England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE QUEEN'S BENCH DIVISION

		Royal Courts of Justice
		Monday, 9th February 1998

ALDOUS LJ

The appellant, Mr Anthony Lee, was until 2l April l997 employed by the respondent, Scully UK Ltd. Clause l7 of his contract of employment contained restrictive covenants. The primary issue upon the appeal is whether HH Judge Havery QC was correct to find that the restrictive covenant in clause l7(c) of that contract was enforceable. The respondents have a cross-appeal in which they seek to enforce the restrictive covenant in clause l7(d) of the contract. Thus the second issue is whether clause l7(d) is enforceable.

Scully is the subsidiary of a United States company. It was established in l985. It deals with the petrochemical industry to which it supplies overfill prevention systems, liquid level detection systems and fluid handling systems. Its products are largely manufactured in the USA, but it has its own engineering department in this country which creates designs and design modifications for the UK market and for individual customers.

Mr Lee started working for Scully in June l99l as a Technical Sales Engineer. At that time he had a City & Guilds qualification in electronics and engineering, a qualification from the Institute of Electrical Engineers and was an Associate Member of the Institute of Practitioners in Radio and Electronics. In l993 he became Technical Sales Manager and in l994 was promoted to General Manager. In August l995 he became the General Sales Manager.

His service agreement dated l0 June l99l was still in force when he left in l997. Clause l7 contained l0 covenants, two of which are relevant.

"l7 - Confidentiality

In order to protect the goodwill, trade secrets and trade connections of the Company and without prejudice to any other duty imposed by law and equity and whether or not the Company shall have been in breach of this agreement the employee covenants that :

....

(c) The employee shall not during the period of twelve months commencing with the termination of his employment hereunder carry on, assist in carrying on or be engaged or otherwise interested in, whether as a shareholder, director, consultant, employee or self-employed person or in any other capacity, within the United Kingdom, any business involving or including the manufacture supply installing modification servicing advertising or otherwise dealing in overspill prevention or tank gauging equipment or without prejudice to the foregoing any other business which competes with any business carried on by the Company at the date of this agreement:

(d) the Employee shall not during the period of twenty-four months commencing with the termination of his employment hereunder directly or indirectly solicit or seek to procure orders from or otherwise solicit or seek to do business with any person, firm or company who was a client, customer, supplier, agent or distributor of the Company during any period of his employment (whether under this agreement or otherwise) with the Company provided always that such restrictions shall apply only to clients, customers, suppliers, agents or distributors of the Company with whom the Employee shall have been personally concerned with directly competing products."

Mr Lee handed in his notice to Scully on 2l January l997. In about the beginning of March he was offered a job by Veeder-Root Environmental Systems Ltd (Veeder-Root) as Sales Manager for special products. He accepted the offer. Prior to his notice running out, Scully became aware of Mr Lee's intention to take up employment with Veeder-Root and they wrote to them drawing their attention to the restrictive covenants in Mr Lee's contract. They asserted that his intended employment would amount to a breach of contract. Veeder-Root took a different view and Mr Lee started to work for them on 22 April. He was based in this country, but was responsible for the introduction throughout Europe of a new range of fuel distribution products

and gauges. He worked from his home and started seeking sales outside the United Kingdom.

On 22 May l997 these proceedings were started seeking:

"1. An order restraining the Defendant until 22 April l998 within the United Kingdom and whether as shareholder, director, consultant, employee of self-employed person or in any other capacity from carrying on, assisting in carrying on, or being engaged by or otherwise interested in

(a) the business of Veeder-Root Inc of Veeder-Root Environmental Systems Limited or any subsidiary or associated company thereof; or

(b) any business involving the manufacture supply installing modification servicing advertising or otherwise dealing in overspill prevention or tank gauging equipment; or

(c) any other business which competes with any business carries on by the Plaintiff.

2. An order restraining the Defendant until 22 April l999 from directly or indirectly soliciting or seeking to do business with any person firm or company who was a client, customer, supplier, agent or distributor of the Plaintiff provided that this restriction shall apply only to (i) clients, customers, suppliers, agents or distributors of the Plaintiff with whom the Defendant was personally concerned and (ii) products directly competing with the Plaintiff's products.

3. An order restraining the Defendant from using or disclosing any of the Plaintiff';s confidential information."

On the same day as the Writ was issued Scully applied ex parte for and obtained interlocutory injunctions in the form of paragraphs 1 and 2 of the Writ and a limited form of injunction restraining use of confidential information. Those injunctions were discharged at an inter partes hearing on 6 June l997. A speedy trial was ordered. It came before HH Judge Havery QC. He held that clause l7(c) was enforceable, but l7(d) was not. He granted an injunction in terms of paragraph l of the Order sought.

Before coming to the submissions of the parties, it is appropriate to set out the basic principles of law applicable to restrictive covenants between an employer and an employee. A clear statement can be found than in the well-known speech of Lord Macnaghton in Nordenfelt v Maxim Nordenfelt Guns & Ammunition Co (1894) AC 535 at page 565:

"The true view at the present time I think, is this: The public have an interest in every person's carrying on his trade freely: so has the individual. All interference with individual liberty of action in trading, and all restraints of trade of themselves, if there is nothing more, are contrary to public policy, and therefore void. That is the general rule. But there are exceptions: restraints of trade and interference with individual liberty of action may be justified by the special circumstances of a particular case. It is a sufficient justification, and indeed it is the only justification, if the restriction is reasonable - reasonable, that is, in reference to the interests of the parties concerned and reasonable in reference to the interests of the public, so framed and so guarded as to afford adequate protection to the party in whose favour it is imposed, while at the same time it is in no way injurious to the public. "

Lord Shaw in Mason v Provident Clothing & Supply Co Ltd (1913) AC 724 at 739 referred to the apparent antagonism between the right to bargain and the right to work. He said:

"I have referred, my Lords, to the apparent antagonism between the right to bargain and the right to work. The extreme of the one destroys the other. But the public interest reconciles these two, and removes all antagonism by the establishment of a principle and a limit of general application. It may be that bargains have been entered into with the eyes open, which restrict the field of liberty and of labour, and the law answers the public interest by refusing to enforce such bargains in every case where the right to contract has been used so as to afford more than a reasonable protection to the covenantee. In every case in which it exceeds that protection, the public interest, which is always upon the side of liberty, including the liberty to exercise one's powers or to earn a livelihood, stands invaded, and can accordingly be invoked to justify the non-enforcement of the restraint."

It is also pertinent to have in mind the speech of Lord Parker in Herbert Morris Ltd v Saxelby (1916) AC 688 where Lord Parker amplified Lord Macnaghton's statement of the law. At page 707 he said:

"It will be observed that in Lord Macnaghten's opinion two conditions must be fulfilled if the restraint is to be held valid. First, it must be reasonable in the interests of the contracting parties, and, secondly, it must be reasonable in the interests of the public. In the case of each condition he lays down a test of reasonableness. To be reasonable in the interests of the parties the restraint must afford adequate protection to the party in whose favour it is imposed; to be reasonable in the interests of the public it must be in no way injurious to the public.

With regard to the former test, I think it is clear that what is meant is that for a restraint to be reasonable in the interests of the parties it must afford no more than adequate protection to the party in whose favour it is imposed. So conceived the test appears to me to be valid both as regards the covenantor and covenantee, for though in one sense no doubt it is contrary to the interests of the covenantor to subject himself to any restraint, still it may be for his advantage to be able so to subject himself in cases where, if he could not do so, he would lose other advantages, such as the possibility of obtaining the best terms on the sale of an existing business or the possibility of obtaining employment or training under competent employers. As long as the restraint to which he subjects himself is no wider than is required for the adequate protection of the person in whose favour it is created, it is in his interest to be able to bind himself for the sake of the indirect advantages he may obtain by so doing.

....

My Lords, it appears to me that Lord Macnaghten's statement of the law requires amplification in another respect. If the restraint is to secure no more than "adequate protection" to the party in whose favour it is imposed, it becomes necessary to consider in each particular case what it is for which and what it is against which protection is required. Otherwise it would be impossible to pass any opinion on the adequacy of the protection.

In the Nordenfelt case that which it was required to protect was the goodwill of a business transferred by the covenantor to the covenantee, and that against which protection was sought was competition by the covenantor throughout the area in which such business was carried on. Under the particular circumstances of that case a world-wide covenant against competition was held no more than adequate for the purchaser's protection. ....

It is quite different in the case of an employer taking such a covenant from his employee or apprentice. The goodwill of his business is, under the conditions in which we live, necessarily subject to the competition of all persons (including the servant or apprentice) who choose to engage in a similar trade. The employer in such a case is not endeavouring to protect what he has, but to gain a special advantage which he could not otherwise secure. I cannot find any case in which a covenant against competition by a servant or apprentice has, as such, ever been upheld by the Court. Wherever such covenants have been upheld it has been on the ground, not that the servant or apprentice would, by reason of his employment or training, obtain the skill and knowledge necessary to equip him as a possible competitor in the trade, but that he might obtain such personal knowledge of and influence over the customers of his employer, or such an acquaintance with his employer's trade secrets as would enable him, if competition were allowed, to take advantage of his employer's trade connection or utilize information confidentially obtained."

Lord Shaw in Mason v Provident Clothing & Supply Co Ltd also made it clear that a distinction needed to be drawn between a covenant which sought to restrain competition from an employee and a covenant which sought to restrain an employee using trade secrets. At page 740 he said:

"I desire, my Lords, expressly to adopt for myself a further proposition bearing upon this subject, and enunciated by Farwell LJ in Sir W C Leng & Co v Andrews. The case that was there being dealt with, as at present, was a case of restraint upon a servant seeking fresh employment. Referring to the passage cited from Lord Macnaghten, he said: "That doctrine does not mean that an employer can prevent his employee from using the skill and knowledge in his trade or profession which he has learned in the course of his employment by means of directions or instructions from the employer. That information and that additional skill he is entitled to use for the benefit of himself and the benefit of the public who gain the advantage of his having had such admirable instruction."

Upon this last point, my Lords, there was much argument at your Lordships' Bar as to whether this case did not fall within the principle of Haynes v Doman. But Haynes v Doman was a case, and was expressly so treated, of the divulging of trade secrets and of a servant entering into new employment carrying with him these trade secrets, with the constant risk of divulging them to rival manufacturers. Such cases, my Lords, are, in my opinion, widely distinguished from the other cases of an employee who, by faithful and industrious exercise of his powers, becomes mentally, or even manually, well equipped as a servant. The distinction between that case and the former is as wide as the psychological distinction between subjective and objective knowledge. But it is also as real. For, in the former case, the equipment of the workman becomes part of himself, and its use for his own maintenance and advancement could not, except in rare and peculiar instances, be forbidden. But in the other case the knowledge of trade secrets may be as real and objective as the possession of material goods, and the law would much more readily support a restraint of liberty which would, or might, be likely to induce the transfer of this to others, with the danger of consequent loss. In all cases of restraint sought to be put upon an employee under a contract between master and servant this distinction should be borne in mind."

Clause l7(c)

A restrictive covenant in a contract between an employer and an employee has to be construed like any other contract. The Court's task is to ascertain the intention of the parties from the words of the contract. In so doing it should not indulge in too formal an analysis of the words, an approach often adopted by lawyers, but should look at the purpose of the contract and give it an appropriate meaning. Thus improbable contingencies which were not within the contemplation of the parties should be disregarded (see Home Counties Dairies Ltd v Skelton (1970) l WLR 526).

Before us two issues of construction were argued. First Mr Tabachnik QC on behalf of Scully submitted that the clause should be construed as only restricting Mr Lee from carrying on etc in any competing business. He submitted that the clause had to be construed in the light of the purpose sought to be obtained by the clause which was, he submitted, the protection of Scully from rivalry in the trade (see Clarke v Newland, [1991] l AER 397). Thus, he submitted, the clause was seeking to prevent the employee carrying on etc in a competing business. That was made quite clear from the phrase "any other business" at the end of the clause. If the words "any business" were not read as meaning any "competing business" then the word "other" was otiose.

Mr Clarke who appeared on behalf of Mr Lee submitted that it was improper to imply into the clause a limitation such that it only applied to a business which competed with that of Scully.

The Judge said:

"The tail piece to clause l7(c) has, in my judgment, two possible meanings. First, that the words "any other business which competes" imply that the earlier reference to "any business" is a reference to any competing business; and, second, that "any other business" means any business at all, and the subsequent words "which competes with any business carried on by the company" qualify that general expression. The former meaning would make Mr Bear's submission clearly right. If full weight were given to all the words, the former meaning would be negatived by the words "without prejudice to the foregoing" since those words are strictly unnecessary on that construction. However, the words may have been inserted into the clause from an abundance of caution. On the whole, I prefer the second meaning.

I find that on a true construction of clause l7(c) the words "any business" where they first occur are not to be construed as any competing business. In fact, the relevant evidence in this case has been directed entirely to the petroleum retail distribution industry."

I believe that the Judge came to the right conclusion. The purpose of the clause is to restrict the employee from engaging in certain activities. Overspill prevention and tank gauging equipment were the core of Scully's business and the clause was designed to protect confidential information relating to that business. That confidential information could be of use to another company even though it was not a competitor of Scully. Thus it is not apparent that the parties intended the clause to be limited to competing businesses. Further the words "without prejudice to the foregoing" before the words "any other business which competes" suggest that the last few words of the clause should not be read as words of limitation and therefore cannot be used to imply into the main part of the clause a limitation to the business being a competing business.

The second issue of construction concerns the words "in overspill prevention or tank gauging equipment." Mr Clarke submitted that those words were general and covered all types of overspill prevention and tank gauging equipment. Thus the clause embraced a wide range of products which had no similarity with Scully's products save that they prevented overspill or were gauges for tanks. Mr Tabachnik sought to limit the apparent width of the clause. He submitted that the parties could not have contemplated that Mr Lee or any other employee would be precluded from working for a company which made and sold equipment which was not used in the petrochemical field. Thus the clause should be construed as a whole as being limited to the type of overspill or tank gauging equipment that was used in the petrochemical industry, that being the industry that the parties had in mind when the agreement was signed.

I accept that the clause should be construed to achieve the intention of the parties. Even so, it cannot be limited to equipment used in the petrochemical field. The clause was intended to protect Scully's confidential information and I cannot find anything in the clause which suggests that the parties intended that Mr Lee should be able upon termination of his employment with Scully, to become involved in a business which was not concerned with the petrochemical industry but made overspill and tank gauging equipment. Companies who make overspill and tank gauging equipment can widen their trade activity, for example from outside the petrochemical field to within it. No intention of the parties to restrict their clause so as to exclude Mr Lee from working for such a company can be found in the words of the clause and I can see no reason for implying them into the clause. The words "in overspill prevention or tank gauging equipment" defined the type of business and were intended to extend the ambit of the covenant to any business which dealt etc in such equipment.

Mr Clarke, rightly in my view, submitted that clause l7(c) was a restriction upon Mr Lee which was unenforceable unless Scully established that it (i) existed to protect a legitimate interest in customer connection and/or confidential information, and (2) the nature, scope and extent of the restriction imposed was no more than was reasonably necessary to protect such an interest.

Mr Clarke drew attention to the width of the covenant. First, it was not limited to the actual customers of Scully. Second, it was not limited to businesses which competed with Scully. Third, it operated to prevent Mr Lee working for a UK business involved in the supply etc of equipment anywhere in the world. Fourth, the covenant covered employment in an advertising business. Fifth, it prevented Mr Lee being a shareholder in any of the named businesses. Sixth, it prevented Mr Lee from being "interested" in any capacity in a relevant business. Mr Clarke also submitted that there was no legitimate interest to protect any customer connection and that any claims to protect confidential information could not provide the legitimate interest required as there was no adequate evidence that Mr Lee had ever had any confidential information of the type that could form a trade secret. If that be wrong, the covenant went wider than was necessary to protect that information in time and area.

The interest relied upon by Scully was their confidential information. That, the Judge realised as he made clear, when he directed himself, that he had "to consider whether clause l7(c) is reasonable in the interests of the parties to protect any confidential information belonging to the plaintiff".

At page l8 of the transcript the Judge came to the consider whether Scully had confidential information and whether the defendant had knowledge of it. Having reviewed the evidence he said:

"The defendant accepted that he had technical knowledge of Scully's products going beyond what was common knowledge; that he had received product training from Scully Signal Company which included information not in the public domain; that he had knowledge, in l993, of marketing plans that were then confidential; that he had knowledge, in l995 of product developments and projected product developments that might well have been of interest to competitors, though he could not say whether they would be of interest to competitors today; that some of the information he had obtained from customers while he was employed by the plaintiff was confidential; and that at the time he left the plaintiff company he had an idea what was under development and what was not.

The defendant claims to have forgotten much of the detail, but memory can be jogged and things thought to be forgotten recalled. It has not been suggested that the defendant can carry circuit diagrams in his head. There was evidence, which I accept and which the defendant accepted, that every competitor wants to know about competitive developments. I am satisfied that the defendant is in possession of confidential information of the kinds mentioned above that could be of value to Veeder-Root and the disclosure of which could significantly damage the plaintiff's business.

I accept the sincerity of the defendant's evidence that he has no intention of divulging what he describes as "the plaintiff's genuinely confidential information." In my judgment that is irrelevant to the question of the reasonableness of clause l7(c), which has to be determined as at the date of the contract, June l99l. But in any event, the information could be used or disclosed inadvertently and the defendant's intention may not continue."

Mr Clarke submitted that there was insufficient evidence to enable the Judge to conclude that Scully had sufficient confidential information to provide them a legitimate interest to be protected. In my view the Judge was entitled to come to the conclusion that he did. No man may be prevented from using the tools of his trade learnt during his employment, but in this case Mr Lee had in his possession information not available to the public which provided Scully, his employer, a legitimate interest to protect by a restrictive covenant in a contract negotiated and agreed to as a term of employment.

Mr Clarke also submitted that Scully had not sufficiently identified the confidential information they relied on. He drew to our attention cases in which the need to particularise the nature of the confidential information was emphasised. However, those were cases where a plaintiff was seeking to enforce an obligation of confidence. It was therefore necessary to identify with particularity the confidential information relied on, not only to enable the defendant to know the case made against him, but also to enable an injunction to be drawn with appropriate clarity. In cases where a restrictive covenant is sought to be enforced, the confidential information must be particularised sufficiently to enable the Court to be satisfied that the plaintiff has a legitimate interest to protect. That requires an enquiry as to whether the plaintiff is in possession of confidential information which it is entitled to protect. (See Littlewoods Organisation v Harris (1977) l WLR 1472 at 1479F). Sufficient detail must be given to enable that to be decided but no more is necessary.

I believe that the confidential information was sufficiently identified by Scully and that the Judge was correct to conclude that Scully had a legitimate interest to protect by way of a restrictive covenant. It was therefore necessary for the Judge to go on and decide whether the restriction was reasonable. That the Judge did. He said:

"So far as the nature of the restraint contained in clause l7(c) is concerned, I am satisfied that it is no more than is reasonably required to protect the plaintiff's legitimate interest in its confidential information save in so far as it extends to shareholdings and to advertising businesses. As to the geographical extent of the restraint, covering the whole of the United Kingdom, the position is this. The defendant was employed by the plaintiff initially as sales engineer for the north of the United Kingdom and Southern Ireland. At the end of l993 he took responsibility for the whole of the United Kingdom as Technical Sales manager. Later he became General Manager. In August l995 he was demoted to the position of General Sales Manager and in the last quarter of l996 he was demoted to the position of Sales Manager for his original northern territory. In my judgment, the area of the restraint is not excessive.

In my judgment, the period of one year as the duration of the restraint is not excessive since lead times for the introduction of new products are often substantially greater than that period. If the reference to a shareholder were confined to a majority shareholder or a shareholder with a controlling or substantial interest, it would, in my judgment, be unobjectionable but covering, as it does, the more likely situation of a small shareholding, it is wider than necessary to protect the plaintiff's legitimate interests. Similarly the inclusion in the restriction of any business involved in advertising overspill prevention or tank gauging equipment is unnecessary.

I conclude that clause l7(c) is reasonable in the interest of the parties save in so far as it extends to shareholdings and to advertising."

Mr Tabachnik did not challenge the Judge's conclusion that the clause went wider than was reasonable insofar as it restricted Mr Lee from being interested as a shareholder or in any other capacity in any business involving or including advertising the stated equipment. He supported the Judge's conclusion that the clause was reasonable in the area of business protected and geographical extent covered by the clause.

The fact that the clause is not limited to the United Kingdom does not, in my view make it unreasonable. Business is becoming increasingly international and the covenant is to protect dissemination of confidential information. That is not constrained by national boundaries. I therefore reject Mr Clarke's submission that the geographical extent of the clause was not reasonable. However I do not take the same view about the general width of the clause. It is not limited to competing businesses. It prevents Mr Lee being inter alia interested in a business supplying any overspill prevention or tank gauging equipment and therefore is not restricted to equipment of the type made by Scully. In that respect it is wider than is reasonable to protect the legitimate interest of Scully which is confined to the petrochemical industry. No doubt it would be acceptable to extend the restriction to business which had not competed in the past, provided they were likely to in the future, but the definition of using the equipment specified as a limitation, is so wide as to cover a variety of business which would have no interest in use of the confidential information of Scully.

The Judge went on to consider whether he could sever the restrictions as to shareholding and employment in advertising from the rest of the covenant. He said:

"As to the shareholding restriction, to the extent that it goes wider than is permissible, it is, I think, trivial. It does not follow that the part of the covenant severable by excision is trivial."

Having referred to Mason v Provident Clothing & Supply Co Ltd (1913) AC 724, Godsell v Goldman (1915) l Ch 292, Rex Stuart Geoffrey Parker Ginsburg Ltd v Parker (1988) IRLR 483 he said:

"In the instant case the defendant stated, in an affidavit, that he was married, had two children, and was anxious to maintain an income to support his family. That statement has not been questioned and I have no doubt that it is true. I infer that the defendant has insufficient financial resources to enable him to secure a substantial shareholding in a significant business. I thus consider that the impact of the clause concerning shareholding must be very limited, if indeed it is of any practical significance at all, and, following the Court of Appeal, I treat it as trivial. Moreover, the prohibition is a separate prohibition.

The advertising prohibition is also a separate prohibition. Thus I am satisfied that I can properly sever the objectionable covenants by excising, from clause l7(c), the words "or otherwise interested", "shareholder", "or in any other capacity" and "advertising" and I accordingly do so."

Mr Clarke submitted that the Judge had not correctly applied the authorities. The covenant not to be engaged or interested in any business involving or including "the manufacture supply installing modification servicing advertising or otherwise dealing in" was not a series of distinct and severable promises and was not trivial or technical. Further the Judge fell in error by considering the clause in the context of Mr Lee's present financial circumstances rather than by reference to the reasonableness of the restraint when entered into. In any case the clause, as drafted, prevented any shareholding in any of the specified classes of businesses. It was an unreasonable "blanket" restriction of great range which covered all the types of businesses in the clause and could not be severed.

I do not believe that the evidence as to Mr Lee's circumstances at any particular time can be material as to whether part of clause l7(c) can be severed. A man, such as Mr Lee, must be able to know whether a covenant in his contract of service is enforceable and that cannot depend upon whether at any particular time during his employment he is married or whether he has won the football pools.

Severance of part of a covenant is only permissible in cases where the obligation to be severed is truly a separate obligation to that to be enforced. If the obligations are in any way interdependent as a matter of wording or meaning then severance will not be permitted. Lord Moulton in Mason v Providential Clothing & Supply Co Ltd gave the reasons why. At page 745 he said:

"Mr Lords, I do not doubt that the Court may, and in some cases will, enforce a part of a covenant in restraint of trade, even though taken as a whole the covenant exceeds what is reasonable. But, in my opinion, that ought only to be done in cases where the part so enforceable is clearly severable, and even so only in cases where the excess is of trivial importance, or merely technical, and not a part of the main purport and substance of the clause. It would in my opinion be pessimi exempli if, when an employer had exacted a covenant deliberately framed in unreasonably wide terms, the Courts were to come to his assistance and, by applying their ingenuity and knowledge of the law, carve out of this void covenant the maximum of what he might validly have required. It must be remembered that the real sanction at the back of these covenants is the terror and expense of litigation, in which the servant is usually at a great disadvantage, in view of the longer purse of his master."

That statement by Lord Moulton was considered by the Court of Appeal in T Lucas & Co Ltd v Mitchell (1974) l Ch l29. In that case there was a restrictive covenant upon an employee which prevented an employee from dealing in any goods similar to or capable of being used in place of any of the particular goods in question or from soliciting orders or supplying any such goods to any person, firm or company carrying on business within certain allocated districts. The restraint against soliciting and supplying was held to be sufficient to protect the trade connection. The Court held that the clause contained two separate obligations, one against dealing in and the other against soliciting and supplying and were severable despite the fact that it could not be said that one of them was trivial. In the judgment of the Court it was said that, even when the part which was unenforceable was not trivial, severance was permissible provided that the enforceable and unenforceable restrictions were as a matter of construction to be regarded by the parties as independent so as to be separate and severable with the result that the excision of the unenforceable restriction could be made without addition or modification. Thus as stated by Glidewell LJ in Rex Stewart Jeffris Parker Ginsberg v Parker (1988) l RLR 483 at 487:

"a contract can be severed if the severed parts are independent of one another and can be severed without the severance affecting the meaning of the part remaining".

In the present case it might be possible to sever the obligation not to be interested in an advertising business by deleting the word "advertising". That obligation would appear to be irrelevant and in the circumstances trivial. However that cannot be said of the other restrictions which are not reasonable to protect the legitimate interest of Scully. To do that the words "or otherwise interested", "shareholder", "or in any other capacity" would need to be altered or deleted. They are not independent parts of the clause. Further it would be necessary to insert some limitation as to the type of equipment. To validate clause l7(c) by notionally deleting the unreasonable restrictions would amount to impermissible amendment, not severance. Clause l7(c) is void and unenforceable.

Clause l7(d)

The Judge held that the injunction sought accurately reflected the meaning of this clause. He went on to consider its enforceability. He held that the absence of a spatial limitation and a limitation to customers dealt with, in say the last l2 months, was not fatal. He then came to the last two submissions advanced on behalf of Mr Lee:

"Mr Clarke's third objection to clause l7(d) was that it went beyond protection of the plaintiff's customer/client connection. The clause applied also to suppliers, agents and distributors. I can see no reason why the covenant should extend to suppliers. There is no evidence that the plaintiff has any goodwill to protect in its relationship with its suppliers. However, I reject Mr Clarke's argument in relation to agents and distributors since they are a link in the plaintiff's customer connection. It is clear on the evidence that there is an agent in Ireland who has done well for the plaintiff and about whom the defendant has particular knowledge which could be of use in dealing with that agent. Apart from the reference to "supplier", I reject Mr Clarke's third objection.

Mr Clarke's fourth objection to clause l7(d) was that the restraint lasted for an unreasonable period of time, 24 months. There appears to be no case where a non-solicitation clause has been held void simply because of its duration. See Rex Stuart Geoffreys Parker Ginsburgh v Parker (l988) l RLR 483, 486, para 40. In that case, a period of l8 months was held not to be excessive in the case of the managing director of an advertising agency. In Ploughman v Ash, it was apparently not argued that a period of two years was excessive in the case of one of five sales representatives of corn and agricultural merchants.

But the burden remains on the plaintiff to establish that a period of two years in this case is reasonable. Mr Bear submitted that Mr Clarke's argument ignored the long lead times that might occur in the industry. I accept that projects can take several years to come to fruition from the initial concept and that developments involve the co-operation of the customer. I cannot see, however, how that advances the plaintiff's argument. On the contrary, a customer who has invested time and money in a development is, as it seems to me, likely to be the less ready to transfer his custom to a competitor. The question is a matter of impression. See per Glidewell LJ in Ginsburgh v Parker. The plaintiffs have failed to leave me with the impression that a period of less than two years would be insufficient to protect their goodwill and trade connections."

Mr Tabachnik submitted that there was no case where a non-solicitation clause had been held unreasonable on the grounds of duration and that in any case two years was not unreasonable. Mr Lee had been in Scully's employment for about five years and the nature of the business was such that further sales to a particular customer might only occur after a number of years. He accepted that the Judge's view as to the restriction upon dealing with suppliers was correct, but submitted that the Judge should have gone on to sever the word "suppliers" with the result that clause l7(d) was enforceable.

The submission of Mr Tabachnik as to the duration of the restrictions has force, but I am not prepared to conclude that the Judge was wrong. What is a reasonable length of time was a matter for the trial Judge and I do not believe he erred in his approach to the question. Upon that basis I conclude that the Judge rightly held clause l7(d) to be unenforceable.

I would allow this appeal and dismiss the cross-appeal.

THE VICE-CHANCELLOR

At the conclusion of argument on this appeal we indicated that Mr Lee's appeal would be allowed and Scully UK Ltd's cross-appeal would be dismissed but that we would hand down written judgments at a later date. We discharged immediately the injunction binding Mr Lee that had been part of the Order dated 11 August 1997 of the judge below.

I have had the advantage of reading in draft the judgment of Lord Justice Aldous. I am in full agreement with his conclusions but, as we are disagreeing with the judge on the enforceability of clause 17(c) of Mr Lee's employment contract, I will briefly express my own reasons.

The first requirement when considering the enforceability of the restraints on Mr Lee contained in clause 17(c) must be to determine the true construction of the words used, namely:-

"(c) The employee shall not during the period of twelve months commencing with the termination of his employment hereunder carry on, assist in carrying on or be engaged or otherwise interested in, whether as a shareholder, director, consultant, employee or self-employed person or in any other capacity, within the United Kingdom, any business involving or including the manufacture supply installing modification servicing advertising or otherwise dealing in overspill prevention or tank gauging equipment or without prejudice to the foregoing any other business which competes with any business carried on by the company at the date of this agreement".

At the date of the agreement and, indeed, throughout Mr Lee's employment by Scully, Scully's business of supplying overfill prevention systems, liquid level detection systems and fluid handling systems was confined to the petrochemical industry. It is plain that the systems would be likely to have a use and importance outside the petrochemical industry. It cannot be only in the petrochemical industry that that it is necessary to take precautions to avoid overfilling tankers or tanks with the liquids or fluids that they are designed to contain. Those who use the major highways of this or any other industrialised country will be accustomed to seeing tankers conveying a variety of liquids or fluids that have nothing to do with the petrochemical industry.

Mr Tabachink Q.C., counsel for Scully, took two associated points of construction, each designed to limit the breadth of the words used in clause 17(c).

First, he submitted that the reference to "any other business which competes with any business carried on by the company at the date of this agreement" at the end of the clause required the words "any business ..." earlier in the clause to be similarly limited to "any business which competes ..." etc.

Second, and, perhaps alternatively, he submitted that the words "any business involving manufacture ... or otherwise dealing in overspill prevention or tank gauging equipment" should, by implication be limited to any business etc., in the petrochemical industry. The limitation would, on the facts of this case, achieve much the same practical result as the limitation of "any business" to "any business which competes ...".

I am able to accept neither of Mr Tabachink's submissions. I of course accept that clause 17(c) must be construed in the context of the relevant commercial background and Scully's inferred purposes in imposing the restraints on its employee. The commercial background does not persuade me, however, that Scully was necessarily concerned only to restrain Mr Lee from involving himself in a competing business in the petrochemical industry. The best guide to Scully's intention is, after all, the contractual language itself. If the contractual language were to lead to some absurdity or to some plain improbability, I would be content to limit the language in order to accord with a more believable intention. But I can see nothing absurd or improbable in Scully intending the clause to have the wide effect consistent with the words used. I return, therefore, to the two points of construction.

As to the first point, the words from "any business" down to "tank gauging equipment" identify the type of businesses in which Mr Lee must not involve himself. There is no limitation of the prohibited business to those businesses competing with Scully. The rest of the sentence, with its reference to "any other business which competes ..." is introduced by the words "without prejudice to the foregoing". It is thereby made clear that the words that follow are not to be taken to limit the breadth of the preceding words. The judge below came to the same conclusion. In my view, he was right. "Any business" means "any business" and is not limited to businesses that compete.

As to the second point, I can see no basis for limiting the natural breadth of the words used in describing the prohibited business. If Scully had intended the prohibited businesses to be limited to those engaged in the petrochemical industry the clause could have said so. Mr Tabachink's argument appeared to me to depend on the following propositions:-

(1) Scully carried on business in the petrochemical industry;

(2) Scully must have intended the clause to restrain its employee from involving himself in a prohibited business in the petrochemical industry;

(3) Scully could not have intended the clause to restrain its employee from involving himself in a prohibited business outside the petrochemical industry;

(4) So the clause should be construed so as only to restrain Mr Lee from involving himself in a prohibited business in the petrochemical industry.

Propositions (1) and (2) are easy to accept. Proposition (3) is the crux. It is not justified by the actual language of the clause. It is not something that the commercial background makes at all evident. I do not know and cannot speculate whether or not Scully might have contemplated a possibility that it might expand its operations outside the petrochemical industry. Nor could Mr Lee have known or usefully speculated about this. This is not a case which to my mind bears any resemblance to Home Counties Davies Ltd -v- Skeleton [1970] 1 WLR 526. In my judgment clause 17(c) must be construed on the footing - the only safe footing in the circumstances of this case - that Scully intended the clause to have the effect demanded by the natural meaning of the words used.

I conclude, therefore, that clause 17(c) on its true construction would restrain Mr Lee from involving himself in any of the prohibited businesses, whether or not in the petrochemical industry, and whether or not competing with a business carried on by Scully at the date of the agreement.

The next question is whether or not the clause, on its true construction, is in unreasonable restraint of trade. In my judgment, it clearly is so. An employee restraint clause, the effect of which is to place severe restrictions on the ability of an individual to earn his living using the skills and experience he has gained during his previous employment, must be subjected to very rigorous and careful scrutiny and enforced only if it goes no further than is reasonably necessary to protect the trade secrets of the previous employer. A clause which bars the employee from involving himself in businesses which do not compete with the business of the previous employer ought not, in my judgment, to be upheld. An extreme example of the unacceptable width of clause 17(c) is the bar on Mr Lee involving himself in a business "advertising" overspill prevention or tank gauging equipment. It is not sufficient that the employer might, in the future, wish to expand its petrochemical industry business into other areas.

Moreover, the type of involvement in the prohibited businesses that would be caught by the restraint is, in my view, much too widely expressed in the present case. Involvement as "shareholder" is prohibited. Involvement "in any other capacity" is prohibited.

The clause, as it stands is, in my judgment, in unreasonable restraint of Mr Lee's ability to earn his living after leaving Scully's employment.

The final question is whether offending words can be severed from the clause so as to leave a provision that would constitute no more than a reasonable restraint. Since in my view the main vice of clause 17(c) is that it restrains Mr Lee from involvement in businesses which may not be in competition with Scully at all, severance cannot, in my view, cure the invalidity of the clause. But, in any event, I agree with the remarks of Lord Justice Aldous on the severance question. I can discern in clause 17(c) no independent covenant or covenants amenable to excision in a severance exercise.

For these reasons, as well as those given by Lord Justice Aldous with all of which I am in full agreement, I would allow the appeal.

As to clause 17(d), I am in agreement with the judge below and, for the reasons expressed by Lord Justice Aldous, would dismiss the cross-appeal.

POTTER L.J

I agree with both judgments.

Order: Appeal allowed with costs