Wednesday, July 23, 2014

Court of Appeal Refuses to Re-Write Restrictive Covenant

The Court of Appeal has overturned a High Court decision that said that a restrictive covenant could be re-written to protect the interests of the former employer.

Mr Huggett worked for Prophet plc, who develop, sell and update software for the grocery sector. When he left to go and work for a company which develops and sells a range of products, including one for use in the same sector, Prophet tried to enforce a restrictive covenant to stop him.

The clause stated that for 12 months he could not be involved in certain activities in connection with “…any products. ..on which he was involved whilst employed by Prophet.”

Mr Huggett argued that the literal meaning of this was that he could not work for someone else supplying Prophet’s products and that since the new job did not involve this, but a similar competing product, the covenant did not apply.

The High Court disagreed. That would lead to an absurd result and could not have been what the parties intended. The Judge said that the clause should in effect be read as including at the end the words “or similar thereto.” An injunction was granted to Prophet to stop Mr Huggett starting the job.

Mr Huggett went to the Court of Appeal who overturned the High Court decision and lifted the injunction. They acknowledged that whilst a covenant can be interpreted by a Court where it is ambiguous, there was no ambiguity here – the clause was just badly drafted. The parties had contracted on those terms. Prophet had “made its bed and must lie in it.” 

Mr Huggett can start his new job. Depending upon how the wording came about it may also be that the person who drafted it is having to speak to their Professional Indemnity Insurers.

Restrictive covenants are a restraint of trade and a Court will not uphold them unless they are clear and reasonable. The case is a reminder that exceptional care needs to be taken in drafting them and this is clearly an area where any employer preparing a contract or seeking to uphold restrictions should take specialist advice.


Tuesday, July 08, 2014

You Can't Have Your Cake and Eat It in Discrimination Law

The BBC reports that a "Christian run" bakery in Northern Ireland is facing a potential sexual orientation discrimination claim after it refused to bake a cake with a slogan on it which supported gay marriage.

The owners of the bakery said that this was incompatible with their religious beliefs.

As a result they have received a letter from the Equality Commission inviting them to compensate their client or face legal action.

The General Manager of the bakery expressed himself "very surprised" at this turn of events. Given the widespread publicity that has been given to previous cases where damages have been awarded against Bed and Breakfasts that refused to allow gay couples to share a bed that surprise is itself somewhat surprising.

Unless the bakery is able to point to evidence that a "straight" cake would have been refused in similar circumstances it would appear that they are likely to be in some difficulties as it would on the face of it seem to be a clear refusal to provide a service because of sexual orientation.

There are two schools of thought on this. Many would say that anyone who provides a service to the public must do so without discriminating and that no-one would dream of allowing a business to refuse to serve a customer on grounds of their race, whether this was based on strongly held religious (or other) beliefs or not.

On the other hand there are those who feel uncomfortable with people being compelled to provide services in circumstances where this clashes with their strongly held beliefs.

At least one Judge has suggested that the law might allow for "conscience clauses" in this respect. Another possibility might be to give private business more leeway than taxpayer funded public services.