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21 August 2014 0 Comments
Posted in Employment, Opinion

Restrictive covenant could not be rewritten by judiciary

Posted by , Partner

In a case which was recently reported in the Update, and the overturned decision highlighted in June’s update, Prophet Plc v Huggett is the rather surprising High Court decision where the judge effectively re-wrote the restrictive covenant to give effect to what he thought the meaning should be – in essence, because he abhorred the way in which the employee had behaved and felt the employer was entitled to some form of remedy. The Court of Appeal has now overturned this decision, saying that it was not the role of the Judge to effectively re-write the restrictive covenant to give effect of what he thought the parties intended it to achieve. This was a 12 month non-compete restriction which, interpreted literally, afforded the employer no protection at all. The covenant specifically precluded the employee from working in connection with any products with which he was involved while working for the company – the problem being that no competitor would ever be selling the products which this particular company produced, so of course the covenant was useless. However the High Court Judge had taken it upon himself to add words which he thought gave some useful meaning to the covenant for the employer, and granted the requested injunction.

The Court of Appeal, while agreeing that the covenant, as drafted in the contract, had no useful effect, nonetheless took the view that the wording of the clause was exactly what the draftsman intended. What went wrong was that the draftsman did not think through to what extent the restriction on competition would achieve any practical benefit to the employer if the employee departed to rival company. Ordinarily the Court would favour an interpretation which would achieve a commercial common sense approach, over one which would give rise to an apparent absurdity. However it held that this situation did not fall within that ambit because it was clear what the draftsman had intended. Consequently the injunction was discharged.

This legal update is provided for general information purposes only and should not be applied to specific circumstances without prior consultation with us.

For further details on any of the issues covered in this update please contact Gemma Ospedale, Partner in Employment on 020 7583 2222.

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