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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
||Royal Courts of Justice
Strand, London, WC2A 2LL
||3rd June 2016
B e f o r e :
His Hon Judge Curran QC
sitting as a judge of the High Court
|| (1) James Pickwell
(2) Molly Nicholls
||PRO CAM CP LIMITED
Jacques Algazy QC and Nathaniel Caiden for the Claimants
Michael Duggan QC for the Defendant
Hearing dates: April, 20, 21, & 22; June 3, 2016
HTML VERSION OF JUDGMENT (AS APPROVED)
Crown Copyright ©
This judgment is divided into topics as follows.
|Terms of the restrictive covenants
|The evidence of Mr Eames
|Mr Pickwell's evidence as to his employment with Pro Cam
|Ms Nicholls evidence as to her employment with Pro Cam
|Summary of the Claimants' progress within Pro Cam after signing the contracts
|How the Claimants came to leave Pro Cam
|Evidence as to the potential consequences of refusal to accept the restrictive covenants
|Consideration the law
|The Claimants' submissions on consideration
|The Defendant's submissions on consideration
|Conclusion on the issue of consideration
|Restrictive covenants in contracts of employment - relevant legal principles
||64 - 68
|Construction of the restrictive covenants
|The Claimants' case on 'protectable interest'
|The Defendant's case on 'protectable interest'
|Conclusion on 'protectable interest'
|The Claimants' case that the covenants are unreasonably wide
|The farming cycle, its relation to Pro Cam's business and duration of the covenants
|Bartholomews Agri Food Limited v Thornton
|The Defendant's case on the third issue
||84 - 86
|Conclusion on the third issue
||87 - 97
- At the conclusion of the hearing on 22 April 2016, it was agreed that the urgency of the case was such that the parties should be informed before 2 May 2016 of the conclusion the court had reached, although the full terms of the judgment would be reserved. On 29 April 2016 arrangements were therefore made for the parties to be informed that the finding of the court was that these claims must be dismissed and judgment entered for the defendant company. The reasons for that finding now follow.
- The case arises out of a dispute between the two Claimants, Mr Pickwell and Ms Nicholls, and their employer, the agricultural supplies company Pro Cam CP Limited ("Pro Cam"), as to the enforceability of restrictive covenants in their contracts of employment as trainee agronomists. In each case, the contract of employment was signed some weeks or months after the claimants had received a written offer of employment from the defendant company and had signed a document accepting that offer.
- The validity and enforceability of the covenants were disputed by the employees, and they sought declaratory relief that the covenants were unenforceable. Each claimant said in evidence that their prospective employer, a company called Frontier Agriculture Limited ("Frontier"), an agricultural supplies and agronomy company in competition with the defendant company, had funded the litigation on their behalf although it was not itself a party to the action.
- Pro Cam resisted the claim, and counterclaimed for declaratory and injunctive relief to enforce the disputed covenants.
- In late summer 2009 Mr Pickwell was interviewed by directors of the defendant company, Mr Bianchi, the managing director, and Mr Barry Eames, head of its 'Field Care South' division. As a result Mr Pickwell received and accepted an offer of employment in a letter from the defendant company dated 16 September 2009. The letter confirmed "the offer of an appointment as a trainee agronomist" and gave details of salary (£23,000 p.a.); a company car or car allowance; private health scheme; pension; expenses arrangements; and holidays. Mr Pickwell accepted the offer in a letter dated 21 September 2009, and actually began work on 2 November 2009.
- Following her successful interview with Mr Bianchi and Mr Eames, Ms Nicholls accepted an offer of employment made in a letter from the company secretary dated 17 August 2012. The letter included the words "
I am writing to offer you the position of Trainee Agronomist
" and gave details of salary (£18,000 p.a.); a company vehicle; expenses; hours of work; mobile telephone provision; holiday entitlement; pension; life cover; private health scheme; permanent health cover; and notice period (one week's notice on each side during the probationary period). Ms Nicholls accepted the offer by signing and returning a reply slip dated 18 August 2012. She actually commenced employment on 24 September 2012.
- As trainee agronomists working for the defendant company their duties included the following tasks.
(1) They were expected to acquire the knowledge and to develop the skills of an agronomist over a period of training and practical work experience by shadowing experienced qualified colleagues and assisting them in their duties, including visiting farms and listening to their discussions with the farmers.
(2) They were required to attend appropriate "BASIS" courses, the fees for which were paid by the defendant company, and to acquire recognised qualifications. BASIS refers to a company called BASIS Registration Ltd, which has become a recognised non-statutory British training and examining body and which makes awards regarded as qualifications in agronomy. Another acronym in terms of agronomy qualifications is "FACTS" which stands for the Fertiliser Advisers Certification and Training Scheme, for agronomists wishing to become advisers to farmers and growers on the use of fertilisers. In summarising the details of these matters Mr Eames made the following uncontroversial points in his witness statement.
i) In order to attain the BASIS Certificate in Crop Protection a trainee agronomist would need to acquire a sound introduction to agronomy, integrated crop protection and crop nutrition.
ii) It is a legal requirement for anyone advising on or selling pesticides in the UK to hold the BASIS Certificate in Crop Protection.
iii) The FACTS certificate concerns crop nutrition and requires successful agronomists to demonstrate they can advise and write recommendations for fertiliser use, which are both economically and environmentally sound. Such certification is also a legal requirement for agronomists advising on fertilisers.
iv) To achieve these two qualifications trainee agronomists would be required to undertake courses delivered by a combination of internal experienced agronomists and external trainers, and to work with experienced agronomists in the field, until they are deemed ready to be entered for the relevant qualifying examinations.
v) Once an agronomist obtains the relevant qualifications he or she can apply to be registered with BASIS Registration Limited. As part of that registration the agronomist would be required to undertake a certain level of continuing professional development each year to maintain their registration.
vi) After qualifying, the trainees would be required to work under the supervision of an experienced BASIS-qualified agronomist for about a year.
vii) Thereafter, the Claimant were expected to acquire customers for the defendant company (a) by cold-calling farmers and inviting them to trade with the defendant company and to receive advice gratis if they did so; and (b) by taking over from more senior agronomists (on their retirement, for example) in dealing with established customers.
- Mr Pickwell explained in his witness statement that the qualified agronomist's function is to advise farmers on the purchase and use of agricultural chemicals such as pesticides, fertilisers and fungicides. As a matter of practical reality, agronomists are employed by companies such as Pro Cam and Frontier whose business involves the production and sale of 'agrochemicals', seed, and other products such as 'micronutrients.' It takes time for a farmer to develop a business relationship with an agronomist and to trust his or her judgment. Once such a relationship has been established, however, many farmers become reliant on the advice of the agronomist, and are likely to follow the advice given and purchase products sold by the agronomist's employer, and such relationships often endure for many years.
Terms of the restrictive covenants
- The restrictive covenants in issue in each case are in the same terms. They are as follows.
"You will not from the date of termination of your employment either on your own account (whether directly or indirectly) or as a representative employee, partner, director, financier, shareholder or agent of any other person, firm, company or organisation:-
for a period of 6 months have any dealings in the sale or supply of any relevant goods or services to any relevant customer
[the 'non-dealing' covenant]
for a period of 6 months canvass or solicit order for any relevant goods or services from any relevant customer
." [the 'non-solicitation' covenant]
The following definitions in their respective contracts apply.
'relevant goods or services' are goods or services which are the same as or of a similar kind to those which in the period of 12 months before termination of your employment have been dealt in or supplied by you in the course of your duties for the Company or group company
'relevant customer' means any person, firm, company or organisation with whom you have dealt in the period of 12 months before the termination of your employment and who as a result of your dealings has bought goods or services from or been supplied with goods or services by the Company or any Group company."
The evidence of Mr Eames
- Mr Eames said that he himself had worked for Pro Cam for 39 years, and that like him many of Pro Cam's agronomists are nearing the end of their careers. He had been planning to retire in June 2016, although that proposal had been affected by the departures of James Pickwell and Molly Nicholls. The Claimants were both agronomists within his division and he had been responsible for their recruitment and nurturing them as they had progressed in their careers with Pro Cam. He thought very highly of both Claimants, and was disappointed by their decision to leave Pro Cam to work for Frontier, which he described as a key competitor. They had given him no impression that they were unhappy nor any warning that they were thinking of moving elsewhere. At the stage at which Ms Nicholls joined Mr Eames said that,
"[w]ithin Pro Cam a number of our agronomists are looking to retire in the next three years and to manage this Pro Cam has put in place its 3-2-1 retirement scheme whereby we look to recruit new agronomist between 2 to 3 years before the planned retirement, who will over the course of that 2-3 year period work alongside the retiring agronomist and facilitate a smooth handover of the customers with whom the retiring agronomist worked to the new agronomist."
With the agreement of Mr Bianchi, he had decided to hand over a substantial part of the Pro Cam customer base for which he was personally responsible to Ms Nicholls, to whom he had been introducing customers since she first started work for Pro Cam as a trainee. Once she became qualified he had been handing over customers to her from January 2014.
- At Pro Cam, Mr Eames said, they train agronomists
in the field in that from day one they will work for Pro Cam shadowing other agronomists
as was demonstrated by entries in Ms Nicholls' training diary at D166 ff in the trial bundles. These entries showed the time she spent with other agronomists during which she would be visiting the customers with whom they work, crop inspecting and learning what to look for and what to identify, whether it be weed, pest or disease or crop nutrition. During this time she was able to develop relationships with the customers and acquired knowledge of their farms and their contacts. Some of their customer accounts were very large and linked accounts to several farms might exist. The agronomist dealing with those accounts would know who the main decision-maker was and would have endeavoured to form a good business relationship with him or her. Whilst it might be possible for someone outside Pro Cam's business to obtain information about a farm, in terms of its address and ownership, information relating to such key decision-makers, such as their contact details, would not have been readily available and it thus constituted commercially sensitive information.
- As to the stage at which an agronomist can be allowed to work for the company independently of more senior colleagues, Mr Eames said,
"There is no actual point in time when an agronomist is competent to handle accounts on their own, and to no longer be deemed to be a trainee. It is a misnomer to refer to 'qualified' and 'non-qualified' agronomists. Whilst an agronomist needs to pass two essential core qualifications before they can advise farmers on crop protection and agrochemicals the fact that they may have attained these qualifications would not mean they were immediately proficient to work as an agronomists."
Miss Nicholls continued to accompany Mr Eames on several customer visits after she had passed her BASIS certificate in June 2013, and experienced agronomists continued to check her crop recommendations for approximately 3-4 months beyond June 2013. Mr Eames said that
"[i]t was not before September 2013 that I was satisfied she was competent."
Her 12-month post-qualification period expired in July 2014.
- Mr Eames said that Mr Pickwell's farming background gave him a natural advantage. Before he joined Pro Cam he had already run his own farm, and had a Diploma in Agriculture. Mr Pickwell passed his BASIS Certificate in Crop Protection in June 2010 and his FACTS certificate on 17 February 2011, within 16 months of commencing employment with Pro Cam. In his opinion,
"James was more or less competent straightway
. However, there is no certainty and it will all come down to how the individual works out in practice."
In addition to having the paper qualifications,
they also need to develop and demonstrate good communications skills, sales techniques and presentation skills and be able to apply the technical knowledge acquired in preparing for the BASIS and FACTS certificates in practice."
There was no final examination, nor any defined period of time to be served, before Pro Cam might be satisfied that trainees who have passed their qualification examinations can advise customers independently of other staff.
- Given their previous experience Mr Eames said that he had not expected either Ms Nicholls or Mr Pickwell to take as long in training as someone with no previous farming experience or related qualifications. However, there was
no certainty and it will all come down to how the individual works out in practice."
He added that,
"Pro Cam invest a lot of time and money into training their trainee agronomists and keeping all its agronomists up to date. In addition to technical training Pro Cam also provides sales training, coaching and mentoring."
Mr Pickwell's evidence as to his employment with Pro Cam
- Mr Pickwell began work for the company on Monday 2 November 2009. Within a week he went out to shadow a qualified agronomist for the first time. They drove to a farm where they did some 'field walking', which involves making observations, according to the seasons, for pests such as slugs, and for signs of crop and weed germination, crop growth, weeds, pathogens and fungal infections. After that he spent a week following a different agronomist each day. Mr Pickwell said that he was surprised by how few farmers they met on these outings, and, when they did, he found that as a trainee he was either not introduced by his mentor at all, or was simply referred to as "the new trainee". The mentor agronomists would explain to him, he said, what they were looking for when field walking, and would talk about the various products Pro Cam had available and what they would recommend to farmers. However, they would not normally involve Mr Pickwell in the recommendation or pricing process.
- Mr Pickwell also attended internal training courses organised by Pro Cam in sales techniques and 'presentation skills.' After he gained his BASIS qualifications, Mr Pickwell said that his mentor told him to go out and find farmers to work with and to make sure that they did not already deal with the defendant company. He said he was not at that stage given the details of any farmers to contact, nor was he given any leads to follow: he was simply told to go out to find the work, which he did his best to do. However, it was, he said, "absolutely prohibited" even to attempt to take work from an existing Pro Cam agronomist. Mr Pickwell tried cold-calling farmers in his area to arrange to see them, but this was difficult "as all farmers will have arrangements with someone already to provide their agronomy services."
- The outcome was that he did not acquire any "proper work" from farmers until, in about September 2010, an agronomist called Adkins resigned from Field Care South to go into a different area of business. In an attempt to retain the Adkins customers, Mr Eames divided them up between some of the company's agronomists, and Mr Pickwell was given the names of eight farmers from the list, of whom he managed to retain six as customers of the defendant company. Mr Pickwell was quite candid in his witness statement about the realities of the business:
"It is far easier to take over an account where the Defendant's agronomists were already providing the agronomy than it is to find new farmers though cold-calling and word of mouth."
However, through his own efforts he did find some farmers who were willing to give him a chance, and by Spring 2011 he had about a dozen such farmers for whom he was providing advice and to whom he was making sales.
- In cross-examination Mr Duggan QC asked Mr Pickwell about the contract of employment, and whether he had read it before signing it.
"A I did read the document.
Q Look at the words in Clause 24 -- 'I understand and agree to the terms and conditions
set out above
.' -- the declaration at the end of the contract of employment: did you read it?
A Yes, I believe so.
Q And Clause 22 just above it the 'entire agreement clause' which says it '
supersedes all previous agreements'?
A I don't remember reading that.
Q You understood when you signed this that it was your contract of employment which was going to govern your relationship with Pro Cam?
Q To govern your employment relationship?
Q And that it superseded all previous documents?
A I don't know.
Q Had you any problems with it when you signed?
Q You were content with the notice period, restrictive covenants etc?
Q So when you signed this contract you understood you were working for the defendant company under the terms of this document?
- Mr Pickwell agreed in cross-examination that in April 2013 there was an important development when Mr Eames informed him that a long-serving company agronomist named Mr Maltby was seriously ill. Mr Maltby had prepared a list of 'his' farmers and he and Mr Eames had divided the names on it between four agronomists in the area. Mr Pickwell was given some of those names, and was instructed to make contact with them, and to explain that Mr Maltby was unwell and that he would be looking after them whilst Mr Maltby was away. There were, he said, approximately a dozen farmers on his list, and he made contact with all of them in April 2013. All but one of those agreed that he might take over as their agronomist. Unfortunately, Mr Maltby was never able to return to work, and he died later that year. Mr Pickwell continued in his place.
- Mr Pickwell also took over some farmers from another agronomist who had broken his ankle in the early summer of 2012. As a result he was unable to drive or field-walk, and in fact he retired about a year later. The farmers' accounts were transferred to Mr Pickwell by Mr Eames, who
simply told the farmers that I was now dealing with them and they were all happy with that."
Ms Nicholls' evidence as to her employment with Pro Cam
- Ms Nicholls said that she was brought up near Lincoln, and had always wanted a career in agriculture. Since her school 'Year 11' she had decided that she wanted to be an agronomist. She wrote to Mr Eames enquiring about employment with the defendant company on 9 July 2012, enclosing her CV, and, following an interview with Mr Bianchi and Mr Eames in August 2012, she was offered a position as a trainee agronomist. She received the offer letter already referred to above, and signed and returned it the following day.
- Ms Nicholls said she was asked to call into the Defendant's depot on 19 September 2012 to collect her company car. On her first day she met a senior agronomist, who took her field walking with him. He told her that he was her mentor. On 27 September 2012 she started shadowing other agronomists. She also started the BASIS training in early October 2012.
- In cross-examination Ms Nicholls was asked, whether she agreed that Mr Eames had handed her the contract of employment and had asked her to read it and to come back to him if there was any query. She answered as follows.
"A I can't remember. I believe I found it in my pigeon hole in the office. I did read it and I did understand it. I thought the six month notice period was very long.
Q What about the restrictive covenant?
A I did read it and understood but I was 20 years old and very happy to have a job.
Q At the time when you signed it you were on probation at one week's notice?
Q If you had refused to sign it Pro Cam Ltd could have given you a week's notice?
A That was never expressed but, [yes]."
- One of the agronomists that Ms Nicholls shadowed a few times was Mr Pickwell. They got on well and have been friends since then. When field walking as a trainee Ms Nicholls said that she could go whole weeks without seeing any farmers. When she did see farmers the agronomist she was with would not normally say any more to them than something like
and this is Molly, she is a new trainee."
In April 2013 Mr Eames suggested that she spent some time visiting farmers to try and sell some trace element products. As she was not yet BASIS qualified she said that she could not make recommendations about pesticides but she was able to try and sell trace elements. It was very slow to start with as,
farmers have a certain lack of trust in dealing with someone so young in the industry as well as someone who was not BASIS qualified."
- In April 2013 Ms Nicholls was asked to look after a 70-acre farm as the agronomist for that farm, Mr Maltby, had died suddenly. The owner of the farm was related to Ms Nicholls by marriage. As she had still not become BASIS qualified at the time all her recommendations had to be signed off by Mr Pickwell. On 21 May 2013 Ms Nicholls said that she received a letter from the company secretary telling her that she had passed her six-month probationary period.
- After gaining her BASIS qualification Ms Nicholls had a meeting with Mr Eames in July 2013. He told her that she was "now an agronomist" and to "go out and find farmers" to sell to. Her area was to be in Lincolnshire and Leicestershire, which she thought was already "saturated" with agronomists. Between July and September of that year Ms Nicholls did not manage to secure any new farmer-customers.
- In the summer of 2014 Ms Nicholls was asked to pick up the "rape desiccation work" for other agronomists who were either busy or on holiday, and she was given a list of farms where she walked the fields and assessed the right herbicide to use and when to apply it. She would then speak to the farmers and give them her views. She described their reaction as follows.
"These farmers were happy that the Defendant had asked me to do this and to follow my advice even though they did not know me. Farmers do not like people they do not know walking their fields but because I was introduced by the Defendant they were happy to let me."
- In January 2015 Mr Eames told her that he wanted to transfer one of his accounts to her. The farm was R. Twidale Farms, which also did the contract farming for another farm account with the same farm manager, and so Ms Nicholls said that she
ended up looking after that account too."
Mr Eames had informed the manager by telephone and Ms Nicholls said,
"I then took over the 1,000-acre estate from Mr Eames who had been the agronomist there for over 30 years."
She added in her witness statement that,
"I was surprised at how easily I was able to step into the shoes of long standing agronomists because I worked for the Defendant and they had the relationship with the farmers. This was a huge contrast to the difficult slog of trying to get farmers with no existing relationship with the Defendant to take me on."
Summary of the Claimants' progress within Pro Cam after signing the contracts
- Mr Pickwell had signed the contract containing the restrictive covenants on 14 December 2009. He qualified as an agronomist on 2 July 2010, and then worked under the supervision of a qualified agronomist until July 2011.
- Ms Nicholls signed her contract containing the restrictive covenants on 21 March 2013. She duly qualified in July 2013, and worked under supervision until July 2014.
- The unchallenged evidence from Mr Eames as to the progress made by each of the Claimants was as follows. After James Pickwell commenced employment in November 2009 on a salary of £23,000 per annum, his salary increased steadily. In April 2011 it increased to £29,000 and in July 2012 it was increased to £34,000. By February 2014 it had increased to £41,000 and his final salary was £41,820. In addition he received regular bonuses. The division of the defendant company in which he worked did not operate a formal bonus scheme. Instead agronomists within it were
incentivised by being able to achieve bonuses for several elements of their performance such as for example, seed sales, forecasting and general performance. In 2011 James received bonuses worth £2,000, in 2012 his bonus payments totalled £3,000, which he replicated in 2014 and 2015."
- Ms Nicholls' salary also increased: in July 2013 to £18,540 and to £25,000 by February 2014. In July 2015 it was increased to £30,000. During this period she also received bonuses.
How the Claimants came to leave Pro Cam
- During the year 2015, Mr Pickwell said, Frontier made contact with him, and Ms Nicholls said that contact was also made by her with Frontier. They both decided to resign and to work for Frontier. They indicated their intentions to Pro Cam. Under the contract of employment each of them was required to give six months' notice, but following Pro Cam's refusal (in the circumstances) to pay for certain future course fees, a dispute arose as to whether Pro Cam had acted in such manner as to constitute a fundamental breach of contract, and whether the Claimants were therefore entitled to resign with immediate effect. The Claimants purported to do so on 18 December 2015. In the light of a warning from Pro Cam that it was preparing for litigation, they returned to work on 1 February 2016. However, upon expiry of their notice, from 2 May 2016, both the Claimants proposed to begin work for Frontier.
The evidence as to the potential consequences of refusal to accept the restrictive covenants
- When Mr Pickwell was asked in cross-examination what he thought would have happened if he had refused to sign the contract, he said he did not know, although he appeared to accept that he would not have been given access to any of Pro Cam's customers. Ms Nicholls agreed that at the time when she signed it she was on probation and could be dismissed with only one week's notice. She also agreed that whilst nothing was expressly stated as to the consequences of refusing to sign the contract of employment, if she had refused to sign it the likelihood was that she would have been given a week's notice.
- Mr Eames's evidence was that he had never been in a position where a trainee has refused to sign such a contract of employment. Neither of the Claimants had refused to sign, nor did they even raise a question over the restrictive covenants. Had they done so, Mr Eames said,
"[w]hilst I would have sought to have discussed any issue they might have with them, and resolve it so that there were willing to enter into the contract of employment, had they refused, Pro Cam would have had to have considered terminating their employment. Pro Cam simply could not risk continuing to introduce an agronomist to its customers, and allowing them to build relationships and goodwill with them, without the protection of knowing they couldn't immediately take those customers with them were they to leave and join competitors. Pro Cam therefore relied upon their acceptance of their contracts of employment, confirmed by their signatures, in continuing to employ them, and in providing them with valuable training so they could progress in their chosen careers; in paying them bonuses and giving them salary increases and in introducing them to valuable customers of the company and disclosing confidential and commercially sensitive information to them."
- Mr Bretherton, Pro Cam's Regional Director, said in his witness statement that if a trainee were to refuse to sign a contract of employment the likelihood was that their training programme would be suspended. Moreover,
where, as in the case of the Molly Nicholls, the employee was still in her probationary period it is likely we would have taken the decision to terminate her employment, if it was not possible to encourage them to agree to the contract of employment, as Pro Cam deems the protection the restrictive covenants afford it as being vital to its business."
- Mr Bianchi said in his witness statement that,
"[i]t is very important to note that had either Claimant refused to sign the contracts of employment, we would have needed to have reviewed their on going employment and for the reasons set out above, it is very likely that we would have terminated their employment before or at the end of their probationary period if we had not been able to persuade them to sign the contact. Neither Claimant expressed any problem in signing the contract and they have been prepared and happy to take its benefits, including access to farmers and bonus derived therefrom which they would not have been given if they had refused to sign."
- None of the witnesses from Pro Cam was challenged in respect of this evidence. On the facts regarding the probable consequences of refusal by either of the Claimants' refusal to sign the contract of employment it therefore seems likely that his or her training programme would have been terminated, all access to farmers would have been stopped, and notice terminating their employment would have been given to them within weeks, or, at the most, months.
- In opening the case leading counsel for the Claimants, Mr Jacques Algazy QC, made it clear that there were three main issues raised by their side in this litigation. First, whether there had been any or any adequate consideration in the employment contracts capable of making the restrictive covenants enforceable. Secondly, if there had been consideration, whether the defendant company had a legitimate interest requiring protection in relation to the Claimants' employment at the time when they entered into the restrictive covenants. Thirdly, whether, in any event, the restrictive covenants were wider than had been reasonably necessary as at the date thereof. It will be necessary to consider each of these matters point by point.
Consideration - the law
- On the first issue, it was submitted that there had been no valuable consideration for the contracts of employment signed by the Claimants weeks or months after each had begun work.
- In the comparatively old case of Woodbridge & Sons v Bellamy  1 Ch 326, the question of consideration was considered at first instance where the employee was engaged by letter on 4 April and an agreement of service was signed on 16 April of the same year. Eve J said:
the further question would then arise whether, in view of the position subsisting on April 16, the Court ought not to infer a sufficient consideration to support this document. The plaintiffs regarded the execution of the document as an absolutely necessary condition precedent to their allowing the defendant access to their business and clients, and I think in that state of things I should be bound to infer that if the defendant had refused to sign, and had asserted his right to be employed on the terms contained in the letters, the plaintiffs would have taken the earliest opportunity of determining the relationship between them and the defendant, and indeed would have taken good care that while he was in their office the defendant should not obtain that access to their clients and business which they contemplated giving him and which they in fact gave him, as soon as he had executed the document. I think, therefore, even if I came to the conclusion that this did not in fact form part of the agreement of service, that I should be bound to hold that there was sufficient consideration to support the contract, although entered into subsequent to, and when there was still subsisting, an existing contract of service. I hold therefore that the defendant has not established his first ground of defence." (at 332)
Although the judge's decision was appealed on another point, his ruling on this issue was not disapproved by the Court of Appeal.
- Cases involving an issue of consideration, such as Lee v GEC Plessey Telecommunications  IRLR 383, have frequently concerned an employee receiving some benefit while accepting new terms and continuing to work. Such conduct has been held to amount to consideration. In Lee three employees brought claims against their employer seeking a declaration that their contracts of employment included within them a term entitling each of them to enhanced severance payments from their employer in the event that they should be made redundant. The court rejected the defendant employers' argument that the terms were not contractually binding upon them because there was no consideration given by the employees for the introduction of the enhanced terms into the individual contracts. Where, in the context of pay negotiations, increased remuneration was paid and employees continued to work as before, there was plainly consideration for the increase by reason of the settlement of the pay claim and the continuation of the same employee in the same employment. The employer had both secured a benefit and avoided a detriment.
- Counsel for the Claimants drew attention to the most recent case in which judicial attention has been given to a point on consideration which is similar to that in the instant case: Reuse Collections Ltd v Keith Sendall & Ors  EWHC 3852,  IRLR 226. The facts concerned a glass recycling business which had previously been owned by Mr Sendall's family. He had joined the family company in 1980, and became a director, which he remained until it was taken over by Reuse, although he stayed on thereafter as an employee. Reuse was itself later acquired. Before October 2012 Mr Sendall had had no written contract of employment (although he had been employed for 32 years). In October 2012 he was given a draft statement of terms and conditions. He did not sign it and took advice. He made it clear by January 2013 that he was not happy about signing the contract, but, after a meeting with the chief executive, he signed it on 22 February 2013. There were many issues in the case, one being that Mr Sendall argued that there was no consideration for the contract. These arguments were considered at paragraphs 70 to 85 of the judgment. The position of the company was that,
the covenants contained in the contract of employment were supported by consideration because they were introduced as part of a package under which benefits were conferred .
Mr Sendall's position was that,
"[h]e denies that in the circumstances of this case mere continued employment could have amounted to consideration."
His Hon. Judge Stephen Davies, sitting as a judge of the High Court, considered the benefits and decided that he was not satisfied that they were received for his agreeing to enter into the contract of employment. The argument that consideration was found by continued employment of Mr Sendall was rejected on the basis that "
this is not sufficient, in the context of this case, where a long serving employee was being asked to accept, new, and substantial contractual restrictions". At paragraph 84 the judge went on to say this:
"This was not a case where, on the evidence, Reuse was putting forward the draft contract of employment on the basis, expressly or implicitly, that a refusal to sign it would, or might, lead to dismissal or indeed any other lesser sanction. It does not appear from the evidence that Reuse was in effect giving Keith Sendall a deadline to sign or refuse to sign, after which consequences might flow. Reuse can scarcely rely on the 'deemed acceptance' provision in the draft in circumstances where Keith Sendall was making it clear in the period following October 2012 that he was not willing to sign the contract of employment. It cannot be said, therefore, in my judgment, that Reuse provided consideration merely by continuing to employ him, particularly without seeking to link its continued willingness to employ him with his willingness to sign the contract of employment."
- In the case of FW Farnsworth Ltd v Lacy [2012[ EWHC 2830,  IRLR 198 the facts were that the defendant Mr Lacy had joined the claimant business as a graduate trainee in 2000 and, by 2009, had been appointed to a senior management role. He had signed a contract in 2003 but was sent a renewed contract for the senior management position in 2009, which he did not sign. He was transferred to a new pension scheme referred to in the 2009 contract as a result of a direction from the employers. However, Mr Lacy had also applied for medical benefits for himself and his family that were unavailable to him under the original contract. The claimant company argued that these acts, among other things, amounted to acceptance of the contract.
- In his judgment in Farnsworth Hildyard J reviewed the legal principles to be found in the cases of Sallem Khatri v Cooperatieve Centrale Raiffeisen-Boerenleenbank BA  EWCA Civ 397 ("Khatri"); Solectron Scotland Ltd v Roper and others  IRLR 4 EAT (which was cited and approved in Khatri); Ignazio Messina & Co v Polskie Line Oceaniczne  2 Ll. Rep. 566 at 571, 24 and Attrill and others v Dresdner Kleinwort Ltd and another; Anar and others v Dresdner Kleinwort Ltd and another  IRLR 553. The learned judge held that while joining the new pension scheme was not referable purely to the new contract, as that was involuntary, Mr Lacy's application for the medical benefits was, and so satisfied the 'purely referable' test in the important case of Solectron, which is dealt with in more detail below.
- Farnsworth contains a number of points which should be borne in mind in considering the question of consideration in the present case, especially in respect of the submissions of counsel for the Claimants upon the relevance of the intentions of the Claimants when signing the contracts of employment.
(1) There is no dispute that the burden is on Pro Cam to establish that the Claimants are and were bound by the contracts containing the restrictive covenants.
(2) If express consent cannot be established, the case would turn on the issue of implied or inferred consent.
(3) To establish such consent it is for the employee to show an "unequivocal act implying acceptance": see per Jacobs LJ in Sallem Khatri v Cooperatieve Centrale Raiffeisen-Boerenleenbank BA  EWCA Civ 397 ("Khatri").
(4) In that regard the decision of the EAT in Solectron Scotland Ltd v Roper and others  IRLR 4 (which was cited and approved in Khatri), was of importance, and, especially, the following passage (in paragraph 30 of the judgment given by the then President of the EAT, Elias J):
"The fundamental question is this: is the employee's conduct, by continuing to work, only referable to his having accepted the new terms imposed by the employer? That may sometimes be the case. For example, if an employer varies the contractual terms by, for example, changing the wage or perhaps altering job duties and the employees go along with that without protest, then in those circumstances it may be possible to infer that they have by their conduct after a period of time accepted the change in terms and conditions. If they reject the change they must either refuse to implement it or make it plain that by acceding to it, they are doing so without prejudice to their contractual rights. But sometimes the alleged variation does not require any response from the employee at all. In such a case if the employee does nothing, his conduct is entirely consistent with the original contract continuing; it is not only referable to his having accepted the new terms. Accordingly, he cannot be taken to have accepted the variation by conduct."
(5) The intention of the parties and the fact of acceptance or otherwise is, in accordance with ordinary principles of contract, to be objectively ascertained (see per Clarke J. in Ignazio Messina & Co v Polskie Line Oceaniczne  2 Ll. Rep. 566 at 571, quoting Steyn LJ (as he then was) in Nazrul Islam v Ali Askar [unreported]).
(6) In Attrill and others v Dresdner Kleinwort Ltd and another; Anar and others v Dresdner Kleinwort Ltd and another  IRLR 553, an offer of improved contractual terms was made by way of an announcement by the employer to its employees. One question that arose was whether acceptance of the new terms was to be implied or inferred from the fact that the employees continued to work after the announcement. It was held that such an inference was not warranted: the Court could not be satisfied that the fact that the claimants continued to work and discharge their contractual obligations to their employer was only referable to, such as to imply acceptance of, the terms of the offer contained in the announcement.
(7) Khatri illustrated the application of the "only referable" test in a situation where in reality the employee was not called upon to do, and had not done, anything substantively different and yet the employer contended that by continuing to work the employee should be taken to have accepted terms wholly to his disadvantage. Again, the test was not satisfied: nothing the employee had done was wholly referable to, such as to give rise to the inference of acceptance by him of, the new terms. Even in the situation of an alteration to the advantage of the employee the 'only referable' test must be satisfied. Thus, in the Attrill case the revised terms put forward by way of the announcement were not only beneficial but had in fact been offered with a view to persuading the employees concerned not to leave their employment. Nevertheless, acceptance was not established because the Court could not be satisfied that the fact that the claimants continued in the employment of the employer was only referable to the announcement of revised terms.
(8) In Farnsworth the new terms comprised a mixture of the advantageous and the disadvantageous. The question arose whether the invocation of the former was 'only referable' to acceptance of the latter. It was held that in such a case the person who alleges inferred or implied acceptance must show that the benefit invoked, being the act relied on as giving rise to the inference of acceptance, was only available pursuant to the contract in question, and that the invocation of that contractual right was in unequivocal terms, such as to be referable only to acceptance of that contract. The question was not what Mr Lacy's subjective intention was, but, instead, the correct inference which was to be drawn from what he did. The fact that he said he never intended to accept the new terms comprised in the 2009 Contract was not only not determinative but legally not relevant.
The Claimants' submissions
- The Claimants make the following submissions.
(a) To be enforceable, restrictive covenants introduced after an employment relationship has commenced must be supported by consideration: Reuse  IRLR 226 at .
(b) The consideration must comprise some real monetary or other benefit causing the employee to agree the restrictive covenant. It must be "substantial and not nominal": Reuse at .
(c) In the context of a contract of employment, consideration for any restrictive covenants introduced part way through an employment relationship is not established merely by continuing to work. Continued employment does not, of itself, constitute the requisite consideration. This was the position in Reuse where there was no unequivocal evidence that the consequences of a refusal to sign would, or might, lead to dismissal or a lesser sanction.
Counsel added a point in respect of consideration which has some bearing on the second and third main issues, i.e. the reasonableness and enforceability of the restrictive covenants: that the adequacy of consideration was a factor relevant to the reasonableness of a restrictive covenant. Mr Algazy submitted that although it had been unnecessary to decide the point in Reuse (at ), the court had favoured the approach of Lord Fraser in Bridge v Deacons  AC 705 to that effect. He conceded however, that there is some academic dispute over the relevance of the adequacy of consideration: see Brearley & Bloch, Employment Covenants and Confidential Information: Law, Practice and Technique (3rd edn, 2009) at [11.24]-[11.34].
Submissions by the defendant company
- Pro Cam's case is put as follows.
(a) Whilst the Claimants' case was that there was no consideration for the covenants because they signed the contract after they had commenced work, and there was already a contract in place, both Claimants had accepted in cross examination that they had read the contract of employment and knew that there were restraints in the contract.
(b) Both accepted that they made no objection whatsoever to the contract. They did not say that they had any concerns or that there were any parts they did not accept.
(c) Both the Claimants accepted that if they had refused to sign it was likely that (at the least) they would not have been given access to the farmer-clients of the defendant company.
(d) The evidence from Mr Eames was that no employee had ever refused to sign such a contract, and all the witnesses called by the defendant company made it clear that if there were such a refusal the employee would not be given access to its clients.
(e) Whilst there is relatively little authority that is precisely on point in the employment field. Prof Freedland in The Personal Contract of Employment notes at page 253 under the requirement of consideration that where there has been a variation which has been "adverse to the worker, it does not seem to have been regarded as arguable that the employing entity has not given consideration for the variation." This is because the employee continues to be employed and receives salary. The position must apply all the more to a contract that is proffered early on in employment which is intended to contain all its terms. It was also submitted that the Claimants in this case must have considered that the written contract of employment applied in its entirety. To illustrate that point counsel pointed to the fact that each of the Claimants had given six months' notice to Pro Cam, i.e. the period of notice provided for by the contract of employment.
(f) It was self-evident that being given access to Clients and, indeed, having farmer-clients passed on amounts to consideration: Pro Cam would not have permitted access if the Claimants had refused to sign the document.
(g) Counsel for the Defendant submitted that the case was on all fours with Woodbridge & Sons v Bellamy, and he drew attention to the extract of the judgment set out above. Mr Duggan pointed in particular to the words of Eve J at page 332 that:
I should be bound to infer that if the defendant had refused to sign, and had asserted his right to be employed on the terms contained in the letters, the plaintiffs would have taken the earliest opportunity of determining the relationship between them and the defendant, and indeed would have taken good care that while he was in their office the defendant should not obtain that access to their clients and business which they contemplated giving him and which they in fact gave him, as soon as he had executed the document."
- Mr Duggan submitted that the words in italics demonstrate the test. This case, he said, falls precisely into that "factual scenario," and that on that basis alone the court should find that there was consideration. Neither of the Claimants disputed that the defendant company would have been entitled to give them notice terminating their employment forthwith. Mr Eames's unchallenged evidence was that no trainee has ever refused to sign such a contract of employment. Mr Bianchi and other witnesses called by the defendant company made it clear that if the Claimants had refused they would not be given access to Clients.
- Dealing with the test suggested in Solectron by Elias J, when President of the EAT, Mr Duggan submitted that the question was whether the conduct of the Claimants, by continuing to work, was only referable to their having accepted the new terms imposed Pro Cam. The company in requiring the Claimants to sign the formal contracts of employment had imposed terms not contained in the appointment letters as contractual terms, by including (for example) the restrictive covenants. Had the Claimants 'gone along' with those new terms without protest? It was common ground that at the stage when they signed they had not demurred, nor indicated any objection. In those circumstances was it correct to infer that they had by their conduct accepted the change in terms and conditions? The Solectron test was,
"If they reject the change they must either refuse to implement it or make it plain that by acceding to it, they are doing so without prejudice to their contractual rights."
Neither Claimant had refused, nor had either of them made it plain that they accepted the new terms under protest, nor had they indicated that they were doing so without prejudice to their contractual rights.
- As for the decision on the consideration point in Reuse, counsel for the defendant company submits that that case turned on facts which were very different from those in the instant case in a number of important respects. (1) Reuse concerned a long-standing employee, who had worked for 32 years without any written contract of employment. (2) He was a very senior member of staff, and one-time director, who stood to gain no benefit from the proposed contract of employment. (3) He made it clear that he was not willing to sign the contract.
- In the cases of Mr Pickwell and Ms Nicholls it was submitted that the differences were clear. (1) Both were at the start of their careers when invited to sign the contract of employment, and were each liable at that time to termination of their positions at short notice. (2) The detailed contract in each case expressly stated that it was intended to supersede their letters of appointment and to be the document that governed their employment from the outset from probationary trainees through to their becoming qualified agronomists. (3) The contract gave them the opportunity to acquire expensive training and qualifications at no cost to themselves; to earn substantially greater sums as they made progress; and the opportunity to establish themselves as experienced professional agronomists. (4) Each of the Claimants agreed they had read the terms of the contracts of employment, and neither had suggested to Pro Cam that they were unwilling to sign the contracts nor that they were doing so on a without prejudice basis. (5) Each of them not only signed the contracts, but worked under the terms of the contracts for some years, and benefited significantly by doing so.
- The case of Woodbridge was not cited in Reuse, but counsel for the defendant company submits that the judge applied a similar test to that of Eve J. On the facts he had rejected the argument that there had been consideration by Mr Sendall continuing to work, as there was no meaningful benefit to him whatsoever. In the present case, there was a clear benefit to each, which would not be obtainable by them without signing the contract. Both the Claimants accepted that if they had refused to sign it then the likelihood was that they would not be given access to Clients. In particular, counsel submitted that there was no variation of their contracts of employment as the written contract in each case was expressly stated to be the document which governed the parties' relationship as being the whole agreement, superseding all previous documents. An impartial third party would have concluded that that was the clear intention of the parties.
- Alternatively, however, if either Claimant's case was regarded as "a variation case" the terms had been at least impliedly accepted in their totality (in contrast with Reuse and with Farnsworth Ltd v Lacy.) The Claimants' own evidence in cross-examination demonstrated that there was consideration, as they accepted that if they had objected to the covenants they would not have been given access to the farmers. By agreeing, they continued in employment and were given such access, which in turn led both to the opportunity to earn greater remuneration and to the fact (in each case) of greater earnings. Mr Pickwell himself made admissions that he could not easily have secured farmers without the help of Pro Cam. Ms Nicholls said in terms that when in July 2014, at the conclusion of her year following qualification she first worked as an agronomist advising farmers on the 'rape desiccation' work, that those farmers were happy to let her advise them as she worked for the defendant company and
"because I was introduced by the Defendant they were happy to let me [walk their fields]."
Conclusion on the consideration issue
- I accept the submission that the case falls within the principle enunciated by Eve J in Woodbridge. In my view Reuse is plainly distinguishable on the facts, for the reasons set out at paragraphs 51-52 above.
- On the evidence, it was quite clear to each of the Claimants that their appointments as probationary agronomists were initially made on the basis of relatively informal letters. Whilst their acceptance of the offers in those letters may have constituted the formation of a contract, it was a contract which was determinable at very short notice on either side, and which, on the evidence, was likely to have been terminated had either of them refused to sign the formal contract of employment.
- In my judgment the evidence showed that each of the Claimants, at the time they signed the formal contract of employment, expressly consented to its terms. However, if I am wrong about that, their conduct, by continuing to work under those terms, was only referable to their having accepted the new terms imposed by Pro Cam. An application of the test suggested by Elias J in Solectron cannot produce any other result.
- Whether the case is looked at as involving the formation of a completely new contract, or as a variation of the terms of the existing contract, when the formal contract of employment was sent to them for signature neither of the Claimants showed the slightest surprise, nor made any objection, or even asked a single question about the additional terms. This was despite the fact that it contained in addition to the restrictive covenants the period of six months' notice on each side. Ms Nicholls' evidence was that she thought that "
the six month notice period was very long
" yet neither she nor Mr Pickwell said anything about that or about the restrictive covenants. There is also the point that whilst the length of the six-month period of notice might in one light be regarded as a fetter, another view could be that it provided a significant benefit, as it provided a measure of security of tenure which was much greater than the period of notice under the letter of appointment.
- The unchallenged evidence from Mr Eames was that Pro Cam regarded the Claimants' acceptance of the terms of the formal contract of employment as a necessary condition if they were to allow the Claimants access to their clients. I accept the evidence of Mr Eames that Pro Cam simply could not have risked continuing to introduce Mr Pickwell or Ms Nicholls as agronomists to its customers, or could have allowed them to build up relationships and goodwill with them, without the protection of knowing that, if they were to leave the company's employment to join a competitor, they could not immediately take those customers with them. In those circumstances, as Eve J said in Woodbridge, I am bound to infer from all the evidence that if either Mr Pickwell or Ms Nicholls had refused to sign, and had asserted his or her right to continue to be employed on the terms contained only in the letters of appointment, Pro Cam would have been likely to have given them notice.
- It seems to me that there was therefore sufficient consideration for the formal contract of employment, even if it is not regarded as a variation of the original but as having been entered into some weeks after the appointment of each Claimant, when there was in each case an existing contract of service.
- Moreover, in my view Pro Cam also conferred benefits upon the Claimants' acceptance of the formal contracts of employment in ways which reflected valuable consideration, by continuing to employ them and also by providing them with valuable status and training so that they could make progress in their careers. An illustration of the latter point was given by Ms Nicholls herself when she said that being able to introduce herself as a representative of the defendant company reassured the farmers she contacted in respect of rapeseed desiccation: the clear implication was that such farmers would have been unlikely to have let her advise them if she did not have that status. With their acceptance of the formal contract Pro Cam gave them the opportunity to earn greater remuneration. There may have been no express promise of such remuneration, but I accept the evidence that if they had not agreed to sign the contract of employment, that opportunity would not have been provided.
- Counsel for the Claimants emphasised that no express contractual right was given by the contract of employment to have existing clients passed over to them on the retirement or death of qualified agronomists, nor did it provide for payment of bonuses. Be that as it may, their acceptance of the terms of the contract of employment provided the Claimants with valuable opportunities both of first-hand experience of observing senior agronomists interaction with customers, and (in due time) of taking over commercially valuable work from colleagues who had retired or left the employment of the defendant company for other reasons, in addition to the opportunity of obtaining customers through their own efforts.
- At the time they signed the contracts of employment both the Claimants, for their part, and the defendant company had in their contemplation that the Claimants would in due time be dealing with farmer customers as qualified agronomists. That was the very reason for the restrictive covenants. As they earned money for Pro Cam so the prospects increased of greater remuneration for themselves. Whilst no contractual guarantees of take-overs were given, the fact that the opportunities provided by their signing the contracts of employment were not merely speculative chances is shown by the evidence of what actually happened. If the Claimants had not accepted the terms of the formal contract of employment they would not have had those commercial opportunities.
Restrictive covenants in contracts of employment relevant legal principles
- The general principles in respect of the enforceability of restrictive covenants in cases such as this were helpfully explained in great detail by Gloster J in Brake Brothers Limited v Ungless  EWHC 2799 at paragraph 15. These were referred to at the hearing, and I bear them firmly in mind.
- The present case involves restrictive covenants which do not purport to prohibit competition as such, as distinct from dealing and solicitation. However, the general approach the Court should adopt was considered in a case in which the enforceability of non-competition covenants was in issue: see Norbrook Laboratories (GB) Limited v Adair  IRLR 878 at paragraphs  to . Those principles may be summarised as follows:
(1) The court must determine what the covenant means, properly construed.
(2) The court must then consider whether the former employer has shown on the evidence that it has legitimate interests requiring protection in relation to the employer's employment.
(3) Once legitimate protectable interests are shown, the covenant must be shown by the former employer to be no wider than reasonably necessary.
(4) Even if the covenant is held to be reasonable, the court will decide whether, as a matter of discretion, the relief sought should in all the circumstances be granted having regard, amongst other things, to its reasonableness at the time of trial.
(5) The burden is on the covenantee to establish that the restraint is no greater than reasonably necessary for the proper protection of protectable interests.
(6) Reasonable necessity is to be assessed from the perspective of reasonable persons in the position of the parties at the time that the contract was entered into or varied and 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 (paragraph ).
- As to construction (an issue which was not said to arise in this case) guidance was given by Cox J in TFS Derivatives Ltd v. Morgan  IRLR 246, where she said at paragraph  that:
"[I]f, having examined the restrictive covenant in the context of the relevant factual matrix, the court concludes that there is an element of ambiguity and that there are two possible constructions of the covenant, one of which would lead to a conclusion that it was in unreasonable restraint of trade and unlawful, but the other would lead to the opposite result, then the court should adopt the latter construction on the basis that the parties are to be deemed to have intended their bargain to be lawful and not to offend against the public interest."
- In TFS Derivatives, the Court enforced a non-competition clause (with the deletion of some unreasonably wide wording). It did so on the basis of the closeness of contacts that were formed between employees and their broker contacts and the confidential information to which the employee would have been exposed. The Court emphasised in particular the difficulty of policing other forms of protection (see paragraph  of the judgment.)
- In the case of FSS Travel and Leisure Systems v Johnson  IRLR 382, (considered in QBE Management Services v Dymoke & others  EWHC 80 QB by Haddon-Cave J) two particularly important aspects of the law were explained by the Court of Appeal in the judgment of Mummery LJ at paragraphs :
(1) The court will never uphold a covenant taken by an employer merely to protect itself from competition by a former employee.
(2) There must be some subject matter which an employer can legitimately protect by a restrictive covenant. As Lord Wilberforce said in Stenhouse Ltd v Phillips  AC 391 at p.400E (cited by Slade L.J. in the Office Angels case  IRLR 214:
"The employer's claim for protection must be based upon the identification of some advantage or asset inherent in the business which can properly be regarded as, in a general sense, his property, and which it would be unjust to allow the employee to appropriate for his own purposes, even though he, the employee, may have contributed to its creation."
(The judgment continued dealing with the protection of employer's trade secrets and related matters.)
Construction of the restrictive covenants
- No suggestion was made at the hearing that there was any ambiguity or other difficulty of construction which arose in the instant case. The wording of the clauses containing the covenants is simple, clear and precise, and no observation was made to the contrary on either side.
The Claimants' case on 'protectable interest'
- For the Claimants it is submitted that Pro Cam did not have a legitimate interest in terms of "customer connection" which was capable of protection vis-ΰ-vis the Claimants at the time when the Claimants signed the contracts containing the restrictive covenants. They were trainee agronomists at the relevant time, who had had no experience, no customer contacts, nor the ability to build relationships with customers which required protection during the period of training. As the Claimants had only trainee status they had limited interaction with farmers who were customers of Pro Cam. Such contact as they had was under the supervision of a senior qualified agronomist. They were not permitted to give advice to farmers about products or otherwise. Even upon qualification they required supervision for the first year. Accordingly, it was contended that the restrictive covenants were void and unenforceable as there was no protectable interest by reference to the Claimants' status at the relevant time. Further, it was submitted that the Claimants were not exposed to information which could properly be described as confidential as opposed to information carried in their heads or information readily available from the farmers themselves or in the public domain.
- Reliance was placed upon the case of Bartholomews Agri Food Limited v Thornton  EWHC 648 (QB) upon the basis that in that case a restrictive covenant was held unenforceable where the facts were similar to those in the instant case in that: (1) it had been imposed on the employee when he was a trainee with no experience and no customer contacts, and (2) when its terms were manifestly inappropriate for such a junior employee. Detailed reference to the facts and the judgment in this case will be made presently.
The Defendant's case on protectable interest
- In this case Pro Cam submits that it may reasonably say that it has a legitimate interest in protecting the connections with its farmer-customers. The agronomists are the human beings who represent the company in its dealings with those customers, and such goodwill as they generate belongs not to them personally, but to the company. The point made in cross-examination of Mr Bianchi to the effect that at the outset of each Claimant's employment they had not themselves dealt with such customers, so that there were no customer connections and thus that the covenants were unnecessary, submits Mr Duggan, is misconceived. If it were correct, then covenants dealing with events which are only in the contemplation of the parties would be invalid. The covenants are engaged when the contemplated business is actually done. That fulfils the expectations of the parties when they made the contract. Both Claimants accepted in cross examination that they would only be restrained from dealing with customers of Pro Cam where they had brought in their business and the restraint would apply only in relation to such customers.
- Indeed, the defendant company submits, this is a classic case of client contact and goodwill being built up, both by contact and by possession of confidential information. The Claimants' own evidence very much supports the case put forward by Pro Cam in this respect. They did not build up their own goodwill with the customers they dealt with: whether the customers were those they had approached through cold-calling or were customers passed on to them, they dealt with them whilst in the employment of Pro Cam, whose customers they were. The case law clearly demonstrates why this is not the position. Indeed, all that the Claimants have done is illustrate why non-dealing and non-solicitation covenants were and are necessary.
- Mr Duggan submitted that the argument put forward in respect of the time at which the covenants were given was spurious. The covenants cater for a time when the agronomist, by virtue of training and experience at Pro Cam's expense, is able to bring work into the business. The Claimants' assertions would involve a complete misreading of the covenants. The need for the covenants has been amply demonstrated by the conduct of the Claimants. They meet all the requirements set out in the case law. The argument that they are not suitable for a trainee is fallacious since they do not apply until business is done. That, he submitted, was a complete answer to the contention.
- In the the case of Allan James LLP v Johal  IRLR 599 Bernard Livesey QC, sitting as a judge of the High Court, dealt with the 'reasonable contemplation' point as follows.
"38. The [employee] contends that the case needs to be looked at on the basis that she has personally dealt with only a small proportion of the clients of the firm and has turned out not to be very good at marketing herself and generating new clients. I do not accept that submission. It is a fundamental principle that the reasonableness of the restriction must be interpreted in accordance with what was in the contemplation of the parties at the date when the contract was made and not as matters in the end turned out. The reason for this is that the covenant will have been formed at the beginning of the employment in the light of what was in the contemplation of the parties at that time. If the covenant was unreasonable for those expectations it will be wholly unenforceable - not partly unenforceable to the extent of what the outcome turned out to be. As Diplock LJ observed in Gledhow Autoparts Ltd v Delaney
'The defendant was in fact employed for over six years by the plaintiffs and no doubt became a valuable servant ... It is natural in those circumstances to look at what in fact happened under the agreement. But the question of the validity of a covenant in restraint of trade has to be determined at the date at which the agreement was entered into and has to be determined in the light of what may happen under the agreement, although what may happen may cover many possibilities which in the result did not happen. A covenant of this kind is invalid ab initio or valid ab initio. There cannot come a moment at which it passes from the class of invalid into that of valid covenants."
39. Since the defendant was recruited into a senior position with a mutual hope that it would mature into a partnership offer, it clearly was within the actual contemplation of the parties that the claimant would promote the defendant to all its actual and target clients, that she would assist in marketing, would generate relationships with actual and potential clients and might well be successful in generating clients from just the sort of introductions as were the natural consequence of each of the marketing events on which the claimant spent its money."
"69.In my judgment the non-dealing covenant has the advantage of being certain as to its area of application and, having regard to those matters which were in the minds of the claimant and defendant at the time when the contract was made, the protection which it provides is reasonable both as regards the restriction and the limited period of time for which the restriction is to operate."
Conclusion on protectable interest
- In my view the submissions made in respect of customer connection and goodwill on behalf of the defendant company are sound for the reasons given by Mr Duggan. Protectable interest in terms of goodwill and customer connection has clearly been established on the evidence. Whilst reference was also made to commercially-sensitive confidential information, such as the contact details of key decision-makers, these were not matters highlighted in submissions at the hearing. Whilst such information might well amount to a trade secret, I do not base my decision upon that point.
- On the 'timing' point raised by counsel for the Claimants, in my judgment any restrictive covenant in a contract of employment involves an attempt by the employer to reach an agreement regulating the activities of the employee after he or she leaves its employment: it is ex hypothesi an attempt to deal with future events, and must therefore involve an exercise in foresight. For it to be enforceable the law confines the exercise to matters which are in the reasonable contemplation of the parties at the time they made the contract. The suggestion that a new contract should have been proffered to the Claimants at the point at which as trainee agronomists they were about to become qualified agronomists is in my view untenable for at least two reasons. First, it would still be a prospective exercise: the employees would not have had any of their 'own' customers at the time such a contract could have been proposed. Secondly, however legally prudent it might have been, it would have been unnecessarily mechanistic: the point at which Pro Cam decided that the trainees could be allowed to deal on their own with customers was a matter for the judgment of their day-to-day superiors, who could not be expected to judge the appropriate moment to require a new form of contract from the personnel department.
- I shall deal with the case of Bartholomews Agri Food Limited v Thornton in greater detail later on, but in my view it concerned a plainly unenforceable restrictive covenant forbidding any competition with any of that company's customers, even though the employee had only ever personally dealt with one per cent of them, and it covered areas of the country in which he had never worked. It was held to have been unenforceable ab initio, whereas, the judge made it clear that had it been a non-dealing or non-solicitation covenant drafted in terms similar to those in the instant case, applying only to customers with whom the employee had dealt personally, it would have been acceptable.
The Claimants' case that the covenants are unreasonably wide
- If, contrary to the Claimants' submission the court were to find that there was a protectable interest, it was submitted that the covenants were wider than was reasonably necessary, and that they constituted an unreasonable restraint of trade and thus were unenforceable. In support of that submission Mr Algazy pointed to the following matters.
(1) The imposition of the same level of restriction on the Claimants, very junior trainee agronomists, as are said to be no more than reasonably necessary in respect of fully qualified and experienced agronomists.
(2) The inability of a trainee agronomist to develop a relationship with a farmer of the nature and quality that might be developed "by an experienced agronomist in the '12 months' period prior to the termination of his/her employment as a trainee; the 12 month backstop is inapposite for a trainee."
(3) The Claimants' status, the nature of the industry and the evidence of the Claimants cumulatively pointed to a '6 months' post-employment restriction as being too lengthy. Any relationship of theirs could easily have been replaced by the Defendant in a much shorter period of time. Further, it is doubtful that the evidence supports such a restraint on the facts for any Agronomist in any event.
(4) The consideration given to the Claimants was inadequate to merit such onerous covenants.
(5) The Claimants were the weaker bargaining party and effectively had no choice but to enter into the contract; any covenants not properly being something negotiated.
(6) The restrictive covenants would inflict substantial harm on the Claimants who would be unfairly impeded in pursuing their careers for 6 months.
The farming cycle, its relation to Pro Cam's business and the duration of the covenants
- The evidence of Mr Eames was that agricultural activity and the agronomy and agricultural supply industries are obviously affected greatly by the seasons of the year, and Pro Cam's business activities fluctuate correspondingly. Pro Cam does not charge its farmer-customers for the advice given by its agronomists, and the company relies primarily on income generated from orders that they have placed. In general, the undisputed evidence was that an agronomist is likely to have worked with a farmer during the six to seven months preceding the spring season. He or she will have built up or consolidated a good working relationship with the customer, and developed his or her knowledge of the farm and of its soils, crops, and yields.
- The spring season is regarded as being between February and June of any year. This is the period when orders are generated. It is a critical time for the company and for the contribution of its agronomists. The witnesses explained the need for the six months' notice, followed by the non-dealing and non-solicitation covenants: absent these provisions an agronomist could time his or her departure to leave at a critical time. Should he or she leave to join a rival company during those months, then that rival company could reap the harvest of the time when the agronomist had had professional contact with Pro Cam's customers during the period from the previous July to February. Moreover, were an agronomist to leave at such a stage, there was a risk that farmers who had dealt with him or her might feel compelled to leave Pro Cam to follow them, even if they did not wish to do so, to have the reassurance that that they would receive appropriate crop protection products from the experts they had become reliant upon.
- Whilst some of this evidence was challenged in cross-examination, and some minor concessions were made by the witnesses, I accept its broad effect as representing both the reality of the interrelation of agricultural activities and Pro Cam's business and the importance of the long lead-up to what amounts to the buying season. The point at which, in any given period of 12 months, an agronomist might choose to leave could have a critical effect.
Bartholomews Agri Food Limited v Thornton
- In support of the proposition that the restrictive covenants were unreasonably wide, counsel for the Claimants relied significantly on Bartholomews Agri Food Limited v Thornton [supra.] In that case the claimant company was an agricultural merchant, and part of a larger group of companies. The employee was an agronomist who had worked for the company for 18 years, starting as a trainee. Clause 10.2 of his contract of employment was a restrictive covenant preventing him from engaging in
work, supplying goods or services of a similar nature which compete with the company to the company's customers, with a trade competitor within the company's trading area... or on [his] own account without prior approval from the company
for six months after the termination of his employment. The employee resigned, intending to take up employment with a seed retailer. The company sought to enforce cl.10.2, relying on two protectable interests: customer connection and confidential information. The employee argued that cl.10.2 was in restraint of trade and was unreasonable and unenforceable. Refusing the application, the judge held that cl.10.2 was in restraint of trade and was unenforceable, as (1) it had been imposed on the employee 18 years previously, when he was a trainee with no experience and no customer contacts, and (2) its terms were manifestly inappropriate for such a junior employee. It was unenforceable when it was imposed and remained unenforceable despite the employee's promotion to a role where it would have been regarded as reasonable, PatSystems Holdings Ltd v Neilly  EWHC 2609 (QB),  I.R.L.R. 979 applied. Moreover, it was far wider than was reasonably necessary for the protection of the company's business interests. It applied to all the company's customers as well as those of its associated companies, regardless of whether the employee had had any relationship with them. The evidence showed that the employee was responsible for just over one per cent of the company's turnover, and the remaining 98 per cent was generated by customers with whom he did not directly deal. It would be wrong to prevent him having dealings with the customers representing that 98 per cent. Such a wide-ranging covenant was not reasonably necessary to protect the customer connection; it would have been sufficient simply to prevent the employee from dealing with or soliciting customers with whom he had dealt for a period of time before the termination of his employment.
The case for the defendant company on the third issue
- Counsel for Pro Cam submitted that the Claimants cannot assert that the non-solicitation and the non-dealing covenant were, in either case, too wide. A covenant which involves a period of only six months could not be regarded as being unreasonably lengthy in a case of this nature. The evidence from Pro Cam's witnesses made reference to the following points.
(1) the cyclical nature of the work;
(2) the fact that without notice of six months and a six-month covenant an employee could "wreak havoc" by leaving at a particular time;
(3) the fact that it takes some time to build up confidence with the farmers;
(4) the fact that a new agronomist would have to be put in to replace the established agronomist in whom the farmer has confidence;
(5) the time it takes to obtain new, competent, experienced, agronomists,
(6) who then have to be introduced to the client farmers.
- In respect of the Claimants' reliance on Bartholomews Agri Food Limited v Thornton Mr Duggan submitted that there were a number of important distinctions from the present case.
(1) It concerned a non-competition covenant which covered all of the areas (some six counties) in which the company had its business even though the employee had never worked in some of those Counties.
(2) The employee had dealt with only some one per cent of the clients of the company, but was restrained from dealing with all of them.
(3) The covenant also applied to all the company's clients during the whole time that the employee was employed whether or not he had ever known them himself.
(4) The judge had expressed the view that,
it was simply not reasonably necessary for the protection of the customer connection for Bartholomews to have imposed such a wide ranging covenant on the Respondent. If the clause had provided that the Respondent could not, for 6 months, deal with or solicit customers with whom he had dealt for a period of time before the termination of his employment that would have been sufficient."
In other words, the defendant company maintain, if the clause in that case had been drafted in exactly the way the covenants were drafted in this case, the judge would then have considered that it would have been reasonable at the time it was entered into.
- Thus it was submitted that the case wholly supports Pro Cam's position that the clause as drafted in the present case is valid. As Mr Eames and Mr Bianchi stated in cross examination it is only engaged or, as they put it, 'kicks in' when the trainee starts to do business. In other words, it is engaged when the events contemplated by the parties at the time of making the agreement actually transpire.
Conclusions on the third issue
- Upon the basis primarily of the Bartholomews case, it is submitted by the Claimants that the restrictive covenants entered into by them when trainees are self-evidently wider than necessary, as restrictive covenants appropriate for a fully qualified agronomist are not suitable for a trainee whose customer connection (if any) with farmers is so limited. If the minimum time to protect the customer connection for a fully-fledged agronomist is six months, it cannot be the same for a trainee.
- In my view that point simply ignores the reality of the case, which is that at the time of signing the relevant contract of employment both parties to it contemplated the trainee period as an initial temporary phase which would enable the Claimants in due time to become fully-fledged agronomists with a long-term future in the employment of Pro Cam. Making provision for the future was both rational and sensible.
- Nor do I accept another point made on behalf of the Claimants, that only a relatively brief period would be necessary for a replacement employee to establish a relationship with customers who had dealt with an ex-employee. Counsel was making the point in the context of replacement of a trainee who would only have been on nodding terms with customers, and he submitted that such a period would be measured only in weeks. The reality in my view is that both the Claimants, at the time they entered into the restrictive covenants contemplated a long-term future with Pro Cam, and understood that the terms of the restrictive covenants were to apply on that basis. In cross-examination Mr Bianchi said that it was the exception rather than the rule for farmers "to change agronomists: the relationship takes a while to develop and a while to deteriorate."
Q Why are both a six-month notice period and a six-month restrictive covenant necessary? Surely after the six months notice a period of further restraint for six months is not necessary?
A It is very difficult for a new (replacement) agronomist to build a satisfactory relationship with a farmer [if the agronomist he has been dealing with leaves.] Farmers regard the agronomist they know as a trusted adviser. Agronomists are few and far between: in fact there are probably no more than 600-700 agronomists in UK. Mr Pickwell and Ms Nicholls were part of succession programme so that is a further reason it is difficult to [bridge the gap]. I don't agree with Mr Pickwell when he says at paragraph 51 of his witness statement that farmers make up their minds quickly it takes time. I was an agronomist myself I was first a trainee and I know how long it takes to establish trust with farmers."
I noted at the time that this was impressive evidence, and I accept it.
- In cross-examination of both Mr Eames and Mr Bianchi it was suggested that the restraint that would be required after a six month notice period might need to be only two to four months, depending upon the time of the year when the employee resigned. Mr Bianchi had conceded that in certain circumstances the need for protection might diminish but did not disappear.
- In support of the propositions (a) that a restrictive covenant should be for the duration that is required to protect the covenantee's legitimate interest; and (b) that six months is a relatively short period; counsel drew my attention to the case of Coppage & Anor v Safetynet Security Limited  EWCA Civ 1176,  IRLR 970 in which Sir Bernard Rix said at paragraph 19 that:
"Secondly, the post-termination restraint was only six months. This is to my mind a fundamental consideration of reasonableness. One might debate matters such as the extent to which a non-solicitation clause is drafted in terms which go no wider than the legitimate protection required by an employer's proprietary interests: but if the restraint period is as short as six months, that must be a powerful factor in assessing the overall reasonableness of the clause."
- The test for determining the reasonableness of length of a covenant was considered by the Court of Appeal in Beckett Investment Management Group Limited v Hall  IRLR 793, a case in which the judge had considered a twelve-month non-dealing restraint too long and held that three months would have been reasonable. On appeal Maurice Kay LJ said at paragraph 29:
"In my judgment, the judge adopted an unrealistic and erroneous approach to the question of duration. He considered the period of 12 months to be 'purely arbitrary' but it was only arbitrary in the sense that any fixed duration bears an element of arbitrariness.
. To have any prospect of retaining the clientele, [the employers] would need to recruit, organise, train and project suitable replacements. On any basis, this was an important aspect of the reasonable protection of their legitimate business interests. However, it was ignored by the judge who chose instead to attach significance to the fact that a non-dealing clause would prevent a client from doing business with someone in whom he had confidence for a period which the judge considered to be too long. It is apparent from the solicitor cases that a non-dealing clause may be valid notwithstanding the potential interference with the client's choice as to whom to instruct and the degree of confidence which exists between client and solicitor: see Fitch v Dewes per Lord Birkenhead LC at p.165 and Bridge v Deacons  AC 705, per Lord Fraser of Tullybelton at pp.719C720B. During the period of restriction, the client is not compelled to remain with the covenantee."
- In this case, counsel for Pro Cam submitted, where the farmers had gained confidence in a particular agronomist who then left and went to a competitor, the company need some time to seek to retain the client. Both the facts and the case law supported a six-month period of time. Whilst an attempt had been made by counsel for the Claimants when cross examining Mr Bianchi to assert that four months was enough, Mr Duggan said this was "simply wrong": a period will be needed to rebuild the goodwill and to introduce an new agronomist to the customers. Six months was reasonable and met the tests in the relevant case law.
- In my view the defendant company is justified in adopting the statements of principle in the cases referred to under this head, and on the facts of this case I find that the duration of the period of notice and of the restriction, and the combined effect of both is no wider than is reasonable in all the circumstances.
- The Claimants also submitted that there had been inequality of bargaining power when they entered into the restrictive covenants, which therefore affected the reasonableness of the restrictive covenant. Mr Algazy made reference to part of Mr Bianchi's witness statement at paragraph 29.2. The full text of that sub-paragraph is as follows:
"The Claimants both cut their teeth on customer accounts early on in their employment with Pro Cam, so it would be impossible to know when the restrictions would become applicable and begin to bite, in terms of having dealt with relevant customers who as a result of their dealings had been supplied or sold good or services by Pro Cam. Similarly, if the restrictions were not already contained in their contracts of employment it would be extremely difficult to know at what point we would need them to bite to protect the business and it might be difficult, at that time, to compel the Claimants to agree to such covenants."
- Counsel submitted that in cross-examination Mr Bianchi accepted that Pro Cam was "taking advantage of the inequality of bargaining power of a trainee at the beginning of their career to get them to sign up." I did not so interpret his evidence in that way at all. The point that he was making in cross-examination was a development of the point being made in the witness statement, which was that it was simply not a practical possibility to identify in advance the precise moment when any individual trainee was going to start dealing commercially with customers, as distinct from observing the agronomist he or she was shadowing. From the moment that such dealing occurred, the restrictive covenants (which dealt only with dealing or soliciting, and not with competition) would become appropriate and legitimate restraints.
- In my judgment the defendant company has shown that the restrictive covenants are no wider than was reasonable in each of the Claimants' cases. They restrain the Claimants only from dealing with customers of the defendant company with whom they, as employees of the defendant company, have dealt during the period specified. Such restraints represent proper and lawful measures to prevent loss of its goodwill and other legitimate commercial advantages. On the point taken under this head as to consideration, I do not propose to take up further time, having already given my reasons for finding that adequate consideration was given.
- In the circumstances, the challenges to the restrictive covenants by these claims fail. Pro Cam is in my view entitled to the relief for which it counterclaims. There must therefore be judgment for the defendant company. I shall invite counsel to draw up the appropriate final order.
31 May 2016
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