In a co-ordinated move, seven of the eight partners resigned from Freehills to go to White and Case within five minutes of each other on September 1 last year. Quinn, who had been planning the exit for at least a year, blamed the remaining partners for his departure, for "the leaking of untruths to the media that I had resigned" and "the assertions to clients that I am leaving or have left the firm".

The following Monday, the law firm went into a full battle mode to protect itself. The law firm told the partners who had resigned that they would have to work at Freehills until at least March, when their six-month notice period expired, hand over the existing clients and refer any new clients to the remaining partners.

Freehills also sought to ban the partners from working at White & Case for a further six months from March until September this year. By entering into the partnership agreement, Freehills argued, the eight partners had signed away their right to work for a competitor such as White & Case for six months from the date of their departure. The defecting partners disagreed, saying the six-month forced career break would stifle competition in the legal market and should be declared invalid.

By February, the partners came head to head in the NSW Supreme Court as two of the country's most prestigious and expensive silks – Peter Brereton, SC, and Bret Walker, SC, – fought over the validity of the six-month ban on the partners working for a competitor. On Thursday, the NSW Supreme Court temporarily granted a partial injunction allowing the partners to join White & Case, but stopping them from poaching Freehills clients and employees. The fight won't be officially resolved until early July, when the court will hear whether Freehills needs the six-month ban to protect its business interests.

The rainmaker

According to Freehills, Quinn was a well-known "rainmaker" of the firm. As a band 1, Chambers-listed project finance partner, he was in charge of 52 clients including HSBC, IFM Investors, ANZ, UBS and Societe Generale and was charging clients up to $US1200 ($1600) an hour.

Quinn was also a big spender, raking up $167,000 on business development in the 2016 financial year alone. Among his spending items were: Chain Reaction bike challenge client events to raise money for sick children; chartered flights and accommodation at Barnbougle golf course in Tasmania for clients at NAB and government-owned Hydro Tasmania; and an $823.50 bottle of wine for AGL's general manager of corporate development Paul Frazer, half of which was paid for by the firm. These were on top of the typical spending of a partner at a top tier law firm: business trips to London and Paris and lunches and dinners at Melbourne and Sydney's exclusive joints including Neil Perry's Rosetta and Rockpool Bar & Grill.


In between doing seven-day 1000 kilometre charity bike rides and indulging in pre-GFC style client entertainment, Quinn was also planning an exit from the top-tier firm. In July 2015, he sent an email to his personal email address drafting his vision for White & Case Australia. The Australian offshoot would be a "small, focused practice in Australia focused on highly profitable work-projects and project finance" and a "lower cost base to service Asian work". It would also serve as a centre for US and Australian clients looking to move offshore, particularly super funds.

In 2002 Quinn had gotten a big break at Freehills as a fourth-year partner when a rainmaker in his team, Nick Grambas, resigned to join Mallesons Stephens Jaques, the firm now known as King & Wood Mallesons. In an internal memorandum, Quinn advised other partners to put Grambas on gardening leave as soon as possible, see all clients next week and recruit one more partner from Clayton Utz or Blake Dawson Waldron, now Ashurst.

Mark Rigotti, global head of HSF, received resignation emails from seven of the eight partners within five minutes. Arsineh Houspian

"Freehills will continue to have a very strong project finance group, nationally and in Melbourne. In Melbourne, the group will be led by Mark Breheny and Brendan Quinn," an internal memo said.

Fourteen years later, the tables turned and Quinn found himself in the midst of a public legal battle with the partners at his old firm.

Freehills had already weathered raids in 2013 when it lost five of its "next generation of star partners" to US-based employment specialist Seyfarth Shaw and top litigators Michael Mills and Michelle Fox to US-based litigation firm Quinn Emanuel.

But this time, the stakes were even higher. Freehill's project finance and project delivery practices, by the firm's own admission, were widely regarded as "one of the jewels of the Australian practices". By the end of 2013 financial year the practices were pulling 11 per cent of HSF Australia's annual revenue.

Top barrister Bret Walker, SC, represented the eight departing partners.


'Project Basil'

Soon after the mass resignation of partners from Freehills, an emergency meeting was called to protect what was left of the firm's project, real estate and finance team. As of 2012 the law firm's project finance and project delivery practices were made up of 17 partners and 68 lawyers. The departure of the eight partners would puncture enormous holes in the practices, especially if younger lawyers followed the partners out the door.

In a nine-page document entitled "Project Basil – People plan", the law firm came up with a staff retention strategy which involved a mix of winning attitudes and generous bonus payments.

"People are most likely to stay if they believe the "stay" team will be successful (a sense that there is calm confidence, clear thought, cohesion, collaboration, strong capability and leadership), there will be opportunities to do great work for great clients and career opportunities for the future," the document said.

Partners were encouraged to "use strategies to shift your mood/emotion if necessary" and to ask staff questions such as "I know there is a great deal going on – I wanted to check in on you. How are you?" and "I'm keen to understand how you are, what are your thoughts and concerns?".

In addition, there would be "selective, specific, scheduled and confidential" retention bonuses to make sure the firm could hold onto the most valuable members of the staff.

"Project Basil" was an utter failure. One of the first people to leave to join White & Case was Kym Robson, a human resources manager who was involved in drumming up the staff retention strategy.

In the next six months 34 lawyers in the team would resign to join White & Case, including six lawyers whom Freehills identified as "key staff", and business development manager Michael Knoff.


Exclusion and isolation

As the departing partners served out their six-month notice period until March, Freehills took steps to freeze them out of the partnership and instructed them to hand over their clients to the other partners in the firm.

The handover wasn't all smooth sailing. When one of the departing partners, Andrew Clark, referred a Fiji Hydro client onto Sydney partner David Ryan, he didn't follow up and Freehills ultimately lost the project to another firm. On another occasion he passed on an inquiry from Investec about a wind farm project, only to be told he needed to decline its instructions – a huge surprise to Clark, given it related to a $3 million matter he had worked on.

After spending most of their working lives at the law firm – most of the departing partners had started working at Freehills as junior lawyers and worked their way up the partnership ladder for nearly two decades – they suddenly found themselves with a lot of spare time on their hands. Most of their key matters were transferred to other partners and their billing hours dropped significantly. With the restrictions on client poaching and $100 limit on corporate credit card expense, the partners no longer went to client lunches, coffee catch-ups and marketing events.

Clark recalled turning up at a seminar in late September and not being given a Freehills name tag. When he asked for one, a Freehills business development manager allegedly said to him: "You don't have one. They didn't want you here."

Another partner, Josh Sgro, gave evidence that when he was invited to drinks by a key client he had to ask another partner to "receive advance approval to buy a round of drinks for the attendees".

Email updates and meeting invites stopped. The partners only found out their quarterly partner drawings were reduced when their colleagues told them, because they had been left out of the partnership email loop.

Oaks Day dramas


The partners were also excluded from the usual corporate festivities. For at least eight years, Quinn, Clark and Sgro, who were members of the Victorian Racing Club, had been hosting the project finance client events on Oaks Day at the Melbourne Spring Racing Carnival.

But this time the other partners took control over the event and the client list, even though the firm still used the three partners' membership to organise client passes. The departing partners said some key clients missed out on the invite as a result. Another departing partner, Joel Rennie, didn't get an invite at all. "Sorry Joel, Oaks is fully subscribed – so I'm afraid the answer is no," global head of finance, real estate and projects team Jason Ricketts said when Rennie fished for an invite.

The partners say their invites to the Freehills Christmas party were "unofficially revoked" when they were left off an email offering them a wristband to get into the party. Some partners also missed out on the invite to the HSF Kids at Work day in December. "It is something that my children look forward to each year", Jo Draper, a disappointed mother of two, said in evidence.

Even the firm website had been changed to undercut the partners' presence in the market. Previously, when the partners searched for their name on the HSF website it would produce multiple results listing their expertise. Now the search of their names came up with: "Expertise: 0".

One of the key issues at the final hearing in June will be whether the eight partners were suspended from the Freehills partnership during the six-month notice period, thus effectively forcing them to take a 12-month career break beginning in September last year. The departing partners will argue they have been suspended from their partnership duties after they handed in their resignation notice in September last year.

Internal priority list

Another point of contention during the hearing for a temporary injunction was whether the six-month restraint period in their partnership agreement was necessary to protect Freehills' confidential information.

Freehills said the departing partners were "trying to recreate the HSF Australia team within White & Case" by hiring two integral members of the business development and human resources team, putting Freehills' confidential information and client connections at risk.


Freehills gave evidence it has an "internal prioritisation of clients" list which divides the firm's clients into five categories ranging from "core or strategic clients" to "clients HSF Australia would not act for". The list, Freehills said, would be highly valuable for White & Case because it could offer lower rates to Freehills' top-priority clients or it could tell Freehills' lower-priority clients they were not highly valued by the law firm and they should hire White & Case instead.

The departing partners deny they have confidential information that could expose Freehills. One of the partners, Jared Muller, said prioritisation of clients is "very fluid" and in reality depends "more on internal 'politics' than any logical or predetermined 'client prioritisation' ".

Freehills posted a profit per equity partner of £840,000 ($1.4 million) last financial year. Despite their big pay cheques, however, many of the partners argued the full extent of the restraint should not apply because they would struggle financially and, in some cases, get into further debt if they could not work for six months.

For instance, Quinn gave evidence he has monthly expenses of about $45,000, which include $15,000 mortgage repayments, $9000 school fees, $6500 payments for two family cars and credit card and living expenses of up to $15,000. He lives in a four bedroom, multi-million dollar mansion in Melbourne's prestigious suburb of Toorak and his wife is currently not working.

Clark said he is sitting on a debt of more than $3.5 million, and he will have to pay $20,000 per month for living expenses including "food, utilities, insurances and up-keep of properties" on top of private school fees and financial support for his dependent parents.

"If I am prevented from working for six months I would need to borrow money in order to service my financial obligations set out above," he said.

Meanwhile, Muller gave evidence he has to pay more than $35,000 a month in living expenses, school fees and debt repayments. He said: "I am very concerned that I may be forced to sell assets to avoid defaulting on my current debt obligations and in order to meet my financial obligations."


For the other partners the prospect of pricey home renovations loomed large. Rennie, who lives in a $3.3 million four-bedroom oceanfront home in Cremorne Point in Sydney's lower North Shore, said he would have to suspend a $1 million home renovation if he was unable to work for six months. The scale of the renovation was such that he has also rented a property for six months until July 2017, he said, and he is currently sitting on a $2.4 million debt. He is the sole income earner in the family and the family is expecting a third child.

Sgro is also going through a renovation in North Fitzroy and has two mortgages, one on a property that he currently lives in and another on a property which is being renovated. He has expenses of up to $35,000 a month.

Another partner, Rosengarten, said the roof of his Prahran family home recently fell in and will require up to $100,000 to repair. If he had no other income and the claim is not covered by insurance, he may have to live with a fallen roof until the repairs are done, he said. On top of that he has to pay $75,000 in school fees per year for his three children, he said.

Justice Robert McDougall, however, showed little sympathy for the partners' financial affairs, saying "I have some difficulty in seeing why the court should relieve them of the consequences of what must have been a careful decision."

He said when they made the decision to retire to defect to White & Case, the consequences of doing so must have been apparent to the eight partners.

"It could hardly be thought that they assumed, rationally, that HSF Australia would not act to protect its interests by seeking to enforce the restraints. That is so, particularly, when one takes into account the circumstances of the departure: eight partners leaving, virtually at the same time as each other, to join a competitor firm," he said.

Justice McDougall was sympathetic to the partners being taken out of the marketplace for six months, which he said may require them "some time to re-establish themselves" and withhold their specialist services from the market. He refused to enforce the restraints in the partnership agreement which stop the partners from working for a competitor such as White & Case, saying they "go beyond what is required for the legitimate protection of the identified interests of HSF Australia" and their "real purpose is to suppress competition".

'Swiss Verein'


The departing partners never disclosed their reasons for departure publicly and declined to comment for this article, which leaves just speculation. To many, the resignation will seem like a prime opportunity for the partners to clean up. The US law firm in 2015 had profit per equity partner of $US2 million ($2.6 million), almost double that of HSF's 2016 financial year profit of £840,000 ($1.4 million).

However, it wasn't just the US firm's fat pay packet that enticed the partners to leave the firm they had worked for most of their professional lives. One of them, Clark, said he was disappointed the 2012 merger between the UK's "silver circle" firm Herbert Smith and the Australian entity Freehills didn't live up to "the most fundamental reason underpinning the merger, being the intention to form a truly financially integrated global law firm, with a single global profit pool, rather than a form of Swiss Verein."

The full financial merger between Herbert Smith and Freehills had inspired high hopes among the Australian partners. After the merger, Herbert Smith Freehills would be the 13th largest law firm in the world with an aggregated revenue of $US1.35 billion and 460 partners. The fact the partners draw from a single profit pool would separate the merger from the "Swiss Verein" structure of King & Wood Mallesons, which was a merger in name only with the Australian partners keeping a separate profit pool.

The Swiss Verein structure is one which has been used in mergers of multinational law firm and allows profits pools and partner remuneration arrangements to be separate from other functions such as strategy, branding and other core functions. The structure turned out to be a blessing for the Australian arm of King & Wood Mallesons when its European arm collapsed in January, owing at least £35 million ($57 million) to its bank, Barclays.

But the promise never delivered. In his evidence, Clark said it weighed heavily on him that "the benefits of the merged partnership are not being delivered; the Australian legal market, other large law firms that merged without true financial integration have suffered prolonged periods of severe disruption, depressed morale and dramatic downsizing, such as now appears to be occurring within HSF."

As late as May 2013, seven months after the merger, the Australian lawyers at Herbert Smith Freehills had to go through an indefinite pay freeze which did not affect the lawyers working for former UK entity Herbert Smith. The Australian partner numbers had also shrunk, from 193 pre-merger in 2012 to 177 in July 2016.

Winners and losers

For Clark, it was ultimately the desire to take control of his legal career that won him over. "I do not relish being unexpectedly forced out at an unknown time through HSF's 'partner retirement program' and have no control over the nature or timing of opportunities," he wrote.


"The opportunity to join a new market entrant, rather than an existing competitor in Australia, is attractive to me. I expect that the international network of White & Case will open opportunities with clients that HSF has no relationship with, and if I was joining a local competitor firm I would feel more like I was 'switching teams' rather than embarking on a new path," he said.

Clark's reasons and Freehills' fightback are not surprising, given the $22 billion Australian legal market has now come to a grinding halt with the growth rate of 1 to 2 per cent. Top-tier partners have been left to compete for an ever-shrinking pie of client work, and in the climate of zero sum game, the only way to grow will be to cut into each other's client base, by suing former colleagues if necessary.

But not everyone has been a loser in this public battle between the partners at Australia's most prestigious law firm. At least four former Freehills senior associates and special counsels – Ged Cochrane, Michelle Keen, Adeline Pang and Cameron Watson – have scored promotions by defecting to White & Case, while five others in the Freehills project finance team – Heidi Asten, Elizabeth Charlesworth, Andrew Griffiths, Richard Wilkinson and Erin Wyeth – have been internally promoted to replace the departing partners. As they say, history doesn't repeat itself, but it certainly rhymes.

misa.han@fairfaxmedia.com.au