The employee had covenanted not to work for any of the employer’s competitors ‘within 25 miles of London’. The appellate committee held that the employer had failed to establish that the extension of the restraint to the area thus specified was reasonably necessary for its protection and concluded that it was therefore void.
To uphold restrictions which a covenant imposes upon the freedom of action of the servant after he has left the service of the master, the master must satisfy the Court that the restrictions are no greater than are reasonably necessary for the protection of the master in his business.
Courts should be reluctant to read down a potentially excessively wide covenant to make it enforceable. If severance is sought, the court should ask whether that which is unenforceable ‘part of the main purport and substance’ of the clause in which it appears?
Lord Moulton said: ‘It was suggested in the argument that even if the covenant was, as a whole, too wide, the court might enforce restrictions which it might consider reasonable (even though they were not expressed in the covenant), provided they were within its ambit. My Lords, I do not doubt that the court may, and in some cases will, enforce a part of a covenant in restraint of trade, even though taken as a whole the covenant exceeds what is reasonable. But, in my opinion, that ought only to be done in cases where the part so enforceable is clearly severable, and even so only in cases where the excess is of trivial importance, or merely technical, and not a part of the main purport and substance of the clause. It would in my opinion be pessimi exempli if, when an employer had exacted a covenant deliberately framed in unreasonably wide terms, the Courts were to come to his assistance and, by applying their ingenuity and knowledge of the law, carve out of this void covenant the maximum of what he might validly have required. It must be remembered that the real sanction at the back of these covenants is the terror and expense of litigation, in which the servant is usually at a great disadvantage, in view of the longer purse of his master.’
Judges:
Lord Moulton
Citations:
[1913] AC 724
Jurisdiction:
England and Wales
Cited by:
Cited – Associated Foreign Exchange Ltd v International Foreign Exchange (UK) Ltd and Another ChD 26-May-2010
The claimant sought interim injunctions to enforce a restrictive covenant against solicitation of customers in a former employee’s contract. The employee, a FOREX dealer, had been placed on garden leave for three months and then his contract . .
Cited – Nevanas (SV) and Co v Walker and Foreman ChD 11-Dec-1913
In 1908 the plaintiff company agreed to employ the defendant F. as manager of the company at Liverpool for five years from January, 1909, and by clause 7 it was provided that the manager should not for a period of one year after the determination of . .
Cited – Goldsoll v Goldman 1914
. .
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. . .
Lists of cited by and citing cases may be incomplete.
Employment, Contract
Updated: 10 April 2022; Ref: scu.416384