Scottish Court of Session Decisions

Messrs Stanley, Limited, Princes Street, Edinburgh, complainers, presented a note of suspension and interdict against Louis Hanway, Templeland Road, Corstorphine, Midlothian, respondent. The complainers craved the Court to interdict the respondent “from engaging, prior to the 28th day of February 1913, in the city of Edinburgh, or within a radius of three miles thereof, either as master or servant or otherwise, directly or indirectly, in the business of manufacturing furrier, and similar to or in competition with that of the complainers in the said city, and in particular from engaging, directly or indirectly, in the business of manufacturing furrier, presently carried on at No. 120 George Street, Edinburgh, under the style of Mrs E. J. Hanway (being the name of his wife), whether as proprietor of such business or as a manager, buyer, salesman, furrier, or other servant therein during the said period; and also during the said period from engaging, directly or indirectly, in the business of manufacturing furrier at Glenfinlas, No. 2 Templeland Road, Corstorphine, Midlothian, either under his own name or otherwise; from advertising in any newspaper that he carries on any such business there; from soliciting customers of the complainers or other parties for orders in the said city or within the said radius thereof in connection with any such business; and from selling skins, furs, and fur garments to any of the customers of the complainers, or to any parties within the said city or the said radius thereof; and to grant interim interdict.”

The complainers (the first parties) and the respondent (the second party) had made the following agreement, dated 20th and 21st January 1909:—“ First—That this engagement shall, notwithstanding the date hereof, commence on first March Nineteen hundred and nine, and shall endure for a period of one year, terminating at twenty-eighth February Nineteen hundred and ten, without notice on either side. Second—That the second party will devote the whole of his time, according to the custom of trade, to the services of the first parties, and shall not enter into any other business engagement during the period of employment under this agreement. Third—That the second party will observe the directions of the first parties or their manager, and will not disclose the methods, patterns, or secrets of the first parties, or the names or addresses of their customers. [ The fourth and fifth articles settled the terms of the salary of the second party.] Sixth—That the first parties agree and hereby bind themselves to take over as at first March Nineteen hundred and nine, and pay for in cash the entire stock, fittings, fixtures, stands, cases, machines, and other trade necessaries belonging to the second party in his premises at number twelve Atholl Place aforesaid at valuation to be mutually fixed. Seventh—That at the end of this engagement the second party shall not, within three years from the date thereof, either as master or servant or otherwise, engage directly or indirectly in any business similar to or in competition with that of the first parties in the city of Edinburgh, or within a radius of three miles thereof, nor permit the name of the first parties to be used in connection with any business in which he may be engaged.”

The complainers averred, inter alia — “(Stat. 4) On the expiry of the respondent's period of service under the said minute of agreement, the respondent asked for a re-engagement for three years, and when informed that this could not be agreed to, he stated that he would not continue in the complainers' service, and actually ceased work. The complainers thereupon made inquiries for a new furrier. The respondent then requested to be reinstated, and this was done. Thereafter negotiations for a new agreement took place between the parties, and a minute of agreement was drafted by the respondent's agents and submitted to the complainers. In the meantime the respondent continued in the service of the complainers until 16th July 1910, when, the said negotiations falling through on account of the respondent refusing to enter into the same restrictive obligation in regard to his said proposed new engagement as he had come under in the said minute of agreement, the complainers dispensed with his services. Within a week or so thereafter the respondent, regretting his said refusal, pleaded to be allowed to return to the service of the complainers, stating his willingness to be bound by the same conditions as in the said minute of agreement. On this footing the respondent was told that he might start at once, but, as he wished a week's holiday, it was arranged that he should return on 1st August 1910. In the meantime information having come to the knowledge of the complainers, which destroyed their confidence in the respondent, his appointment with them for 1st August 1910 was cancelled.”

The respondent's answer was—“(Ans. 4) Admitted that negotiations were entered into between the complainers and the respondent for the adjustment of a new contract. Quoad ultra denied, under reference to the correspondence between the parties. Explained that pending the adjustment of a new contract the respondent continued in the service of the complainers upon the terms and conditions of the original agreement. Explained that the contract entered into between the complainers and the respondent was one of yearly employment; that the agreement between the complainers and the respondent ended on 28th February 1910, that it was tacitly renewed for another year, and that in accordance with and on the faith of the said tacit renewal the respondent continued in the

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complainers' service until he was dismissed on 16th July 1910; that the contract of employment between the complainers and the respondent for the year from 1st March 1910 to 28th February 1911 was broken by the complainers in so dismissing the respondent. Explained that the conditions of the fur trade and the nature of the work undertaken by the respondent in the complainers' service rendered it necessary that his term of employment should be at least by the year; that in the business of manufacturing furriers it is necessary to purchase the required skins, to make them up into fur garments and other articles, and to sell the said articles; that the purchasing of the stock of skins for the year's trade is done in the spring, in or about March, at the annual sales of skins held in London, that the process of their manufacture goes on thereafter and that the season for the sale of articles so manufactured extends from September to the end of February; that in order to secure a successful year's trading it is necessary to exercise great skill and care in the purchase of the year's stock of skins. Explained further, that in the year from 1st March 1909 the operations in the said fur department of the complainers' business were conducted by the respondent either in person or subject to his personal supervision, and that in particular the duty of purchasing the skins was artended to by him personally. After 28th February 1910 the respondent continued in the complainers' service in terms of the tacitly-renewed contract on the same footing as during the preceding year. He proceeded to make provision for the ensuing winter season of 1910–11, and in particular went to London and purchased the stock of skins required for the complainers' business, and proceeded to prepare and carry out the manufacture of those skins.”

The pursuer, admitting that he was carrying on business in breach of the seventh clause of the agreement, pleaded — “The complainers having broken their contract with the respondent have no title to sue.”

The Lord Ordinary ( Dewar) on 17th March 1910 granted the prayer of the note of suspension and interdict and decerned.

Opinion.—[ After summarising the averments and the agreement]. — “He [the respondent] founds upon the case of The General Bitlposting Company, Limited v. Atkinson, 1909 AC 118.

In that case a firm of billposters agreed with their manager that he should hold office subject to termination at twelve months' notice by either party and with a restriction on his right to trade after its termination. The employers wrongfully dismissed him without notice. It was held that he was entitled to treat the dismissal as a repudiation of the contract and to sue for damages for the breach, and was no longer bound by the restriction on trade. The ground of judgment is set forth in Lord Robertson's opinion, who says at p. 121—‘The respondent's position in entering the contract is a very intelligible one. He says, “I am a billposter and I desire occupation either on my own account or in the service of others. If I enter the employment of others I am willing to give up the right to trade on my own account to the extent specified in this agreement. I do not desire to have it both ways.” The claim of the appellants, on the other hand, as now put forward, is that, taking him at his word, as they expressed in the contract, and getting his services, they are to be entitled both to deprive him (against the contract) of the right to serve them and also of the right to serve himself.’

But in this case there is no stipulation that the respondent is to hold office subject to one year's notice. On the contrary, it is agreed that the agreement shall terminate on 28th February 1910 without notice on either side. The true meaning of the contract is I think this—the respondent agreed that if the complainers employed him for one year, viz. from 1st March 1909 to 28th February 1910, he would give up the right to trade on his own account to the extent specified in the agreement. They did employ him for a year, and thus acquired the right to restrain him from competing with them in business, and it cannot I think be assumed that they deprived themselves of this right because they retained the respondent in their employment beyond the period of the agreement. Even if I assume that the agreement was tacitly renewed for another year, the relationship of parties could only be regulated by the old terms so far as they are applicable ( Nelson v. Mossend Iron Company, 13 R. (H.L.) 50), and if I am right in the view that at 28th February 1910 the complainers acquired the right to prevent the respondent competing with them in business until 28th February 1913, it is clear that clause 7 does not apply. And further I think it appears from the correspondence, which the respondent has lodged in process, that the complainers refused to agree to retain him in their service on the footing that they had not the right to restrain him from competing with them, as he admits he is now doing.

In these circumstances, I am of opinion that the respondent has not set forth any relevant or sufficient averments to entitle him to the proof which he asks, and I accordingly repel the defences, and grant interdict as craved.”

The respondent reclaimed, and argued — Where there was a contract of yearly service, and the servant continued after the termination of the year in the master's employment, that inferred tacit relocation— Tait v. Mackintosh, February 26, 1841, 13 S.J. 280; Fraser, Master and Servant (3rd ed.), p. 58—and the inference could be the more clearly drawn where, as here, not only did the employment involve the servant's making contracts for the yearly stock, but where these had actually been already made— Stevenson v. North British Railway Company, July 20, 1905, 7 F. 1106, 42 S.L.R. 768. The present was a clearer case for the application of tacit relocation than Stevenson, for here the relationship was undoubtedly that of master and servant. That continuance in the service

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involved a renewal of the contract, and therefore a further engagement for a period of a year appeared on considering the counterpart in the agreement; for if the respondent had without further agreement continued for three years more in the complainers' service, they would not then have admitted that he was free to commence at once a competing business in Edinburgh. The contract had been broken by the complainers, and by their breach the respondent was freed from his obligations — General Billposting Company, Limited v. Atkinson, [1909] AC 118. The respondent ought to be given an opportunity of proving that employment such as his was always or usually by the year.

Argued for the complainers—The doctrine of tacit relocation was limited to certain classes of servants — Lennox v. Allan & Son, October 26, 1880, 8 R. 38, per Lord Justice-Clerk Moncreiff at p. 40, 18 S.L.R. 13,—and did not apply to the present case. There was no proper averment of an implied new contract, and, even if there had been, a breach of the new contract by the complainers would not destroy the right which they had acquired under the old, namely, that the respondent should not compete with them for three years. The averment that negotiations were pending for a new contract and the averment that there was tacit relocation were inconsistent and self destructive. Reference was made to Wade v. Walden, 1909 SC 571, 46 S.L.R. 359, and Fraser on Master and Servant, p. 799.