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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> Ryanair DAC v Bellew [2019] IEHC 907 (23 December 2019)
URL: http://www.bailii.org/ie/cases/IEHC/2019/2019IEHC907.html
Cite as: [2019] IEHC 907
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THE HIGH COURT
[2019] IEHC 907
[2019 No. 6239 P]
BETWEEN
RYANAIR DAC
PLAINTIFF
AND
PETER BELLEW
DEFENDANT
JUDGMENT of Mr. Justice Allen delivered on the 23rd day of December, 2019
Introduction
1. This is an action to compel compliance by the defendant with a covenant that he would
not for a period of twelve months following the termination of his employment with the
plaintiff go to work for a competitor.
2. The defendant admits that he freely signed the covenant and that at the time he signed it
he understood its meaning and purpose but makes the case that he is not bound by it.
3. The action is defended on a number of grounds. There is some overlap in the grounds of
defence and there was some inconsistency in the case sought to be made on behalf of the
defendant at the trial, but in broad terms the defence is (1) that the covenant was not
binding, (2) that the covenant is void and unenforceable because the restraint is
excessive, and (3) that the circumstances in which the defendant’s employment came to
be terminated are such that even if the covenant is binding and enforceable, the court in
the exercise of its discretion ought not to enforce it.
4. The defendant has signed a contract to commence working for another airline on 1st
January, 2020. The action was commenced on 6th August, 2019 and was tried over
eight days in the first two weeks of December, 2019. It was hard fought on both sides.
The outcome is important for the parties and, if it was possible, the parties needed to
know before Christmas what that was. If I had had more time for consideration, I might
have been able to refine and polish my analysis and reasoning, but I am satisfied that I
have had sufficient time to weigh the evidence and arguments and to make my decision.
Overview
5. In October, 2017 Mr. Peter Bellew was recruited as chief operations officer (“COO”) of
Ryanair Limited, as it then was. He had previously worked for the company from 2006 to
2015, most recently in pilot rostering, recruitment and training.
6. In the autumn of 2017, owing in part to a change in the regulations in relation to pilots’
leave and in part to competition for pilots from other airlines, Ryanair found itself dealing
with a pilot rostering crisis. Besides, there was increasing pressure on the company to
recognise the pilots’ unions - something which it had steadfastly refused to do since the
time of its establishment in about 1985.
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7. One day in mid-September Mr. Michael O’Leary, Ryanair’s chief executive officer,
happened upon Mr. Bellew in the Ryanair canteen. In the time of his previous
employment with Ryanair, Mr. Bellew had been responsible for pilot training and
recruitment, reporting to then COO, Mr. Michael Hickey. Mr. O’Leary suggested that Mr.
Bellew might return to Ryanair in his previous role but Mr. Bellew was not interested. He
had left Ryanair in 2015 to take up the position of COO with Malaysia Airlines, were he
had later been promoted to chief executive officer. Soon after the initial approach, Mr.
Hickey left Ryanair. His departure left open the role of COO and Mr. O’Leary offered that
role to Mr. Bellew. The position of COO was one of the most senior executive roles in
Ryanair, one of about eight roles designated as “Z”. The responsibilities of the COO
included pilot rostering, training and recruitment but extended to the maintenance and
development of Ryanair’s base structure, engineering and safety, and ground operations
and customer handling.
8. On or shortly before 4th October, 2017 Mr. O’Leary and Mr. Bellew agreed outline terms
which were confirmed in an e-mail of that date sent by Mr. O’Leary’s personal assistant to
a private e-mail address which Mr. Bellew had provided. The outline terms included a job
description and set out that Mr. Bellew would have a basic salary of €550,000 per annum,
a bonus of a maximum of €500,000, a pension contribution, various other benefits, and
share options.
9. For many years prior to 2017 Ryanair had offered share options to senior executives. In
2013 Ryanair plc had adopted a share option scheme called the Ryanair plc Share Option
Plan 2013 under which senior executives were offered share options from time to time in
grants approved by the remuneration committee. The Ryanair plc Share Option Plan
2013 was not put into evidence but broadly the scheme was that the executives would be
offered the option, at future specified dates, to purchase shares in the Ryanair plc at the
price at which they stood at the date of the grant, called the strike price. The scheme
was devised to incentivise and retain senior staff. The allotted number of options would
vest in tranches over five years, subject to the company achieving specified profit after
tax targets and would become exercisable at the end of the five years, subject to the
employee remaining in employment.
10. In 2014 during his previous employment with Ryanair, Mr. Bellew had been granted
250,000 share options over a five-year period. The first tranche of 50,000 of these had
vested before he left in 2015 but had lapsed when he left.
11. By the autumn of 2017 the shares in Ryanair were trading at a substantially higher price
than the 2014 strike price and Mr. O’Leary proposed that if Mr. Bellew would return to
Ryanair he would be put in the position he would have been if he had never left. Neither
Mr. O’Leary nor Mr. Bellew knew the precise details of the Ryanair plc Share Option Plan
and so the means by which what was to be done were not then tied down, but the
commercial agreement was that all of Mr. Bellew’s 2014 options would be restored. If
that was not possible under the rules of the scheme, Mr. Bellew would have the money
equivalent of the difference between the strike price and the market price when he had
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made up the balance of the five years’ service required for the options to become
exercisable, which had been interrupted by his time with Malaysia Airlines.
12. The outline terms specified that Mr. Bellew’s contract would be subject to “6 months’
notice with 12 months non-compete post termination”.
13. In and after 2015 Ryanair had made the grant of share options conditional on the
agreement of the executive not to compete with the company for twelve months after the
termination of his or her employment and the agreement between Mr. O’Leary and Mr.
Bellew was that any future grant of share options to Mr. Bellew would be subject to such
a condition. However, the 2014 grant had not been subject to such a condition and the
agreement for the restoration of the balance of 2014 options was not subject to that
condition.
14. The e-mail of 4th October, 2017 was followed up by an e-mail of 5th October, 2017 to
which was attached proposed terms and conditions of employment and, separately, a
form of “amendment to employment contract” which set out post termination restrictions.
On 10th October, 2017 Mr. Bellew was sent a “cleaned up final version” of the proposed
terms and conditions of employment and a letter confirming what had been agreed in
relation to the 2014 share options. The terms and conditions of employment (but not the
addendum) were signed on the following day.
15. It had been agreed that Mr. Bellew would take up his employment as COO on 1st
December, 2017, and so he did. On the same day, Mr. Bellew was given a letter formally
confirming the means by which what had been agreed in relation to his 2014 share
options would be implemented and a letter of offer of 2017 share options.
16. The simple restoration of Mr. Bellew’s share options would have required that he remain
in employment with Ryanair until 2019, after which they would have become exercisable,
but if he had left before then they would have lapsed. The implementation of the
commercial agreement made in October was done by a mix of restored share options and
cash. By the remuneration committee deeming Mr. Bellew to have been a “good leaver”
and to be a “good returner”, his share options for 2014, 2018 and 2019 could be
restored. The 100,000 share options that he would have qualified for in 2016 and 2017
could not be restored because he had not been in service. To bridge this gap he was
promised a cash bonus calculated by reference to the mark-to-market value of that
number of shares as at 30th November, 2017. The difference between the strike price of
€6.25 and the then market price of €17.55 was €11.30. Mr. Bellew was promised a cash
bonus of €1,130,000, payable in June, 2019.
17. I pause to observe that in the course of the hearing Mr. Bellew complained that his
entitlements had not been resolved until after he had returned to work. While the
mechanics had not been worked out until then, there was never any doubt or issue as to
his entitlement or Ryanair’s commitment to deliver what had been promised.
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18. The letter of offer of 2017 share options was an offer of 100,000 options at the strike
price of €17.55, and Mr. Bellew took this up.
19. On 23rd March, 2018 Mr. Bellew had his first performance review with Mr. O’Leary, which
was positive. Mr. Bellew was awarded 90% of his maximum bonus, pro-rated for the
four months of his service. He was also told that the remuneration committee had
“awarded” him a total of 500,000 share options at a strike price of €14.40, subject to the
terms and conditions which would be confirmed in writing to him in April.
20. By letter dated 27th April, 2018, signed by the company secretary, Mr. Bellew was invited
by the board of directors of Ryanair plc to participate in an offer of share options for
2018. What was offered to Mr. Bellew was the option to subscribe for up to 500,000
ordinary shares in the company at €14.40 per share, subject to the conditions set out in
the Ryanair plc Share Option Plan 2013. The options would vest in equal tranches over
five years, subject to the achievement of specified profit after tax targets for the company
in each year. If in any year the target was met, the options not only for that year but for
any previous year in which the target might not have been reached would vest. In other
words, there was provision for the vesting to catch up. In the further alternative, it was
provided that the options would vest in their entirety if on 1st April, 2023 the market
price for the company’s shares equalled or exceeded a specified price. As had been the
case with the 2014 round, the options whether vested or not would lapse should Mr.
Bellew cease to be employed within five years – that is before 31st March, 2023.
21. The letter of 27th April, 2018 set out that the consideration for the grant of the options –
if Mr. Bellew wished to accept it – was €0.10 and a non-compete clause “… under which
you may not work for any airline that competes with Ryanair, in any market, for a
minimum of twelve months after the date of your departure from Ryanair”. Attached to
the letter of offer was a form of acceptance addressed to the company secretary which
added “I understand that Ryanair’s Human Resources Department will provide me with
the appropriate documentation for execution”. Mr. Bellew signed and returned the form
of acceptance on 11th May, 2018.
22. On 15th June, 2018 Mr. Bellew was provided with a form of “amendment to employment
contract” which was in the same terms as the draft which had been attached to the e-mail
of 5th October, 2017 and which he signed and returned on 20th June, 2018. This
document provided:-
“AMENDMENT TO EMPLOYMENT CONTRACT
I, Peter Bellew, hereby confirm my understanding and acceptance of the following
amendments to my contract of employment. The consideration for these
amendments is my agreed participation in the Ryanair share option scheme in
accordance with [the company’s secretary’s] letter of 27th April, 2018.
1. POST TERMINATION RESTRICTIONS
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1.1 For a period of 12 months after the termination of your employment you shall
not, without the prior written consent of the Company, directly or indirectly in
any capacity either on your own behalf or in conjunction with or on behalf of
any other Person;
a. be employed, engaged, concerned or interested in any capacity in any
business wholly or partly in competition with the Company for air
passenger services in any market;
b. solicit or entice or endeavour to solicit or entice away from the
Company any person who was employed within in (sic.) a senior
executive, managerial, or technical capacity by the Company.
1.2 If you receive an offer of employment or engagement during your
employment with the Company, or before the expiry of the restriction period
set out in this clause, you shall give the person or entity making the offer a
copy of this clause.
1.3 You hereby acknowledge and agree that the provisions of this clause are
separate and severable and that the restrictions therein contained are fair
and reasonable in all the circumstances. In the event, however, that any of
the restrictions contained in this clause are adjudged by a court of competent
jurisdiction to go beyond what is reasonable, in all the circumstances, for the
protection of the legitimate interests of the Company and/or any associated
company but would be adjudged reasonable if any particular restriction or
restrictions, or part thereof, were deleted in any manner, then the
restrictions in question shall apply with such deletions as may be decided by
a court of competent jurisdiction without affecting the remaining provisions
thereof.
1.4 No variation of this agreement shall be valid unless it is in writing and signed
by both you and the Chief Executive Officer.
1.5 This Agreement shall be governed by and construed in accordance with the
law of Ireland and the courts of Ireland shall have exclusive jurisdiction to
deal with all disputes arising from or touching upon this Agreement.
1.6 This Agreement contains the whole agreement between the parties hereto
relating to the matters provided for in this Agreement and supersedes all
previous agreements (if any) between such parties in respect of such matters
and each of the parties to this Agreement acknowledges that in agreeing to
enter into this Agreement it has not relied on any representations or
warranties except for those contained in this agreement.
I, Peter Bellew, confirm my understanding and acceptance of the above conditions
in full. I acknowledge that my contract of employment is now amended to include
the above terms and that all other terms and conditions of my employment remain
unchanged.”
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23. It was common case 2018 was a very difficult year for Ryanair. This had two
consequences of relevance to the dispute now before the court. Firstly, there was more
than usual pressure on the executives, including, if not in particular, Mr. Bellew, to
manage a variety of significant problems. I will deal later as briefly as I can with the
impact of those difficulties on Mr. Bellew’s position. Secondly, there was a sharp drop in
the share price which meant that there was a lot of catching up to do before the share
options which had been awarded on 27th April, 2018 would be valuable again. The
commercial object of the share option scheme was to retain staff and for so long as the
market price might remain below the strike price, the 2018 options were less attractive.
Moreover, there was a significant decline in profits in 2018, which made the profit targets
set earlier that year for the following five years (which by design had been ambitious) at
least very difficult to achieve.
24. The management structure in Ryanair DAC, the operating company, is hierarchical. At
the pinnacle is the chief executive officer. The next most senior executives, each of
whom have responsibility for particular broad areas of operation, are called “Z’s”. In
2018 the incumbent CEO took a close interest in all aspects of the business. He asked
those who immediately reported to him to submit a short written report each Friday.
Those reports were circulated on the Friday to all the other Z’s. Early every Monday
morning there was a meeting of the senior managers, which the witnesses called the Z
meeting. The weekly reports, and the CEO’s observations on them, were discussed at
the Monday meetings. The report of each of the Z’s was returned to him or her: marked
with the CEO’s comments in manuscript. At the conclusion of the Z meeting, each of the
Z’s met with those who immediately reported to him or her to update their teams as to
the performance of the company over the previous week and the objectives for the
future.
25. The chairman of the Monday morning Z meetings – although he was not formally so
described – was the CEO. His management style was robust. He was inclined, from time
to time, to use language which - to borrow a dictum from Moriarty J. some years ago -
would not be heard at a vicarage tea party. Similarly, the manuscript comments marked
up on the weekly reports tended very much more to clarity than to politeness. While
there was, as I shall come to, a good deal said as to the CEO’s engagement with the
defendant, it was not suggested that the defendant was in general treated any differently
to any of the other Z’s.
26. At the Z meeting on Monday 5th November, 2018 Mr. O’Leary was particularly critical of
Mr. Bellew’s written report of the previous Friday and of his performance on a number of
issues over the previous weeks. On the same day Mr. O’Leary took the unusual step of
sending Mr. Bellew a written memorandum setting out those criticisms and asserting that
his performance was in a number of respects unacceptable. The memo identified a
number of areas in which improvement was said to be required. I will need to return to
the detail on the criticisms then made of Mr. Bellew but it is sufficient for the moment to
recall generally what happened, and when.
Page 7 ⇓
27. On 22nd March, 2019 Mr. Bellew had his second formal performance review. There was
a meeting between Mr. O’Leary and Mr. Bellew followed by a written memorandum. The
memo noted that the past year had been one of the most challenging in Ryanair’s history,
and listed a number of difficulties and successes. It suggested that Mr. Bellew’s
performance as COO had been disappointing and listed a number of areas in which he had
been successful and a number of areas in which, it was said, work needed to be done.
28. The annual review was the time at which employees’ bonuses were to be awarded.
Under his terms and conditions of employment, Mr. Bellew was entitled to a maximum
bonus of €500,000. The award of half of the bonus was measured by reference to the
profit after tax earned by the company and the other half by reference to his individual
performance. Mr. Bellew was awarded €163,000 based on profit after tax and €200,000
(80% of the maximum under this criterion) based on his personal performance. Mr.
Bellew was given a non-exhaustive list of eight objectives for the following year. He was
told that given the profit decline that year, there would be no change in his salary or
bonus for the following year.
29. Much of the dispute was said to have originated in the last paragraph of the
memorandum of 22nd March, 2019 and I will set it out in full:-
“In light of your performance this year, I expect to see a dramatically improved and
sustained output from you each week over the next 12 months. We will continue
to honour your existing share option/bonus agreement, which falls due for payment
in June 2019. However, if you do not deliver a significantly improved performance
on cost and efficiency within the operations function over the next 6 months, then
at that date, we will have to consider your continuing suitability for the position of
COO after March 2020. I am not at this time awarding you any replacement share
options under the 2019 share options scheme, but would encourage you to
significantly improve your performance, and if you deliver significant cost and
efficiency objectives over the next 12 months, then I may be willing to recommend
to the RemCo that you be included in the 2019 share option scheme to replace your
2018 share options. This is a challenge and incentive to you, and I look forward
to working closely with you over the next 12 months to help you achieve this (sic.)
objectives.”
30. On 20th June, 2019 Mr. Bellew was paid the deferred cash bonus of €1,130,000 which
had been identified in Ryanair’s letter of 1st December, 2017 as the best way of
implementing part of what he had been promised on 4th October, 2017. At the same
time, the last tranche of the restored share options vested and became exercisable. At
the time of the trial Mr. Bellew had not exercised those options but the mark-to-market
value of them was said to be €1.2 million, or thereabouts.
31. On 8th July, 2019 Mr. Bellew handed Mr. O’Leary a short letter of resignation as COO with
effect from 8th January, 2020. There was a brief conversation, to which I will return.
That afternoon Mr. O’Leary wrote to Mr. Bellew accepting his resignation, with regret;
thanking him for all his hard work over the previous 18 months in what had been a
Page 8 ⇓
difficult period for the airline; acknowledging his substantial and significant contribution to
the management of, and recovery from, a number of challenges; looking forward to
working with him over the coming six months, not least in identifying a suitable
successor; and extending best wishes to him and his family. Mr. O’Leary suggested that
for mutual convenience they might agree a finish date of 31st December, 2019.
32. On 11th July, 2019 Mr. O’Leary circulated a complimentary and friendly announcement of
Mr. Bellew’s resignation to the management team.
33. At about twenty past four on the afternoon of 17th July, 2019 Mr. O’Leary had a
telephone call from Mr. Bellew, who was working in Vienna. Mr. Bellew told Mr. O’Leary
that he had a new job. Having congratulated Mr. Bellew, Mr. O’Leary asked where the
new job was, to which the answer was easyJet. Mr. O’Leary was not happy. He
reminded Mr. Bellew of the twelve months non-compete period to which he had agreed,
and of the €1,130,000 which he had been paid in the previous month, to which Mr. Bellew
responded by saying that his share options were under water. Mr. O’Leary asked Mr.
Bellew to consider his position carefully and warned him that if he continued on the
course he was on Ryanair would have to consider an injunction.
34. On the following morning, 18th July, easyJet published its quarterly results. At the same
time easyJet made an announcement that Mr. Bellew would be joining it as COO on 1st
January, 2020.
35. There were a number of meetings and an exchange of correspondence over the following
days and weeks, on the detail of which it is not useful to dwell.
The proceedings
36. By plenary summons issued on 6th August, 2019 the plaintiff commenced these
proceedings claiming:-
1. An order for specific performance of the defendant’s contract of employment, as
amended, with the plaintiff and in particular the post termination restrictions
therein as set out in the amendment to employment contract dated 15 June 2018.
2. An injunction, if necessary an interlocutory injunction, prohibiting the defendant
from acting contrary to the post termination restrictions set out in the amendment
to employment contract dated 15 June 2018 and, in particular, prohibiting the
defendant from commencing employment with easyJet for a period of 12 months
post termination of his employment with the plaintiff.”
37. The statement of claim pleads the employment of the defendant from 1st December,
2017; the amendment to his employment contract dated 15th June, 2018; his resignation
on 8th July, 2019; and the threat and apprehension that the defendant, unless enjoined,
would commence employment with easyJet. It alleges that the defendant as a senior
executive is privy to confidential material and sensitive commercial and operational
information in relation to the past and future business of the plaintiff and that the plaintiff
Page 9 ⇓
will be exposed to irremediable and unquantifiable loss and damage should the defendant
commence employment with easyJet. The statement of claim complains, besides, that
the defendant failed to inform easyJet of his post termination restrictions or, as he was
expressly required to do, to provide easyJet with a copy of those restrictions.
38. The defence admits that the defendant executed the addendum to his contract of
employment dated 15th June, 2018 but pleads that the consideration for it has wholly
failed as inter alia the conditions precedent for the offer of share options and the exercise
of the options as set out in the letter of 27th April, 2018 were not met and/or the plaintiff
withdrew the said share options offer as comprised in the said letter and/or allowed same
to lapse.
39. The defence does not deny that the defendant is privy to confidential and sensitive
commercial and operational information. Rather, it pleads that the defendant is fully
aware of his obligations of confidentiality during and after his employment and intends to
honour those obligations, and that there is no evidence that the plaintiff has breached, or
will breach, those obligations. It pleads that the restraint which the plaintiff seeks to
impose on the defendant is wholly unnecessary, unreasonable and unwarranted for the
purpose of ensuring the plaintiff’s obligations of confidentiality or for the protection of the
plaintiff’s legitimate interests.
40. Further and alternatively, the defendant pleads that the conduct of the plaintiff, and in
particular its chief executive officer, was such that it disclosed a wish that the defendant
should resign and that the plaintiff so unreasonably treated the defendant vis-à-vis his
share options in an entirely different manner to all of the other executives that it was
entirely appropriate that he should have resigned; and that in circumstances in which his
resignation had been caused in whole or in part by the plaintiff it would be unjust and
inequitable to impose on the defendant an entirely unreasonable restraint of trade.
There is some ambiguity in this last plea and it was clarified by counsel in the course of
the trial. The defendant’s case was not that the plaintiff was guilty of a repudiatory
breach of contract such as entitled him to treat the contract in its entirety as discharged,
but rather that the plaintiff’s conduct was such as should engage the discretion of the
court to refuse equitable relief to which the plaintiff otherwise might have been found to
be entitled. In other words, even if the defendant’s covenant was supported by
consideration (which it was said it was not), and even if it was not an unreasonable
restraint of trade (which it was said it was), nevertheless the defendant was so badly
treated by the plaintiff that there ought not to be an injunction.
The defendant’s case in relation to share options
41. The case pleaded by the defendant in relation to his share options is clear enough. The
offer of 27th April, 2018 was said to have been subject to conditions precedent which had
not been fulfilled and/or that offer had been withdrawn and/or had lapsed and/or that the
2018 grant had been replaced in its entirety by the 2019 grant, which had not been
extended to the defendant.
Page 10 ⇓
42. In the course of the trial the defendant sought to make not only the case pleaded but
another case, which not only had not been pleaded (and was not the subject of any
application for leave to amend) but was inconsistent with the pleaded case. The pleaded
case was that the defendant was not bound by his promise not to compete because he
had gotten nothing for it. The alternative case he sought to make was that he was,
after all, entitled to the 2019 share options which Mr. O’Leary had said at his performance
review on 22nd March, 2019 he was not to have.
43. The defence, as I have said, complained that Mr. Bellew, uniquely, had not been awarded
share options in a round which had been extended to all the other executives, but the
complaint was that this was unfair and unreasonable, rather than that anyone had
withheld share options to which he was entitled, or failed to tell him of an entitlement
which he had. What was suggested in the course of the evidence was that from the
documents which had been discovered by Ryanair, Mr. Bellew came to know that he had
been granted share options by the remuneration committee, but that Mr. O’Leary had
concealed that grant from him.
44. Precisely where this alternative proposition might go was not made clear. Absent an
application to amend the defence to add a counterclaim, there could be no question of a
declaration as to Mr. Bellew’s entitlement to share options. There was no indication as to
how the proposition that Mr. Bellew was entitled to the 2019 share options fitted in with
his argument that there had been a total failure of consideration for the non-compete
covenant. In any event, if the 2019 share options had been, as they had been, and as
Mr. Bellew at all times knew they had been, granted on terms that the executive should
remain in employment for five years from the date of grant, any options which might then
have been granted would automatically lapse on the cessation of Mr. Bellew’s
employment.
45. While Mr. Bellew sought to make the case that Mr. O’Leary had withheld share options to
which he was entitled, he did not say that if he had been granted those share options (or
that if he had known that he had been granted those share options) he would not have
resigned. Part of Mr. Bellew’s case was that by reason of Mr. O’Leary’s conduct towards
him it was “entirely appropriate” that he should have resigned. But logically, anything
done or not done of which he was unaware before he decided to resign could not have
contributed to his decision to resign.
46. Before dealing with the several alternative issues in relation to share options it in
necessary to look at the discovered documents now relied on by Mr. Bellew - all of which
were put to and acknowledged by Mr. O’Leary in evidence.
47. On 8th February, 2019 Mr. O’Leary sought approval from the remuneration committee for
another round of share options at the strike price of the trading price on that day of
€11.40, subject to new profit targets for the following five years and a new five year
target share price. The document submitted to the remuneration committee set out a
list of the names of the executives qualified to participate in the scheme, the allocation of
shares under the 2018 round, and the proposed allocation under the proposed 2019
Page 11 ⇓
round. Mr. Bellew’s name was on the list with a previous allocation of 500,000 options at
€14.40 and a proposed allocation of 500,000, without a price. On 15th February, 2019
Mr. O’Leary sought approval for a slightly revised list at the slightly revised price of
€11.12. Attached to the proposal was a list of “Feb 2019 share option grants to replace
2018 share options”, on which Mr. Bellew was shown to have a 2018 allocation of
500,000 at €14.40 and a 2019 allocation of 500,000 at €11.12.
48. Mr. O’Leary’s memo of 15th February, 2019 asked that a letter be prepared to go to each
of the individuals on the list advising them that in order to qualify for the 2019 round they
would need to surrender their 2018 share options and serve one more year. Those who
were not willing to do that had the right to decline the 2019 offer and stay on their 2018
share options.
49. Such a letter had already been prepared. It followed broadly the form of the 2018 letters
of grant but spelled out:-
“Surrender of 2018 Options
By signing the attached Form of Acceptance, you agree to surrender the 2018
Options. The 2018 Options (none of which have vested) will be cancelled, will
never vest and you will have no rights to exercise them in any circumstances. If
you prefer to keep the options granted to you under the 2018 Options Grant, please
do not sign the attached Form of Acceptance. However, this will mean that you
will not receive (or have any entitlement in respect of) and will not be able to
exercise the Options under the 2019 Grant as communicated in this letter.”
50. At some time shortly before 1st March, 2019 the chief financial officer sent to Mr.
O’Leary, under cover of a note of that date, a batch of offer letters for signature by him
and distribution to the Z’s. It was said that the remaining option letters were going to
the company secretary for signature by him and would be sent to the Z’s for distribution
by them to their teams. In due course Mr. Bellew had to swallow his disappointment at
not having been made an offer and to distribute the letters to those of his team as had
been.
51. Included in the plaintiff’s discovery, attached to the copy memo of 1st March, 2019, was a
form of letter dated 8th February, 2019 addressed to Mr. Bellew which would have offered
him 500,000 share options at €11.12 in exchange for his 2018 options. That letter, in
common with all of the other letters to all of the other staff who got them, spelled out
that the 2019 options were offered in substitution for the 2018 options. In evidence Mr.
Bellew confirmed that he was aware at the time of the terms of the 2019 offers.
52. All of the share options in this case were granted under the terms of the Ryanair Holdings
plc Share Option Plan 2013. Unsurprisingly, having regard to the case pleaded, that plan
was not discovered, and it was referred to in evidence only in passing. Mr. Bellew’s case
that Mr. O’Leary had withheld from him share options which had been granted to him by
the remuneration committee was not made by reference to the terms of the plan, but to
Page 12 ⇓
the memoranda sent by Mr. O’Leary to the remuneration committee and the form of letter
on the file which was never signed and was never sent to Mr. Bellew. Two memoranda
of 15th February, 2019 referred variously to an “attached list of the revised allocations as
approved by the Rem Co” and “the final allocations”. The draft letter dated 8th
February, 2019, if signed and sent, would have conveyed an offer by the remuneration
committee of share options pursuant to the terms and conditions of the Ryanair Holdings
plc Share Option Plan 2013. There were a number of references in the memoranda sent
by Mr. O’Leary to the remuneration committee and in the letter of 8th February, 2019 to
a “grant” but nothing that I can see to justify Mr. Bellew’s position that he had been
granted the share options by the remuneration committee. In my view, any case that
the share options had been granted could not sensibly have been made without reference
to the terms of the Share Option Plan, which presumably sets out the respective roles of
the remuneration committee, the board and the chief executive. By reference to the
plain terms of the letter of 8th February, 2019, the height of what Mr. Bellew might have
had was the option to swap his 2018 options for the 2019 options and not, as he
contended, a grant of the 2019 options. Mr. Bellew was mistaken in his impression that
he was the only executive who was not given the opportunity to participate in the 2019
round of share options. Incidentally, the disclosure included a memorandum of 10th
April, 2018 from Mr. O’Leary to Mr. Bellew setting out a “revised allocation to the people
in your area based on your feedback to my original proposals”, which conveys executive
involvement on the part of Mr. Bellew in the final award to his team of the share options
in the 2018 round, the allocation of which had previously been approved by the
remuneration committee.
53. Mr. Bellew’s first line of defence is that he is not bound by the post termination restraint
which he signed because, as he repeatedly asserted in the course of his evidence, the
2018 grant is “obsolete and worthless”. He pointed out that by contrast with the grants
in 2014, 2017 and 2019 there was no reference in the Ryanair annual reports to the 2018
grants. The absence of any such reference showed, said Mr. Bellew, that the 2018 grant
to him was obsolete and worthless and had ceased to exist. When it was pointed out to
him that there was no reference in the annual reports to the 2018 grant, Mr. O’Leary
recalled that the auditors had taken the view that they were immaterial.
54. Mr. Rogers submits that there was a total failure of consideration for Mr. Bellew’s
covenant. The time at which that is to be assessed is the time at which the covenant
was given: that is the date on which the offer of share options was accepted. The profit
and share price targets for the 2018 grant were fixed in early 2018 and were ambitious.
The paperwork generated by Ryanair at the time was very clear. The performance
targets and the terms upon which the share options would vest and become exercisable,
and would lapse, were spelled out. Mr. Bellew acknowledged in evidence that he was in
no doubt as to what was asked of him in return. In the event 2018 turned out to be a
particularly difficult year. By early 2019 the 2018 share options were decidedly
unattractive, but I am quite satisfied that at the date of the grant they were thought – on
both sides - to be valuable.
Page 13 ⇓
55. The proposition that the 2018 share options lapsed is irreconcilable with the terms of the
2018 grant and with the terms of the 2019 grant. I accept that the prospects that the
profit and share price targets by reference to which the 2018 options might vest rapidly
receded over the course of 2018. I accept that all appearances now are that the profit
targets set in early 2018 for the financial years ending 31st March, 2020 to 2023 and the
target share price for 1st April, 2023 will not be achieved: but I am not prepared to say
that it is impossible. Even if it was, it would not, in law, mean that the consideration for
Mr. Bellew’s covenant had wholly failed.
56. The profit and share price targets are not conditions precedent to the effectiveness of the
agreement recorded in the letter of 27th April, 2018. They are agreed conditions for the
vesting of the options.
57. The options granted by the letter of 27th April, 2018 have not lapsed. Neither have they
been withdrawn. Neither have Mr. Bellew’s 2018 options been replaced by the grants
made to the majority of the Ryanair executives in 2019. Neither have the 2018 options
of any of the other executives who did not agree to surrender them been replaced by the
2019 grants.
58. Mr. Bellew’s 2018 options will lapse on 31st December, 2019 by reason of Mr. Bellew’s
leaving Ryanair’s employment before 31st March, 2023.
59. The absence of any reference to the 2018 grant in Ryanair’s annual reports is nihil ad
rem. The proposition that Mr. Bellew’s rights might have been abrogated by a failure to
refer to them in the reports is unstateable. By the way, Mr. Bellew’s opinion as to the
value of his options appears to match the opinion of the auditors that they were not
material.
60. Mr. Bellew’s first line of defence fails.
The circumstances leading to the defendant’s resignation
61. Logically, perhaps, I should address the legal issue as to the enforceability of the restraint
before dealing with the evidence and argument directed to the exercise by the court of its
discretion, but so much of the trial was occupied with the hotly contested issues of the
engagement between Mr. Bellew and Mr. O’Leary that I propose to deal with those issues
first.
62. It is common case that in the autumn of 2017 Mr. O’Leary went to some trouble to recruit
Mr. Bellew as COO. It is common case that the role was very well paid. It is common
case that the role was demanding. It is common case that Mr. O’Leary accepted Mr.
Bellew’s resignation with regret. It is common case that the reasons given by Mr. Bellew
for his resignation were that he could not cope with the pressure of his work, was
stressed and having difficulty sleeping, and that his family life was being affected.
63. Mr. O’Leary’s immediate reaction to the news that Mr. Bellew had lined up a job with
easyJet as COO which he proposed to take up immediately on the termination of his
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employment with Ryanair was predictable, if not inevitable. He did not take it well. I am
uncertain whether before he resigned, Mr. Bellew foresaw that Ryanair would bring him to
court but, as I will come to, he correctly saw it as a distinct possibility.
64. The chronology is of some significance. If, as Mr. Bellew said on 8th July, 2019, he was
having difficulty managing his work, Mr O’Leary was content to let him go. Mr. O’Leary
gave evidence that he was surprised by Mr. Bellew’s resignation and asked him to sit
down. Mr. O’Leary asked Mr. Bellew why he wanted to resign. He said that things were
improving and that Mr. Bellew could still qualify for the 2019 share options. Mr. O’Leary
reminded Mr. Bellew that he had just paid him €1.13 million. Mr. O’Leary said that he
wanted to think about it but that if Mr. Bellew really felt that he was under that much
stress and pressure and could not cope with it, he would accept his resignation, but with
regret. None of this was challenged. Mr. Bellew agreed that he had told Mr. O’Leary
that he was resigning because he could not cope with the pressure. The only difference
in the evidence was whether Mr. Bellew had said that he wanted to travel. Nothing turns
on that.
65. By the time Mr. Bellew told Mr. O’Leary that he intended to go immediately to easyJet he
was committed to easyJet and the announcement by easyJet was imminent. Mr. Bellew
had left it so late that Mr. O’Leary had no opportunity to try to manage the situation.
66. The defence, delivered on 23rd August, 2019, pleaded that the chief executive officer of
the plaintiff sought to compel or encourage the defendant to resign by (a) unreasonably
treating him in an entirely different manner vis-à-vis share options to all the other
executives, and (b) acting in a wholly unreasonable manner towards him. In reply to a
request for particulars of the conduct of the plaintiff and its CEO relied upon, Mr. Bellew
revived the memorandum of 5th November, 2018, to which I have earlier referred. That
memorandum was said to have followed a telephone call in which Mr. O’Leary raised an
issue in relation to Mr. Bellew’s attendance at a dinner and event in the European
Parliament. In the course of that call, Mr. O’Leary was said to have been screaming
obscenities at Mr. Bellew. Between the time of the memorandum and May, 2019 Mr.
O’Leary was said to have criticised Mr. Bellew at the weekly management meetings,
notwithstanding that Mr. Bellew had completed all of his required tasks. The criticism was
said to have ended on the week after Mr. Bellew’s annual review when he had been put
on “six months performance notice”. It was said that Mr. Bellew could clearly see from
the behaviour, the weekly criticism, and finally the “removal” of the share option scheme
and annual review with a six-month performance review that the plaintiff and the CEO
wanted him to resign.
67. The statement of claim was in the main forensic, but it did allege that Mr. Bellew’s
engagement with easyJet during the currency of his employment with Ryanair was
duplicitous and surreptitious. The claim of unreasonable treatment arose from the
defence, but on the run of the case it fell to the plaintiff to lead whatever evidence it had
which it was thought would show that Mr. Bellew had not been treated unreasonably. In
the way of things, I suppose, the evidence on both sides was as much directed to trying
Page 15 ⇓
to persuade the court of the rights and wrongs of a series of business engagements and
disagreements, rather than the reasonableness of the way in which Mr. Bellew was
treated.
68. Mr. O’Leary in evidence acknowledged that Mr. Bellew’s performance in some areas had
been good but said that in other areas it had been poor. Mr. Bellew was adamant that
in all respects his performance had been excellent.
69. When it was put to him that he was seeking to get Mr. Bellew to leave Ryanair, Mr.
O’Leary said that if he had wanted Mr. Bellew to be gone, he would have been gone.
Mr. Bellew did not contest this. His position was that Mr. O’Leary “would pull the trigger
in the autumn after the AGM”. Mr. Bellew did not explain why he thought that Mr.
O’Leary would wait until then, but it seems to me that the explanation as to why Mr.
Bellew thought that he had not been dismissed was at least an implicit acknowledgement
that if Mr. O’Leary had wanted him gone, he would have been gone.
70. Mr. O’Leary was cross examined in great detail and at great length in relation to detailed
operational issues in Ryanair, the resolution of those issues, and the extent to which Mr.
Bellew had contributed to the resolution. Mr. Rogers referred the court to a folder of Mr.
Bellew’s weekly operational reports, with Mr. O’Leary’s manuscript notes, and suggested
that by reading these the court could be satisfied that Mr. Bellew had achieved all of the
goals set for him. This, with the greatest respect, is to misunderstand the role – never
mind the capacity – of the court.
71. There were issues surrounding pilot absenteeism; increasing passenger numbers;
decreasing fares; baggage handling procedures; the relative merits, cost and feasibility of
aircraft maintenance by airlines and contractors, and so on and so forth.
72. The impossibility of what the court was asked to embark on can be illustrated by
examining a couple of those issues.
73. From the time it started operating in Spain (whenever that was) Ryanair used the
services of a third party baggage handler. As Ryanair’s business there grew, there were
increasing difficulties with baggage handling which affected punctuality and turnaround
times for the aircraft. Mr. Adrian Dunne, director of ground operations, devised a plan to
address the problem. Mr. Dunne reported to Mr. Bellew. Mr. Dunne proposed that
Ryanair would do its own baggage handling in Spain. Ryanair would need to decide
what equipment it needed and to identify a supplier. It would be necessary to engage
with the Spanish airport authority and the Spanish civil aviation authority. The 28
airports served by Ryanair in Spain would need to be equipped with the baggage handling
equipment and IT equipment. To do what he wanted to do, Mr. Dunne needed approval
for a capital expenditure of €50 million. The project was described by Mr. Dunne as a
massive project, probably the largest change of ground handler in airline history. It was,
in Mr. Dunne’s words, a massive decision to move it forward. There was a certain
amount of pressure in the fact that the contract for ground handling services was due for
renewal, or not, on 31st March, 2019.
Page 16 ⇓
74. Mr. Dunne formulated his plan and sent it up the line to Mr. Bellew. In the same
sentence, Mr. Dunne explained that he knew the enormity of the project and needed to
get approval very quickly to do it. But, said Mr. Dunne, his request for approval
“dragged on” for four weeks. Mr. Dunne was peppering to get his project underway and
was frustrated by what he characterised as the absence of a decision, but what he really
meant was the absence of approval. Mr. Bellew reported back to Mr. Dunne that he
didn’t think that Mr. O’Leary wanted to proceed at that time. Mr. Dunne brought his
proposal directly to Mr. O’Leary and had approval within ten minutes. Mr. Bellew’s
evidence was that the change in ground handling in Spain was his idea but that Mr.
O’Leary, as well as a number of the other Z’s, was against it at the start. Without
suggesting that there was any Damascene moment for Mr. O’Leary, Mr. Bellew said that
the project was eventually approved by the board and was successful.
75. Nobody got into the detail of the matters which needed to be taken into consideration
before a decision was made on the biggest proposal for ground handling in airline
history, but it stands to reason that the relative cost of contracting out or bringing the
task in house was just the starting point. As far as I can see, the problem was probably
less to do with baggage handling and more to do with scheduling. If the court had been
provided with all of the proposals and arguments – which, incidentally, it was not – it
would not have been in a position to second guess the commercial judgment of the
airline executives, still less to say whether the project should have been approved sooner
than it was.
76. Mr. Dunne and his colleague Mr. Neal McMahon, director of flight operations, gave
evidence of alleged failure or delay on the part of Mr. Bellew to approve extraordinary pay
increases for which there was, in their opinion, a compelling commercial case. Again, I
think that in truth their complaint was that their proposals were not approved, rather than
that there was a delay in making a decision or that no decision was made. Having failed
to get approval from Mr. Bellew, Messrs. Dunne and McMahon appealed to Mr. O’Leary,
from whom they got it. They each agreed in cross examination that the pay increases
for which they needed sanction could not have been approved by Mr. Bellew but needed
the approval of Mr. O’Leary.
77. These, and the many other issues discussed in the course of the trial, were business and
operational matters. It is not the business of the High Court to review the
reasonableness of commercial assessments of the wisdom of business plans or proposals,
still less to review the reasonableness of the time taken to make commercial decisions
which will inevitably have knock-on consequences. It is not the business of the High
Court to decide after the event whether such and such an employee should or should not
have been awarded a pay increase of so and so much, or whether a senior manager
should or should not have done more to promote or secure approval for the
recommendation of one of the managers reporting to him.
78. Indecisiveness can be costly in business. So too can rash decisions. The time at which
a decision should be made and the level of information upon which a decision should be
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based, are matters of business judgment. It is clear that the approaches of each of Mr.
O’Leary and Mr. Bellew are different. Mr. O’Leary, I think it is fair to say, is decisive.
Mr. Bellew, perhaps, is more circumspect. It is not for me to say which is the better
approach, but Mr. O’Leary is the boss and I think that he is entitled to set the pace which
he expects from those immediately reporting to him and who are paid in the order of €1
million per annum, before whatever they may earn from share options.
79. It seems to me that part, at least, of the difficulty in the relationship between Mr. O’Leary
and Mr. Bellew is that Mr. O’Leary first identified Mr. Bellew as someone who had
previously shown himself to be eminently suitable to deal with a particular problem which
Ryanair was dealing with in the autumn on 2017, which was a shortage of pilots. A
regulatory change in the pilots’ leave year from the fiscal year ending 31st March to the
calendar year, coupled with competition from other airlines, notably Norwegian, for pilots
had given rise to a rostering failure and the cancellation of thousands of flights. In the
time of his previous employment with Ryanair, Mr. Bellew had been, for a time, in charge
of pilot training and recruitment. He had been the friendly face of Ryanair to the pilots,
and well-liked by them. In September, 2017 Ryanair was, as it had been from the time of
its foundation, vigorously non-union and had organised its collective bargaining in an
employee representative council model, in which Mr. Bellew had an established record of
success. Specifically, Mr. O’Leary hoped that Mr. Bellew would be able to see off the
growing pressure for unionisation. Mr. Bellew was not interested in that limited role and
came to be employed in a more senior role than he had previously occupied in Ryanair.
The role of COO at the time of his recruitment included engineering, safety, ground
operations and customer handling as well as pilot rostering, training and recruitment and
the maintenance and development of the employee representative council structure.
Within a couple of weeks of Mr. Bellew taking up his new role, Ryanair decided to
recognise the pilots’ unions. With the benefit of hindsight, the particular skill for which
Mr. Bellew had been recruited was redundant. Mr. Bellew now had full responsibility for
the operations of the largest airline in Europe. He had experience as COO of Malaysia
Airlines, but that was a different airline to Ryanair.
80. A great deal of time was spent discussing Mr. Bellew’s involvement with the pilots’ unions
after Ryanair decided to recognise them. Mr. O’Leary’s recollection was that Mr. Bellew
went to the first meeting with the German union in Frankfurt and largely agreed with
everything the unions requested and was removed from further negotiations with any of
the unions. That recollection was shown to be incorrect. A table was made up by Mr.
Darrell Hughes, who is the people director at Ryanair, showing a list of meetings between
Ryanair and the German pilots’ union between December, 2017 and 25th September,
2018. This showed that all of those meetings were attended by Mr. Bellew. Mr. Bellew
had a record of a further meeting on 9th October, 2018 at the Carlton hotel in Dublin.
There was however a meeting in September, 2018, lead by Mr. Bellew, at which the
German unions said that they wanted mediation and time off work to attend union
meetings. There was a strike looming which Mr. Bellew hoped to see off. Whether Mr.
Bellew did or not do so, Mr. Eddie Wilson, then chief people officer, apprehended that Mr.
Bellew might have given the German union to believe that Ryanair would agree to the
Page 18 ⇓
proposals and a letter was written on the following day, which Mr. Bellew signed, making
it clear that Ryanair was not agreeable to the union’s proposals. Whatever may or may
not have happened at the meeting with the German unions was not of sufficient
significance at the time to find its way into the litany of criticisms in Mr. O’Leary’s
memorandum of 5th November, 2018. It seems to me that it was a workaday issue that
arose in the course of complex industrial relations negotiations and I frankly do not
understand why the parties spent so much time on it.
81. I find that the case that Mr. Bellew was unreasonably slow or poor in his decision making
has not been made out.
82. Mr. Bellew’s case that Mr. O’Leary wanted him to resign and that Mr. O’Leary’s treatment
of Mr. Bellew was such that it was entirely appropriate to resign is not altogether easy to
follow.
83. The case particularised, as I have said, is that in early November, 2018 Mr. O’Leary had
screamed obscenities when taking issue with Mr. Bellew’s attendance at a dinner and
event in the European Parliament. Between the time of the memorandum and May,
2019 Mr. O’Leary was said to have criticised Mr. Bellew at the weekly management
meetings, notwithstanding that Mr. Bellew had completed all of his required tasks. The
criticism was said to have ended on the week after Mr. Bellew’s annual review when he
had been put on “six months performance notice”. By reference to the contemporary
records, Mr. Bellew’s performance review took place on 22nd March, 2019. If the
criticism ended about a week after that, it ended by the end of March, rather than in May.
On the case pleaded, there was nothing that happened after that which was relied upon
as unreasonable treatment or wholly unreasonable behaviour, or which might have
compelled or encouraged Mr. Bellew to resign.
84. Mr. Bellew in his evidence in chief dealt in exquisite detail with the circumstances in which
he had had been re-employed by Ryanair; the resolution of a deficiency in the records of
aircraft maintenance, for which he took credit; a difficulty with cabin crew which arose
one weekend on which Mr. O’Leary was duty executive, which led to a meeting at the
Irish Aviation Authority at which Mr. Bellew said that he saved the day; and an initiative
taken by Mr. O’Leary to deal with a perceived problem of absenteeism by pilots. In the
course of the trial I could not see how any of these matters went to the issue as to
whether Mr. Bellew’s post termination restraint should be enforced and, on reflection, I
still do not.
85. Mr. Bellew in evidence (as he had in a memorandum of 9th November, 2018) gave a
point by point explanation of the several criticisms made in Mr. O’Leary’s memorandum of
5th November, 2018 and went through a number of his weekly reports between then and
the summer of 2019 before coming back to his performance review on 22nd March, 2019.
He did not give evidence that Mr. O’Leary had screamed obscenities at him at the weekly
meetings.
Page 19 ⇓
86. Mr. Bellew said that he was devastated by his performance review, specifically by the
news that he was not to be offered the opportunity to participate in the 2019 round of
share options and the warning that his suitability for his role would be considered over the
following six months. Far from being the culmination of weekly abuse at the Monday
management meetings, as had been pleaded, Mr. Bellew’s evidence was that there had
been no criticism of him at any time. The progression in the business, he said, was
obvious for everyone to see.
87. Mr. Bellew’s evidence was that Mr. O’Leary’s warning (and Mr. O’Leary agreed that it was
a warning) that in the absence of improved performance his continuing suitability would
be reviewed conveyed to him that he was a dead man walking.
88. Having then dealt with the documents discovered by the plaintiff in relation to the 2019
share option grants, Mr. Bellew returned to the meeting of 22nd March, 2019: this time
saying, in response to a question as to whether anything had happened to repair the
shock, that the shouting and roaring at the Monday meetings decreased appreciably after
the review. Mr. Bellew gave evidence that through April and May it became obvious to
everybody that the operations had dramatically improved and that everything was going
better than it had for some years
89. In about the middle of April, 2019 Mr. Bellew had a telephone conversation with a Mr.
Thierry Lindenau. Mr. Lindenau is a recruitment consultant and was known to Mr. Bellew
personally as well as professionally. Mr. Bellew’s evidence was that it was Mr. Lindenau
who first approached him. Mr. Lindenau asked whether Mr. Bellew was interested in a job
with easyJet. In the following months Mr. Bellew engaged with Mr. Lindenau and later
the executives of easyJet and was eventually offered a job, which he accepted. Mr.
Bellew’s case was that although he was working steadily towards an offer of employment
with easyJet, he did not decide to leave Ryanair until 7th July, 2019: that is the day
before he tendered his resignation. His decision to resign, he said, had been precipitated
by two events in that week.
90. The detail of Mr. Bellew’s engagement with Mr. Lindenau and easyJet is of some
importance and I will deal with it presently. Before doing so I will look at the two events
which are said to have prompted the decision to resign.
91. The first event was an alleged outburst by Mr. O’Leary at a meeting on 2nd July, 2019 at
which Mr. Bellew was not present. What was put to Mr. O’Leary was that Mr. O’Leary
had excoriated one of Mr. Bellew’s colleagues, Mr. Hutchinson, had ended up nose to nose
with him, just short of violence, and had said to him, Mr. Hutchinson, that he, Mr.
Hutchinson, was f****** useless. Mr. O’Leary denied this account of what had
happened, but he did acknowledge that from time to time he used bad language, and that
he could have said what he was alleged to have said. He was adamant that there was no
squaring up.
92. Mr. Bellew, not having been present at the meeting, was not in a position to say what had
happened in fact, but I ruled that he was entitled to give evidence of what was said to
Page 20 ⇓
him, as evidence of what was said to him, and not as evidence of the fact of what had
happened. Mr. Bellew’s evidence of what had been said to him did not quite match what
had been put to Mr. O’Leary. What Mr. Bellew said had been recounted to him was that
Mr. O’Leary had approached Mr. Hutchinson’s desk in an open plan office and had started
shouting at him about a letter to one of the regulators that deals with refunds to
passengers. What Mr. Bellew said had been said to him was that Mr. O’Leary said to Mr.
Hutchinson that the letter was f****** useless, that nobody was able to write a letter,
and that everybody was f****** hopeless, f****** useless. To my mind there is a
difference between the condemnation of a piece of work and the condemnation of a
person, and between the condemnation of an individual and the condemnation of the
entire management team.
93. I had the evidence of Mr. Eddie Wilson, then the chief people officer and now CEO, which
I accept, that Mr. Hutchinson was distressed and annoyed by the encounter to the point
that, although in the last week of his employment, he threatened to leave immediately
and had to be talked out of it. I am satisfied that Mr. Hutchinson was annoyed, and that
his annoyance was perfectly justified: but he got over it.
94. I am not satisfied that the incident happened in the way in which it was put to Mr.
O’Leary. No witness was called to substantiate what was put or to contradict Mr.
O’Leary. The account of the incident that was put to Mr. O’Leary ought not to have been
put unless it was to be backed up by evidence.
95. I accept that Mr. O’Leary is prone to outbursts, but it seems to me that the real reason
why his outburst on 2nd July, 2019 was examined in such detail was that it was
something that happened in the week in which Mr. Bellew signed for easyJet which was a
hook on which he sought to hang his decision that he would not honour his non-compete
covenant.
96. Mr. Hayden, in cross examination, took Mr. Bellew to the note of his performance review
on 22nd March, 2019 and suggested that the criticism then recorded had been presaged
by previous criticism of his work. In reply, Mr. Bellew said that Mr. O’Leary was inclined
to shout and scream at lots of people and that he regularly screamed loudly and angrily at
him, Mr. Bellew, that he, Mr. Bellew, was f****** useless. That was not put to Mr.
O’Leary. Mr. Bellew shouted into the microphone and appeared to me to be playing to
the gallery.
97. Counsel, when cross examining a witness, will put to the witness any issue on which there
is disagreement and the substance of any evidence that will be led to contradict what the
witness has said. This allows the witness the opportunity to comment on the evidence
that it to be led, which ensures fairness and assists the court in identifying and resolving
contested issues of fact. Counsel will properly use discretion as to the detail that is put.
It is not necessary in every case to put word for word the contradictory evidence that is to
be led but the substance must be put.
Page 21 ⇓
98. In this case Mr. Rogers put to Mr. O’Leary in detail the case that Mr. Bellew would make
as to the encounter between him and Mr. Hutchinson. He did put to Mr. O’Leary,
generally, that he had used abusive language to Mr. Bellew but he did not put it to Mr.
O’Leary that Mr. O’Leary had not only said the same thing to Mr. Bellew as he was said to
have said to Mr. Hutchinson but had done so repeatedly. Given the emphasis that was
put on the encounter with Mr. Hutchinson, I think that if Mr. O’Leary had repeatedly used
the same words directly to Mr. Bellew, Mr. Bellew would have so instructed his solicitors
and it would have been put to Mr. O’Leary, in terms, that he had done so. I am entitled
to infer from the fact that this was not put, that Mr. Bellew did not so instruct his
solicitors, and I am entitled to infer from the fact that Mr. Bellew did not so instruct his
solicitors, that it did not happen.
99. I have spent some time on this issue because it (and more so another issue, to which I
will come) goes beyond the particular issue to the reliability of Mr. Bellew’s evidence.
100. I accept that what happened in the last week of Mr. Hutchinson’s employment was
extremely unpleasant for Mr. Hutchinson and might very well have justified Mr.
Hutchinson putting on his coat and going home: but I am not satisfied that it was a
precipitating factor in Mr. Bellew’s decision to resign.
101. The second event relied upon by Mr. Bellew as having triggered his resignation was
something that allegedly happened on Friday 5th July, 2019. At that stage, he said,
everything was running more smoothly that he could have hoped. Mr. O’Leary, he said,
said that he wanted him to go to Austria for six months or maybe more or maybe less to
run the operation in Lauda Air. Mr. Bellew, in evidence, said that he did not want to
leave his family and friends to go to Vienna - which he characterised as the Siberian front
- but he did not suggest that he had then said to Mr. O’Leary that he did not want to go
to Vienna. Neither was this alleged request – relied upon at the trial as the last straw –
part of the case pleaded. When it was put to Mr. O’Leary that he had told Mr. Bellew to
go to Vienna and live there for three or four days a week, Mr. O’Leary denied this. He
said that he had asked Mr. Bellew to spend three days every other week in Vienna,
alternating with Mr. Neal McMahon. The fact is that Mr. Bellew is primarily based in
Dublin while his family are in Kerry. If he takes up the job he has been offered by
easyJet, he will be based in London, which is a flight away from Dublin. I will come back
to this.
102. In his evidence in chief, Mr. Bellew moved directly from his telephone call with Mr.
Lindenau in the middle of April, 2019 to the week before he tendered his resignation.
Mr. Hayden explored with him what happened in the interim.
103. Mr. Bellew had discovered the text messages and e-mails he had exchanged with Mr.
Lindenau and easyJet and they were given to him in the witness box. There was not a
great deal of material and much of it dealt with arrangements for meetings and so forth
but there were a handful of documents – communications between Mr. Bellew and easyJet
- that Mr. Bellew must have known would call for explanation.
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104. The texts and e-mails showed that a meeting was arranged for 14th May, 2019 at the
offices of Clifford Chance in London, which was to be attended by Mr. Bellew and the chief
executive officer and the group people director of easyJet. That meeting went well, and
further meetings were arranged for 31st May, 2019 with the chief financial officer and the
chairman. Those meetings also went well, and easyJet asked Mr. Bellew to meet a
psychologist, which he did.
105. Mr. Hayden brought Mr. Bellew back to 17th April, 2019 and asked him to confirm that his
position was that as of that date he would not be getting the 2019 share options.
Whatever about what was written in the memorandum of 22nd March, 2019 and
whatever Mr O’Leary might then have said, Mr. Bellew’s declared position in his evidence
in chief was that he held out no hope that he would be given the options. He was, he
said, a dead man walking. When the issue was revisited, however, Mr. Bellew said that
in view of his performance he thought that “there would be some chance that [he] might
get them”, “some possibility”, “some faint hope”. He appeared to me to be trying to
anticipate what he knew was coming, in the hope that he could take some of the sting out
of it.
106. On 10th June, 2019 Mr. Bellew sent to Mr. Lindenau a statement of his benefits and pay
at Ryanair. He acknowledged that the information was required by easyJet so that it
would know what package he had with Ryanair and that his letter to Mr. Lindenau would
be passed on.
107. Mr. Bellew wrote that he had 26 days annual leave, plus bank holidays. That was not
true. He had twenty. In evidence Mr. Bellew said that Mr. O’Leary had said in February
and March that he would increase all of the Z’s leave entitlement in 2020 to 25 or 26
days. Whether Mr. O’Leary had or not said that, Mr. Bellew was not entitled to 26 days
when he told easyJet that he was.
108. Mr. Bellew wrote that he was entitled to work from home for a minimum of two days a
month. That was not true. In evidence, Mr. Bellew said that he was negotiating. That
did not make his assertion that he was entitled to work from home for a minimum of two
days a month true.
109. Mr. Bellew wrote that he had been offered 500,000 share options at €11.14 (nil payment
required), with a requirement to accept by 30th June, 2019. That was not true. Mr.
Bellew’s position moved from dead man walking on 22nd March, 2019, to some faint hope
on 17th April, 2019, to a confident belief on 10th June, 2019, based on his performance,
that he would be awarded the share options. The proposition that Mr. Bellew believed on
10th June, 2019 that he would be awarded the 2019 share options is utterly inconsistent
with the case pleaded and run. Whatever Mr. Bellew thought his prospects might have
been of being awarded the share options, the statement that he had been offered them
was simply untrue.
110. Mr. Bellew wrote that he expected a bonus of €350,000 from a maximum of €500,000 for
the year ending 31st March, 2010 which he would lose if he left before then. If he
Page 23 ⇓
thought that, he must have thought that he would survive any assessment of his
suitability in the following September.
111. Having reprised his litany of areas in which he said his performance had been so good,
Mr. Bellew asserted that he still felt like a dead man walking.
112. On 16th June, 2019 Mr. Lindenau sent Mr. Bellew indicative terms for the position of COO
with easyJet. On the same day Mr. Bellew rejected the terms as too low. He took a very
strong position on the initial offer, which in the event turned out to be successful, but
which it seems to me was not the position of a man who thought that his days at Ryanair
were numbered.
113. By the way, in a comment on a proposal that his bonus in easyJet might be weighted
60% to the profitability of the company, Mr. Bellew said that a core part of the role he
saw for himself at easyJet would be to find cost savings, staff efficiencies and leadership
for the operations team and he suggested that bonus criteria relating to those challenges
would be more appropriate.
114. On 17th June, 2019 easyJet offered revised terms, and in an e-mail of 27th June, 2019
Ms. Ella Bennett, the group people director of easyJet, conveyed to Mr. Bellew her delight
that he would be jointing easyJet and attached a draft letter of offer and a printed form of
contract. She wrote, “As I mentioned to Thierry [Lindenau] if you would like our lawyers
to review your current contract to understand any restrictive covenants we would be
happy to do so.”
115. On 1st July, 2019 Mr. Bellew sent to Ms. Bennett what he described as a copy of his
current contract with Ryanair. What was attached was a copy of the letter of 10th
October, 2017, only. He wrote that, “My Irish solicitor has reviewed all correspondence,
share agreements etc., in relation to employment restrictions.” That was true, but at
best ambiguous. On the same day Ms. Bennett replied that there appeared to be no
restrictive covenants in his contract but “Could I just double check there are no additional
side letters or correspondence that sets out any employment restrictions?” On 3rd July,
2019 Mr. Bellew replied that he had “… taken extensive legal advice in Ireland which says
that there is no impediment to my joining or a non-compete other than a six months’
notice period.” At least with the benefit of hindsight, this reply was not really an answer
to the question, but Ms. Bennett appears to have thought it was, for she replied on 4th
July, 2019 “Thank you for your confirmation that you are not aware of any restrictive
covenants that would apply to you.”
116. By way of an aside, the easyJet standard form of contract of employment for its senior
executives included a six months post termination restraint, which Mr. Bellew sought to
have reduced to three. For the stated reason of the level of insight and involvement that
Mr. Bellew would have into key business strategies, decisions and relationships, easyJet
would not reduce the duration of the covenant.
Page 24 ⇓
117. At 10:24 on 5th July, 2019 Ms. Bennett sent Mr. Bellew a contract of employment signed
by the chairman, Mr. Lundgren, which she invited him to sign and return. Mr. Bellew
signed the contract on the afternoon of 7th July, 2019 and e-mailed a photograph of the
signed signature page to Ms. Bennett at 17:28.
118. The amendment to contract of employment dated 15th June, 2018 which had been signed
and returned by Mr. Bellew on 20th June, 2018 required that he should give a copy of the
clause to any person or entity who might make an offer of employment to him. Mr.
Bellew did not do so because, he said, what he called the 2018 scheme was obsolete and
worthless. For the reasons already given, I have found that the 2018 share options were
not obsolete. If there was an issue as to whether the status or value of the 2018 share
options was relevant to the validity or enforceability of the post termination restraint, it
seems to me that this was something on which easyJet was entitled to be in a position to
form its own view.
119. Mr. Bellew was asked a simple question by Ms. Bennett, which was whether there was
any side letter or correspondence that set out any employment restrictions. There was.
Mr. Bellew did not tell Ms. Bennett that there was but sought to evade the question by
referring to legal advice that there was no impediment to joining or a non-compete other
than a six months’ notice period. In my view, Mr. Bellew’s letter to Ms. Bennett of 3rd
July, 2019 was not only misleading but was untrue. If there was an issue as to the
validity or enforceability of the restraint, it was a matter on which easyJet was entitled to
form its own view. I find that the statement that there was no non-compete, in reply to
a question as to whether there was any side letter or other correspondence that set out
any employment restriction, was false.
120. One of the issues canvassed in the course of Mr. Bellew’s cross examination was when
and how he had come to the view that he was not bound by his post termination
restraint. The context was a text message of 25th June, 2019 from Mr. Bellew to Mr.
Lindenau in which Mr. Bellew referred to an appointment which he had made with his
solicitor. It was said that Mr. Bellew’s solicitor wanted to be prepared “… as O’Leary will
likely be odd about it.” Mr. Rogers objected that this was trespassing into privilege.
There was an exchange between counsel as to the difference between legal advice
privilege and litigation privilege in which Mr. Bellew intervened to say that he anticipated
litigation. By then Mr. Bellew had his indicative terms and revised terms from easyJet
which showed an assumed start date of 1st January, 2020. That start date could only be
met if Mr. Bellew could get out of his covenant and Mr. Bellew quite correctly anticipated
that he would not be allowed to go quietly. I have great difficulty believing that Mr.
Bellew’s failure to provide easyJet with a copy of the addendum to his contract and indeed
his suppression of its existence was rooted in a firm belief that he was not bound.
121. My findings as to the engagement between Mr. Bellew and easyJet go not only to the
issue as to the general equitable jurisdiction of the court not to make an order for the
enforcement of the restraint to which Mr. Bellew agreed but to the reliability of Mr.
Bellew’s evidence, generally.
Page 25 ⇓
122. When Mr. Bellew agreed in October, 2017 to re-join Ryanair he knew more or less what
he was letting himself in for. I say more or less because Mr. Bellew was re-joining the
organisation at a higher level and one particular element of the job for which he had been
recruited was almost immediately overtaken by the decision to recognise the unions. Mr.
Bellew was aware before re-joining of Mr. O’Leary’s inimitable management style. I find
that Mr. O’Leary did not treat Mr. Bellew any differently to any of his other most senior
managers. Mr. O’Leary is unapologetically demanding of his managers. If he can be
abrasive and rude from time to time – which he accepts – that goes with the €1 million
plus remuneration package.
123. It is not the business of the court to assess whether Mr. O’Leary’s criticisms of Mr.
Bellew’s performance were warranted or unwarranted. The performance standards in
Ryanair are set by Mr. O’Leary and within reason the assessment of performance of the Z
executives is a matter for Mr. O’Leary. With the exception of the time at which Mr.
Bellew ceased to be involved in the negotiations with the pilots’ unions, where there was
divergence between the evidence of Mr. Bellew and Mr. O’Leary, I prefer the evidence of
Mr. O’Leary.
124. As to the allegation that Mr. Bellew’s decision to sign for easyJet was precipitated by Mr.
O’Leary telling him on the afternoon of 5th July, 2019 that he had to go permanently to
Vienna, the fact is that from about 20th June, 2009 Mr. Bellew did go to Vienna for one
day every other week, alternating with Mr. Neal McMahon. There was a memorandum to
that effect and Mr. Bellew acknowledged that that was what had been happening until he
submitted his resignation. It is also the fact that after his resignation and before the
announcement that he was to go to easyJet, Mr. O’Leary had said that he expected that
Mr. Bellew would work normally as COO during his notice period. In a memo of 11th July,
2019 Mr. O’Leary confirmed that Mr. Bellew would continue to represent Ryanair on the
European Union Aviation Safety Agency board and suggested that he do Tuesday and
Wednesday of the following week in Vienna. The first reference in the paperwork to Mr.
Bellew being based in Vienna is in the notes taken by Mr. Wilson of a meeting on 19th
July, 2019 – after the genie was out of the bottle - which records a suggestion by Mr.
Bellew that he would go to Vienna if Mr. O’Leary wanted him to.
125. I find on the evidence that there was a discussion on the afternoon of 5th July, 2019 in
relation to Mr. Bellew’s attendance in Vienna. It was not, as Mr. Bellew said, a
requirement that he would go to live there but, as Mr. O’Leary said, a proposal that Mr.
Bellew would go to Vienna for three days every other week, alternating as he had been
with Mr. McMahon.
126. The proposition that Mr. O’Leary ordered Mr. Bellew to move to Vienna was not part of
the case pleaded and particularised. It is not consistent with the contemporary records
and correspondence and I reject Mr. Bellew’s evidence that it happened.
127. I am not satisfied that Mr. O’Leary’s decision on 22nd March, 2019 that Mr. Bellew should
not at that stage be given the opportunity to participate in the 2019 round of share
options, or that his performance might be reviewed in six months’ time, or that Mr.
Page 26 ⇓
O’Leary’s treatment of Mr. Bellew then, or before, or thereafter was unfair or
unwarranted. I am not satisfied that either of the events of the week ending 5th July,
2019 relied on had anything to do with Mr. Bellew’s decision to resign from Ryanair.
128. In my judgment Mr. Bellew got a better offer from easyJet. In deciding whether to take
that offer or not I am sure that Mr. Bellew took into account the comparative demands
which would likely be made of him and the management style of those he would be
working with in easyJet, as well as the financial terms and conditions, but that is far short
of the case he advanced that it would have been unreasonable to have expected that he
would continue to work for Ryanair.
129. If Mr. Bellew had made out his case that he was badly or unreasonably treated – short of
constructive dismissal – an interesting legal issue might have arisen as to the extent to
which the court might properly have regard to such conduct in the exercise of its
discretion to enforce a post termination restraint to which the employee had agreed but
the ground has not been laid in fact, so the legal issue does not arise.
The enforceability of the restraint - legal principles
130. And so I come, at last, to the issue as to the enforceability of the restraint.
131. When I sat to hear this case I thought that the law was settled. Mr. Rogers and Mr.
Mallon submit that it is. Mr. Hayden and Mr. Aylward, however, submit that there has
been a significant recent development in England, which ought to be followed here.
Specifically, the submission is that there is authority in England for the proposition that an
employer has a legitimate interest in maintaining the stability of his workforce, and that
this is a factor that the court should take into account in this case. I will look at the
English authorities which are relied on, but the starting point is the Irish authorities.
132. In Macken v. O’Reilly [1979] I.L.R.M. 79 O’Higgins C.J. said, at p.90:-
“All interference with an individual’s freedom of action in trading is per se contrary
to public policy and, therefore, void. The general prohibition is subject to the
exception that certain restraints may be justified. Restraints, restrictions or
interferences are permitted if they are, in the circumstances obtaining, fair and
reasonable. Whether what is complained of can be justified on this basis involves a
careful examination of all the circumstances – the need for restraint, the object
sought to be attained, the interests sought to be protected and the general interest
of the public. What is done or sought to be done must be established as being
reasonable and necessary and on balance to serve the public interest.”
133. More recently, there is a judgment of Clarke J. (as he then was) on the subject. It is the
[2005] 3 IR 12. As usual, if I may say so, Clarke J. expounds the law clearly and
succinctly. At paras. 15 to 17 he said:-
Page 27 ⇓
“A restraint on a person working or being engaged in one or more lines of business
is by definition a restraint of trade. It is well settled that such a term will not be
enforced by the courts unless it meets a two fold test:-
a. it is reasonable as between the parties; and
b. it is consistent with the interests of the public.
see McEllistrim v. Ballymacelligott Co-operative Agricultural and Dairy Society
[1919] A.C. 548 at p. 562.
In relation to the first test i.e. reasonableness inter partes, in the leading case of
Stenhouse Ltd .v. Phillips [1974] AC 391, Lord Wilberforce said at p. 400:-
‘The accepted proposition that an employer is not entitled to protection from
mere competition by a former employee means that the employee is entitled
to use to the full any personal skill or experience even if this has been
acquired in the service of his employer: it is this freedom to use to the full a
man’s improving ability and talents which lies at the root of the policy of the
law regarding this type of restraint. Leaving aside the case of misuse of
trade secrets or confidential information … the employer’s claim for protection
must be based upon the identification of some advantage or asset inherent in
the business which can properly be regarded as, in a general sense, his
property, and which it would be unjust to allow the employee to appropriate
for his own purposes, even though he, the employee, may have contributed
to its creation.’
The test seems to be, therefore, as to whether in all the circumstances of the case
both the nature of the restriction and its extent is reasonable to protect the
goodwill of the employer. Clearly certain clauses which preclude solicitation come
within that definition provided that they are not excessively wide. In certain other
cases clauses have been upheld which have prohibited employees setting up a
similar business within a specified distance of an employer’s establishment: see for
example Marion White Ltd. v. Francis [1972] 1 W.L.R. 1423. But it is clear that the
duration of the prohibition and the geographical scope of same are important
matters to be considered having regard to the nature of the work in question and
the structure of the business.”
134. Murgitroyd was a case in which the purpose of the restraint was to protect the employer’s
customer base, but it seems to me (and it was not argued otherwise) that the same
principles apply where the object of the restraint is to protect trade secrets or confidential
commercial information akin to trade secrets.
135. Covenants in restraint of competition are found in contracts for the sale and purchase of
businesses as well as contracts of employment. It is settled that the courts will take a
less restrictive view of a covenant in a contract for the sale of a business – the clear
commercial purpose of which is to protect the goodwill of the business which the
Page 28 ⇓
covenantee has bought and which the covenantor has been paid for – than they will of
restraints in employment contracts.
136. In Murgitroyd Clarke J. said, at para. 21:-
“However, it is also clear that a more restrictive view is taken of covenants by
employees than is taken of covenants given on sale of a business. Covenants
against competition by former employees are never reasonable as such. They may
be upheld only where the employee might obtain such personal knowledge of, and
influence over, the customers of his employer as would enable him, if competition
were allowed, to take advantage of his employer’s trade connection.”
137. The prohibition in that case was against the defendant, a patent attorney, working on his
own account in competition with the plaintiff anywhere in Ireland for a period of twelve
months. Having regard to the nature of the plaintiff’s business, Clarke J. found that the
restraint was reasonable in duration and geographic scope, but he went on to find that a
prohibition of competition by the defendant for the business of persons who were not
existing clients of the plaintiff was excessive. He held that the plaintiff’s trade
connections could have been adequately protected by a prohibition on the defendant
dealing with existing customers.
138. Murgitroyd & Company Ltd. v. Purdy was followed by Dunne J. in Net Affinity Ltd. v.
Conaghan [2011] IEHC 160, [2012] 3 I.R. 67.
139. That was a case in which the defendant employee had agreed that she would not, for a
period of twelve months following the termination of her employment, work for any
individual or company that provided services similar to those provided by the plaintiff.
The plaintiff’s business was a hotel marketing agency, specialising in reservation and
booking engine systems for hotels in Ireland. The action, in which the former employee
and her proposed new employer were named as defendants, was to restrain the employee
from taking up employment with the plaintiff’s main competitor in the market.
140. Besides the judgment of Clarke J. in Murgitroyd & Company Ltd. v. Purdy, Dunne J. was
referred to a number of English authorities, including a decision of the High Court of
on which counsel for the plaintiff in that case, and this, sought to place particular
emphasis. Besides going to work for a direct competitor of Net Affinity Limited, Ms.
Conaghan had made off with a box of documents and a memory stick onto which she had
copied files on the evening before she left, and injunctions were sought to restrain
apprehended breaches of confidentiality as well as working for a competitor.
141. I pause here to observe that in the case before me Ryanair sought to canvass an issue as
to whether in the days immediately before the trial Mr. Bellew had attempted to remove
from the office a confidential document which, through absolutely no fault on his part,
had become mixed up on a shared printer with material which he had been legitimately
printing, and an issue as to the nature and extent of Mr. Bellew’s use of certain
Page 29 ⇓
programmes on his work devices. Net Affinity is authority for the proposition that, apart
altogether from any covenant not to compete, there may be cases in which it may be
appropriate to make an order preventing an employee from working for a competitor for a
period of time so as to prevent a breach of confidentiality. In this case, however, the
plaintiff’s case was pleaded solely by reference to the defendant’s agreement not to work
for a competitor and I ruled that the issues which had arisen on the eve of the trial were
not relevant to the case before the court.
142. The decision in Net Affinity turned on the breadth of the clause. It did not have a
geographical limit and, as the business of the plaintiff was confined to Ireland, it was far
too wide to protect the legitimate interests of the plaintiff. By prohibiting all competition
by the employee in the area of services provided by the plaintiff, the clause would have
prevented the first defendant from working for a company based outside Ireland providing
hotel booking services for hotels in (Dunne J. took the example of) the United States of
America, or for a company based in Ireland but whose business was limited to booking
engine services for hotels in France. The clause was too wide to protect the legitimate
requirements of the plaintiff and Dunne J. found it to be void and unenforceable.
143. Starting at para. 48 of the judgment Dunne J. said:-
“[48] It does seem to me that there is a difference of emphasis discernible between the
judgments of Clarke J. in Murgitroyd & Co. Ltd. v. Purdy [2005] IEHC 159, [2005] 3
I.R. 12 and the judgment of Cox J. in TFS Derivatives Ltd. v. Morgan [2004] EWHC
3181, [2005] IRLR 246. The judgment of Clarke J. has clearly set out the
applicable law in this jurisdiction and I see no reason for preferring the judgment of
Cox J. in TFS Derivatives Ltd. over the judgment of Clarke J. in Murgitroyd.
Accordingly, I propose to consider the clause in this case in the light of the
judgment in Murgitroyd.
[49] The non-compete clause in this case is not limited at all in its scope geographically.
There is a temporal limitation for a period of 12 months after termination of
contract. The extent to which a temporal limitation may or may not be reasonable
depends on the facts of any given case. In this case I would have no issue with
the period of 12 months.
[50] There are two aspects of the clause that cause me concern. The first of these is
that there is no geographical limit contained in the clause. One could imagine a
situation where Ms. Conaghan might seek employment outside this country in a
similar business to that which is run by the plaintiff. Assuming for the sake of
argument that such a business operated only booking engines for hotels in the
United States, having regard to the terms in which the non-compete clause is
phrased, she would be precluded from taking up such employment even though
that employment would not be competing in any sense with that of the plaintiff’s
business. If Ms Conaghan was to take up employment in this country with a
company which operated a business similar to that of the plaintiff, but which, for
example, operated booking engines for hotels in France, likewise Ms. Conaghan
Page 30 ⇓
would be precluded by virtue of the non-compete clause from taking up such
employment. She is completely precluded by the clause from working ‘for any
individual or company that provides or plans to provide services similar to that
which is provided by the plaintiff.’ To my mind, the clause at issue in this case is
far too wide to protect the legitimate requirements of the plaintiff. It is a clause
which does in fact prohibit all competition by Ms. Conaghan in the area of services
provided by the Plaintiff. As has been made clear in the judgment of Clarke J. in
Murgitroyd & Co. Ltd. v. Purdy [2005] IEHC 159, [2005] 3 IR 12, such a clause is
too wide. In those circumstances I have come to the conclusion that the non-
compete clause is void and unenforceable.”
former employee who had secured employment with a rival company sought an
interlocutory inunction restraining his former employer from interfering with his new
contract of employment. The former employer did not put up evidence that would have
allowed the court (as it had in Murgitroyd and Net Affinity) to come to any conclusion as
to whether the restraint was justified. Laffoy J. referred to both Murgitroyd and Net
Affinity but decided the motion by applying the Campus Oil principles.
145. Having looked at the Irish cases, I turn to the English cases relied upon on behalf of the
plaintiff.
146. The most recent of these was the judgment of the United Kingdom Supreme Court in
Tillman v. Egon Zehnder Ltd. [2019] UKSC 32. It is a wonderful exposition of the law in
relation to the severability of post-employment restraints but is not directly relevant to
this case. The dispute between Ryanair and Mr. Bellew calls for the construction of the
relevant clause and an assessment as to whether the restraint has been justified, and if it
has, whether it has been shown not to be excessive in geographical scope or temporal
limitation. There was no argument that the restraint in this case, if it were found to be
excessive on its face, might be limited and thereby saved by the use of a blue pencil.
147. What is interesting about Tillman in the present context is that the U.K. Supreme Court
heard two days of argument in January, 2019 on issues that had been distilled in the
judgments of Mann J. and the Court of Appeal, and took a little over five months before
Lord Wilson delivered a judgment tracing the evolution of the law from Dyer’s case in
1414, 2 Hen 5, f 5, pl 26, with which all the other members of the court were able to
unreservedly agree. Such luxury is not available to trial court judges who must decide in
short order whether a former employee is entitled to take up a job which he might
otherwise lose, or an employer is to be exposed to a risk of irremediable damage if the
former employee is allowed to go to work for a competitor. It is against that backdrop
that I come to the cases relied on.
148. Mr. Hayden refers the court to a decision of the High Court of England in Kynixa Ltd. v.
Hynes [2008] EWHC 1495 in which Wyn Williams J., at para. 130 of his judgment,
gratefully adopted what he described as the exposition of the law by Gloster J. in Brake
Page 31 ⇓
delivered about a fortnight after the conclusion of a three week trail which raised issues of
breach of fiduciary duty, removal of confidential information, deletion of business e-mails,
post-termination competition and, significantly, as I will come to, enticing away. Wyn
Williams J. put aside “a comprehensive volume of relevant authorities” and applied the
law as Gloster J. was said to have expounded it.
last minute, there were issues of trade secrets or confidential information akin to trade
secrets, the reasonableness and enforceability of post-termination restraints, and enticing
away. On reading the judgment of Gloster J. it becomes apparent that what Wyn
Williams J. referred to as his exposition of the law is in fact a summary taken from
counsels’ skeleton arguments. The issue as to the lawfulness of the covenant on the part
of the defendants not to entice away the plaintiff’s staff strictly speaking evaporated
when, at the trial, the defendants gave undertakings in the terms of the covenants to
which they had agreed but it appears to have been a live issue when the skeleton
arguments were written. The judgment of Gloster J. shows, at para. 10, that the
claimant’s case was that that covenant sought to protect its interest in maintaining staff
stability. At para. 47, under the heading “Staff Stability” Gloster J. noted the
undertaking not to entice away the employees and said that, in any event, the covenant
was, in his judgment, reasonable.
150. The thirteen point summary of the law approved by Gloster J. in Blake Brothers Limited
and adopted by Wyn Williams J. Kynixa Ltd. is a useful, and, in my view, in the context of
the cases in which it was applied, an accurate summary of the law. I will not set out the
entire summary, but the ninth point is that: “The legitimate interests which justify the
imposition of a covenant in restraint of trade are (i) trade connection; (ii) trade secrets or
confidential information akin to a trade secret; and (iii) staff stability. The eleventh
point is that: “An employer has a legitimate interest in maintaining the stability of its
workforce.” I quite agree. But the legitimate interest is the employer’s interest in
keeping his employees other than those who have left, and not preventing or impeding
those who might wish to leave from leaving.
evolution of the doctrine of restraint of trade back to Dyer’s case in 1414. At para. 23
of his judgment Lord Wilson recalled that:-
“In Dyer’s case, 2 Hen 5, f 5, pl 26, 1414, John Dyer, a dyer, was sued in the Court
of Common Pleas for breach of a condition in an indenture that he would not work
as a dyer for six months. He contended that he had not broken the condition but
Justice Hull observed that he should have taken a wider point, namely that the
obligation was void. ‘By God’, added the judge, ‘if the plaintiff was here, he would
go to prison until he paid a fine to the King.’”
152. The important distinction between the English cases relied on on behalf of the plaintiff and
the present case is the purpose of the restraint. As Lord Shaw put it in Herbert Morris
Ltd. v. Saxelby [1916] 1 A.C. 688, an employer is entitled to reasonable protection
Page 32 ⇓
against the dissemination of his trade secrets or solicitation of his customers, in other
words against the misuse of his property, but not directly against the employee’s use of
his skill and manual or mental ability, which are the employee’s own property.
153. While there is a covenant in Mr. Bellew’s contract against enticing away, there is no
allegation that he threatens or intends to do that. The plaintiff’s legitimate interest in
preserving the stability of its workforce is not a factor to be taken into consideration in
determining the reasonableness of the restraint on Mr. Bellew joining a rival.
154. In the written submission filed on behalf of the plaintiff it was suggested that, in general,
post termination restraints are valid if the terms thereof are fair and reasonable in the
circumstances. In argument, Mr. Hayden agreed that the law is more nuanced. The
presumption is that post termination restraints are void and unenforceable, but they may
in certain circumstances be justified if the purpose of the restraint is legitimate and if the
restraint goes no further than is necessary to protect a legitimate interest and is, in all
the circumstances, fair and reasonable. It was accepted that the onus is on the plaintiff
to establish the legitimate purpose and to show that the restraint goes no further than is
necessary.
155. It was agreed at the bar, but it is important to emphasise, that the time at which the
court is to assess the justification for, and the reasonableness of, a restraint is the date of
the contract. See for example John Orr Ltd. and Vestcom Ltd. v. John Orr
[1987] ILRM 702, 706. So, for example, an employer with a nationwide chain of
supermarkets might seek to enforce against a senior executive a covenant not to work in
the supermarket business in Ireland within, say, 12 months of the cessation of his
employment. If the executive had been employed as such at a time when the chain was
established, the restraint might be justifiable. But if the executive had been employed
as, say, a trainee manager, at a time when the employer had a single shop, it would not.
In the example, it could not at the time of the contract have been anticipated that the
employee in the course of his employment would come to be in possession of sensitive
commercial information, so as to engage the clause. Similarly, the confidential
information in relation to a chain of supermarkets would be of a different character to that
of a single shop. Similarly, the owner of a single shop might very well have a legitimate
interest in protecting his business within, say, ten or 20 miles of his shop, but not the
whole country.
156. It is important also to set out that the enforceability of the restraint is to be judged by
reference to what the employee agreed not to do, rather than what he or she proposes to
do after the cessation of employment. Net Affinity v. Conaghan is a good example.
The covenant in that case was that the employee would not for a period of 12 months
after termination be employed in any business providing services similar to those
provided by the employer. The employer’s business was the provision of reservation,
booking, and marketing services for hotels in Ireland. The employee, having resigned,
proposed to go to work for a direct competitor providing the same services in Ireland but
Dunne J. focussed on the terms of the covenant rather than the new employer’s business.
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Because there was no geographical limitation on the restraint, it would, if enforced,
prevent the employee from taking up employment with an employer providing similar
services for hotels in France or the United States who would not be in competition with
the plaintiff. Dunne J. found that the clause was too wide and so void and
unenforceable. Inferentially, at least, if the covenant had been limited to Ireland, Dunne
J. would have enforced it.
The enforceability of the restraint
157. I turn now to the enforceability of the clause in this case.
158. It was agreed at the bar that in construing a restraint, the court, in case of ambiguity,
should lean towards an interpretation that would result in finding that the clause is
enforceable.
159. If necessary, I would apply that principle to reject the proposition put to Mr. O’Leary in
cross examination (but which was not in the written submission) that European railways
and ferries are in competition with Ryanair for air passenger services.
160. It was submitted that this is not a case of a simple employer and employee relationship.
It was said that the fact that Mr. Bellew is a senior executive and that the non-compete
clause was executed in return for the offer by Ryanair to allow Mr. Bellew to participate in
the share option plan (or, more correctly, to participate in the 2018 round of options)
should have the effect that the clause should not be subjected to the more restrictive
view that is taken of covenants by employees than is taken of covenants given on the
sale of a business. I am uncertain whether the proposition was that the test should be
that applicable to a covenant on the sale of a business, or somewhere between that and a
contract of employment. Whichever it was, I cannot agree. It seems to me that the
share options given to Mr. Bellew were part of his remuneration as an employee, albeit as
a senior executive. The evidence does not establish that the share option scheme is
limited to senior executives. The justification for the more liberal view of covenants
given on the sale of businesses is that they support and preserve the value of what has
been sold. This is not such a case.
161. The first step is to assess whether Ryanair has established that the imposition of the
restraint was justifiable, in principle, to protect its business rather than to hobble Mr.
Bellew in the legitimate pursuit of his career.
162. Mr. O’Leary outlined the nature of the information to which Mr. Bellew would have been
privy as COO and by reason of his attendance at the weekly management meetings. His
role meant that he had intimate knowledge of the markets in which Ryanair was
interested, the incentives sought and obtained from the airports which it served, and its
knowledge of the strengths and weaknesses of its competitors. Ryanair regularly buys
large numbers of airplanes to replace aircraft that have come to the end of their useful
life and to expand its routes and services. While the strategic plans are constantly
evolving, all of the executives at the management meetings are privy to the plans and
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priorities and to where and perhaps when adjustments might be made. As a Z, Mr.
Bellew was provided with detailed monthly management accounts, which would give
enormous insight into all aspects of the company’s business. As COO Mr. Bellew had an
intimate knowledge of Ryanair’s plans and strategies in the area of pilot training and
recruitment and so on. All of this information was confidential and commercially
sensitive. The disclosure and use of the information would be of great value to Ryanair’s
competitors and could be damaging to Ryanair.
163. The nature and extent of the confidential information available to those attending the Z
meetings was expanded upon by Mr. David O’Brien, chief financial officer, who
characterised the Monday morning meetings as the centre of gravity of Ryanair’s
business. Mr. O’Brien was cross examined about suggested differences between the
business models of Ryanair and easyJet, ranging from the airports they each served, the
number of bases they operated, the size of their fleets, and so on and so forth. The focus
of the cross examination was, perhaps, promoted by the framing of the relief sought.
164. Further detail of the type of information that would come to Mr. Bellew’s knowledge as
COO and as a Z was given by Messrs. Wilson, Dunne and McMahon and Dr. Karsten
Muehlenfeld. Much of the information was secret. The value of some of it was that it
was distilled from mountains of publicly available information. It was explained that the
useful or valuable life of the information varied from about 12 months in the case of pilot
planning, to up to five years in the case of the plans for fleet development and
deployment and incentive agreements.
165. There was some cavilling about the extent of Mr. Bellew’s knowledge in relation to
particular areas and the value of the knowledge which he did have to competitors in
general and easyJet in particular, but there no real issue that Mr. Bellew’s attendance at
the weekly Z meetings gave him oversight over all of the operational, organisational and
financial aspects of Ryanair’s business. In an exchange with counsel in relation to his
agreement to the non-compete clause which he had agreed to give to easyJet, Mr. Bellew
accepted that his role as COO of Ryanair had given him (as his role in easyJet would give
him) insight and involvement into key business strategies, decisions and relationships.
Elsewhere, he agreed that as a matter of principle he had sensitive protectable
information that he acquired as COO of Ryanair. Given the extent of the evidence led on
behalf of Ryanair this was no great concession.
166. In the defence which he delivered and in evidence Mr. Bellew acknowledged his
obligations of confidentiality during and after his employment and declared his intention
to honour those obligations. In the light of Mr. Bellew’s disregard of his covenant
because he thought that his 2018 share options had become obsolete and worthless, and
on the view I have taken of Mr. Bellew’s correspondence with easyJet in relation to the
existence of a non-compete clause, I have to say that I have some sympathy for Mr.
O’Leary’s scepticism of the value of Mr. Bellew’s pledge. That apart, there are good
reasons why a confidentiality clause is no substitute for a non-compete clause.
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167. The first of these is the difficulty, in practice, of enforcing a confidentiality clause. In
Littlewoods Organisation Limited v. Harris [1978] 1 All E.R. 1026, Lord Denning M.R. said
at p.1033:-
“It is thus established that an employer can stipulate for protection against having
his confidential information passed on to a rival in trade. But experience has shown
that it is not satisfactory to have simply a covenant against disclosing confidential
information. The reason is because it is so difficult to draw the line between
information which is confidential and information which is not; and it is very difficult
to prove a breach when the information is of such a character that a servant can
carry it away in his head. The difficulties are such that the only practicable solution
is to take a covenant from the servant by which he is not to go to work for a rival in
trade. Such a covenant may well be held to be reasonable if limited to a short
period.”
168. The other good reason why sensitive and valuable commercial information cannot be
adequately protected by a confidentiality clause is illustrated by Brake Brothers Ltd. v.
Ungless [2004] EWHC 2799 (QB). Brake was in the business of supplying food products
to the catering industry. Two young men who had been employed by Brake Brothers as
purchasing managers left their employment with the intention of joining one of Brake’s
largest competitors. In the course of their employment the men had been engaged in
negotiating trading and partnership agreements with suppliers and managing Brake’s
business relationship with those suppliers. Among the issues debated was the interaction
between various confidentiality and non-compete covenants. Gloster J., at para. 51,
considered the interaction between confidentiality and non-competition.
“I also conclude that the evidence shows why, on the non-dealing clause alone, a
mere confidentiality clause would be insufficient and why an area covenant is
indeed needed. As [counsel for the plaintiff] submitted, if a buyer from Brakes
were to tell his new employers what products Brakes were planning to launch, that
would not involve dealing or soliciting with suppliers. If that buyer were to tell his
new employer what lines Brakes were planning to promote heavily, that likewise
would not involve dealing with suppliers. If a buyer from Brakes were to tell his
new employer that a supplier in common had been willing to finance promotional
activities, that would not be a traceable breach of confidence. The employer might
well, in the light of the information, adjust its negotiating stance and secure a more
favourable trading agreement. That adjustment need not involve telling the
supplier, merely knowledge that the supplier had already given such support in the
past. As Mr. Ungless himself said in evidence ‘there’s always a tussle about
lowering a price. Some [suppliers] rolled over and you kicked yourself for not
pressing them.’ As he accepted, the point emerging from this evidence was that
ordinarily you never actually knew how far a supplier would go. He accepted that
this applied not only to re-negotiation, In the present example, a trade rival would
know how far a supplier was prepared to go and that would be it on the back of a
breach of confidence. One can trace this example through to a number of fact
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scenarios, namely whether a supplier would be prepared to enter a long-term
agreement, whether it was willing to pay a rebate, whether it was willing to pay,
and had in the past paid, a lump sum and how much and so forth.”
169. It seems to me that sensitive commercial information obtained by an employee in the
course of his previous employment can be can be valuable to a competitor, and can be
deployed, without necessarily disclosing it. An executive’s knowledge what agreements
a counterparty had previously made would allow him to adopt, or direct, or advise a
negotiating position without expressly disclosing the fact or terms of a previous
agreement made by his former employer. The basis of the negotiating position might
rapidly become fairly obvious to the new employer, but technically there would have been
no disclosure.
170. The recognition of the distinction between breach of confidence and competition also
disposes, I think, of the argument that there is any significance to be attached to the fact
that there was not in this case (on the pleadings, at least) any allegation of retention or
copying of confidential information.
171. While much of the evidence was directed to the type and usefulness of the information
which Mr. Bellew had in fact gathered in the course of his employment, I am satisfied that
I can properly infer that it was all information of the kind that it could properly have
anticipated that he would acquire. Moreover, Mr. Bellew, in the time of his previous
employment with Ryanair, at one level lower, reporting to the then COO, was required
from time to time to substitute for the COO at Z meetings and he acknowledged that he
was well aware of the nature and breadth of the information shared at those meetings.
172. I am satisfied that the nature and extent of the confidential information that would
inevitably come to the knowledge of Mr. Bellew in the course of his employment was such
as to justify a post termination restraint.
173. What has vexed me most in this case is whether the restraint goes further than is
necessary for the legitimate protection of Ryanair’s interests.
174. The covenant is that Mr. Bellew will not for a period of 12 months after the termination of
his employment, directly or indirectly in any capacity either on his own behalf or in
conjunction with or on behalf of any other person be employed, engaged, concerned or
interested in any capacity in any business wholly or partly in competition with Ryanair for
air passenger services in any market.
175. I have no difficulty with the time constraint. I find that the period of 12 months was
abundantly justified by the likely useful life of the confidential commercial information
that would come to Mr. Bellew’s knowledge.
176. Before the action was commenced, there was some discussion about modifying the time
during which the restraint would apply. I do not take this as an acknowledgement that
the stipulated twelve months was unreasonable.
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177. Mr. Rogers submitted that in assessing the reasonableness of the time constraint, the
court ought to take account of the fact that Mr. O’Leary has not been attending Z
meetings since shortly after he gave his notice. I cannot accept that. The evidence is
that until he discovered that Mr. Bellew intended to go immediately to easyJet, Mr.
O’Leary expected Mr. Bellew to continue to perform his ordinary duties during his notice
period. When Mr. Bellew eventually disclosed his intentions, Mr. O’Leary had no choice
but to reassign him away from the Z meetings. In my view the reasonableness of the 12
months is to be judged on the premise that Mr. Bellew would, during the period of his
notice, continue to discharge all of the duties of COO: for which, after all, he has
continued to be paid. The passage from the judgment of Neill L.J. in Credit Suisse Asset
Management Ltd. Armstrong [1996] I.R.L.R. 450 referred to in the defendant’s written
submissions which refers to a long period of garden leave appears to me to go to the
discretion of the court to make an order enforcing a covenant found to have been
otherwise reasonable, as opposed to the reasonableness of the covenant.
178. Ryanair’s apprehension is that Mr. Bellew will commence employment in January, 2020
with easyJet and the order sought is an order restraining Mr. Bellew from commencing
employment with easyJet. The focus of the evidence was very much on the usefulness of
the information which Mr. Bellew has for easyJet and the damage that might be done to
Ryanair if that information is disclosed to, or used for the benefit of, easyJet.
179. The written submissions filed on behalf of the plaintiff introduce Ryanair as a well known
airline, synonymous with providing low fare passenger services across a number of
defined routes throughout the E.U. and beyond. It is submitted that the non-compete
clause does not prevent Mr. Bellew being employed by “other forms of airlines, e.g. high
cost legacy airlines” or “long haul airlines”.
180. Ryanair’s case is that:-
“The plain and ordinary meaning of the words used in the non-compete clause
limits the scope of the same to airlines that compete with Ryanair, i.e. low fares
airlines operating on the same, or interchangeable, routes as Ryanair. That is a
defined and limited group of airlines in respect of which Mr. Bellew is prevented
from taking up employment for a period of 12 months post termination of his
employment with Ryanair.”
181. The evidence tended to focus on the differences and similarities between the businesses
of Ryanair and easyJet but there was evidence in relation to competition in the airline and
European airline industry generally.
182. In the course of his cross examination of Mr. O’Leary, Mr. Rogers appeared to be trying to
get Mr. O’Leary to agree that easyJet was not a competitor of Ryanair. There was quite a
long discussion about routes and destinations and cities and airports, and even about the
relative passenger capacity of the Boeing 737 airplanes flown by Ryanair and the Airbus
airplanes flown by easyJet. Mr. Bellew, in his evidence in chief, spent ten minutes listing
the differences between the two airlines before saying that Ryanair was in competition
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with every other airline in Europe. That was what Mr. O’Leary had said. In the course
of his evidence, however, Mr. O’Leary identified a “low fare space” in which Ryanair
competed with Wizz, easyJet and Norwegian.
183. There was some discussion as to the difference between low cost airlines and the so-
called legacy airlines and the extent or keenness of the competition between the two.
The half year results for Ryanair for the first half of 2019 were put into evidence. This
document shows Ryanair offering “More choice. Lower fares. Great care.” Ryanair’s first
proud boast is that it is the lowest fare / lowest cost airline group in Europe. It shows
Ryanair’s average fare on that period at €37, Wizz at €47, easyJet at €61, Norwegian at
€91, and then Lufthansa at €176, IAG at €191 and Air France/KLM at €210. On a page
captioned “Europe’s lowest cost wins” there is a table of comparative costs for Ryanair,
Wizz, easyJet, Norwegian and Eurowings, ranging from €29 in the case of Ryanair to €114
in the case of Eurowings.
184. There was also a discussion of the easyJet results presentation for 2018 which showed
the market share on easyJet routes, divided between easyJet, legacy/other and low cost
carriers.
185. Mr. O’Leary in his evidence clearly distinguished between low cost carriers (or, he said,
those other than Ryanair who claim to be low cost carriers) on the one hand - he
mentioned Wizz, easyJet and Norwegian - and legacy high cost airlines, on the other - he
mentioned Lufthansa, IAG and Air France/KLM. Mr. Rogers seemed at one stage to be
trying to get Mr. O’Leary to agree that Ryanair was not in competition in the low cost
space with Wizz, easyJet and Norwegian: but Mr. O’Leary would not.
186. Mr. Andrew Simpson, who is head of airline research at Goodbody, was called on behalf of
Ryanair. Mr. Simpson distinguished between “flag” carriers, who operate short haul
flights between key hubs and long haul flights, on the one hand, and low cost carriers,
who operate flights on a point to point basis, on the other. Mr. Simpson listed as low cost
carriers Ryanair, Wizz, Norwegian and easyJet. He identified easyJet as Ryanair’s largest
competitor, and as a direct competitor: suggesting that there was little product
differentiation between them but that their cost structures were significantly different.
187. The substance of Mr. Simpson’s evidence is that while there is competition between all of
the airlines operating in Europe, the main competition faced by the low cost carriers
generally, and by Ryanair in particular, is from the other low cost carriers.
188. It is common case, then, that Ryanair is in competition with all of the other airlines in
Europe, in the sense that potential passengers wishing to get to particular destinations
have a choice of airline. What is also clear from the evidence, however, is that there are
two “spaces” in the market: the low cost space and the legacy or flag space, in which the
fares are considerably higher. In the first half of 2019 Norwegian’s average European
fare was nearly two and a half times that of Ryanair, but Norwegian’s average fare, the
highest fare of the low cost carriers, was nearly half that of Lufthansa, the lowest of the
legacy carriers.
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189. On the evidence which I have heard, Ryanair sees its key competitive edge over its rivals
as cost and efficiency. It is the confidential commercial information in relation to those
issues which Mr. Bellew will take away that is the focus of its concern. While it sees
itself in competition with the legacy carriers, the gap in fares is very large. In the first
half of 2019 the average Lufthansa fare was pushing 5 times the average Ryanair fare.
190. On the afternoon of the second day of the trial, Mr. O’Leary was cross examined as to the
scope of the restraint. In answer to a question whether Lufthansa was an employer to
which Mr. Bellew could not go, he said “Actually, not true”. Pointing to the provision in
the clause that allows for a prior written consent, he said that if Mr. Bellew was joining a
legacy airline in Europe Ryanair would have “certainly have taken a different view.”
When it was put to him that he was talking about concessions on the clause rather than
the meaning of it he said:-
“I get you, but I mean, does the clause mean you – airlines that are in competition
with Ryanair? Yes. In Europe? Yes, it does. Are we in competition with
Lufthansa? Yes, we are. If he wanted to join SAS, would we be injuncting him to
stop him going there? I very much doubt it.”
191. The law requires that in construing the clause I must put from my mind the fact that Mr.
Bellew proposes to join Ryanair’s most immediate rival and having construed the clause,
determine whether the restraint is limited to the interest.
192. It is well established that in a case where a particular provision of a restraint is found to
be excessive and the unenforceable provision can be removed without adding to or
changing the wording of what remains, and where the removal of the unenforceable
provision does not change the character of the contract, the court may sever the
offending provision. This is sometimes called the blue pencil rule. It is spelled out more
or less in clause 1.3 of Mr. Bellew’s covenant but would have applied anyway as a matter
of law. There was no argument in this case, as there was in others in the books, that the
prohibition on Mr. Bellew being “interested or concerned in” any business might have
been a restraint on his being a shareholder in any other airline: or, as there was in other
cases in the books, on the severability of that, or indeed, of any other provision. It is
also well established that there is no jurisdiction to amend or rewrite such a clause.
193. The covenant in this case applies to any business wholly or partly in competition with
Ryanair for air services. In is common case that Ryanair is in competition with all of the
European airlines, and conversely, they are in competition with it. Ryanair has clearly
demonstrated its interest in protecting its confidential information from disclosure to, or
use by or on behalf of, its competitors in the low cost market, or the low cost sector of
the market, but I cannot find that it has demonstrated the same interest in relation to the
legacy or flag or high cost airlines. In its plain terms, the restraint applies to all
European airlines, including the legacy airlines. On Ryanair’s case, if Mr. Bellew had
wanted to join a legacy airline, he would have been allowed to. But to have joined any
such legacy airline he would have required the prior consent in writing of Ryanair, rather
than have been entitled to do so as of right. It seems to me to follow that the
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commercial information that Mr. Bellew has is not sufficient justification for preventing
him from taking up employment with a legacy airline and that the restraint is too wide.
194. With considerable reluctance, but without misgivings as to the applicable law, or my
application of the law, I am driven to the conclusion that the clause is void and
unenforceable as an unjustified restraint of trade.
195. The other provision of the restraint in this case which troubled me was the prohibition on
employment in any business in competition with Ryanair “in any capacity”. It appeared
to me that literally construed it would restrain Mr. Bellew from taking up employment with
another airline as a pilot or air steward.
196. Mr. Hayden submitted that the clause must be construed in the factual matrix in which it
was made; that it was futile to contemplate whether the clause might bear that meaning
because there was never any question of his being employed other than as a senior
executive; and that any ambiguity should be resolved in favour of a construction that
made it enforceable. He referred to a paragraph in the judgment of O’Donnell J. in Law
Society of Ireland v. Motor Insurers’ Bureau of Ireland [2017] IESC 31 which describes a
contract as a form of communication intended to convey the meaning agreed upon by the
parties. The Supreme Court in that case was dealing with an agreement negotiated
between successive Ministers for Transport and the companies in the business of
underwriting motor insurance in Ireland. I confess that I struggle to see this standard
form clause which was prepared by one of the big firms of solicitors with little if any input
from Ryanair and none at all from Mr. Bellew as a communication, but I do “… endeavour
to understand from all the available information, including the words used, what it is that
the parties agreed, or what it is a reasonable person would consider that they had
agreed.” As I understand the law, the role of the reasonable person in the
interpretation of a contract is limited. As I understand people, the view of a reasonable
person would be coloured by an expectation that other people would be unlikely to make
unreasonable agreements. In this case, the issue is whether an agreement which at the
time it was made - or at least subscribed to - was considered by both parties to be
reasonable, was in fact, or in law, unreasonable.
197. It is submitted that in view of the seniority of Mr. Bellew’s position and the salary he
commanded, the covenant, or perhaps the parties, could not possibly have contemplated
employment with a rival airline as a pilot or air steward, but this, it seems to me, is to
contemplate the likely common subjective intention of the parties, or of reasonable
persons, as to what they should agree, or should have agreed, rather than what they did
agree. I quite accept that having regard to Mr. Bellew’s seniority and salary, to which I
would add his age and the fact that he is not trained either as a pilot or an air steward,
the parties did not intend to make provision for an eventuality that would never arise.
But that, I think, is a distraction from the task of construing the contract.
198. Mr. Hayden relied on the decision of the Court of Appeal in England in Marion White Ltd.
v. Francis [1972] 1 W.L.R. 1423.
Page 41 ⇓
199. Marion White Ltd. was a case in which a company which operated a hairdressing business
sought to restrain a former employee from working in a rival salon 150 yards away from
that at which she had been employed. The employee’s covenant was that she would not
within 12 months of the end of her employment carry on or assist in the carrying on
whether as principal or manager agent or servant or assistant or in any other capacity
whatsoever be engaged in the business of a ladies’ hairdresser within one half mile of the
premises at which she had worked. I cannot help wondering whether Buckley L.J.’s
analysis of the clause was coloured by the view he expressed that the conduct of the
employee, ethically, was really quite inexcusable. The County Court judge had found the
covenant to be too wide because it would have prevented the defendant from obtaining
employment as a receptionist in a hairdressing salon. In the Court of Appeal the
argument turned to whether it would have prevented her taking up employment as a
bookkeeper or cleaner. Buckley L.J. expressed the view that the employment of the
defendant as a receptionist in a rival hairdresser would be just as damaging as
employment in the actual process of attending to people’s hair, but by taking the view
that the clause was “aimed at active participation in a way that is directly connected with
the hairdressing aspects of the business” he said that it would not extend to employment
as a bookkeeper or hairdresser. Stephenson and Davies L.JJ. agreed but I have to say
that I am not convinced by the reasoning. To my mind, the conclusion of the Court of
Appeal was that the restraint would bite where it needed to, rather than where it did.
200. Brake Brothers Ltd. v. Ungless [2004] EWHS 2799 (QB), to which I have already referred,
is another case in which the restraint extended to employment “in any capacity”. The
defendants had agreed that they would not “be concerned or involved directly or
indirectly in any capacity in any business activity which is undertaken in competition with
any of the Businesses” of their employer. Gloster J. quickly disposed of the defendants’
argument that the restraint extended to employment by a competitor extended to
employment in any capacity by pointing to the fact that the employer’s Businesses (with a
capital B) were defined in the contract as activities with which the employee should have
been concerned or involved to any material extent in the 12 months prior to the end of
his employment. By reference to the definition, the restraint did not extend to
employment in human resources or as a janitor.
201. The “amendment to employment contract” in this case is a standard form agreement.
The evidence is that it applies to at least the senior executives who report to the Z’s, as
well as the Z’s themselves. It is introduced, in every case, as an amendment to a
standard form of terms and conditions of employment which in the case of Mr. Bellew,
and presumably in every case, identifies the position in which the employee is to be
employed. In every case the factual matrix will be that the employee has been
employed for a particular position. The contract of employment, as so amended, read as
a whole, will specify the position in which the employee is employed. It seems to me
that to confine the meaning of the restraint to the position for which the employee was
employed would be to modify or ignore the words of the contract. However unlikely it
might be thought to be that a Ryanair Z might contemplate employment with a rival
airline as a pilot or air steward or janitor, it seems to me that it is by no means beyond
Page 42 ⇓
the bounds of possibility that he or she might decide to take a step back, or two steps
back, to go to a less challenging and, perhaps, more civilised, position. The legitimate
interest of Ryanair might very well extend to restraining alternative employment at a rank
immediately below the highest executive rank but not, perhaps, the rank below that. It
seems to me that to attempt to so construe the clause that it will be confined to
employment in any capacity in which the employee is likely to contemplate employment
with a rival would be (as some of the English cases put it) to read down the clause: which
is something the court is not permitted to do.
202. In construing a contract it is not permissible to take into account the prospect that it
would be enforced. In this case, the possibility or probability or inevitability that consent
of the employer to a proposal to take up a particular position with a competitor would be
forthcoming is not only no answer to the problem but rather highlights it.
203. I think that the problem is compounded by clause 1.1.b which limits the obligation not to
entice away to persons employed in a senior executive, managerial or technical capacity.
It seems to me that if the restraint on enticement is limited to particular capacities, the
restraint on the employee taking up alternative employment in any capacity must go
beyond the specified capacities.
204. I find myself again driven to the conclusion that the restraint in this respect is too wide
and that it is, for this reason also, void and unenforceable as an unjustified restraint of
trade.
Summary and conclusions
205. For the reasons given, I find that there was not a total failure of consideration for the post
termination restrictions which the defendant clearly understood and to which he freely
agreed. The covenant is binding.
206. For the reasons given, I find that the defendant was not unfairly or unreasonably treated:
whether by reason of Mr. O’Leary’s decision on 22nd March, 2019 that he should not at
that time be afforded the opportunity of participating in the 2019 round of share options,
or otherwise. If the covenants which the plaintiff seeks to enforce are valid in law, there
is no basis on which the court should exercise its discretion against the making of the
orders sought.
207. The commercial morality of the defendant’s behaviour is not material to the construction
of the clause or the application of the law.
208. I find that the plaintiff has discharged the onus of proving that it had a legitimate interest
in exacting a covenant from the defendant to protect the valuable sensitive and
confidential commercial, operational and financial information that would come to the
defendant’s knowledge in the course of his employment. For the reasons given, I find
that that interest has not been shown to extend beyond those airlines in competition with
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the plaintiff in the low cost or low fare sector, to those airlines operating in the legacy or
flag or high cost sector.
209. I find that the covenant in this case, properly construed, would prevent the defendant
from taking up employment with any European airline, including the legacy carriers, and
so goes beyond what the plaintiff has shown to be justified.
210. The legitimate interest of the plaintiff in restraining the defendant from taking up
alternative employment is limited to roles which would risk the disclosure or use of its
protectable information. I find that the restraint on employment in any capacity goes
beyond that interest and has not been shown to be justifiable.
211. For the reasons given, I find that the covenant to which the defendant, for valuable
consideration, freely agreed is, as a matter of law, void and unenforceable as an
unjustified restraint of trade.
212. The action must be dismissed.
Result: Application refused