#6722 - Mellstrom V. Garner - Commercial Remedies BCL

Mellstrom v. Garner

Facts

The plaintiff and the defendants are all chartered accountants. The plaintiff was in partnership with two of the defendants up to April 7, 1967. He then entered into an agreement dissolving the partnership in which he had been the moving spirit; and the agreement provided that he should continue (on terms which it is unnecessary for me to recite) as what was defined in the agreement as a “salaried partner.” One clause of the agreement which apparently is causing the plaintiff concern is clause 5(b). It is in these terms:

“It is further provided that the retiring partner shall not accept as clients clients of the old partnership” “and shall not at any time hereafter interfere with or intervene or endeavour to divert any of the business intended to be carried on by the continuing partners and forming the basis of goodwill.”

No one has ever suggested that it prevents the plaintiff from acting for persons who had been clients of the partnership after April 7, 1967, and during the time when he was a salaried partner. It is conceded that he would be entitled to act for such clients if they came to him of their own free will. What has disturbed the plaintiff about the second part of the clause is whether it prohibits him from canvassing the clients to whom I have referred. Accordingly he issued this originating summons endeavouring to obtain a declaration that the clause on its true construction does not prohibit him from canvassing these clients.

Holding

Harman LJ

The Supreme Court Practice (1970), so far as it has got anything to do with it, in a note on what is now R.S.C. Ord. 15, r. 16 (which originally was Ord. 25, r. 5) says this:

“No action … shall be open to objection on the ground that a merely declaratory judgment or order is sought thereby, and the court may make binding declarations of right whether or not any consequential relief is or could be claimed.”

In the Supreme Court Practice (1970), p. 202, one finds this: “Where specific relief, other than a declaration, is not claimed, the jurisdiction to make a binding declaration of right should be exercised with great caution”; and, just above that, “The power to make binding declarations of right is a discretionary power.” Various examples of that are given. It goes on:

“A claim for a declaration only, not followed by a claim for consequential relief, will be carefully watched; but properly employed it is useful. Thus a declaration will not be made against a person who has asserted no right nor formulated any specific claim.”

That is precisely in point here. No one of these people have claimed to do something which the other says he is not entitled to do. All they say is: “If I did it, it would not be any breach.” That is not enough.

I think the judge here has gone beyond the jurisdiction allowed him under Order 15. The plaintiff wanted a declaration that he was entitled to canvass customers of the firm, with certain exceptions. That would have been a gross breach of professional etiquette on his part and I do not think in any event the court would give him a declaration that he was entitled to do something which is notoriously against the rules of the Institute of Chartered Accountants. That is not the sort of thing that the court will do. The result would only be either that he would be committing that breach and would be struck off, or he would not be committing it, in which case there would be no need for the declaration. Consequently, I think that the judge went too far in struggling with this farrago of nonsense, and, being defeated by it, says that it has no effect.

Salmon LJ

No one disputes that to canvass a client is a gross breach of professional etiquette on the part of a chartered accountant; and it is a breach of which the Institute takes the most serious view...