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WRN Ltd v. Tim Ayris


Queen’s Bench Division

Restrictive covenants in a contract of employment were too wide to be enforceable by reason of the fact that they were not limited to preventing the former employee from having contact with customers of the former employer with whom he personally had had dealings.

The claimant (W) sought injunctions requiring the defendant (T) to comply with various terms of his employment contract and of a further contract said to have been made by T when he left W's employment. T had been employed by W as a manager. He went to work for a competitor (V). W's case was that V and W shared a number of customers and T in his new job was expected by V to have contact with a number of customers which it had in common with W. W sought to enforce covenants in T's employment contract which provided that he would not for a period of six months after the termination of his employment seek in any capacity whatsoever any business, orders or custom for any restricted products or restricted services from any customer of W nor accept any orders for such products or services from any customer. The terms of the leaving contract extended the relevant period from six months to 12 months. T's case was that he had not, save in minor respects and largely inadvertently, infringed any of the covenants which W sought to enforce. T contended that (1) the leaving contract was unsupported by consideration, and thus did not give rise to obligations enforceable against him; (2) the relevant covenants were unenforceable as being unreasonable restrictions upon him in restraint of trade.

HELD: (1) Before execution of the leaving contract an oral agreement had been made between W and T varying the terms of the employment contract, as varied up to that date, to provide for a new termination date and relieving W of the obligation of paying T's salary after that date. In the light of that finding, the only consideration passing from W which could be said to support the leaving contract was a promise to perform an existing contract. It was well-established that such would not, in law, constitute consideration, and consequently the leaving contract was not valid and binding in law. (2) The reasonableness of the covenants had to be tested as at the commencement of T's employment. The relevant covenants were too wide to be enforceable solely by reason of the fact that they were not limited to preventing T having contact with customers with whom he personally had had dealings. At the commencement of his employment an important part of his job was to foster contacts with actual or potential customers. There could be no proper objection to a covenant restraining him for a suitable period after leaving W from soliciting or accepting business from contacts developed during the currency of his employment by W. However, there was no justification for restraining him from having contact with customers of W with whom he personally had had no dealings. The period of six months specified in the relevant covenants was reasonable.

Action dismissed.

Counsel for the defendant: Louise Chudleigh.

[2008] IRLR 889

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