Dissolving contractual ties that bind

Roger Pearson looks at the High Court battle that will attempt to untangle the Saatchis web

The High Court is set for a clash of the advertising titans. Three of the top Saatchi & Saatchi advertising companies are preparing for a battle with the organisation's former chairman Maurice Saatchi in a bid to prevent him and three executives forming a rival agency.

A precursor to the forthcoming Chancery Division battle has already taken place with top flight QCs Charles Gray, Gordon Pollock and Michael Bourton arguing respectively for the Saatchi companies, Maurice Saatchi and the three senior executives Jeremy Sinclair, David Kershaw and William Muirhead.

Mr Justice Jonathan Parker has refused interim injunctions which would have blocked Maurice Saatchi and the others setting up a rival organisation. Saatchis claims that a new company has the potential to inflict "massive damage" to it.

Maurice Saatchi lost his job with the agency on 16 December last year. But within two days it is claimed plans were being drawn up to establish a rival organisation which would involve Sinclair, who had held a u350,000 a year post of acting chairman and was also chief creative director with Saatchis; Muirhead, their chief of operations in the US; and Kershaw who ran the British business.

Sinclair, Muirhead and Kershaw all handed in their resignations but these were refused. As a result it was argued in the interim proceedings that they remained directors and employees of Saatchis and could therefore be prevented from involvement in the new organisation. It was claimed their activities in respect of Saatchi's new company, Dress Rehearsal, amounted to breaches of their contracts. Injunctions were sought to prevent the alleged breaches along with an injunction preventing Saatchi inducing contract breaches.

The three Saatchi companies at the centre of the row are Saatchi & Saatchi Co, Saatchi & Saatchi Advertising and Saatchi & Saatchi Group. Their argument was that Sinclair, Muirhead and Kershaw could not benefit from the rival agency while they were still employees of Saatchis.

As far as Maurice Saatchi is concerned, it is argued that there is no objection to his competing with his former company provided he does so fairly and does not interfere with the contracts of other Saatchi employees, including Muirhead, Kershaw and Sinclair. Of the recent interim proceedings Mr Justice Jonathan Parker said he viewed them as "back door" moves aimed at preventing Maurice Saatchi setting up a rival agency.

Sinclair, Kershaw and Muirhead had all offered undertakings before the recent hearing not to breach their contracts. The judge ordered an expedited hearing of the full action and that is expected to reach court in the next three months.