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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.

 

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