A former assistant solicitor, whose contract had been brought to an end by the dissolution of the partnership which had employed him, was held to be bound by a restrictive provision expressed to operate once the agreement ‘shall have determined for whatever reason.’
Held: The clause was not binding.
Scott J said: ‘I am unable to accept this submission. First the obligation to which the defendant subjected himself under clause 8 cannot in my opinion be wholly separated from the other provisions of the agreement. The bargain between the plaintiff and Mr. Rees on the one hand and the defendant on the other hand was, in broad terms, that in return for a five-year employment on clause 6 remuneration terms, the defendant would, during the five-year term, discharge the duties imposed on him and after the termination of his employment observe the clause 8 restraint. The plaintiff and Mr Rees were together responsible for withholding from the defendant the benefit of employment for the last year of the five-year term. One year out of five is certainly not de minimis. The defendant was deprived, by a breach of contract for which the plaintiff and Mr Rees were together responsible, of the full consideration in exchange for which he accepted the clause 8 restriction. In such a case, in my opinion, he is not bound by the restriction. Secondly, and this is another way of putting the same point, the breach of contract for which, as I have held, the plaintiff and Mr Rees were jointly responsible, was accepted by the defendant as putting an end to the contract. In such a case outstanding contractual obligations of the injured party are in law discharged together with the contract. This result does not, in my judgment, depend on the construction of the contract.
But the point goes further. Suppose I am wrong. Suppose Mr Johnson is right in submitting that under the true construction of the contract clause 8 binds the defendant regardless of whether the 1979 agreement is brought to an end by the decision of the plaintiff and Mr Rees to discontinue their partnership, or by some other wrongful dismissal of the defendant. The termination of the defendant’s employment under the 1979 agreement could, on that footing, have taken place at any time after 3 September 1979, but the defendant would still have been bound by the five-year restraint clause. It is well settled that the reasonableness of a restraint clause is to be tested by reference to the position as at the date of the contract of which it forms part. If Mr Johnson’s submissions are right I would regard the clause 8 restraint as unreasonable as between the parties. A contract under which an employee could be immediately and wrongfully dismissed but would nevertheless remain subject to an anti-competitive restraint seems to me to be grossly unreasonable. I would not be prepared to enforce the restraint in such a contract.’
Judges:
Scott J
Citations:
[1990] ICR 473
Jurisdiction:
England and Wales
Cited by:
Cited – Rock Refrigeration Limited v Jones and Seward Refrigeration Limited CA 10-Oct-1996
The claimant sought to enforce a post employment restrictive covenant given by the defendant. The defendant replied that the clause was too widely framed and was unreasonable since it applied to a temination of his contract ‘howsoever occasioned’. . .
Lists of cited by and citing cases may be incomplete.
Employment
Updated: 05 May 2022; Ref: scu.276819