Law firm loses appeal against directors who quit to start their own business
A Liverpool legal firm has lost its fight against two former directors who left to form their own business.
The Court of Appeal ruled this week that CEL Solicitors had no basis for alleging that Thomas Blanchfield and Mark Montaldo had breached their fiduciary duty before resigning in 2023.
The Law Society Gazette reported that the pair were placed on gardening leave following their resignations and it was then discovered that for several months they had been taking steps to set up a new law firm.
Ruling in Cheshire Estate & Legal Limited v Blanchfield & Ors, Lord Justice Phillips said the firm’s appeal against the High Court’s ruling had been ‘ill-founded’ and there was no basis for challenging any aspect of it.
CEL Solicitors, based in 20 Chapel Street, had begun proceedings within a month of Blanchfield and Montaldo’s resignations, alleging they were in breach of contract and had conspired with their new firm to cause harm to it.
The former directors had registered the name Complex Claims in August 2022, then set up a website, opened a bank account and applied to the Solicitors Regulation Authority to register a firm. They had also entered discussions with funders, including Deminor Litigation Funding, a company which had previously worked with CEL.
Following a trial in April 2023, HH Judge Bever held that Blanchfield and Montaldo’s preparatory steps had not ‘crossed the line’ or put them in a position of conflict, and there was no intention to injure CEL.
The firm, which specialises in financial mis-selling and fraud claims, appealed the decision and tried to overturn the judge’s findings on liability for breach of fiduciary duty and breach of contract.
However Lord Justice Phillips said the directors had served CEL ‘faithfully’. Allegations about their dealings with Deminor were ‘tenuous at best’ given that CEL had already entered a contract to deal exclusively with another funder. The appeal was dismissed.
In a statement following the ruling, Blanchfield said: “This litigation has been an immensely challenging period in my life. However, given the seriousness of the allegations, I felt it essential to defend myself comprehensively.”