MR SALTER QC:
Introduction
- This action concerns restrictive covenants in the contract of employment of an employee of a recruitment consultancy. It raises for decision a number of issues concerning the
validity
of such covenants, including whether the increasing use by teachers and
schools
of social media and the internet means that the employer no longer has any protectable connection with its customers, and an interesting point about the effect on the enforceability of such covenants of restrictions on the acts which the ex-employee may
take
"as a shareholder" of a competing company.
Background
- The Claimant,
East
England
Schools
CIC
(which trades as, and which I shall refer to as, "
4myschools")
is a Community Interest Company which carries on business as a recruitment agency in the educational sector. Broadly, its business involves matching teacher applicants with
schools
that have
vacancies,
both for short-term placements of a day or so (to cover sickness and similar absences) and for longer-term positions. It employs 13 staff across all of its businesses, and had a turnover in 2012 of approximately £3.2m.
- The First Defendant, Luci
Palmer
("Ms
Palmer")
was employed by
4myschools
as a "Recruitment Consultant" at its Chelmsford offices, under a contract of employment dated 17 January 2011 (the "
4myschools
Contract"). Ms
Palmer's
starting salary was £25,000 per annum plus commission. At
4myschools,
Ms
Palmer
was primarily responsible for matching teachers with
vacancies
at secondary
schools
in Essex.
- Clause 15 of the
4myschools
Contract contained covenants not to solicit or to deal for a period of 6 months after the ending of her employment with the candidate teachers or client
schools
with whom Ms
Palmer
had dealt in her last 12 months at
4myschools.
Those covenants were expressed to extend to actions carried out by Ms
Palmer,
not merely on her own account, but also "as principal, partner, shareholder, director, employee, consultant or in any other capacity whatsoever".
- Towards the end of 2012, Ms
Palmer
became disillusioned with her prospects at
4myschools.
She therefore started to look for a new job. On 31 January
2013
she was offered a post by the Second Defendant, Sugarman Group Limited ("Sugarman Education") as a "Senior Consultant", at a higher salary than she was receiving at
4myschools.
Sugarman Education is
another
educational sector recruitment agency. It operates from premises in the City of London Ms
Palmer
accepted the post offered by Sugarman Education by email dated 4th February
2013,
and on 1st March
2013
she gave notice to
4myschools
that she was leaving. Clause 11.1.2 of the
4myschools
Contract required Ms
Palmer
to give 4 weeks' notice to terminate her employment. Her employment with
4myschools
therefore ended on Friday, 29th March
2013.
- On Tuesday 2 April
2013
(Monday 1 April was a Bank Holiday), Ms
Palmer
started work with Sugarman Education. Sugarman Education wished to develop its business in Essex, and so assigned Ms
Palmer
to work on building Sugarman Education's business with secondary
schools
in Essex, the same area that she had covered for
4myschools.
- Not long after Ms
Palmer
started work,
4myschools
received information which led it to believe that Ms
Palmer
was breaking the terms of her restrictive covenants by soliciting and/or dealing with the candidate teachers and client
schools
with whom she had dealt while employed by
4myschools.
On 30 April
2013,
Field Fisher Waterhouse LLP ("FFW"), who are
4myschools'
solicitors, wrote letters both to Ms
Palmer
and to Sugarman Education. Those letters drew attention to Ms
Palmer's
contractual obligations. The letter to Ms
Palmer
demanded that she sign an undertaking to comply with the terms of clause 15 of the
4myschools
Contract, and provide a list of all teachers and
schools
that she had contacted in breach of those terms. The letter to Sugarman Education asked Sugarman Education to confirm whether any information confidential to
4myschools
was on Sugarman Education's systems or had been used by Sugarman Education since Ms
Palmer
had joined it.
- In response, Ms
Palmer
(at Sugarman Education's expense) and Sugarman Education each consulted solicitors. Ms
Palmer
instructed Bignalls Balderston Warren ("BBW"). Sugarman Education instructed Manches LLP ("Manches", now Penningtons Manches LLP). BBW and Manches entered into correspondence with FFW. Eventually, under cover of emailed letters dated 24th May
2013,
BBW sent to FFW a form of undertaking signed by Mr
Palmer
("the 24 May Undertakings"). The wording of the 24 May Undertakings did not follow the wording proposed by FFW on 30 April
2013.
However, the undertakings which were contained in the 24 May Undertakings essentially mirrored the terms of sub-clauses 15.2.2, 15.2.3, 15.2.6 and 15.2.7 of the
4myschools
Contract, with the addition of a 30-mile geographical restriction.
- To reinforce the 24 May Undertakings, under cover of an email dated 31 May and a letter dated 3 June
2013,
BBW sent to FFW a copy of an Affidavit sworn by Ms
Palmer.
In that Affidavit, she "state[d] unequivocally that I shall abide by the terms of the undertakings". Under cover of a letter dated 13 June
2013,
BBW also sent to FFW a copy of a Schedule which purported to show that, in the 4-week period beginning on 22 April
2013,
Ms
Palmer
had placed candidates to fill 31 days of
vacancies
at 6
schools
which were (in BBW's words) "common clients of both
4myschools
and Sugarman [Education]".
- Thereafter,
4MySchools
received additional information which led it to believe that Ms
Palmer
had committed further breaches of her restrictive covenants, over and above those about which FFW had been informed by BBW.
4myschools
therefore decided to bring High Court proceedings against Ms
Palmer
and Sugarman Education. On 8 July
2013
4myschools
issued and served on BBW and Manches a Claim Form and an Application for an interim injunction. That Application came on for hearing on 12 July
2013
before Sharpe J, and was disposed of by a Consent Order under which Ms
Palmer
and Sugarman Education gave undertakings, against a cross-undertaking in damages given by
4MySchools.
The order of Sharpe J contained directions for a speedy trial of the action, and it is that trial which has come before me for hearing.
The Issues
- The undertakings given by Ms
Palmer
and by Sugarman Education to Sharpe J lasted only for the balance of the 6-month period from the termination of Ms
Palmer's
employment with
4myschools
prescribed by clause 15 of the
4myschools
Contract. Those undertakings accordingly expired on 29 September
2013,
more than 2 months before the trial before me began. In practical terms, therefore, the central issue which I have to determine is whether, had an injunction been granted on 12 July
2013
in the terms of the undertakings then given by Ms
Palmer
and Sugarman Education, that injunction would have been "wrongly granted"[1]. Put in positive terms, I have to decide whether (on the facts as I now find them) Sharpe J should have granted an injunction to
4myschools,
if undertakings had not been given by the Defendants. If so, I shall have to consider whether
4myschools
is additionally entitled to an award of damages or to any other further relief. If not, I shall have to consider whether to order an enquiry under the cross-undertaking given by
4myschools
as to the damage (if any) suffered by Mr
Palmer
and Sugarman Education by reason of the undertakings which they gave to Sharpe J.
- In order to decide that central issue, and the other issues which arise in this action, I have to answer the following main questions:
12.1. What, if any, was the legal effect of the 24 May Undertakings?
12.2. Were the restrictive covenants to which Ms
Palmer
agreed in sub-clauses 15.2.2, 15.2.3, 15.2.6 and 15.2.7 of the
4myschools
Contract and/or in the 24 May Undertakings (to the extent, if any, that I find that the 24 May Undertakings have any independent contractual force) legally enforceable? In particular, has
4myschools
established that:
12.2.1. It had a legitimate proprietary interest requiring protection; and that
12.2.2. Each of the covenants and/or undertakings on which it relies was, on its true construction (and
taken
together with the other covenants and undertakings), no wider than was reasonably necessary to protect that interest?
12.3. To the extent, if any, that I find that any of these covenants and undertakings was legally enforceable:
12.3.1. To what extent did Ms
Palmer
breach that covenant or undertaking, and to what extent (if any) at the time of the application to Sharpe J did she threaten and intend to do so in the future?
12.3.2. What recoverable loss (if any) have the breaches by Ms
Palmer
caused to
4myschools?
12.3.3. Did Sugarman induce any of those breaches by Ms
Palmer,
and to what extent (if any) at the time of the application to Sharpe J did it threaten and intend to act in that way in the future?
12.3.4. If Sugarman did induce any breaches by Ms
Palmer,
is Sugarman liable to pay exemplary, as well as compensatory, damages to
4myschools
for that tort?
12.3.5. As a matter of discretion, and having regard to all the circumstances, would it have been right (if no undertakings to the Court had been offered in lieu) to grant injunctive relief at the time of the application to Sharpe J (a) against Ms
Palmer
and/or (b) against Sugarman Education?
- In paragraph 5 of her Defence, Ms
Palmer
originally alleged that
4myschools
had committed repudiatory breaches of the
4myschools
Contract, which she had accepted by resigning, thereby discharging her from further compliance with her post-termination restrictive covenants (under the rule in General Billposting Co Ltd
v
Atkinson[2]). Ms
Palmer
also gave evidence supporting these allegations in her Second Affidavit and in her Witness Statement. Ms
Palmer's
allegations were all strongly disputed by
4myschools.
However, at the outset of the trial, Mr Brook indicated on behalf of Ms
Palmer
that this line of defence was no longer to be pursued. I therefore need say no more about it.
What was the legal effect of Ms
Palmer's
written undertakings and First Affidavit?
The nature of the issue
- Paragraph 12 of the Particulars of Claim pleads that the undertakings sent to FFW by BBW on 24 May
2013
were given "[b]y way of .. contractual undertakings": and paragraph 14 asserts that "the Undertakings were given in order to prevent .. the Claimant seeking interim injunctive relief and in an attempt to reduce any orders for costs in respect of which [Mr
Palmer]
might be liable". Paragraph 15 of Ms
Palmer's
Defence admits that she signed "contractual undertakings", but avers that they were of no legal effect until released on 11th July
2013
(by which time, proceedings had already been issued). Paragraph 12 of Sugarman Education's Defence admits paragraph 12 of the Particulars of Claim, but avers that the undertakings were offered "in order to minimise costs and to bring the matter to a commercially sensible conclusion", so that "no admissions were made or implied" by the giving of the undertakings.
- The Statements of Case served on behalf of the Defendants therefore both admit that the 24 May Undertakings had contractual force. However, in the course of the trial, I indicated to Mr Solomon, who appeared for
4myschools,
that I was in some doubt as to whether the evidence placed before me supported the conclusion of law that the written exchanges between the parties (both parties being agreed that all relevant communications were in writing) had created a legally binding contract. In particular, I was concerned as to whether the correspondence between BBW and FFW had given rise to any concluded agreement.
The relevant correspondence
- The relevant correspondence begins with FFW's letter dated 30 April
2013
to Ms
Palmer.
That letter enclosed a form of undertaking to be signed by Ms
Palmer,
the opening words of which were:
I, Luci
Palmer
acknowledge that I am bound by post-termination restrictions, including non-solicitation obligations, contained in the contract of employment dated 17 January 2011 ("the Contract").
In consideration for
East
England
Schools
CIC
trading as
4myschools
.. agreeing not to bring injunctive proceedings against me in the High Court of Justice, London,
England
for breach of the non-solicitation restrictions in the Contract, I hereby unequivocally and irrevocably undertake to
4myschools
as follows ..
- Had Ms
Palmer
signed that form and returned it to FFW, there can be little doubt that that would have amounted to an agreement between Ms
Palmer
and
4myschools
which (subject to any issues of restraint of trade) would have been legally binding as a simple contract. The terms of that contract would then have precluded
4myschools
from "bring[ing] injunctive proceedings .. for breach of the non-solicitation restrictions in the [
4myschools]
Contract" – something which
4myschools
in fact did by issuing its Claim Form and Application Notice on 8 July
2013.
- However, Ms
Palmer
did not sign FFW's form of undertaking. Instead, BBW replied on Ms
Palmer's
behalf on 9 May
2013,
admitting two contacts "in a personal capacity" with individuals at
schools
"which are Clients of both
4myschools
and Sugarman", but denying any breaches of the restrictive covenants in the
4myschools
Contract, and asserting that those covenants were, in any event, too widely drawn to be enforceable.
- FFW's reply, dated 15 May
2013,
stated that, in
view
of evidence that had been obtained of breaches by Ms
Palmer,
"our client is no longer willing to accept undertakings directly from your client". FFW enclosed a draft Claim Form "which will be issued by Friday 17 May", and required the provision of undertakings by Ms
Palmer
to the Court, failing which an application for a "springboard" injunction would be made. BBW responded by email the same day, attempting to stave off proceedings as premature. However, by letter sent by email on 16 May
2013,
FFW repeated their client's intention to issue a claim, and to require undertakings to the Court in the form of a further draft Order. BBW's response, sent on 17 May
2013,
was that "our client does not agree to the undertakings and denies any liability to your client for breach".
- After some further exchanges of correspondence, on 21 May
2013
FFW wrote a lengthy letter to BBW, in the course of which they "offered a compromise .. in relation to the non-competition clause .. [to the effect that] an injunction based on clause 15.2.1 will not be pursued at the interim hearing ..". BBW responded on the following day, 22 May
2013,
saying that "Given your client's new position .. in relation to the non-competition clause at 15.2.1, our client is willing to give suitable undertakings in your client's favour pending resolution of the issue, which we expect to be without the need for any proceedings"[3]. BBW's letter invited FFW to prepare a revised draft of the undertakings to be given.
- FFW's response on 23 May
2013,
however, stated again that "our client requires undertakings to be provided to the Court". That letter enclosed a draft Order for an Injunction, and asked BBW to confirm that they were instructed to accept service of proceedings.
- At 11.33 on 24 May
2013,
BBW sent a holding reply by email to FFW, saying that they "anticipate being able to write to you with proposals that will hopefully dissuade your clients from proceeding with the immediate issue of proceedings ..": and at 12.59 on 24 May
2013
BBW sent to FFW a letter in the following terms:
.. Without prejudice to her arguments as to the enforceability of those covenants which have been set out clearly and at length in our recent letters, our client is willing to offer undertakings in the form enclosed. We shall arrange for a signed copy to be forwarded to you, hopefully within the hour and would ask that this be held to our order pending your confirmation that your clients will not seek an order of costs in the proposed injunction proceedings based on any breaches of covenant that are alleged to have
taken
place to date. Clearly our client's firm intention is to avoid such injunction proceedings being issued.
For the avoidance of doubt, this does not in any way limit your clients' claim for costs should they decide to proceed with their proposed claim for damages, nor indeed would it limit your clients' claim for costs should they make a future application consequent upon an alleged breach or breaches of the enclosed undertakings ..
- The attached form of undertaking was in the following terms;
I, LUCINDA
PALMER
.. pursuant to my contract of employment with ..
4myschools
("the Company") which was entered into on the 11th January 2011 and terminated as a result of my resignation on the 29 March
2013
("the Contract")
HEREBY UNDERTAKE as follows:
I shall not, up to and including 29 September
2013,
within 30 miles of any branch of the Company or any Group Company at which I worked in the 12 months ending on 29 March
2013,
on my own account or on behalf of others, whether directly or indirectly and whether by myself, or through my servants or agents:
In competition with the Company or any Group Company canvass or solicit business or custom from any Client or Prospective Client in relation to Services;
In competition with the Company or any Group Company be concerned with the supply to any Client or Prospective Client of Services or otherwise deal with any Client or Prospective Client in relation to Services;
Canvass or solicit business or custom from any Candidate or Prospective Candidate In relation to Services;
Be concerned with the supply to any Candidate or Prospective Candidate of Services or otherwise deal with any Candidate or Prospective Candidate in relation to Services.
For the purposes of these undertakings the terms "Candidate", "Client", "Group Company", "Prospective Candidate", "Prospective Client" and "Services" shall have the meanings attributed to them in the Contract, a copy of which is annexed.
I understand that, if I breach any of the terms of this Undertaking the Company may issue proceedings against me without further notice seeking an Injunction, damages and costs. I have had the opportunity of
taking
independent legal advice before signing this undertaking.
A signed copy of the 24 May Undertakings was provided under cover of an email sent at 15.57 on 24 May
2013.
- FFW, however, did not accept this offer. By letter dated 28 May
2013,
they recorded receipt of the signed undertakings from BBW "which we confirm we are holding to your order". However, they reiterated that
.. our client requires undertakings to be provided to the Court. In the event of further breaches of covenant by your client, a contractual remedy against your client is not acceptable .. Therefore, please confirm by return that your client consents to a court order reflecting the signed undertakings. If your client is not prepared to consent, please explain why? ..
FFW's 28 May
2013
letter did, however, make a counter-offer to Ms
Palmer:
Conditional upon your client's agreement to a court order enshrining the undertakings .. our client is prepared to refrain from seeking a costs order from your client at this stage in relation to the proposed application for an injunction ..
- By email sent at 14.58 on 28 May
2013,
BBW requested clarification of FFW's position on costs, to which FFW replied on 29 May
2013,
enclosing an amended draft Order. A flurry of further correspondence between BBW and FFW then ensued, culminating in an email from BBW to FFW at 16.13 on 31 May
2013,
which stated:
I attach the first affidavit of Luci
Palmer,
which is currently unsworn. Please hold the affidavit to our order on the same terms as set out in our letter of 24 May
2013
which enclosed the unsigned undertakings.
Our client has tried to speak with six or seven solicitors but has been unable to find someone who can see her to swear the affidavit today, largely due to holiday and solicitors' attendance at Court. She is therefore going to arrange an appointment on Monday 3 June. I shall send you the sworn affidavit once I have received it.
- The enclosed draft affidavit stated that it was made "in support of" the 24 May Undertakings, and exhibited a copy of them. It continued:
[I]t has been suggested that I might not abide by the terms of the Undertakings unless they are given to the Court. This will necessitate the issue of injunction proceedings in the High Court, with its attendant costs ..
.. In the light of the above, I wish to state unequivocally that I shall abide by the terms of the Undertakings. Indeed, my earnest wish is to avoid proceedings.
- BBW sent a sworn copy of Ms
Palmer's
First Affidavit to FFW on 3 June
2013,
under cover of a letter which proposed a settlement meeting and which expressed the hope "that this matter can move forward in a conciliatory and constructive manner without the need for proceedings". That letter also agreed to provide a Second Affidavit, to deal with "documents and confidential information".
- Following a response dated 5 June
2013
from FFW, complaining of the delay, BBW sent an email to FFW at 17.29 on 5 June
2013
in the following terms:
Please find attached our client's sworn first and second Affidavits. Please hold these to our order pending your confirmation that your clients will not seek an order of costs in the proposed injunction proceedings based on any breaches of covenant that are alleged to have
taken
place to date. Please note that our client reserves her position in the event that the matter is litigated and understands that your client reserves its position also.
- As I have already noted in paragraph 9 above, on 13 June
2013,
BBW wrote to FFW enclosing a schedule of placements which Ms
Palmer
admitted making. That letter concluded
.. You will note immediately that the total gross[4] profit of the placements is £1,240, ie at the
very
bottom of the small claims track bracket. On any
view,
this sum cannot justify the bringing of High Court proceedings, particularly now that sensible resolution has been achieved regarding all other substantive issues ..
- There then followed a 3-week period of silence between the parties, which was only broken by FFW's letter dated 8 July
2013,
which attached the Claim Form and Application for an Injunction.
- BBW's first letter dated 11 July
2013
in response protested that the decision to issue proceedings was "disproportionate and unnecessary", and continued:
We understand that the First Defendant has notified you that she is prepared to re-affirm her commitment to her contractual undertakings of 24th May
2013.
Despite your failure to reply to the issue of these undertakings having been held to the "order of BBW", she is now willing to offer them unconditionally. In the circumstances, this is a proportionate and adequate safeguard for your client
- BBW's second letter dated 11 July
2013
stated:
We confirm that we release the undertakings and affidavits which were sent to you on 24 May, 3 June and 5 June
2013.
We also confirm that our client is willing to give an undertaking to the court in the terms of paragraph 1 of your draft order.
- FFW replied that same day:
You state that your client is willing to provide undertakings in the form of paragraph 1 of our draft order. However, so that the position is entirely clear, please send us by return a copy of the court order which your client is willing to have made against her by the court tomorrow, which we will consider ..
If your client consents to the undertakings sought in paragraph 1 of the draft order, our client is prepared to agree not to seek undertakings in relation to confidential information, and will instead rely on the content of your client's second affidavit sworn on 5 June
2013.
- Thereafter, the terms of the Orders to be made by Sharpe J were agreed between solicitors and counsel, and the Orders in fact made on 12 July
2013
were made by consent.
Analysis and conclusions
- Doing the best that I can, I am unable to find in this correspondence any concluded agreement sufficient to amount to a simple contract between Ms
Palmer
and
4myschools,
at least at any point prior to the parties' eventual agreement on the terms of the Orders to be made by Sharpe J.
- The declared intention of BBW in sending the 24 May Undertakings and Ms
Palmer's
First Affidavit sworn on 3 June
2013
to FFW was to stave off proceedings: and, at least to some extent, they were successful in that endeavour, and obtained from FFW a degree of forbearance to sue. However, BBW do not seem to have turned their mind to the question of whether a Deed might have been a better legal format for what they intended to achieve than a mere signed document, or even an Affidavit. As for FFW, their focus was on obtaining undertakings to the Court. Their declared position at the time was that their client was not interested in a mere further contractual promise.
- The 24 May Undertakings were expressly sent "to be held to our [ie BBW's] order pending your confirmation that your clients will not seek an order of costs in the proposed injunction proceedings based on any breaches of covenant that are alleged to have
taken
place to date". That same condition was attached to Ms
Palmer's
Affidavit which was to be held "to our order on the same terms as set out in our letter of 24 May
2013".
FFW did not at any point meet that condition, or give the agreement sought. On the contrary, they continued to insist that any undertakings should be given, not just in writing, but to the Court, on the basis that "a [purely] contractual remedy against your client is not acceptable". By the time that the condition imposed by BBW was released on 11 July
2013,
proceedings had already been begun: and there was no specific counter-promise or performance either sought or given in return for that release, so as to turn what would otherwise simply be unilateral promises by Ms
Palmer
into a legally binding contract between her and
4myschools.
Applying the conventional concepts, I find that there was no correspondence of offer and acceptance at any relevant point in the exchanges between the parties.
- Mr Solomon submitted that BBW's stipulation that the 24 May Undertakings should be held to BBW's order "makes no sense in the context, especially in the light of the terms of the Affidavit", and should therefore be disregarded. As to that, I accept that the concept of being "held to order" is more appropriate to those types of document – such as a deed or conveyance – which do not
take
effect until delivery. However, even in such cases, the legal concept of delivery does not simply mean "handed over" to the other party, but rather means an act done so as to evince an intention to be bound by the document[5]. The focus, even in such cases, is on the manifested intention of the delivering party. Here, the intention of BBW - that the 24th May Undertakings should not
take
effect as a contractual offer unless and until BBW said so – would have been plain to a reasonable recipient in FFW's position, even though the legal concept that BBW employed to express that intention was arguably inapt.
- For these reasons, I have come to the conclusion that the 24 May Undertakings are not enforceable in their own right as a separate contract.
- That, however, does not necessarily mean that they are entirely irrelevant. The fact that undertakings in these terms were offered by Ms
Palmer,
voluntarily
and with the benefit of legal advice, is a factor which could be
taken
into account, if appropriate, in considering the reasonableness of the similar restrictions contained in the
4myschools
Contract.
The enforceability of the restrictive covenants
- I therefore turn to consider the enforceability of the restrictive covenants which were contained in clause 15 of the
4myschools
Contract itself.
The relevant provisions of the contract
- The relevant terms of the
4myschools
Contract are the following:
15. RESTRICTIONS
15.1 In this clause:-
15.1.1 "Candidate" means an applicant for permanent, temporary or contract employment (employment through a service company) who has at any time during the Relevant Period been registered with the Company or any Group Company and with whom the Employee was materially involved or had personal dealings during the Relevant Period;
15.1.2 "Client" means any person, firm,
school,
nursery, company or entity which has at any time during the Relevant Period been a client of the Company or any Group Company and with whom the Employee was materially involved or had personal dealings during the Relevant Period;
…
15.1.5 "Prospective Candidate" means any person, firm, company or entity who has at any time during the period of six months prior to the Termination Date been in negotiations with the Company or any Group Company about their availability for placement in permanent, temporary or contract employment and with whom during such period the Employee was materially involved or had personal dealings;
15.1.6 "Prospective Client" means any person, firm,
school,
nursery, company or entity which has at any time during the period of six months prior to the Termination Date been in negotiations with the Company or any Group Company for the supply of services and with whom during such period the Employee was materially involved or had personal dealings;
15.1.7 "Relevant Area" means within 30 miles of any branch of the Company or any Group Company at which the Employee worked in the Relevant Period;
15.1.8 "Relevant Period" means the period of 12 months ending on the Termination Date;
15.1.9 "Services" means services identical or similar to those being supplied by the Company or any Group Company at the Termination Date and with which the Employee was materially involved during the Relevant Period;
15.1.10 "Termination Date" means the date on which the Employee's employment terminates or, if she spends a period on garden leave immediately before the termination of her employment, such earlier date on which such garden leave commences;
15.2 The Employee covenants with the Company that she will not, save with the prior written consent of the Company, directly or indirectly, either alone or with or on behalf of any person, firm, company or entity and whether on her own account or as principal, partner, shareholder, director, employee, consultant or in any other capacity whatsoever:-
15.2.1 for six months following the Termination Date be engaged or concerned in any business supplying Services to
schools,
nurseries or teachers in the Relevant Area;
15.2.2 for six months following the Termination Date and in competition with the Company or any Group Company canvass or solicit business or custom from any Client or Prospective Client in relation to Services;
15.2.3 for six months following the Termination Date and in competition with the Company or any Group Company be concerned with the supply to any Client or Prospective Client of Services or otherwise deal with any Client or Prospective Client in relation to Services;
…
15.2.6 for six months following the Termination Date canvass or solicit business or custom from any Candidate or Prospective Candidate in relation to Services;
15.2.7 for six months following the Termination Date be concerned with the supply to any Candidate or Prospective Candidate of Services or otherwise deal with any Candidate or Prospective Candidate in relation to Services;
…
15.4 Each of the restrictions contained in this clause is an entirely separate and independent restriction, despite the fact that they may be contained in the same phrase, and if any part is found to be unenforceable the remainder will remain
valid
and enforceable.
- The argument during the hearing before me was confined to sub-clauses 15.2.2, 15.2.3, 15.2.6 and 15.2.7, because those were the provisions of clause 15 which were reflected in the undertakings given to Sharpe J on 12 July
2013.
I therefore deal in this judgment only with the enforceability of those 4 sub-clauses.
The law
- As is stated in Chitty on Contracts[6], all covenants in restraint of trade are prima facie unenforceable at common law, and are enforceable only if they are reasonable with reference to the interests of the parties concerned and of the public. Unless the unreasonable part can be severed by the removal of either part or the whole of the covenant in question, its inclusion renders the covenant or the entire contract unenforceable. The doctrine of restraint of trade is probably one of the oldest applications of the doctrine of public policy.
- There was no dispute between the parties that these 4 covenants were prima facie in restraint of trade, or about the basic principles of law which I should apply in deciding whether these particular sub-clauses in this particular contract were "reasonable with reference to the interests of the parties concerned and of the public". Both sides agreed that those principles were accurately stated by Sir Bernard Rix in his judgment in Coppage
v
Safety Net Security Limited[7], as follows:
(1) Post-termination restraints are enforceable, if reasonable, but covenants in employment contracts are
viewed
more jealously than in other more commercial contracts, such as those between a seller and a buyer.
(2) It is for the employer to show that a restraint is reasonable in the interests of the parties and in particular that it is designed for the protection of some proprietary interest of the employer for which the restraint is reasonably necessary.
(3) Customer lists and other such information about customers fall within such proprietary interests.
(4) Non-solicitation clauses are therefore more favourably looked upon than non-competition clauses, for an employer is not entitled to protect himself against mere competition on the part of a former employee.
(5) The question of reasonableness has to be asked as of the outset of the contract, looking forwards, as a matter of the covenant's meaning, and not in the light of matters that have subsequently
taken
place (save to the extent that those throw any general light on what might have been fairly contemplated on a reasonable
view
of the clause's meaning).
(6) In that context, the
validity
of a clause is not to be tested by hypothetical matters which could fall within the clause's meaning as a matter of language, if such matters would be improbable or fall outside the parties' contemplation.
(7) Because of the difficulties of testing in the case of each customer, past or current, whether such a customer is likely to do business with the employer in the future, a clause which is reasonable in terms of space or time will be likely to be enforced. Moreover, it has been said that it is the customer whose future custom is uncertain that is 'the
very
class of case against which the covenant is designed to give protection ... the plaintiff does not need protection against customers who are faithful to him' (John Michael Design plc
v
Cooke [1987] 2 All ER 332, 334).
(8) On the whole, cases in this area turn so much on their own facts that the citation of precedent is not of assistance.
Some proprietary interest of the employer
- Both sides were also agreed that the first question which I should consider is whether, looking at the matter as at January 2011 (which was when the
4myschools
Contract was made),
4myschools
had a relevant proprietary interest which these covenants were designed to protect.
- In paragraph 6 of the Particulars of Claim,
4myschools
identified the proprietary interest which these covenants were designed to protect as its:
.. [L]egitimate interests in its trade connection with its clients and candidates. By reasons of [Ms
Palmer]'s
employment with [
4myschools],
[Ms
Palmer]
had built up close relationships with [
4myschools]'s
clients and candidates which she would be able to
take
advantage of for her own benefit and for the benefit of her future employer upon termination of her employment with [
4myschools]
- The existence of this proprietary interest is denied by both of the Defendants. Ms
Palmer
asserts in her Defence (in paragraph 9 and elsewhere), that:
48.1. While employed by
4myschools,
she did not build up close relationships either with
schools
or with teachers. In general, neither
schools
nor teachers have any loyalty to any particular agency. Each simply goes to whichever of the many agencies in the market can meet its, his or her immediate need for a placement.
48.2. With the increasing use of the internet and social media, all relevant information is now in the public domain, and so cannot be confidential to any particular agency.
48.2.1. With regard to
schools,
the identity of all state secondary
schools
in Essex, and the names and contact details of all of the individuals who deal with teacher recruitment at those
schools,
is easily accessible public information.
48.2.2. With regard to teachers, they generally ensure that their identity and details are publicly available on the internet and social media, in order to maximise their opportunities for work.
48.3. All
schools
in any event deal with a number of employment agencies: and almost all teachers register with several employment agencies at the same time.
48.4. To the extent that any loyalty does exist, it is to the agency and not to any particular employee.
Paragraph 6 of Sugarman Education's Defence is to the like effect.
The witnesses
- The nature of this dispute was amplified and clarified in the evidence given before me. Although (as one might expect) there was a considerable degree of common ground in the descriptions given by all of the witnesses of how business is done by companies like
4myschools
and Sugarman Education, there were some (at least apparent) conflicts in the relevant factual evidence which I must resolve.
- I therefore begin my consideration of that evidence by setting out my impressions of the witnesses. I have, of course, paid close attention to the demeanour of each witness when he or she has been giving their evidence. However, I must also test their evidence against all the other materials available to me. In that regard, I bear in mind the helpful observations of Robert Goff LJ (as he then was) in The Ocean Frost[8]:
.. It is frequently
very
difficult to tell whether a witness is telling the truth or not; and where there is a conflict of evidence such as there was in the present case, reference to the objective facts and documents, to the witnesses' motives, and to the overall probabilities, can be of
very
great assistance to a Judge in ascertaining the truth ..
I also bear in mind the
valuable
observations on the fallibility of human memory made by Leggatt J in his
very
recent judgment in Gestmin SGPS SA
v
Credit Suisse (UK) Ltd[9].
- The only witness to give relevant evidence on behalf of
4myschools
was Mr Mark Payne. Mr Payne and his wife are, in practice, the principals of
4myschools.
Mr Payne was a confident and careful witness, who did not duck difficult questions. My impression was that he was doing his best to give his evidence truthfully and to the best of his recollection, while also attempting to put the best "spin" on his company's case that he could.
- Ms
Palmer
gave evidence on her own behalf. She was
very
nervous, and I make full allowance for that. Unlike Mr Payne, however, she did have a tendency to avoid answering difficult questions. My impression was that she was trying to give her evidence truthfully, but was also trying to avoid saying anything which might help
4myschools.
When questioned about why some of the answers given on her behalf in correspondence had been misleading, and why names which she knew to be those of teachers with whom she had dealt at
4myschools
had been redacted in the copies provided on disclosure, she had a tendency to
take
refuge in blaming her "brief". Her excuse, on too many occasions, for her lack of frankness was to say words to the effect of "I can only go with the legal advice I was given". Any such advice would, of course, have been not just wrong, but improper: and, in my judgment, it is highly improbable that she received any such advice. I have to
take
those untruthful and evasive answers into account in my assessment of the reliability of her evidence overall.
- The sole witness on behalf of Sugarman Education was its Managing Director, Mr Tim Wheeler. He was a combative witness, who made speeches, asked questions of counsel, and prefaced many of his answers with the disingenuous remark that "I am not trying to be difficult, but ..". Even so, it seemed to me that he tried to give his evidence about the way that business is done in this sector of the market truthfully and to the best of his recollection – though, like Mr Payne, he also attempted to put the best "spin" on his company's case that he could. However, unlike Mr Payne, he was not a careful witness. He exaggerated, and failed to give straight answers to a number of questions, particularly concerning the extent to which he was aware at the material times of the restrictions binding Ms
Palmer.
The nature of the market
- The extracts from the witness statements served on behalf of the parties which are quoted in the following paragraphs of this judgment serve to give a flavour of the dispute on this point.
- Mr Payne gave evidence to support
4myschools'
pleaded case as to the nature of the interest to be protected. According to Mr Payne:
.. It is correct that client information, and certain basic candidate information, is available within the public domain. Teacher candidates often register with more than one agency. However; the non-solicitation restrictive covenants do not seek to protect general information about clients and candidates but are concerned with protecting the close relationships with specific clients and candidates which are built up by consultants on behalf of the Claimant. A protected period of 6 months following the departure of a recruitment consultant is necessary to protect the trade connections between the Claimant and its clients and candidates and to enable the Claimant to have a reasonable chance of securing the future business and goodwill of its clients and candidates following the inevitable disruption to that relationship resulting from the departure of the relevant recruitment consultant from the business.
Ms
Palmer
was no exception to this and was engaged by the Claimant to
take
on responsibility for the management of the Claimant's existing client and candidate list for Essex secondary
schools
when
another
employee went on maternity leave. Ms
Palmer's
role for the Claimant was to manage and build the close business relationships with the Claimant's list of clients and candidates that she inherited when
taking
over the position of the recruitment consultant with sole responsibility for Essex secondary
schools.
Ms
Palmer
was the point of contact for Essex based candidates and
schools,
to ensure the Claimant's business was maintained and retained on an ongoing basis. .. [T]he main purpose of [Ms
Palmer's]
employment [was to build up close relationships with clients/candidates] in order to maximise the Claimant's business with its customers: and the Claimant invested in individual training of Ms
Palmer
to enable her to better build rapport with key individuals at
schools.
She would regularly meet with and speak on the telephone to contacts at
schools
so she could understand their requirements and build close relationships. This was also true of the candidates where Ms
Palmer
interviewed each teacher face-to-face, registered them with Claimant, and then provided them with work. Ms
Palmer
says that her dealings with the Claimant's clients were limited to a small number of individuals at each client. I agree that this was the case. These were the key individuals with whom it was so important for the Claimant to build and maintain a relationship. Without them, there is no client relationship ..
- Mr Payne did, however, accept in cross examination that, if Ms
Palmer
were ill, any of his team would answer the telephone to clients and candidates, and that "the business would get done" in Ms
Palmer's
absence. He also accepted that, in at least one case (Moulsham
School)
where the documents might otherwise have suggested that Ms
Palmer
had a close relationship with the relevant supply manager, Ms
Palmer
had nevertheless been unable to secure that
school's
business for Sugarman Education after leaving
4myschools.
- By contrast, according to Mr Wheeler no such "close relationships" of the kind referred to by Mr Payne exist in this market:
.. The goodwill between an agency and a client
school
is of marginal
value
when the nature of the educational recruitment industry is properly considered. The key factor for a placement to
take
place is the quality and availability of candidates, not loyalty to any particular agency or consultant ..
.. The needs of
schools
outstrip the ability of the market, and certainly any one agency, to supply. The truth of the matter is that the real drivers of this market are the candidates, and they are in
very
short supply ..
No one agency will have the best candidate for every position and teaching roles have to be filled ..
As a public service, details of state
schools
are openly accessible to everyone .. all of the information relating to
schools
that is required to run an effective recruitment business is online or otherwise readily available to the public ..
.. Candidates also list their details on publicly available websites such as Linked In, CV Library, Jobs in Education, Total Jobs, and Reed ..
In summary, the open availability of
school
and candidate details, the number of agencies with which
schools
and candidates deal, the need for the
schools
to carry out their duties to their pupils and the desire of candidates to secure employment is such that the sense of loyalty or protectable goodwill that may be found in other fields does not arise in education recruitment as it once did. The advent of the internet has completely changed the working environment ..
- Ms
Palmer's
evidence supported that of Mr Wheeler. According to her:
.. [T]he education recruitment industry .. functions effectively on the basis of fluid, non-proprietary relationships between clients, candidates and agencies alike. It was my experience that none of the
schools
or candidates were loyal to any particular agency ..
.. Any particular relationship I built up with clients and candidates whilst working at [
4myschools]
was due simply to my inherent personal skills, rather than any advantage afforded to me by [
4myschools].
I was not the only consultant building up such relationships with the
schools
..
Further, my professional relationships with the clients and candidates were no deeper than those which subsist between the
schools/candidates
and every other consultant at the numerous agencies with which they deal .. [
4myschools]
continued to trade with these
schools
(in some cases, more than when I was the acting consultant) and candidates immediately after my departure.
- However, Ms
Palmer
was obliged to admit in cross-examination that her job description at
4myschools
included as part of her role to "Build relationships with new clients (
schools)
by
visiting
them in their premises to gain a thorough understanding of their needs", to "Keep in touch with existing clients over the phone and by
visiting
them in their premises and search for new opportunities through recommendations", and to "Build relationships with candidates and ensure they understand the "why" about
4myschools".
She also accepted that she had in fact carried out these
tasks,
and that Mr Jessop, one of her chosen referees for the position with Sugarman Education, had said in his reference for her that she "builds deep relationships with clients".
- In my judgment, Mr Wheeler's description of the way in which the market in this sector now operates (and operated in 2011) was generally an accurate one. I find as a fact that the market is candidate-driven, that the number of
vacancies
exceeds the number of candidates, that much of the relevant information about teachers and
schools
is publicly available, that
schools
will generally use whichever agency can get them the best candidate at the right price when they need him or her, that candidates will usually sign up with multiple agencies, and will
take
the best offers that come in from time to time, and that there is therefore little loyalty owed either by
schools
or teachers to any particular consultant or to any particular agency.
- Despite all that, I am satisfied that
4myschools
did have a sufficient proprietary interest that it was entitled to seek to protect in the connections which Ms
Palmer
would be likely to make while employed by
4myschools
with the
schools
and teachers with whom she dealt on
4myschools'
behalf.
- My reasons for this conclusion (and my further relevant findings of fact) are as follows:
62.1. Although Ms
Palmer
was only a comparatively junior employee, who (in the event) was passed over for supervisory roles, the job envisaged for her in the
4myschools
Contract was to be the name and (to a lesser extent) the face which represented
4myschools
to its Essex secondary
school
clients and candidates. It was envisaged that emails would normally be sent out (even if written by other members of staff or automatically) over her name. It was envisaged that she would, primarily, be the person who
visited
the
schools
and who spoke to them over the telephone on behalf of
4myschools.
She would be the person who met and spoke on the telephone to the candidate teachers. The building up of relationships with
schools
and teachers was an integral part of the role envisaged for her.
62.2. Although
schools
will ultimately use whichever agency has the right applicant, they have a choice about which agency to contact first. That choice may be influenced by a number of factors, including whether the agency has good systems, whether it is trustworthy, and whether it is known to have a good range of candidates. However, many agencies may fulfil those criteria: and among those otherwise equal agencies, the relationship between the consultant and the manager may sometimes be the deciding factor – not as to which agency will ultimately be used to fill the
vacancy,
but as which will get the first chance to do so. To be a
school's
first choice is a
valuable
asset for an agency like
4myschools.
62.3. Similarly, although candidate teachers will usually register with a number of agencies, the process of registration
takes
time and effort, so they will limit the number with which they are registered. Again, their choice may be driven by a number of factors. However, again, a number of agencies may meet the criteria: and, in choosing between them, the relationship with the consultant may in some cases be the deciding factor. The trust built up between the consultant and the candidate teacher – that the consultant will not try to push the candidate to
take
an unsuitable
vacancy,
and will be upfront about any problems - may also be influential in persuading a candidate to stay with a particular agency. A good pool of candidate teachers is a
valuable
asset for an agency like
4myschools.
62.4. Ms
Palmer
would, when she left, have
taken
with her in her head at least some
valuable
information confidential to
4myschools.
Although identities, addresses, phone numbers and qualifications may all have been publicly available, Ms
Palmer
would have acquired other
valuable
information about
schools
and candidates in the course of her employment that was not publicly available (or, at least, not so readily available). That would include information about the personalities concerned, about their likes, dislikes and foibles, and about their special requirements. That information, as an aspect of her personal connection with the people concerned, would be of use to Ms
Palmer
in any attempt that she might make to divert to a new employer the business of those with whom she had dealt while employed by
4myschools.
62.5.
Taking
all of these factors into consideration, it seems to me that it was reasonable for
4myschools
to envisage when the
4myschools
Contract was made that Ms
Palmer
would, if and when she left the employment of
4myschools,
be in a position to use the relationships which she had built up during her employment, and the confidential information which she had acquired during her employment, to influence the choice of an appreciable number of
schools
and teachers away from
4myschools
to her new employer.
62.6. The fact that the relationship between
schools
and teachers on the one hand, and
4myschools
on the other, was known to be a fragile one, makes it more, rather than less, necessary and legitimate for the employer to seek to protect it, because it makes the prospect of a successful solicitation by the ex-employee more likely[10].
Reasonableness
- I next turn to consider whether the restrictions in these sub-paragraphs were wider than was reasonably necessary for the protection of the interest which I have identified above.
- Mr Brook, on behalf of Ms
Palmer
and Sugarman Education, challenged the reasonableness of these restrictions on 3 grounds:
64.1. First, that, in looking back for a 12-month period, these covenants encompassed a wider selection of
schools
and teachers than was reasonably necessary for the protection of
4myschools'
proprietary connection, having regard to the fast-moving nature of the market.
64.2. Secondly, that, in restricting Ms
Palmer's
activities for 6 months after the end of her employment, the restrictions lasted longer than was reasonably necessary; and
64.3. Thirdly, that the fact that the restrictions are expressed to extend to actions carried out by Ms
Palmer,
not merely on her own account, but also "as principal, partner, shareholder, director, employee, consultant or in any other capacity whatsoever" of itself makes them unreasonably wide.
Restricting actions as a shareholder
- It was this third point which Mr Brook put at the forefront of his submission, so I shall deal with it first.
- Mr Brook submitted that the opening words of clause 15.2:
The Employee covenants with the Company that she will not .. [do any of the acts specified in the following sub-paragraphs] directly or indirectly, either alone or with or on behalf of any person, firm, company or entity and whether on her own account or as principal, partner, shareholder, director, employee, consultant or in any other capacity whatsoever ..
mean, when properly construed, that Ms
Palmer
would be in breach of clause 15 merely (for example) by acquiring a small minority shareholding in a company which dealt with the same
schools
or teachers as she had dealt with at
4myschools,
even if she played no active part in the business of that company. That, Mr Brook submitted, was plainly a wider restriction than could be justified for the protection of
4myschools'
legitimate interests.
- In support of his argument on this point, Mr Brook drew my attention to the
very
recent unreported decision of Tugendhat J in White Digital Media Ltd
v
Weaver[11]. That case, which came before Tugendhat J on an application for an interim injunction, concerned the restrictive covenants in the contract of employment[12] of the Regional Director of Operations of a publisher of free electronic magazines. As in the present case, the covenants against soliciting or dealing with relevant customers were set out in individual sub-clauses, all of which were prefaced by the following words:
The Employee will not .. directly or indirectly and whether alone or in conjunction with or on behalf of any other person and whether as a principal, shareholder, director, employee, agent, consultant partner or otherwise ..
- Tugendhat J decided that the restrictions in that case were wider than was reasonably necessary for the protection of the employer's legitimate interests, and so refused the injunction application. One of his reasons for doing so was that the restrictions were capable of being infringed merely by the ex-employee owning a minority shareholding in a competing company.
[23] Mr Nicholls submits that a clause that restrains a person from being involved in a competing business as a shareholder or in any other capacity is unenforceable. He cites Scully (UK) Ltd
v
Lee [1998] IRLR 259 at paras 24-25. In that case the judge at first instance had held that a covenant was too wide in so far as it provided that the employee should not "carry on, assist in the carrying on or be engaged or otherwise interested in, whether as a shareholder, director, consultant, employee or self-employed person or in any other capacity . . . ."
[24] As the judge observed, the words of the covenant restricted the employee from being a minority shareholder in a company which fell within the description given in that covenant. But the judge went on to hold that that provision was trivial and that the covenant in question was enforceable.
[25] In allowing the appeal, Aldous LJ recorded that Counsel did not challenge the judge's conclusion that the clause went wider than was reasonable in so far as it restricted the employee from being interested as a shareholder or in any other capacity. The court held at paras 33, 53 and 56 that this unreasonable part of the restriction could not be severed from the rest.
[26] Mr Redmayne submitted that in Scully the mischief was that the restrictive covenant was not confined to carrying on a competing business: see para 26. In the present case there are the words "so as to compete", which address that potential objection. So no question of severance arises.
[27] Mr Redmayne's submission is correct to the extent that the absence of words confining the restriction to a competing business was an issue in the case. But it does not meet the point made by Mr Nicholls. In my judgment the whole of cl 3 is unenforceable for the reason he advances.
- Mr Brook submits that the words of the clause considered by Tugendhat J are materially similar to those of the clause in the
4myschools
Contract which I have to consider, and that Tugendhat's decision is therefore persuasive authority both for the construction of that clause and for the consequent conclusion of law for which Mr Brook contends.
- So far as it is possible to tell from the judgment, the White Digital Media case was concerned, like the present case, with covenants against soliciting or dealing with the employer's clients (or enticing away the employer's staff). However, the observations of the Court of Appeal in the case of Scully (UK) Ltd
v
Lee[13] on which Tugendhat J relied were, by contrast, directed towards a rather different clause in the following terms, which directly prohibited the employee from being engaged in a competing business:
(c) The employee shall not during the period of 12 months commencing with the termination of his employment hereunder carry on, assist in carrying on or be engaged or otherwise interested in, whether as a shareholder, director, consultant, employee or self-employed person or in any other capacity, within the United Kingdom, any business involving or including the manufacture supply installing modification servicing advertising or otherwise dealing in overspill prevention or
tank
gauging equipment or without prejudice to the foregoing any other business which competes with any business carried on by the company at the date of this agreement
There was also a provision in the contract considered in Scully (clause (d)[14]) which contained a prohibition against soliciting or dealing with clients. However, that clause, although it prohibited actions
taken
"directly or indirectly", contained no reference to actions "as a shareholder, director, consultant, employee or self-employed person or in any other capacity".
- Scully was therefore concerned with provisions such as those to be found in sub-clause 15.2.1 in the present case, which in terms restrict the ability of the employee to be "engaged or concerned" in a competing business, even as a small minority shareholder. It is easy to see why such prohibitions will usually be held to be unreasonably wide. However, it would seem to follow that Tugendhat J must have considered that the non-solicitation and non-dealing provisions which he had to consider in White Digital Media had a similar practical effect, in that they could be infringed (inter alia) simply by the ex-employee owning a small minority shareholding. In my judgment, Mr Brook is therefore correct in his submission that the White Digital Media case directly supports his arguments, not merely on the issue of reasonableness but also on the issue of construction.
- Mr Solomon, on behalf of
4myschools,
did not dispute that a clause which prohibited Ms
Palmer
from owning a small minority shareholding in a competing business could be unreasonably wide. His submission was that that was not what the words of clause 15 (as applied to the covenants against soliciting or dealing in sub-clauses 15.2.2, 15.2.3, 15.2.6, 15.2.7) mean. In Mr Solomon's submission, none of those sub-clauses would be infringed simply by Ms
Palmer
owning a small minority shareholding (for example) in Sugarman Education. Each requires some positive act of infringement – either soliciting or dealing – carried out either directly or indirectly by Ms
Palmer.
- In construing a restrictive covenant, the same principles of construction apply as to the construction of any other written term[15]. The principles are those identified by Lord Hoffmann in Investors' Compensation Scheme
v
West Bromwich Building Society[16], as elucidated by the subsequent decisions of the House of Lords in Chartbrook Ltd
v
Persimmon Homes Ltd[17], of the Privy Council in AG of Belize
v
Belize Telecom Ltd[18] and of the Supreme Court in Rainy Sky SA
v
Kookmin Bank[19]. They are too well-known to require repetition in this judgment.
- In my judgment, Mr Solomon is right and Mr Brook's contention is wrong in relation to sub-clauses 15.2.2 and 15.2.6.
- Sub-clause 15.2.2 requires Ms
Palmer
not to "canvass or solicit business or custom from any Client or Prospective Client in relation to Services". To infringe that provision would require a positive act of canvassing or soliciting by her. It not a stipulation that could be infringed by the mere ownership by her of a minority shareholding. The same is true of sub-clause 15.2.6, which requires Ms
Palmer
not to "canvass or solicit business or custom from any Candidate or Prospective Candidate in relation to Services".
- The requirement that Ms
Palmer
must not do any of the acts prohibited by these 2 sub-clauses "directly or indirectly, either alone or with or on behalf of any person, firm, company or entity and whether on her own account or as principal, partner, shareholder, director, employee, consultant or in any other capacity whatsoever" does not, in my judgment, undermine the fundamental requirement of these clauses, which is that Ms
Palmer
cannot be in breach unless she actually (whether directly or indirectly) herself canvasses or solicits.
- However, the same is not true of sub-clauses 15.2.3 and 15.2.7. Sub clause 15.2.3, for example, requires Ms
Palmer
not to "be concerned with the supply to any Client or Prospective Client of Services or otherwise deal with any Client or Prospective Client in relation to Services". That prohibition has 2 parts. The second part prohibits Ms
Palmer
from dealing with clients and potential clients. Like sub-clause 15.2.2, that part of sub-clause 15.2.3 requires a positive act by Ms
Palmer
before it can be infringed. However, the first part of sub-clause 15.2.3 requires Ms
Palmer
not to "be concerned[20] with the supply to any Client or Prospective Client of Services". It seems to me that it is perfectly possible for Ms
Palmer
to fall within a prohibition against "be[ing] concerned with" the supply of competing services simply by being a minority shareholder in a competing company. That, in my judgment, is the ordinary and natural meaning of the words of clause 15, when read as a whole, and is what a reasonable person with all the relevant background knowledge would have understood the parties to have meant.
- The same considerations apply to sub-clause 15.2.7, which similarly requires Ms
Palmer
not to "be concerned20 with the supply to any Candidate or Prospective Candidate of Services or otherwise deal with any Candidate or Prospective Candidate in relation to Services".
- I have considered whether I should adopt a narrower construction of sub-clauses 15.2.3 and 15.2.7, so as to interpret the prohibition against "being concerned with the supply of Services" as requiring some positive act of "dealing" with the Client or Candidate, either (a) on the Rainy Sky principle that the court is entitled, where the language used by the parties may be construed in two different ways, to prefer the construction which is consistent with business common sense and to reject the other[21] and/or (b) on the basis that the court should, where two constructions are possible, adopt that construction which results in the
validity
of the clause, because the parties are to be deemed to have intended their bargain to be lawful and not to offend against the public interest[22].
- However, the Rainy Sky principle "does not elevate commercial common sense into an overriding criterion, still less does it subject the parties to the individual judge's own notions of what might have been the most sensible solution to the parties' conundrum"[23]: and I am not confident that such a narrower construction (even if open on the wording of the clause) would make better business sense from the employer's point of
view,
but for the law relating to restraint of trade.
- As for the principle that I should adopt the construction which
validates
the clause, that principle can only be applied where – having construed the covenant without regard to its legal consequences[24] - there is an element of genuine ambiguity, which the application of the principle can help to resolve. As Simon Brown LJ observed in JA Mont (UK) Ltd
v
Mills[25], "the court should not too urgently strive to find, within restrictive covenants ex facie too wide, implicit limitations such as alone could justify their imposition". In the present case, there is no such genuine ambiguity.
- That means that Mr Brook is right, and Mr Solomon's contention is wrong in relation to sub-clauses 15.2.3 and 15.2.7. It follows that those clauses ought not to have been enforced by injunction (or by undertaking) according to their original terms. However, that is not the end of the matter.
- First of all, the terms of sub-clause 15.4 of the
4myschools
Contract would mean that, even if sub-clauses 15.2.3 and 15.2.7 were wholly unenforceable, that would not of itself make sub-clauses 15.2.2 and 15.2.6 also unenforceable.
- Secondly, I must consider whether I can blue-pencil or sever the phrase 'be concerned with the supply to any Client or Prospective Client of Services or otherwise' from sub-clauses 15.2.3 and 15.2.7, so as to leave each of those sub-clauses simply as a
valid
prohibition against dealing.
- The authorities on severance were considered and the relevant test was helpfully explained by Cox J in TFS Derivatives Ltd
v
Morgan[26], as follows:
In Attwood
v
Lamont [1920] 3 KB 571 CA, Younger LJ stated that severance was only permissible where the covenant is not really a single covenant, but is, in effect, a combination of several distinct covenants. More recently, however, in the case of Sadler
v
Imperial Life Assurance Company of Canada Ltd [1988] IRLR 388 (High Court), the judge held, after reviewing the authorities, that a contract which contains an unenforceable provision nevertheless remains effective after removal by severance of that provision if the following conditions are satisfied:
'(1) The unenforceable provision is capable of being removed without the necessity of adding to or modifying the wording of what remains.
(2) The remaining terms continue to be supported by adequate consideration.
(3) 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"' (paragraph 19).
This approach was followed in the later case of Marshall
v
NM Financial Management Ltd [1996] IRLR 20 (High Court), in which the approach in Sadler was followed, but with the addition of a fourth condition, ie that the severance must be consistent with the public policy underlying the avoidance of the offending part.
- In my judgment, each of those 4 tests is satisfied here. The phrase that I have identified can be removed as a whole from both sub-clauses, without any re-writing of any other part of the clause. The phrase to be removed has no effect on consideration, does not change the underlying character of the contract, and its removal is consistent with the underlying public policy.
- It therefore seems to me that I can properly sever or blue pencil the phrase 'be concerned with the supply to any Client or Prospective Client of Services or otherwise' from each of sub-clauses 15.2.3 and 15.2.7, so as to leave each of those sub-clauses simply as a
valid
prohibition against dealing. Subject to Mr Brook's two remaining points on reasonableness, that remainder of sub-clauses 15.2.3 and 15.2.7 could therefore be enforced – though it is to be noted that paragraphs 1(ii) and 1(iv) of the undertakings given to Sharpe J by Ms
Palmer
included undertakings based on the phrase which I have held can (and should) now be severed as unenforceable.
Periods forward and back
- I can deal with Mr Brook's two remaining points on reasonableness comparatively shortly.
- Mr Brook first submitted that the prohibitions on soliciting or dealing with customers that Ms
Palmer
had dealt with at any time in the whole 12 months preceding the end of her employment by
4myschools
encompassed an unreasonably wide number of clients and candidates, some of which might only have had a fleeting encounter with Mr
Palmer
more than 11 months' previously. In that connection, Mr Brook again drew my attention to what he described as the "promiscuous" nature of the market, with its rapid turnover of personnel and often
very
short engagements.
- I
take
all of those points, as well as all the evidence which I heard from Mr Wheeler and Ms
Palmer
about the market, fully into consideration. Nevertheless, in my judgment the 12 month period was a reasonable, if perhaps not perfectly accurate, way for
4myschools
to identify the client and candidate base in relation to which it required and was entitled to protection.
- Mr Brook's second submission was that the nature of the market made the 6-month period for the restraints unreasonably long. In this connection, he drew my attention in particular to the speed with which Ms
Palmer
was effectively replaced by
4myschools.
- Against these points, however, I have to
take
into account Mr Payne's unchallenged evidence that the 13 weeks of
school
holidays each year mean that agencies such as
4myschools
can trade with
schools
for only 39 weeks in the year (and that the first and last week of each term are also times in which effective contact is difficult). In my judgment it was not unreasonable for
4myschools
to envisage that the covenant period would encompass a
school
holiday – perhaps even the long summer holiday. Moreover, I accept Mr Payne's further evidence that relationships with
schools
and teachers
take
time to build up.
- Weighing these matters up, I am satisfied that the 6 months periods adopted by
4myschools
were, in all the circumstances of this particular case, reasonable with reference to the interests of the parties concerned and of the public.
- It follows that, in my judgment
94.1. The covenants against canvassing or soliciting Clients and Candidates to which Ms
Palmer
agreed in sub-clauses 15.2.2, and 15.2.6 of the
4myschools
Contract were legally enforceable;
94.2. The covenants against dealing with Clients and Candidates (though not the covenants against being concerned in the supply of Services to Candidates or Clients) to which Ms
Palmer
agreed in sub-clauses 15.2.3, and 15.2.7 of the
4myschools
Contract were also legally enforceable.
- I have reached these conclusions without
taking
into account in
4myschools'
favour two additional factors urged on me by Mr Solomon:
95.1. Ms
Palmer's
willingness to give the 24 May Undertakings; and
95.2. The fact that the
4myschools
Contract was based on the Model Contract of Employment published by the Recruitment & Employment Confederation, which (in clause 16) contains identical restrictive covenants.
- Neither of these additional factors seems to me to be, in itself, of any great weight. Ms
Palmer's
agreement to give the 24 May Undertakings was given in an attempt to stave off costly legal proceedings, and may therefore say little about the reasonableness (or otherwise) of including the original restrictions in her contract of employment. As for the fact that this is an industry standard form, I have already indicated that one sub-clause (15.2.1) copied from the model would be at risk (in
another
case) of being held to be unenforceable, and that 2 other sub-clauses (15.2.3 and 15.2.7) copied from the model are enforceable in the present case only after parts of those clauses have been severed.
Breach by Ms
Palmer
Actual breaches
- By the end of the hearing, the parties had agreed lists covering the relevant period of (a) "Contacts with
schools/candidates"
made by Ms
Palmer
and/or Sugarman Education, and (b) "Placements made" by Ms
Palmer
and/or Sugarman Education. The information in these lists was
taken
from documents disclosed in the course of the action by Ms
Palmer
and Sugarman Education.
- These lists show that, between 3rd April and 28 May
2013,
Ms
Palmer
had 107 contacts with
Schools
or Candidates which were in breach of the restrictions in the
4myschools
Contract, which resulted in 33.5 days of placements, plus a further 20 days' worth of placements in the period from 9 June to 30 June
2013,
making 53.5 days in all.
- Those lists also show 112 days' worth of placements with
Schools
or Candidates within the scope of Ms
Palmer's
restrictions, made by 2 other employees of Sugarman Education in the period from 26 May until 21 July
2013.
- It was Ms
Palmer's
and Sugarman Education's case at trial that those placements by other Sugarman Education employees did not amount to breaches by Ms
Palmer
of her restrictions. Ms
Palmer's
evidence was that, at or around the time when she signed the 24 May Undertakings, she was instructed by Sugarman Education not to deal with any candidates or
schools
within 30 miles of Chelmsford with whom she had dealt on behalf of
4myschools.
Responsibility for Essex secondary
schools
was passed instead to other Sugarman Education employees, and Ms
Palmer
was directed to work on "securing placements and establishing trading relationships with new
schools
and candidates in Kent".
- However, on disclosure, 4 emails dated 10 June
2013
from Ms
Palmer,
one to each of these other Sugarman Education employees, were produced. Each email listed a series of secondary
schools
in Essex, with the name of the contact there, and asked (for example) "Can you please ring the following
schools
for me today, see if there is anything they need", or "Can you please do me a favour a [sic] ring the following Essex
schools
for me".
- Ms
Palmer
sought to explain away those emails, by saying that it had been agreed by Sugarman Education that she would return to working with Essex
schools
as soon as her covenants had expired, so she was merely reminding her colleague to keep these
schools
"warm" for her pending her return. Mr Wheeler attempted to explain these emails on the basis that it was necessary (in order to preserve Sugarman Education's reputation) for an explanation to be given to the
schools
in Essex that Ms
Palmer
was no longer to be acting as their consultant, and that Ms
Palmer
was simply telling her colleagues to make contact for that purpose.
- These explanations are unconvincing, given the terms and timing of the emails. (If Ms
Palmer's
evidence is to be believed, she had been relieved of her duties in relation to Essex
schools
some 17 day previously, and it is unlikely that there would have been no contact with these
schools,
and so no explanation already given, during that period).
- In my judgment, these emails are sufficient evidence to demonstrate that Ms
Palmer
was continuing, albeit indirectly and through her colleagues, to infringe the restrictions to which she had agreed in the
4myschools
Contract.
Future conduct
- On 9 May
2013,
BBW wrote on Ms
Palmer's
behalf to FFW admitting that Ms
Palmer
"has had contact with two individuals at two
schools
.. but in a personal capacity". The lists to which I have just referred show that that was simply a lie. Ms
Palmer
had by then contacted many more individuals at many more
schools
than the 2 which she was prepared for her solicitors to disclose, and in a business, not a personal capacity.
- On 3 June
2013,
BBW sent two letters. The first enclosed Ms
Palmer's
First Affidavit, in which she re-iterated on oath her intention to abide by the 25 May Undertakings. The second sought to explain away a contact which had occurred between a Sugarman Education employee named Collette and Lisa Costa at Ramsey College in Essex as something in which Ms
Palmer
was not involved except by accident. However, the documents now obtained show that, on 10 June
2013,
Ms
Palmer
emailed Collette, asking her specifically to contact Lisa Costa at Ramsey College "for me".
- On 13 June
2013,
BBW sent to FFW a list of all placements made by Ms
Palmer.
That list ended with the week beginning 13 May
2013,
thereby implying that Ms
Palmer
had been responsible for no more placements after that date. For the reasons explained above, it is now clear that Ms
Palmer
had continued, indirectly, to be responsible for many placements after that date. Moreover, as a result of the provision on the almost the last day of the trial of un-redacted copies of certain documents in the bundle, it became clear that Ms
Palmer
had herself been directly responsible for at least 20 days' worth of placements (for a single candidate) after that date.
- Against that background, it is clear that
4myschools
was justified in
taking
the
view
in early July
2013
that, unless restrained, Ms
Palmer
threatened and intended to commit further breaches, despite the 24 May Undertakings.
Damages
- Mr Brook did not dispute the calculation made by Mr Solomon, on the basis of the agreed lists of placements, which showed that
4myschools'
recoverable loss caused by Ms
Palmer's
breaches of her restrictions (and therefore the compensatory damages payable by Ms
Palmer
to
4myschools)
was at least £7,040.
- Mr Solomon did not pursue his clients' alternative pleaded claims for damages based upon the profit made by Ms
Palmer
HREF='#note27'>[27] or for what are sometimes called "negotiating" damages or "Wrotham Park[28]" damages.
Inducing breach
- It is
4myschools'
case that Sugarman Education induced Ms
Palmer's
breaches of her restrictive covenants. This is disputed by Sugarman Education. Sugarman Education's case is that that it was unaware of the terms of Ms
Palmer's
contract, and moved her to work on Kent area
schools
as soon as she gave the 24 May Undertakings.
The law
- The relevant legal principles in respect of this tort were re-stated by the House of Lords in OBG Ltd
v
Allan[29]. In order to be liable for inducing breach of contract:
.. You must know that you are procuring an act which, as a matter of law or construction of the contract, is a breach. You must actually realise that it will have this effect. Nor does it matter that you ought reasonably to have done so.
- However, I accept Mr Solomon's submissions that turning a blind eye to the terms of the contract would be enough for this purpose. The House of Lords in OBG cited with approval the statement to this effect in Emerald Construction Co Ltd
v
Lowthian[30].
Even if they did not know the actual terms of the contract, but had the means of knowledge - which they deliberately disregarded - that would be enough. Like the man who turns a blind eye. So here, if the officers deliberately sought to get this contract terminated, heedless of its terms, regardless of whether it was terminated by breach or not, they would do wrong. For it is unlawful for a third person to procure a breach of contract knowingly, or recklessly, indifferent whether it is n breach or not.
- So far as inducement is concerned, the question is:
.. did the Defendant's acts of encouragement, threat, persuasion and so forth have a sufficient causal connection with the breach by the contracting party to attract accessory liability .. [31]
If Sugarman Education's words or acts were intended to cause, and did cause breach, they will be actionable whatever their form. It is not necessary, in order to establish intention, to show that there was a desire to injure:
.. It is necessary, for this purpose, to distinguish between ends, means and consequences. If someone knowingly causes a breach of contract, it does not normally matter that it is the means by which he intends to achieve some further end or even that he would rather have been able to achieve that end without causing a breach ... On the other hand, if the breach of contract is neither an end in itself nor a means to an end, but merely a foreseeable consequence, then in my opinion it cannot for this purpose be said to have been intended ..
The evidence
- Ms
Palmer's
evidence was that she was
.. initially assigned to Essex as a result of my personal connection to and knowledge of the area .. At my induction, it was made
very
clear to me that .. I was not to rely upon knowledge that |I had acquired elsewhere ..
.. I did not specifically
target
[
4myschools']
clients. Rather I contacted all
schools
in Essex for which Sugarman had the contact details on its database .. I simply started at the beginning of Sugarman's database and worked my way through it .. As for candidates .. I looked for any potential candidates based, or prepared to work, in the relevant area ..
- It was not Ms
Palmer's
evidence that anyone at Sugarman instructed her, at any point prior to 24 May
2013,
not to contact former candidates and clients of
4myschools.
- Mr Wheeler's evidence was that:
.. Sugarman did not instruct [Ms
Palmer]
to
target
schools
she had dealt with whilst working for [
4myschools].
She was assigned, and contacted all
schools
in Essex, irrespective of whether she had spoken to them previously or not ..
- In answer to questions put to him by Mr Solomon in cross-examination, Mr Wheeler expanded on this evidence by saying that his initial instructions to Ms
Palmer
were to contact all
schools
and teachers in Essex.
- It seems clear from this evidence Ms
Palmer
was acting on the direct instructions of her managers at Sugarman Education in contacting
schools
and teachers in Essex. I have already held that Ms
Palmer's
actions in doing that were in breach of the
4myschools
Contract. The issue of whether those breaches were procured by Sugarman Education therefore seems to me to turn on the question of whether Sugarman Education was aware of the restrictive covenants binding Ms
Palmer.
- As to that, Ms
Palmer's
evidence, both in her Second Witness Statement, and orally at trial, was that she informed Nicky McCloy, who was responsible for Human Relations at Sugarman Education, of the restrictive covenants contained in the
4myschools
Contract, and gave her a copy of that contract at the outset of her employment.
- As I have already mentioned, on 30 April
2013,
FFW sent letters by recorded delivery, both to Ms
Palmer
and to the Head of Human Resources at Sugarman Education (ie Nicky McCloy). The letter to Ms
Palmer
attached a copy of the
4myschools
Contract: and both letters drew specific attention to the restrictions binding Ms
Palmer.
- Ms
Palmer's
evidence in cross-examination was that she showed a copy of her letter to Ms McCloy immediately after she received it. Ms McCloy then showed the letter to Mr Wheeler, and they took a copy. Ms
Palmer
then discussed going to see a solicitor, and Mr Sugarman agreed to pay her costs. She chose BBW on the recommendation of
another
colleague at Sugarman Education, and went to see them. BBW then wrote their first letter on her behalf on 9th May
2013.
- In paragraph 8 of its Defence, Sugarman Education had stated that it "was not aware of the terms of the purported restrictive covenants": and Sugarman Education did not produce any copy of the
4myschools
Contract in its disclosure. However, on the morning after Ms
Palmer
had given evidence, Mr Brook produced a copy of the
4myschools
Contract, which he accepted (on instructions) had been in his clients' possession, and should have been disclosed. Mr Brook also told me, again on instructions, that his clients now accepted that copies of both of the 30 April
2013
letters sent by FFW had been placed on Ms McCloy's desk, and had been passed by her (after she returned from holiday) to Mr Sugarman (rather than to Mr Wheeler).
- Mr Wheeler's evidence about his own knowledge of Ms
Palmer's
restrictive covenants was as follows:
.. When [Ms
Palmer]
first started working for Sugarman, I was not aware of the restrictions set out in her employment contact with [
4myschools]
..
I am .. familiar with .. the reasonable restrictions to which new employees may be subject. I always ensure that the newly recruited employee and the company acts accordingly. For example, all new recruits are instructed during their induction to develop their prospect list from 'cold' or to expand upon work already completed by other Sugarman consultants ..
.. I have discovered in preparing for this litigation that Sugarman also contains onerous covenants in its contracts of employment for recruitment consultants. I was not previously aware of this ..
.. I do not regard such unreasonable restraints as legitimate in our industry and would not have given such clauses my attention. I have not reviewed a consultant's contract, and have certainly never sought to enforce these covenants.
- When asked about his knowledge of Ms
Palmer's
contract, Mr Wheeler continued to deny knowledge of it, saying "I personally did not have sight of that contract". However, he did accept that he was not aware of any recruitment consultant who was not subject to post-termination restrictive covenants – it was "always worth trying things on".
- Ms McCloy did not give evidence on behalf of Sugarman Education. Nor did Mr Sugarman himself give evidence, although he was in Court throughout most of the hearing.
Findings
Taking
all this evidence into account, I am satisfied that Sugarman Education was from the start sufficiently aware of the restrictive covenants binding Ms
Palmer
to make Sugarman Education liable for procuring the breaches that she committed: and I so find as a fact.
- By Mr Wheeler's own admission, he was not aware of any recruitment consultant who was not subject to some form of restrictive covenant. In my judgment, he knew full well that Ms
Palmer
was likely to be subject to some form of post-termination restriction imposed by her contract with
4myschools
on the
schools
and teachers that she was allowed to contact. However, instead of
taking
reasonable steps to make himself aware of the precise nature of those restrictions – something which he could easily have done, since Sugarman Education's Human Resources department had a copy of the
4myschools
Contract (provided by Ms
Palmer
herself) in its possession – he chose to give instructions to Ms
Palmer
which (as he must have realised) could well require her (and did in fact require her) to act in breach.
- According to Lord Scott of Foscote in Manifest Shipping Co Ltd
v
Uni-Polaris Shipping Co Ltd[32], an imputation of blind eye knowledge:
.. requires an amalgam of suspicion that certain facts may exist and a decision to refrain from
taking
any step to confirm their existence. Lord Blackburn in Jones
v
Gordon [1877] 2 App Cas 616 at 629 distinguished a person who was "honestly blundering and careless" from a person who
"refrained from asking questions, not because he was an honest blunderer or a stupid man, but because he thought in his own secret mind—I suspect there is something wrong, and if I ask questions and make farther inquiry, it will no longer be my suspecting it, but my knowing it, and then I shall not be able to recover".
…
In summary, blind-eye knowledge requires, in my opinion, a suspicion that the relevant facts do exist and a deliberate decision to avoid confirming that they exist. But a warning should be sounded .. In my opinion, in order for there to be blind-eye knowledge, the suspicion must be firmly grounded and
targeted
on specific facts. The deliberate decision must be a decision to avoid obtaining confirmation of facts in whose existence the individual has good reason to believe ..
- That, it seems to me, was precisely the position here. Having seen and heard him give evidence, I am satisfied that Mr Wheeler was neither an "honest blunderer", nor stupid. On the contrary, he is a clever man with a forceful personality, who decided to
take
a commercial risk. In his own mind, he had formed the
view
that all
schools
and teachers in Essex were fair game in his line of business: and he was not going to let any legal niceties deter him from his intended course of action.
- That conclusion makes it unnecessary for me to resolve the conflict between Ms
Palmer's
evidence that Ms McCloy showed a copy of FFW's 30th April
2013
letter to Mr Wheeler, and Mr Wheeler's own evidence, to the effect that everything was dealt with by Mr Sugarman personally, and that he (Mr Wheeler) never saw a copy of the
4myschools
Contract. If I had resolved that conflict in Mr Wheeler's favour, I would then have to decide the difficult legal issue of whether knowledge by Mr Sugarman of the details of the restrictions would be sufficient to make Sugarman Education liable for procuring Ms
Palmer's
breaches of those restrictions though the instructions given by Mr Wheeler. Fortunately, it is unnecessary for me to explore that issue further.
- However, were I to be wrong in my conclusion that Sugarman Education was liable for procuring Ms
Palmer's
breaches from the start, I would unhesitatingly have held that it was liable for procuring the indirect breaches committed by Ms
Palmer
after she gave the 24 May Undertakings. By that point, no one in authority at Sugarman can have been in any doubt that Ms
Palmer
was subject to relevant restrictions. That was, after all, why they changed her primary duties to dealing with
schools
in Kent. It was the evidence both of Ms
Palmer
and of Mr Wheeler that the emails which Ms
Palmer
sent to her colleagues, asking them as a favour to contact
schools
"for me" – which I have found to be the cause of indirect breaches of those restrictions - were sent on the instructions of Linsey Sugarman and Mr Wheeler.
Exemplary Damages
- My conclusion in relation to procuring a breach of contract means that Sugarman Education is liable, jointly and severally with Ms
Palmer,
to pay compensatory damages to
4myschools.
- However,
4myschools
has also pleaded against Sugarman Education a claim for exemplary damages, on the basis that Sugarman Education has acted "with a cynical disregard for [
4myschools']
rights .. calculat[ing] that the money to be made out of [its] wrongdoing will probably exceed the damages at risk"[33].
- Exemplary damages are rarely awarded. In my judgment, the essential factual requirement – that Sugarman Education made the cynical assessment that it would make more profit than it would have to pay in damages – is not here made out. There is simply no evidence that Sugarman Education thought that it would profit more than
4myschools
would lose.
- In his closing submissions, Mr Solomon wisely did not press this claim, observing that this may most sensibly be addressed as a matter to be
taken
into account in respect of costs. I will therefore say no more about it at this stage.
Should an injunction have been granted?
- In the light of my findings, it seems to me that Sharpe J should (if undertakings had not been given) have granted an injunction to
4myschools,
both against Ms
Palmer
and against Sugarman Education. However, that injunction should not have included any provision enforcing the covenants in sub-clauses 15.2.3 and 15.2.7 against being concerned in the supply of Services, which I have held to be unenforceable.
Conclusions
- For the reasons set out above, I propose to make the following orders:
138.1. To declare that:
138.1.1. Sub-clauses 15.2.2 and 15.2.6 of the
4myschools
Contract were enforceable at all material times against Ms
Palmer
138.1.2. The covenants against being concerned in the supply of Services in sub-clauses 15.2.3 and 15.2.7 were unenforceable, as wider than was reasonably necessary for the protection of any business interest of
4myschools
138.1.3. The phrase 'be concerned with the supply to any Client or Prospective Client of Services or otherwise' can be severed from the remainder of sub-clauses 15.2.3 and 15.2.7, and that the remainder of each of those sub-clauses was enforceable at all material times against Ms
Palmer
138.2. To order Ms
Palmer
and Sugarman Education to pay damages of £7,040 to
4myschools,
plus interest from the date of each placement to the date of judgment, to be assessed by a Master if not agreed.
- I invite counsel to agree a Minute of Order giving effect to this judgment. I will hear counsel on the issue of costs.