Estate agency — Solicitors — Differences of view within solicitors’ partnership as to desirability of selling property after alteration of Law Society’s rules in 1985 to allow solicitors practising as such to carry on the business of selling property — The dispute was within a partnership operating in three distinct offices — The partners in one of the offices decided that they wished to carry on the business of selling property and made preparations for this purpose including an extension to their office building — They kept their intentions secret, not wishing them to come to the knowledge of other solicitors or of estate agents in the district, but, unfortunately, did not inform their own partners of the project — The latter became aware of it only when they made inquiries about the reason for extending the office building — They did not approve and, after some correspondence, commenced proceedings by writ seeking an injunction to restrain their colleagues from using the firm’s name and assets in connection with the property selling venture — These dissenting partners applied for an interlocutory injunction until judgment in the action and in the meantime in the terms sought by the writ — Leonard J concluded that there was clearly an issue to be tried in the action as to whether the defendants were doing anything wrong under the partnership deed, having regard to the Law Society ruling — After weighing the respective disadvantages to the parties, he decided that the balance of convenience lay in favour of refusing the injunction — The plaintiff partners might suffer some damage as a result, pending the trial, but he considered that this was outweighed by the disadvantage which the defendants might suffer, if the injunction were granted, by being prevented from carrying on a valuable business which, on one possible outcome of the trial, they were perfectly entitled to carry on — Held that the judge had properly exercised his discretionary jurisdiction — The Court of Appeal could only interfere with his order if they thought that he had exercised his discretion on wrong principles and that the conclusion he reached was clearly wrong — That was not the case here — Appeal dismissed
No cases are
referred to in this report.
This was an
appeal by Richard William Nixon and others, partners in a firm of solicitors,
with offices at Bletchley, Leighton Buzzard and Stony Stratford, from a
decision by Leonard J in chambers, refusing the appellants an interlocutory
injunction in an action by them against David Alister Wood and others, who had
been partners in the same firm of solicitors. The interlocutory injunction was
sought pending the trial in an action by the appellants as plaintiffs alleging
breaches by the defendants, the present respondents, of the terms of the
partnership deed.
G W Jaques
(instructed by E T Ray & Co, of Bletchley) appeared on behalf of the
appellants; Mrs Reziya Harrison (instructed by E T Ray & Co, of Stony
Stratford) represented the respondents.
Giving the
first judgment at the invitation of Russell LJ, SIR DENYS BUCKLEY said: This is
an appeal against an order made in chambers by Leonard J on July 2 last
whereby, upon the defendants’ giving certain undertakings, he refused to make
an injunction sought by the plaintiffs.
The dispute in
the action relates to a solicitors’ partnership. The partnership is a little
unusual in its constitution. There are a number of partners. There are three
distinct offices from which the partnership operates: one at Bletchley, one at
Leighton Buzzard and one at Stony Stratford. The broad effect of the
partnership deed is that the partners who are actively engaged in the
conducting of the partnership business at those three separate offices have
autonomy in the conduct of the business in each of those offices. They are in
effect three distinct practices, but they are all conducted under one
partnership deed which binds all the partners. The deed provides that the
profits of each separate office shall be divided between the partners concerned
with that particular office as to 95% of those profits, and only 5% of the
profits of that particular office is divisible between all the partners
generally. As I say, the partners engaged in each office have a wide degree of
autonomy in the conduct of the business in that office. The partnership deed provides
that the business of the partnership shall be the business of solicitors. In
clause 1 of the deed the partnership practice is defined as meaning ‘the
practice of Solicitors carried on under the style and firm name of ‘E T Ray
& Co”.
Early in 1985 the
Law Society altered the rules governing the conduct of solicitors’ businesses
so as to make it permissible for solicitors to sell property, which had not
been a type of business which solicitors could previously engage in in their
capacity as solicitors. A handout was published which was circulated to all
members of the profession and updated on June 17 1987. In that document para
1.1 provides:
Property
selling is work which a solicitor may properly carry on in the course of his
professional practice.
1.2 A solicitor who carries on such work is
acting as a solicitor.
I need not
read the rest of that paragraph.
Description of
Property Selling Work
3.1 A solicitor’s practice may only be designated
as that of a solicitor and by such other designation as may be approved by the
Council.
Thus under the
rules of the profession as so amended by the Law Society it became permissible
for solicitors practising as such to carry on, in the course of their practice
as solicitors, the business of selling property.
The members of
the firm who were concerned with conducting the Stony Stratford office of the
partnership decided that they would carry on the business of selling property.
For that purpose they extended their office in Stony Stratford by adding a
substantial extension to the building. They were anxious, however, that what
they had in mind should not become public property until they were ready to
launch into their property-dealing activities. In particular I think they were
anxious that the matter should not come to the notice of other solicitors in
the neighbourhood, and possibly they were anxious that it should not come to
the notice of estate agents in the neighbourhood. At any rate they adopted a
policy of secrecy and, perhaps unfortunately, they did not tell their partners
who were concerned with the Bletchley and Leighton Buzzard offices.
It was not
until June 15 1987 that one of those other members of the partnership became
aware of the physical addition to the Stony Stratford office. The other
partners then made inquiries as to what was going on at Stony Stratford and
were then told by the partners concerned with Stony Stratford that they were
proposing to embark upon selling property. The partners other than the Stony
Stratford partners did not approve of this course of action and raised
objection. They thought that it would damage the goodwill of the firm and, in
consequence, after some correspondence, they launched proceedings on June 29
last by way of writ seeking an injunction to restrain the defendants from using
the firm name, E T Ray & Co, or the property or assets of the firm, in
connection with the proposed property-selling venture. In that action they
applied for an interlocutory injunction until judgment or further order in the
meantime in the terms sought in the writ. That was the application which came
before Leonard J and upon which he made the order which is now appealed
against.
The
appellants, who are the partners concerned with the offices other than Stony
Stratford, contend that the judge was wrong in
(the Stony Stratford office has in fact begun to carry on its property-selling
business) was a clear breach of the terms of the partnership deed. The way in
which that is put is that when the partnership deed was entered into and when,
from time to time, supplemental deeds were executed as new partners were
brought into the firm, the business which was in contemplation as being the
business of the partnership was the business of a solicitors’ practice such as
could be conducted under the rules of the profession in force before 1985. They
say that to embark upon property selling was a clear departure from that type
of business, embarking on a new sort of business and that that departure was
one which the defendants were not entitled to make without the approval and
consent of the other partners in the partnership. We have been referred to
certain authorities on that aspect of the matter. I do not think for present
purposes that it is necessary for me to take up time in referring to them. That
was the nature of the argument.
The learned
judge came to the conclusion that there is clearly a matter to be decided in
the action. He therefore proceeded upon the footing that he could not dispose
of the application before him upon the basis that the defendants were so
clearly in the wrong that the matter could be dealt with summarily. Indeed
nobody asked him to make an immediate order on the writ. He was being asked
only to make an interlocutory order.
He came to the
conclusion — rightly, I think — that there was clearly an issue to be tried in
the action as to whether in fact the defendants were doing anything which was
in conflict with the terms of the partnership deed in embarking upon property
dealing, the argument being that property dealing was a legitimate part of a
solicitors’ business and that all they were seeking to do was to carry on a
type of business which, as a result of the changes in the rules of the
profession, had become something which was a legitimate part of any solicitors’
business and therefore a type of business which they, the defendants, were
entitled to carry on at the Stony Stratford office as part of their business as
solicitors practising under the partnership deed.
Mr Jaques, in
the clear submissions that he has made to us, has put in the forefront of his
argument the submission that the breach, as he contends, of the partnership
deed was so clear that the learned judge was wrong in thinking that he would
have to consider matters such as the balance of convenience. He contends that
the judge ought to have made the order asked for without further investigating
the matter.
For my part I
do not think that that submission is well founded. It seems to me that there
truly is a point of law, and not an easy point of law, to be determined by the
trial of the action as to whether in fact the defendants are in default at all.
The learned
judge, having disposed of that point, went on to consider whether the
circumstances were such that an interlocutory injunction should be granted. He
reviewed the nature of the dispute and the evidence which was before him, and
he came to the conclusion that there was the possibility that, if the
injunction were granted, the defendants would be put at risk of being prevented
from carrying on valuable business which, on one view of the possible outcome
of the action, they were perfectly entitled to carry on, and that the damage
involved in their being excluded from the possibility of carrying on that
business pending the trial might be substantial damage which would be difficult
to assess. He also came to the conclusion that, if the injunction were refused,
the plaintiffs might consequently suffer damage during the period pending the
trial and that that damage might be difficult to assess. Quite properly, I
think, in applying the principles elaborated in the House of Lords by Lord
Diplock in the case of American Cyanamid Co v Ethicon Ltd [1975]
AC 396, he came to the conclusion that he ought to weigh those possible
disadvantages under which the parties might be as a result of his either
granting or refusing to grant an injunction and decide accordingly as to the
way in which he thought that the balance of convenience lay. He came to the
conclusion that the balance of convenience lay in favour of refusing the
injunction.
In so doing,
the learned judge was exercising an essentially discretionary jurisdiction. We
could interfere with his decision only if we thought that he had exercised his
discretion on wrong principles and that the conclusion which he reached was
clearly the wrong one. For my part I feel quite unable to think that that was
the case, and accordingly in my judgment this appeal should be dismissed.
RUSSELL LJ
agreed and did not add anything.
The appeal
was dismissed with costs.
