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.