Post-termination covenants, the interests they may legitimately protect, and the limits of enforceability. Nordenfelt v Maxim Nordenfelt Guns & Ammunition Co Ltd; Tillman v Egon Zehnder Ltd.
Restraint of trade; geographic scope; a 25-mile radius restriction for a door-to-door canvasser was grossly wider than necessary to protect the employer's interest. Excessive geographic scope renders the whole covenant void; the court will not rewrite it. [Summary not yet checked against the judgment.]
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References found in the judgments’ text, with the number of paragraphs in which each case is mentioned. Not a classification: how a case was treated is recorded under Later history.
Restraint of trade; severance; where a single covenant restrains multiple activities forming a single indivisible restraint, the court cannot sever individual parts, the restriction stands or falls as a whole. Contrasted with Nordenfelt where severable. [Summary checked against a practitioner text, not the judgment.]
Overruled by Tillman v Egon Zehnder Ltd [2019] UKSC 32 (2019-07-03)
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References found in the judgments’ text, with the number of paragraphs in which each case is mentioned. Not a classification: how a case was treated is recorded under Later history.
Ch 117 - Contract; confidentiality; trade secrets are protected post-employment, but general skill and knowledge are not. [Summary checked against a practitioner text, not the judgment.]
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References found in the judgments’ text, with the number of paragraphs in which each case is mentioned. Not a classification: how a case was treated is recorded under Later history.
Restrictive covenants; group companies; severance. The Court of Appeal (Maurice Kay LJ) upheld a 12-month non-dealing covenant given to a holding company whose clients were in fact served by a subsidiary. Construction is not to be inhibited by a purist approach to corporate personality: the subsidiaries were the instrumentalities through which the group ran its business, so the covenant protected the group's client connection and the covenantee had a legitimate interest [16]-[23]. Twelve months was not arbitrary where the employer needed time to rebuild client trust after key advisers left [29]. The three-stage severance test from Sadler v Imperial Life was adopted: the offending words must be removable without adding to or modifying what remains, the remaining terms must be supported by consideration, and removal must not change the character of the contract [40]-[44]. Restated by the Supreme Court in Tillman v Egon Zehnder.
Approved by Tillman v Egon Zehnder Ltd [2019] UKSC 32 (2019-07-03)
The Supreme Court took the three Beckett criteria one at a time.
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References found in the judgments’ text, with the number of paragraphs in which each case is mentioned. Not a classification: how a case was treated is recorded under Later history.
Restrictive covenants; team moves; springboard relief. The court granted a final springboard injunction until 28 April 2012 against three senior employees and the company backing their competing start-up [293]-[294]. The first defendant owed a fiduciary duty [27]. The three had acted unlawfully while still employed: they were trying to destroy the business and re-create it elsewhere for their own benefit [258], [260]. The backer was liable for inducing breach of contract: indifference to whether the employees' departure is lawful is enough [263], [265]. Non-competition covenants were not enforced against eight other employees: the evidence did not justify them on confidential information or client contact grounds [226], [230], and workforce stability was not open because the contracts had specified the interests protected [235]-[237]. Springboard relief is not confined to breach of confidence [242]; it is refused where money is an adequate remedy [245]; its length is the time the wrongdoer would have needed to achieve lawfully what he achieved unlawfully [285].
“The Court must assess the actual advantage gained by wrongdoers as a result of their unlawful activities and grant appropriate relief. Springboard injunctive relief is for unlawfully ‘stealing a march’ on competitors. The essential question is therefore: how much of a march have the Defendants in this case, in fact, stolen on the Claimant as a result of their wrongdoing? This depends on both the length and tensile strength of the ‘springboard’ itself and gauging the relative advantage gained by its use.”Haddon-Cave J, at [284]
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References found in the judgments’ text, with the number of paragraphs in which each case is mentioned. Not a classification: how a case was treated is recorded under Later history.
Restrictive covenants; interpretation; a poorly-drafted covenant that on its natural construction did not cover the activity the employer sought to restrain was unenforceable, the court will not rewrite a covenant to give it a meaning the words cannot bear, even if the parties' intention was clear.
“It was not for the judge nor is it for this court to re-make the parties’ clause 19 bargain. Prophet made its clause 19 bed and it must now lie upon it.”Rimer LJ, at [38]
Penalty clauses; restraint of trade; reformulated the test: a clause is enforceable if it protects a legitimate business interest and is not exorbitant or unconscionable. Departed from the 'genuine pre-estimate of loss' test. Applied to restrictive covenant forfeiture and liquidated damages provisions.
Jurisdiction; individual contracts of employment; Section 5 Brussels I (Recast); anti-suit injunction. An English employee's stock awards from his employer's US parent were subject to a Massachusetts exclusive jurisdiction agreement [4]. The dispute over them related to his contract of employment: Section 5 is construed by the substance of the relationship so as to protect the employee as the weaker party [19]-[20]. Following Samengo-Turner, a group company providing benefits to reward employees of an associated company may be an employer for the purposes of the Regulation: the jurisdiction agreement had no legal force and the English court had jurisdiction [21], [23], [26]. The judge was wrong to refuse an anti-suit injunction on grounds of comity: in a case within Section 5 one should ordinarily be granted to restrain proceedings outside the Member States [31], [35]. Vos LJ doubted Samengo-Turner but held the court bound by it [45]; Sales LJ defended it [46]. EMC's appeal dismissed; Mr Petter's allowed [36].
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References found in the judgments’ text, with the number of paragraphs in which each case is mentioned. Not a classification: how a case was treated is recorded under Later history.
Restrictive covenants; construction; validity. The court applied the three-stage approach in TFS Derivatives v Morgan: construe the covenant, ask whether the employer has shown a legitimate interest requiring protection, then whether the restraint is no wider than reasonably necessary [18]. The onus of establishing reasonableness is on the employer [17]. On construction, where one reading would render the clause unenforceable and another legitimate reading would not, the latter is preferred, per Turner v Commonwealth and British Minerals [20]. Read as a whole, a post-termination restriction on being interested in a competing business activity did not catch shareholdings, the contract permitting a limited shareholding during employment [127]-[128]. No blue pencil issue arose [130]. The six-month non-compete was reasonable when agreed, whether or not the potential three months of garden leave was taken into account [116]-[117]. All the restrictions were valid and enforceable [138], [150].
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References found in the judgments’ text, with the number of paragraphs in which each case is mentioned. Not a classification: how a case was treated is recorded under Later history.
Restraint of trade; severance; non-compete. The Supreme Court (Lord Wilson, with whom Lady Hale, Lord Kerr, Lord Briggs and Lady Arden agreed) held that a covenant not to be 'interested in' a competing business extends to holding shares, so the clause fell within the restraint of trade doctrine and, so construed, was unreasonably wide; but that the offending words could be severed. Attwood v Lamont was overruled and the three criteria adopted in Beckett Investment Management Group Ltd v Hall endorsed: the unenforceable words must be removable without adding to or modifying what remains, the 'blue pencil' test [85]; the remaining terms must be supported by adequate consideration, rarely an issue where the employer sues [86]; and the third criterion is better expressed as whether removal of the provision would not generate any major change in the overall effect of all the post-employment restraints in the contract, which it is for the employer to establish [87]. The words 'or interested' were severed and the covenant enforced [88], reversing [2017] EWCA Civ 1054.
“The third criterion is that “the removal of the unenforceable provision does not so change the character of the contract that it becomes ‘not the sort of contract that the parties entered into at all’”. This is the crucial criterion … But I suggest, with respect, that the criterion would better be expressed as being whether removal of the provision would not generate any major change in the overall effect of all the post-employment restraints in the contract. It is for the employer to establish that its removal would not do so.”Lord Wilson; Lady Hale; Lord Kerr; Lord Briggs; Lady Arden, at [87]
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References found in the judgments’ text, with the number of paragraphs in which each case is mentioned. Not a classification: how a case was treated is recorded under Later history.
Restrictive covenants; non-compete; Ireland. The Irish High Court (Allen J) dismissed Ryanair's action to enforce a 12-month non-compete against its former chief operations officer, who had left to join easyJet. Ryanair had a legitimate interest in protecting its confidential information from competitors in the low-cost sector, and 12 months was a reasonable duration. The covenant was void as a restraint of trade because its scope went wider than that interest required. This summary is taken from published reports of the decision, not from the judgment. [Summary not yet checked against the judgment.]
Breach of confidence; lawful excuse; unlawful means conspiracy. The appeals concerned the limits of the equitable doctrine of misuse of confidential information and of the tort of conspiracy to injure by unlawful means, in a dispute over live betting and horseracing data collected at racecourses [1]-[3]. At [45] the court noted that the usual three-part statement of the claim for breach of confidence is not complete: there is a further requirement that the unauthorised use of the information was without lawful excuse. Relied on for that requirement in GQA Qualifications Ltd v Clayton [2026] EWHC 114 (KB) at [111] and [155], where the judge accepted that a qualifying disclosure under the whistleblowing regime can be a lawful excuse.
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References found in the judgments’ text, with the number of paragraphs in which each case is mentioned. Not a classification: how a case was treated is recorded under Later history.
Restrictive covenants; interim injunctions; non-compete. The Court of Appeal dismissed the employer's appeal against the refusal of an interim injunction enforcing a 12-month non-compete [1], [100], [106]. The judge's reasoning on enforceability could not stand: he did not apply the right test, and the one factor he weighed against enforcement was the effect on the employee's employment prospects [86], [91]. By the appeal the employee had been in post over seven months with about four to run: enforcement now would be contrary to the balance of convenience [99]-[100]. The rule in Doherty v Allman that a valid negative covenant is ordinarily enforced by injunction applies after trial and has no relevance at the interlocutory stage [96], [105], [112]. An interim application is not the occasion for a definitive ruling on enforceability: the court may make some assessment of the merits within the balance of convenience, and an employer wanting a decision must go to trial, if appropriate a speedy one [102]-[104], [109]-[110].
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References found in the judgments’ text, with the number of paragraphs in which each case is mentioned. Not a classification: how a case was treated is recorded under Later history.
Restrictive covenants; confidential information; severance. The Court of Appeal upheld the severance of an over-broadly drafted definition of confidential information at the interim injunction stage, leaving the enforceable core standing. Severance may be applied on an interim application without a full trial of the merits.
Cites
References found in the judgments’ text, with the number of paragraphs in which each case is mentioned. Not a classification: how a case was treated is recorded under Later history.
Restraint of trade; bonus clawback; a clause requiring repayment of bonus on resignation is a loyalty incentive, not an unenforceable restraint of trade.
Injunctions; procedure; failure to order a speedy trial in a 12-month covenant case was an error of law; such cases demand expedition.
Cites
References found in the judgments’ text, with the number of paragraphs in which each case is mentioned. Not a classification: how a case was treated is recorded under Later history.
Restrictive covenants; interim injunctions; full and frank disclosure; adequacy of damages. The Court of Appeal allowed the claimants' appeal, restraining the seller of a business from competing until the two-year covenant expired and from using confidential information until trial [82]. Males LJ held that two of the four non-disclosures found by the judge were not failures at all [42], [48]; the other two were not deliberate and were relatively insubstantial, so the without notice injunction should have stood [68]-[69]. After a failure of disclosure the interests of justice may still require the order to continue, the failure being marked in costs [31]. Refusing fresh relief because the seller could pay damages was wrong in principle [25], [74]: damages will generally not be adequate for breach of a non-compete covenant [76]; an injunction is generally the appropriate remedy because it is what the parties bargained for [77]. Whether the covenant fell away on an accepted repudiation was a triable issue [81].
“Although the starting point is likely to be that an injunction should be set aside and not renewed when a failure of disclosure is substantial or deliberate, that is only the starting point … it is necessary to keep a sense of proportion and to consider also whether some measure short of setting aside an injunction which is otherwise well justified can appropriately be used to mark a failure of disclosure which is not deliberate.”Males LJ, at [68]
Restrictive covenants; interim injunctions; full and frank disclosure; adequacy of damages. The Court of Appeal allowed the claimants' appeal, restraining the seller of a business from competing until the two-year covenant expired and from using confidential information until trial [82]. Males LJ held that two of the four non-disclosures found by the judge were not failures at all [42], [48]; the other two were not deliberate and were relatively insubstantial, so the without notice injunction should have stood [68]-[69]. After a failure of disclosure the interests of justice may still require the order to continue, the failure being marked in costs [31]. Refusing fresh relief because the seller could pay damages was wrong in principle [25], [74]: damages will generally not be adequate for breach of a non-compete covenant [76]; an injunction is generally the appropriate remedy because it is what the parties bargained for [77]. Whether the covenant fell away on an accepted repudiation was a triable issue [81].
“Although the starting point is likely to be that an injunction should be set aside and not renewed when a failure of disclosure is substantial or deliberate, that is only the starting point … it is necessary to keep a sense of proportion and to consider also whether some measure short of setting aside an injunction which is otherwise well justified can appropriately be used to mark a failure of disclosure which is not deliberate.”Males LJ, at [68]
Breach of confidence; damages; loss measured by what a 'willing buyer' would hypothetically pay to license the confidential information used.
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References found in the judgments’ text, with the number of paragraphs in which each case is mentioned. Not a classification: how a case was treated is recorded under Later history.
Non-compete; competition; no breach where a client moved services 'in-house', the client had effectively left the marketplace and was no longer a competitor.
Cites
References found in the judgments’ text, with the number of paragraphs in which each case is mentioned. Not a classification: how a case was treated is recorded under Later history.