A court considering whether a restrictive covenant in an employment contract is reasonable, can sever words which render it too broad ‘if the severed parts are independent from one another and can be severed without the severance affecting the meaning of the part remaining’ and/or where the covenant is not really a single covenant but is in effect a combination of several distinct covenants.
Held: Reversing the order of the Divisional Court, the covenant was not severable. The tendency of recent decisions had been to limit severability more than previously but that in his view it remained the law that severance was available if the parts proposed to be severed were independent and if it did not affect the meaning of what was proposed to remain. If severance of one part were to leave the remainder of the covenant with a meaning different in kind and not only in extent from its previous meaning, the parts of the covenant could not be said to be ‘substantially equivalent’ to separate covenants. Severance of the list of trades would entirely alter the scope and intention of the agreement and so failed Sargant J’s test.
Younger LJ
(a) stated that recent decisions of the House of Lords had wrought a fundamental change in the approach of the law to post-employment restrictions, which were peculiarly susceptible to current views of public policy;
(b) observed there that the principle of freedom of contract still remained operative in contracts between the vendor and purchaser of a business;
(c) suggested that severance of a covenant was available only where it was ‘not really a single covenant but [was] in effect a combination of several distinct covenants’;
(d) held there that the list of prohibited trades was in effect contained in one covenant because (so he reasoned) the claimant himself had only one trade and not several trades;
(e) noted there that, even if he was wrong to regard the list of trades as contained in one covenant, the court should nevertheless decline to sever it;
(f) quoted with approval the observations first of Lord Moulton that severance should be confined to the trivial and the technical and then of Neville J in the Goldsoll case that a partly unreasonable restraint should make it entirely void, even if grammatically severable; and
(g) concluded that severance should not generally be allowed.
Judges:
Lord Sterndale Mr, Atkin LJ
Citations:
[1920] 3 KB 571
Jurisdiction:
England and Wales
Citing:
Appeal from – Attwood v Lamont KBD 1920
The claimant carried on business in Kidderminster as a draper, tailor and general outfitter, employed the defendant as a cutter in the tailoring department. The defendant covenanted not at any time thereafter to trade as ‘a tailor, dressmaker, . .
Cited by:
Cited – Allan Janes Llp v Johal ChD 23-Feb-2006
The claimant sought to enforce a restrictive covenant against the defendant a former assistant solicitor as to non-competition within a certain distance of the practice for a period of three years. After leaving she had sought to set up partnership . .
Cited – Tillman v Egon Zehnder Ltd SC 3-Jul-2019
The company appealed from rejection of its contention that its former employee should be restrained from employment by a competitor under a clause in her former employment contract. The court particularly considered the severability of a section . .
Lists of cited by and citing cases may be incomplete.
Employment, Contract
Updated: 11 April 2022; Ref: scu.240029