Restrictive Covenants

The recent High Court case of Prophet Plc v Huggett [2014] brought an interesting dimension to advice on restrictive covenants.  The employer had drafted a 12 month non-compete restrictive covenant which if read literally offered the employer no protection at all.  The clause was drafted in such a way that it could be read that he could as a sales manager not be engaged or employed in connection with any products he was involved in during his employment. In reality no competitor would ever be selling the employer’s products so the clause was useless.

The Court took a more unusual approach and read words into the covenant to produce a commercially sensible result.  It corrected the drafting error by looking at what a reasonable person would have understood the parties to have meant.  The Court then went on to uphold the restriction as re-drafted.  It said that there was a legitimate interest to protect and that the non-solicitation and non-dealing covenants even coupled with the restrictions on confidential information would not provide sufficient protection on their own.

Whilst this may provide some comfort for those drafting covenants, it does not provide comfort for those trying to advise on the covenants already in place.  It seems now it is not just what is written but what ought to be there to give it commercial effect where the clause is not well drafted.

Written by
Edward Aston
22nd April 2014

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