England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(Mr H Wolton QC
(sitting as a Deputy High Court Judge))

		Royal Courts of Justice Strand London WC2
		22nd May 2000

1. LORD JUSTICE SIMON BROWN: This is an appeal by the claimant company, Wincanton, against the order of Mr Wolton QC sitting as a deputy judge of the Queen's Bench Division, made on 6th December 1999, dismissing their application for interlocutory injunctions to enforce various restrictive covenants in the first defendant's, Mr Cranny's, contract of employment. The appeal is brought with the permission of the judge below.
2. There are issues between the parties as to whether the covenants were in fact contained in Mr Cranny's contract of employment and whether in any event they were supported by consideration (the latter an issue raised afresh by the respondent's notice) and whether Mr Cranny was in fact wrongfully dismissed and, if so, with what consequence in terms of the enforceability of the restrictive covenants. Triable however though no doubt some or all of those issues may be, I would not on their account withhold from Wincanton interlocutory relief if otherwise I judged it appropriate. The judge below refused relief essentially on the ground that the relevant covenants were, as he held, unenforceably wide.
3. Before setting them out, it is convenient first to sketch in the basic facts of the case, although I need do so only very briefly. Wincanton, a subsidiary of Unigate, is the second largest haulier in the United Kingdom with a number of distribution centres. Its business includes a small European haulage operation based mainly at Milton Keynes and Bicester. The Bicester operation was acquired by Wincanton on 16th February 1998 when they bought Rokold European Transport Ltd ("Rokold") a company with 127 employees, including Mr Cranny whose employment with Rokold had begun on 23rd April 1990, and including also a Mr Stephen David Miles, whose initials are those of the second defendant company, (SDM). SDM was incorporated on 27th April 1998 when four directors were appointed, Mr Miles, Mr Cranny, and two others who had previously worked for Rokold, namely Mr Pye, their European Traffic Manager, and Mr Hodgkins, their Fleet Engineer.
4. In February 1999 Mr Cranny was appointed Wincanton's European Operations Manager with a salary of £33,000 per annum and subject to three months' notice by Wincanton, two months' notice on his side. His contract, which he signed on 12th February 1999, referred to a booklet which contained certain standard terms and conditions, including those the subject of these proceedings.
5. Mr Miles left Wincanton in June 1998 and immediately began working for them as a sub-contractor, using his own tractor unit to haul their containers around Europe. He operated through SDM, and this was the first, apparently, that Wincanton had heard of that company.
6. Mr Pye left Wincanton in February 1999 and Mr Hodgkins left in April 1999. Mr Cruickshank, Wincanton's witness in these proceedings, became their European General Manager at Bicester on 5th July 1999. That appears to have come as something as a disappointment to Mr Cranny, who himself had harboured hopes of attaining that position.
7. Be that as it may (and I can take this matter very shortly) on 4th August 1999 Mr Cranny gave the required two months' notice of his intention to seek employment elsewhere. In the event it was agreed that he would take a fortnight's holiday to which he was entitled in late August and leave Wincanton's employment on 31st August. He duly did so and on 1st September began work for SDM. Mr Cruickshank says that he knew nothing of Mr Cranny's (or indeed Mr Pye's or Mr Hodgkins') association with SDM until mid October 1999 when he found that Wincanton were losing business and began to make investigation. Again taking it very shortly, Mr Cruickshank says that he discovered that Wincanton had lost work from six or seven customers, all of whom subsequently confirmed to him that they were approached by Mr Cranny and are now using Mr Cranny, and more particularly SDM, for their European haulage work.
8. Mr Cruickshank estimates that Wincanton's loss of operating profit for the period to 31st August 2000, the date when the relevant covenants expire, is between £150,000 and £225,000. Mr Cruickshank also suggests that from when it first began trading SDM was given preferential treatment, presumably by Mr Cranny, over other sub-contractors at Wincanton's expense, for example receiving some £12,000-£15,000 benefit by way of unjustifiable premium rates.
9. Let me now set out the covenants upon which Wincanton seek to rely. Only two are presently relevant, clauses 15(a)(i) and 16. At one time the claimants also sought to invoke clause 11 with regard to confidential information and indeed clause 15(a)(ii) and (iii). None of these, however, are persisted in today, and I need say no more about them:

"15. NON-COMPETITION

(a) you shall not for a period of 12 months after the termination of your employment hereunder, howsoever arising, without the consent in writing of Unigate PLC's Company Secretary:

(i) be directly or indirectly engaged concerned or interested in any capacity whether as Director, Principal, Agent, Partner, Consultant or otherwise in any business of whatever kind within the United Kingdom which is wholly or partly in competition with any business carried on by the Company or with any of Unigate's subsidiary or associated companies except as the holder of shares or debentures quoted or dealt in on a recognised stock exchange in the United Kingdom or elsewhere;

...

16. NON-SOLICITATION

(a) you shall not within the United Kingdom for a period of 12 months after termination of your employment hereunder, howsoever arising, directly or indirectly and whether on your own behalf or on behalf of any other business concern, person, partnership, firm, company or other body which is wholly or partly in competition with any business carried on by the Company or of Unigate's subsidiary or associated companies:

(i) Canvass solicit or approach or cause to be canvassed or solicited or approached for orders, in respect of any services provided or any goods dealt in by the Company or by any of Unigate's subsidiary or associated companies in respect of the provision or sale of which you were engaged during the last 12 months of your employment, any person or persons who at the date of the termination of your employment or within two years prior to such date is or was a client or customer of the Company or any of Unigate's subsidiary or associated companies or was in the habit of dealing with the Company or any of Unigate's subsidiary or associated companies and with whom you shall have dealt;

(ii) Deal with any person or persons who at the date of the termination of your employment or within two years prior to such date have been in the habit of dealing under contract with the Company or any of Unigate's subsidiary or associated companies and with whom you shall have dealt."

10. Wincanton made their application for interlocutory injunctive relief on 29th November 1999 and the matter came speedily before the deputy judge on 6th December. We are told that the application was moved from a different court to Mr Wolton's court, but that he had an opportunity to read the pages before the hearing began. That notwithstanding, I have to say that to my mind the judgment betrays a certain lack of appreciation of the material before the court.
11. In essence the judge began by considering clause 15 and this he struck out essentially on the basis that the prohibition against competing in any capacity "with any business carried on" by Wincanton was plainly too wide. As he rightly pointed out, Wincanton's business has a number of facets. It is apparently concerned not merely with distribution, but also for example with what is called logistics, and the use of the standard restraint clauses was obviously designed to extend their restrictive effect on ex-employees beyond the particular field of activity (in Mr Cranny's case the European Transport Operation) in which personally they had been engaged. The further objectionable words in clause 15 "or with any of Unigate's subsidiary or associated companies" the judge felt able to sever. So far so good. The judge however then proceeded to Clause 16 and, having quoted only the opening words, he said this:

"Again, I repeat that the words 'any business carried on by the company' extends to matters outside the scope of the transport business with which the contract of employment was originally concerned."

12. He then turned to Commercial Plastics Ltd v Vincent [1965] 1 QB 623 - the single authority with which the judgment deals, but one no longer suggested by either side to be of sufficient relevance even to appear in the bundle of authorities - and said this:

"It appears to me that that judgment indicates in precisely similar terms that in order to be reasonable a restrictive covenant within a contract of employment must not go beyond that which it seeks to protect. In this particular case we have the first defendant who, with the greatest respect to him, was employed in a fairly junior role to the operation of the business as a whole when employed by the claimant, and yet he is bound by a restrictive covenant, if it were to be upheld, which goes way beyond his responsibility and indeed the knowledge that he would have gained in that particular position."

13. He then turned to the "balance of advantage" (by which I think he must have meant the balance of convenience) and said that he had:
14. "... just been told there is a specific number of customers who have been taken away from Wincanton Limited, but I have no real evidence of any damage ..." - a comment which is a little difficult to reconcile with a thorough reading of the papers.
15. In the event, having expressed the view that both the covenants relied upon were too wide, he declined to grant restraining orders, although observing that obviously the matter could proceed to full trial.
16. For my part, I have reached the conclusion that the judge was correct in his approach to clause 15, but incorrect in his approach certainly to clause 16(i). It is difficult indeed to resist the inference that he failed to read far enough into clause 16 to recognise that it is, as Mr Duggan put it in his skeleton argument, intrinsically self-limiting.
17. First, however, as to clause 15. I need say no more than that on its face it plainly falls foul of all the well-known authorities in this field. Mr Duggan himself appears to recognise that it is necessary to read it down for it to become enforceable. He seeks to rely for the purpose upon the well-known trilogy of cases, GW Plowman v Ash [1964] 1 All ER 10, Littlewoods Organisation Ltd v Harris [1978] 1 All ER 1026 and Business Seating (Renovations) Ltd v Broad [1989] ICR 729.
18. In my judgment, however, the approach adopted in those cases cannot apply in a case like the present where, so far from there having been any attempt to formulate the covenant in a way which focuses upon the particular restraint necessary in respect of a particular employee, the clause is in a standard form plainly intended to apply to the widest possible range of situations. This court's judgment in JA Mont (UK) Ltd v Mills [1993] IRLR 172 is in my judgment fatal to the enforceability of a clause drawn as intentionally widely as clause 15(a) in the present case.
19. I take a different view however with regard to Clause 16(i). On careful reading it can be seen only to restraint canvassing, soliciting or approaching (which for convenience I shall call "soliciting") if each of the following four circumstances obtain, namely that the solicitation is (i) in respect of any services or goods provided by Wincanton; (ii) in respect of the provision or sale or which Mr Cranny was engaged in the last 12 months of his employment; (iii) of any person or persons who at the date of termination of his employment or for two years prior thereto was a client or customer of Wincanton or was in the habit of dealing with Wincanton; and (iv) with whom Mr Cranny had dealt.
20. In other words, put at its simplest, Mr Cranny was only forbidden to solicit (a) in respect of services he himself had been engaged in providing in his last 12 months with Wincanton and (b) persons with whom he himself had dealt in the course of their dealings with Wincanton during the previous two years. The fact that Mr Cranny had been employed by Wincanton for less than two years before he came to leave them is to my mind nothing to the point.
21. For my part, I see nothing objectionable about clause 16(i) once its internal limitations come to be recognised. Mr Choudhury has striven to maintain that it is too wide notwithstanding these considerations. In particular he points to what he describes as a mismatch between the periods of 12 months and two years, in each instance dating back from the date of termination of employment. To my mind, however, there is no mismatch here. There are different considerations in play in determining whether for these stipulated purposes the period prior to termination of employment should be one year or two.
22. As to clause 16(ii), the position seems to me somewhat less clear, since there are not quite so many self-limiting features of that provision. I think it unnecessary however for present purposes to arrive at any particular view about this. It can, if necessary, be dealt with at any subsequent trial of the action.
23. As indicated, however I conclude that the judge formed a wrong view as to the enforceability of clause 16(i) and would accordingly have been inclined to allow this appeal on that issue, subject always to the question as to where the balance of convenience lies. As at 6th December 1999 when the matter was before the deputy judge, and when nine months of the 12-month period of restraint remained outstanding, I might - I do not say I would, only that I might - have concluded that the balance of convenience lay in enjoining Mr Cranny not to solicit any other of his erstwhile Wincanton contacts during the remaining part of the term of restraint. Now, however, the matter is before the court when there are only three months left of this covenant to run and of one thing I am perfectly clear, which is that by now, at least, the balance of convenience fully fairly and squarely in the respondent's favour.
24. Mr Duggan tells us that when he filed the Notice of Appeal he wrote a letter asking for an expedited hearing. Perhaps to a degree this hearing has been expedited. But no other steps were taken to accelerate the listing and the fact remains that these covenants have now all but run their course. Even looking back to December last, it seems to me that much of the damage, at least with regard to solicitation, had already then been done. It is not as if this court, were it to grant interlocutory relief against further solicitation, would at the same time impose any restriction upon the respondent's continued dealing with those already by then successfully solicited. Authority for that, if it be needed, is to be found in the Vice-Chancellor's decision in Universal Thermosensors Ltd v Hibben [1992] 1 WLR 840, see particularly the passage at 854C.
25. Really, as it seems to me, the claimants in this case ought from the outset to have concentrated their efforts on securing a speedy trial, rather than embarked upon the barren road of seeking interlocutory injunctive relief. And certainly they should not have been given leave to appeal. This is a case where, according to Mr Cruickshank's evidence, it is possible for the claimants to quantify the loss allegedly resulting from the breach of these covenants. The right course was to allow the respondents to continue trading. If and when they come to be found liable in damages, they will be the better able to discharge their liability.
26. There can at this point be no possible question of granting injunctive relief, however clear this court may be as to the enforceability of any particular covenant. I would accordingly dismiss the appeal.
27. LORD JUSTICE SEDLEY: I agree that this appeal cannot now succeed. Three-quarters of the permitted period of restraint has now gone by and the only practical recourse for the claimant is to pursue its claim for damages. It is up to an employer who contends that an ex-employee is behaving in breach of restrictive employment covenants not only to move swiftly to restrain the breach but, if unsuccessful at first instance, to ensure that any appeal is brought on fast; or else, in most cases, to abandon it in favour of a final trial.
28. In all appropriate cases, application can be made to this court for expedition. But in this case, beyond counsel's initial letter asking the Civil Appeals Office to expedite the appeal, none was made here. Clocks may be able to be turned back and films rewound, but genies cannot be put back in their bottles.
29. This in my view is enough to conclude the present appeal against the appellant. In so far as it might have been necessary to form a view of the efficacy of the covenants relied on by the appellant, I would have shared my Lord's view of them. These are clauses drafted with the comprehensive particularity of a conveyancer, and one of the morals of the many decided cases in this field of law is that those who live by this mode of drafting may find, when it comes to litigation, that they perish by it. Unlike leasehold covenants, restrictive employment covenants need particularity in those parts which limit their scope rather than in those which expand it. I agree with my Lord's view of how well this has been achieved here.
ORDER: Appeal dismissed; the appellants to pay half the respondents of the appeal. The costs order below to remain undisturbed. (Order not part of approved judgment)