Towry and the Dangers of Kitchen Sink Litigation

The judgment in the case of Towry EJ Limited v Raymond James & Others, which involved allegations of breach of restrictive covenants, misuse of confidential information and conspiracy, was handed down on February 14.

The claim was brought by Towry following its acquisition of advisory firm Edward Jones in late 2009 when certain Edward Jones advisers left to join Raymond James and a significant number of their clients followed. Towry claimed that the advisers had "solicited" the clients and were therefore in breach of their restrictive covenants. The defendants argued that the clients had moved of their own volition and, since there was no restriction in their contracts on "dealing" with clients and no evidence of solicitation, there was no breach of the restrictive covenants.

The judge dismissed all the claims against the defendants and, even more significantly, made an award of "indemnity" costs in their favour. This is the most penal award of costs that can be made and a strong indication of what the judge thought about Towry's case. Towry had brought every conceivable claim against Raymond James and the advisers, including most seriously "unlawful means conspiracy." The conspiracy claim was found by the judge to be "manifestly unreasonable" and it was Towry's persistence in that claim that led to the award of indemnity costs. This is a cautionary lesson on the dangers of "kitchen sink" litigation.

The Raymond James decision has brought into sharp focus the issue of what a departing employee can and cannot do with respect to their clients or customers. Read more.