee equal to 2.15 x the Actual Revenue [defined to mean the highest revenue, net of VAT, received by any "Relevant Company", namely Old Quad, New Quad, the LLP and QFC].
2.4 It is acknowledged that the damages payable pursuant to clause 2.3 above does not preclude Quad from applying to Court for an injunction to restrain a breach of clause 2.1 [sic; presumably clause 2.2]. …
2.5 Each party acknowledges that the provisions of clauses 2.2 & 2.9 are no more extensive than is reasonable to protect the interests of Quad and that the level of liquidated damages set out in clause 2.3 represents a genuine pre-estimate of the anticipated loss which would be incurred by Quad in the event of such breach.
2.6 The restrictions contained in clause 2.2 & 2.9 (each of which is a separate obligation) are considered reasonable by the parties (each of the parties having taken, if required, separate legal advice) in all the circumstances as necessary to protect the legitimate interests of the other party; but if any such restriction shall be judged by a competent court to be void but would be valid and enforceable if certain words were deleted or the period reduced or any other amendment made, such restriction shall apply with such modification to make it valid and effective.
2.9 In addition to the restraints on the part of the LLP contained in this clause 2.2 above, the LLP shall not during the period from the date of this Agreement to and including the expiration of the Extended Period directly or indirectly solicit or endeavour to solicit or obtain instructions for Services from any of the Prospects [i.e. those identified by Old Quad as potential new clients in the twelve-month period before the making of the Services Agreement] other than for the benefit of Quad pursuant to the provisions of this Agreement save that this provision shall not apply to P&O.
2.10 For the purposes of this Agreement, the provisions of clause 2.1 shall not apply to work undertaken for any Clients where Quad acknowledges in writing to the LLP that both of the following conditions are satisfied:
2.10.1 the LLP employs or directly engages one or more individuals who previously acted as a scheme consultant or scheme actuary to a Client to the extent that any such employment or engagement does not relate to any person employed or directly engaged by Quad prior to the Effective Date; and
2.10.2 the sole reason for any additional work emanating from any such Client is the engagement by the LLP of the individual referred to in 2.10.1.
In such circumstances such discrete items of work shall be carried out by the LLP and invoiced by the LLP without any payment being due to Quad. For the avoidance of doubt, it is agreed that clause 2.10.1 shall not include circumstances where the LLP engages one or more individuals pursuant to an agreement or arrangement between the LLP and a third party for the provision of services to or on behalf of the LLP."
"the clients and schemes to which Quad has provided any Services prior to 1st April 2007 together with such clients as are attributable to the Pipeline Business and any parties introduced either to Quad or the LLP by any of the Introducers during the Extended Period including (without limitation) those clients and schemes as are set out in Part 1 of Schedule 2 to this Agreement which expression shall include (where appropriate) any companies within the same group of companies as the relevant Client from time to time and any pension schemes sponsored by any Clients and any new entrants into such schemes".
The "Pipeline Business" was defined to mean "any engagements by Quad entered into with any of the Clients or Prospects or which are referred to Quad by any of the Introducers in connection with the provision of Services during the Extended Period". "Introducers" was defined to include all Clients, all those identified in Schedule 4 to the Services Agreement, and everyone else with whom Old Quad had had face to face contact for the purposes of engendering a commercial relationship in the twelve months immediately prior to 1 April 2007.
"7.1 The LLP shall provide the Services to Quad subject to the terms and conditions set out in this Agreement.
7.2 Quad shall at its own expense from time to time supply the LLP with all necessary information, data, documentation and other records and materials relating to the Services (the 'Input Documentation') within sufficient time to enable Quad [presumably this should read 'the LLP'] to provide the Services in accordance with this Agreement. The parties hereby acknowledge and confirm that as at the date hereof Quad has provided to the LLP all such Input Documentation as may be necessary for the LLP to commence provision of the Services to Quad. In addition, Quad shall make available the Assets to the LLP in order to enable it to perform the Services PROVIDED HOWEVER THAT such consent to use the Assets shall be terminated immediately upon the termination or expiration of this Agreement.
7.3 The LLP shall provide the Services in a professional, competent, diligent and efficient fashion in accordance with Best Industry Practice and shall devote such time and efforts as it deems reasonably necessary for the efficient operation of Quad's business.
7.4 The LLP shall in providing the Services comply with any statutory, regulatory or professional requirements as well as any other reasonable requirements made known to it from time to time by Quad which shall include (but not be limited to) the implementation of any actions arising from any reviews of service standards by Quad with any Clients or Introducers. The LLP shall consider in good faith any recommendations made by Quad in the LLP's performance of the Services and the LLP shall be deemed to accept any such recommendation unless the LLP promptly notifies Quad in writing of the LLP's rejection of any such recommendation and provides reasonably detailed reasons for such rejection.
7.5 Without prejudice to the generality of the LLP's obligations contained in this Agreement, the Services shall be performed to a standard no less favourable than that provided by the LLP from time to time for other clients in respect of services the same as or similar to the Services."
Clause 1 and Schedule 1 defined "Assets" as "All assets owned or leased by Quad to the extent that they are used on or prior to the date of this Agreement for the provision of the Services to the Clients or for any reason relating to the business of Quad".
"8.1 With effect from the Effective Date, but subject to the proviso to this clause and to clause 8.3 below, the LLP is authorised to and agrees to exercise the powers and authorities conferred upon Quad to the extent that such powers and authorities relate or are ancillary to, arise from or are requisite for the provision of the Services PROVIDED THAT, in performing the duties and exercising the powers and authorities referred to in this clause the LLP shall:
8.1.1 have no power or authority whatsoever to bind or commit Quad, other than pursuant to a power of attorney or other written authority granted by Quad; and
8.1.2 be subject to the restrictions set out or referred to in this Agreement.
8.2 The LLP reserves the right to request specific approval by Quad before taking any action whether or not such action constitutes part of the Services and shall not be in breach of this Agreement if it requests such approval but such approval is not or has not been granted and it does not therefore take the action for which approval was requested.
8.3 Quad shall have the right at any time while this Agreement subsists to serve notice on the LLP prescribing limitations on the duties, powers, authorities and discretions exercisable by the LLP hereunder and the time at which such limitations shall take effect.
8.4 The LLP shall use all reasonable endeavours to avoid doing anything which might prejudice or bring into disrepute in any manner the business or reputation of Quad or any of its directors.
8.5 The LLP shall allow Quad, upon demand from any director of Quad, immediate access to any Information requested."
"Information" was defined to mean "such data, records, files or information in the possession of the LLP in relation to the Clients and the Services".
"In consideration of the provision of the Services by the LLP to Quad, the LLP shall on the last working day of each month invoice Quad in the sum of 57% of the aggregate of the amounts Quad has invoiced to the Clients and received payment for during each respective month for the Services … together with any Commissions received by Quad for that month to the extent that the Services were carried out on or after 1st April 2007 ('the Administration Fees'). For the avoidance of doubt the amounts referred to above shall include payments and Commissions received in respect of QFC matters. …"
(This arrangement reflected the fact that it was envisaged that the Clients would contract directly with Quad, not with the LLP; therefore, as a matter of form, the LLP would seek payment from Quad. The formal position was reversed under the Introducer's Agreement in respect of regulated business: the Clients there contracted with the LLP, which accounted to QFC, and subsequently to New Quad, for the relevant percentage of fees.) Clause 9.8 made provision for the advance of set-up costs by Old Quad to the LLP:
"The LLP shall invoice Quad in respect of set up fees in the sum of £250,000 within 28 days of the date of this Agreement. Quad shall be entitled to a reduction of the amounts invoiced in accordance with clause 9.1 above to such amount as equates to the set up fees invoiced to it by the LLP. This reduction shall be effected by the LLP declining to invoice and waiving any future entitlement to invoice in respect of any period after 1st April 2009 which reduction and waiver shall have effect until such time as the full reduction has taken effect. In the event of this Agreement being terminated prior to the full reduction being achieved, then the difference between any reduction achieved and the amount invoiced in respect of set up fees shall become immediately due and payable from the LLP to Quad."
"The LLP is required to ensure the orderly transition of the Services from the LLP to Quad or any Replacement Provider in the event of any termination (including partial termination) or expiry of this agreement. This Schedule sets out the principles of the exit and service transition arrangements which are intended to achieve this and upon which the Exit Plan shall be based."
The "Exit Plan" was required to facilitate the transition of the Services from the LLP to the Replacement Provider (if Old Quad outsourced them to such a third party) or to Old Quad itself (if it decided to insource them).
"18. The LLP and Quad are not partners with each other and neither the terms of this Agreement nor the fact that Quad and the LLP or anybody affiliated to the LLP may have joint interests in any one or more investments shall be construed so as to make them partners of each other or impose any liability as such on either of them."
"20.1 The LLP may not assign, sub-contract, novate or otherwise dispose of any or all of its rights and obligations under this Agreement without the prior written consent of Quad other than in accordance with this Agreement.
20.2 Quad may assign, novate or otherwise dispose of any or all of its rights and obligations under this Agreement to any third party of its choice without consent."
"17.1 This Agreement and the documents referred to in it constitute the entire agreement between the parties and supersedes all prior arrangements, written or oral with respect thereto. All other terms and conditions, expressed or implied by statute or otherwise, are excluded to the fullest extent permitted by law.
17.3 If any of the provisions of this Agreement are held by any competent authority to be invalid or unenforceable in whole or in part, the validity of the other provisions of this Agreement and the reminder [scil. remainder] of the provisions in question shall not be affected."
Is New Quad a party to the Services Agreement by Novation?
"At no stage prior to the emergence of this dispute was the Defendant informed that the Claimant had taken the place of Old Quad in the manner described in the Particulars of Claim; at all material times prior to that, the Defendant believed that it was dealing with Old Quad. The use of the Claimant's company number was simply a result of an instruction from Mr Baldwin that the number previously being used was erroneous. This falls far short of amounting to a novation."
"19-087 Novation takes place where the two contracting parties agree that a third, who also agrees, shall stand in the relation of either of them to the other. There is a new contract and it is therefore essential that the consent of all parties shall be obtained; in this necessity for consent lies the most important difference between novation and assignment.
19-088 Many of the reported cases in English law have arisen either out of the amalgamation of companies, or of changes in partnership firms, the question being whether as a matter of fact the party contracting with the company or the firm accepted the new company or the new firm as his debtor in the place of the old company or the old firm. That acceptance may be inferred from acts and conduct, but ordinarily it is not to be inferred from conduct without some distinct request."
- The LLP: At the date of the Services Agreement the members of the LLP were Mr Reid-Jones, Mr Davies, Mr Vincent and Mr Deidun (all of whom had been members since incorporation on 12 March 2007) and Rhidian Williams and Karen Kendall (who became members on 1 June 2007, having formerly worked for Buck Consultants). Those six remain members of the LLP. Mr Baldwin became a member of the LLP on 1 January 2008 and remained a member until 30 April 2013.
- Old Quad: At the date of the Services Agreement and until after January 2008 the directors of Old Quad were Mr Coombes, Mr Baldwin, Mr Deidun, Mr Powis and Mr Reid-Jones. At the date of the Services Agreement the shareholders in Old Quad were Mr Coombes, Mr Baldwin, Mr Deidun, Mr Reid-Jones, Mrs Emma Reid-Jones, Ms Betty Binysh (Mr Coombes' wife) and Mrs Jane Baldwin. (Ms Binysh and Mrs Baldwin held only non-voting shares.) The entire issued share capital of Old Quad was purchased by New Quad on 1 January 2008.
- RPS: The directors of RPS were Mr Davies and Mr Powis (from incorporation on 25 November 2004) and Mr Reid-Jones (from 16 February 2005). Mr Powis resigned in July 2008. The shareholders in RPS were Mr Davies, Old Quad, Mr Powis, Mr Vincent and Mr Price. (Mr Vincent and Mr Price held only non-voting shares.) The entire issued share capital of RPS was purchased by New Quad on 1 January 2008.
- New Quad: At the date of the Services Agreement the directors of New Quad (then, of course, called Pascal Company Solutions Limited) were Mr Coombes, Mr Baldwin, Mr Reid-Jones, Mr Deidun, Mr Davies and Mr Powis. Mr Baldwin, Mr Reid-Jones, Mr Deidun and Mr Powis had been appointed as directors on 31 October 2007, the day before the Services Agreement was executed. Mr Powis, who was a non-executive director, resigned as director on 1 April 2008. Mr Reid-Jones and Mr Davies resigned as directors on 25 May 2018, at the commencement of the dispute between the parties. The shareholders in New Quad as from 1 January 2008, when their shares were issued, were Mr Coombes, Mr Baldwin, Mr Deidun, Mr Reid-Jones, Mrs Reid-Jones, Mr Davies, Mr Vincent, Ms Binysh and Mrs Baldwin. (Mr Davies, Mr Vincent, Ms Binysh and Mrs Baldwin held only non-voting shares.)
"Due to the restructuring of Quantum Advisory Limited's business activities it has become necessary to open new client bank accounts under a new Quantum Advisory Limited company profile.
The new Quantum Advisory Limited Company has been formed under the temporary name Pascal Company Solutions Limited but will change its name to Quantum Advisory Limited following the change over from the old Quantum Advisory Limited Company on 1st January 2008."
Mr David Timms, the LLP's Financial Controller, showed the draft to Mr Vincent for comment and approval. On 15 November 2007 Mr Vincent sent the draft by email to all the other members of the LLP and to Mr Baldwin. The email, which had the Subject line "QAL to Pascal and back again!", said:
"I'm not sure how clients will react to this so should we be adding more meat to the bones of the covering letter? Comments please."
Ms Kendall replied:
"I don't understand at all … what's Pascal, and why are we temporarily having to call bank accounts Pascal instead of Quantum Advisory?
If I don't understand then I am sure clients won't either—if anything it looks like some dodgy money laundering scam."
That reply shows that Ms Kendall took the view—I should have thought, entirely reasonably—that the draft letter failed to give clients a sufficient explanation of what was happening. It also shows that she did not herself have a clear understanding of the restructuring; she, of course, was not a member of the legacy companies. Mr Baldwin responded in turn with an email that, though rather jocular in tone, was straightforward and accurate:
"In the beginning there was Quad and then the lord (Rob etc) cometh and we formed Renaissance Pension Services Ltd as a mechanism for bringing Rob into the business, paying him etc tax efficiently and giving him shares in the combined business.
It was always intended that Renaissance would be merged into Quantum.
Apparently the best way of doing this is to tip both Quad and Ren into a new co and then to rename the newco Quad.
I gather this is fairly common."
That response explained the restructuring but did not address the issue of communication with clients. Mr Reid-Jones therefore asked, pertinently:
"Does this deal with the point raised by Karen in terms of how it looks to her and therefore our clients?"
Mr Williams, who was the other person not involved in the restructuring, replied:
"No, still looks dodgy to me. A couple of points:
I think that more explanation is needed in the covering letter. Could/should this letter be countersigned by the consultant/actuary for the client?
If this is purely a device for tax purposes, why use the name Pascal? How about Quad II or some such similar.
Why do we need to change client bank accounts at all? Surely it is just a change in the responsibility for operating those accounts that is needed."
Mr Vincent responded:
"I suspected this to raise a few comments. We will raise Rhidian's points with Dave T[imms] and see what he says. The obvious route would be to keep the accounts intact, but I suspect this has already been discounted as not feasible.
Pete, can you and I have a chat with Dave T tomorrow and let everyone know the outcome.
The letter will of course have to be expanded on."
The relevant chain of emails concluded the following morning, 16 November 2007, with Mr Baldwin's reply to all:
"I know that we have discussed possible alternatives with the bank on several occasions—but there is no alternative as the new Quantum Advisory Limited is a different company to the old one.
There may be some merit in deferring until we are in a position to write to clients re the QFC changes. The changes can then be explained in more detail and clients only get troubled once.
However, we have no scope for delay. We need the accounts transferred before Quad becomes new Quad otherwise we can't pay pensions etc.
Do we have a feel for LLP authorisation timescale?"
"'Quad' shall mean Quad as defined above and shall also include any other party to which this Agreement is novated in its place".
That by itself is sufficient to dispose of the submission.
Direct Client Engagements
Is clause 2.2 of the Services Agreement an unreasonable restraint of trade?
Summary of the LLP's case
"All covenants in restraint of trade are prima facie unenforceable at common law and are enforceable only if they are reasonable with reference to the interest of the parties concerned and of the public. Unless the unreasonable part can be severed by the removal of either part or the whole of the covenant in question, its inclusion renders the covenant or the entire contract unenforceable."
- The lack of a genuine process of negotiation leading to the Services Agreement, the imbalance of the bargaining positions of the parties to the agreement, and the absence of independent legal advice for the LLP.
- The fact that, because of the very limited powers of the LLP to terminate the Services Agreement, the likely duration of the restraints is 100 years.
- The fact that this duration, far from being due to any assessment of what was necessary to protect Quad's legitimate interests, resulted from a late decision, made for other reasons, to extend the term of the contract.
- The fact that the LLP is not only prevented from acting for the Clients on its own behalf but positively obliged to act for them on New Quad's behalf.
- The level of fees to which New Quad is entitled in respect of work done by the LLP.
- The consequences of the restraints on a competitive market for the Clients.
Some relevant points of law
Scope of the doctrine
"Every member of the community is entitled to carry on any trade or business he chooses and in such manner as he thinks most desirable in his own interests, so long as he does nothing unlawful: with the consequence that any contract which interferes with the free exercise of his trade or business, by restricting him in the work he may do for others, or the arrangements which he may make with others, is a contract in restraint of trade. It is invalid unless it is reasonable as between the parties and not injurious to the public interest."
He resisted the submission that the principle as formulated was too broad, stating: "The categories of restraint of trade are not closed." To similar effect, Diplock LJ offered the following definition at 180:
"A contract in restraint of trade is one in which a party (the covenantor) agrees with any other party (the covenantee) to restrict his liberty in the future to carry on trade with other persons not parties to the contract in such manner as he chooses."
Having observed at 183 that most of the reported cases concerned contracts between master and servant and between purchasers and vendors of the goodwill of businesses, Diplock LJ noted the existence of "plenty of others in which neither of these relationships subsists between covenantee and covenantor" and, like Lord Denning MR, he rejected the submissions that the doctrine of restraint of trade was limited to certain confined categories of contract.
"The doctrine does not apply to ordinary commercial contracts for the regulation and promotion of trade during the existence of the contract, provided that any prevention of work outside the contract, viewed as a whole, is directed towards the absorption of the parties' services and not their sterilisation. …
When a contract only ties the parties during the continuance of the contract, and the negative ties are only those which are incidental and normal to the positive commercial arrangements at which the contract aims, even though those ties exclude all dealings with others, there is no restraint of trade within the meaning of the doctrine and no question of reasonableness arises. If, however, the contract ties the trading activities of either party after its determination, it is a restraint of trade, and the question of reasonableness arises. So, too, if during the contract one of the parties is too unilaterally fettered so that the contract loses its character of a contract for the regulation and promotion of trade and acquires the predominant character of a contract in restraint of trade. In that case the rationale of Young v. Timmins (1831) 1 Cr & J 331 [where the covenantor was obliged to work for no one but the covenantee, but the covenantee had no obligation to provide work to the covenantor] comes into play and the question whether it is reasonable arises."
"Often, in reported cases, we find that instead of segregating two questions, (i) whether the contract is in restraint of trade, (ii) whether, if so, it is 'reasonable', the courts have fused the two by asking whether the contract is in 'undue restraint of trade' or by a compound finding that it is not satisfied that this contract is really in restraint of trade at all but, if it is, it is reasonable. A well-known text-book describes contracts in restraint of trade as those which 'unreasonably restrict' the rights of a person to carry on his trade or profession. There is no need to regret these tendencies: indeed, to do so, when consideration of this subject has passed through such notable minds from Lord Macclesfield onwards, would indicate a failure to understand its nature. The common law has often (if sometimes unconsciously) thrived on ambiguity and it would be mistaken, even if it were possible, to try to crystallise the rules of this, or any, aspect of public policy into neat propositions. The doctrine of restraint of trade is one to be applied to factual situations with a broad and flexible rule of reason."
Nevertheless, Lord Wilberforce did consider that some guidance could be given as to the kinds of case to which the doctrine would not apply:
"This does not mean that the question whether a given agreement is in restraint of trade, in either sense of these words, is nothing more than a question of fact to be individually decided in each case. It is not to be supposed, or encouraged, that a bare allegation that a contract limits a trader's freedom of action exposes a party suing on it to the burden of justification. There will always be certain general categories of contracts as to which it can be said, with some degree of certainty, that the 'doctrine' does or does not apply to them. Positively, there are likely to be certain sensitive areas as to which the law will require in every case the test of reasonableness to be passed: such an area has long been and still is that of contracts between employer and employee as regards the period after the employment has ceased. Negatively, and it is this that concerns us here, there will be types of contract as to which the law should be prepared to say with some confidence that they do not enter into the field of restraint of trade at all.
How, then, can such contracts be defined or at least identified? No exhaustive test can be stated - probably no precise non-exhaustive test. But the development of the law does seem to show that judges have been able to dispense from the necessity of justification under a public policy test of reasonableness such contracts or provisions of contracts as, under contemporary conditions, may be found to have passed into the accepted and normal currency of commercial or contractual or conveyancing relations. That such contracts have done so may be taken to show with at least strong prima force that, moulded under the pressures of negotiation, competition and public opinion, they have assumed a form which satisfies the test of public policy as understood by the courts at the time, or, regarding the matter from the point of view of the trade, that the trade in question has assumed such a form that for its health or expansion it requires a degree of regulation. Absolute exemption for restriction or regulation is never obtained: circumstances, social or economic, may have altered, since they obtained acceptance, in such a way as to call for a fresh examination: there may be some exorbitance or special feature in the individual contract which takes it out of the accepted category: but the court must be persuaded of this before it calls upon the relevant party to justify a contract of this kind."
"I turn now to the agreements. In my opinion, on balance, they enter into the category of agreements in restraint of trade which require justification. They directly bear upon, and in some measure restrain, the exercise of the respondent's trade, so the question is whether they are to be treated as falling within some category excluded from the 'doctrine' of restraint of trade. The broad test, or rather approach, which I have suggested, is capable of answering this. This is not a mere transaction in property, nor a mere transaction between owners of property: it is essentially a trade agreement between traders. It is not a mere agreement for exclusive purchase of a commodity, though it contains this element: if it were nothing more, there would be a strong case for treating it as a normal commercial agreement of an accepted type. But there are other restrictive elements. There is the tie for a fixed period with no provision for determination by notice, a combination which McEllistrim's case  AC 548 shows should be considered together, and there is the fetter on the terms on which the station may be sold. … Finally the agreement is not of a character which, by the pressure of negotiation and competition, has passed into acceptance or into a balance of interest between the parties or between the parties and their customers; the solus system is both too recent and too variable for this to be said."
"'The doctrine of restraint of trade is one to be applied to factual situations with a broad and flexible rule of reason' (Lord Wilberforce p. 331G), taking into account 'the wider aspects of commerce … as well as the narrower aspect of the contract as between the parties' (Lord Pearce p. 330B): 'its application ought to depend less on legal niceties or theoretical possibilities than on the practical effect of a restraint in hampering that freedom which it is the policy of the law to protect' (Lord Reid p. 298A–B)."
His conclusion as to the correct approach was set out at 327:
"[I]t follows, in my judgment, that the right approach for the court, once it is satisfied that the contract before it is a contract which is (in ordinary parlance) in restraint of trade, is to consider whether in all the circumstances sufficient grounds exist for excluding that contract from the application of the doctrine: as Lord Wilberforce put it, 'to dispense [the contract] from the necessity of justification' (p. 332G). If no sufficient grounds exist, the contract attracts the doctrine.
As to what constitutes sufficient grounds for this purpose, this raises once again the question where the line is to be drawn between those contracts in restraint of trade (giving that expression its ordinary meaning) which attract the doctrine and those which do not. Lord Reid said (p. 298G):
'I would not attempt to define the dividing line between contracts which are and contracts which are not in restraint of trade.'
And, as noted above, Lord Morris of Borth y Gest said (p. 306F):
'For my part, I doubt whether it is possible or desirable to record any very rigid classification of groups of cases.'
Accordingly, on the authority of Esso it would be a wrong approach in this case to attempt answer the question whether the 1988 Agreement is a contract which attracts the doctrine, so that its terms require to be justified under the Nordenfelt test, by reference to any kind of formula applicable in all cases. Yet this appears to me to be no more than a reflection of the fact the doctrine itself is not of its nature susceptible of that degree of analysis. Esso establishes that the doctrine is not to be applied in a mechanistic or formalistic way. Such an approach would, as it seems to me, be the antithesis of the approach required by the 'rule of reason'."
"[R]estraints of trade and interference with individual liberty of action may be justified by the special circumstances of a particular case. It is a sufficient justification, and indeed it is the only justification, if the restriction is reasonable – reasonable. that is, in reference to the interests of the parties concerned and reasonable in reference to the interests of the public, so framed and so guarded as to afford adequate protection to the party in whose favour it is imposed, while at the same time it is in no way injurious to the public."
"However, in practice, I find that the line between the two stages identified by Jonathan Parker J [in Panayiotou] is not clear cut, and that the analysis has to be an iterative one between them. In particular, the matters that might be raised under the second stage might also be relevant to the question whether the doctrine of restraint of trade is engaged at all."
Gross LJ noted at  that the two questions were analytically distinct, though he acknowledged that they could not "be viewed as existing in wholly watertight compartments", and at  he said that the question of which contracts attract the doctrine of restraint of trade could not be answered "in a mechanistic or formalistic way."
"It has been authoritatively said that the onus of establishing that an agreement is reasonable as between the parties is upon the person who puts forward the agreement, while the onus of establishing that it is contrary to the public interest, being reasonable between the parties, is on the person so alleging: see Herbert Morris Ltd v Saxelby  1 AC 688, 700, 707-708, per Lord Atkinson and Lord Parker. The reason for the distinction may be obscure, but it will seldom arise since once the agreement is before the court it is open to the scrutiny of the court in all its surrounding circumstances as a question of law."
The relationship between the two parts of the Nordenfelt test has been a matter of different emphases in the cases. In Petrofina, Diplock LJ remarked at 181-182:
"Although reference to the distinction drawn by Lord Macnaghten between the interest of the parties and the interest of the public continues to be made in subsequent cases, it appears to be true in 1965, as it was in 1913 (see the Adelaide Steamship Co. case  AC 781), that, with one possible exception, the courts have never yet held a restriction which is reasonable in reference to the interests of the parties to be unreasonable in reference to the public. This, I think, is because the interests of the parties are simply a particular facet of the interests of the public – and generally the most important facet. The public interests, which the common law doctrine against restraint of trade is designed to promote, are social and economic – liberty and prosperity; the liberty of the individual to trade with whom he pleases in such manner as he thinks desirable, the prosperity of the nation by expansion of the total volume of trade. … A liberty to trade with whom one pleases in such manner as one thinks desirable, if it is shared with any other trader, cannot be absolute. The liberty of one cannot be exercised to the full without some curtailment of the liberty of the other. … The test of unreasonableness has been expressed in a number of different ways, but most helpfully, I think, by Lord Atkinson in McEllistrim v Ballymacelligott Co-operative etc. Society  AC 548, 574, as being whether
'it affords no more than adequate protection to those interests of the private parties concerned which they have a right to have protected.'
It is for the party seeking to enforce the restriction to show that it complies with that test.
Put in this way, the test really does combine regard for the interests of the parties with regard for the interests of the public. It is consideration of the public interest which determines what is an interest of the private party concerned which he has a right to have protected."
At 182-183 Diplock LJ illustrated this approach by reference to the two main categories of contract to which the doctrine applies: master and servant, and vendor and purchaser of a business. In the former category, the employer's interest in protecting confidential information is to be weighed against the employee's right to compete with his former employer; in the latter category, the interest in protecting goodwill that has been built up is to be weighed against the purchaser's interest in carrying on any trade or business that he chooses. In each case, however, the private interest on either side reflects a public interest; therefore: "A compromise between these two conflicting interests, if reasonable in reference to the interests of the parties concerned, is reasonable in reference to the interests of the public."
"[I]n every case it is necessary to consider first whether the restraint went farther than to afford adequate protection to the party in whose favour it was granted, secondly whether it can be justified as being in the interests of the party restrained, and, thirdly, whether it must be held contrary to the public interest. …
I think that in some cases where the court has held that a restraint was not in the interests of the parties it would have been more correct to hold that the restraint was against the public interest. For example, in Kores Manufacturing Co Ltd v Kolok Manufacturing Co Ltd  Ch 108 the parties had agreed that neither would employ any man who had left the service of the other. From their own points of view there was probably very good reason for that. But it could well be held to be against the public interest to interfere in this way with the freedom of their employees. If the parties chose to abide by their agreement an employee would have no more right to complain than the Mogul Company had in the Mogul case  AC 25. But the law would not countenance their agreement by enforcing it. And in cases where a party, who is in no way at a disadvantage in bargaining, chooses to take a calculated risk, I see no reason why the court should say that he has acted against his own interests: but it can say that the restraint might well produce a situation which would be contrary to the public interest.
Again, whether or not a restraint is in the personal interests of the parties, it is I think well established that the court will not enforce a restraint which goes further than affording adequate protection to the legitimate interests of the party in whose favour it is granted. This must I think be because too wide a restraint is against the public interest. It has often been said that a person is not entitled to be protected against mere competition. I do not find that very helpful in a case like the present. I think it better to ascertain what were the legitimate interests of the appellants which they were entitled to protect and then to see whether these restraints were more than adequate for that purpose."
"The onus is on the party asserting the contract to show the reasonableness of the restraint. That rule was laid down in the Nordenfelt case and in Herbert Morris Ltd v Saxelby. When the court sees its way clearly, no question of onus arises. In a doubtful case where the court does not see its way clearly and the question of onus does arise, there may be a danger in preferring the guidance of a general rule, founded on grounds of public policy many generations ago, to the guidance given by free and competent parties contracting at arm's length in the management of their own affairs. Therefore, when free and competent parties agree and the background provides some commercial justification on both sides for their bargain, and there is no injury to the community, I think that the onus should be easily discharged. Public policy, like other unruly horses, is apt to change its stance, and public policy is the ultimate basis of the courts' reluctance to enforce restraints. Although the decided cases are almost invariably based on unreasonableness between the parties, it is ultimately on the ground of public policy that the court will decline to enforce a restraint as being unreasonable between the parties. And a doctrine based on the general commercial good must always bear in mind the changing face of commerce. There is not, as some cases seem to suggest, a separation between what is reasonable on grounds of public policy and what is reasonable as between the parties. There is one broad question: is it in the interests of the community that this restraint should, as between the parties, be held to be reasonable and enforceable?"
Inequality of bargaining power
"Where two experienced traders are bargaining on equal terms and one has agreed to a restraint for reasons which seem good to him the court is in grave danger of stultifying itself if it says that it knows that trader's interest better than he does himself. But there may well be cases where, although the party to be restrained has deliberately accepted the main terms of the contract, he has been at a disadvantage as regards other terms: for example where a set of conditions has been incorporated which has not been the subject of negotiation – there the court may have greater freedom to hold them unreasonable."
Accordingly, the usual inclination of the courts to proceed on the basis that contracting parties are the best judges of their own interests—and, to the extent that those private interests correlate to public interests, of those latter interests also—will be modified where one of the parties was to some extent disabled from protecting his own interests. The same point appears from the speech of Lord Morris of Borth y Gest at 305:
"The law recognises that if business contracts are fairly made by parties who are on equal terms such parties should know their business best. If there has been no irregularity, the law does not mend or amend contracts merely for the relief of those for whom things have not turned out well. But when all this is fully recognised yet the law, in some circumstances, reserves the right to say that a contract is in restraint of trade and that to be enforceable it must pass a test of reasonableness."
Lord Pearce, too, at 323, made the point by way of emphasis on the relevance of equality of bargaining power:
"It is important that the court, in weighing the question of reasonableness, should give full weight to commercial practices and to the generality of contracts made freely by parties bargaining on equal terms. Undue interference, though imposed on the ground of promoting freedom of trade, may in the result hamper and restrict the honest trader and, on a wider view, injure trade more than it helps it. … Where there are no circumstances of oppression, the court should tread warily in substituting its own views for those of current commerce generally and the contracting parties in particular. For that reason, I consider that the courts require on such a matter full guidance from evidence of all the surrounding circumstances and of relevant commercial practice. They must also have regard to the consideration. It is clear that the question of the consideration weighed with Lord Macnaghten in the Nordenfelt case. And although the court may not be able to weigh the details of the advantages and disadvantages with great nicety it must appreciate the consideration at least in its more general aspects. Without such guidance they cannot hope to arrive at a sensible and up-to-date conclusion on what is reasonable. That is not to say that, when it is clear that current contracts (containing restraints), however widespread, are in fact a danger and disservice to the public and to traders, the court should hesitate to interfere."
"As I understand these references, they establish that while the Court is in general slow to substitute its (objective) view as to the interests of the contracting parties for the (subjective) views of the contracting parties themselves in electing to enter into the contract, that consideration will carry less weight, and may (depending on the particular facts) carry no weight at all, where the evidence establishes that the contracting parties were negotiating on other than equal terms."
"It will be recalled that the Rooneys had no legal advice at the time of execution. This is all the more important in the light of the judge's finding that, on Proactive's side, a longer term than usual was demanded for the IRRA [image rights representation agreement] because it was known that WR was 'hot property'. The absence of independent legal advice in my judgment deprives the fact that the Rooneys were content with the terms of the IRRA of probative weight on the restraint of trade issue. It underscores the inequality of bargaining power between the parties. Moreover, it predisposes the agreement to a finding that it was one-sided, unfair or oppressive."
"Surely it can never be in the interest of a person to agree to suffer a restraint unless he gets some compensating advantage, direct or indirect. And Lord Macnaghten said [in Nordenfelt]: '… of course the quantum of consideration may enter into the question of the reasonableness of the contract.'"
Lord Hodson, too, referred at 318 to the speech of Lord Macnaghten in Nordenfelt and said that "a restriction as to time may be reasonable or unreasonable according to whether sufficient compensation has been given to the person restrained". Lord Pearce's comments to similar effect are set out in the citation, above, from his speech at 323.
"As I read the passages in Esso referred to above, in applying the first limb of the Nordenfelt test the size of the consideration may be a positive factor tending to justify the restraint. If the consideration for the restraint is so substantial that by any objective standard it is in the interests of the party receiving the consideration to subject himself to the restraint, then that must in my judgment be a factor pointing in the direction of justification. Without bringing that factor into account the courts could not, in my judgment (and paraphrasing Lord Pearce), hope to arrive at a sensible and up-to-date conclusion on what is reasonable as between the parties, for the purposes of the first limb of the Nordenfelt test. The dictum in Amoco supports this conclusion."
""[W]hen addressing the question of whether a contract attracts the doctrine of restraint of trade, the contract must be considered when it is made: A Schroeder Music Publishing Co Ltd v Macaulay  1 WLR 1308, at 1309 per Lord Reid. As it seems to me, how the contract has subsequently turned out is only relevant for these purposes insofar as it furnishes evidence of the nature of the contract in question when made."
Thus Arden LJ said at :
"It is no answer to say that there have been substantial financial rewards on all sides from the exploitation of WR's image rights. The question of restraint of trade has to be considered by reference to the terms of the IRRA."
Pre- and post-termination restraints
"The doctrine does not apply to ordinary commercial contracts for the regulation and promotion of trade during the existence of the contract, provided that any prevention of work outside the contract, viewed as a whole, is directed towards the absorption of the parties' services and not their sterilisation. Sole agencies are a normal and necessary incident of commerce and those who desire the benefits of a sole agency must deny themselves the opportunities of other agencies. …
When a contract only ties the parties during the continuance of the contract, and the negative ties are only those which are incidental and normal to the positive commercial arrangements at which the contract aims, even though those ties exclude all dealings with others, there is no restraint of trade within the meaning of the doctrine and no question of reasonableness arises. If, however, the contract ties the trading activities of either party after its determination, it is a restraint of trade, and the question of reasonableness arises. So, too, if during the contract one of the parties is too unilaterally fettered so that the contract loses its character of a contract for the regulation and promotion of trade and acquires the predominant character of a contract in restraint of trade. In that case the rationale of Young v Timmins comes into play and the question whether it is reasonable arises.
The difficult question in this case … is whether a contract regulating commercial dealings between the parties has by its restraints exceeded the normal negative ties incidental to a positive commercial transaction and has thus brought itself within the sphere to which the doctrine of restraint applies."
"So while the mere fact that the operation of a restraint is limited to the period of the contract may not suffice to justify the restraint, it is, as I understand the position, a factor to be brought into account on the side of justification (the weight to be attached to that factor depending, of course, on the facts and circumstances of the particular case)."
"Contractual terms which are in unreasonable restraint of trade are unlawful as a matter of English law. This legal principle applies to restrictions applicable during the contract not just to restrictions applicable on or after the termination of the contract, see A. Schroeder Music Publishing Co Ltd v Macaulay  1 W.L.R. 1308. In the case of restrictions intended to be effective during the currency of the contract, however, the court must be careful not to fetter what one may call ordinary commerce. Sole agencies are common in ordinary commerce and there would, therefore, have to be something specially restrictive before the restraint of trade principle will be effective."
Application to this case
The doctrine does not apply
1) The context of the agreement, mentioned several times already, is critical. The springboard for the LLP was provided in the form of financial assistance, the use of the means to carry on business (staff, equipment, premises), and the ability to carry out the legacy business and use the Quantum brand. But the legacy business itself—its goodwill and its profits—was not given to the LLP but remained Quad's. The LLP never bargained for its acquisition, and the Services Agreement expressly provides for it to revert to Quad upon termination of the agreement.
2) The LLP does not in terms complain of the duration of the Services Agreement; this itself cannot be within the purview of the doctrine. Nor does it complain of the nature of the covenants; these are rightly accepted to be unexceptional in principle. What it complains of is the duration of the restraints in the covenants, which last for the full term of the Services Agreement and for twelve months thereafter (a total of 100 years, unless the agreement is terminated early), in circumstances where the LLP has very limited ability to extricate itself from the Services Agreement before its term expires. Mr Butler said in his submissions that a shorter period for the restraints might have been justifiable; he said that he would have found it much harder to argue that a 10-year duration was unreasonable.
3) That way of approaching the matter seems to me to divorce the restraints from the wider agreement and thus to mistake their nature. In his witness statement (paragraph 23) Mr Coombes explained why he did not agree that the provisions of clause 2.2 were an unreasonable restraint of trade: "The purpose of those provisions was to recognise the legacy/LLP client ownership boundaries and it would have been unacceptable for legacy to entrust LLP with the servicing of legacy clients and legacy assets without such protection." The point about "ownership boundaries" is relevant to understanding why the doctrine does not apply in this case. Consideration of the practical realities of the situation shows this clearly enough.
4) A basic point of the Services Agreement was to enable the members of the LLP to use the legacy business, its infrastructure, and the Quantum brand to build up a business of its own; while at the same time the legacy business remained that of Quad, as mentioned above. The evidence shows that it was always intended that the restraints now found in clause 2.2 should last for the full term of the agreement and one year thereafter. The original discussions and agreement in principle were, I find, for a 10-year term for the Services Agreement (I accept the evidence of Mr Coombes and Mr Baldwin on this point). However, the members of the LLP were concerned that, if the agreement ended after 10 years, the LLP's sustainability would be threatened by the loss of a major part of its business and income so soon after trading had commenced (cf., for example, Mr Coombes' statement at paragraph 30, and Mr Reid-Jones' statement at paragraph 32). Mr Coombes had the idea of addressing that concern by extending the term of the agreement to 99 years. This found favour with the LLP, which never thereafter asked for a shorter term. The consequence of this for the LLP was that, as it was concerned to do, it retained the benefit of carrying on Quad's legacy business under the Quantum brand, as well as the other benefits under the Services Agreement. The consequence for Quad was that the opportunity of either re-tendering the outsourcing of its legacy business or choosing to insource it was lost, though the LLP had not acquired or sought to acquire the legacy business itself. These consequences endured so long as the agreement subsisted. The covenants give effect to the "ownership boundaries", in that they reflect the fact that, while the LLP is given the benefit of servicing the legacy Quantum business for the lengthy period it agreed to and therefore wanted, it has not acquired that business for itself and is not entitled to use its favourable position under the Services Agreement to help it to take a business for which it has not bargained.
If the doctrine applies, the restraints are reasonable
"In putting the outsource deal together, part of the thinking behind was that it should, in broad terms, be fair. … Now if we want to go back to legacy and renegotiate, we are always free to do so. However, we should be aware that legacy should decide that there has been enough give on its part and decide that it might like to renegotiate on certain areas that it feels hard done by on. … Taken in the entirety, I think the deal is reasonable. There will always be elements of it we can point to as unfair, but that is available to both parties."
The Introducer's Agreement
"(A) The LLP [that is, the defendant] is a specialist firm of actuaries and employee benefit consultants and has recently obtained authorisation from the FSA to provide investment advice and insurance mediation services.
(B) QFC is currently authorised by the FSA to provide investment advice and insurance mediation services but is willing to voluntarily de-authorise itself for the purposes of this Agreement.
(C) QFC has agreed to act as an introducer appointed representative to the LLP in accordance with the provisions of this Agreement".
Accordingly, clause 2.1 provided:
"With effect from the Effective Date [defined to mean 30 November 2008], the LLP confirms the appointment of QFC as an Introducer Appointed Representative to the LLP in accordance with the terms of this Agreement."
Clause 1 defined "Introducer Appointed Representative" as having the meaning set out in section SUP12.2.8 of the FSA (now the FCA) Handbook. Nothing of substance turns on the detail of that definition or on the corresponding definitions of "Introduction", "Introduce" and "Introduced". Clause 2.2 provided:
"In its capacity as an Introducer Appointed Representative, QFC shall Introduce to the LLP:
2.2.1 all those clients whose names are set out on the Q List;
2.2.2 any Prospective Clients."
"Relevant Services" was defined to mean "the provision of investment advice and insurance mediation services to Clients in accordance with the provisions of Part II of the Financial Services & Markets Act 2000 (Regulated Activities) Order 2001".
"In consideration of each Introduction …, the LLP shall pay QFC a fee equal to 43% of the Relevant Income actually received by the LLP in respect of the Client Introduced ('QFC Income')."
"Relevant Income" was defined to mean "the net commission or other fee income (exclusive of VAT and any disbursements) received by the LLP in respect of the provision of Relevant Services to a Client Introduced by QFC to the LLP pursuant to this Agreement". The substance of this apportionment of fees was therefore the same as that under the Services Agreement. The mechanism was different, because the retainer for regulated services was required to be with an authorised person; as QFC was becoming de-authorised, it could not contract directly with the clients, and they had to contract with the newly authorised LLP.
"With respect to the parties' rights and obligations under this Agreement, the parties agree that QFC is the Data Controller and that the LLP is the Data Processor."
Clause 9.2 begins, "The LLP shall", and it then set out obligations of the defendant under ten numbered sub-paragraphs. The focus of each of those sub-paragraphs is data protection, and clause 9.2.9 is the only one that does not include the words "Personal Data":
"9.2.9 [The LLP shall] permit QFC or its external advisers (subject to reasonable and appropriate confidentiality undertakings) to inspect and audit the LLP's data processing activities and those of its agents, subsidiaries and sub-contractors and comply with all reasonable requests or directions by QFC to enable QFC to verify and procure that the LLP is in full compliance with its obligations under this Agreement".
"13.1 This Agreement and the documents referred to in it constitute the entire agreement between the parties and supersedes all prior arrangements, written or oral with respect thereto. All other terms and conditions, expressed or implied by statute or otherwise, are excluded to the fullest extent permitted by law.
13.3 If any of the provisions of this Agreement are held by any competent authority to be invalid or unenforceable in whole or in part, the validity of the other provisions of this Agreement and the reminder [scil. remainder] of the provisions in question shall not be affected."
(The clause is identical, right down to the typographical error, to clause 17 of the Services Agreement.)
Is the Introducer's Agreement void for uncertainty?
"[T]he Q-List under the [Introducer's Agreement] was blank and accordingly, on its face, there are no clients in respect of whom the Defendant is obliged to pay. Further or alternatively, the [Introducer's Agreement] is, for that reason, void for uncertainty."
Paragraph 39 of the Counterclaim reads:
"Pursuant to the [Introducer's Agreement], the Defendant had at [30 November 2018] paid the Claimant the sum of £2,184,439. The [Introducer's Agreement] being devoid of an identifiable list of clients, and/or void for uncertainty, this money has been paid under a mistake, and the Claimant has been unjustly enriched by its receipt. The Claimant is obliged to repay the same."
"The contract should be given the meaning it would convey to a reasonable person having all the background knowledge which is reasonably available to the person or class of persons to whom the document is addressed."
The ramifications of that approach have been discussed in detail in many cases. I refer in particular to Rainy Sky S.A. v Kookmin Bank  UKSC 50,  1 WLR 2900; Arnold v Britton  UKSC 36,  AC 1619, esp. per Lord Neuberger PSC at -; and Wood v Capita Insurance Services Limited  UKSC 24,  AC 1173, esp. per Lord Hodge at -. Lord Hodge's judgment in Wood v Capita Insurance discussed in particular the relationship between text and context; he said:
"10. The court's task is to ascertain the objective meaning of the language which the parties have chosen to express their agreement. It has long been accepted that this is not a literalist exercise focused solely on a parsing of the wording of the particular clause but that the court must consider the contract as a whole and, depending on the nature, formality and quality of drafting of the contract, give more or less weight to elements of the wider context in reaching its view as to that objective meaning."
"12. … To my mind once one has read the language in dispute and the relevant parts of the contract that provide its context, it does not matter whether the more detailed analysis commences with the factual background and the implications of rival constructions or a close examination of the relevant language in the contract, so long as the court balances the indications given by each."
In the recent case of First National Trust Co (UK) Ltd v McQuitty  EWCA Civ 107, Peter Jackson LJ, with whom Asplin LJ and Henderson LJ agreed, cited with evident approval the remarks of Briggs J in LB Re Financing No 3 Ltd v Excalibur Funding No 1 Plc  EWHC 2111 (Ch):
"46. Commercial absurdity may require the court to depart even from the apparently unambiguous natural meaning of a provision in an instrument, because 'the law does not require judges to attribute to the parties an intention they plainly could not have had': see per Lord Hoffmann in the ICS case at page 913. …"
"59. … Where something has gone wrong with the language, it is not in my judgment necessarily an objection to dealing with it in a way that avoids commercial absurdity that provisions have, apparently, to be rewritten, blue pencilled, or amplified so as to work rationally in particular circumstances."
Peter Jackson LJ himself concluded:
"33. When construing a document the court must determine objectively what the parties to the document meant at the time they made it. What they meant will generally appear from what they said, particularly if they said it after a careful process. The court will not look for reasons to depart from the apparently clear meaning of the words they used, but elements of the wider documentary, factual and commercial context will be taken into account to the extent that they assist in the search for meaning. That wider survey may lead to a construction that departs from even the clearest wording if the wording does not reflect the objectively ascertained intention of the parties."
- "The Court should strive to give some meaning to contractual clauses agreed by the parties if it is at all possible to do so": Openwork Ltd at .
- To the same effect: "A conclusion that a contractual provision is too uncertain to be enforceable is, as was said by Leggatt J in Astor Management AG v Antalaya Mining Plc  EWHC 425 (Comm) at , (approved in Openwork Ltd v Forte  EWCA Civ 783) 'a last resort or, as Lord Denning MR once put it, a "counsel of despair"'": Macquarie Capital (Europe) Ltd v Nordsee Offshore MEG I GmbH  EWHC 1655 (Comm), per Butcher J at .
- "The object of the court is to do justice between the parties, and the court will do its best, if satisfied that there was an ascertainable and determinate intention to contract, to give effect to that intention, looking at substance and not mere form. It will not be deterred by mere difficulties of interpretation. Difficulty is not synonymous with ambiguity so long as any definite meaning can be extracted. But the test of intention is to be found in the words used. If these words, considered however broadly and untechnically and with due regard to all the just implications, fail to evince any definite meaning on which the court can safely act, the court has no choice but to say that there is no contract": per Lord Wright in the G Scammell & Nephew case, at p. 268.
- "'A provision in a contract will only be void for uncertainty if the court cannot reach a conclusion as to what was in the parties' minds or where it is not safe for the court to prefer one possible meaning to other equally possible meanings,' while bearing in mind that what is in the parties' mind is a legal construct and not an enquiry into subjective intent": Openwork Ltd v Forte at , quoting from Lewison, op. cit. at p. 473.
"In considering, therefore, whether a particular person or thing has been sufficiently indicated by a testator, there must be some words to which the required meaning may be attached. A complete blank cannot be filled up by parol testimony, however strong. Thus a legacy to Mr ________ cannot have any effect given to it, nor a legacy to Lady ______. But if there are any words to which a reasonable meaning may be attached, parol evidence may be resorted to to shew what that meaning is. Thus a legacy to a person described by an initial, as to Mrs C, admits of explanation as by shewing that the testator was accustomed to speak of a particular person by the initial of her name. And where a blank was left for the Christian name, parol evidence has been admitted to shew who was intended."
"A convenient statement of this principle is to be found in the following passage in Spencer Bower and Turner on 'Estoppel by Representation', 3rd edition at p.157, which was cited with approval by Lords Justices Eveleigh and Brandon (as they then were) in Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd  1 QB 84 at pp.126 and 130 as follows:
'This form of estoppel is founded, not on a representation of fact made by a representor and believed by a representee, but on an agreed statement of facts the truth of which has been assumed, by the convention of the parties, as the basis of a transaction into which they are about to enter. When the parties have acted in their transaction upon the agreed assumption that a given state of facts is to be accepted between them as true, then as regards that transaction each will be estopped against the other from questioning the truth of the statement of facts so assumed.'"
Kerr LJ further said at 34-35:
"All estoppels must involve some statement or conduct by the party alleged to be estopped on which the alleged representee was entitled to rely and did rely. In this sense all estoppels may be regarded as requiring some manifest representation which crosses the line between representor and representee, either by statement or conduct. It may be an express statement or it may be implied from conduct, e.g. a failure by the alleged representor to react to something said or done by the alleged representee so as to imply a manifestation of assent which leads to an estoppel by silence or acquiescence. Similarly, in cases of so-called estoppels by convention, there must be some mutually manifest conduct by the parties which is based on a common but mistaken assumption. The alleged representor's participation in this conduct can then be relied upon by the representee as a basis for this form of estoppel. … A similar situation existed in the Amalgamated Investment case (supra) which is now the leading authority on this doctrine in this country. The parties negotiated and dealt at length on the basis of their common assumption of a binding contractual nexus between them which did not in fact exist. Having acted on this assumption throughout these negotiations and dealings, neither party was thereafter entitled to rely on the absence of the contractual nexus on which these had been based. …
The applicability of the doctrine of estoppel in any given case can also be tested in another way. There cannot be any estoppel unless the alleged representor has said or done something, or failed to do something, with the result that – across the line between the parties – his action or inaction has produced some belief or expectation in the mind of the alleged representee, so that, depending on the circumstances, it would thereafter no longer be right to allow the alleged representor to resile by challenging the belief or expectation which he has engendered. To that extent at least, therefore, the alleged representor must be open to criticism."
"The elements of an estoppel by convention are not much disputed between the parties. They are reflected in para 10.01 of Wilken and Ghaly on The Law of Waiver, Variation and Estoppel, 3rd edn. (Oxford: Oxford University Press, 2012), as follows:
'(i) It is not enough that the common assumption upon which the estoppel is based is merely understood by the parties in the same way. It must be expressly shared between them.
(ii) The expression of the common assumption by the party alleged to be estopped must be such that he may properly be said to have assumed some element of responsibility for it, in the sense of conveying to the other party an understanding that he expected the other party to rely upon it.
(iii) The person alleging the estoppel must in fact have relied upon the common assumption, to a sufficient extent, rather than merely upon his own independent view of the matter.
(iv) That reliance must have occurred in connection with some subsequent mutual dealing between the parties.
(v) Some detriment must thereby have been suffered by the person alleging the estoppel, or benefit thereby have been conferred upon the person alleged to be estopped, sufficient to make it unjust or unconscionable for the latter to assert the true legal (or factual) position.'"
"Viewed as an application of the general requirement for a reliance-based estoppel—that B (actually or as reasonably understood by A) intended to induce A to act in reliance on the relevant proposition other than at A's own risk—the question raised by this second of Briggs J's requirements is whether B actually (or as reasonably understood by A) intended that A could rely on the subscription of A to their common view (as opposed to each, keeping his own counsel, being responsible for his own view). It is by reference to their subsequent dealings on that basis that B will be answerable to A: for B will be taken to assume responsibility for A's reliance on the understanding to which B has assented if B knew or ought to have known that A was relying or would rely on it, unless A knew, or in the circumstances should have known, that B was not making himself responsible for A's understanding or action, which remained A's own risk and responsibility."
Ought the LLP be ordered to give an account under the Introducer's Agreement?
1) The Services Agreement was novated from Old Quad to New Quad.
2) The Direct LLP Clients are correctly treated as New Quad's Clients for the purposes of the Services Agreement—which is, indeed, how both parties have treated them.
3) The covenants in clause 2 of the Services Agreement are not unenforceable restraints of trade because (a) the doctrine of restraint of trade does not apply to them and (b), if the doctrine did apply, the restraints would be reasonable.
4) The Introducer's Agreement is not void for uncertainty and the LLP is not entitled to the return of the moneys that it has paid under it.
5) No order ought to be granted to New Quad for an account of the moneys due to it from the LLP under the Introducer's Agreement.
Note 1 “(1) An introducer appointed representative is an appointed representative appointed by a firm whose scope of appointment must, under SUP 12.5.7 R, be limited to: (a) effecting introductions to the firm or other members of the firm's group; and (b) distributing non-real time financial promotions which relate to products or services available from or through the firm or other members of the firm’s group.” [Back]
Note 1 “(1) An introducer appointed representative is an appointed representative appointed by a firm whose scope of appointment must, under SUP 12.5.7 R, be limited to: (a) effecting introductions to the firm or other members of the firm's group; and (b) distributing non-real time financial promotions which relate to products or services available from or through the firm or other members of the firm’s group.” [Back]