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England and Wales High Court (Queen's Bench Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Towry EJ Ltd v Bennett & Ors  EWHC 224 (QB) (14 February 2012)
Cite as:  EWHC 224 (QB)
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QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
| TOWRY EJ LTD
|- and -
|(1) BARRY WILLIAM PROSSER BENNETT
(2) PIETER BURGER
(3) JAMES SCOTT CHANDLER
(4) WAYNE ALAN HAYHURST
(5) THOMAS MARK SPAIN
(6) STUART LEE HUTTON
(7) RAYMOND JAMES INVESTMENT SERVICES LTD
(8) TRACEY LOUISE SIMPSON
Chris Quinn (instructed by Faegre, Baker Daniels LLP, Solicitors) for the Defendants
Hearing dates: June – 7, 9, 10, 13, 14, 15, 16, 20, 21, 22, 23, 24, 30
July – 1, 4, 5, 6, 7, 8, 11, 12, 13, 14, 15
Crown Copyright ©
For the reasons fully set out in this judgment, I find:
(1) That there was no repudiatory breach by the Claimant of the contracts of employment of the Individual Defendants
(2) That the Claimant has not proved the allegations of wrongful conduct against the Defendants
The Claim is therefore dismissed.
|1. Introduction and Preliminary matters||1 - 32|
|2. The Facts: From events before the Acquisition to individual offers and termination of Defendants' employment||33 - 276|
|3. Issue A.1: Repudiatory Breach||277 – 395|
|4. Issue A.2: Reasons for Resignation
A.3: Wrongful Dismissal
B.4: Effect of Repudiatory Breach
396 – 404
|5. Issue C.1: Effect of Restructuring Post-Termination Restriction||405 – 415|
|6. Issue D.7: Confidential Information||416 – 431|
|7. Issues E.8 – E.11 Alleged wrongful conduct|
|The Law||432 – 446|
|The Facts||447 – 575|
|Issue E.8(1) Solicitation|
|Barry Bennett||576 – 636|
|Pieter Burger||637 – 673|
|James Chandler||674 – 730|
|Wayne Hayhurst||731 – 777|
|Tracey Simpson||778 – 808|
|Thomas Spain||809 – 845|
|Stuart Hutton||846 – 878|
|General Conclusions||879 – 906|
|Issue E.8 (2) – (4):|
|Misuse of Confidential Information||907 – 914|
|Inducement of Breach by Raymond James||915 – 917|
|Breach of Confidence||918 - 924|
Mrs Justice Cox :
The extensive, factual dispute between the parties resulted in a vast quantity of documentary evidence being placed before the Court. Some of it was produced over a number of days during the course of the trial. The Defendants complained of a failure by Towry to comply with its disclosure obligations and sought to rely on this failure, in part, in their closing written submissions. Towry said that they complied fully with their disclosure obligations, but that the Defendants sought repeatedly to widen the scope of allegations said to be relevant to the issues to be determined. Towry, in turn, complained of an unsatisfactory approach to disclosure by the Defendants, drawing attention, for example, to various documents said to have been provided late.
(2) Rulings at the Outset
(a) Legal Advice: Waiver of Privilege
(b) The CPR 33.4 Application
"… the party who puts in the evidence may be bound by the rule that he cannot disavow the evidence he has led, even though he has deliberately not called the witness to give oral evidence."
(17th Edition, para. 29.05, footnote 24).
The author goes on to suggest that, in the light of that:
"It might be a condition for the Court giving leave to the party not putting in the evidence to call the witness to cross-examine, that the party adducing the evidence is not bound by his evidence in this way."
(3) Agreed Issues
(4) The Trial
Events before the Acquisition on 22 October 2009
"As a Financial Adviser with Edward Jones, you will spend much more of your time doing exactly what you do best – building relationships with clients face-to-face and helping them reach their financial goals … we'll even provide you with your own dedicated assistant and a high street office … you'll have more time to devote to meeting the needs of your clients and building a successful business. We'll also train you as a Stockbroker as soon as you join us, allowing you to offer clients a more diversified and comprehensive range of services than you would be able to as a traditional IFA. Beyond that, you can look forward to moving towards Chartered Financial Planner status.
As one of our Financial Advisers you will receive a unique combination of top quality, award winning-training, as well as a role where you'll be based in your local community. You'll find yourself in control of your own earning potential and able to take advantage of an excellent package that includes a starting salary, funded initial and ongoing training, commissions and bonuses, along with the opportunity to become a partner …
Become qualified as a Financial Adviser and Stockbroker …
Based in your chosen location … you'll focus all your energies on developing and building a client base, using a personal, face-to-face approach. From the word go, you'll be very much responsible for your own success – but you won't be on your own. We'll support you every step of the way, with ongoing training, mentoring and development opportunities."
"16.3 You acknowledge that the obligations set out in this Agreement are reasonable and necessary in order to protect the Company's legitimate business interests.
16.4 You agree that for the period of 12 months after the termination of your employment under this Agreement, you will not directly or indirectly:-
16.4.1 solicit, canvas or endeavour to solicit or canvas in any capacity whatsoever, by post, phone, electronic communication, personal contact, or by any other means, any business, orders or custom which is in competition with any restricted Business from any Active Customer;
16.4.2 solicit, canvas or endeavour to solicit or canvas in any capacity whatsoever, by post, phone, electronic communication, personal contact, or by any other means, any business, orders or custom which is in competition with any Restricted Business from any Passive Customer;
16.4.3 induce or attempt to persuade any Employee to leave employment or engagement by the Company or any Group Company or offer employment or engagement to any Employee.
16.5 You will not at any time after the termination of your employment under this Agreement, directly or indirectly:-
16.5.1 induce or seek to induce, by any means, involving the disclosure or use of Confidential Information, any Active Customer to cease dealing with the Company or any Group Company or to restrict or vary the terms upon which it deals with the Company or any Group Company;
16.5.2 induce or seek to induce, by any means, involving the disclosure or use of Confidential Information, any Passive Customer to cease dealing with the Company or any Group Company or to restrict or vary the terms upon which it deals with the Company or any Group Company;
16.5.3 make use of or disclose to any third party including, but without limitation any prospective or future employer, and Confidential Information;
16.5.4 represent yourself or permit yourself to be held out as having any connection with or interest in the Company or any Group Company;
16.5.5 solicit or recommend the makings of unwarranted claims against the Company."
For the purposes of clause 16.5, "confidential information" was defined as follows at clause 17.2:
"'Confidential Information' means all and any information (whether or not recorded in documentary form or on computer, lap top, hard drive, zip drive, software (including programmes) disk or tape) of the Company, any Group Company or any of its or their customers, suppliers or agents which the Company or the relevant Group Company regards as confidential or in respect of which it owes an obligation of confidentiality to a third party which is not part of your own stock in trade and which is not readily ascertainable to persons not connected with the Company either at all or without a significant expenditure of labour, skill or money. The following is a non-exhaustive list of matters, which are considered confidential:
(a) any trade secrets of the Company and the Group for example, but not limited to the following: customer lists, customer contact details, contacts with or requirements of customers pricing strategies, investment and development strategies and objectives;
(b) any information in respect of which the Company or any Group Company is bound by an obligation of confidence to any third party;
(c) unpublished and price sensitive information relating to securities listed on any recognised stock exchange;
(d) the movements and whereabouts and all personal or private matters concerning senior employees and directors;
(e) marketing strategies and plans:
(f) discount rates and sales figures;
(g) lists of suppliers and rates of charge;
(h) information which has been supplied in confidence by clients, customers or suppliers;
(i) information and details of and concerning the engagement, employment and termination of employment of any investment Representative and any other personnel;
(j) information concerning any litigation proposed in progress or settled;
(k) any invention, technical data, know-how or other manufacturing secrets of the group and their clients/customers;
(l) any other information made available to you, which is identified to you as being of a confidential nature. …"
"end the current commission-based system of adviser remuneration: we propose to ban product providers from offering amounts of commission to secure sales from adviser firms and, in turn to ban adviser firms from recommending products that automatically pay commission."
Events following the Acquisition and the Termination of the Defendants' Employment
Communication with the Edward Jones Advisers
"It is important to continue to provide the advice and service our clients expect and deserve. We remain committed to serving their needs and will work to make the process as seamless as possible for them. Please reassure our clients that they are important to us, and that Edward Jones Ltd and Towry Law are fully committed to looking after their needs for the long term. …
For the moment it is very much business as usual."
"Oh my Lord, what on earth is happening!! I just can't believe it, I know I'm probably going to be out of a job by 4pm but to tell you the truth my primary concern is for my clients, the clients that have trusted me with their money and the clients I have brought into the Jones model … please tell me what you know so I can tell them."
Having built up substantial, apparently successful and individually profitable businesses in their own area, and without the global picture of the Company's finances, a number of the individual Defendants could not understand why Edward Jones had been sold.
" – A big fear for many advisers is becoming managed again. Some have had past experience of this (that was poor) from previous employers … they do believe in management, but not micro-management …
The transition from 300 offices to 20 or 30 will not be easy … the overriding consideration is the client experience and ensuring it is a positive one. BOAs will be needed in admin roles although the number is not currently known.
- All employees are owners of the business with share options. Their stated aim is to float in the next couple of years. This gives potential for employees (including Jones' advisers and associates) to benefit financially and have an ongoing interest in the success of the business. Becoming a public company is also great PR if the company is well run and professional. This in turn attracts more business.
Once FSA approval has been given, more specifics will be covered. I know everyone is keen to view in detail the investment proposition and the income situation as well as know they have employment moving forward. This should start in earnest once approval is given.
Thank you for your questions. I appreciate not all have answers yet … thank you for you patience at a difficult time …"
"It does not mean that I thought what Towry was offering was not any good, however, it would mean that my current clients would no longer be able to be advised by me on their investments, unless they switched into the Towry discretionary managed fund. I had joined Edward Jones so that I could have the freedom to make my own choices, work closely with clients and develop a strong and trusting relationship. This change had the potential to undermine that trust and relationship if I stayed and was not how I wanted to work with my clients. "
"The first area of focus is roles within the enlarged Towry Law Group. We have been very open with you from the beginning that we will not have roles for everybody in the company. We will hold individual discussions with you to discuss your future. Our communication programme starts this week on Wednesday with FAs. Advisers will be asked to one or more meetings during the period 25 Nov to 9 Dec. At those meetings we will discuss with you your individual position. Similar meetings will take place for BOAs during the period 30 Nov to 11 Dec and for home office staff between 2 Dec and 18 Dec. We appreciate that you all want certainty on your position as soon as possible. However we want to meet everybody to understand the roles that you have the potential and interest to undertake. Our plan is that everybody knows where they stand by the Christmas holiday period.
The second area of focus is the 300 offices. Our rent roll is a huge drain on our financial resources and we need to move to a position where we have about 30 offices in total. This number will probably increase over time. We will not be able to move to 30 offices immediately so we will initially consolidate into about 100 offices. We will talk to you over the next few weeks about what this means for you and your office as we develop our plans.
On Friday the collective consultation process started with the EJCC, where we are consulting under redundancy legislation and TUPE regulations. I have answered a question previously regarding TUPE. My response was directly linked to the transaction, which was that it was not a TUPE transfer. However, because EJ and TL are so alike, we are able to integrate the two businesses almost immediately, and this constitutes a TUPE transfer. This has no downsides, and protects your terms and conditions of employment, and previous years' service. It is however discrete from redundancy legislation."
"The covenants contained in Appendix 3 to these terms and conditions form part of your contract of employment and are of a continuing nature and shall remain in full force and effect notwithstanding the termination of your employment and maybe enforced against you accordingly."
Paragraphs 3-9 of Appendix 3 provided:
"3. You will not directly or indirectly, for a period of 12 months after the Relevant Date, solicit or seek to entice away from the Company or any Group Company the business or trade of a Relevant Customer or relevant Prospective Customer with the intention of supplying or providing goods or services to that Relevant Customer or Relevant Prospective Customer so as to compete or seek to compete with any Relevant Business.
4. You will not directly or indirectly, for a period of 12 months after the Relevant Date, in competition with any Relevant Business deal with or supply or provide goods or services or accept business from any Relevant Customer or Relevant Prospective Customer.
5. You will not directly or indirectly, for a period of 12 months after the Relevant Date, for your benefit or on behalf of any business which is in competition with any Relevant Business, offer employment or engagement to a Relevant Employee from the Company or any Group Company, whether or not this would be a breach of contract on the part of that employee.
6. You will not directly or indirectly, for a period of 12 months after the Relevant Date, for your benefit or on behalf of any business which is in competition with any Relevant Business, persuade or encourage or attempt to persuade or encourage a Relevant Employee to leave the employment of the Company or any Group Company, whether or not this would be a breach of contract on the part of that employee.
7. Following termination of your employment, you shall not in any way hold yourself out or permit yourself to be held out as continuing to be connected with the business of any Group Company.
Nothing in this clause shall prevent you from being engaged in or by, or participating in any business or entity to the extent that any of its or your activities for such business or entity shall relate solely to:
a) geographical locations in which the business or entity does not compete or seek to compete with a Relevant Business; or
b) business or matters of a type with which you were not materially concerned in the 12 months immediately preceding the Relevant Date; or
c) customers or prospective customers of the Company with whom you had no dealings or confidential information as defined;
8. The restrictions set out in this clause apply whether you act for your own benefit or on behalf of any company, other organisation or person and whether you act directly or indirectly. You acknowledge and agree that each of the restrictions contained in the above sub clauses are intended to be separate and severable. If any of the restrictions are held to be void, this will not affect the enforceability of the remaining restrictions, and if any restriction is held to be void but would be valid if part of the wording in the restriction was deleted such restriction will apply with such deletion as may be necessary to make it valid and effective.
9. In the event that you leave the employment of the Company you agree to provide a copy of these post-termination restrictions to any prospective Company before accepting any employment or engagement with them."
"'Relevant Customer' means any person, company or other organisations
(i) who or which at any time in the period of 12 months immediately preceding the Relevant Date, was a customer or client or an intermediary or agent on behalf of any customer or client of the Company or any Group Company; or
(ii) to whom or which the Company or a Group Company provided goods or services or where business was introduced by an intermediary or agent in the period of 12 months preceding the Relevant Date;
In either case for the purpose of a Relevant Business, provided that this definition shall apply only to persons, companies or other organisations with whom or which you had commercial dealings at any time in the Relevant Period, or about whom or which you obtained confidential information as a result of your employment,
'Relevant Prospective Customer' means any person, company or other organisation
(i) who or which at any time in a period of 6 months immediately preceding the Relevant Date, was a prospective customer or client or the Company or any Group Company, to whom or which the Company or any Group Company made a proposal to provide goods or services directly to the prospective customer or client or via an intermediary or agent in the period of 6 months preceding the Relevant Date: and
(ii) for the purpose of a Relevant Business, provided that this definition shall apply only to persons, companies or other organisation, with whom you have or had commercial dealings in preparing or submitting the proposal to provide goods or services at any time in the Relevant Period, or about to whom or which you obtained confidential information as a result of your employment."
"The 'blogs' on the internet suggest that there is nothing to stop the EJ advisers walking off with their clients. There are no restrictions in their contracts. Is this true?
- All Edward Jones' advisers have employment contracts that include appropriate restrictive covenants prohibiting them from soliciting or dealing with clients if they leave Edward Jones."
"A query is coming up constantly now around restrictive covenants. Some EJ advisers are saying that their covenant is a non-solicitation clause only without a 'no dealing' element. The problem as they see it is that ours is both non-solicitation and no deal. Here are the key points in addressing this objection –
- Our covenant is industry standard
- It is no deal and no solicitation
- EJ's covenant is now the same – no deal, no solicitation
- However, some EJ advisers have an old 'non-solicitation only' covenant
- EJ would have moved to harmonise these contracts at some point
- Any covenant in the industry will now be the same as ours and EJ's
- We will not amend our contract to reflect outdated terms"
"Most clients will not give execution-only instructions to their advisers. They will not say: I wish to buy this, sell this, transfer this, and be that specific. Effectively what you find with most advisers, because they cannot help themselves, is they will give advice or promote their new business or recommend a transfer. And solicitation prevents all of those matters.
So all non-dealing does is to operate to reduce the legal burden of proving solicitation by making it much, much easier and much, much clearer to prove."
"I would have explained the effect of the non-solicitation clauses, in terms of not allowing the advisers, if they left, to solicit and deal with those clients. And in terms of the expression 'dealing' in this regard, dealing is ongoing interactions with the client once you have solicited them so the clauses were rather effective …
The effect of the non-solicitation clauses is that the adviser cannot solicit or, in fact, deal with the client in those terms, because in giving advice to the client and recommending they transfer to a new business, they are soliciting that client. So the effect of a non-dealing clause is just to amplify the solicitation and to make it easier to prove. So from having reviewed the contracts in the due diligence process, I had no concerns about the effect of the contractual clauses at all.
Q: So what you're saying is that there is no difference as to the legal obligation between a non-solicitation covenant and a non-dealing covenant?
A. No. There is a difference in operation. But in terms of financial advice when clients seek advice and require advice and want advice, this manifests itself in making a non-dealing clause easier to prove than a non-solicitation clause for the same breach of contract. If there was a relationship that did not involve advice, say a commercial salesman of, I don't know, photocopiers for example, clients do not require advice. He is merely selling products to them. In those terms a non-dealing clause may be more onerous because he could not contact those people or they could not contact him and deal. In terms of financial advice, the advice is key … most financial advisers will give advice, recommendations, canvass or solicit a client or their former clients and attempt to transfer them to their new business. So the non-dealing clause effectively makes the evidence easier to find …
Q. With a non-dealing covenant any relationship that an employee and a client have will necessarily come to an abrupt halt. They simply cannot deal with each other, for the period of the restraint, regardless of the wishes of either of them, can they?
A. No they can't. I wouldn't say that the wishes of the adviser are relevant, because the adviser is an employee of the company. The client relationship is actually with the company. And the employee is merely an agent of the company. The employee does not own the relationship with the client or control that relationship with the client. So it's a perfectly reasonable commercial contract and commercial clause to protect the legitimate interests of the employer.
Q. With a non-solicitation covenant, on the other hand, it is open to them to continue dealing with each other so long as this is at the behest of the client and not due to the persuasion of the employee.
A. Is there a question in that statement?
Q. Do you agree? That is what is fundamentally different ---
A. Hypothetically ---
Q. --- in a non-solicitation covenant?
A. Hypothetically, if the specific facts of the circumstances allow. But, again, I repeat, in my experience involving financial advisers, it is very rare for a client to give a range of specific instructions to that adviser in terms of their investments and arrangements."
The Individual Offers and Termination of the Contracts
"I have sent an email … to Robert Chandler about the targets and how they relate to my income. As I have not received a reply yet, I am unable to come to a conclusion at this stage until I have received further guidance.
I would add that the contract on offer is significantly different to my current contract in that at the moment I have autonomy in running my business, which allows me to conduct working hours suitable to me subject to satisfactory performance. I also hold a stockbroking licence which I would also lose.
However the main issue is the ability to earn is very significantly impacted by the low salary offered and targets which are 2.5 times higher than colleagues on a higher basic salary. This means I have to work twice as hard to earn a bonus on top of my low salary."
"… I wanted to confirm in writing my response to Towry Law's proposition as it was explained to me today.
Firstly, I do not believe that you have given me sufficient time to consider the new contract. I have been put under increasing pressure since returning from leave, highlighted by today's deadline to sign at my first personal face-to-face consultation.
Secondly, I would like to continue to serve the clients under the old terms and conditions of Edward Jones to the best of my ability.
Thirdly, I understand that you will not provide me with further time to consider my options and therefore you are effectively dismissing me from my current employment forthwith.
I will await to receive confirmation of this in writing, but until such a time will continue to serve the clients of Market Harborough to the best of my ability."
"I have just got back from a meeting with Tom, he wanted more time to consider, I agreed to let him have the weekend to think it over and come back to us on Monday, he said that was not enough time as his solicitor is on holiday next week.
I suggest we send the letter as soon as we can. It's a shame as he is a good guy, I tried my best to show how Towry Law would be good for him and his clients."
The "letter" referred to in that email was the standard letter notifying advisers of termination of their contracts due to redundancy.
ISSUE A.1: Was There a Repudiatory Breach of the Defendants' Contracts of Employment?
1. Did Towry act in repudiatory breach of the implied term of trust and confidence in any of the contracts of employment? In particular:
(1) Did Towry act in the manner alleged at paragraphs 10(1)(a) to (h) of the Amended Defence of Defendants 1-7 and the Defence of Defendant 8?
Paragraph 10(1) reads:
(1) It is averred that, following its acquisition by the Towry Law Group, the Claimant acted in repudiatory breach of the implied term of trust and confidence contained in each of the Individual Defendants' respective Contracts of Employment such as to entitle each of the Individual Defendants to treat the same as having been terminated. In particular:
(a) The Claimant sought to enforce upon the Individual Defendants new contracts of employment containing more extensive Restrictive Covenants (including non-dealing clauses), unreasonable in their effect, upon them.
(b) The Claimant sought to move the locations from which the Individual Defendants would work.
(c) The Claimant sought to remove the Individual Defendants' responsibility for the profitability of their businesses and instead sought to make them salaried employees, in many cases leading to a sizable reduction in their current and potential future uncapped income.
(d) The Claimant sought to introduce inappropriate and unachievable targets.
(e) The Claimant required the Individual Defendants to "churn" their clients into the Towry Law discretionary managed fund.
(f) The Claimant sought to impose the loss of their stockbroker licences upon the Individual Defendants.
(g) The Claimant sought to impose the loss of the Individual Defendants' independence of choice by introducing a bias towards Towry Law's in-house manufactured products.
(h) The Claimant sought to impose an unreasonable change of investment approach upon the Individual Defendants whereby instead of not putting more than 25% of a clients' funds into one managed fund, they were required by the Claimant to put 100% of a clients' funds into just one fund.
(2) Was it unlawful for Towry to terminate the contracts of the Individual Defendants by giving notice and placing them on gardening leave?
(3) If "yes" to (1) or (2), did any such conduct evince an intention on Towry's part no longer to be bound by the contracts of employment?
"… the employer shall not, without reasonable and proper cause, conduct itself in a manner calculated and likely to destroy or seriously damage the relationship of confidence and trust between employer and employee."
"apt to cover the great diversity of situations in which a balance has to be struck between an employer's interest in managing his business as he sees fit and the employee's interest in not being unfairly and improperly exploited."
Discussion and Conclusion
Allegations relating to Process
"Today was a good day, results at EJCC (go Alex!) and good session in London, continuing the buy-in.
Did a round of calls to RLs, got Howard and [Blank] Left messages with [Blank] Fraser Irvine and [Blank]
Having bounced all our thoughts off Howard in particular, some objectives which would be good to meet next week without delay –
- Re retention bonus, great! But perhaps give RLs choice of cash or shares
- Re Howard, base of 160 K pounds, retention shares, options of 75,000, normal transitional adviser bonus scheme (on NRI and AUM), SCP title, interim RL responsibility – all fine
- In addition RLs get retention bonus (cash or shares), plus normal EJ adviser incentives …"
"Howard Goodship –
- SCP with immediate effect, to get contract signed Wednesday
- Basic 160 K pounds
- 75,000 shares in addition to EBT
- Retention bonus total 20% of salary (10% for signing in 90% plus of those in his region to be confirmed into role, further 10% for retaining them through 2010, total £32,000.00 – could be payable as shares, say @ £6 conversion rate so 530,000 shares)
- Adviser bonus plans re NRI and AUM apply but unlikely to cost as much as targets will be high
- Requirement to get to Chartered in two years
Fraser Irvine (RL)
- Same as adviser deal except 100% of EJ earnings (I think 96 K pounds)
- Retention bonus (cash or shares)
- 20,000 shares in addition to EBT in recognition of interim continuing RL responsibilities
- Normal adviser bonus deals"
"Under the 'bonus schemes' there is a further plan for the current Regional Leaders …
We'd like to offer this small group of key influencers a 'retention bonus'. This will pay up to 20% of salary as follows –
- 10% for achieving 90% or more sign up of advisers we want to confirm into role in their region
- A further 10% for retaining at least 90% of this number to 31st Dec 2010
I suggest this would be payable in shares or as cash (option for each individual) at the end of 2010. It will apply to a very small number i.e.
Loss of Local Offices: Moving the Defendants to New Locations (Paragraph 10(1)(b))
"Your normal place of work is at the Company's office at the address specified in Appendix 1 and/or such other place of business of the Group within the United Kingdom, which the Company may require for the proper performance and exercise of your duties. This clause does not provide you with any exclusive right to any particular territory."
I agree with Mr Tolley that the implied term, that the employer would not without reasonable and proper cause destroy the relationship of trust and confidence between employer and employee, cannot in this case be used to circumscribe the express power enjoyed by the employer to determine the employee's appropriate place of business for the proper performance of his/her duties with a general requirement of reasonableness (see Reda v. Flagg Ltd at paragraphs 44-45). There was no evidence of any other agreement reached between Edward Jones and any Defendant as to his or her place of work. Whilst it is correct that each Defendant was recruited and required to work pursuant to Edward Jones' policy of building business in local communities, the terms of clause 3.7 were clear. In its terms no Defendant enjoyed any exclusive right to any particular territory. Clearly, this power should not be exercised irresponsibly or capriciously, but there is, in my judgment, no contractual requirement to act reasonably in the exercise of such an express, contractual power (see also White v. Reflecting Roadstuds Limited  ICR 73).
The Change to Salaried Employment: the Loss of the Defendants' Uncapped Ability to Earn (Paragraph 10(1)(c))
Loss of stockbroking activities (paragraph 10 (1)(f))
Introducing inappropriate and unachievable targets (paragraph 10 (1)(d): Requiring the Defendants to "churn" their clients into the IIM (paragraph 10 (1)(e): Introducing a bias towards Towry's in-house manufactured products, thereby removing independence of choice (paragraph 10 (1)(g): Requiring the Defendants to put 100% of clients' funds into just one fund paragraph 10 (1)(h)
Imposition of a more extensive restrictive covenant: (paragraph 10 (1)(a))
Issue A. 1 (2): Was it unlawful for Towry to terminate the contracts of the individual Defendants by giving notice and placing them on gardening leave?
ISSUE A.3: Alternatively, were Barry Bennett, Pieter Burger, James Chandler, Wayne Hayhurst, Thomas Spain or Tracey Simpson wrongfully dismissed by Towry?
C.5: Did the May 2010 Restructuring have the effect that the Claimant company, Towry EJ Ltd, ceased to have any requisite legitimate business interest such as to justify the continued enforceability of clauses 16.4 and 16.5?
Mr Quinn submitted essentially that the effect of the restructuring entered into by Towry, after the departure of the individual Defendants, was (a) to restrict the Claimant company's ability to enforce the post-termination restrictions in this litigation; and (b) to limit the relevant period, in respect of which the Claimant can claim any loss, to the period before that restructuring took effect. In this way his submissions go, in addition, to Issue F.12 dealing with Remedies.
D.7: On the proper construction of Clause 17, do the following matters (or any of them) constitute Confidential Information, or are they to be properly regarded as part of the "skill and knowledge" or "stock in trade" of any of the Individual Defendants?
(1) The identities of customers
(2) Customers' contact details and addresses
(3) Customers' investment requirements, strategies and objectives
(4) The nature and amount of customers' existing investments
(5) The FA Performance Summaries
(1) The Individual Defendants
E. 8: In respect of the customers listed in the Table annexed to the Amended Particulars of Claim, or any of them, did the Individual Defendants (or any of them) act:
(1) In breach of Clause 16.4.1, by directly or indirectly soliciting or canvassing any business, orders or custom of the customer; and/or
(2) In breach of Clause 16.5.1, by directly or indirectly inducing, by any means, involving the disclosure or use of Confidential Information, the customer to cease dealing with Towry?
(3) In breach of Clause 16.5.3, by making use of or disclosing to Raymond James any Confidential Information?
(4) In breach of confidence as a matter of the general law?
(2) The Individual Defendants and Raymond James
E.9: Between about December 2009 and April, alternatively July, 2010, did the Individual Defendants and Raymond James (or any two or more of them together) wrongfully and with intent to injure Towry by unlawful means conspire and combine together to breach the Contracts of Employment (and/or each of them)?
(3) Raymond James
E.10: In respect of the customers listed in the Table, did Raymond James act in breach of confidence as a matter of the general law in order to give effect to transfer requests from each of these customers and to commence and continue the management of each of the customer's investments?
E.11: In respect of the individual Defendants' breaches of contract at E.8 above, did Raymond James knowingly induce or procure the individual Defendants and/or any one or more of them to act in breach of their Contracts of Employment?
I set out again here the terms of the non-solicitation clause, namely Clause 16.4.1, which provides:
"You agree that for a period of 12 months after the termination of your employment under this Agreement, you will not directly or indirectly: solicit, canvas or endeavour to solicit or canvas in any capacity whatsoever, by post, phone, electronic communication, personal contact, or by any other means, any business, orders or custom which is in competition with any Restricted Business from any Active Customer."
Both direct and indirect solicitation is therefore prohibited, and it is the solicitation of business, orders or custom of clients against which the clause is directed. It is common ground that there is no practical difference between soliciting and canvassing. The burden of proving, to the civil standard, that there has been solicitation lies on Towry.
The textbook "Employee Competition" (second edition), edited by Paul Goulding QC, contains the shrewd observation that "The concept of 'solicitation' is not easy to define." A practical approach is suggested, based on the New Zealand case of Sweeney v Astle  NZLR 1198, the question being whether the conduct of the employee evidences a specific purpose and intention to obtain orders from the customers? Where it is the employee who initiates contact with a customer, and does something more than merely inform the customer of his departure from the former employment, the employee may be regarded as soliciting the customer. The author continues by stating that "Care should be taken, however, not to confuse a non-solicitation clause with a non-dealing clause. Where the customer initiates contact, the employee may be entitled to respond, as in Austin Knight (UK) Ltd v Hinds  FSR 42 ."
"…where the customer telephones the ex-employee asking what the ex-employee will be doing after employment, it is questionable whether it would amount to solicitation if the ex-employee informs the customer that he will, for instance, be trading from a particular address in the same line of business as the ex-employer. However, if his response is, for instance, immediately to offer to make a sales presentation, it might be difficult to say that there has been no solicitation. Each case will turn on its own precise facts. If the gist of what the ex-employee says is responsive to the customer's enquiries, there will be no solicitation. If there is significant use of persuasion by the ex-employee, this is likely to be seen as soliciting. It is often difficult to draw the line."
After referring to the particular facts in some cases to illustrate this difficulty, the authors add this advice for employers,
"In order to avoid the difficulties of proving customer solicitation by the ex-employee, it is advisable for the employer to seek a non-dealing covenant from the employee."
There is no dispute as to the relevant legal principles, which were re-stated by the House of Lords in OBG Ltd and another v Allan and others  1 AC 1. At paragraph 39 of Lord Hoffman's speech the test was formulated as follows. 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."
Once again, the law is not in dispute. A combination to do a tortious act, such as to break, or threaten to break a contract, or to procure a breach of contract, is an 'unlawful means' conspiracy. A person can be liable for conspiracy to breach a contract to which he was not party where he combined, with a common design, together with the parties committing the breach.
(1) 14.7% for all accounts with an AUA of £10,000 or greater and 15.2% for accounts with an AUA of £50,000 or greater, in cases where the Edward Jones adviser stayed at Towry; and
(2) 36.8% for all accounts, 35% for accounts with an AUA of £10,000 or greater and 39% for accounts with an AUA of £50,000 or greater, in cases where the Edward Jones adviser left Towry and left the industry.
Mr Quinn, whilst not disputing these figures, points out that there are no comparative figures for cases where the Edward Jones adviser left Towry and went to work for a competitor other than Raymond James.
The Similarity of the Edward Jones and Raymond James Models
The Raymond James Recruitment Process
- Everything the advisers do now has implications-the EJ contract is quite tight and they need to think before they act
- They need to understand the restrictions and comply with them-if they don't we can't support them
- We recommend that they take legal advice. RJIS will re-imburse them up to £500 each for legal expenses on signing an IC contract with RJIS.
- They have to expect that Towry Law will seek to take action on any suspected breaches of the contract
- We have seen an EJ contract and our lawyers have a view, but you should not rely on this view-you must seek your own advice. Our lawyers general view of what they can and cannot do is:
Cannot do (either directly or indirectly):
- Solicit clients
- Canvass clients
- Induce clients or other EJ advisers to leave
- Retain confidential information (this specifically includes client data)
- Deal with former EJ clients provided they have not breached the above-mentioned covenants directly or indirectly
- Open an office in the local area in competition with EJ
- Conduct general marketing activities in the local area
"If they decide to resign and after they have finished their notice period they can become registered with RJIS. Until that time they cannot induce other employees to work together with them. Once the notice period is finished they can discuss setting up in a branch with other ex-EJ employees if they wish
If they join RJIS, provided that they have not breached their covenants we will support them if there are court actions. However if it can be proven that they did breach the covenants we will reserve the right to terminate their contract"
The Expectation as to the Edward Jones' Clients
"(f) The parties envisage that:
1. the services shall generate at least £10 million of net assets in custody arranged through Raymond James within twelve months of the date of this Agreement; and
2. the services shall generate brokerage charges and portfolio management charges payable to Raymond James in an amount of at least £1000 per month (calculated as £3000 per calendar quarter), commencing after twelve full calendar months following the date of this Agreement, increasing to £2000 per month (calculated as £6000 per calendar quarter) commencing after eighteen full calendar months following the date of this agreement."
Towry's Communication with the Edward Jones' clients
E.8 (1) Solicitation: The Individual Defendants
I have regard to the all facts found in relation to Mr Bennett's background, his work for Edward Jones, the events that led to his decision to leave Towry and the termination of his employment. Those facts, relating to each Defendant, will be relevant when considering at this point the case alleged against each of them.
"Q. Did you understand that Mr Burger had made a recommendation that you should transfer your investments to Raymond James?
A. No, he hadn't made any recommendations at all. It was my choice.
Q. So, what was Mr Burger's investment advice in relation to this?
A. We were carrying on as we had done before."
"- Do not know 10-50.
- enough resources.
- Kept 2 or 3 on the back.
taking on – approached. HNW clients.
- a lot of money.
- Work under himself
Rolling 12 months"
Given the context for the discussion between them, the single word "approached" in the note may have had nothing to do with the initials "HNW clients" and in any event there appears to be a full stop after the word "approached". In my view it is not possible to form a sensible view as to what Mr Cherriman was noting as being said at this point. The notes may also refer to a number of discrete points which were being made over the course of several minutes. I am not satisfied that Mr Hayhurst referred at any stage to an approach, or any intention to approach Edward Jones high value clients with a view to encouraging them to transfer their assets from Towry to Raymond James. Nor do I accept that Mr Cherriman was suggesting that he should.
E.8 (2)-(4): Misuse of Confidential Information
E.11– Inducement of breach of contract by Raymond James
E. 9 (Conspiracy between Raymond James and individual Defendants) and E.10 (Breach of Confidence by Raymond James)