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 requiring the former employee to take no interest in a competing company.
Held: The court should set aside the Court of Appeal’s order and should overrule the decision in the Attwood case; and that, although the contractual period of the restraints has expired long ago, it should formally restore the injunction granted by Mann J, subject only to the removal of the words ‘or interested’.
Lady Hale, President, Lord Kerr, Lord Wilson, Lord Briggs, Lady Arden
 UKSC 32,  AC 154,  ICR 1223,  3 WLR 245,  WLR(D) 395,  1 All ER 477,  IRLR 838,  FSR 39,  2 BCLC 143, UKSC 2017/0182
England and Wales
Appeal from – Tillman v Egon Zehnder Ltd CA 21-Jul-2017
Post employment restrictive covenant – unreasonable restraint of trade – six months restriction – not to become shareholder in a competitor.
Held: The injunction against employment and holding the shares was discharged. The Court rejected the . .
At First Instance – Egon Zehnder Ltd v Tillman ChD 23-May-2017
Application for an injunction to enforce an employee restrictive covenant which, if effective, would restrain the defendant from working for a competitor of the claimant for a period of six months from the termination of her employment. Mann J, at . .
Cited – Colgate v Bacheler 1653
The defendant agreed that, if for three years his son worked as a haberdasher in Canterbury or Rochester, he would pay the plaintiff pounds 20. The court held the agreement to be void irrespective of its limitations of time and place because it was . .
Cited – Mitchel v Reynolds 1711
A bond or promise to restrain oneself from trading in a particular place, if made upon a reasonable consideration, is good. (So Davis v Mason, 5 TR 118.) Secus if it be on no reasonable consideration, or to restrain a man from trading at all.
Cited – Scully UK Limited v Lee CA 9-Feb-1998
An employee had covenanted that throughout the year following termination he would not engage in or be ‘otherwise interested in, whether as a shareholder . . employee or . . in any other capacity’ any business, which was defined in terms not limited . .
Cited – National Enterprises Ltd v Racal Communications Ltd 1975
When a court makes an assumption about the law, instead of reaching a focussed determination in relation to it, the decision based upon it does not carry binding authority under the doctrine of precedent . .
Cited – George Hill and Co v Hill 1886
The plaintiff company acquired the meat export business of the defendant, who covenanted not to ‘be in any way concerned or interested in any similar business’ within ten miles of the Royal Exchange. He became an employee of a similar business . .
Cited – Nordenfelt v Maxim Nordenfelt Guns and Ammunition Company HL 1894
Exceptions to Freedom to Trade
The purchaser of the goodwill of a business sought to enforce a covenant in restraint of trade given by the seller.
Held: At common law a restraint of trade is prima facie contrary to public policy and void, unless it can be shown that the . .
Cited – Servais Bouchard v Princes Hall Restaurant CA 1904
A restaurant in Piccadilly had contracted with a supplier of burgundy not to sell burgundy to its customers other than such as it had purchased from the supplier. The restaurant broke the contract
Held: A contract by which defendant Restaurant . .
Cited – Wood v Capita Insurance Services Ltd SC 29-Mar-2017
Construction of term of contract for the sale and purchase of the entire issued share capital of a company.
Held: The appeal was dismissed: ‘the SPA may have become a poor bargain, as it appears that it did not notify the sellers of a warranty . .
Cited – Proactive Sports Management Ltd v Rooney and Others CA 1-Dec-2011
Wayne Rooney set up a company to which he assigned his image rights, in other words his rights to exploit his image by, for example, his indorsement of sports products and by other forms of promotion and sponsorship. His company contracted with the . .
Cited – McPhail v Doulton (on appeal from In re Baden’s Deed Trusts) HL 6-May-1970
The settlor asked whether the test for validity, in point of certainty of objects, is the same for trusts and powers, or whether the test for trusts is more demanding.
Held: The test is the same. The context was a provision, held to be a . .
Cited – Dickson v Pharmaceutical Society of Great Britain HL 1970
The Society was concerned by the extension of the range of non-pharmaceutical goods sold in chemist’s shops and the effect which it might have on the quality and status of the profession, proposed a new rule for inclusion in the code of ethics and . .
Cited – Herbert Morris Ltd v Saxelby HL 1916
For a covenant in restraint of trade to be treated as reasonable in the interests of the parties ‘it must afford no more than adequate protection to the benefit of the party in whose favour it is imposed.’ There is a need for the court to consider . .
Cited – Esso Petroleum Co Ltd v Harper’s Garage (Stourport) Ltd HL 1968
Agreement in Restraint of Trade Unenforceable
The defendant ran two garages under solus agreements with the plaintiffs who complained when the defendants began to purchase petrol from cheaper alternative sources. The House was asked whether the solus agreements were be regarded in law as an . .
Cited – In re Baden’s Deed Trusts CA 1969
The Court by a majority, determined the meaning of a deed of settlement by reference to the validity principle.
Harman LJ said: ‘the court is at liberty, if the considerations on both sides seem evenly balanced, to lean towards that which may . .
Cited – TFS Derivatives Ltd v Morgan QBD 15-Nov-2004
The claimant sought to enforce a post employment restrictive covenant. There was a 6 months’ prohibition, post-termination of employment (less any period of garden leave) on any employment which was competitive with the business of a former . .
Cited – Anglo Continental Educational Group (GB) Ltd v Capital Homes (Southern) Ltd CA 17-Mar-2009
The two parties to this appeal are locked in battle over a contractual provision for a discount in the calculation of the purchase price for two properties.
Arden LJ said: that ‘if the agreement is susceptible of an interpretation which will . .
Cited – Inland Revenue Commissioners v Williams ChD 1969
Megarry J adverted to the need for an even balance when construing a clause in a deed: ‘It is possible that the same approach might be adopted where the scales are tilted only slightly to one side or the other; but plainly it cannot apply where, . .
Cited – Tindall Cobham 1 Ltd and Others v Adda Hotels and Others CA 5-Sep-2014
Tenants had assigned their leases to subsidiary companies as part of a company re-organisation, and now claimed the benefit of the 1995 Act to relieve them from liability under an authorised guarantee agreement. . .
Cited – The Great Estates Group Ltd v Digby CA 13-Oct-2011
The Claimant, an estate agent, considers that it was cut out of its entitlement to commission on the sale of a property in London in the buoyant market of the summer of 2007. By these proceedings it seeks compensation for that loss.
Toulson LJ . .
Cited – Smith v Hancock ChD 23-Apr-1894
The defendant sold his grocery business near Stoke-on-Trent to the claimant and agreed not for the following ten years to carry on or be ‘in any wise interested’ in any similar business operating within five miles of it. The defendant’s wife set up . .
Cited – Gophir Diamond Co v Wood ChD 26-Mar-1902
The ex-employee of a jewellery shop in Regent Street had become a salaried employee of a rival shop in the same street. Swinfen Eady J noted that his covenant had only been not to be ‘interested’ in a similar business; and the judge added that in . .
Cited – David Chesman, Et Ux v Margery Nainby, Widow HL 22-Feb-1727
Miss Nainby traded as a draper from her home in Drury Lane. Prior to her marriage Mrs Chesman became apprenticed to Miss Nainby. Mrs Chesman entered into a bond that, after leaving Miss Nainby’s service, she would not trade as a draper, nor assist . .
Cited – Mason v Provident Clothing and Supply Co Ltd HL 1913
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 . .
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 – Tradition Financial Services Ltd v Gamberoni and Others QBD 12-Apr-2017
Post-employment restrictions on the employee included a covenant on his part not for six months to ‘undertake, carry on or be employed, engaged or interested in any capacity in . . any business activity’ of a specified character. Among the . .
Cited – Philip William Carney v John Edward Herbert and Others PC 29-Oct-1984
(New South Wales) The security for payment of the price, for which a contract for the sale of shares had provided, was not only a guarantee but also mortgages which were statutorily illegal. The Privy Council indorsed a decision of the Supreme Court . .
Cited – CEF Holdings Ltd and Another v City Electrical Factors Ltd and Others QBD 1-Jun-2012
The claimant sought continuation of interim orders requiring the defendants not to solicit the employment of its workers, and restraining any use of its intellectual property by defendants who had already left.
Held: That for various reasons . .
Overruled – 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 – Attwood v Lamont CA 2-Jan-1920
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 . .
Cited – Putsman v Taylor KBD 1927
The plaintiff employed the defendant as manager of his tailoring business at 49 Snow Hill in Birmingham. The defendant covenanted that, following the end of his employment, he would not be employed by a tailor (a) anywhere else on Snow Hill nor (b) . .
Cited – Scorer v Seymour Jones CA 1966
The claimant, an estate agent in Dartmouth, opened a branch in Kingsbridge and employed the defendant to manage it. The defendant’s post-employment covenant was not to set up as an estate agent within five miles either of Kingsbridge or of . .
Cited – T Lucas and Co Ltd v Mitchell CA 1974
The claimant, which manufactured foodstuffs, employed the defendant as a salesman in Manchester. His post-employment covenant was not to deal in goods similar to those manufactured by the claimant nor to solicit orders from, nor to supply, any of . .
Cited – Sadler v Imperial Life Assurance Co of Canada Ltd QBD 1988
The defendant employed the claimant as an insurance agent on commission, to be calculated by reference to premiums paid to the defendant for the first ten years under any policy which he had procured. A clause of the contract stated that, if in . .
Cited – Marshall v NM Financial Management Ltd ChD 10-Jul-1995
A post-termination restriction on an employment was in restraint of trade and ineffective despite a payment having been made for the restriction. The agent was not entitled to any commission after termination under the relevant clause.
Mr . .
Cited – NM Financial Management Limited v Marshall CA 13-Mar-1997
The court considered a provision that a commission agent would be paid commission following the termination of his agency provided that he did not within a year become an independent intermediary or work for a competitor. Here the suspension of . .
Cited – Beckett Investment Management Group Ltd and others v Hall and others CA 28-Jun-2007
The defendants, who had been employed by the claimant as independent financial advisers, covenanted that, for the year immediately following termination of their employment, they would not deal with any of the claimant’s clients with whom they had . .
Cited – Freshasia Foods Ltd v Lu ChD 20-Mar-2019
The Court considered continuation of an interim injunction to enforce a post employment restrictive covenant.
Held: Arnold J ruled that the employer had failed to establish legitimate interests which required the protection of the covenant. He . .
Cited – UK Power Reserve Ltd v Read ChD 2014
The court focussed on whether the effect of the words ‘concerned or interested’ in a post-employment restraint was to preclude the ex-employee from having no more than a passive minority shareholding in a competitor, because, if so, they were . .
Cited – East England Schools CIC (T/A 4Myschools) v Palmer and Another QBD 20-Dec-2013
The claimant company sought to enforce post employment restrictive covenants against the defendants, its former employees. The defendant argued that the increasing use by teachers and schools of social media and the internet means that the employer . .
Cited – Ashcourt Rowan Financial Planning Ltd v Hall QBD 10-May-2013
ARFP sought to enforce post-termination covenants against the defendant, and inter alia an order which would prevent him from working for a competitor for a time. H contended that ARFP were relying on covenants that were already spent and in any . .
Cited – British Reinforced Concrete Engineering Co Ltd v Schelff CA 1921
Younger LJ said: ‘Now the effect of severing by striking out with a blue pencil the obnoxious part of a covenant is not to alter or affect the construction of what is left. That must be construed as if the portion struck out still remained . . ‘ . .
Lists of cited by and citing cases may be incomplete.
Updated: 11 April 2022; Ref: scu.639249