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Restrictive Covenant upheld despite drafting error

In Prophet plc v Huggett (2014) EWHC 615 (CH), the High Court considered the enforceability of a non-compete restriction which, on its face, offered the claimant employer no protection because of a drafting error.

Mr Huggett was employed by Prophet plc, a software developer and supplier for the fresh produce industry, as its UK Sales Manager.  He was subject to a restrictive covenant that prevented him from competing with, or working for a competitor of Prophet plc.

Mr Huggett left Prophet plc and moved to a competitor company and his original employer, Prophet plc, sought to enforce the covenant.

The non-compete restriction, read literally, would provide Prophet with no protection. This was because no competitor would ever be selling Prophet products which were the only products with which Mr Huggett would ever have been involved while employed by Prophet. It was clear that something had gone wrong in the drafting.

The court invited both parties to submit an alternative formulation for what had been reasonably intended. The court rejected the employee’s assertion that the covenant meant to say what it said. The court found that the probable true intention of the parties could be reached simply by adding the words “or similar thereto” to the end of the clause.

Applying the Court of Appeal’s decision in Turner v Commonwealth & British Minerals Ltd, the High Court found that it was not necessary to apply the legitimate interest “and reasonableness” tests to each possible construction of the covenant. The court therefore went on to test the re-worded covenant to see whether it was enforceable, and whether, as a matter of discretion, an injunction should be granted.

The High Court granted an injunction preventing Mr Huggett from being involved in the provision of software designed for the fresh produce industry until the expiry of the 12 month period, while allowing him to remain employed by his new employers, K3.

This case is a useful reminder of the court’s powers to interpret a post-termination restrictive covenant where there is a drafting error that renders the clause useless. It is somewhat surprising that the court felt able to add words to the contractual language to make the covenant work, but it illustrates the rule of construction that contractual interpretation consistent with “business common sense” is generally preferred to more literal or strict readings.

For more information on this, please contact us on 01483 303636.

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Rachel O’Connell, Solicitor & Director, Just Employment Ltd.

This entry was posted in Employment Law, Just Employment Solicitors, Restrictive Covenants and tagged , , . Bookmark the permalink.

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