If you were not already aware of it, a train wreck is currently taking place in the Australian legal sector:- the partners of Herbert Smith Freehills (HSF) are suing the departing partner leaving to set-up White & Case’s new Australian venture and nasty details of this divorce are being spread all over the Australian Financial Review on a weekly (sometimes daily) basis.
From yesterday‘s (Monday 3 April 2017) instalment we learnt that the departing partners collectively spent $364,000 on business development activities in the financial year 2016* on such things as:
- trips to the exclusive Barnbougle golf course in Tasmania,
- an $800 bottle of wine for a general manager of one of Australia’s leading energy companies (who is most likely hiding out in his/her office ruing the day they ever heard of HSF), and
- getting in on the next generation, gifts for the births of clients’ babies.
The most interesting part of yesterday’s nugget wasn’t, however, all the unscrupulous details of what the partners at HSF call ‘business development’; but, rather the news that HSF are claiming that as they spent the money on the BD activities, and not the departing partners themselves directly, the client actually ‘belongs’ to the firm – and, therefore, the partners are ‘not allowed’ to take the client with them to White & Case.
Wow, hold on there for a second.
Leaving aside the fact that most of the clients who have been named and shamed for several weeks in one of Australia’s leading business publications and whose wining and dining (literally) has been described in miniature detail in court papers are unlikely to want to go anywhere near either firm for the foreseeable future, with the level of lateral hiring that has taken place in the Australian legal market over the last few years, arguing that because the firm has paid the business development dollars the firm owns the client raises a very interesting and thorny issue for the courts.
The next round in these hostilities is due to take place June 5, but I await the outcome of whether or not a firm can ‘own’ a client with interest. Because if the result goes one way, it may just kill the lateral hiring market overnight.
* poor Ms Draper must be wondering what she has done wrong too, having only ‘spent’ $2,865 on business development activities during that period but being pulled to the confession box along with all the other naughty sinners