Today Kerr J gave judgment on strike out and summary judgment applications in X-R Touring LLP v Javor & another [2024] EWHC 563 (KB). The court struck out claims founded on a (rather unusual) commission provision, and permitted claims founded on a non-solicitation covenant to proceed to trial. The judgment gives insight into where such applications are likely to succeed in restrictive covenant cases, and suggests that the trial of this matter will grapple with a significant point on the meaning of solicitation.
The facts
The Claimant, X-R Touring LLP (“X-R”) is a concert booking agency for artists in the music industry. It formerly employed the First Defendant, Mr Javor, who left X-R to work for the Second Defendant, William Morris Endeavour Entertainment (U.K.) Limited (“WME”).
Mr Javor’s employment contract included two relevant post-termination obligations: a 12 month non-solicitation obligation in respect of staff, clients and artists, and a less familiar obligation relating to commission. The latter obliged Mr Javor to pay all sums obtained upon certain bookings being made (by Mr Javor or any entity with which he was associated) to X-R, and to ensure that all such bookings were instead contracted via X-R.
On 16 May 2023 Mr Javor informed the directors of X-R that he had decided to leave, confirming this in writing the following day. On 17 May 2023 he signed a contract with WME. There followed, the court noted, a “barrage of correspondence” which “continued unabated for months thereafter but without any application for an injunction being made”. By agreement, Mr Javor’s employment was extended incrementally, ultimately to 17 August 2023. At the time of the end of his employment he had assured X-R, through solicitors’ correspondence, that he would abide by the terms of his non-solicitation covenant.
WME released a press statement dated 16 August 2023 announcing that Mr Javor had joined the agency’s London office. The press statement referred to many of the artists with whom Mr Javor had previously worked, including Coldplay and Eminem. The statement quoted Mr Javor stating ““Steve Strange and I built an incredible business at X-Ray over the last 18 years through teamwork and passion for our artists … I’m excited to start this next chapter at WME and to continue this legacy with the team in London and across the world.”
On 6 September 2023 X-R brought a claim seeking declaratory and injunctive relief to enforce the non-solicitation and commission obligations, and damages and other monetary remedies in relation to lost profits. It did not seek interim relief.
The Defendants applied for strike out of (or summary judgment in respect of) the entire claim, arguing that the Claimant had no real prospect of establishing that these two obligations were enforceable and had been breached.
Non-solicitation
In relation to the non-solicitation clause, Kerr J was not persuaded that the covenant was plainly unenforceable, having considered submissions concerning the position of Mr Javor, the length of the restraint, and the scope of employees concerned.
Kerr J also considered that the surrounding circumstances combined to give real prospects of establishing breach at trial. The court noted Mr Javor having been for a time a “reluctant employee” of X-R, behaving in a “semi detached” way, and having been in contact with at least Coldplay and perhaps other X-R clients at a time when he had already made a contractual commitment to WMR. However, of particular importance was the press statement of 16 August 2023.
When considering the statement of 16 August 2023, Kerr J recalled the distinction in Trego v Hunt [1896] AC 7 between a general appeal for custom and a specific and direct appeal to customers of the previous firm (a“time honoured” distinction more recently affirmed in QBE Management Services v Dymoke [2012] EWHC 80 (QB)). Kerr J considered that there was a real prospect that this case crossed “the Trego line”. Factors in play were the timing of the announcement, the statement that Mr Javor had already joined WME, the naming of artists and the reference to Mr Javor’s intention to “continue this legacy”.
If this covenant is held to be enforceable at trial, the court will need to grapple with whether, as suggested by Kerr J, an announcement to the world at large such as this can indeed cross “the Trego line”. Kerr J also observed that a sub-issue may arise as to whether solicitation can (in relation to a clause silent on this point) be indirect. No doubt practitioners will watch with interest to see whether general announcements which may previously have been thought to be safe now risk being considered acts of solicitation.
Commission Payment
The court had little hesitation in accepting that the commission payment was an indirect restraint of trade. In line with the approach set out by the Supreme Court in Egon Zehnder Ltd v Tillman [2019] UKSC 32, the court took a practical approach to determining the applicability of the doctrine. Kerr J noted that the commission provision “operates as a strong disincentive to Mr Javor to work for any employer that has any clients in common with X-R”, and held that it was clearly a restraint of trade.
Kerr J went on to consider the scope of the covenant and held that it was possible to determine without a trial that the clause was unreasonably wide. X-R could have protected itself with a non-dealing covenant, but instead had imposed a commission clause without limitation in time which, by diverting commission back to X-R, “would make Mr Javor’s job with WME not worth his while”.
The court’s conclusion is perhaps unsurprising given that the effect of the clause would have been, as submitted on behalf of Mr Javor, that he would be working for the benefit of X-R “as an unremunerated agent… even after the end of his employment”.
Observations
Practitioners in this field will no doubt await the trial of this matter with interest. In the meantime, the summary judgment decision is instructive:
- This case is another reminder that the court will look to function over form, and will not hesitate to apply the doctrine of restraint of trade where the reality of the contractual provision merits it, even if the restraint in question is indirect.
- Although in more finely balanced cases the question of enforceability is likely to be one for trial, in a clear case the court can and will tackle it head-on at an early stage (whether on a strike out/summary judgment application or at an interim relief hearing).
- While the commission clause here failed on its own fundamentals, and not as a matter of inadequate pleading, Kerr J’s analysis of every component of the claims pleaded is a reminder of good practice when pleading cases concerning restraint of trade (an exercise often carried out at speed in cases where interim relief is sought). It is vital properly to plead not only the covenant relied upon but the basis upon which it is said to be enforceable, including a more than cursory pleading of the protectable interest in question and the reasonableness of the clause. It should not be assumed that a pleading deficient in these respects will survive to trial.
- If it is the case, as contended by X-R, that commission provisions as seen in this case are common in the music industry, employers with such contracts in place would be wise to take urgent advice on whether their particular covenants are likely to be enforceable.
David Reade KC acted for the First Defendant, instructed by Marriot Harrison LLP
Adam Solomon KC acted for the Second Defendant, instructed by Morgan, Lewis & Bockius UK LLP
