It is time to take a stand against the orthodoxy that partnerships (including LLPs) are able to enforce wide-ranging and lengthy post-termination restrictions against departing partners.  It is time to say that the leading authority of Bridge v Deacons is out of date and no longer good law.

Robin Bridge was an equity partner in Deacons, a law firm in Hong Kong.  He left in 1982, receiving a substantial payment for his share of the partnership.  He then set up his own practice acting for former clients of his old firm. Unfortunately for him, the Deacons partnership agreement included onerous restrictions.  One of these prevented him, for five years, from acting as a solicitor in Hong Kong for any person who had been a client of Deacons within the three years prior to his departure. Deacons successfully applied for an injunction to enforce this restraint.

  • Although Mr Bridge had contact with less than 10% of Deacons’ clients, the Privy Council held that he owned, together with the other partners, the whole of the assets, notwithstanding any ‘departmentalisation’ of the practice.
  • Strangely, the Privy Council said a restriction limited to clients for whom Mr Bridges had personally acted ‘might well be difficult to apply’ and felt that such a clause ‘might work very unfairly in the case of a partner who for some reason had acted for only a small number of clients.’  These days, when considering whether such a restraint is enforceable against employees, a limitation restricting it to clients the employee actually knew is generally required by the courts.
  • Although there was no evidence to justify the duration of the restriction, the Privy Council felt this was ‘hardly susceptible of proof by specific evidence’.  In today’s employment cases, these clauses have to be justified by those seeking to enforce them.
  • On the palpably excessive five years, the Privy Council said ‘there appears to be no reported case where a restriction which was otherwise reasonable has been held to be unreasonable solely because of its duration’.  Again, in modern employment disputes, excessively long covenants are regularly struck down.
  • As for the justification for upholding this anti-competitive regime, the Privy Council said ‘there is a clear public interest in facilitating the assumption by established solicitors’ firms of younger men as partners’.  This gender-specific language indicates how much times have changed since this decision.  It is time to have another look at not only the language but also the reasoning.

If two solicitors enter into partnership with each other, each will (probably) have a reasonable bargaining position.  A solicitor promoted to a bigger partnership is likely to have little influence over the terms of the partnership deed.  A firm could change strategic direction against a partner’s will and yet enforce the restrictions against that partner. Of course, it is always open to the solicitor to decline partnership (just as it is open to any employee to decline an offer of employment) but the imbalance of bargaining power needs to be taken into account.

One reason why Bridge v Deacons has not yet been challenged is because of the practical reality – it will annoy the clients!  When lawyers move from firm to firm, a commercial deal tends to be struck and the courts are rarely troubled. Another is that most firms have arbitration clauses in their LLP deeds, so disputes that are contested tend to be played out behind closed doors.

There may be some merit in the view that, as a part-owner of a business, a partner should be subject to different rules on covenant enforceability, the authority of Bridge v Deacons should not lead partnerships to be too complacent.  (Not least because Privy Council decisions, while persuasive, are technically not binding on English courts). Lengthy restrictions may be unreasonable in many modern partnerships and someone (me!) is bound to challenge the long-held assumption that, in this area, partnerships can get away with almost anything.