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The recently adjudicated case of Prophet v Huggett ha s resulted in common sense reading of an employee restraint clause at High Court (Chancery Division) rather than the nonsense that was written into the contract..

The court followed the pathway set by Cox J in TFS Derivatives v Morgan [2005] IRLR 256 at [37] to [39]:

  1. Firstly, the court must decide what the covenant means when properly construed.
  2. Secondly, the court will consider whether the former employers have shown on the evidence that they have legitimate business interests requiring protection in relation to the employee’s employment …
  3. Thirdly, once the existence of legitimate protectable interests has been established, the covenant must be shown to be no wider than is reasonably necessary for the protection of those interests. Reasonable necessity is to be assessed from the perspective of reasonable persons in the position of the parties as at the date of the contract, having regard to the contractual provisions as a whole and to the factual matrix to which the contract would then realistically have been expected to apply.
  4. Even if the covenant is held to be reasonable, the court will then finally decide whether, as a matter of discretion, the injunctive relief sought should in all the circumstances be granted, having regard, amongst other things, to its reasonableness as at the time of trial.”

In this case the court held that the non-compete restrictions in Huggett’s contract did not restrain him from developing and supplying Prophet’s software products because no competitor organisations would ever be selling them; they would have their own products to sell. It was accepted that this was a clear drafting error in the clause. The court decided that the restriction was intended to prohibit Huggett from competing in the fresh produce sector with the same “or similar” products to those developed and supplied by Prophet. In a move away from the hard-line approach usually adopted in such matters, the court found that inserting the words “or similar” into the clause was a minimal change which was necessary to produce a commercially sensible result.

Despite the success of this ruling it is important to remember that restrictions on employees are highly fact specific (dependent on the circumstances) and there is no universally acceptable wording.

Citation:  [2014] EWHC 615 (Ch) 

 

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