An Australian Supreme Court judge has ruled that the eight partners who quit Herbert Smith Freehills (HSF) in September 2016 to join White & Case will be able to join immediately, but are prohibited from soliciting their former client bases.
Justice Robert McDougall of the New South Wales Supreme Court found that until a permanent order was made, certain clauses within HSF’s partnership deed which forbid the partners from joining White & Case were unreasonable. Namely, provisions which disallowed the former partners from practising within ‘restricted areas’ surrounding HSF’s offices and joining a ‘specified competitor’ within six months of resignation. However, the judge upheld HSF’s contention that the exiting partners should be barred from contacting their previous clients.
As a result, Legal Business understands the partners will be immediately joining White & Case’s Australian offices in Melbourne and Sydney. The former partners will be able to practise at White & Case, but not in a partner capacity and without accessing their former client bases for six months. After the ‘restricted period’ is over, the former HSF team will be able to become White & Case partners.
The case was pursued by 167 current HSF partners, led by commercial litigation partner Michael Pryse. The eight defendants were former Melbourne partners Andrew Clark, Brendan Quinn, Alan Rosengarten, Josh Sgro, Tim Power, Jared Muller and Joanne Draper, alongside Joel Rennie from the Sydney office. Seyfarth Shaw partner Chris Gardner represented the former HSF partners.
Court documents revealed that the decision to classify White & Case as a ‘specified competitor’ was taken by the HSF Australia board on 31 August 2016, one day before the eight partners resigned en masse within half an hour of each other.
HSF had argued that the location clauses were reasonable because outgoing partners ‘may, post-retirement, tend to be able to maintain a higher level of connection with HSF’s clients…in closer proximity to his or her former office’ and ‘restraints against working in competition within a restricted area are difficult for HSF Australia and/or the Global LLP to police.’
A White & Case spokesperson said: ‘We’re glad that these individuals will join White & Case in the near future as we continue to grow our Australia practice.
‘The firm’s Melbourne office has been active since 1 December 2016 and will continue to operate as normal. The Sydney office will open very shortly and it, too, will be fully operational upon its opening.’
A HSF statement read: ‘This is a successful outcome for Herbert Smith Freehills.
‘These proceedings had the objectives of protecting the firm’s interests, including protecting our valued relationships with clients.
‘Today’s decision prevents the departing partners from joining White & Case as partners, and from soliciting our clients for a six-month period.
‘We’re happy with this outcome.’
A direction hearing tomorrow will determine the date of a future trial to make a permanent decision.
White & Case’s move last year to hire the project finance team from HSF was considered one of the largest legal moves ever in the Asian market. A senior White & Case partner indicated the team controls around £30m of business.