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MICHAEL DUGGAN QC SUCCESSFULLY OBTAINS DECLARATION AND INJUNCTION AT TRIAL IN PICKWELL AND NICHOLLS

Michael Duggan QC successfully obtains declaration and injunction at trial in Pickwell and Nicholls v Pro Cam CP Limited [2016] EWHC 1304 (QB).

Michael Duggan QC recently successfully acted in two cases which demonstrate the difference between a badly drafted covenant and a covenant which will be enforced. In Bartholomews Agri Food Limited v Thornton [2016] EWHC 648 the Court found a restrictive covenant to be unenforceable as a matter of construction.

By contrast, in Pickwell and Nicholls v Pro Cam CP Limited the covenant in question was held to be properly drafted and enforceable, though the case is of interest for its findings on consideration, about which there is little authority in this field. Both Claimants (they had issued proceedings to seek a declaration that their covenants were in restraint of trade) were subject to the same covenants, which provided as follows: 

"You will not from the date of termination of your employment either on your own account (whether directly or indirectly) or as a representative employee, partner, director, financier, shareholder or agent of any other person, firm, company or organisation:- …  

… for a period of 6 months have any dealings in the sale or supply of any relevant goods or services to any relevant customer …[the ‘non-dealing’ covenant]" 

Both were trainee agronomists who accepted offers of employment contained in letters. Pickwell signed a contract of employment on 14 December 2009, having started work on 2 November 2009, whilst Nicholls signed her contract on 21st March 2013 having commenced work on 24 September 2012. Both intended to work for a competitor from 2 May 2016, having worked out their notice. They sought a declaration that they could solicit and deal with Pro Cam’s clients on the basis that (i) there was no consideration for the covenant as the contracts had been entered into when they were working and no additional consideration was given (ii) there was no legitimate interest to protect and (iii) the covenants were too wide.

In a detailed analysis, HHJ Curran QC rejected the consideration argument, adopting the approach of Eve J in Woodbridge & Sons v Bellamy [1911] 1 Ch 326, that the Claimants would not have been given access to clients and confidential information if they had refused to enter into covenants and, indeed, may have been dismissed. Reuse Collections Ltd v Keith Sendall & Ors [2014] EWHC 3852, [2014] IRLR 226 was distinguished. The Judge concluded at paragraph 59 that "I am bound to infer from all the evidence that if either Mr Pickwell or Ms Nicholls had refused to sign, and had asserted his or her right to continue to be employed on the terms contained only in the letters of appointment, Pro Cam would have been likely to have given them notice.”

In relation to the argument that there was no protectable interest as the Claimants were trainees with no customer connection at the time that they signed the contracts, HHJ Curran QC held accepted the argument that if this were correct it would mean that "covenants dealing with events which are only in the contemplation of the parties would be invalid”. In this case the covenants were only engaged when the business was done. The Court referred to Allan James LLP v Johal [2006] IRLR 599 and stated that:

On the ‘timing’ point raised by counsel for the Claimants, in my judgment any restrictive covenant in a contract of employment involves an attempt by the employer to reach an agreement regulating the activities of the employee after he or she leaves its employment: it is ex hypothesi an attempt to deal with future events, and must therefore involve an exercise in foresight. For it to be enforceable the law confines the exercise to matters which are in the reasonable contemplation of the parties at the time they made the contract.

The Judge distinguished Bartholomews Agri Food Limited v Thornton as involving a plainly unenforceable covenant. He noted that the Court had there stated that "the judge made it clear that had it been a non-dealing or non-solicitation covenant drafted in terms similar to those in the instant case, applying only to customers with whom the employee had dealt personally, it would have been acceptable.”

The Judge held that the covenant was not unreasonably wide. A notice period of six months and a covenant for six months was reasonable and the approaches taken in Coppage & Anor v Safetynet Security Limited [2013] EWCA Civ 1176, [2003] IRLR 970 and Beckett Investment Management Group Limited v Hall [2007] IRLR 793. Six months was a short enough period and it would take time to obtain new competent agronomists and introduce them to the client farmers.

The case will be a relief to those employers who have provided contracts of employment after the employee has commenced work and there are some clear lessons to come from this authority (and Bartholomew).

  • The employees signed a contract after they started work which stated that it superseded all previous agreements. They also did not protest about any of its contents.
  • The Judge found that they would not have been given access to clients and confidential information if they had refused to sign. This was the basis on which there was consideration.
  • Where an employee signs a contract of employment sometime after employment has commenced it would be prudent for there to be an express statement that the employee is being given access to clients and information on the basis and as consideration for contract being signed and/or that the employee is being retained on this basis. This provides the necessary element of consideration.
  • At the time of entering into the contracts the employees were trainees with no clients. It was contemplated that they would be introduced to clients. The covenants only ‘kicked in’ when business was done with a client. This self-limiting restraint provision meant that the covenant was valid; compare this with Bartholomew where the covenant applied irrespective of any contact with clients from the date that the trainee commenced employment so that it was too wide.
  • The Court took notice of the factual background in deciding why a notice period of six months coupled with a six months’ covenant was needed.

The two cases illustrate the importance of ensuring that covenants are tailor made to the circumstances of the employee Pro Cam also provides very useful guidance on the issue of consideration and is to be welcomed in this respect.

 

Posted: 07.06.2016 at 09:47
Tags:  News  Cases  Employment Law  Injunctions
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