Case Explained: Ex-manager who failed to refer work to law firm has to repay debt instead – Legal Perspective

Bark-Jones: Successful claim

A tax specialist owes his former law firm £204,000 in overpayments he received while an employee after failing to refer work that would cover his debt, the High Court has ruled.

Mr Justice Moody upheld a decision that a 2017 settlement between London criminal law firm Bark & Co and Andrew Lynch was enforceable after the five-year period it gave Mr Lynch to introduce work expired without him doing so.

He also agreed with Ms Recorder Lambert KC that elements of the Tomlin order could be excised because they required Mr Lynch to make referrals which were banned by the Solicitors Regulation Authority (SRA).

Mr Lynch, now a non-solicitor partner at another London law firm, was a tax senior manager at Bark & Co from 2009 to 2016.

Moody J explained that, after he left, the firm sued him for £415,000 said to be due “mainly from allegedly overpaid commission, credit card spending and what are said to be secret commissions”.

It settled by a Tomlin order in late 2017, which stated in clause 1 that Mr Lynch owed Bark & Co £204,000 in overpayments.

To discharge the debt, Mr Lynch undertook to introduce to Bark & Co criminal fraud, white-collar crime, money laundering and civil fraud matters.

The value of this work was to be fees of twice the amount of the debt and introduced within five years.

There were provisions for Mr Lynch to receive a cut of the fees in certain circumstances, but that if he did not meet the target after five years, anything still owing fell immediately due as a contractual debt.

Mr Lynch did not introduce any work that led to billings and Bark & Co sought to enforce the Tomlin order on the basis that it contained an admission of a debt.

It was common ground that the clauses specifying introductions of criminal fraud, white-collar crime and money laundering work were unenforceable because they breached the SRA’s prohibition on referral fees in criminal cases.

The law firm sought the application of the ‘blue pencil test’ to excise them from the order.

Recorder Lambert agreed, excising the offending clauses and holding that the rest of the Tomlin order was enforceable, having refused Mr Lynch permission to withdraw the admission of a debt. She went on to give summary judgment in favour of Giles Bark-Jones, the law firm’s principal.

On appeal, Moody J agreed that the unenforceable parts of the agreement could be severed.

“I consider that the change effected by the blue pencil test would not be such as to change the character of the contract so that it became not the sort of contract that the parties entered into at all.

“It remained a contract of compromise which recognised an existing debt, and it was agreed that it could be paid off or reduced by the referral to the claimant of legal work.”

He accepted that clause 1 was a binding admission as to the existence of a debt and that the recorder correctly directed herself on the law in deciding that it could not be withdrawn.

“I cannot see that the recorder impermissibly took into account an irrelevant factor or overlooked relevant factors,” Moody J concluded.

“I can see no basis on which this court, exercising a review function, can properly interfere with the recorder’s weighing of those factors. I consider that the conclusion she came to was one that was properly open to her.”