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You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Rush Hair Ltd v Gibson-Forbes & Anor [2016] EWHC 2589 (QB) (21 October 2016)
URL: http://www.bailii.org/ew/cases/EWHC/QB/2016/2589.html
Cite as: [2016] EWHC 2589 (QB), [2017] IRLR 48

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Neutral Citation Number: [2016] EWHC 2589 (QB)
Case No: HQ16X02756

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL
21 October 2016

B e f o r e :

MR MARTIN CHAMBERLAIN QC
(Sitting as a Deputy Judge of the High Court)

____________________

Between:
RUSH HAIR LIMITED
Claimant
- and -

HAYLEY GIBSON-FORBES
S.J. FORBES LIMITED

Defendants

____________________

Mr Chris Quinn (instructed by Osborne Clarke LLP) for the Claimant
Mr Aidan Briggs (instructed by Goldstein Legal) for the Defendants
Hearing date: 9 September 2016

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    Mr Chamberlain QC :

    Introduction

  1. Hayley Gibson-Forbes, the First Defendant, is a successful hairdresser and businesswoman. She is the sole director and 76% owner of Cre8heir Ltd ("Cre8heir"), which was incorporated on 16 September 2014. The remaining shares in Cre8heir are owned by Ms Gibson-Forbes's husband, Mr Sean James McElhill. On 27 May 2016, S.J. Forbes Ltd ("SJFL"), the Second Defendant, was incorporated with Ms Gibson-Forbes and Mr McElhill as directors and shareholders. On 6 July 2016, the entire share capital of SJFL was transferred to Cre8heir.
  2. Rush Hair Ltd ("Rush"), the Claimant, is a hair and beauty business. It runs 80 salons, of which 30 are franchises. The franchised salons are licensed to use the Rush brand and trade marks. They are required to use Rush's system and to promote certain products with whose manufacturers or distributors Rush has commercial agreements. These have at times included L'Oréal (hair and beauty products) and GHD (electrical hair care appliances).
  3. The background to the present dispute goes back to 2008, when Ms Gibson-Forbes was a director and sole shareholder of another company, Hair (WNDSR) Ltd, which later changed its name to Hair (Windsor) Ltd. I shall refer to this company, in both of its guises, as "Hair Windsor". On 1 August 2008, Rush (as Franchisor) entered into an agreement ("the Franchise Agreement") with Hair Windsor (as Franchisee) and Ms Gibson-Forbes (as Principal). Under the Franchise Agreement, Rush granted Hair Windsor the right and licence, and Hair Windsor assumed the obligation, to operate a Rush hairdressing salon at 61 Peascod St, Windsor, Berkshire. Ms Gibson-Forbes guaranteed Hair Windsor's due, proper and punctual performance of the Franchise Agreement. Ms Gibson-Forbes gave covenants that, for a period of one year following termination, she would not do certain things, including:
  4. "17.10.5.1 within a radius of 1 (one) mile from the Premises (except as the holder of not more than five per cent (5%) of the shares in any company whose shares are listed or dealt with in the Stock Exchange or other recognised public market) directly or indirectly be engaged or concerned or interested in any capacity whatsoever in any business which carries on a business similar to or which competes with the RUSH Business other than as a franchisee or the Franchisor under a separate franchise agreement entered in to with the Franchisor or under any other agreement with a RUSH Company;
    17.10.5.2 directly or indirectly be engaged, concerned or involved in any capacity whatsoever in a business which carries on a business similar to or which competes with the RUSH Network within a radius of 1 (one) mile from any premises (other than the Premises) in the United Kingdom on or upon which the RUSH Business is being carried on by any franchisee of the Franchisor or by the Franchisor itself if the Franchisee shall have provided Services or sold the Products to customers whose address or place of business is within any such radius".

    "RUSH Business" was defined as:

    "the Franchisor's hairdressing business, including the operation and management of hairdressing salons, which the Franchisor conducts and operates under a uniform business format and brand".
  5. It is common ground that Ms Gibson-Forbes built a successful business with a loyal customer base from the salon in Windsor and, later, from two other salons in Maidenhead and Egham. The Maidenhead salon was run through a separate company, Hair (Maidenhead) Ltd ("Hair Maidenhead"). Ms Gibson-Forbes also supplied teams of stylists for fashion shows and photo shoots at other locations. She was on three occasions a finalist at the British Hairdressing Awards.
  6. Between November 2014 and March 2015, Ms Gibson-Forbes entered into discussions with Rush with a view to selling her shares in Hair Windsor and Hair Maidenhead. They resulted, on 9 March 2015, in Ms Gibson-Forbes (as Seller) and Rush (as Buyer) signing a Share Purchase Agreement ("the SPA"). Rush agreed to buy all the shares in Hair Windsor and Hair Maidenhead. Clause 3 provided as follows:
  7. "3. PURCHASE PRICE
    3.1 The Purchase Price is £40,000. £25,000 is to be paid to the Seller at Completion (the Initial Purchase Price) with the balance of £15,000 (the Deferred Consideration) payable 6 months after completion provided the Seller has not breached any clauses in this agreement. If the Seller breaches any clauses in this agreement in the 6 months post completion the Deferred Consideration is reduced to £nil.
    3.2 If the Seller breaches any of the clauses in this agreement after the Deferred Consideration has been paid the Seller must repay the Deferred Consideration to the buyer within 14 days of being notified of the breach by the Buyer. The amount of deferred consideration is not a cap on the damages the Buyer may claim under this agreement."

    Clause 7 imposed restrictions on Ms Gibson-Forbes, as Seller, including the following:

    "7.1.2 the Seller shall not at any time during the period of two years from Completion, canvass, solicit, entice or employ:
    Jo Thompson…
    Luke Harris…
    Charlotte Hanson.
    7.1.3 the Seller shall not within the Territory (except as the holder of not more than 5% of the shares in any company whose shares are listed or dealt in The Stock Exchange or other recognised public market) and for a period of two years from Completion directly or indirectly be engaged concerned employed or interested in any capacity whatsoever in a business which carries on a business similar to or which completes with the RUSH business."

    Unlike the Franchise Agreement, the SPA contained no definition of "RUSH business". "The Territory" referred to in clause 7.1.3 was, however, defined as:

    "an area within a two mile radius around the address where the Companies currently trade being 61 Peascod Street, Windsor and 68A High Street, Maidenhead."
  8. On the same date, 9 March 2015, Ms Gibson-Forbes entered into an agreement with Hair Windsor ("the Settlement Agreement") under which she agreed to terminate her employment with Hair Windsor and waive post-termination claims in return for a termination payment of £9,995. She also agreed, in consideration for a further £5, to be bound by the restrictive covenants set out in the SPA.
  9. Rush paid £35,000 (comprising the Initial Purchase Price under the SPA and the sums due under the Settlement Agreement) at completion on 9 March 2015. It did not pay the balance of £15,000 contemplated by the SPA because it took the view that, by that time, Ms Gibson-Forbes was in breach of covenant by employing two former employees of Hair Windsor referred to in clause 7.1.2 of the SPA: Luke Harris and Charlotte Hanson. On 7 October 2015 there was a meeting at which this was discussed between representatives of Rush and a solicitor and accountant. The solicitor, Mr Parslew, says that he was not then formally representing Ms Gibson-Forbes. The accountant, Mr Quirk, was representing her at the time.
  10. In July 2016, Ms Gibson-Forbes opened another salon, trading under the name S.J. Forbes Windsor, at 134 Peascod St, Windsor. She advertised a launch weekend starting on Saturday 6 August 2016 and invited customers to "join our opening celebrations with a complimentary blow dry". The salon manager and senior stylist is Jo Thomson, who is engaged on a self-employed basis pursuant to a Consultancy Agreement dated 11 July 2016. Ms Gibson-Forbes signed the consultancy agreement "for and on behalf of [SJFL]".
  11. On 26 July 2016, Rush's solicitors sent a letter before claim to Ms Gibson-Forbes and Mr McElhill in their capacities as directors of SJFL requesting that they cease to employ Jo Thomson, comply with clauses 7.1.2 and 7.1.3 of the SPA and cease any business competing with Rush within the Territory, as defined by the SPA. Ms Gibson-Forbes refused, saying that the covenants had been made under duress and contesting their validity. Rush issued its claim on 2 August 2016, alleging in paragraph 8 of the Particulars of Claim that Ms Gibson-Forbes, acting through SJFL, had breached clauses 7.1.2 and 7.1.3 of the SPA in that she had "(a) Set up a competing hair and beauty salon…; (b) Employed Jo Thomson as Salon Manager of the same". (There was no pleaded allegation that the SPA had been entered into under duress.) Rush applied for interim injunctive relief. That was refused by Knowles J after a hearing on 5 August 2016. Instead, he ordered a speedy trial, which was listed before me on 27 September 2016.
  12. On 22 September 2016, Rush applied to amend its Particulars of Claim to plead that Ms Gibson-Forbes had not only "employed" Jo Thomson but had also, or alternatively, "canvassed or solicited" her to work as salon manager at S.J. Forbes Windsor. That application came before me at the start of the hearing on 27 September 2016. I made clear that I would decide the application after the trial.
  13. In the course of the hearing, which lasted one day, I heard evidence from Mr Andreas Panteli, the Chief Financial Officer of Rush; and from Ms Gibson-Forbes, Ms Jo Thompson and Mr Chris Parslew. There was a witness statement from Mr Jeffrey Quirk. I was told that he was in hospital and so was unable to give oral evidence. I took into account his witness statement, making due allowance for the fact that he had not been cross-examined.
  14. At the trial, I invited the parties to submit short written submissions on a point of law arising from the decision of the Supreme Court in Petrodel Resources Ltd v Prest [2013] 2 AC 415. Both counsel filed short written submissions in response to this invitation. Unfortunately, through no fault of Mr Quinn's, his submissions did not reach me and I prepared the first draft of this judgment without having read them. When the draft was circulated, Mr Quinn provided them by email. I have now considered them, but they do not affect the conclusions contained in the first draft of my judgment.
  15. The issues

  16. There are nine issues for determination:
  17. i) Should Rush be permitted to amend its Particulars of Claim to plead that Ms Gibson-Forbes had "canvassed" and "solicited" Jo Thomson to work at S.J. Forbes Windsor?

    ii) What is the correct construction of clauses 7.1.2 of the SPA?

    iii) What is the correct construction of clause 7.1.3 of the SPA?

    iv) Are the restrictions contained in those clauses unenforceable on the ground that they are contrary to public policy?

    v) Did the employment of Luke Harris and Charlotte Hanson constitute a breach of clause 7.1.2 on the part of Ms Gibson-Forbes? The answer to this question will determine whether Rush breached the SPA when it declined to pay the £15,000 Deferred Consideration in September 2015.

    vi) If Ms Gibson-Forbes was in breach of clause 7.1.2, did Rush elect to treat the breach as repudiatory and accept the repudiation so as to discharge Ms Gibson-Forbes from any further obligation under the SPA? If Rush was in breach of the SPA when it declined to pay the £15,000, did that breach entitle Ms Gibson-Forbes to treat herself as relieved of any further obligations under the SPA?

    vii) Did Ms Gibson-Forbes breach clause 7.1.2 of the SPA by employing Jo Thomson?

    viii) If permission to amend is granted, did Ms Gibson-Forbes breach clause 7.1.2 by canvassing or soliciting Jo Thomson to work at S.J. Forbes Windsor?

    ix) Should any breaches of the SPA be restrained by injunction, or are damages an adequate remedy?

    Issue (i) Rush's application to amend

  18. Mr Chris Quinn, who appeared on behalf of the Claimant, invited me to permit the amendment sought. He submitted that, in pre-action correspondence, the Claimant's solicitors had asked a number of questions about Ms Thomson's status as manager of S.J. Forbes Windsor; and that the Defendants' solicitors had "wholly failed to deal with" these. Mr Quinn submitted that they had compounded these omissions with "substantial deficiencies and gaps in their disclosure despite repeated requests". He noted that draft amended Particulars of Claim had been served on 16 August with the Claimant's Reply and Defence to Counterclaim; and that no prejudice would be caused by allowing the amendment.
  19. Mr Briggs resisted the application to amend. He noted that the Defendants' solicitors had responded to the draft amended Particulars promptly by letter of 18 August, indicating that they did not consent to the amendment, noting (amongst other matters) that the allegation of canvassing or soliciting had not been raised in pre-action correspondence or at the hearing before Knowles J (despite the fact that its absence had been flagged in the Defendants' skeleton argument for that hearing); that the pleading was insufficiently particularised and that introducing a new claim would extend the scope of disclosure and derail preparations for trial. Despite two chasing emails from the Defendants' solicitors asking whether the Claimant intended to apply to amend, no indication was given that an application was to be made until 13 September and the application itself was not served until 20 September (and then only in draft). The application was issued on 22 September.
  20. In my judgment, Mr Briggs's points about the timing of this application have force. One of the purposes of a statement of case is to define the issues in relation to which the parties must give disclosure. In this case, the Particulars of Claim in their original form contained no allegation of canvassing or soliciting. The omission was remarked upon by the Defendants at the time of the application for interim relief. Once the Defendants made clear that they were not prepared to consent to the application, it was incumbent on the Claimant to issue it as soon as possible, particularly in the light of the highly expedited procedural timetable ordered by Knowles J. In fact, the application was not served in draft until Monday 20 September and not issued until Thursday 22 September (when the trial was listed in a window beginning on Tuesday 27 September). This means that the Defendants cannot be criticised for giving disclosure on issues raised by the original Particulars only.
  21. Mr Quinn argued that the amendment did not require any greater disclosure than did the original Particulars, which had alleged that Ms Gibson-Forbes had "employed" Ms Thompson. Any documents within the Defendants' possession, custody or control that were relevant to the question whether Ms Gibson-Forbes had "canvassed" or "solicited" Ms Thompson would also be relevant to the question whether she had "employed" her.
  22. I do not accept this argument. The Defendants have never disputed that Ms Thompson was engaged to work as salon manager and chief stylist at S.J. Forbes Windsor. Until the application to amend, the dispute was about whether her engagement pursuant to a Consultancy Agreement with SJFL amounted in law to employment by Ms Gibson-Forbes contrary to clause 7.1.2 of the SPA. Documents evidencing the current legal relationship between Ms Gibson-Forbes, S.J. Forbes and Ms Thompson (such as the consultancy agreement between the latter two) were obviously relevant to this dispute. Documents showing who had made the first move were not. The Defendants were not obliged to disclose documents in this second category unless and until the Claimant obtained permission to amend his Particulars to plead that Ms Gibson-Forbes had enticed or solicited Jo Thompson. In fact, some documents relevant to this allegation were disclosed, albeit Mr Quinn made strong criticism of the extent of disclosure on this issue.
  23. It is, however, a separate question whether allowing the amendment would prejudice the Defendants. Despite their position, expressed in correspondence, that an application to amend was required, Ms Gibson-Forbes addressed in her witness statement the question whether she had enticed or canvassed Jo Thompson, or others. At paragraph 20, she said that Luke Harris, Sophie Bratton, Charlotte Hanson and Jo Thompson had all approached her and added: "I did not approach them at all". Jo Thompson also gave evidence on this point. At paragraph 5 of her witness statement, she said that she had "pestered" Ms Gibson-Forbes for work and that Ms Gibson-Forbes had initially refused to employ her, before SJFL eventually engaged her pursuant to a consultancy agreement. Both Ms Gibson-Forbes and Ms Thompson were cross-examined on these points.
  24. In those circumstances:
  25. i) Given the timing of the application to amend, I do not accept that the Defendants can properly be criticised for failures in the discharge of their duty to disclose documents relevant to the allegation that Ms Gibson-Forbes "canvassed" or "solicited" Jo Thompson to work at S.J. Forbes Windsor.

    ii) However, given that their witness statements dealt with the issue, and in the light of what I have said at (i) above, I do not consider that the Defendants would be prejudiced by allowing the application to amend.

  26. I shall therefore permit Rush to amend its Particulars of Claim.
  27. The structure of the analysis of the restrictive covenants

  28. The proper approach to the assessment of the reasonableness of restrictive covenants was explained by Cox J in TFS Derivatives Ltd v Morgan [2005] IRLR 246, at [37]:
  29. "First, the court must decide what the covenant means when properly construed. Secondly, the court will consider whether the former employers have shown on the evidence that they have legitimate business interests requiring protection in relation to the employee's employment… Thirdly, once the existence of legitimate protectable interests has been established, the covenant must be shown to be no wider than is reasonably necessary for the protection of those interests. Reasonable necessity is to be assessed from the perspective of reasonable persons in the position of the parties as at the date of the contract, having regard to the contractual provisions as a whole and to the factual matrix to which the contract would then realistically have been expected to apply."
  30. It will be apparent from the above that TFS Derivatives was a case about covenants given by an employee. The case law indicates that there are some differences between the principles applicable in that situation and those applicable to covenants given by the seller of a business. I will return to these differences later, but the basic three-part structure set out by Cox J is equally applicable to the latter case. Neither counsel suggested the contrary. It follows that the first questions to consider concern the proper construction of clauses 7.1.2 and 7.1.3 of the SPA.
  31. (ii) What is the correct construction of clauses 7.1.2 of the SPA?

  32. There was no dispute, and there were no submissions, about the proper construction of the terms "canvass" and "solicit". Both seem to me to require a positive act on the part of the covenantor to approach the named individuals with a view to persuading them or suggesting to them that they leave the employment of the covenantee and instead to work for, or with, the covenantor. It is clear as a matter of ordinary language that a person (A) does not canvass or solicit another person (B) merely because B approaches A and, as a result of that approach, A employs B. To "canvass" or "solicit", A must make the first move.
  33. The meaning of the word "employ" in clause 7.1.2 is disputed. Mr Briggs did not go so far as to submit that it covers only employment pursuant to an employment contract stricto sensu. Nonetheless, he submitted that it "indicates a contractual relationship between two persons in which one provides work to the other, which the other does for remuneration" (Defendants' skeleton argument, paragraph 25). The clause binds "the Seller" (i.e. Ms Gibson-Forbes) and, by clause 1.4, also her "personal representative, successors and permitted assigns". Mr Briggs observed that the parties could have spelled out (but did not) a prohibition on employment by a company of which the Seller was a director or shareholder. Objectively construed, therefore, Mr Briggs submitted that clause 7.1.2 should not be understood as containing any such prohibition.
  34. Mr Quinn responded as follows at paragraph 7 of his written Response to Ds' Skeleton Argument:
  35. "…An agent's acts are taken to be those of his principal. The Court will not allow a corporate vehicle [to] be used as a device to get round a valid restrictive covenant: Gilford Motor Co v Horne [1933] Ch 935 at 961. The principle is so trite that the standard wording for all injunctions reflects the rule that a person who is enjoined not to do something must not do it either directly or indirectly."
  36. Mr Quinn submitted, by reference to the Oxford English Dictionary, that the term "employ" can mean "give work to (someone) and pay them for it", "keep occupied" and "make use of". He relies also on the definition in Words and Phrases Legally Defined, which cites Emmens v Elderton (1852) 4 HL Cas 624 at 654 as authority for the proposition that to "employ" someone it is not necessary to keep him "employed in actual work"; "keeping [a person] in… service" is enough. Other case law is also cited, but none of it bears directly on the present situation.
  37. Applicable legal principles

  38. Two important doctrines emerge from the case law.
  39. The first can be seen in the judgment of the Court of Appeal in Prophet plc v Huggett [2014] EWCA Civ 1013. That case concerned the construction of a restrictive covenant in an employment contract which (in summary) prevented an employee, whilst employed and for 12 months thereafter, from being engaged, employed, concerned or interested in any business that was similar to or competed with that of his employer. That very wide restriction was subject to a proviso, designed to limit its scope with a view to making it enforceable. The proviso was that the covenant "shall only operate to prevent the Employee from being so engaged, employed, concerned or interested in any area and in connection with any products in, or on, which he/she was involved whilst employed hereunder": see at [5]. The products in which the employee had been involved were proprietary software packages that only the employer supplied: see at [11]. The employer argued that the proviso could not sensibly be read so literally or narrowly; and that it must be construed so as to catch products similar to those of the employer and intended for the same market.
  40. Rimer LJ (with whom Lewison and Christopher Clarke LJJ agreed) accepted that to read the covenant in the narrow way the employee urged would result in its having "no relevant teeth": see at [32]. It was permissible in a case where a contractual provision was ambiguous to choose a "commercially sensible" meaning over one that leads to "apparent absurdity"; but that approach was available only in a case where the language of the provision was "truly ambiguous": see at [33]. Here, it was not. The result was that the covenant should indeed be construed narrowly as referring only to the very products supplied by the employer (and no-one else), even though that construction left the employer with "for all practical purposes, a toothless restrictive covenant": see at [35].
  41. The second doctrine relates to the circumstances in which a person who covenants not to do something will breach the covenant if the prohibited act is done not by him but by a company with which he is concerned. As I have indicated, Mr Quinn relied on the decision of the Court of Appeal in the Gilford Motor case. In that case, the managing director of a motor parts business covenanted that he would not, within five years of the determination of the agreement, "either solely or jointly with or as agent for any other person, firm or company, be engaged, directly or indirectly, in any business similar to that of the company within a radius of three miles from any premises wherein the business of the company shall for the time being be carried on". Shortly after the termination of his appointment, the defendant opened a new spare parts business. As appears from p. 954, the business was initially operated by the defendant as a sole trader. Later, having been informed of the terms of the covenants he had given, he caused a limited company to be incorporated and the business was then run through this company. Lord Hanworth MR held at 955-6 as follows:
  42. "I have not any doubt on the evidence I have before me that the defendant company was the channel through which the defendant Horne was carrying on his business. Of course, in law, the defendant company is a separate entity from the defendant Horne, but I cannot help feeling quite convinced that at any rate one of the reasons for the creation of that company was the fear of Mr Horne that he might commit breaches of covenant in carrying on the business… and that he might possibly avoid liability if he did it through the defendant company…
    I am quite satisfied that this company was formed as a device, a stratagem, in order to mask the effective carrying on of a business by Mr E.B. Horne. The purpose of it was to enable him, under what is a cloak or a sham, to engage in business which, on consideration of the agreement which had been sent to him, just about seven days before the company was incorporated, was a business in respect of which he had a fear that the plaintiffs might intervene and object."
    Lord Hanworth did not explain why it was appropriate to enjoin both Mr Horne and the company. Lawrence and Romer LJJ did. Lawrence LJ indicated at 965 that the company was a "mere channel used by the defendant Horne for the purposes of enabling him to, for his own benefit, to obtain the advantage of the customers of the plaintiff company". Romer LJ added at 969 that the defendant company "was formed and was carrying on business merely as a cloak or sham for the purpose of enabling the defendant Horne to commit the breach of covenant".
  43. The Gilford Motor case was one of those considered recently by the Supreme Court in Prest v Petrodel Resources Ltd [2013] 2 AC 415. Lord Sumption (with whom the other members of the Court broadly agreed) noted at [28] that two separate legal principles underlay the cases in which the phrase "cloak or sham" had been used: first, the "concealment principle" ("that the interposition of a company or perhaps several companies so as to conceal the identity of the real actors will not deter the courts from identifying them, assuming that their identity is legally relevant"); and secondly the "evasion principle" ("that the court may disregard the corporate veil if there is a legal right against the person in control of it which exists independently of the company's involvement, and a company is interposed so that the separate legal personality of the company will defeat the right or frustrate its enforcement").
  44. Lord Sumption analysed Lord Hanworth's judgment in the Gilford Motors case as an example of the concealment principle. At [29], he said this:
  45. "Because the restrictive covenant prevented Mr Horne from competing with his former employers whether as principal or as agent for another, it did not matter whether the business belonged to him or to JM Horne & Co Ltd provided that he was carrying it on."

    The reasons given by Lawrence and Romer LJJ for granting the injunction against the company as well as Mr Horne, on the other hand, reflected the evasion principle and, to that extent, the decision could be regarded as one to pierce the corporate veil.

  46. At [34], Lord Sumption summarised his analysis of the case law in the following way:
  47. "These considerations reflect the broader principle that the corporate veil may be pierced only to prevent the abuse of corporate legal personality. It may be an abuse of the separate legal personality of a company to use it to evade the law or to frustrate its enforcement. It is not an abuse to cause a legal liability to be incurred by the company in the first place. It is not an abuse to rely on the fact (if it is a fact) that a liability is not the controller's because it is the company's. On the contrary, that is what incorporation is all about."
  48. At [35], he added this:
  49. "I conclude that there is a limited principle of English law which applies when a person is under an existing legal obligation or liability or subject to an existing legal restriction which he deliberately evades or whose enforcement he deliberately frustrates by interposing a company under his control. The court may then pierce the corporate veil for the purpose, and only for the purpose, of depriving the company or its controller of the advantage that they would otherwise have obtained by the company's separate legal personality. The principle is properly described as a limited one, because in almost every case where the test is satisfied, the facts will in practice disclose a legal relationship between the company and its controller which will make it unnecessary to pierce the corporate veil."
  50. Lord Neuberger's analysis was broadly similar, but he added this interpretation of the judgments in the Gilford Motor case, at [71]:
  51. "it seems to me that the decision in the Gilford Motor case that an injunction should be granted against the company was amply justified on the basis that the company was Horne's agent for the purpose of carrying on the business (just as his wife would have been, if he had used her as the "cloak"); therefore, if an injunction was justified against Horne, it was justified against the company".
  52. So far as relevant to the present case, the following propositions can be stated.
  53. First, a person who has entered into a covenant not to "employ" another must not employ that other either himself or through an agent. That is because the agent's acts are, in law, those of his principal, the covenantor. This explains why, when a court enjoins someone from doing some act, the standard wording forbids the doing of the act "directly or indirectly".
  54. Secondly, when a company acts through its director, the director is normally the agent of the company, not the other way round. A covenant not to do a particular act can be framed so as to prohibit the doing of that act as agent for another. The covenant in the Gilford Motor case is an example. Whether any particular covenant prohibits acts done as agent for another is a matter of construction.
  55. Thirdly, where a person who controls a company uses that company "as a cloak or sham", i.e. "so as to conceal the identity of the real actors", the application of the "concealment principle" enables the court to conclude that the acts apparently done by the company are, in fact, acts of the person controlling it (on Lord Neuberger's analysis of Gilford Motor Co. v Horne, because the use of the company as a "cloak" makes the company the agent of the controller).
  56. Fourthly, where a controller interposes a company so that the separate legal personality of the company will defeat a legal right or frustrate its enforcement, the "evasion principle" enables the court to pierce the corporate veil, i.e. to treat the company's acts as, in law, those of the controller.
  57. Fifthly, where an act has in fact been done by a company, and not by its controller (and where neither the concealment principle nor the evasion principle applies), it is not an abuse to rely on that fact.
  58. Application of the principles to the facts of this case

  59. As I have indicated, Mr Briggs does not deny that Ms Gibson-Forbes "employed" Ms Thompson simply because the latter was engaged on a self-employed basis. The consultancy agreement by which Ms Thompson was engaged established, on any view, "a contractual relationship between two persons in which one provides work to the other, which the other does for remuneration" so as to satisfy Mr Briggs's definition. The objection is that it was SJFL that "employed" Ms Thompson, not Ms Gibson-Forbes.
  60. The starting point is the consultancy agreement signed by Ms Gibson-Forbes "for and on behalf of [SJFL]". It is true that SJFL was incorporated shortly before the salon was opened. But there is nothing to indicate that it was incorporated with the intention of concealing Ms Gibson-Forbes's role in the business or to evade liability under the covenant. In the Gilford Motors case, the company had been created shortly after Mr Horne had received a copy of the agreement containing the covenants. The inference to be drawn, and the judge's finding, was that it had been set up as a device to conceal Mr Horne's involvement and to evade his liability under the covenant. Here, by contrast, Ms Gibson-Forbes had run a number of salons. In each case a limited company was incorporated for the purpose. SJFL was no different from Hair Windsor or Hair Maidenhead in this regard. There was no attempt to conceal Ms Gibson-Forbes's role in the new Windsor salon. Indeed, it was advertised prominently on the S.J. Forbes website.
  61. I therefore reject Mr Quinn's submission, made orally at the hearing and in writing afterwards, that the principle in the Gilford Motor case assists the Claimant here. This is not a case in which either the concealment principle or the evasion principle applies. It is, rather, the kind of case Lord Sumption had in mind in [34] of his judgment in Petrodel. There is nothing to displace what was said on the face of the consultancy agreement, namely, that it was entered into by Ms Gibson-Forbes as agent for S.J. Forbes. It is in no sense an abuse for the Defendants to rely on that fact.
  62. That leaves the question of how to construe clause 7.1.2 of the SPA. Did that clause, on its true construction, prohibit only activities done by Ms Gibson-Forbes on her own behalf or did it extend also to activities done by her as agent for another? As Lord Sumption noted in Petrodel, the covenant in the Gilford Motor case provides an example of express language designed to achieve the latter effect ("either solely or jointly with or as agent for any other person, firm or company"). Such language is not present in the SPA. But that does not mean that clause 7.1.2 of the SPA, objectively construed, has a different meaning.
  63. Mr Briggs relied on clause 1.4, which provides that a reference to a party includes that party's personal representatives, successors and permitted assigns. In my judgment, that clause addresses a different question: who is bound by the obligations contained in the SPA? It does not address the scope of those obligations. In this case, there is no doubt that the only person bound by the obligations contained in clause 7.1.2 the SPA is Ms Gibson-Forbes herself. The question is whether her obligations under that clause covered acts done by her as agent for another person.
  64. Ultimately, the proper construction of clause 7.1.2 must be ascertained by reading the language used in that clause in the context of the SPA as a whole, giving such weight as is appropriate in the circumstances to the factual matrix known to the parties when it was concluded.
  65. Starting with the language of clause 7.1.2, it seems to me that a covenant requiring a seller not to "canvass solicit entice or employ" named individuals could – on its natural meaning – be read either as prohibiting the doing of any of those acts only when acting on his own behalf or as prohibiting the doing of those acts whether on his own behalf or as agent for another. An employee who enters into a covenant not to "canvass, solicit or entice" other employees after termination, and who then, having gone to work for a competitor, encourages his former colleagues to join him could, on one plausible reading, be held to be in breach of such a clause. The fact that the encouragement was an act done as agent for another would not, I think, preclude that reading. If that is true when the prohibited act is canvassing, soliciting or enticing, I see no reason why it should not also be true when the prohibited act is employing. That is a significant starting point because it means that the situation is different from that in Prophet v Huggett, where there was no ambiguity. Given that there is ambiguity in the words used, it is – as Rimer noted at [33] of his judgment in that case – permissible, and appropriate, to give the clause a commercially sensible meaning.
  66. The task of interpreting the SPA involves "the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract": Investors Compensation Scheme Ltd. v West Bromwich Building Society [1998] 1 WLR 896, per Lord Hoffmann at 912. The extent to which it is appropriate to take into account the factual matrix known to the parties at the time of contracting differs depending on the circumstances: see BNY Mellon Corporate Trustee Services Ltd v LBG Capital No. 1 plc [2016] UKSC 29, [2016] Bus LR 725, per Lord Neuberger (with whom Lord Mance and Lord Toulson agreed) at [30]-[31]. Here, however, what is being interpreted is not a multi-party agreement, but a contract between two parties who had already been in a long contractual relationship at the time when the SPA was concluded. The facts known to the parties as a result of their previous course of dealing must, therefore, be taken into account.
  67. An obvious fact known to both parties when the SPA was concluded concerns the way in which Ms Gibson-Forbes had run her salons prior to 2014. Both parties would have known that each of the salons had been operated by a limited company of which Ms Gibson-Forbes was a director and shareholder. Both would have known that it was this limited company that employed the staff; and that Ms Gibson-Forbes acted as agent for this company. This common understanding is, as I have shown above, the reason why Mr Quinn cannot be right to say that SJFL was used as a cloak or sham to conceal Ms Gibson-Forbes's role in the new salon. It is also, however, the reason why both parties would have understood that a covenant binding on Ms Gibson-Forbes only in respect of acts done on her own behalf (rather than as agent for another) would have been, to use Rimer LJ's language in Prophet v Huggett, "toothless". Given that the language of the clause does not compel such a construction, clause 7.1.2, read against the background of what the parties both knew about the way Ms Gibson-Forbes ran her businesses, in my judgment compels the contrary conclusion.
  68. Clause 7.1.2 must therefore be construed in the only way that is commercially sensible: as prohibiting Ms Gibson-Forbes from canvassing, soliciting, enticing or employing any of the named individuals whether on her own behalf or as agent for another.
  69. Issue (iii): What is the correct construction of clause 7.1.3 of the SPA?

    The arguments

  70. Clause 7.1.3 prohibits Ms Gibson-Forbes, within a two mile radius of the original salon and for a period of two years, from directly or indirectly being "engaged concerned employed or interested in any capacity whatsoever" in "a business which carries on business similar to or which competes with the RUSH business". Mr Briggs says that "the RUSH business", though defined in two different ways in the Franchise Agreement, is undefined in the SPA; and that clause 7.1.3 is therefore void for uncertainty. For the proposition that vagueness alone is sufficient to strike down such a clause, he relies on Davies v Davies (1887) 36 Ch D 359. Alternatively, if clause 7.1.3 has a definite meaning, that meaning is broad: it prohibits Ms Gibson-Forbes from being directly or indirectly concerned in any business that: (a) manages hairdressing salons under a uniform business and brand; (b) uses any of the products, including cosmetics and electrical goods, which happen to have been used or promoted by Hair Windsor; (c) sells any such products; or (d) promotes such products. If correct, this construction would, of course, assist Mr Briggs in the submission he makes under issue (iv) below: that the covenant is too broad to be enforceable.
  71. Mr Quinn, for his part, says that the meaning of clause 7.1.3 is perfectly clear. He relies on Goulding, Employee Competition (3d ed., 2016), §6.170, for the proposition that the court will only rarely strike down a covenant on the ground of uncertainty of meaning; and on the judgment of Sir Nathaniel Lindley MR in Haynes v Doman [1899] 2 Ch 13 (cited with approval by Harman LJ in Home Counties Dairies Ltd v Skilton [1970] 1 WLR 526) for the proposition that:
  72. "Agreements in restraint of trade, like other agreements, must be construed with reference to the object sought to be attained by them. In cases such as the one before us, the object is the protection of one of the parties against rivalry in trade. Such agreements cannot be properly held to apply to cases which, although covered by the words of the agreement, cannot be reasonably supposed ever to have been contemplated by the parties, and which on a rational view of the agreement are excluded from its operation by falling, in truth, outside, and not within, its real scope."

    Analysis

  73. Although the SPA contains no definition of "RUSH business", I do not think there is any real difficulty in identifying what that term means in clause 7.1.3. It means, in short, Rush's hairdressing business. I reach that conclusion by considering the SPA as a whole, and its manifest purpose, and without the need to conclude that the parties intended to incorporate the definition of "RUSH Business" in clause 1 of the Franchise Agreement. I note, however, that my reading of the term corresponds broadly to the latter definition.
  74. Mr Briggs argued that it was impossible to know whether the "RUSH business" also included (as per clause 2.2) "the use, sale and promotion of the Products", which were themselves defined. As I understood it, his point was that the SPA did not make clear whether Ms Gibson-Forbes would be prohibited from engaging in a business which did not involve hairdressing but did involve promotion of, for example, L'Oréal hair and beauty products. Whilst I admire the ingenuity of the argument, I do not think the SPA could reasonably be read as prohibiting Ms Gibson-Forbes from being concerned in such a business. Rush's business is a hairdressing business, which also uses, sells and promotes various products to its customers. Clause 7.1.3 is designed to prevent competition with its hairdressing business. To adopt the words of Harman LJ in the Home County Dairies case, it cannot be "reasonably supposed ever to have been contemplated by the parties" that it would also cover a business that focused on the sale or promotion of products outside the context of a hairdressing business. (She would not, for example, be prohibited from working for a pharmacist on the ground that it sold or promoted L'Oréal products.) Support for this approach can be derived from the judgment of Buckley LJ in Marion White v Francis [1972] 1 WLR 1423, at 1429H-1430F, rejecting the argument of the defendant (a hairdresser) that a covenant she had given would – on its terms – prevent her from working for competing businesses other than as a hairdresser. I shall come back to this case in my consideration of issue (iv).
  75. (iv) Are the restrictions contained in clauses 7.1.2 and 7.1.3 unenforceable on the ground that they are contrary to public policy?

    The law

  76. Mr Quinn emphasised the distinction drawn by the case law between covenants given by an employee to his employer and covenants given by the seller of a business to a buyer. In the latter case, the correct approach was set out by Viscount Maugham for the Privy Council in Connors Bros Ltd v Connors [1940] 4 All ER 179, at 190-191:
  77. "To take a simple case, if the managing director of a private company, owning all or the great majority of its shares, desires to effect a sale by the company of the whole undertaking and is willing, in order that a better price may be obtained, to enter into a reasonable covenant restrictive of his activities as regards carrying on such a business in the future, it is difficult to see why public policy should intervene, for, though public policy requires that trading should be encouraged, and that trade should, as far as possible, be free, on the other hand, there would be a restriction on this freedom if the person in control of a company owning a business was not able to enter into such a contract as would enable him to obtain the full benefit of the proposed sale."
  78. In Allied Dunbar (Frank Weisinger) Ltd) v Weisinger [1988] IRLR 60, Millett J upheld a covenant preventing the seller of a business from being involved in any capacity in a business which competed in any way with that of the buyer. Millett J compared vendor-purchaser covenants with employee-employer covenants. At [20], he said this:
  79. "In the former case (but not the latter), it may be legitimate to protect the covenantee from any competition by the covenantor; and the courts adopt a much less stringent approach to the covenant, recognising that the parties who negotiated it are the best judges of what is reasonable between them. The inclusion of such a covenant may be necessary to enable the covenantor to realise a proper price for the goodwill of the business; and by upholding the validity of the covenant the courts may well facilitate trade rather than fetter it."
  80. The relevant principles were summarised in Cavendish Square Holdings BV v El Makdessi [2012] EWHC 3582 (Comm), per Burton J at [15]. These include the following:
  81. "(vi) The law distinguishes between covenants in employment contracts and covenants in business sale agreements. There is more freedom of contract between buyer and seller than between master and servant, because it is in the public interest that the seller should be able to achieve a high price for what he has to sell: Nordenfelt v The Maxim Nordenfelt Guns and Ammunition Co Ltd [1894] AC 535, Mason v Provident Clothing (supra) and Attwood v Lamont[1920] 3 KB 571 : see also Ronbar Enterprises Ltd v Green [1954] 1WLR at 820 and at 821 per Jenkins LJ: "It is obvious that in many types of business the goodwill would be well-nigh unsaleable if it was unlawful for the vendor to enter into an adequate covenant against competition." The quantum of consideration may enter into the question of the reasonableness of the covenant: Alec Lobb Ltd v Total Oil (Great Britain) Ltd [1985] 1WLR 173 (CA) at 179, 191 (citing Nordenfelt (supra) at 565).
    (vii) Even in the business sale context, however, if a covenant goes further than is reasonably necessary to protect a legitimate business interest, it is void and will not be enforced: Nordenfelt (supra).
    (viii) The Court should be slow to strike down clauses freely negotiated between parties of equal bargaining power, recognising that parties are often the best judges of what is reasonable as between themselves: North Western Salt Co Ltd v Electrolytic Alkali Co Ltd [1914] AC 461 at 471, Esso Petroleum Ltd v Harpers Garage Ltd [1968] AC 269 at 300, Allied Dunbar (supra) at paragraph 32, Dawnay, Day (supra) esp. at 1107 (CA), Emersub XXXVI Inc v Wheatley per Wright J (QB) at p. 13. However the court's deference to the parties is not absolute. The mere fact that parties of equal bargaining power have reached agreement does not preclude the court from holding the agreement bad where the restraints are clearly unreasonable in the interests of the parties: Kores Manufacturing Co. Ltd v Kolok Manufacturing Co. Ltd [1959] 1 Ch 108 (where the restraint was held to be "grossly in excess of what was adequate" (at 124))."
  82. At [16], Burton J observed that the onus was on the claimant to establish the reasonableness of the restraints, but that, in a vendor-purchaser covenant, the onus was "not a heavy one". At [23(iv)], he observed that, in vendor-purchaser covenants, "there is no reported case in which a restriction otherwise reasonable has been held unreasonable on grounds of duration".
  83. Given the clear distinction drawn by the authorities between vendor-purchaser and employee-employer covenants, cases in the latter category must be approached with care. However, Mr Briggs relies on four such authorities, all dealing with hairdressers, who – it would appear – have been a rich source of jurisprudence in this area. In Supercuts Ltd v Woods (unreported, 23 April 1986), the Court of Appeal upheld a six month restriction preventing a hairdresser from working as such within 3/8 of a mile of the claimant's salon in Peterborough. Out of 80 hairdressers' establishments in Peterborough, only 20 were within the prohibited area, so – O'Connor LJ observed – this was "not one of those cases where if the covenant was enforced there was no reasonable opportunity for the employee to earn his or her living".
  84. A covenant framed in materially identical terms to the one in Supercuts was upheld by the Court of Appeal in Steiner (UK) Ltd v Spray (unreported, 1 December 1993). In that case, the salon was in Norwich and 14 or 15 of the 40 salons in that city were outside the restricted area.
  85. In Marion White v Francis [1972] 1 WLR 1423, a one year restriction over a half-mile radius in Leighton Buzzard was upheld by the Court of Appeal. In the course of his judgment, Buckley LJ (with whom Stephenson and Davies LJJ agreed) observed as follows at 1429C-D:
  86. "It is obvious that in an establishment such as a ladies' hairdresser's establishment the assistants who actually deal with the customers, who dress their hair, wash their hair, and do whatever else they do for the customers, provide a very important part of the personal contact between those engaged in the business and the customers of the business. That constitutes an important element of the goodwill of the business; and that is an interest which the employer is entitled to have protected."
  87. A similar restriction (one year, covering a circle of half mile radius), this time in Spalding, was enforced on an interim basis by Mr Christopher Nugee QC (sitting as a Deputy High Court Judge) in Steffen Hair Designs v Wright [2004] EWHC 2995 (Ch). This, however, offers very little assistance because the only question for the deputy judge was whether it was "plain and obvious" that the clause would not be enforced at trial: see at [7].
  88. Clause 7.1.2: The Defendants' arguments

  89. At paragraph 35 of his skeleton argument, Mr Briggs submits that clause 7.1.2 is unreasonable in four respects:
  90. i) There is no need for any restriction relating to employees or former employees. The Franchise Agreement had none.

    ii) There is no geographical restriction, so it prevents Ms Gibson-Forbes from employing the named individuals even if they moved to an entirely different area with no likelihood of client overlap.

    iii) On the Claimant's construction, it prevents Ms Gibson-Forbes from even being involved in a company that later employs the named individuals.

    iv) The two-year duration is twice that of the non-competition obligation in the Franchise Agreement.

  91. In oral argument, Mr Briggs submitted that, in considering these points, it was necessary to bear in mind the inequality in bargaining power between Rush and Ms Gibson-Forbes.
  92. Clause 7.1.2: Analysis

  93. Part of Mr Briggs's argument depends on criticising the apparent breadth of the Claimant's construction, as he understands it. My assessment must, of course, be based on the construction that I have adopted, as set out at paragraphs 52-53 above. In assessing the reasonableness of clause 7.1.2, I have had regard to the following matters.
  94. First, I accept – up to a point – Mr Briggs's submission that, in the negotiation over the terms of the SPA, Rush had greater bargaining power than Ms Gibson-Forbes. Because of the Franchise Agreement, the business could not realistically be sold to anyone other than Rush. The only options available to Ms Gibson-Forbes were, as she put it in evidence, to "walk away" (ie to relinquish the franchise without receiving any consideration) or to accept whatever terms Rush offered. That may supply part of the explanation why Rush felt able to reduce the price from £75,000 to £50,000 with no real justification (there had at one stage been a suggestion that Rush might pay as much as £100,000); and why Ms Gibson-Forbes felt constrained to accept. The inequality of bargaining power is one, but only one, of the factors to be considered in assessing the reasonableness of the covenants: see Cavendish Square Holdings, at [15(viii)].
  95. Secondly, although I accept that the quantum of consideration can in principle be relevant to the reasonableness of the covenant (see Cavendish Holdings, at [15(vi)]), it would be very difficult, on the evidence before me, to draw any firm conclusions from the fact that the price eventually agreed was £50,000. That is because I have no basis for saying whether £50,000 did or did not reflect the true value of the business (even supposing that such a concept had any definable content in a case such as the present). All that can confidently be said is that the consideration paid was substantial (as opposed to merely nominal).
  96. Thirdly, the SPA was an agreement for the sale of a business (or, rather, two businesses: Hair Windsor and Hair Maidenhead). If consideration was to be paid for these businesses, the purchaser was entitled to protect what it was paying for (the goodwill of the businesses). To put the point another way, if it were not possible to protect the goodwill by appropriate covenants, the businesses would be worthless. This point was amply supported by the evidence given by Mr Panteli on behalf of Rush, who explained that – without appropriate covenants – Rush would not be willing to pay anything for the shares. The case law cited at paragraphs 57-60 above attests to the legal significance of this point.
  97. Fourthly, as explained in the extract from Buckley LJ's judgment in Marion White Ltd v Francis (see paragraph 63 above), an important part of the goodwill of the businesses, which Rush was entitled to protect, was the value of the personal connection between the individual stylists employed by them and the regular customers of those stylists. If one or more of those stylists left, the goodwill of the businesses would be, to that extent, diminished, even if the stylists did not draw customers away by going to a competitor. That is because a customer would be less likely to return to Hair Windsor or Hair Maidenhead (and more likely to go somewhere else) if her regular stylist was no longer working there (even if the stylist was not working somewhere else in the area). It follows that Rush had, in my judgment, a legitimate interest in ensuring, to the extent possible, that the employees of Hair Windsor and Hair Maidenhead remained. Ms Gibson-Forbes could not, of course, guarantee that the employees would remain. She could, however, and did, agree not to do certain things likely to cause them to leave.
  98. Fifthly, the fact that the Franchise Agreement contained no restriction similar to clause 7.1.2, though not irrelevant, is not a matter of great weight. The goodwill inherent in the personal connection between stylist and customer (and which clause 7.1.2 was designed to protect) was built up over the years since the Franchise Agreement had been signed. In any event, the Franchise Agreement – unlike the SPA – did not involve payment of substantial one-off consideration by Rush.
  99. Sixthly, the cross-examination of Mr Panteli revealed no particular scientific justification for the selection of two years as the duration for the restriction in clause 7.1.2 (or clause 7.1.3). But, to the extent that Mr Briggs suggested that that kind of justification was required, I disagree. If the connection between individual stylist and customer is a protectable element of the goodwill of the business, and the disruption of that connection would diminish the goodwill, the diminution would be the same whether it occurred in the second year after completion or the first six months. The case law indicates that the process of assessing the reasonableness of a covenant is, necessarily, somewhat impressionistic. A duration of two years is not, in my judgment, unreasonable, given the duration of the covenants upheld in the vendor-purchaser cases referred to above. I derive some comfort from Burton J's observation at [23(iv)] of his judgment in Cavendish Square that there is no vendor-purchaser case in which an otherwise reasonable covenant has been held unreasonable on grounds of duration. The lesser durations of the covenants upheld in employee-employer cases involving hairdressers do not undermine this conclusion because, in the light of the case law cited at paragraphs 57-60 above, a different and less rigorous approach applies when considering vendor-purchaser covenants; and because the fact that covenants of a particular duration have been upheld does not (in and of itself) show that covenants or longer duration would not have been.
  100. In the light of these factors, I conclude that the restriction imposed by clause 7.1.2 is, in all the circumstances, reasonable.
  101. Clause 7.1.3: the Defendant's arguments

  102. At paragraph 36 of his skeleton argument, Mr Briggs submits that clause 7.1.3 is unreasonable in three respects:
  103. i) It excludes Ms Gibson-Forbes from operating in the entire Windsor area, where she lives and which contains some 28 salons.

    ii) It operates for a two-year period, twice that provided in the Franchise Agreement or in any comparable case.

    iii) It extends significantly further than the business of the companies sold under the SPA and purports to cover the Claimant's entire enterprise, including the management of salons, branding, sale and promotion of products etc.

  104. This last submission was, of course, premised on a construction of clause 7.1.3 that I have rejected. The reasonableness of the covenant must be assessed on its true construction, which I have set out in paragraphs 55-56 above. On that construction, the covenant (in summary) prevents Ms Gibson-Forbes, within a two mile radius and for a period of two years, from being involved in a business that is "similar to or… competes with" Rush's hairdressing business. Mr Briggs and Mr Quinn proceeded on the common assumption that the effect of the two mile radius would be to prevent Ms Gibson-Forbes from being involved in any business of the relevant kind in either Windsor or Maidenhead.
  105. The interest protected by the covenant in clause 7.1.3 overlaps with, but is not the same as, that protected by clause 7.1.2. To the extent that Ms Gibson-Forbes has customers of her own, her involvement in another business in the same town could cause those customers to leave Hair Windsor or Hair Maidenhead and thus diminish the goodwill of the business that Rush had purchased. But her value is greater than that. Ms Gibson-Forbes's own reputation would, no doubt, attract some customers to any salon with which she was associated, even if she did not herself cut their hair.
  106. In my view, the geographical reach of the covenant is reasonable. I accept, as I have said, that it prevents Ms Gibson-Forbes from operating in Windsor, where she lives. But living in Windsor has not stopped her from opening an salon in Egham and the covenant does not stop her from continuing to operate the salon there. Nor would it prevent her from opening a salon elsewhere in the area. Although Mr Panteli was cross-examined about his rationale for choosing a radius of two miles (rather than one as initially proposed), I do not think the difference is material. The aim of the covenant was to prevent Ms Gibson-Forbes from operating anywhere in Windsor. Rush was entitled to take the view that Windsor was a small town and the detriment it feared (loss of customers) would occur if she relocated to any part of that town.
  107. Mr Briggs emphasised that, in a vendor-purchaser covenant, the purchaser is entitled to protection of the value of the goodwill of the business he has bought, not to protection from competition with any business that he already has at the time of the sale. I agree. But, on the construction I have adopted, clause 7.1.3 applies only to competing with Rush's hairdressing business within the two mile radius. It was not suggested that Rush had any existing hairdressing businesses within that radius. So the only businesses protected by the covenant were those that Rush was buying from Ms Gibson-Forbes.
  108. Finally, the duration of the covenant did not, in my view, go beyond what was reasonably to be regarded as necessary for the protection of Rush's interests. I have addressed the question of duration in relation to clause 7.1.2. What I have said there is also applicable to clause 7.1.3. In cross-examination, Mr Briggs suggested to Mr Panteli that there was no proper commercial basis for the selection of two years as the proper period. Mr Briggs suggested that no thought had been given to, for example, the frequency with which customers came to the salon or their propensity to return to the same stylist. Again, the authorities do not require a party seeking to rely on a covenant to justify it with evidence as fine-grained as that. Of course, the likelihood that the establishment by Ms Gibson-Forbes of a competing salon would draw away customers will diminish as time goes on, because, over time, a personal connection may be built up between the customer and her new stylist; and the longer that connection lasts, the less likely she will want to return to Ms Gibson-Forbes. But Ms Gibson-Forbes had been trading under the Franchise Agreement for some more than five years; she had achieved considerable success and had a good reputation. I see can no reason to doubt that there would be some real loss of business to Rush if she opened a competing salon during the second year of the period. Finally, as with clause 7.1.2, the period is not out of keeping with those upheld in other vendor-purchaser agreements.
  109. For these reasons, I consider that the clause 7.1.3, construed in the way I have explained, imposes a restriction that is reasonable and in principle enforceable.
  110. Issue (v): Did the employment of Luke Harris and Charlotte Hanson constitute a breach of clause 7.1.2 on the part of Ms Gibson-Forbes?

  111. There is no dispute that Luke Harris and Charlotte Hanson were employed in the salon in Egham. When it was put to Ms Gibson-Forbes in evidence that she had employed Mr Harris and Ms Hanson, her answer was that they had been employed not by her, but by what she described as "my company". The documents do not disclose who signed their contracts as agent for Cre8heir (or indeed whether it was Cre8heir or some other company). There were in evidence text messages between Luke Harris and Ms Gibson-Forbes containing discussion about his working at the Egham salon. These show, incidentally, that it was Mr Harris, and not Ms Gibson-Forbes, who first raised the issue. But they also demonstrate that it was Ms Gibson-Forbes through whom discussions about the employment took place. There was no evidence to contradict the inference that, in taking at least some of the steps necessary to employ Mr Harris and Ms Hanson (of which the signature of the contracts was only one), the company acted through Ms Gibson-Forbes. On my construction of clause 7.1.2, that was enough to breach the restriction imposed by that clause.
  112. Mr Briggs accepts that, if – as I have found – Luke Harris and Charlotte Hanson were employed in breach of clause 7.1.2, Rush was entitled under the SPA to withhold the deferred consideration of £15,000.
  113. Issue (vi): If Ms Gibson-Forbes was in breach of clause 7.1.2, did Rush elect to treat the breach as repudiatory and accept the repudiation so as to discharge Ms Gibson-Forbes from any further obligation under the SPA? If Rush was in breach of the SPA when it declined to pay the £15,000, did that breach entitle Ms Gibson-Forbes to treat herself as relieved of any further obligations under the SPA?

  114. Mr Briggs submits that, even if Ms Gibson-Forbes was in breach of clause 7.1.2 of the SPA by employing Luke Harris and Charlotte Hanson, and Rush was therefore entitled to withhold the deferred consideration of £15,000, Rush nonetheless evinced an intention to treat the breach as repudiatory and to accept the repudiation, thereby discharging Ms Gibson-Forbes from any further obligations under the SPA. He relies in particular on the fact that, when it discovered that Luke Harris and Charlotte Hanson had been employed, Rush not only indicated that it would withhold the deferred consideration, but also demanded repayment of the initial sum of £35,000. That, he says at paragraph 43 of his skeleton argument, is "wholly inconsistent with the continuing subsistence of the contract".
  115. I do not agree. In the light of Ms Gibson-Forbes's breach, Rush had no further substantial obligations under the contract (since it was not required to pay the deferred consideration). The main continuing substantive obligations owed at that time under the SPA were owed by Ms Gibson-Forbes. It would have been surprising, in those circumstances, if Rush had sought to treat the contract as at an end. What is required to establish that an innocent party has accepted a breach of contract as repudiatory, so as to bring the contract to an end, is a "conscious intention to bring the contract to an end, or the doing of something that is inconsistent with its continuation": see Geys v Société Générale [2013] 1 AC 513, at [17].
  116. Nothing in the letter dated 7 October 2015, which was handed by Mr Panteli to Mr Parslew at the meeting on that date, evidences any conscious intention to bring the contract to an end. The demand for repayment of the initial £35,000 (a demand which was never satisfied) cannot, on its own, be considered inconsistent with the continuation of the contract. That sum was sought because "damages so far exceed the £35,000 hereby demanded". Rush would in principle be entitled to damages even if the contract continued. (Whether the employment of Luke Harris and/or Charlotte Hanson actually gave rise to any compensable loss is another matter, which does not fall for decision now.) Nothing else in the contract, or in Rush's subsequent conduct, is inconsistent with the continuation of the contract.
  117. In the light of my conclusions under issue (v) above, the other questions posed under this issue do not arise.
  118. Issue (vii): Did Ms Gibson-Forbes breach clause 7.1.2 of the SPA by employing Jo Thomson?

  119. In the light of my construction of clause 7.1.2, Ms Gibson-Forbes breached clause 7.1.2 of the SPA by entering into the consultancy agreement as agent for SJFL.
  120. It was not disputed that, subject to questions of enforceability, Ms Gibson Forbes had, by setting up S.J. Forbes Windsor, acted contrary to clause 7.1.3 of the SPA.
  121. Issue (viii): If permission to amend is granted, did Ms Gibson-Forbes breach clause 7.1.2 by canvassing or soliciting Jo Thomson to work at S.J. Forbes Windsor?

  122. In the light of my conclusion on the other issues, it would be disproportionate to spend much time analysing the evidence on this issue. As I have said, the documents included screen shots of text messages passing between Ms Gibson-Forbes and Ms Thompson. Ms Gibson-Forbes was cross-examined about these. However, as I have given permission to amend on this point, I should briefly record my conclusions on it.
  123. Both the oral evidence and the documents show that Ms Gibson-Forbes and Ms Thompson were good friends who socialised outside the context of work. Many of the text messages are obviously of a personal nature. In those circumstances no firm conclusions can be drawn from the documents as to who first made the suggestion that Ms Thompson should come to work for SJFL. In those circumstances, and having heard her given cross-examined on this point, I have no basis on which to doubt Ms Gibson-Forbes's oral evidence that it was Ms Thompson who approached her for work, and not the other way round. Accordingly, I conclude that Ms Gibson-Forbes did not breach clause 7.1.3 of the SPA by canvassing or soliciting Ms Thompson to work for SJFL.
  124. Issue (ix): Should any breaches of the SPA be restrained by injunction, or are damages an adequate remedy?

  125. Although I have heard some submissions on this issue, I am conscious that they were made without knowing what conclusion I would reach on the other issues and, in particular, on the construction of the SPA. In those circumstances, I consider it appropriate to invite the parties to make further brief submissions at the hand-down of this judgment and/or in writing beforehand, before deciding this last issue.
  126. Crown copyright©


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