Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2009] CSOH 111
CA39/09	OPINION OF LORD GLENNIE in the cause BELL & SCOTT LLP Pursuers; against DAVID STANLEY KAYE Defender: ­­­­­­­­­­­­­­­­­________________

Pursuer: Duncan; Shepherd & Wedderburn LLP

Defender: Doherty QC, Brown; Balfour & Manson

28 July 2009

Introduction

[1] Until mid-July 2006, the defender was the sole equity partner in Clairmonts, a firm of solicitors in Glasgow. The pursuers (to whom I shall, on occasion, refer as "B&S") are a firm of solicitors which, until that time, had an office only in Edinburgh. In terms of a Business Transfer Agreement dated 13 and 27 July 2006 ("the BTA"), with effect from 1 August 2006, the defender sold to the pursuers his interest in Clairmonts, including his interest in the business as a going concern and in such matters as the goodwill of the business, its client databases, the equipment and the benefit of the Work in Progress as defined therein. Subsequently, pursuant to another agreement (the "LLP Agreement"), the defender became a partner in the pursuer.

[2] The consideration for the purchase of the defender's interest in Clairmonts under the BTA was the sum of £800,000 divided between the Goodwill (£749,999), the Equipment (£40,000), the Work in Progress (£40,000) and the remainder of the Assets (£1). It was payable by six instalments (the second to sixth instalments being known as the "Deferred Payments"), the last instalment (£250,000) being payable 30 months after the Effective Date, i.e. on 1 February 2009. Clause 3.5 provided that if the defender retired with effect from a date earlier than 30 months from the Effective Date, or inter alia was in breach of any of the restrictive covenants in clause 12.1.2, he would forfeit his right to any outstanding part of the Deferred Payments.

[3] Clause 12 of the BTA contained certain stipulations restricting the future activities of the defender during certain periods. The relevant part provided inter alia as follows:

"12 Future Activities

12.1 For the purpose of assuring to the Purchaser the full Benefit of the Business and the Goodwill, the Vendor agrees with the Purchaser that:

12.1.1 ...

12.1.2 he shall not while he is a member of the Purchaser (except as may be agreed with the Purchaser, or in respect of Private Client Services and other legal services not provided by the Purchaser or referrals in the event of conflict) either on his own account, or through or with any other person directly or indirectly solicit, interfere with or endeavour to entice away from the Purchaser and/or thereafter deal with:

12.1.2.1 any Clients

12.1.2.2 any client of the Purchaser

12.1.3 he shall not for the period of 1 year after he ceases to be a member of the Purchaser either on his own account, or through or with any other person directly or indirectly solicit, interfere with or endeavour to entice away from the Purchaser and/ or thereafter deal with:

12.1.3.1 any Clients

12.1.3.2 any Client of the Purchaser

...

12.2 The Purchaser agrees that the restrictions:

12.2.1 contained in clauses 12.1.2, 12.1.3 and 12.1.6 shall not prohibit the Vendor from undertaking Private Client Services to Clients after he ceases to be a member of the Purchaser;

12.2.2 contained in this clause 12 shall cease to apply in the event of the Purchaser failing to make payment of any of the Deferred Payments within 7 days of a due date for payment."

By clause 12.3, the defender agreed that the restrictions were reasonable and no more than necessary to protect the legitimate interests of the pursuers. There is no issue between the parties as to their reasonableness.

[4] On 2 August 2008 the defender gave the pursuers six months notice in writing of his intention to retire as a member of the pursuer. His retirement took effect from 1 February 2009, a date 30 months from the Effective Date. Soon afterwards he joined Harper Macleod, another firm of solicitors.

[5] This action is concerned with the pursuers' complaint that in January 2009, while he was still a member of the pursuers, the defender was in breach of the restrictive covenant in clause 12.1.2. The relevant averments are set out in Article 7 of Condescendence. On the basis of those allegations of breach, the pursuers aver that they are reasonably apprehensive that the defender, having ceased to be a member of the pursuers, will act in breach of clause 12.1.3; and they seek interdict prohibiting the defender until 31 January 2010 from acting in a manner prohibited by the covenant in that clause. The pursuers sought interim interdict but an undertaking was given by the defender which has regulated the position to date. The matter came before the court on a proof before answer restricted to the issue of whether, in the period before he left the partnership on 1 February 2009, the defender acted in breach of clause 12.1.2 in the manner alleged. That question is central to the issues in dispute between the parties, having a potential impact also on the defender's right to be paid the sixth instalment and, if the pursuers ought to have paid that instalment by the due date, on the question whether the defender remains bound by the restrictive covenant in clause 12.1.3 for the year after his retirement from the pursuers. Some of those issues are raised, with other matters, in a separate action by the defender against the pursuers (CA32/09); and it has been agreed that certain aspects of procedure in that other action should await my decision in this restricted proof.

[6] Many of the relevant facts were not in dispute. The issues turned more on the interpretation of those facts and the meaning properly to be given to the restrictive covenant. However, I heard evidence from a number of witnesses, namely: Michael Kane and Robert Iain MacDonald, both partners in the pursuers; the defender; Jonathan Steele, a partner in Harper Macleod; and John McVitie, director and principal shareholder in LEBC Group Limited ("LEBC"). The evidence of Mr Steele and Mr McVitie was not significantly challenged and I accept it. That of the other witnesses was challenged to some extent. I accept that, in the main, they were doing their best to assist the court, but in certain respects I found the evidence of each of them to be wanting. Both Mr Kane and Mr MacDonald seemed to me to wish to downplay the defender's legal abilities and the success of the particular business model that he operated. The defender, for his part, was evasive about why, at the critical moment, he sought help from a partner in another firm rather than from Mr Kane, as he would have been expected to do. However, the unsatisfactory nature of parts of the evidence of these witnesses did not lead me to discount their evidence on other matters. I set out my findings on the particular issues as they arise.

The defender's business before he joined the pursuers

[7] The defender had been a partner in Clairmonts since about April 1995. The firm was based in Glasgow. Towards the end of that period there were two other partners in Clairmonts, namely Jane Steel and Rhona Wark, but they were salaried partners and the defender owned the whole equity in the firm. In his Affidavit, the contents of which he adopted in his evidence in chief, he described his principal area of practice as being in the field of commercial law, though he had also undertaken a lot of private client work.

[8] Over a number of years, and with several clients, the defender developed an arrangement whereby corporate clients paid a fixed quarterly retainer in return for receiving company secretarial services and also "general commercial and legal advice on any matter arising in the course of the company's business". As the defender put it in paras.5 and 6 of his Affidavit,

"the service was modelled on the work carried out by in-house legal departments for larger corporate clients. The concept was developed so that smaller companies which would not individually have been in a position to justify having an in-house solicitor, or others who did not wish to employ one, would, by virtue of out sourcing that work to Clairmonts, be enabled to have ready access to immediate and reliable advice in return for a relatively modest fixed cost.

The general arrangement was that initial and informal advice on the matter was covered. In the event that any particular matter developed into a substantive instruction where a client would normally have to instruct an external solicitor, such as, for example, a formally documented corporate transaction, a property acquisition or disposal or lease, or any form of actual litigation such as an employment tribunal or court action, then a separate file would be opened, a separate letter of engagement would be issued and the client would pay an additional fee according to the work actually done."

LEBC was one of the clients with whom such an arrangement was in place. It carried on business as an independent financial adviser. The defender was company secretary of all of the group companies within LEBC. He attended Board Meetings quarterly, his role in attending such meetings being akin to that of a non-executive director. His main point of contact with LEBC was with Mr McVitie (who also, in a different capacity, happened to act as his financial adviser in relation to his self-administered pension fund).

[9] In para.17 of his Affidavit, the defender went on to explain that the retainer entitled the client to general advice on any area of law. However, it was impossible for him to remain fully conversant and up to date with the law and practice in every field upon which he might be called to give advice. For that reason, he said,

"... it has for many years been my practice to seek assistance from colleagues in dealing with queries. I have spent most of my career in small legal practices. I have regularly required to ask colleagues in other firms to comment and give me guidance albeit I usually presented the advice to the clients. Sometimes the colleague in question will be asked to advise the client in question directly. More frequently, I will discuss the matter with the colleague, and will take account of the colleague's view in formulating the advice to the client. The maintenance of these client relationships depends very heavily on the personal relationship between me and the principal contact of the client, and in the clients having confidence in me personally. It is that which differentiates it from a conventional solicitor client arrangement and this has been my way of working for most of my career."

I accept this evidence. The defender's evidence about the nature of his retainer work was consistent with a Clairmonts' brochure referred to in evidence. The cover of the brochure referred to "Company Secretarial Outsourcing". The advantages of outsourcing were described. The third page of the brochure listed the services offered as part of this outsourcing:

"We can provide a legally qualified Company Secretary in many day-to-day matters either supporting the in-house Legal Department or in its place.

- Maintaining the Company Books and/or

- Attending Board and Management Meetings, taking Minutes and giving Corporate Governance advice

- Health & Safety - Formulating and running a Risk Committee

- Advising on all aspects of Employment Law

- Drafting, revising and giving advice on Contracts

- Data Protection Registration and formulating a Policy

- Trading Standards - liaising with Home Authority and advising on all aspects of consumer legislation

- Trademarks - advising on Intellectual Property and the registration of trademarks etc.

- Property - dealing with all aspects of commercial leasing and general property advice

- Consumer Credit License Registration and Renewal"

Although the services offered to each client might differ, it is clear from the brochure that the retainer fee might entitle the client to legal advice on employment and on contracts, and possibly on other areas of law. I accept also that the defender did not have the legal expertise to provide such advice, even at a general or initial or informal level, on all these matters himself, or even from within Clairmonts. He would often ask others in other firms for some help before reverting to the client. When giving such general or initial or informal advice as was covered by the retainer, with or without input from others, he would tend to give it in his own name, rather than immediately put the client in direct contact with another lawyer. No doubt the person from whom the defender sought advice would be happy to give it in the expectation that, if the matter developed into a more substantial transaction or piece of litigation, that work would be directed to him or his firm. In the period up to July 2006, the defender passed corporate legal work to a joint venture called CHM Partnership, which was essentially a fee sharing arrangement between Clairmonts and Holmes McKillop, another firm of solicitors. Sometimes, however, the matter began and ended with the general or initial advice, and there would be no requirement for follow-up.

Discussions on joining the pursuers

[10] The defender's evidence was that the pursuers agreed to allow him to continue doing this retainer work after he sold the business to them and became a partner in the firm. This was not seriously challenged by the pursuers, though there was, so it seems to me, a failure on the part of the pursuers fully to understand the scope of the work which might be covered by the retainer. Mr Kane, who was head of the corporate team within the pursuers, made it clear in his Affidavit that he was aware of the general nature of Clairmonts company secretarial/ general consultancy service to their clients, including LEBC, though according to him the retainer fees entitled the client to general business (non-legal) advice, company secretarial advice, some employment advice and "identifying the need for and acquiring specific advice". He understood "that part of the service provided was that [the defender] would identify where specific legal advice was required and that he would then source the appropriate technical advice." He attended only one of the meetings with the defender before the defender sold the business to the pursuers and joined them as a partner. Nonetheless, he gave this as his opinion of the basis on which the transaction proceeded:

"[The pursuers] agreed to proceed with the acquisition of Clairmonts on the understanding that that specific legal advice to the clients on retainer agreements would be delivered by appropriate [B&S] personnel and separately charged for. It was understood that [the defender] would continue to provide general business consultancy advice to those clients and that his retainer arrangement would remain in place in connection with his own work. [The defender] would also be able to provide legal advice within his skills set (largely franchising advice). I would have expected that to be separately charged for."

In another passage in his Affidavit, he explained that the basis upon which the pursuers proceeded with the Clairmonts acquisition was that the relationship between Clairmonts and Holmes McKillop would "quickly unwind", that Holmes McKillop would compete any transactions they were working on at the time and that any new transactions would come to the pursuers. As will appear, I have some difficulty with one aspect of Mr Kane's evidence about the defender's retainer agreements prior to him joining the pursuers; and this impacts upon the reliability of his evidence about what was to happen when the pursuers purchased the Clairmonts business.

[11] However, the main evidence on this aspect from the pursuers' side came from Mr MacDonald. He was managing partner of the pursuers at the relevant time, and indeed until 31 October 2008 when he stood down to become a consultant in the firm. He explained that there had been discussions with the defender some years before but they had not progressed. However, in January 2006, it was decided to open an office in Glasgow. To this end, they decided to speak once again to the defender as it appeared that Clairmonts had a client base which would fit in with that of the pursuers and would assist them in entering the Glasgow market. Mr MacDonald explained that he was not involved in the initial meeting between the pursuers and the defender, but he did become involved after that. He said that he discussed clients with the defender, who provided a handwritten list of his major clients, the first part of which set out the "consultancies" he had and the fees generated from those consultancies. According to Mr MacDonald, the defender explained that the consultancies related to clients to whom he provided what he termed "Business Advice". This entailed attending board meetings, preparing board minutes, completing forms for Companies House and giving them general business advice. He continued in his Affidavit as follows:

"This did not include legal advice per se but he would answer ad hoc legal questions at board meetings. He advised that legal work was charged separately and provided by himself on corporate and contract matters, Jane Steel on property matters and Rhona Wark on litigation and employment matters. Manjit Hunjari, the then associate also dealt with property matters. [The defender] further explained the joint venture arrangement Clairmonts had with Holmes McKillop, CHM Partnership, whereby they provided the corporate back up on deals. [The defender] considered that Business Consultancy was an area of work he could expand with back up from Bell & Scott with the added benefit we would benefit from the fee income Holmes McKillop received as their part of the CHM Partnership as Mike Kane would do that work instead of ... Holmes McKillop."

It is apparent from these passages that both Mr Kane and Mr MacDonald were at pains to emphasise that the advice and other services covered by the retainer, in cases where a retainer was in being, did not include any legal advice even of a general or preliminary nature, save where the defender might be asked a question ad hoc at a Board Meeting; and that when legal advice was given the client would be charged a fee over and above the retainer. In his oral evidence Mr Kane shifted somewhat from this position, accepting, as I understood his evidence, that the defender would sometimes give general legal advice before passing the work on to a partner specialising in the relevant area of law. I am satisfied that even this takes too narrow a view of the services covered by the retainer agreement. I prefer the evidence given by the defender, which is consistent with the Clairmonts brochure to which I have referred. Mr MacDonald accepted that he was aware of the brochure, but appeared to be not much interested in it because it was a Clairmonts brochure. This, with respect, misses the point. It was accepted that the defender could continue to offer his retainer clients the services covered by the retainer, and the brochure, albeit that it was a Clairmonts brochure, showed clearly that the services covered by the retainer might well include the giving of some legal advice, albeit of a general or preliminary nature. The brochure no doubt contemplated that there would be input into that advice from other partners within Clairmonts if they were able to deal with the particular matters raised - it was after all a service offered by Clairmonts as a firm rather than by the defender personally - and no doubt the pursuers would have contemplated that after their acquisition of the business the input, when needed and if within their expertise, would have been given by them. However, it remained the case that the defender personally dealt with the client under the retainer arrangements at the initial stage, that he himself would give general or initial advice to the client, and that this general or initial advice would be covered by the retainer and not charged separately. I do not accept Mr MacDonald's evidence that the defender told him at a meeting prior to the conclusion of the BTA that the services covered by the retainer did not include legal advice per se, and that legal work was charged separately. In this respect I did not find Mr MacDonald's evidence reliable, though I do not think, and it was not suggested, that he was deliberately trying to mislead the court. I can think of no reason why the defender should have told Mr MacDonald any such thing, and I accept his evidence that he did not. Legal work would only be charged separately when a matter progressed beyond general or preliminary advice and developed into a more substantial transaction. The line between the general advice, which was not charged separately, and the more substantial matters, where legal advice and services were to be paid for, was, I suspect, not always easy to draw and might vary from case to case and from client to client - but that it existed I have no doubt. Mr MacDonald, and Mr Kane initially, took the view that all legal advice was to be charged. This view failed to take into account the fact that by paying a retainer a client was buying the right to some legal advice free of further charge. To my mind this failure to understand the nature of the retainer arrangements is at the root of the present dispute. It resulted, I suspect, from insufficient attention being given, in the course of the pre-contract discussions with the defender, to precisely what was covered by the retainer arrangements which were offered by Clairmonts.

The events surrounding the alleged breach of clause 12.1.2

[12] Some time after the defender joined the pursuers, LEBC sought advice relating to an investment in the Group by BP Marsh ("Marsh") in the form of a share sale agreement. The details do not matter. LEBC approached the defender, who, after some involvement in the initial stages of the transaction, passed it on to Michael Kane, the head of the corporate team within the pursuers. During the course of acting for LEBC over a period of some five months, Mr Kane formed a direct working relationship with Jack McVitie, the majority shareholder within LEBC and the pursuers obtained a fee of some £48,000.

[13] It is apparent from the evidence that the defender's time as a partner of the pursuers was not a happy one. It is no part of my function to seek to apportion blame for this unfortunate state of affairs. It was due in some part to a clash of personalities and in part to the difficulties of the defender, who had been used to running his own show, fitting into a rather more orthodox and structured organisation. Be that as it may, the defender decided to leave at the earliest opportunity consistent with him receiving all parts of the Deferred Payment under the BTA. That meant that he had to stay until the beginning of February 2009, unless some other agreement was reached in the meantime. Accordingly, on 2 August 2008, the defender gave the pursuers six months notice in writing of his intention to retire as a member of the pursuer. His retirement was to take effect from1 February 2009, a date 30 months from the Effective Date. Before that date, there were discussions between himself and Mr Kane and Mr McVitie about handover of clients and other matters. The pursuers made it clear that they valued, and wanted to retain, the various clients brought to them by the defender when he joined, including LEBC. The defender, for his part, gave somewhat inconsistent statements of intent, but it seems fairly clear that in the latter stages of the discussions he indicated that he wanted to continue in business offering the company secretarial and franchising services which had always been part of his practice. According to Mr MacDonald, though the defender disputed this, the defender indicated that he wished to continue acting for six businesses, including LEBC. There was discussion about the defender leaving early, i.e. without serving his six months notice, and there was some discussion about the possibility of him paying the pursuers for the right to deal with certain clients after he left. I do not need to make specific findings on the disputed points of detail, since their importance (if any) is no more than marginal. The defender did indeed leave the pursuers with effect from 1 February 2009 and, soon afterwards, joined Harper Macleod.

[14] The present dispute arises out of the events in the last two weeks before his departure from B&S. By e-mail of 19 January 2009 timed at 4 p.m., Mr McVitie sent the defender initial documentation about a facility which was proposed to be provided to LEBC by Marsh and asked him to

"have a look at this and give me your comments."

He said that he was

"particularly interested [in] your views around potential for personal liability for myself and Nigel" - Nigel Stallworthy (another director of LEBC) - "as we are parties to the loan agreement along with LEBC Group."

That e-mail came to the defender at his B&S e-mail and also on his Blackberry. He was out of the office at the time. He immediately forwarded it to his secretary within B&S asking her to print two copies of each of the attached documents. Later that evening, at 7.55 p.m., he forwarded the e-mail to his personal Sky e-mail address.

[15] The defender forwarded Mr McVitie's e-mail to Paula Skinner (of Harper Macleod) 17 minutes later, at 8.12 p.m. on the same day, from his Sky e-mail address, asking her for advice on the issues raised. His e-mail to Ms Skinner was in the following terms:

"Hi Paula,

LEBC are one of my most important clients and we have done a few corporate deals for them over the years.

I am the Company Secretary of all Group Companies.

As this facility will not be signed off until February can you or a colleague please assist me in preparing a Report on the attached documentation and in particular can you please comment on the personal liability of the Chairman and CEO as mentioned below.

Many thanks

Regards David"

The words "as mentioned below" were intended as a reference to the e-mail from Mr McVitie, forwarded to Ms Skinner by the defender. Ms Skinner replied the next evening (5.59 p.m.) in the following terms:

"Hi David

Jonathan Steele is your man for this. He is a partner in our corporate department dealing with our transactional banking work. I've copied him into this e-mail so you have his details.

Obviously we will need to get money laundering information from LEBC Group Limited however we can get that in due course.

Thanks

Paula"

At some point after this there was a telephone conversation between the defender and Mr Steele. On the evening of 22 January 2009, Mr Steele e-mailed the defender with copies of the documents marked up with his suggested revisals and, in the text of the e-mail, added a number of specific comments about the documents and the suggested revisals. The defender thanked him later that evening and said that he would review the "reports", take instructions and revert to him.

[16] After receiving Mr Steele's comments, the defender simply e-mailed them to Mr McVitie in slightly modified terms (the changes being stylistic only) as coming from him. The e-mail to Mr McVitie was sent by the defender's secretary at B&S, and bore to set out the advice as coming from the defender at B&S. There was nothing to show Mr McVitie that the defender had consulted anyone at Harper Macleod. Nor was Mr Steele or anyone else at Harper Macleod put in contact with Mr McVitie. Ultimately the transaction did not progress in the form upon which the defender's advice had been sought. There was no requirement for any further involvement of lawyers.

The evidence about these events
[17] The defender explained that the e-mail from Mr McVitie of 19 January 2009 did not come as a particular surprise to him since he was aware in general terms from discussion at LEBC Board Meetings which he had attended that the provision of loan funding by Marsh to LEBC was under consideration. It was common for Mr McVitie to send him questions on legal and commercial matters as part of the retainer arrangement. LEBC had never given their business exclusively to Clairmonts or to the pursuers, and the defender had, he said, often liaised with other firms on their behalf. The scope of the initial request from Mr McVitie in this case was simply to review the documents, to provide an overview and to comment on a matter affecting his and Mr Stallworthy's personal liability. It was, he said, the sort of instruction that cropped up regularly with clients with whom he had a fixed retainer arrangement.

[18] I accept that evidence. I find more difficulty, however, in accepting the defender's evidence as to why he chose to refer Mr McVitie's request to a partner in Harper Macleod, rather than seek assistance from someone within B&S such as Mr Kane, as he might have been expected to do. I did not consider that he was entirely candid in his evidence about this issue. In the defences in the action, the explanation was given that his failure to approach Mr Kane was due to Mr Kane being absent at the time due to illness. This was incorrect and, in his Affidavit (at para.19), the defender accepted that that was not in fact the case. In his oral evidence the defender said that he might have attempted to contact Mr Kane before looking for advice elsewhere, but he could not be certain about this. I am not satisfied that the defender made any attempt to contact Mr Kane in respect of this matter. Rather he took the view that he would seek assistance from someone at Harper Macleod. His motives were probably mixed. He was aware of the restrictive covenant. Equally, he was disenchanted with the pursuers - he may have had concerns that they were not going to pay him the final instalment of the price due under the BTA - and he was no doubt unenthusiastic about putting further work their way, particularly work from clients that he regarded as his clients. Although this was only general advice, which he would expect to relay to LEBC himself, he may have thought that if he asked Mr Kane for assistance in drafting a response it was likely that the pursuers would then keep hold of the work if it developed into something of substance. Better, he may have thought, to get a partner at his new firm involved. It was suggested that his transferring of the request from Mr McVitie to his personal e-mail before then sending it on to Ms Skinner was indicative of a deliberate attempt, a pre-formed plan, to engineer a situation where, unknown to the pursuers, LEBC would be taken over by Harper Macleod. I am not prepared to make any such finding. That theory does not, to my mind, fit easily with the fact that he used his secretary at B&S to copy the incoming documents from LEBC and, further, to send out the advice to LEBC from his B&S e-mail. I do not think that his motivation was by that stage fully formed. It is more probable, in my view, that at that stage he sought to get Harper Macleod involved simply to show them the type of work he might bring in when he joined the firm, leaving all options open should the matter have become a more substantial transaction.

[19] The crucial part of this sequence of events is that, when he received the advice from Mr Steele at Harper Macleod, the defender relayed it to Mr McVitie in his own name and as coming from him as a partner in B&S. From LEBC's point of view they were getting advice from the defender at B&S. I am satisfied on the evidence that even if the defender had turned to seek advice not from Mr Steele but from Mr Kane, he would still have sent the advice out to Mr McVitie as coming from him. He would not simply have passed the matter over to Mr Kane for him to deal directly with Mr McVitie. Nor would the pursuers have expected him to do so. That was not the way it worked under the retainer arrangements which the defender, whilst at Clairmonts, had put in place. He liked to keep the relations with the client on a personal basis, at least until any particular matter became a more substantial transaction, at which point the client would expect to be referred to a specialist lawyer and be charged for the advice. This was so whether he sought assistance from his partners in Clairmonts or from others outside Clairmonts; and I am not persuaded that he was expected to operate in a different way when he joined B&S. Mr Kane gave evidence that, if he had had the request from Mr McVitie passed on to him, he would have e-mailed Mr McVitie and sent him an engagement letter, and would then have prepared a report on the draft documents and have submitted a fee for the work (though he accepted in cross-examination that he might have decided to waive his fee for the initial advice). I do not accept that evidence, which seems to me to stem from the misunderstanding, to which I have already referred, of the nature of the retainer arrangement and of what was required and expected under it. Mr McVitie expected the defender, not Mr Kane, to come back to him with the advice on the matter which he had raised with him.

Submissions

[20] Mr Duncan, who appeared for the pursuers, candidly accepted that there was no evidence that the defender had breached either limb of clause 12.1.2 by enticement or soliciting. This concession was inevitable in light of the unchallenged evidence that the defender had neither introduced Mr McVitie to Harper Macleod nor even made him aware of their involvement in giving advice on the issues. However, he maintained that the defender had breached the prohibition on interfering with clients. That interference, he said, "comprised preventing Mr Kane having contact with a client whereby he might have had the opportunity to cement client relations at a critical time." In other words, the pursuers' contention is that the defender ought to have, and in the ordinary course of events would have, passed on Mr McVitie's request for advice to Mr Kane, and that Mr Kane would thereafter have dealt directly with Mr McVitie, thereby enabling him to develop a closer relationship with Mr McVitie and LECB.

[21] Mr Duncan argued that clause 12.1.2 had to be construed against the background of the surrounding circumstances and, objectively, the aim of the contract. As the opening words of clause 12.1 made clear, the aim of the restriction was to assure to the pursuers the full benefit of the business and goodwill. It was to stop the defender doing anything, whilst he was a partner in the pursuers, which would hinder the pursuers in their attempts to obtain and keep the full benefit of that business and goodwill. In this context, the restriction on interfering with clients must include a restriction on doing anything which interfered with the pursuers' relations with their clients (or potential clients who had previously been clients of Clairmonts) or hindered the pursuers in their attempt to foster good relations with clients or gain their business. This was consistent with the ordinary meaning of the word "interfere"; to interfere was to obstruct, prevent, hinder or meddle in. Conduct which kept the pursuers, and in particular Mr Kane, out of direct contact with the client was a breach of that clause. It was not necessary to find that the defender intended to hinder the development of a relation ship between the pursuers and LEBC, though in some cases it might be relevant. Here, however, the action itself, in not referring the matter to Mr Kane, was itself interference within the meaning of the clause. By this action, the defender deprived Mr Kane of the opportunity of providing advice to Mr McVitie. Mr Kane would have expected to be given this opportunity. Had the matter been referred to Mr Kane, he would have approached Mr McVitie for instructions and drafted a report. He had already had a successful relationship with Mr McVitie. Given the impending departure of the defender, it would have been even more important that he make direct contact with the client. The question of whether or not he would have charged for his advice, or waived his fee, was a wholly separate matter. He might well have waived his fee, but the point was that he would have had the opportunity of developing the relationship.

[22] Mr Docherty, who appeared for the defender, submitted that the expression "interfere with" should be interpreted in the context in which it appeared. It took its colour from the other words in the clause, in accordance with the maxim noscitur a sociis. The clause was not constructed in such a way as to exclude, by any of the well-known methods, the application of that maxim or the related ejusdem generis rule. The restriction imposed by the clause was that the defender was not entitled, directly or indirectly, to "solicit, interfere with or endeavour to entice away from the [pursuers] and/or thereafter deal with" any clients. "Solicit" and "entice" were well-known words with well-known meanings. The phrase "interfere with" should be given a similar meaning. He referred me to the definition in the Oxford English Dictionary, where the phrase, used of persons, is given the meaning "to meddle with; to interpose and take part in something, esp. without having the right to do so; to intermeddle". Whilst recognising that decisions on words in different contexts were of limited value, he referred me to the decision of the House of Lords in R. B. Burden Ltd. v. Swansea Corporation [1957] 3 All ER 243, 253 in which, in the context of a building contract and a clause entitling the contractors to determine their employment if the employers "interfered with or obstructed " the issue by the architects of interim certificates, Lord Tucker expressed the view that interference "connotes intermeddling with something which is not one's business, rather than acting negligently in the performance of some duty properly undertaken." Negligence was not enough; there had to be some deliberate act designed to intermeddle in the pursuers' relationship or potential relationship with clients.

[23] Mr Docherty submitted that it was clear on the evidence that the retainer arrangement with clients entitled the client to be given some general legal advice before any question of further payment of fees came into play. That advice usually went out in the name of the defender, even when he had sought assistance from others with legal expertise or experience in the area concerned. As had happened in the present case, the advice sought from others was unashamedly "topped and tailed" and passed on as his own. Further, it was established on the evidence that the defender would often seek informal advice from colleagues, i.e. solicitors either within his own firm or in other firms. That was something which solicitors did not uncommonly. The advice sought in the present case by LEBC was the sort of advice which they would expect to be given as part of the services paid for in the retainer. There was as yet no transaction for which formal advice was necessary. LEBC were exploring a possible credit facility and Marsh had produced some draft documentation to which Mr McVitie and another director were parties. As at that time, there was no expectation that the transaction would proceed, and ultimately it did not proceed in that form. It was premature to think in terms of a letter of engagement or a transaction at that stage. What the defender did was to give informal advice. In order to do so he sought assistance from Ms Skinner and, subsequently, Mr Steele but there was no question of them being paid for that assistance. The pursuers' complaint that they were deprived of contact with Mr McVitie, and thereby deprived of an opportunity of developing relations with LEBC, was unfounded. The defender was the contact with LEBC. If the defender had asked Mr Kane to assist, rather than Ms Skinner and Mr Steele, the likelihood is that he would have sent out his general preliminary advice in his own name and would not have put Mr Kane in contact with Mr McVitie at that stage. It was not demonstrated that, even if the defender had chosen to seek informal advice from Mr Kane, there would have been direct contact between Mr Kane and the client. The defender would have continued to contact the client direct, at least until the matter moved to the next stage. There was therefore no interference of the kind prohibited by the clause. Even if it could be shown that the defender's actions prevented contact being established on that occasion between Mr Kane and the client, that would not amount to interference on the proper construction of the clause, since there was not any deliberate attempt by the defender to injure or damage the relationship between LEBC and the pursuers. The defender was simply endeavouring to fulfil his obligations under the retainer in the difficult situation which had arisen. Mr Docherty said that he did not shrink from it being the general expectation that the defender would seek help from someone within the pursuers; but it did not follow from that, that seeking help from another firm would amount to a breach of the covenant. Even if the defender had wanted to point work in the way of Harper Macleod, no interference of that type actually occurred in the present case.

Discussion

[24] In considering these submissions, it seems to me that three particular questions fall to be considered: (1) what is the meaning to be given to the words "interfere with" in clause 12.1.2 of the BTA? (2) have the pursuers established on the evidence that the defender ought to have referred the matter at that stage to Mr Kane? and (3) would a referral to Mr Kane at that stage have been likely to lead to direct contact between Mr Kane and Mr McVitie? I shall deal with each of these in turn.

[25] The restrictive covenants in clause 12 of the BTA were designed, as the introductory wording makes clear, to ensure that the pursuers obtained the full benefit of the business that they were purchasing from the defender, that is to say the business of Clairmonts and the goodwill associated with it. They had, as Mr Duncan emphasised on more than one occasion, paid a large sum for it; and they were entitled to the protection set out in that clause. That protection fell essentially into two parts. The first part, contained in clause 12.1.2, applied during the period when the defender was a member of B&S. During that period he undertook not to "solicit, interfere with or endeavour to entice away" any clients from B&S, whether directly or indirectly, whether on his own account or through or with any other person, and whether or not those clients had previously been clients of Clairmonts. The second part, contained in clause 12.1.3, extends the same protection to the period of one year after the defender ceased to be a member of B&S. Mr Duncan quite properly accepted that there was no evidence here of soliciting or of any endeavour to entice clients away from the pursuers - since the matter referred to the defender did not develop into a more substantial transaction, we do not know what would have happened if it had, and it is idle to speculate. Mr Duncan was left, therefore, with a complaint that the defender, by his conduct, had "interfered with" clients of B&S in breach of clause 12.1.2.

[26] What constitutes interference of the kind prohibited by the clause? In one sense, of course, almost anything which has an adverse effect on the relations between one person and another might be said to be interference in their relationship. So, for example, if the defender delayed in advising a client, and thereby made the client less likely to continue his relationship with the pursuers, that could be said to be "interference" with that client. So also, it might be called "interference" if the defender negligently dealt with the affairs of the client, thereby jeopardising the relationship between the client and the pursuers. But that is not what the clause is dealing with. Sandwiched, as it is, by "solicit" and "endeavour to entice away", the phrase "interfere with", as used in the clause, seems to me to contemplate some deliberate action on the part of the defender to disrupt an existing relationship between the pursuers and one of their clients, to obstruct or impede the development of a relationship between the pursuers and a former client of Clairmonts, and, in both cases, to obstruct or impede the further development of that relationship.

[27] The evidence falls far short of that which would be required to show that the defender interfered with any client in this way. I am satisfied that when the defender received the request from Mr McVitie, he treated it as a request for general or initial advice such as would be covered by the retainer. In this particular case, it was a matter upon which he needed assistance from others before going back to the client. He sought that assistance not from Mr Kane of the pursuers, as he might have been expected to do, but from a partner in Harper Macleod. His motives for this are not entirely clear. I have discussed this in para.[18] above. But his motives, to my mind, are irrelevant. He dealt with the client in the way in which he would have been expected to deal with a retainer client. I can accept that the pursuers might have expected the defender to have sought assistance on legal matters from Mr Kane or another partner within the firm, even where the defender was only giving general advice to the client under the retainer; and I can accept also that his seeking advice from Mr Steele might reasonably have caused them to be suspicious that he was pushing the client towards Harper Macleod. But I am satisfied on the evidence that the advice sought was general or initial advice covered by the retainer and was advice in respect of which it would not be right to fee the client. Although I accept Mr Duncan's point that the question of feeing was a separate matter from that of whether the defender should have involved Mr Kane or another partner in B&C at that stage, I am also satisfied that at that stage the defender was entitled to deal with the client himself without referring the matter to Mr Kane or allowing Mr Kane to take over and deal with the client direct. It is clear to me that, whether he had sought assistance from Mr Kane of the pursuers or from Mr Steele of Harper Macleod, the defender would have, and would have been expected to have, relayed the advice to Mr McVitie as coming from him. This is what he did, and there is no good reason to think that he would have done otherwise if he had gone to Mr Kane. In those circumstances, it seems to me that the answers to both questions (2) and (3) posed in para. [24] is: No.

[28] For those reasons it seems to me that the pursuers have failed to make out their case that the defender was in breach of clause 12.1.2 in the manner for which they contend.

Disposal

[29] I shall put the matter out By Order so that the appropriate interlocutor can be considered along with the question of further procedure in the other action between the parties.