Partners lose legal battle with Deloitte

Four senior partners at Deloitte & Touche who accused John Connolly, its chief executive, of breaking his word are being forced to work out six months' notice after losing a court battle against the firm.

Mr Connolly was said to have reneged on severance agreements made with the partners in the firm's private equity practice. They joined Deloitte from the disgraced firm Arthur Andersen in 2002.

After a year of grievances under Mr Connolly, including a restructuring plan that they felt undermined their position, the four took up a lucrative offer from the rival firm KMPG. The partners claimed they had arranged a special escape clause with Mr Connolly that entitled them to leave Deloitte after one year without being subject to restrictions, such as lengthy notice periods and client poaching. But Mr Connolly argued the clause expired at the end of their first 12 months with Deloitte. This view was upheld in the High Court yesterday.

"We continue to believe that the words 'after a year' genuinely mean 'after a year'," Rustom Kharegat, one of the partners, said. He added that he and his colleagues were considering their legal options. Fox Williams, solicitors to the partners, called the ruling "bizarre".

The four are now seeking to test whether the restrictions are enforceable. Under Deloitte rules, the partners, once at KMPG, will not be able to speak to their former clients for two years. But the partners are challenging these rules.

Mr Connolly said: "We are very pleased with the outcome." The four are being refused gardening leave.