Sparta Global Limited & Anor v Ben Hayes & Anor
[2024] EWHC 100 (KB)
Alan James Boydell v NZP Limited & Anor
4 April 2023
[2023] EWCA Civ 373
Court of Appeal
A worker left his job and his old company sued to stop him from working for a competitor. A judge said the worker couldn't work for competitors for a year, but he could work other places. The worker appealed, but the appeal court agreed with the judge, as the restrictions weren't too unfair considering his special job.
Key Facts
- •Dr Alan Boydell, a former employee of NZP Limited (a pharmaceutical company), appealed against an interlocutory injunction preventing him from competing with his former employer.
- •The injunction was based on restrictive covenants in Boydell's employment contract and shareholder's agreement.
- •The covenants prohibited Boydell from competing with NZP or its affiliates for 12 months (employment contract) and 2 years (shareholder agreement).
- •The judge granted an injunction enforcing the 1-year covenant with some modifications, but refused to enforce the 2-year covenant.
- •Boydell appealed the judge's decision on several grounds, including that the clause was too wide and the judge's approach to severance was incorrect.
- •NZP argued that they only needed to show a serious question to be tried, relying on *American Cyanamid v Ethicon*.
- •Boydell argued the covenants were unenforceable because they were too wide, even after severance.
- •The appeal centered on the interpretation of clause 3.1 of the employment contract and the principles of severance.
Legal Principles
In interlocutory injunction applications, the court should consider whether there is a serious question to be tried. However, in cases where a trial won't occur until after the covenant expires, the court can form a preliminary view of the claimant's prospects of success.
American Cyanamid v Ethicon [1975] AC 396; Lansing Linde v Kerr [1991] 1 WLR 251
The court should construe the contract at the interlocutory stage if possible, unless there are disputed facts that need resolving at trial.
Arbuthnot Fund Managers Ltd v Rawlings [2003] EWCA Civ 518
Restrictive covenants should be interpreted in their natural and ordinary sense, within the context known to both parties.
Lambeth LBC v Secretary of State for Local Communities and Government [2019] UKSC 33
A valid clause remains valid even if it covers unlikely or improbable circumstances.
Home Counties Dairies Ltd v Skilton [1970] 1 WLR 526
In cases of ambiguity, the court should prefer the interpretation that renders the clause valid (the validity principle). However, this principle is not applicable if only one realistic construction exists.
Egon Zehnder Ltd v Tillman [2019] UKSC 32
Severance of words in restrictive covenants is permissible if the severed part is not essential to the overall effect of the restraints; the ‘blue pencil’ test applies.
Egon Zehnder Ltd v Tillman [2019] UKSC 32
A restrictive covenant is unenforceable if it is wider than reasonably necessary to protect the legitimate interests of the employer.
Various cases cited throughout judgment, including Wincanton Ltd v Cranny
The court considers the adequacy of damages in determining whether to grant an injunction. If damages would be inadequate for the claimant, this favors granting an injunction.
American Cyanamid analysis implicitly referenced
Outcomes
Appeal dismissed.
The Court of Appeal found that the judge's interpretation of clause 3.1 and his application of severance were largely correct. While acknowledging the clause was broadly drafted, they did not find it plainly and obviously unenforceable. The court considered the specialized nature of NZP's business and concluded that the restraints, as severed, were not unreasonably wide in the context. The non-solicitation and non-dealing clauses were also upheld.
Interlocutory injunction upheld (with modifications).
The Court of Appeal agreed with the judge that there was a serious question to be tried regarding the enforceability of the covenants. The balance of convenience favoured granting the injunction until trial, particularly given the payment to Dr. Boydell of his full salary during the injunction period. The court refused permission to cross-appeal on the issue of severance.