Alan James Boydell v NZP Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Bean,Lord Justice Coulson,Lady Justice Macur |
| Judgment Date | 04 April 2023 |
| Neutral Citation | [2023] EWCA Civ 373 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: CA-2023-000408 |
[2023] EWCA Civ 373
Lady Justice Macur
Lord Justice Bean
and
Lord Justice Coulson
Case No: CA-2023-000408
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
HIS HONOUR JUDGE AUERBACH
KB 2023 000177
Royal Courts of Justice
Strand, London, WC2A 2LL
Paul Nicholls KC and Andrew Edge (instructed by Hogan Lovells International LLP) for the Appellant (Defendant)
Judy Stone, Rupert Paines and Raphael Hogarth (instructed by Kirkland and Ellis International LLP) for the Respondents (Claimants)
Hearing date: 15 March 2023
Approved Judgment
This judgment was handed down remotely at 10.30am on [date] by circulation to the parties or their representatives by e-mail and by release to the National Archives.
Dr Alan Boydell appeals against a decision of His Honour Judge Auerbach, sitting as a Judge of the High Court, to grant interlocutory injunctions against him pending a trial which we are told is listed to be heard between 19 and 29 June 2023. The judge himself granted permission to appeal to this court on certain grounds which raise what I regard as the main point in the case; on other grounds Dr Boydell seeks permission to appeal which the judge refused. By a Respondent's Notice the Claimant companies seek permission to cross-appeal on one aspect of the judgment below.
The business of the First Claimant (“NZP”) is in a niche area of the pharmaceutical industry described in summary as the development, production and sale of bile acid derivatives for sale to pharmaceutical companies for use by them in their products. It is part of the ICE Pharma Group of companies. Its ultimate holding company is the Second Claimant. Dr Boydell is a former employee of NZP. Following his notice of resignation, given in October 2022, his employment ended on 25 January 2023. At that time he was Head of Commercial — Speciality Products, a position he had held since early 2021 although he had worked for NZP for some years before. He stated his intention to join Zellbios GmbH, which is part of the Axplora Group, to head their “bile acid business.”
The claim was issued on 24 January 2023. The Claimants sought to enforce two sets of restrictive covenants. One set, contained in a variation to the Appellant's employment contract, ran for one year from the termination of his employment. The other set, contained in a shareholder's agreement ran for two years. The judge granted an interim injnnction enforcing the one year covenants in the employment contract until the trial, with some modifications to which I will come later. He refused to enforce the two year restrictions in the shareholder's agreement; the Claimant companies have not sought to appeal against that aspect of his decision.
When proceedings were issued the Defendant gave a written undertaking to abide by the covenants pending determination of the Claimants' application for an interim injunction. The parties sought a hearing on 6 February 2023 but the court was unable to accommodate them. The hearing was listed for and took place on 23 February 2023. The judge gave his decision orally the following day. It was no mean feat to have produced a judgment of such high quality so promptly.
The most important clause of the employment contract for present purposes is clause 3.1, which provided as follows:
“3.1 The Employee agrees with the Company, that they will not, for a period of 12 months after the termination of their employment with the Company for whatever reason, be involved directly or indirectly, in any activity, whether as a self-employed person or as an employee, even on an occasional basis or without remuneration as a partner, director, employee, contractor, assistant, or agent, independently of their duties under their new business relationship for the benefit of any-subject, natural or legal person, company or other entity howsoever defined that carries out any business activity that would compete with the business activity as carried out by the Company or any of its affiliates, including each entity in the Group (together, the “Group Companies”), or that any Group Company was actively considering carrying out as evidenced by board minutes, at the date of termination of the Employee's employment, including collection of bile or other related animal products, processing of bile or other related animal products, conversion of bile or other related animal products for pharmaceutical use, any activities relating to the supply chain, manufacturing or use of bile from various animals, including but not limited to cattle, chicken, pigs; any business related to cholic acid or any derivatives (including UDCA — ursodeoxycholic acid), and anything that is either related to or is a substitute of [sic] such products; any pharmaceutical business that involves applications for gallstone dissolution, PBC (primary biliary cholangitis), or other liver or GI (gastrointestinal) related conditions. For the purposes of this non-compete covenant, amongst the companies which are to be considered as competitors, are included by way of example, the following (including the relevant parent subsidiaries and/or affiliates): Belling, Pharmazell, Dipharma. Falk/Tiefenbacher, Pro.Med, Riverson, Cheplapharm, Daewoong Mitsubishi Pharma.”
Further clauses provided:
“3.2 The Employee covenants and agrees that the Employee will not following the termination of the Employee's employment (however terminated) for a period of 12 months, without the prior written consent of the Company, do any of the following:
a. directly or indirectly induce or solicit or endeavour to induce or solicit, any person who or entity which was at any time within the 12 month period prior to the termination of the Employee's employment, was a client or customer of any Group Company and with whom the Employee had direct dealings during the 12 months prior to the termination of the Employee's employment, to cease doing business with the relevant Group Company or to reduce the amount of business which the person or entity would normally do with the relevant Group Company;
b. directly or indirectly approach, entice away or deal in trade with any person who or entity which, within the 12 month period prior to the termination of the Employee's employment, was a client or customer of any Group Company and with whom the Employee has direct dealings during the 12 months prior to the termination of the Employee's employment; and
3.3 The obligations set out under the above covenants will be valid within the territory of the United Kingdom. Considering the current technological resources (including, but not limited to, email and video conferencing), allowing a dissociation between the place in which the activity may be carried out and the place in which it may be used and, in any event, take effect, the restriction referred to above shall be deemed to relate to both places and shall therefore be binding not just with regard to the place in which the activity is carried out, in any form, but also the place in which such activity is intended to take direct effect, permanently and regularly, irrespective of the physical presence of the Employee in that place.
3.4 In consideration of the obligations set out above, the Company will pay the Employee a gross amount equal to 100% of the last annual gross salary, calculated on the basis of (i) the annual gross base salary applicable at the date of termination of the Employment; (ii) the average of the cash bonuses paid by the Company to the Employee during the 3 years preceding the date of termination of the Employment, and of any potential stock option/stock grants or the like potentially assigned to the Employee; and (i) the value indicated under the relevant payslip of the benefits potentially assigned to the Employee as at the date of termination of the Employment. This amount will be paid by the Company to the Employee after the termination of the Employment, during the period of effectiveness of the non-compete, in quarterly consecutive equal instalments and any of these instalments will be due on the last day of each quarter, on the proviso that the Employee fulfils the non-compete obligations.
3.5 The Employee and the Company agree that the obligations set in this variation are reasonable and that the consideration above is reasonable and that they intend the obligations in this clause to operate to the maximum extent.
3.6 In the event of any conflict between the provisions of this clause 3 and any other arrangement, the provisions of this Agreement shall prevail, unless the relevant clause of the relevant arrangement expressly provides that it shall prevail, thereby referencing the clause of this Agreement over which the applicable schedule is intended to prevail.”
I have recited clause 3.5, which is a form of words commonly inserted into covenants of this kind; but Ms Stone rightly did not rely on it. Such clauses are rarely worth the paper they used to be written on, or the digital equivalent. Clause 3.6 was not referred to in argument and does not appear to be relevant.
The facts
I gratefully adopt the summary of the material points of the claimants' evidence given by the judge at paragraphs 19–22 of his judgment:-
“19 ICE Pharma's key business involves the development, production and sale of bile acid derivatives for the pharmaceutical industry. This involves obtaining animal bile and use this to manufacture products, most importantly ursodeoxycholic acid (UDCA).
20 Zellbios, as I have noted already, is a company within the Axplora Group formed by a merger, one part of which was formerly known as Pharmazell. Axplora is ICE Pharma's main competitor and Axplora and ICE are the only companies which control their own...
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