Employing Senior Management - The Case Of Deacons v White & Case & Others

Profession:Angela Wang & Co.,
 
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Introduction

Once again, the movement of a team of senior lawyers from one prestigious law firm to another in Hong Kong has hit the headlines as well as adding to the substantial body of decided cases on employment law.

In this widely publicized case, culminating in a 28 day trial, the judgment focused not just on the enforceability of restrictive covenants in partnership agreements, employment contracts and merger agreements but also on the implied duties of partners and employees under common law.

The lengthy judgment by Deputy Judge Gill in Deacons v. White & Case and others was published on 24 October 2003 and makes fascinating reading with a sufficient undercurrent of underhand dealings and intrigue to form the plot for a John Grisham bestseller.

The case

Deacons brought an action against White & Case alleging, inter alia, that it had breached a non-solicitation clause in a merger agreement dated 1999 when several members in Deacons' insolvency team (including 3 partners and 2 associates) left Deacons and joined White & Case in 2002. Under the terms of the merger agreement, such a move was forbidden for a period of 1 year from the date of termination of merger discussions.

Deacons also claimed that two of its former partners (one being an equity partner and the other a salaried partner) had breached their obligations and duties to Deacons by passing on confidential information to White & Case and persuading some of its major clients, such as Standard Chartered Bank and KPMG, to transfer to White & Case.

As a result, Deacons applied for injunctive relief to restrain White & Case from representing Deacons' clients as well as damages and an account for profits among other remedies.

The Court's Decision

The court held that there was no solicitation by White & Case in respect of employing the members of Deacons' insolvency team and thus no breach of the non-solicitation restrictions in the merger agreement. The partners were in fact "recruited", instead of "solicited" or "approached" by White & Case. The court stated that it was important to appreciate the difference between being "recruited" and "solicited", as partners or employees cannot be prevented from advancing their careers as they choose without any undue restraint.

Apart from any breach of the partners' contractual duties stated in their partnership agreement or employment contract with Deacons, there were certain fiduciary duties owed to Deacons in their capacity as...

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