Allan Janes LLP v Johal and Others
| Jurisdiction | England & Wales |
| Judge | HIS HONOUR JUDGE RICH, Q.C. |
| Judgment Date | 27 October 2005 |
| Neutral Citation | [2005] EWHC 2864 (Ch) |
| Date | 27 October 2005 |
| Court | Chancery Division |
| Docket Number | Case No: HC 05 C02796 |
[2005] EWHC 2864 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
His Honour Judge Rich Q.c.
(Sitting as a Judge Of The High Court)
Case No: HC 05 C02796
MR. TERRY (instructed by Allan Janes LLP) for the Claimant.
MR. DEVONSHIRE (instructed by Harris Cartier LLP) for the Defendant.
Approved Judgment
The Claimants are a firm of solicitors. The Defendant was employed by them or their predecessors as an assistant solicitor from 2 November, 2000 until her resignation took effect on 29 July, 2005. Her contract of employment contained restrictions whose terms I will in due course have to recite in detail. For the moment I will refer to Clause 20.2, containing a permanent prohibition against soliciting the business of any person who had been the client of the Claimants during the three years before the termination of her employment as the 'non-solicitation clause'; and to Clause 22.2 containing a restriction whose effect was to prohibit her from practising as a solicitor within a six mile radius of the Claimants' office in High Wycombe for the period of three years from the date of the termination of her employment, as the 'six mile bar'.
The Defendant had, before leaving the Claimants' employment, made plans to join the Second Defendant, and forming a partnership which is the Third Defendant. She does not deny the Claimants' allegations of breach of the non-solicitation clause and there is indeed evidence that she began her solicitations even before she left the Claimants' employment.
As to her setting up an office in High Wycombe, which is where the Claimants practise, she described her activities as taking a form which may have involved only a technical breach of the six mile bar; but although she denies any present intention to practise within the area, she refuses to give an undertaking not to do so, or even in the terms of Clause 22.1, which prohibits her from acting for the persons who had been clients of the Claimant during the year before the termination of her employment for a period of one year from such termination, and even then limits the prohibition to a specified area, albeit —although there is no evidence as to this —that it may be somewhat more extensive than the six mile radius. Clause 22.1 I shall refer to as the 'non-dealing covenant'.
The Claimants seek an interim injunction requiring compliance with the non-solicitation clause and the six mile bar. The Defendant's defence to that claim is that neither clause is enforceable, or, perhaps more accurately that the Claimants have failed to put before the court evidence which discloses that the Claimant has any real prospect of establishing the validity of these restrictions.
It is common ground that it is necessary, in order that the Claimants should succeed at trial, for them to show on evidence (1) that they have legitimate business interests requiring protection in relation to the Defendant's employment; and (2) as it is put in the headnote to TFS (Derivatives) -v—Morgan [2005] IRLR 246,
"The covenant must be shown to be no wider than is reasonably necessary for the protection of those interests. Reasonable necessity is to be assessed from the perspective of reasonable persons in the position of the parties as at the date of the contract, having regard to the contractual provisions as a whole and to the factual matrix in which the contract would then realistically have been expected to apply".
It is right to say that this application when made was supported by the evidence of Mr. Hitchen, which justified the proposition made at para. 18 of his witness statement that the First Defendant was "flagrantly and blatantly in breach of these covenants", but gave no evidence as to the Claimants' legitimate business interests or as to the necessity of the covenants in the terms in which they had been drawn in order to protect those interests. I think I am entitled to infer that a solicitor does have a legitimate to protect himself from having his clients taken away. Mr. Devonshire, for the Defendant, does not seriously dispute that, but he says —and I accept says rightly —that as Sir Christopher Slade put it in Office Angels Ltd. -v—Rainer—Thomas & O'Connor [1991] IRLR, 214 at para. 25,
"If the court was to uphold restrictions which a covenant imposes upon the freedom of action of the servant after he has left the service of the master, the master must satisfy the court that the restrictions are no greater than are reasonably necessary for the protection of the master in his business (see Mason Brotherman Clothing Supply Co. Ltd. [1913] AC, 724 at 742, per Lord Melton). As Lord Parker stressed in Herbert Morris Ltd. -v—Saxelby p.707, 'For any covenant in restraint of trade to be treated as reasonable in the interests of the parties it must afford no more than adequate protection to the benefit of the party in whose favour it is imposed'. The emphasis was Lord Parker's".
The reasonable necessity of the particular restrictions does therefore need justification by evidence. In a second witness statement, dated 19 October, 2005, Mr. Hitchen dealt with these gaps in the evidence in his first statement as follows. Of the First Defendant he says,
"It is suggested I have not even attempted to justify or explain the need for the restricted covenants which we are now attempting to enforce. The fact is the First Defendant was introduced to most of the firm's substantial clients. She had no following of her own. It will be noted from the flyer sent out by e-mail to Messrs. Goodwin & Bader that the areas which she purported to wish to practise mirror almost exactly those areas in which Allan Janes practised. Having introduced her to our clients, Allan Janes, I think, had a legitimate interest in requiring her not to solicit their business for the period stipulated in the covenant".
In fact, of course, no period is stipulated. The restriction is proposed to be permanent.
It is, however, possible that there are circumstances which would justify such a permanent prohibition of soliciting as opposed to dealing, although Mr. Hitchen does not attempt to give such justification. Mr. Hitchen's explanation as to why the bar should extend to all clients, rather than to those for whom the Defendant in fact acted, has to be found in the assertion that she was introduced to 'most of the firm's substantial clients' which has to be inferred to mean that she was introduced more widely than the clients for whom she acted.
However, when the adjourned hearing took place after the initial hearing, further evidence from another partner in the claimant firm, Mr. David Hay, did give more substantial reasons for justifying a ban on soliciting all clients of the firm, to which I will refer when I come to that clause.
Mr. Hitchen's second witness statement continues in respect of the six mile bar as follows:
"She then goes on to make reference to the area covered by Clause 22.2. There is a plan attached to my original statement at Appendix 5, which shows the area covered by the six miles. There are three main centres of population, which we wish to consider, High Wycombe, Beaconsfield and Marlow. The First Defendant makes reference to Hazlemere in her statement, but, as far as I know, there is only one solicitor (a branch office of a High Wycombe firm) practising from there. I have looked through Yellow Pages and can advise this Honourable Court, that there are sixteen firms listed in High Wycombe and Beaconsfield. That figure includes Allan Janes. I cannot see where she gets her figure of fifty from."
In fact, in the course of the hearing, it was agreed that the correct figure is probably forty-six, including Allan Janes.
"In addition, though I have not got a copy of Yellow Pages for Marlow, having discussed the situation with my colleagues, we can recall the names of five firms in Marlow which would make a total of twenty-one firms. I estimate that 95 percent of our client base is located in this area, and it will therefore be seen that the firm has a 'legitimate interest' in protecting that area. At para. 29 of her statement, the First Defendant suggests that the restriction covers a geographical area of over 110 miles. I am not quite sure where she gets that calculation from and my maths is, quite frankly, not up to the calculation, and I think that she has overstated the area by some margin".
My maths is equal to it, although my mental arithmetic is not. I calculate that the area of six miles radius is equivalent to just over 113 sq.miles.
This does produce a serious case for at least some restriction over a six mile area being no more than is reasonably necessary, although the terms of Mr. Hitchen's witness statement are by no means wholly accurate.
The witness statement of the First Defendant, to which it is a reply, however questioned also the justification for a bar on practise within fields in which the Defendant had not practised whilst in the Claimants' employment, and in regard to potential clients for whom the Claimants were not wishing to act. She said at paras. 29 to 30 of her witness statement:
"As I have already observed, Mr. Hitchen does not begin to justify the area restriction in this case. It covers a geographical area of 110 sq.miles (some 35 sq.miles more than the radial restriction in the Allan Janes Partnership Agreement). There are numerous clients and potential clients in that area for legal services of the type performed by Allan Janes. Equally, as I have already said, there are at least fifty other...
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