Romero Insurance Brokers Ltd v Templeton  EWHC 1198 (QB)
Judgment in proceedings where a former employer was seeking to enforce restrictive covenants and damages for their breach. Damages were awarded.
The claimant had employed the first defendant as an insurance broker with a view to building their business in his local area. In the eyes of the employer, the appointment was not as successful as they had hoped and they negotiated the defendant's salary downwards. Subsequently the defendant, under the shadow of possible redundancy consultation (which he later claimed was a sham), resigned and claimed constructive dismissal while also beginning to work for the second defendant (who was joined to these proceedings after their inception). The claimant initiated these proceedings, firstly seeking an injunction preventing the defendant from working with the second defendant and subsequently claiming for damages.
In this judgment Sir Raymond Jack identifies that he must determine, among other things, whether the claimant's behaviour amounted to a repudiation of his contract of employment and whether the covenant as drafted was enforceable. He finds that:
* there was no repudiation by the claimants, partly because he found that the redundancy consultation was not a sham as alleged * the only covenant at issue was one that sought to prevent the defendant from soliciting business from clients with whom he had done business for 6 months prior to termination of employment. He then concludes that the covenant was enforceable, partly as it was standard in the industry, partly because insurance renewals operate on a 12 months cycle so the 6 month limit provided protection, and also because the defendant was a 'broker of standing' in his local area.
Case No: HQ12X04769
Neutral Citation Number:  EWHC 1198 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Date: 10 May 2013
SIR RAYMOND JACK SITTING AS A JUDGE OF THE HIGH COURT
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ROMERO INSURANCE BROKERS LIMITED (Claimant)
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(1) ANDREW TEMPLETON; (2) EASTWOOD & PARTNERS LIMITED (Defendants)
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Mr Akhlaq Choudhury (instructed by Eatons Solicitors) for the Claimant
Mr Dale Martin (instructed by Baxter Caulfield) for the Defendants
Hearing dates: 23, 24, 25 April 2013
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SIR RAYMOND JACK :
- On 22 November 2011 the first defendant, Mr Andrew Templeton, entered a contract of employment as a corporate manager with the claimant, Romero Insurance Brokers Limited. The employment began on 1 December, a week later. Mr Templeton was to be the manager of a small new office of Romero to be opened in the following February in Halifax, the main office of Romero being in Leeds. Mr Templeton has been in insurance broking all his working life. He is now 52. Between 1994 and January 2010 he was employed by Alec Finch & Co Ltd in their Halifax office and had become a board director. On leaving he was subject to restrictive covenants which prevented him approaching his former clients for 12 months. He had acquired a substantial following as a broker in Halifax. A major aim of his employment by Romero was that he should persuade many of his former clients to join him at Romero. Although Mr Templeton thought that he had been successful in building up Romero's Halifax business, Romero was less happy. Following a meeting on 6 August 2012 Mr Templeton agreed to a reduction in his salary. The reduction might be made up if turnover increased. On 28 September 2012 a meeting took place which led to his resignation on 8 October claiming constructive dismissal. On 9 October he commenced employment with the second defendants, Eastwood & Partners Limited, which has its main offices in Huddersfield. It also has an office in Halifax. Eastwood's hope was that Mr Templeton would bring a substantial number of ex-Romero clients to Eastwood. He has succeeded in that.
- On 13 November 2012 Romero issued proceedings against Mr Templeton and sought an interim injunction to enforce the restrictive covenants in his contract of employment. That application was dismissed on 23 November on the ground that Romero had not proceeded with due expedition. Directions were given which included directions for a speedy trial.
- On 21 December 2012 Eastwood was joined as second defendant on the basis that it had induced Mr Templeton's alleged breaches of covenant. Eastwood has undertaken to pay any damages found due from Mr Templeton, because, as Mr Eastwood very fairly put in his evidence, Eastwood have had the benefit of the clients. At the end of the trial Eastwood also undertook to be responsible for any costs awarded against Mr Templeton, and not to ask for any costs itself even if successful. It was agreed by counsel that in these circumstances no separate consideration of the case against Eastwood was necessary.
- At the start of the trial on Tuesday 23 April 2013 an application was made that Romero might rely on a further witness statement by its managing director, Mr Simon Mabb, which had been served late on Friday 19 April. It set out a greatly increased claim for damages. Romero had given no disclosure as to damages refusing to do so on the ground that disclosure would reveal confidential information. But no application to the court for disclosure was made on behalf of the defendants. I decided that the least unsatisfactory course was that I should not decide the quantum of damage – if it arose, in this trial, but that it should be determined subsequently at Romero's expense.
- The issues as they stood at the trial can be shortly stated:
(1) Had Romero's conduct amounted to a constructive dismissal of Mr Templeton in the sense that it amounted to a repudiation of his contract of employment which he could accept by resigning?
(2) Had Mr Templeton removed any documents containing confidential information from Romero and used the information in the course of Eastwood's business?
(3) Was the 12 month covenant in a separate agreement with Romero prohibiting the procuring of orders from entities who had in the 6 months prior to the termination of Mr Templeton's employment done business with or been a client of Romero and with whom Mr Templeton had dealings enforceable?
(4) Should Romero now be granted any relief by way of injunction?The Events
- I have mentioned the meeting on 6 August 2012 at which Mr Templeton was requested to accept a lower salary. It was followed by negotiations in which Mr Templeton improved his position. But with a basic salary of £60,000 reduced from £76,500 he was likely to be substantially worse off unless he quickly achieved substantial increases in turnover. He was not bound to agree to these new terms but he appreciated that if he was to have a future with Romero it was in his interest to do so. The revised terms were sent to him on 20 August.
- At a meeting on 14 September 2012 between Mr Justin Romero-Trigo, Romero's chairman and majority shareholder, and Mr Mabb, Mr Mabb was asked to produce a report to review how the company's income might be increased. The report was probably ready at the beginning of the week commencing 24 September. It suggested that account executives should either work to get new business or work on existing clients but not both. It made suggestions in respect of 10 individual account executives including Mr Romero and Mr Templeton. It suggested in respect of Mr Templeton that he might move from Halifax to Leeds because with Mr Mabb's involvement with the Halifax office there was no need for a manager there, and that at Leeds Mr Templeton could spend all his time on new business development. The report stated "N.B. This would be a change in role and one that will require some HR involvement and potentially putting him at risk of redundancy for that role [i.e. his position as corporate manager in Halifax] as there will no longer be a requirement for that role." I consider that the move from Halifax and the requirement to work only on new business would have been most unwelcome to Mr Templeton for three reasons. First, it would have meant giving up the clients he had brought to Romero who were many of them drawn from his former following at Finch. Second it would have meant moving from Halifax where he lived and had also worked for very many years. Third, it appeared to me that Mr Templeton was temperamentally better suited to the work he was doing in Halifax with much of his time being spent managing his clients rather than suited to the aggressive seeking of new business required by Mr Romero. It was suggested that the report was an invention prepared for the purpose of the case after the events. I have no hesitation in rejecting that. It has the hallmarks of a genuine document.
- A major reason for suggesting that the report was not genuine was that at the meeting on 28 September there was no reference to Mr Templeton being offered an alternative job in Leeds. Nor was that referred to in the letter presented to him at the meeting. That only stated "We will also consider alternative vacancies within our organisation where available." This was in part of the letter which seems to be in a standard form rather than specific to Mr Templeton's case. In his evidence Mr Mabb accepted that he had not mentioned Leeds at the meeting. But he also said that he wanted Mr Templeton to come to Leeds and that the meeting "was not a nice thing to have to do." The Leeds possibility was not referred to subsequently. One way for Mr Mabb to have handled the meeting would have been for Mr Mabb to say that the company wanted him to give up his existing position and to come to Leeds to concentrate on new business and then to move on to the redundancy situation from there. But that was not done. I think that the most likely explanation for there being no reference in the letter to the alternative of moving to Leeds and no reference to it by Mr Mabb at the opening of the meeting is that the move away from Halifax and the giving up of his clients would have been deeply unattractive to Mr Templeton.
- Before the meeting Mr Mabb took what he called HR advice as to how the situation should be handled in accordance with, in particular, the law relating to unfair dismissal. A carefully drafted letter addressed to Mr Templeton and dated 28 September 2012 was prepared. It began:
"Following our consultation meeting on 28th September 2012 we confirm that the company is currently considering a restructure which could result in potential redundancy. The purpose of the letter is to inform you that unfortunately the proposed restructure would put your job at risk of redundancy, and that a period of consultation will now commence."
- When he got into work on 28 September Mr Templeton found that a number of emails had disappeared when he accessed the company system and also that his electronic diary was blank. He thought that this must have been done remotely from the Leeds office. He told Mrs Whiteley who worked with him in the Halifax office and had worked with him at Alec Finch, and she looked at his screen. It is a helpful piece of the background that she had heard rumours that the directors were unhappy with Mr Templeton's performance. Mr Templeton was still able to send emails and still had access to the main system which contained all the information about clients. A director, Mr Nicolson, was able to insert an engagement into his diary. I do not think that Mr Templeton's computer problems that morning arose because it had been decided to cut him out of the system in anticipation of his leaving. Mr Templeton told Mrs Whiteley at lunch that he thought he was 'going to get the push'.
- The meeting on Friday 28 September began at about 4 p.m. Mr Mabb's evidence was that he began the meeting by saying that Romero had decided that a restructure of its business was required and that in consequence his role was at risk of redundancy. He gave Mr Templeton the letter, which Mr Templeton read. Mr Templeton said that he should have gone to Eastwoods 3 years ago instead of coming to Romero. He asked what deals were on the table for him leaving. Mr Mabb said that his role was at risk and they still had the consultation period, but Mr Templeton wanted to know what deals were available. Mr Mabb was not in a position to discuss a negotiated settlement. Mr Templeton then raised the possibility of Romero selling his book of business and Mrs Whiteley coming with him. Mr Mabb said the business was not for sale, but any offers would be considered. He agreed to Mr Templeton talking to two unidentified potential purchasers. Mr Templeton then asked that Mrs Whiteley might join the meeting and that she should be told the position. Mrs Whiteley was then asked to come in. At some point Mr Mabb suggested they meet again on the Monday morning at 9 in the Leeds office. Mr Templeton did not want to come to the Leeds office and wanted time to take advice. They agreed to meet at the Viaduct café in Halifax at 2 p.m. That was Mr Mabb's account of the meeting.
- Mrs Whiteley was called to give evidence by Romero. She had worked with Mr Templeton at Finch and he had thought she would follow him to Eastwood, but she chose not to. Her evidence was that when she came in to the meeting she was told that Mr Templeton had asked that she come in to hear what was being discussed. Mr Mabb told her that Mr Templeton had been informed that he was at risk of redundancy and that he had been given a letter explaining this. There was a letter on the table. In cross-examination she said that she had experience of redundancy and going through consultation. She said she was told that Mr Templeton was at risk of redundancy and that something was said about consultation.
- Mr Templeton's evidence was that Mr Mabb began the meeting by saying that he had bad news and that he, Mr Templeton, was going to be made redundant. Mr Mabb did not say that this was just consultation and that there might be another role. He glanced at the letter but did not read it until later. So the difference between the two accounts is essentially that Mr Templeton said that he was told that he was going to be made redundant rather than being told that he was at risk of redundancy and that there was to be a consultation about it.
- It is not now possible to decide what precise words Mr Mabb used at the start of the meeting. I am however satisfied that an observer at the meeting would have appreciated that Mr Templeton was not being presented with a fait accompli, but with the information that he was at risk and that there would be a consultation. I say that for three reasons. First, Mr Mabb knew that it was important to follow the correct procedure in order to avoid a risk of unfair dismissal. Second, even if Mr Templeton did not read the letter carefully, he would have seen enough of its opening to understand it. Third, there is the evidence of Mrs Whiteley as to what she was told in Mr Templeton's presence. I think that Mr Templeton jumped to the conclusion that the guillotine had fallen and his mind moved on to think about the redundancy package, as he called it, with which he might leave, and he then moved to the potential sale of his book of business to a purchaser who would become his employer. I think that, although he had had in mind the possibility that Romero might want to end his employment, the opening of the meeting nonetheless came as a great shock to him. I say that in part by reason of Mr Eastwood's description of how he was when Mr Eastwood met him subsequently.
- At the conclusion of the meeting Mr Mabb told Mr Templeton that he should not come into work and should not contact any clients. In his first witness statement Mr Mabb said that this was standard practice with any employee at risk of redundancy. I find that surprising. However here Mr Mabb was dealing with an employee who apparently wished to negotiate a redundancy package rather than engage in consultation and who was looking to arrange the sale of his book of business. That is a rather different situation, and I do not consider that Mr Mabb's instruction was unreasonable in the circumstances. Mr Mabb also arranged for Mr Templeton's access to the company computer system to be blocked. Mr Templeton's contract of employment contained a 'garden leave' provision, but that was only operable when notice of termination had been given.
- After Mr Templeton had left, Mrs Whiteley told Mr Mabb that during the afternoon Mr Templeton had removed a file of papers from his desk to his car. I am not satisfied that the file contained company papers rather than papers relating to a sports club of which he was chairman. Having heard Mr Eastwood's evidence I am also satisfied that he would not tolerate the misuse in his office of another company's confidential papers. The information about clients which an ex-employee necessarily carries in his head is of course another matter.
- On Monday morning Mr Templeton spoke to a recruitment agent and the agent started to market his services. The agent was saying that Mr Templeton had been made redundant because of financial issues at Romero caused by litigation with another brokering company. Mr Mabb spoke to the agent to correct that.
- Mr Templeton and Mr Mabb met at 2 p.m. on that Monday as agreed. Mr Templeton asked what package Romero was offering him. Mr Mabb gave him a page setting out three possibilities. He asked for a response in the next few days and said that otherwise they would continue with the consultation. There was a disagreement about the notice period. Mr Templeton thought that it was 3 months. Mr Mabb correctly thought that it was 1 month. Mr Mabb agreed to look into that, and Mr Templeton said he would contact him about the possible purchase of his book of clients. Having checked Mr Templeton's contract Mr Mabb emailed him to say that the period was 1 month and asked Mr Templeton to say whether any of the three options were acceptable by Wednesday. Late that night Mr Templeton sent an email saying that he had placed the matter in the hands of his solicitors and that none of the options were acceptable. Meanwhile at 4 p.m. Mr Eastwood had met Mr Templeton. Sometime in the following days Mr Eastwood told him he would offer him a job.
- On 2 October Mr Mabb met Mr Eastwood to discuss a sale of Mr Templeton's book of clients. The terms offered by Mr Eastwood were not acceptable. Later, at 11.07 Mr Mabb sent Mr Templeton an email to say that, contrary to what Mr Templeton had been telling third parties he had not been made redundant, but a period of consultation had started. He said that he was prepared to consider any counter-proposals to the three options, but otherwise the consultation process would continue 'the outcome of which has not been pre-determined'.
- Mr Mabb then sent an email to all clients of Mr Templeton as follows:
"I'm writing to let you know that Andrew Templeton your current contact at Romero Insurance Brokers is currently absent from work and is currently not contactable. We are not sure how long the absence will last, so we have appointed one of our existing team in Halifax to look after your account with immediate effect. The details are below. They will contact you in the next 24 hours to arrange to come and see you and put your mind at ease. The team in Halifax still remain the same so I hope this isn't too much of an inconvenience for you."
The name and contact details of the new contact followed. In my view these emails and the arrangements they set up were a reaction to the situation which Mr Mabb was then facing, namely that Mr Templeton was looking for a new job and trying to find a purchaser for his book of clients. Mr Mabb also believed that Mr Templeton had taken confidential documents. The purpose of the emails was to prevent Mr Templeton from 'poaching' any of Romero's clients. The email caused concern with a least some of Mr Templeton's clients, particularly with those who knew him well. Later that day Mr Templeton emailed Mr Mabb that his solicitor was away and that he would not be able to get back to him until Friday. Later again, Mr Mabb sent an email to Mr Templeton complaining that he had contacted clients and saying that his redundancy was not a fait accompli.
- On Monday 8 October Mr Templeton's solicitor sent a letter to Mr Mabb by email. It stated that having reduced Mr Templeton's salary in August on the basis that he would be continuing with the company, the proposed termination of his employment meant that he could no longer have trust or confidence in Romero. It said that the termination was pre-ordained and the consultation was a sham. It said that there was no reason or right to suspend Mr Templeton or to require that he should not contact clients. It complained of the email sent to clients on 2 October about Mr Templeton's absence with the name of a new contact. It said that the company was also in breach of contract in that it had not paid Mr Templeton a bonus to which he was entitled. It complained that Mr Templeton had been placed under surveillance. (At the trial Mr Templeton accepted that this was a mistaken impression on his part.) It said that Mr Templeton thereby accepted these serious breaches of his contract as discharging it.
- On the following day Mr Templeton sent an email to a number of clients. It attached his solicitor's letter terminating his employment. He described it as having 'fun and games with Romero'. He said he had 'known for a while that Romeros are having some difficulties'. He later said 'in the meantime following legal advice (to weaken Romero's bargaining power) I have resigned and have threatened them with breach of contract as per the attached'. He said that he was trying to take as many of Romero's clients as he could to weaken Romero's position in a sale. He asked if the recipient would join him as 'This would greatly assist me in my negotiations.' When Mr Eastwood saw this email, he rebuked Mr Templeton.
- In his closing submissions Mr Dale Martin put Mr Templeton's case as follows. He said that the proposed redundancy consultation process was a sham and that its outcome was pre-determined. He pointed out that the alternative to a dismissal on notice by reason of redundancy was a dismissal on notice by reason of Mr Templeton's performance. He said that to establish a fair dismissal on the latter ground under the Employment Rights Act 1996 would cause Romero considerable difficulties. Therefore the company had to dress up a case of redundancy and the outcome was always going to be that Mr Templeton would go. With regard to the need for consultation to avoid a risk of unfair dismissal I refer to Harvey, Industrial Relations & Employment Law, paragraphs D1 1704 and following, where the need for consultation in the case of an individual is considered. Putting it very shortly, even where a situation seems clear cut to the employer there should be a consultation because something may emerge.
- I do not think that the proposed consultation was a sham. I think that Mr Mabb intended in the consultation to discuss the situation including the possibility of moving to Leeds and see what emerged. I consider that in reacting as he did on 28 September by asking what his redundancy package or deal might be and raising the question of the sale of his book of business Mr Templeton jumped the gun. The offer of consultation was there but was ignored by him.
- Mr Martin referred to the emails sent on 2 October to Mr Templeton's clients appointing another broker to look after them and to call on them. He said that their terms showed an intention to replace Mr Templeton permanently, which showed that the consultation was a sham. As I have said, I consider that they were Mr Mabb's reaction to the situation facing him at that time, namely that Mr Templeton was looking for a new job and trying to find a buyer for his book of clients. The emails do not support the case that the redundancy consultation was a sham. I will return to the separate point that the emails were themselves a breach of Mr Templeton's contract.
- Mr Martin submitted that a person in Mr Templeton's position had a right to work in accordance with the decision of the Court of Appeal in William Hill Organisation Ltd v Tucker  ICR 291. He submitted Mr Mabb's instruction that Mr Templeton should not attend the office and should not contact clients was a breach of that obligation. He relied on emails sent to clients of Mr Templeton on 2 October as part of this case. I have set out in paragraph 20 above my finding as to why these emails were sent. They would have been less harmful to Mr Templeton if they had said that the appointment of the new contacts was temporary. In my view, in the particular and unusual situation which he was facing Mr Mabb was entitled to require Mr Templeton not to attend the office and not to contact his clients. Further, the reasoning in William Hill, where there a long term exclusion from work, does not apply here.
- I do not consider that in the confused situation which existed at this time the apparent replacement of Mr Templeton without limit of time shows that Romero was repudiating his contract of employment. It was a moving situation and on the same day Mr Mabb sent Mr Templeton an email saying that his redundancy was not a fait accompli. In giving the leading judgment in the Court of Appeal in Tullett Prebon Plc v BGC Brokers LP  EWCA Civ 131 Maurice Kay LJ stated that the question of repudiatory breach was a highly context-specific question. He cited from the judgment of Etherton LJ in Eminence Property Developments Ltd v Heaney  EWCA Civ 1168:
"[The legal test] is whether, looking at all the circumstances objectively, that is from the perspective of a reasonable person in the position of an innocent party, the contract breaker has clearly shown an intention to abandon and altogether refuse to perform the contract."
Because of the circumstances in which the email was sent the answer to that question here must be 'no'.
- The next matter referred to on behalf of Mr Templeton was the renegotiation of his salary only a little over a month before the issue of redundancy was raised. It was submitted that this was a serious mismanagement of the employment relationship. But it was not submitted that 'it would inevitably impinge on the [term as to trust and confidence between employer and employee] to renegotiate a salary in one month and commence a redundancy process in the next. However, given that [Mr Mabb] agreed that it was reasonable for [Mr Templeton] to consider that he had secured his position for the foreseeable future, it casts [Romero] in a poor light.' The proximity of the two events is indeed unfortunate. I think that it happened because Mr Romero decided to ask for a general review of the company's business when he did, which was unconnected to the salary reduction agreement.
- The last point is as to bonus. The signed contract of employment was silent as to bonus. But Mr Romero's letter of 28 September 2010 setting out the offer of employment as from 1 December 2010 set out what Mr Templeton's bonus arrangement should be based on commission income for the first, second and third years. It was accepted that this formed part of his contract. If the first year was measured from the opening of the office in Halifax in February 2011, he was entitled to a bonus. If it was measured from the start of his employment on 1 December 2010 he was not. Mr Templeton said that it was not anticipated that he would earn commission until he moved to Halifax. Mr Romero said that Mr Templeton was given leads to follow up in the time before he moved and that he was not employing Mr Templeton at £76,500 p.a. to bring in no business in the period before he moved. I consider that the contract is clear: the 'first year' must mean the first year of the employment. If something else was intended it was necessary to say so. Further I am not satisfied that at any time prior to his resignation Mr Templeton pressed a claim for bonus, and there was no refusal by Romero to pay.
- I find that there was no repudiation of Mr Templeton's contract by Romero, and that there was no constructive dismissal.
- I have stated that this was not established on the evidence.
- I was originally referred to three covenants, but following discussion it was clear that only one was relevant if I found that Mr Templeton had not misused documents. On the first day of his employment, 1 December 2011, Mr Templeton entered an agreement with Romero, which contained a number of covenants. The relevant one reads:
"The Employee will not for the period of 12 months immediately following the termination of his employment without the prior consent of the Board in connection with the carrying on of any business similar to or in competition with the business of Insurance Brokers/Services on his own behalf or on behalf of any person firm or company directly or indirectly seek to procure orders from or do business with any person firm or company who has at any time in the 6 months immediately preceding such termination done business with or been a customer or client of the Company or any Subsidiaries or Associated Companies and with whom the Employee has had dealings or "
It is thus a 12 month restriction limited to clients of Romero who had been a client in the last 6 months and with whom Mr Templeton had had dealings. The final 'or' shows that something was omitted when the document was prepared, but that is not material.
- It was submitted for Mr Templeton that the covenant was unsupported by consideration. It was, however, understood by Mr Templeton that Romero would require him to enter covenants, as is entirely normal in the insurance broking business. The covenants were part of the package constituting Mr Templeton's contract of employment. They cannot be considered in isolation. They are supported by the consideration moving from Romero in that contract.
- There was no dispute between the parties as to the principles to be applied in considering whether the covenant is unenforceable because it is a restraint of trade. It is for Romero to establish that the covenant was reasonable in the interests of the parties and in the interests of the public. In modern times the emphasis is on the former. The party seeking enforcement must show a 'protectable interest'. That often is, and is here accepted to be, the employer's trade connection with customers with whom the employee was dealing. If the restraint is greater than is reasonably necessary to protect that trade connection, it will not be enforced.
- Here the only point in issue is whether the period of 12 months was more than was reasonably necessary to protect Romero's business connection with its clients with whom Mr Templeton was dealing. In Stenhouse Australia Ltd v Phillips  AC 391 at 402 Lord Wilberforce stated:
"The question is not how long the employee could be expected to enjoy, by virtue of his employment, a competitive edge over others seeking the clients' business. It is, rather, what is a reasonable time during which the employer is entitled to protection against solicitation of clients with whom the employee had contact and influence during employment and were not bound to the employer by contract or by stability of association. This question, secondly, their Lordships do not consider can advantageously form the subject of direct evidence. It is for the judge after informing himself as fully as he can of the facts and circumstances relating to the employer's business, the nature of the employer's interest to be protected, and the likely effect on this of solicitation, to decide whether the contractual period is reasonable or not."
- It seems that 12 months is a period which is common in the insurance broking business in contracts with broker employees, although other periods are sometimes seen. Mr Templeton's contract with Alec Finch had a 12 month non-solicitation provision. His contract with Eastwood has one. The clauses are, of course, drafted by the employers' solicitors, and they no doubt do so with an eye on what it is thought that the court will uphold. The employee will have little or no say in the matter. But if an employee were to be asked to sign a particularly burdensome covenant, and if he was shrewd, he might say nothing on the basis that he would have a good chance of arguing that it was not enforceable, whereas if he objected successfully he would find himself with a covenant having a better chance of being upheld. Here the covenant was as Mr Templeton expected. It was similar to a covenant in his contract with Finch. That expired in the latter part of January 2011. Romero had suggested that he take legal advice as to its enforceability. He had done so and been advised that if he intended to break it he should first seek an indemnity from Romero. He observed the covenant.
- The legitimate purposes of the covenant here were to give time to Romero to build a connection between clients looked after by Mr Templeton and his replacement, and to diminish by the passage of time the strength of the connection between Mr Templeton and the client. In paragraph 12 of his fifth witness statement Mr Mabb said of clients: 'It does not really matter at the end of the day who is servicing their account as long as it is done.' It was suggested that this meant that here there was little 'client connection' to protect. I do not think that the passage is relevant to Romero's client connection, but it might suggest that Mr Templeton had no client connection. There is, however, powerful evidence to the contrary. Here Mr Templeton was a broker of standing in his area. He had good connections with his former clients at Finch. It was those connections which made him attractive to Romero. Just as he could deliver clients, he might well be able to take them with him when he left.
- Mr Martin submitted that there was an imbalance between the period of 6 months chosen as the period within which the client must have 'done business with or been a customer or client' of Romero, and the period of 12 months chosen as the length of the restriction: if 6 months for the one, why not 6 months for the other? But the periods are fulfilling different functions. I think that the difficulty is that one clause has to cover all situations. Many insurances are renewed annually and the renewal date is when a client is most likely to change brokers. If the 6 month period had been set at 12 months, that could be argued to mean that a client with a renewal date towards the start of that period would be protected, looking at it on this basis, for nearly two years – which might have been thought to make the restriction vulnerable. But, if it is only 6 months, such a client might not be protected unless Mr Templeton had dealt with him since the renewal date. I do not think that these possibilities help me in deciding whether the 12 month period is itself reasonable. I do think, however, that the fact that insurances often last for 12 months is relevant. A renewal period was a factor considered by Hickinbottom J in Lonmar Global Risks Ltd v West  EWHC 2878 (QB): paragraph 53 of the judgment.
- Looking at the whole of the situation I have concluded that it was reasonable for Romero to seek to protect their client connection with a 12 month restriction against solicitation by Mr Templeton in the way Romero did. The clause is enforceable. I would not have upheld a longer clause.
- The situation is different from when an interim injunction was sought. That is because Romero has now established that the clause is enforceable, and Mr Templeton has failed to establish his case as to constructive dismissal. It is well-established that in cases such as the present employers should not normally be left to their remedy in damages, and so an injunction is appropriate to cover the rest of the 12 months. However it emerged at the end of the trial that Romero had failed to put in evidence in relation to clients and the 6 month period. I will hear counsel as to the consequences of this.
- Romero is entitled to damages for breaches by Mr Templeton of the covenant occurring between his leaving Romero and this judgment. As I have said, I ruled at the start of the trial that the quantum of damage, if it arose, should be assessed subsequently and at the expense of Romero, meaning that Romero must pay the defendants' costs of the assessment. As I said at the time, the order must take into account the possibility of an offer of settlement by Romero which it might later be found should have been accepted by the defendants thus making Romero's continued liability for the defendants' costs inappropriate. I will hear submissions as to the orders to be made in connection with the assessment.
Published: 16/05/2013 16:22