England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION
(THE VICE CHANCELLOR)

		Royal Courts of Justice Strand London WC2
		24th May 2000

1. LORD JUSTICE MORRITT: This is the application of the defendant, Mr Christensen, for permission to appeal with the appeal to follow if permission is granted from the order of the Vice-Chancellor made on 12th May 2000 whereby he restrained Mr Christensen from undertaking or continuing employment by, or the provision of advice, assistance or services to the Microsoft Corporation at any time before 16th September 2000.
2. The new generation of mobile telephone is called a "Wireless Information Device" or WID for short. It is a cross between a mobile telephone and a palmtop computer and is capable of both voice communication and digital data transfer. A WID connects to the Internet via the wireless network and accesses information held by a server. The two ends of this chain of communication are called, in the case of the WID, "the front-end" and, in the case of the server, "the back-end". Communication between the two is provided by a wireless application protocol or WAP.
3. Symbian Limited, the claimant, is a joint venture company formed by the well known Psion and four other equally well known companies in a similar line of business. It carries on the business of researching, developing and commercially exploiting software designed for Wireless Information Devices or the front-end. WIDs work in conjunction with a platform. The platform developed by Symbian is called EPOC. Symbian does not provide software for the servers or back-end.
4. Microsoft, the well known computer software company, also has a platform for WIDs called Windows CE. Windows CE competes with EPOC. It also has a "backend" server called Microsoft Exchange to be accessed by its WAP called Mobile Explorer.
5. Mr Christensen was employed by Psion from November 1992 to June 1998 as an international sales executive. He entered into a contract of employment with Symbian on 23rd June 1998. The material provisions of that contract are as follows:
6. "1.1 "The Business" The business of the research,
7. development, devising writing, engineering licencing, marketing, distributing, and supply of computer software and computer products of all kinds as carried on by the Group from time to time.
8. "The Group" The Company and Subsidiaries (or any one of them where the context so admits).
9. "The Protected Matters" The private affairs trade secrets or other confidentialinformation relating to the Business technical processes plans or finances of the Group or its suppliers or customers and which are of such a nature that their publication or use outside the Group would reasonably be expected to be detrimental to the Group, its suppliers or customers as the case may be.
10. SubsidiaryAny company which for the time being is a subsidiary company of the Company (as defined by Section 736 of the Companies Act 1985)."
11. Clause 2.1 provided for the company, as Symbian was defined, to employ Mr Christensen as Executive Vice-President Sales and Marketing.
12. Clause 3 provided:

"Subject as hereinafter provided the said appointment shall be deemed to have commenced on the date of this Agreement and shall continue thereafter until terminated at any time by either party giving to the other not less than six calendar months previous notice in writing."

13. Clause 4 is headed Duties and starts with clause 4.1 setting out in express terms the duties during the continuance of the Agreement.
14. Clause 4.3 provides:

"... the Appointee..."

15. - being Mr Christensen,

"... shall not during the term of this Agreement (except as a representative of the Group or with the prior consent in writing of the Board such consent not to be unreasonably withheld) be directly or indirectly engaged or concerned or interested in any capacity in any trade business or occupation whatsoever other than the business of the Group whether or not competing in any material respect with the Business."

16. Clause 12 is headed Termination.
17. 12.1.1 provides for the Appointee's employment under the Agreement to be subject to termination by the Company by not less than six calendar months notice in writing in the case of incapacity of the Appointee.
18. Clause 12. 1.2 provides for termination by a summary notice.
19. Clause 12.3 provides:

"The company may suspend the Appointee from his duties and not require the Appointee to attend his place of work or provide him with any work during any period of notice whether that notice is given by the Company or by the Appointee. The Company need not give any reason for exercising its rights under this Clause but must provide the remuneration due to the Appointee during the relevant period of notice. During any period of suspension under this Clause 12.3 the Appointee must not without the written consent of the Board, go to any premises of the Company or other member of the Group or contact any employee (other than a director of the company), customer, or supplier of the Company or other member of the Group."

20. Clause 15 is headed Confidentiality and Restrictions and Clauses 15.1 and 15.2 provide for the non-disclosure or use of protected matters both during and after the continuance of the employment.
21. Clause 15.4 provides:

"For a period of six months from the earlier of:

(a) the date the Appointee ceases to work for the Company or carry out his normal duties, or

(b) the expiry or termination of this Agreement

the Appointee must not..."

22. And then in various numbered subparagraphs there are prohibitions on soliciting orders, competition, impairing the relationship with the supplier, enticing away employees.
23. In Clause 15.4.6 the prohibition is not to:

"engage in the United Kingdom, Germany or any State of the USA where Business is carried on in any capacity directly or indirectly in the Business before obtaining prior written consent of the Board (such consent to be withheld only so far as is reasonable to protect the legitimate interests of the Company or any member of the Group) PROVIDED THAT this restriction will only relate to engaging in a business of such nature as the Appointee engaged in during one year before notice of termination of this Agreement."

24. I omit 15.4.7.
25. Clause 15.5 provides:

"The covenants contained in this clause 15 are considered reasonable by the parties and are in respect of each part separate severable and separately enforceable in the widest sense from the other parts so that each covenant is a separate covenant even if it appears in the same clause sub-clause or sentence as any other covenant or is imposed by the introduction of a word or phrase conjunctively with or disjunctively from or alternatively to other words or phrases."

26. There is a provision in Clause 17 that the expiration or determination of the Agreement howsoever arising should not operate to affect such of the provisions thereof as in accordance with their terms are expressed to operate or to have effect thereafter.
27. On Friday 17th March 2000 Mr Christensen, as is now known, accepted an offer of employment from Microsoft to commence on 1st April 2000. In the light of that acceptance on the same day he wrote to Symbian indicating that he wished to leave with effect from 24th March and to do so free of all contractual restrictions. On the same day he saw Symbian's Chief Executive Officer, Mr Myers, and when reminded that he was required to give six months notice, indicated that he, Mr Christensen, considered his contract to be invalid. He did not on that day tell Mr Myers or anyone at Symbian that he proposed to take up employment with Microsoft.
28. The next week on Wednesday 22nd March, Mr Christensen addressed the executive directors of Symbian at lunch and told them that he would be joining Microsoft. In consequence no doubt of that information, Mr Myers consulted Symbian's lawyers and in consequence of their advice saw Mr Christensen later in the day and gave him notice of suspension for two weeks under clause 12.3; he subsequently wrote to the like effect and pointed out to Mr Christensen that six months notice was required under clause 3 of his contract of employment.
29. The following week on 28th March Mr Christensen agreed that six months notice was required. He acknowledged his continuing duties under his contract of employment but claimed that his position with Microsoft would be one of defining, marketing and selling server or back-end software and would not on that account be competitive with the business of Symbian. He resigned all offices with Symbian on that day.
30. Following on from that conversation on 30th March the attorneys for Microsoft wrote to those for Symbian indicating the nature of Mr Christensen's duties with Microsoft if he joined them. In the light of that Symbian on that day continued the suspension under clause 12.3 for the whole of the notice period.
31. Between 31st March and 7th April 2000 there was correspondence between the parties' solicitors debating the issues. In the course of that correspondence Mr Christensen offered undertakings to protect Symbian's interests as he saw them. Symbian did not consider them to be enough. In the course of that correspondence Mr Christensen tendered his immediate resignation with effect from 4th April.
32. These proceedings were commenced by claim form issued by Symbian on 12th April 2000. Application for interim relief came before the Vice-Chancellor on 8th May 2000. The Vice-Chancellor considered that he should grant an injunction to enforce clause 4.3 but not clause 15.4. But the enforcement of clause 4.3 was, he thought, necessarily to be restricted to employment with Microsoft. He reached a number of relevant conclusions, which, for present purposes, can be summarised as follows:
33. First, a period of suspension under clause 12.3, colloquially known as a garden leave, puts an end to the relationship of employer and employee even though the contractual relationship continues; consequently, the Vice-Chancellor considered, during a period of garden leave there were no surviving duties of good faith and fidelity capable of enforcement by injunction.
34. Second, he thought that the provisions of clause 4.3 applied during the period of garden leave and, subject to questions of the reasonability of the restrictions, should be enforced by injunction but only to protect some legitimate interest of Symbian.
35. Third, he considered that injunctions to enforce clause 15 would not go wide enough to protect Symbian.
36. Fourth, that an injunction to enforce clause 4.3 but in a limited manner would serve the legitimate interest of Symbian and would not be an unreasonable restraint of trade.
37. It followed from those conclusions that he granted the injunction in the terms which I have already summarised.
38. The Vice-Chancellor refused permission to appeal on the basis that his decision was based on his construction of the contract and the exercise of his judicial discretion. The application to this Court for permission to appeal was made on 16th May, and, as I have said, the hearing has been of the application for permission with the appeal listed for hearing immediately thereafter if permission were granted.
39. Before turning to the submissions for Mr Christensen it is convenient to consider the structure and proper construction of the service contract. First, notwithstanding the apparent conflict between clauses 3 and 12.1.1 it is common ground that the company may give six months notice to the employee to determine his employment for any reason. The company is not restricted to the cases of incapacity described in clause 12.1.1.
40. Second, it follows that the circumstances in which clause 12.3 may operate are, as it states, not confined to cases of notice given by the employee but include cases where the six months notice has been given by the Company.
41. Third, the provisions of clause 12.3 contemplate that the suspension may be for "any period of notice". It was not disputed that this entitles a suspension for a shorter period than the period of notice to determine the agreement. As it seems to me it must also permit, at least, a determinable suspension too.
42. In my view it follows from the terms of the agreement and the considerations to which I have just referred that the overlap between clauses 4.3 and 15.4.6 has important limitations. First, the three periods involved, namely the notice period under clause 3, the period of suspension under clause 12.3 and the period during which clause 15.4 operates are not necessarily the same. Thus, clause 15.4 may be operative during a period in which clause 4.3 is not; the converse is true too. An example makes the point clearer. If it be assumed that the employee gives notice to leave on 1st January expiring on 30th June but the employer does not decide to put him on garden leave until 1st February then clause 15.4 will not be operative during January, clause 4.3 will cease to operate on 30th June but clause 15.4 will remain in operation until 31st July. Second, the scope of clauses 4.3 and 15.4 is different. The former precludes any other employment; the latter only any other competing employment. Thus clause 4.3 is designed to ensure that at all times during the term of the agreement the services of the employee are available to the company. If the suspension pursuant to clause 12.3 is for a period shorter than six months or is for a terminable period then clause 4.3 should remain in operation during that period so as to ensure the employee's continued availability if and when it comes to an end before the contract expires. The purpose of clause 15.4 is different. It assumes that the employment will cease without any possibility of the employee being required to work out the notice period.
43. The case for Mr Christensen was put with, if I may say so, admirable clarity by his counsel. His submission was that the provisions of clause 15.4.6 describe and prescribe the limits to which the provisions of clause 4.3 may be enforced against an employee sent on garden leave pursuant to clause 12.3. He accepted that, theoretically, such limits may arise by way of (1) a restrictive construction of clause 4.3, (2) the application of the doctrine of restraint of trade to clause 4.3 and/or (3) the exercise of a judicial discretion. A conclusion upholding the first or second submission would mean that the Vice-Chancellor had no power to make the order he did. If by contrast we only uphold the third submission then counsel submitted, for the reasons to which I shall refer later, the Vice-Chancellor failed properly to exercise his discretion.
44. Initially counsel disclaimed any suggestion that the limitation on clause 4.3 for which he contended could be imposed by any process of construction. Later I understood him to seek to argue, albeit faintly, for such a contractual limitation arising from the construction of the agreement. In my view his original concession was rightly made. There is every reason why the provisions of clause 4.3 should be operative "during the term of this Agreement" including any period of notice to determine it. The only circumstance in which an intention to limit its operation could be attributed to the parties is where notice of suspension has been given for the whole of the notice period. But in those circumstances there would have to be detailed provisions to cater for the cases in which the operation of clause 4.3 was to be modified and the manner of its modification. For example it would need to be spelt out if and for how long the salary remains payable to the employee if he did obtain alternative but non-competitive employment. I see no basis on which such widespread modifications and interpolations could be made. They could not be necessary for the commercial efficacy of the agreement and the uncertainty of their terms demonstrates that the test of the officious bystander could not be satisfied either.
45. I turn then to consider the second contention based on the doctrine of restraint of trade. The conventional doctrine invalidates contractual terms as at the date the restraint is imposed unless the term can be justified as being reasonable with reference to the interest of the parties and of the public. On this basis the validity or otherwise of clause 4.3 must be tested as at the date of the employment contract. It is submitted, and I accept, that the principle may be applicable to restraints imposed during the subsistence of the contract. Esso Petroleum v Harpers Garage]1968] AC 269, 328/9 and Instone v Schroeder [1974] 1WLR 1308, 1315. Even so I do not see how the provisions of clause 4.3 can be invalidated. Standing alone the clause is obviously justifiable. The argument can only arise if and to the extent that the power conferred by clause 12.3 is exercised. But I do not understand how the exercise of that power in any particular manner can invalidate clause 4.3. It was not suggested by reference to the minority judgment of Lord Denning in Shell UK Ltd v Lostock Garage Ltd [1976] 1WLR 1187, 1198 or otherwise that clause 4.3 might become temporarily unenforceable in certain circumstances arising after the conclusion of the contract. Nor do I see any reason why it should, given the discretion of the court which is the foundation of the third submission. For these reasons I would reject the second contention too.
46. Counsel for Mr Christensen relied on the judgment of Taylor LJ, with which Mann LJ agreed, in Provident Group v Hayward [1989] ICR 160,170 for the proposition that the court has the power to modify the extent to which it will enforce the contractual embargo so long as that contractual embargo is valid (see JA Mont UK Ltd v Mills [1993] IRLR 190) so as to ensure that at the time of such enforcement it does not operate in unreasonable restraint of trade. That was the approach to which I referred in William Hill v Tucker [1999] ICR 291, 301. That too was the approach the Vice-Chancellor adopted in this case.
47. In Provident Group v Hayward Dillon LJ considered ([1989]) ICR 160, 167) that a similar approach could be justified as the enforcement of the implied duty of fidelity. The Vice-Chancellor declined to adopt that approach in this case because he considered that the exercise of the power conferred by clause 12.3 operated to terminate the duty of fidelity because the relationship of employer/employee ceased, notwithstanding that the term of the contract continued. Counsel for Mr Christensen confessed to some difficulty in seeking to justify that part of the Vice-Chancellor's judgment in his favour. But as we heard no argument on the point from counsel for Symbian and it is not necessary to deal with it I say no more about it.
48. Accordingly the question is whether the Vice-Chancellor properly exercise the discretion to modify the contractual embargo. The Vice-Chancellor concluded that clause 15.4.6 would not preclude the employment of Mr Christensen by Microsoft, "in developing and marketing back-end applications and devices." He continued at page 27C of the transcript of his judgment:

"Nonetheless, the fears expressed by..."

49. - counsel on Symbian's behalf

"... that Mr Christensen's employment by Microsoft in marketing and sale of their back end technology may operate to damage Symbian in a number of various ways, which are in my opinion justified fears, at least from Symbian's point of view. Microsoft, of course, suggest that these fears are illusory and to some extent they may be right. I doubt whether even with the advantage of full evidence at trial a judge could be clear either that Symbian's fears were definitely well founded or that they were definitely ill-founded. The impression I had is that they are genuine fears that commercial disadvantage may result from the engagement of Mr Christensen in the back end side of the Microsoft business, notwithstanding that Symbian's primary concern is with the front end.

I am, for the reasons I have given, very doubtful whether the injunction that Symbian is seeking could be justified simply by reference to the restrictions in clause 15.4.6. It is necessary, in my view, for Symbian to rely on clause 4.3. As I have said, the clause 4.3 restriction remains, in my judgment on foot during the term of the agreement, that is to say, until 16th September. An injunction to enforce the provision and to restrain Mr Christensen from all commercial activity during the garden leave period would not, in my view, be granted. An injunction of that width would not serve any genuine interest of Symbian's. But in my view an injunction limited to restraining Mr Christensen from being employed by or advising Microsoft, activities which would constitute a breach of clause 4.3, would serve a genuine and legitimate interest of Symbian's. It would provide Symbian with a legitimate degree of protection which would not, in my judgment, be vulnerable as being an unreasonable restraint of trade.

If there had been an express term in this agreement that, for the period of six months after termination of the agreement or the commencement of a garden leave period Mr Christensen should not enter into the employment of a competitor of Symbian, that restriction, in my view, would have been eminently reasonable for the purpose of protecting the confidential information of Symbian for all the reasons that [counsel] advanced in his submissions to me.

Accordingly, it seems to me, there is no restraint of trade objection that can be taken to the enforcement of the clause 4.3 restriction by the grant of an injunction on the lines of that express term. Enforcement of the clause 4.3 obligation to the extent of restraining Mr Christensen from being employed by Microsoft until the expiry of the six month notice would, in my judgment, be a justifiable exercise of discretion. To that extent it seems to me clause 4.3 should be enforced. It remains part of the contract between the parties. Mr Christensen has sought to avoid the Service Agreement by serving a termination notice which was shorter than the requisite six months. But he cannot, in my judgment, escape clause 4.3 so far as working for Symbian's competitors are concerned."

50. Mr Christensen contends that such exercise of the judicial discretion as to the form of the injunction is one with which this court can and should interfere. He relies on a number of grounds set out in paragraph 4 of his appeal notice.
51. First, it is contended that the judge should have regarded his discretion as fettered by and to the extent of clause 15.4. For my part I would reject that contention. The Vice-Chancellor rightly held that clause 4.3 remained operative to its full contractual width. He properly paid regard to the existence and limitations of clause 15.4.6 but was fully entitled to go outside its confines in determining the terms of the injunction he should grant.
52. Second, it is suggested that the Vice-Chancellor wrongly considered that the exercise of his discretion was unfettered by considerations of the doctrine of restraint of trade. I do not understand this objection, for the Vice-Chancellor expressly considered whether the relief he proposed to grant would be an unreasonable restraint and concluded that it would not.
53. Third, it is contended that the Vice-Chancellor was wrongly influenced by Symbian's fears rather than the extent of its protectible interests. But again this is, in my view, to misread the Vice-Chancellor's judgment. In the passage I have already quoted he said that he regarded those fears as justified to some extent and, at page 28D, that the injunction would serve a genuine and legitimate interest of Symbian and provide a legitimate degree of protection.
54. Fourth, Mr Christensen also contends that the Vice-Chancellor failed to pay proper regard to the seven considerations set out in paragraph 4.4 of the notice of appeal. But, as Counsel for Mr Christensen accepted, each one of those considerations is referred to at some point in the judgment. I will, however, refer to two of them. The first is that part of clause 15.5 in which the parties acknowledge that the covenants contained in clause 15 are considered by them to be reasonable. Such a provision appears to me to be of very little legal value because it is the opinion of the court, not of the parties, which determines the validity of the covenants. But in any event it is immaterial because it is not the validity of clause 15 which is in question. The issue is the proper extent of the enforcement of clause 4.3 beyond the area covered by clause 15.4.6. On the facts of the case the Vice-Chancellor considered that a more extensive enforcement was justified.
55. The other consideration was the nature and extent of the undertakings offered by Mr Christensen and the safeguards proposed by Microsoft to ensure, as far as they could, that Mr Christensen did not infringe his remaining contractual obligations. The undertakings and safeguards are described in detail in paragraphs 3 to 6 of Mr Christensen's first witness statement. There is no doubt that both are extensive. The undertakings and safeguards were referred to by the Vice-Chancellor on page 14E to 15D. But the fears of Symbian to which the Vice-Chancellor referred in the passage which I have quoted included fears that the undertakings and safeguards did not provide sufficient protection. Thus it is clear, as one would expect, that the Vice-Chancellor did take the undertakings and safeguards into account but, nevertheless, concluded that injunctive relief based on clause 4.3 was justified. That was a matter for him; the fact, if it be one, that this court might have come to a different conclusion is immaterial.
56. For all those reasons I am clear that there are no grounds on which the exercise by the Vice-Chancellor of the discretion vested in him is open to review in this court.
57. At the commencement of the hearing we invited counsel for Mr Christensen to treat the hearing as the hearing of the appeal, whilst making plain that we were not giving him the permission to appeal he sought at that stage. In the event I am satisfied that the appeal for which permission is sought has no prospect of success. In those circumstances the proper order would appear to be to dismiss the application for permission rather than grant the application and dismiss the appeal. See CPR 52.3(6)(a). However I am not sure that it makes any difference which course is adopted. If there is a material difference then, for my part, I would be prepared to reconsider what is the appropriate order if either party sought an order in the alternative form. But either way Mr Christensen fails and the injunction granted by the Vice-Chancellor remains in force in accordance with its terms.
58. LORD JUSTICE CHADWICK: I agree.
59. MR JUSTICE CHARLES: I also agree.

(Appeal dismissed with costs; permission to appeal to the House of Lords Refused).